ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Assets
|
|
Cash
|
|
$
|
9,872
|
|
|
$
|
5,216
|
|
Deposits
|
|
|
—
|
|
|
|
313
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
—
|
|
Notes receivable (Note 5)
|
|
|
—
|
|
|
|
8,000
|
|
Work in progress (Note 1)
|
|
|
—
|
|
|
|
18,732
|
|
Other current assets
|
|
|
—
|
|
|
|
744
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
9,872
|
|
|
|
33,005
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, less accumulated depreciation
|
|
|
|
|
|
|
|
|
of $7,283 (2013) and $5,799 (2012) (Note 1)
|
|
|
196
|
|
|
|
1,111
|
|
Deferred debt issuance costs (Note 3)
|
|
|
2,082
|
|
|
|
12,340
|
|
|
|
|
|
|
|
|
|
|
Total long-term assets
|
|
|
2,278
|
|
|
|
13,451
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,150
|
|
|
$
|
46,456
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Deficit
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts and notes payable:
|
|
|
|
|
|
|
|
|
Accounts payable, related party (Note 2)
|
|
$
|
425,346
|
|
|
$
|
336,639
|
|
Accounts payable, other
|
|
|
524,746
|
|
|
|
571,424
|
|
Derivative liability, convertible notes payable (Note 3)
|
|
|
712,992
|
|
|
|
693,269
|
|
Notes payable, related party (Note 2)
|
|
|
42,868
|
|
|
|
27,207
|
|
Notes payable, other (Note 3)
|
|
|
580,063
|
|
|
|
489,373
|
|
Convertible notes payable, net of discount of
|
|
|
|
|
|
|
|
|
$92,772 (2013) and $137,253 (2012) (Note 3)
|
|
|
390,240
|
|
|
|
244,247
|
|
Litigation contingency (Note 7)
|
|
|
-
|
|
|
|
360,803
|
|
Payroll liabilities (Note 7)
|
|
|
134,083
|
|
|
|
118,647
|
|
Accrued expenses (Note 7)
|
|
|
500,000
|
|
|
|
298,463
|
|
Dividends payable (Note 6)
|
|
|
78,071
|
|
|
|
45,747
|
|
Accrued interest payable:
|
|
|
|
|
|
|
|
|
Interest payable, convertible notes (Note 3)
|
|
|
93,347
|
|
|
|
69,205
|
|
Interest payable, related party notes (Note 2)
|
|
|
9,180
|
|
|
|
7,008
|
|
Interest payable, notes payable other (Note 3)
|
|
|
65,547
|
|
|
|
30,521
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,547,524
|
|
|
|
3,292,553
|
|
|
|
|
|
|
|
|
|
|
Capital leases (Note 7)
|
|
|
-
|
|
|
|
389
|
|
Long-term convertible notes payable net of current portion,
|
|
|
|
|
|
|
|
|
net of discount of $0 (2013) and $32,083 (2012)
|
|
|
-
|
|
|
|
2,917
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
-
|
|
|
|
3,306
|
|
|
|
|
|
|
|
|
|
|
Total liablities
|
|
|
3,547,524
|
|
|
|
3,295,859
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ deficit: (Notes 1 & 6)
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 10,000,000 shares authorized,
|
|
|
404,055
|
|
|
|
404,055
|
|
404,055 (2013) and 404,055 (2012) shares
|
|
|
|
|
|
|
|
|
issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; 760,000,000 (2013) and
|
|
|
631,402
|
|
|
|
22,239
|
|
7,500,000,000 (2012) shares authorized,
|
|
|
|
|
|
|
|
|
631,402,195 (2013) and 22,238,636 (2012) shares
|
|
|
|
|
|
|
|
|
issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
14,322,968
|
|
|
|
14,543,507
|
|
Accumulated deficit
|
|
|
(22,939,333
|
)
|
|
|
(21,746,084
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders' deficit of the Company
|
|
|
(7,580,908
|
)
|
|
|
(6,776,283
|
)
|
|
|
|
|
|
|
|
|
|
Non-controlling interest (Note 1)
|
|
|
4,045,534
|
|
|
|
3,526,880
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' deficit
|
|
|
(3,535,374
|
)
|
|
|
(3,249,403
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' deficit
|
|
$
|
12,150
|
|
|
$
|
46,456
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Revenue (Note 1)
|
|
|
|
|
|
|
Reactor sales
|
|
$
|
13,440
|
|
|
$
|
61,134
|
|
Consulting fees
|
|
|
-
|
|
|
|
-
|
|
Total revenue
|
|
|
13,440
|
|
|
|
61,134
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (Note 1)
|
|
|
(21,421
|
)
|
|
|
(25,829
|
)
|
|
|
|
|
|
|
|
|
|
Gross loss
|
|
|
(7,981
|
)
|
|
|
35,305
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
Product development expense (Note 1)
|
|
|
-
|
|
|
|
593
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
Related party (Note 2)
|
|
|
334,065
|
|
|
|
433,510
|
|
Stock-based compensation (Note 9)
|
|
|
3,239
|
|
|
|
126,000
|
|
Depreciation
|
|
|
915
|
|
|
|
2,352
|
|
Other (Note 4)
|
|
|
424,846
|
|
|
|
613,180
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
(763,065
|
)
|
|
|
(1,175,635
|
)
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(771,046
|
)
|
|
|
(1,140,330
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Litigation contingency (Note 7)
|
|
|
351,232
|
|
|
|
-
|
|
Interest (expense) income, amortization
|
|
|
|
|
|
|
|
|
of convertible note discount (Note 3)
|
|
|
(401,225
|
)
|
|
|
(503,517
|
)
|
Interest expense (Note 3)
|
|
|
(107,107
|
)
|
|
|
(126,966
|
)
|
Fair value adjustment of derivative liabilities (Note 3)
|
|
|
(265,103
|
)
|
|
|
(534,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(422,203
|
)
|
|
|
(1,164,935
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(1,193,249
|
)
|
|
|
(2,305,265
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision (Note 8)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,193,249
|
)
|
|
|
(2,305,265
|
)
|
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interest (Note 1)
|
|
|
64,979
|
|
|
|
55,178
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Company
|
|
$
|
(1,128,270
|
)
|
|
$
|
(2,250,087
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
|
|
outstanding (Notes 1 & 9)
|
|
|
83,211,445
|
|
|
|
8,730,190
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Deficit
Years Ended
December 31, 2013 and 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Common stock
|
|
|
Preferred stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
controlling
|
|
|
shareholders
|
|
|
|
Shares
|
|
|
Par value
|
|
|
Shares
|
|
|
Par value
|
|
|
capital
|
|
|
deficit
|
|
|
interest
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011 (Restated)
|
|
|
4,638,146
|
|
|
$
|
4,638
|
|
|
|
521,162
|
|
|
$
|
521,162
|
|
|
|
14,206,702
|
|
|
$
|
(19,440,819
|
)
|
|
$
|
2,403,918
|
|
|
$
|
(2,304,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2012, issuance of convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
notes (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,167
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock in private placements (Note 6)
|
|
|
350,000
|
|
|
|
350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to convertible noteholders (Notes 3 & 6)
|
|
|
16,766,027
|
|
|
|
16,766
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,188,836
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,205,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on conversion of debt (Notes 3 & 6)
|
|
|
331,500
|
|
|
|
332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, redemption of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred stock (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(110,857
|
)
|
|
|
(110,857
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, dividends on Series B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,344
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, changes in ownership of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiary common stock by Parent (Note 1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
163,758
|
|
|
|
-
|
|
|
|
-
|
|
|
|
163,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on preferred stock conversion (Note 6)
|
|
|
52,966
|
|
|
|
53
|
|
|
|
(6,250
|
)
|
|
|
(6,250
|
)
|
|
|
6,197
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for services (Note 6)
|
|
|
100,000
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2012, issuance of warrants to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchase common stock (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity of AlumiFuel Power International,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc. subsidiary, net of non-controlling interest (Note 1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,214,587
|
)
|
|
|
-
|
|
|
|
1,067,784
|
|
|
|
(146,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,305,265
|
)
|
|
|
55,178
|
|
|
|
(2,250,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 (Restated)
|
|
|
22,238,639
|
|
|
$
|
22,239
|
|
|
|
404,055
|
|
|
$
|
404,055
|
|
|
$
|
14,543,507
|
|
|
$
|
(21,746,084
|
)
|
|
$
|
3,526,880
|
|
|
$
|
(3,249,403
|
)
|
(CONTINUED)
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Deficit
Years Ended
December 31, 2013 and 2012
|
|
Common stock
|
|
|
Preferred stock
|
|
|
Additional paid-in
|
|
|
Accumulated
|
|
|
Non-controlling
|
|
|
Total shareholders
|
|
|
|
Shares
|
|
|
Par value
|
|
|
Shares
|
|
|
Par value
|
|
|
capital
|
|
|
deficit
|
|
|
interest
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 (Restated)
|
|
|
22,238,636
|
|
|
$
|
22,239
|
|
|
|
404,055
|
|
|
$
|
405,055
|
|
|
|
14,543,507
|
|
|
$
|
(21,746,084
|
)
|
|
$
|
3,526,880
|
|
|
$
|
(3,249,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2013, Reverse stock split (1 for 200)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares issued for fractional shares (Note 6)
|
|
|
641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2013, issuance of common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock to convertible noteholders (Notes 3 & 6)
|
|
|
607,322,918
|
|
|
|
607,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
286,155
|
|
|
|
-
|
|
|
|
-
|
|
|
|
893,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2013, issuance of common
|
|
|
1,840,000
|
|
|
|
1,840
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,960
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,800
|
|
stock on conversion of debt (Notes 3 & 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2013, dividends on Series B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(32,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(32,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January through December 2013, issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to purchase common stock (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,239
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of equity by AlumiFuel Power International,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc. subsidiary, net of non-controlling interest (Note 1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity of AlumiFuel Power International,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc. subsidiary, net of non-controlling interest (Note 1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(518,269
|
)
|
|
|
-
|
|
|
|
453,675
|
|
|
|
(64,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,194,742
|
)
|
|
|
64,979
|
|
|
|
(1,129,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
631,402,195
|
|
|
$
|
631,402
|
|
|
|
404,055
|
|
|
$
|
405,055
|
|
|
|
14,322,968
|
|
|
$
|
(22,939,333
|
)
|
|
$
|
4,045,534
|
|
|
$
|
(3,535,374
|
)
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,193,249
|
)
|
|
$
|
(2,305,265
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used by operating activities:
|
|
|
|
|
|
|
|
|
Non-cash interest expense (Note 6)
|
|
|
274,886
|
|
|
|
58,410
|
|
Stock based compensation (Note 6)
|
|
|
3,239
|
|
|
|
126,000
|
|
Debt issuance costs (Note 4)
|
|
|
16,758
|
|
|
|
45,536
|
|
Beneficial conversion feature (Note 6)
|
|
|
18,400
|
|
|
|
-
|
|
Allowance for bad debt (Note 5)
|
|
|
9,900
|
|
|
|
8,780
|
|
Recovery of bad debt expense (Note 5)
|
|
|
(95,750
|
)
|
|
|
(45,155
|
)
|
Depreciation and amortization
|
|
|
915
|
|
|
|
2,352
|
|
Change in fair value of derivative liability (Note 3)
|
|
|
49,900
|
|
|
|
534,436
|
|
Amortization of discount on debentures payable (Note 3)
|
|
|
327,134
|
|
|
|
503,517
|
|
Change in non-controlling interest (Note 1)
|
|
|
(58,564
|
)
|
|
|
8,376
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts and other receivables
|
|
|
94,593
|
|
|
|
35,733
|
|
Work in progress (Note 1)
|
|
|
18,732
|
|
|
|
(18,732
|
)
|
Prepaid expenses and other assets
|
|
|
313
|
|
|
|
159
|
|
Accounts payable and accrued expenses
|
|
|
(115,505
|
)
|
|
|
210,529
|
|
Related party payables (Note 2)
|
|
|
88,706
|
|
|
|
224,937
|
|
Dividends payable (Note 6)
|
|
|
32,324
|
|
|
|
45,747
|
|
Interest payable
|
|
|
103,810
|
|
|
|
(33,943
|
)
|
Net cash used in operating activities
|
|
|
(423,458
|
)
|
|
|
(598,583
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
-
|
|
|
|
-
|
|
Issuance of notes receivable (Note 3)
|
|
|
-
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes (Note 3)
|
|
|
151,000
|
|
|
|
229,000
|
|
Proceeds from notes payable, related (Note 2)
|
|
|
36,100
|
|
|
|
52,970
|
|
Proceeds from notes payable, other (Note 3)
|
|
|
329,516
|
|
|
|
408,590
|
|
Proceeds from sales of common stock (Note 6)
|
|
|
-
|
|
|
|
5,000
|
|
Proceeds from sales of subsidiary equity (Notes 1 & 6)
|
|
|
-
|
|
|
|
163,758
|
|
Proceeds from sale of subsidiary stock by parent (Notes 1 & 6)
|
|
|
-
|
|
|
|
-
|
|
Payments under capital leases (Note 7)
|
|
|
(389
|
)
|
|
|
(1,555
|
)
|
Payments on notes payable (Note 3)
|
|
|
(56,176
|
)
|
|
|
(63,835
|
)
|
Payments on notes payable, related (Note 2)
|
|
|
(20,439
|
)
|
|
|
(60,400
|
)
|
Payments to placement agents (Note 3)
|
|
|
(6,500
|
)
|
|
|
(21,500
|
)
|
Payments on convertible notes payable (Note 3)
|
|
|
(5,000
|
)
|
|
|
-
|
|
Payments on redemption of preferred stock (Note 3)
|
|
|
-
|
|
|
|
(110,857
|
)
|
Net cash provided by financing activities
|
|
|
428,112
|
|
|
|
601,171
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
4,656
|
|
|
|
2,588
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
5,216
|
|
|
|
2,628
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
9,872
|
|
|
$
|
5,216
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
|
|
$
|
17,447
|
|
|
$
|
8,555
|
|
|
|
|
|
|
|
|
|
|
Noncash financing transactions:
|
|
|
|
|
|
|
|
|
Notes and interest payable converted to stock
|
|
$
|
343,088
|
|
|
$
|
489,194
|
|
Notes payable related converted to preferred stock
|
|
$
|
-
|
|
|
$
|
1,118,538
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
AlumiFuel Power Corporation (the “Company”) was incorporated on January 19, 2000 under the laws of the state of Nevada as Organicsoils.com, Inc. The Company operates primarily through its subsidiaries, NovoFuel, Inc. (“Novofuel”), AlumiFuel Power, Inc., a Colorado corporation ("API"), AlumiFuel Power Technologies, Inc., a Colorado corporation ("APTI") and AlumiFuel Power International, Inc. ("AFPI"), a Canadian corporation. The Company is a an early production stage alternative energy company producing products that generate hydrogen gas and steam for multiple niche applications requiring on-site, on-demand fuel sources. Our hydrogen drives fuel cells for back-up, remote, and portable power, fills inflatable devices such as weather balloons, and can replace costly, hard-to-handle and high pressure K-Cylinders. Its steam/hydrogen output is also being designed to drive turbine-based underwater propulsion systems and auxiliary power systems. Our technology has significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products. AFPI was formed as the international marketing arm of the Company.
The financial statements contained herein for the years ended December 31, 2013 and 2012 comprise the consolidated financial statement of the Company and its subsidiaries API, APTI, AFPI, and HPI Partners, LLC ("HPI").
Formation of NovoFuel, Inc.
During the nine month period ended September 30, 2013, we transferred all of the assets related to our hydrogen generation business to a new wholly owned subsidiary, NovoFuel, Inc. in exchange for 12,000,000 shares of Novofuel common stock
;
2,000,000 of which were allocated to our majority-owned subsidiary, AFPI, in exchange for the return of the European intellectual property and marketing rights back to the Company for use by NovoFuel. Novofuel was formed as a separate entity in anticipation of executing a transaction with Genport, SrL of Italy. In November 2013, the Company signed an agreement with Genport, SrL of Italy to combine and integrate their technologies, assets and operations into NovoFuel, contingent upon closing of private financing of up to $4,500,000 for the venture. On closing of a capital investment, NovoFuel common shares are to be allocated to Genport shareholders in exchange for 100% of Genport shares. Although Genport would then be a wholly-owned subsidiary of NovoFuel, Genport, SrL would retain its status as an Italian company under Italian law. Following the closing of the transaction, NovoFuel will have operations in the United States and Italy. As of the date of this report, this financing has not been completed and the Company cannot guarantee it will be completed.
Formation of AlumiFuel Power International, Inc.
In February 2010, the Company formed its subsidiary, AFPI. In connection with the formation of the AFPI, the Company and AFPI executed a License Agreement through which AFPI received certain international marketing rights and the rights to utilize certain intellectual property from the Company for exploitation in countries and territories outside of North America in exchange for 25,000,000 shares of the Company's $0.001 par value common stock. In addition, the Company purchased 15,000,000 shares of AFPI common stock at $0.01 per share. On July 31, 2011, the Company and AFPI executed a Patent Purchase Agreement through which the Company sold AFPI the international patent rights to certain of the Company's intellectual property. In exchange for the sale of these rights, the Company received 7,500,000 shares of AFPI common stock valued at $10,275,000, the market value of the stock on the Deutsche Börse Frankfurt Stock Exchange on the agreement date.
As of December 31, 2011, AFPI had issued a total of 13,911,864 shares of its common stock in the private placements, warrant exercises, stock issued to consultants and stock issued to officers and directors in exchange for fees. As a result of these transactions, the total number of AFPI shares outstanding at December 31, 2012 was 62,411,864.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 2013, AFPI issued 5,700,000 shares to holders of certain notes of the Company pursuant to the issuance of those notes. These shares were valued at $5,700, which amount was booked as interest expense. Following this issuance there were 68,111,864 shares of AFPI outstanding as of December 31, 2013.
During the year ended December 31, 2012, the Company sold a total of 8,373,271 shares of AFPI in both private and public transactions for total proceeds of Euro 131,461 or approximately $171,997 and recorded expense on the transfer of 20,048 shares to consultants for fees valued at $7,516, which is reflected on the statements of changes in stockholders' deficit. In addition, the Company purchased 1,016,978 shares at a cost of $106,001. As a result, the Company owned 39,984,494 shares of AFPI common stock at December 31, 2012. During the year ended December 31, 2013, the Company paid 384,615 shares of AFPI common stock to the trustee of its German bank accounts in payment of fees resulting in the Company owning 39,599,879 shares of AFPI common stock at December 31, 2013.
We maintain a custody account for our cash and securities in Germany that had a cash balance of $583 and $245 at December 31, 2013 and 2012, respectively, and is reflected as Cash on our balance sheet.
In December 2012, the Deutsche Börse Frankfurt Stock Exchange closed the First Quotation Board, the exchange on which AFPI's common stock traded. The Company anticipates applying for listing on the GXG Markets on which it will seek admission to the GXG Markets' First Quote segment, which is the new European stock exchange catering to early stage growth companies.
The value of all shares of AFPI held by the Company have been eliminated on consolidation of the financial statements at December 31, 2013 and 2012 as intercompany accounts. At December 31, 2013 there were 28,511,985 shares held by shareholders other than the Company representing 41.9% of the outstanding common shares of AFPI as of that date. This represents a non-controlling interest in AFPI that totaled $4,045,534 based on AFPI's outstanding total equity of $9,665,317 at December 31, 2013. In addition, $64,979 in the net loss of AFPI of $155,227 for the year ended December 31, 2013 has been attributed to the non-controlling interest of those stockholders. At December 31, 2012 there were 22,427,370 shares held by shareholders other than the Company representing 35.9% of the outstanding common shares of AFPI as of that date. This represents a non-controlling interest in AFPI that totaled $3,526,880 based on AFPI's outstanding total equity of $9,814,756 at December 31, 2012. In addition, $55,177 in the net loss of AFPI of $153,552 for the year ended December 31, 2012 has been attributed to the non-controlling interest of those stockholders
Going Concern
Inherent in the Company’s business are various risks and uncertainties, including its limited operating history. The Company’s future success will be dependent upon its ability to market its products including its portable balloon inflation devices including the PBIS-1000 (of which the Company sold three units in 2010) and the PBIS-2000 (of which the Company delivered one unit to the U.S. Air Force in 2012, which unit the Air Force returned to the Company in the fourth quarter of 2012 to make certain paid improvements, which totaled $13,440 in revenue during 2013).
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred operating losses since inception, used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant restructuring to sustain its operations for the foreseeable future. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to raise capital through equity offerings and debt borrowings to meet its obligations on a timely basis and ultimately to attain profitability through the successful commercialization of its products.
Principals of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries NovoFuel, HPI, API, APTI and AFPI. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash equivalents at December 31, 2013 and 2012 were $-0-.
Income Taxes
The Company accounts for income taxes under the provisions of ASC Topic 740, formerly known as SFAS No. 109, “Accounting for Income Taxes”. ASC Topic 740 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance for net deferred taxes is provided unless the ability to realize the deferred amount is judged by management to be more likely than not. The effect on deferred taxes from a change in tax rates is recognized in income in the period that includes the enactment date. More information on the Company’s income taxes is available in Note 6. Income Taxes in these financial statements.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Colorado as “major” tax jurisdictions, as defined. We are not currently under examination by the Internal Revenue Service or any other jurisdiction. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.
Stock-based Compensation
The Company has certain stock option plans approved by its stockholders, and also grants options and warrants to consultants outside of its stock option plan pursuant to individual agreements.
|
The Company accounts for compensation expense for its stock-based employee compensation plans and issuances of options and warrants to consultants in accordance with ASC Topic 718, formerly known as SFAS No. 123R "Share Based Payment" which replaced SFAS No. 123, "Accounting for Stock-Based Compensation"
(“SFAS No. 123”) and supersedes Opinion No. 25 of the Accounting Principles Board, "Accounting for Stock Issued to Employees" (APB 25). The Company has elected the modified-prospective method, under which prior periods are not revised for comparative purposes. See Note 5. Capital Stock for further information on the Company's stock options plans and other warrant/option issuances.
Property, equipment and leaseholds
Property, equipment and leaseholds are stated at cost, and depreciation is provided by use of accelerated and straight-line methods over the estimated useful lives of the assets. The cost of leasehold improvements is depreciated over the estimated useful life of the assets or the length of the respective leases, whichever period is shorter. The estimated useful lives of property, equipment and leaseholds are as follows:
Office equipment, furniture and vehicles
|
5 years
|
Computer hardware and software
|
3 years
|
Leasehold improvements
|
7 years
|
The Company's property and equipment consisted of the following at December 31, 2013 and 2012:
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Balance
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Equipment
|
|
$
|
5,799
|
|
|
$
|
5,799
|
|
|
$
|
5,799
|
|
|
$
|
5,220
|
|
|
$
|
0
|
|
|
$
|
2,595
|
|
Furniture
|
|
|
1,680
|
|
|
|
1,680
|
|
|
|
1,484
|
|
|
|
1,148
|
|
|
|
196
|
|
|
|
868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,479
|
|
|
$
|
7,479
|
|
|
$
|
7,283
|
|
|
$
|
6,368
|
|
|
$
|
196
|
|
|
$
|
1,111
|
|
Investment Securities
The Company accounts for its ownership of the common stock of FastFunds Financial Corporation ("FFFC") in accordance with APB Opinion No. 18 (APB 18),
The Equity Method of Accounting for Investments in Common Stock
, which provides that the equity method of accounting should be used by an investor whose investment in voting stock gives it the ability to exercise significant influence over operating and financial policies of an investee even though the investor holds less than a majority of the voting stock. Because the Company owned approximately 34% of FFFC's common stock in 2011, but not a majority of the shares, the Company has the ability to exercise significant control over FFFC's operations.
Under the equity method, the investment account is adjusted quarterly to recognize the Company's share of the income or losses of FastFunds. Accordingly, since FastFunds has recorded significant net losses in each of its last two fiscal years, the investment has been written down and remains at zero.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Research and Development
Research and development costs are expensed as incurred. In each of the years ended December 31, 2013 and 2012, the Company incurred $0 and $593 in direct research and development costs, identified as "product development expense" on our statements of operations.
Debt Issue Costs
The costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method over the lives of the related debt. The straight-line method results in amortization that is not materially different from that calculated under the effective interest method.
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.
The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments. The fair values of receivables from related parties are not practicable to estimate, based upon the related party nature of the underlying transactions.
The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.
Loss per Common Share
Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods ended December 31, 2013 and 2012, as the impact of the potential common shares, which totaled approximately 7,426,230,633 (December 31, 2013) and 35,263,790 (December 31, 2012), would be anti-dilutive, but not decrease loss per share. Therefore, diluted loss per share presented for the years ended December 31, 2013 and 2012 is equal to basic loss per share.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Accounting for obligations and instruments potentially settled in the Company’s common stock
In connection with any obligations and instruments potentially to be settled in the Company's stock, the Company accounts for the instruments in accordance with ASC Topic 815, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock"
.
This issue addresses the initial balance sheet classification and measurement of contracts that
are indexed to, and potentially settled in, the Company's stock.
Under this pronouncement, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All contracts are initially measured at fair value and subsequently
accounted for based on the then current classification. Contracts initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as
equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes in the financial statements as long as the contracts remain
classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be included in
earnings. The classification of a contract is reassessed at each balance sheet date.
Revenue Recognition
Revenues on product sales are recognized upon shipment of the product to the customer. Payment terms are typically 30 to 60 days net due following order delivery, depending on the customer. Fee revenues for research and development contracts are typically recognized on milestone dates outlined in the contracts. In instances where definable dates are not outlined, fee revenue is recognized when received.
During the fiscal year ended December 31, 2012 the Company recorded revenue totaling $61,134 an order from the U.S. Air Force Strategic Operations Command to produce one PBIS-2000 portable balloon inflation device.
In the fourth quarter ended December 31, 2012, the U.S. Air Force returned the PBIS-2000 unit to the Company to make certain paid design improvements. The work was completed in the first quarter of 2013 and the unit was returned to the Air Force at that time. Expenditures made during the fourth quarter of 2012 on this project was reflected as "Work in progress" on our balance sheets and was offset against the revenue received in the first quarter of 2013.
Derivative Instruments
In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative instruments under the provisions of ASC Topic 815, “Derivatives and Hedging”, formerly known as SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): “
Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)
”. ASU 2013-11 provides guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current US GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. We do not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on our present or future consolidated financial statements.
NOTE 2.
RELATED PARTY TRANSACTIONS
Related Party Accounts Payable
The Board of Directors has estimated the value of management services for the Company at the monthly rate of $8,000 and $2,000 for the president and secretary/treasurer, respectively. The estimates were determined by comparing the level of effort to the cost of similar labor in the local market and this expense totaled $120,000 for each of the years ended December 31, 2013 and 2012. In addition, beginning October 1, 2010 the Company's president and treasurer were accruing a management fee of $7,500 and $3,500, respectively, for their services as managers of AFPI. This amount totaled $132,000 for the years ended December 31, 2013 and 2012. In December 2012, the Company awarded a one-time management fee to its officers totaling $100,000. As of December 31, 2013 and 2012, the Company owed $369,692 and $276,792, respectively to its officers for management services.
In September 2009, the Company's board directors authorized a bonus program for the Company's officers related to their efforts raising capital to fund the Company's operations. Accordingly, the Company's president and secretary are eligible to receive a bonus based on 50% of the traditional "Lehman Formula" whereby they will receive 2.5% of the total proceeds of the first $1,000,000 in capital raised by the Company, 2.0% of the next $1,000,000, 1.5% of the next $1,000,000, 1% of the next $1,000,000 and .5% of any proceeds above $4,000,000. The amount is capped at $150,000 per fiscal year. During the years ended December 31, 2013 and 2012, the Company recorded $4,065 and $3,510, respectively to a corporation owned by Messrs. Fong and Olson under this bonus program. At December 31, 2013 and 2012, respectively, there was $3,048 and $964 payable under the bonus plan.
In the years ended December 31, 2013 and 2012, APTI paid a management fee of $6,500 per month to a company owned by the Company’s officers for services related to its bookkeeping, accounting and corporate governance functions. For each of the years ended December 31, 2013 and 2012, these management fees totaled $78,000. As of December 31, 2013 and 2012, the Company owed $14,485 and $33,319 in accrued fees and related expenses.
The Company rented office space, including the use of certain office machines, phone systems and long distance fees, from a company owned by its officers at $1,200 per month in 2013 and 2012. This fee is month-to-month and is based on the amount of space occupied by the Company and includes the use of certain office equipment and services. Rent expense totaled $14,400 for each of the years ended December 31, 2013 and 2012, respectively. A total of $700 and $0 in rent expense was accrued but unpaid at December 31, 2013 and 2012.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Accounts payable to related parties consisted of the following at December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Management fees and related expenses payable to officers
|
|
$
|
396,171
|
|
|
$
|
313,611
|
|
|
|
|
|
|
|
|
|
|
Bonus payable to officers
|
|
|
3,048
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
Rent payable to affiliate of officers
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Accrued other expenses payable to officers
|
|
|
26,127
|
|
|
|
22,044
|
|
|
|
|
|
|
|
|
|
|
Total accounts payable, related party
|
|
$
|
425,346
|
|
|
$
|
336,639
|
|
Related Party Notes Payable
AlumiFuel Power Corporation
The Company has issued promissory notes to its president for loans made to it from time-to-time at an interest rate of 8% per annum and due on demand. During the year ended December 31, 2012, $3,055 in principal and $116 in accrued interest was paid on these notes leaving no balance due at December 31, 2012. During the year ended December 31, 2013 an additional $500 was loaned that remained payable at December 31, 2013. There was $28 and $0 in accrued interest payable at December 31, 2013 and 2012, respectively.
Prior to the year ended December 31, 2012, the president of API loaned the Company $4,500 in promissory notes bearing interest at 8% and due on demand of which $1,512 was outstanding at the end of 2011. No further loans or payments were made during the years ended December 31, 2013 or 2012 leaving a principal balance of $1,512 in both years with accrued interest of $365 and $244 payable at December 31, 2013 and 2012, respectively.
From time to time, the Company has issued promissory notes to a company owned by its president which at December 31, 2011 had a balance due of $118. The notes bear an interest rate of 8% per annum and are due on demand. During the year ended December 31, 2012, an additional $18,550 was loaned and a total of $18,365 in principal and $185 in interest was paid leaving balances due of $302 in principal and $7 in interest. During the year ended December 31, 2013, an additional $18,100 was loaned and a total of $5,086 in principal and $415 in interest was paid leaving balances due of $13,316 in principal and $169 in interest.
The Company has executed two promissory notes with a company affiliated with a Company’s officer. These notes carry an interest rate of 8% per annum and are due on demand. As of December 31, 2011 of $935 in principal and $339 in accrued interest was payable on these notes. During the year ended December 31, 2012, an additional $4,500 was loaned and no principal or interest was repaid leaving balances due at that date of $5,435 in principal and $628 in interest. No loans or payment occurred in 2013 leaving balances due of $5,435 in principal and $1,064 in interest at December 31, 2013.
At December 31, 2011, the Company owed $2,165 in principal and $282 in accrued on a promissory note issued to a partnership affiliated with the Company’s president. These notes carry an interest rate of 8% and are due on demand. There were no further transactions with this partnership during the years ended December 31, 2013 or 2012 leaving $2,165 in principal payable in both years along with $630 and $456 in accrued interest payable, respectively.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Prior to 2012, the Company issued a promissory note to a partnership affiliated with its president and secretary in the amount of $5,000. This note carries and interest rate of 8% per annum and is due on demand. There have been no payments of principal or interest on this note. At the years ended December 31, 2013 and 2012, $5,000 in principal with $1,888 and $1,488, respectively, in accrued interest remained outstanding on this note.
During the year ended December 31, 2012, the Company borrowed $9,770 from a Corporation owned by its Secretary. During the year ended December 31, 2013, an additional $15,000 was loaned. These notes carry an interest rate of 8% per annum and are due on demand. All of the respective 2012 notes were repaid in 2012 with $6 in interest leaving $2 in accrued interest payable at December 31, 2012. Of the 2013 loans, $11,000 was paid in 2013 along with $80 in interest leaving $4,000 in principal and $2 in interest payable at December 31, 2013.
From time to time, a company owned by the Company's officers has loaned the Company funds that at December 31, 2011 totaled $1,268 in principal. These notes are due on demand and carry an interest rate of 8%. During the year ended December 31, 2012, an additional $15,950 was loaned and $17,218 in principal with $269 in interest was repaid leaving no amounts due at year end. During the year ended December 31, 2013, an additional $2,500 was loaned and $1,500 in principal with $1 in interest was repaid leaving $1,000 in principal and $19 in accrued interest payable at December 31, 2013.
As of December 31, 2011, the company owed a corporation affiliated with the Company's officers $19,583. During the year ended December 31, 2012, $9,993 in principal and $607 in interest was repaid on these notes leaving balances due of $9,590 in principal and $1,050 in interest due at that date. There were no further transaction in 2013 leaving $9,590 in principal and $1,817 in interest payable at December 31, 2013.
At December 31, 2011, the Company owed $350 to a company affiliated with the Company's officers. This note is due on demand and bears interest at 8% per annum. The principal balance of $350 along with accrued interest of $307 and $279 remained outstanding at December 31, 2013 and 2012, respectively.
As of December 31, 2011, the Company owed $2,853 to an affiliate of the Company's president. This note is due on demand and bears interest at 8% per annum. During the years ended December 31, 2012 no transactions took place leaving $2,853 in principal and $255 in interest due at December 31, 2013. The entire principal balance and $147 of interest was repaid in 2013 leaving no principal but $291 in interest due at December 31, 2013.
As of both December 31, 2013 and 2012, $2,365 in accrued interest, but no principal, remained payable on two notes previously issued to third parties.
HPI Partners, LLC
In periods prior to December 31, 2011, HPI received loans from Company officers or their affiliates that were repaid in prior periods. Accrued interest due totaling $235 remained unpaid on these paid notes as of both December 31, 2013 and 2012.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Notes and interest payable to related parties consisted of the following at December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Notes payable to officers; interest at 8% and due on demand
|
|
$
|
1,512
|
|
|
$
|
1,512
|
|
|
|
|
|
|
|
|
|
|
Notes payable to affiliates of Company officers; interest at 8% and due on demand
|
|
|
41,356
|
|
|
|
25,695
|
|
|
|
|
|
|
|
|
|
|
Notes payable, related party
|
|
|
42,868
|
|
|
|
27,207
|
|
|
|
|
|
|
|
|
|
|
Interest payable related party
|
|
|
9,180
|
|
|
|
7,008
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, related party
|
|
$
|
52,048
|
|
|
$
|
34,215
|
|
NOTE 3. NOTES PAYABLE
AlumiFuel Power Corporation
From time to time the Company has issued various promissory notes payable to an unaffiliated trust which had a balance due of $9,785 at December 31, 2011. All notes bear an interest rate of 8% and are due on demand. During the year ended December 31, 2012, and additional $376,150 in principal was loaned by the trust and a total of $3,835 in principal and $915 in interest was repaid in cash. In addition, during the year ended December 31, 2012, the trust sold $227,250 in principal on these notes to unaffiliated third parties that were converted to common stock of the Company. As of December 31, 2012, $154,850 in principal and $9,301 in interest remained unpaid on these notes. During the year ended, 2013, the trust loaned the Company $76,700 and sold $38,300 in principal on these notes to unaffiliated third parties that converted that balance to convertible notes and/or common stock of the Company. In addition, the Trust was repaid $23,236 in principal and $13,535 in interest during 2013. Please see note Note 6 Capital Stock below for further information on the note sale and conversion transactions. As of December 31, 2013, $170,014 in principal and $13,641 in interest remained unpaid on these notes.
As of December 31, 2011, $32,732 in principal was outstanding on a demand promissory note from an unaffiliated third party with interest payable at 8%. During the years ended December 31, 2013 and 2012, no further transactions occurred leaving a principal balance of $32,732 at the end of both years with interest due of $5,581 and $2,962 as of December 31, 2013 and 2012, respectively.
As of December 31, 2011, the Company owed an unaffiliated third party $26,000. The notes to this party are due on demand and bear interest at 8% per annum. In the year ended December 31, 2012, a total of $118,351 in debt due this party from our subsidiary API was converted to two promissory notes of the Company under the same terms. An additional $43,087 was loaned during the year ended December 31, 2013. During the year ended December 31, 2013, $144,351 of these notes was purchased by an unaffiliated third parties and became convertible notes. As a result of these transactions, there was $43,087 and $144,352 in principal due this party at December 31, 2013 and 2012, respectively with $6,316 and $3,324 in accrued interest payable at December 31, 2013 and 2012, respectively.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 2012, the Company borrowed a total of $26,440 from an unaffiliated third party. These notes carried interest rates of 60% for $13,000 and 36% for $13,440 of the principal balance. The $13,000 note was due on April 1, 2012; on November 1, 2012 the terms of the note were changed to make it convertible at market at which time the interest rate was lowered to 8%. The $13,440 was repaid in 2013 upon receipt of payment by the U.S. Air Force on the design improvements being made to the PBIS-2000 unit shipped during 2012. In addition, in November 2012, the Company purchased 1,000,000 shares of AFPI stock from this entity and issued them a promissory note of $100,000 in payment. This note is due in November 2013 and carries an interest rate of 8%. Interest payments of $806 were made during the year ended December 31, 2012 on these notes. As a result of these transactions, the principal balance on these notes was $126,440 with interest payable of $6,920 at December 31, 2012; with a principal balance of $113,000 and interest payable of $19,539 at December 31, 2013.
During the year ended December 31, 2012, the Company borrowed $6,000 from an unaffiliated third party. This note carries interest at a rate of 8% and is due on demand. No principal or interest was repaid on this note during the year ended December 31, 2012 leaving a principal balance of $6,000 and interest payable of $467 as of that date. No further transactions took place in 2013 leaving a principal balance due of $6,000 with interest payable of $947 at December 31, 2013.
In years previous to 2012, the Company borrowed $20,000 from an unaffiliated third party. This note was due on demand and carried interest rate of 8% per annum. The entire principal balance of this note was repaid at June 30, 2010 with accrued interest payable balance of $57 due as of December 31, 2013 and 2012.
Many of the Company's notes issued to unaffiliated third parties contain provisions allowing them to be converted to common stock of the Company at market price on the date of conversion.
AlumiFuel Power, Inc.
As of December 31, 2011, the entire principal balance on certain accounts receivable financing loans totaling $6,000 was due and payable. During the year ended December 31, 2012 the entire principal balance of these loans was repaid along with $5,400 in accrued interest leaving no principal balance due and interest payable of $1,050 at both December 31, 2013 and 2012.
AlumiFuel Power International, Inc.
At December 31, 2011, AFPI owed $17,678 to an unaffiliated third party that was changed to a derivative convertible note in January 2012. The remaining balances due on this note are derivative convertible notes as explained more fully under the section "AlumiFuel Power Corporation Convertible Promissory Notes" below.
In the fourth quarter of 2011, the entire balance of a $50,000 note was sold to an unaffiliated third party and became a derivative convertible note as explained more fully under the section "Convertible Promissory Notes" below. During the year ended December 31, 2011, the Company accrued interest and fees totaling $22,000 prior to the note sale with no payments made to the outstanding fees leaving total fees due of $23,549 as of that date. In addition this party was owed $2,556 in accrued interest from notes payable prior to 2012. During the quarter ended June 30, 2012, $26,100 of the accrued interest payable was converted to a convertible promissory note leaving an interest balance due of $5 at both December 31, 2013 and 2012.
As of December 31, 2012 there was a balance due an unaffiliated third party of $25,000 at with an interest rate of 12% issued prior to December 31, 2011. No payments were made in 2012 or 2013 leaving a principal balance due at December 31, 2013 and 2012 of $25,000 with accrued interest payable of $8,786 and $5,787 at December 31, 2013 and 2012, respectively.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 2013, the Company was loaned a total of Euro 144,650 from unaffiliated third parties. This amount represented $190,230 as of December 31, 2013. These notes are due one year from issuance with an interest rate of 10% and may be converted to AFPI common stock after six months outstanding and if AFPI's common stock begins trading again. As of December 31, 2013, there was a total of $8,978 in interest payable on these notes, which interest may be paid in shares of AFPI common stock.
HPI Partners, LLC
In periods prior to 2011, the Company issued various a notes payable to unaffiliated third parties through HPI. These notes were also repaid in the periods prior to December 31, 2011 leaving interest payable of $647 at December 31, 2012 and 2011.
Notes and interest payable to others consisted of the following at December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Notes payable, non-affiliates; interest at 8% and due on demand
|
|
$
|
580,063
|
|
|
$
|
489,373
|
|
|
|
|
|
|
|
|
|
|
Interest payable, non-affiliates
|
|
|
65,547
|
|
|
|
30,521
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, other
|
|
$
|
645,610
|
|
|
$
|
519,894
|
|
AlumiFuel Power Corporation Convertible Promissory Notes
Convertible Notes and Debentures with Embedded Derivatives:
From time-to-time, we issue convertible promissory notes and debentures with conversion features that we have determined represent an embedded derivative as they are convertible into a variable number of shares upon conversion. Accordingly, these notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted for separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments are recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the notes in the period in which they are issued. Such discount is capitalized and amortized over the life of the notes. The change in the fair value of the liability for derivative contracts is credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The face amount of the corresponding notes are stripped of their conversion feature due to the accounting for the conversion feature as a derivative, which is recorded using the residual proceeds to the conversion option attributed to the debt.
2009/2010 Convertible Debentures
In September 2009 through January 2010 we issued $435,000 of 6% unsecured convertible debentures in transactions with private investors (the “Debentures”). We received net proceeds from the Debentures of $363,190 after debt issuance costs of $71,810 paid to the placement agent. Additionally, the placement agent received a one-time issuance of 900,000 shares of our $0.001 par value common stock valued at $117,000 or $0.13 per share, the market price for our common stock on the date of issuance.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Among other terms of the offering, the Debentures were originally due in January 2013, but have been extended to December 31, 2013. The Debentures are convertible at a conversion price equal to 75% of the lowest closing bid price per share of the Company’s common stock for the twenty (20) trading days immediately preceding the date of conversion.
The debt issuance costs of $188,810 were being amortized over the three year term of the Debentures so that as of December 31, 2013, all $188,810 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the Debentures resulted in an initial debt discount of $435,000 and an initial loss on the valuation of derivative liabilities of $71,190 for a derivative liability balance of $506,190 at issuance
.
The fair value of the Debentures were calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
9/29/2009
|
|
$
|
207,429
|
|
3 years
|
|
$
|
0.105
|
|
|
$
|
0.13
|
|
|
|
195
|
%
|
|
|
1.38
|
%
|
10/15/2009
|
|
$
|
117,800
|
|
3 years
|
|
$
|
0.075
|
|
|
$
|
0.12
|
|
|
|
196
|
%
|
|
|
1.38
|
%
|
11/15/2009
|
|
$
|
77,778
|
|
3 years
|
|
$
|
0.045
|
|
|
$
|
0.09
|
|
|
|
193
|
%
|
|
|
1.38
|
%
|
12/15/2009
|
|
$
|
15,200
|
|
3 years
|
|
$
|
0.038
|
|
|
$
|
0.05
|
|
|
|
192
|
%
|
|
|
1.13
|
%
|
1/19/2010
|
|
$
|
67,667
|
|
3 years
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
|
|
195
|
%
|
|
|
1.38
|
%
|
1/28/2010
|
|
$
|
20,317
|
|
3 years
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
|
|
195
|
%
|
|
|
1.38
|
%
|
As of December 31, 2011, the total face value of the Debentures outstanding was $153,500.
During the year ended December 31, 2012, the debenture holders converted a total of $106,500 in face value of the debentures to 2,431,667 shares of our common stock, or $0.044 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $143,929 and as of December 31, 2012, the total face value of the Debentures outstanding was $47,000.
During the year ended December 31, 2013, the debenture holders converted a total of $37,000 in face value of the debentures to 2,466,667 shares of our common stock, or $0.015 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $49,333 and as of December 31, 2013, the total face value of the Debentures outstanding was $10,000.
At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. Therefore, for the period from their issuance to that date, the Company has recorded an expense and decreased the previously recorded liabilities by $492,857 resulting in a derivative liability balance of $13,333 at December 31, 2013.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
13,333
|
|
3 years
|
|
$
|
0.0055
|
|
|
|
188
|
%
|
|
|
1.25
|
%
|
2011 Convertible Notes
During the year ended December 31, 2011, the Company entered into four separate note agreements from September through December with an institutional investor for the issuance of a convertible promissory notes in the aggregate amount of $152,500. These notes were completely repaid as of September 30, 2012. We received net proceeds from the 2011 Convertible Notes of $142,500 after debt issuance costs of $10,000 paid for lender legal fees. These debt issuance costs were amortized over the period the Notes were outstanding.
The fair value of the 2011 Convertible Notes was calculated at each issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
5/13/2011
|
|
$
|
111,364
|
|
9 months
|
|
$
|
0.0022
|
|
|
$
|
0.0089
|
|
|
|
163
|
%
|
|
|
0.19
|
%
|
9/2/2011
|
|
$
|
33,333
|
|
9 months
|
|
$
|
0.002
|
|
|
$
|
0.001
|
|
|
|
155
|
%
|
|
|
0.09
|
%
|
10/24/2011
|
|
$
|
48,485
|
|
9 months
|
|
$
|
.0017
|
|
|
$
|
.0033
|
|
|
|
210
|
%
|
|
|
0.09
|
%
|
12/12/2011
|
|
$
|
42,500
|
|
9 months
|
|
$
|
.001
|
|
|
$
|
.002
|
|
|
|
218
|
%
|
|
|
0.08
|
%
|
The beneficial conversion feature (an embedded derivative) included in the 2011 Convertible Notes resulted in total initial debt discounts of $142,500 and a total initial loss on the valuation of derivative liabilities of $83,182 for a derivative liability balance of $235,682 total for their issuances
.
As of December 31, 2011, and the total face value of the 2011 Convertible Notes outstanding was $117,500.
During the year ended December 31, 2012, the note holders converted the entire remaining balance of $117,500 in face value and $3,300 in accrued interest to 2,390,219 shares of our common stock, or $0.06 per share. As a result of these transactions, the entire derivative liability of $235,682 for the converted notes was extinguished as of December 31, 2012.
Converted AFPI Notes
In November and December 2011, two holders of certain demand promissory notes issued by AFPI totaling $125,000 sold them to an unaffiliated third party investor (the "Converted AFPI Notes"). We agreed to allow conversion of the Converted AFPI Notes into shares of our common stock at a 50% discount to the lowest three trading prices in the ten days prior to conversion. The principal balance on these notes was $85,000 at December 31, 2011. In addition, in January 2012, we agreed to convert $22,500 in accrued interest on these notes to a convertible note with the same conversion terms, interest at a rate of 8% and due in 12 months.
The beneficial conversion feature (an embedded derivative) included in the Converted AFPI Notes resulted in an initial debt discount of $147,500 and an initial loss on the valuation of derivative liabilities of $110,133 for a derivative liability balance of $257,633 at issuance
.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
4/4/2011
|
|
$
|
58,824
|
|
3 months
|
|
$
|
0.0009
|
|
|
$
|
0.0021
|
|
|
|
179
|
%
|
|
|
0.25
|
%
|
12/1/2011
|
|
$
|
83,333
|
|
6 months
|
|
$
|
0.0006
|
|
|
$
|
0.0021
|
|
|
|
199
|
%
|
|
|
0.07
|
%
|
12/1/2011
|
|
$
|
83,333
|
|
6 months
|
|
$
|
0.0006
|
|
|
$
|
0.0021
|
|
|
|
199
|
%
|
|
|
0.07
|
%
|
1/2/12
|
|
$
|
32,143
|
|
12 months
|
|
$
|
0.0007
|
|
|
$
|
0.0015
|
|
|
|
226
|
%
|
|
|
0.11
|
%
|
During the year ended December 31, 2012, the note holders converted $107,500 face value and $1,144 in interest payable on the notes to 3,045,755 shares of our common stock, or $0.04 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $210,574 for the converted notes and as of December 31, 2012, and the total face value of the Converted AFPI Notes outstanding was $0.
November 2011 Note
In November 2011, a holder of debt issued by AFPI totaling $52,000 sold that debt to an unaffiliated third party investor. As part of this transaction, the Company agreed to amend the terms of the debt for the new holder in the form of an amended promissory note (the "November 2011 Note"). The November 2011 Note matured in November 2012, carries an interest rate of 12% and is convertible into shares of our common stock at a 50% discount to the lowest trading price in the three days prior to conversion. The Company may prepay the notes at any time they remain outstanding at 150% of the outstanding principal balance, however, the holder may convert the notes to stock within three days of such notice.
The beneficial conversion feature (an embedded derivative) included in the November 2011 Note resulted in an initial debt discount of $52,000 and an initial loss on the valuation of derivative liabilities of $86,667 for a derivative liability balance of $138,667 at issuance
.
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
11/23/11
|
|
$
|
138,667
|
|
12 months
|
|
$
|
0.0008
|
|
|
$
|
0.0026
|
|
|
|
241
|
%
|
|
|
0.1
|
%
|
During the year ended December 31, 2012, the note holders converted the entire $39,000 face value of the notes to 368,333 shares of our common stock, or $0.10 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $55,714 for these notes and as of December 31, 2012, the total face value of the Debentures outstanding was $-0-.
January 2012 Convertible Notes
In January 2012 we issued two convertible notes of $25,000 each for a total of $50,000 to an unaffiliated third party investor. These notes are due six months from issuance, carry interest at 10% per annum and are convertible at $0.0012 per share. The Company has determined that the conversion feature does not represent an embedded derivative as the conversion price was known and was not variable making it conventional. The Company determined there was a beneficial conversion feature related to the January 2012 Convertible Notes based on the difference between the conversion price of $0.0012 and the market price of the Company’s common stock on the issue dates and recorded as interest expense $4,167 with an offset to additional paid-in capital.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 2012 Interest Note
In January 2012, we converted a total of $26,100 in interest payable on $75,000 in notes of the Company and AFPI to an unaffiliated note holder to a convertible note. This note is due in January 2013 and carries an interest rate of 8% per annum. The note is convertible into shares of our common stock at a 50% discount to the lowest three trading prices in the ten days prior to conversion.
The beneficial conversion feature (an embedded derivative) included in the January 2012 Interest Note resulted in an initial debt discount of $26,100 and an initial loss on the valuation of derivative liabilities of $11,186 for a derivative liability balance of $37,286 at issuance
.
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
1/2/12
|
|
$
|
37,286
|
|
12 months
|
|
$
|
0.0007
|
|
|
$
|
0.0014
|
|
|
|
226
|
%
|
|
|
0.11
|
%
|
At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding January 2012 Interest Note. As a result, for the period from their issuance to December 31, 2013, the Company has recorded an adjustment and increased the previously recorded liabilities by $14,914 resulting in a derivative liability balance of $52,200 at December 31, 2013.
The fair value of the convertible note was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
52,200
|
|
6 months
|
|
$
|
0.00005
|
|
|
|
312
|
%
|
|
|
0.13
|
%
|
September 2012 Convertible Note
In September 2012 we issued $35,000 of 6% unsecured convertible debenture with a private investor (the “Sept Debenture”). The Sept Debenture is due in September and is convertible at 50% of the lowest closing bid price per of the Company’s common stock for the twenty (20) trading days immediately preceding the date of conversion. In addition, the Sept Debenture provides for adjustments in the case of certain corporate actions.
Debt issuance costs totaling $11,500 are being amortized over the three year term of the Sept Debenture or such shorter period as the Sept Debenture may be outstanding. Accordingly, as the Sept Debenture is converted to common stock, that amount of debt issuance costs attributable to the amounts converted will be accelerated and expensed as of the applicable conversion dates. As of December 31, 2012, $958 of these costs had been expensed as debt issuance costs.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The beneficial conversion feature (an embedded derivative) included in the Sept Debenture resulted in an initial debt discount of $35,000 and an initial loss on the valuation of derivative liabilities of $35,000 for a derivative liability balance of $70,000 at issuance
.
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
9/27/12
|
|
$
|
70,000
|
|
3 years
|
|
$
|
0.00005
|
|
|
$
|
0.0002
|
|
|
|
271
|
%
|
|
|
0.33
|
%
|
At December 31, 2012, the Company revalued the derivative liability balance of the remaining outstanding January 2012 Interest Note. As a result, for the period from their issuance to December 31, 2012, the Company recorded no adjustment to the previously recorded liabilities resulting in a derivative liability balance of $70,000 at December 31, 2012.
During the year ended December 31, 2013, the note holder converted the entire $35,000 in face value of the Sept Debenture to 47,442,640 shares of our common stock, or $0.0007 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $70,000.
October 2012 Convertible Notes
In October 2012 we issued $10,000 of 8% unsecured convertible debenture with a private investor at which time the investor also purchased $50,000 in existing notes from one of our third party note holders (together the “October Notes”). The October Notes are due in October 2013 and are convertible at 50% of the lowest closing price per share of the Company’s common stock for the thirty (30) trading days immediately preceding the date of conversion.
Debt issuance costs totaling $1,000 are being amortized over the term of the October Notes or such shorter period as the October Notes may be outstanding. As of December 31, 2013, $208 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the October Notes resulted in an initial debt discount of $60,000 and an initial loss on the valuation of derivative liabilities of $60,000 for a derivative liability balance of $120,000 at issuance
.
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
10/12/12
|
|
$
|
50,000
|
|
1 year
|
|
$
|
0.00005
|
|
|
$
|
0.0002
|
|
|
|
236
|
%
|
|
|
0.18
|
%
|
10/17/12
|
|
$
|
10,000
|
|
1 year
|
|
$
|
0.00005
|
|
|
$
|
0.0002
|
|
|
|
236
|
%
|
|
|
0.18
|
%
|
During the year ended December 31, 2012, the debenture holders converted a total of $32,500 in face value of the debentures to 3,250,000 shares of our common stock, or $0.01 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $65,000 and as of December 31, 2012, the total face value of the Debentures outstanding was $27,500.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 2013, the October Notes holders converted a total of $24,520 in face value of the October Notes plus $514 in interest to 21,581,793 shares of our common stock, or $0.0011 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $60,000 and as of September 30, 2013, the total face value of the October Notes outstanding was $2,980.
At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. Therefore, for the period from their issuance to that date the Company has recorded an expense and decreased the previously recorded liabilities by $114,040 resulting in a derivative liability balance of $5,960 at December 31, 2013.
The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
5,960
|
|
1 year
|
|
$
|
0.00005
|
|
|
|
312
|
%
|
|
|
0.13
|
%
|
October/November Convertible Notes
In October and November 2012 a private investor purchased a total of $139,600 in existing notes from one of our third party note holders (together the “October/November Notes”). The notes were amended to include a maturity date that is nine months from the amendment date or July/August 2013 and have an 8% interest rate.
The October/November Notes are convertible at 50% ($124,300) and 45% ($15,300) of the lowest closing bid price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the October/November Notes resulted in an initial debt discount of $139,600 and an initial loss on the valuation of derivative liabilities of $143,000 for a derivative liability balance of $282,600 at issuance
.
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
10/11/12
|
|
$
|
13,000
|
|
9 months
|
|
$
|
0.00005
|
|
|
$
|
0.0002
|
|
|
|
208
|
%
|
|
|
0.06
|
%
|
11/15/12
|
|
$
|
15,300
|
|
9 months
|
|
$
|
0.000045
|
|
|
$
|
0.0001
|
|
|
|
255
|
%
|
|
|
0.16
|
%
|
11/29/12
|
|
$
|
50,000
|
|
9 months
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
255
|
%
|
|
|
0.16
|
%
|
11/30/12
|
|
$
|
61,300
|
|
9 months
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
255
|
%
|
|
|
0.16
|
%
|
During the year ended December 31, 2012, the debenture holders converted a total of $14,600 in face value of the debentures to 3,250,000 shares of our common stock, or $0.01 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $31,000 and as of December 31, 2012, the total face value of the Debentures outstanding was $125,000.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During year ended December 31, 2013, the note holders converted a total of $46,901 in face value of the October/November Notes to 111,750,000 shares of our common stock, or $0.00042 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $66,962 and as of December 31, 2013, the total face value of the October/November Notes outstanding was $78,099.
At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. For the period from their issuance to December 31, 2012, there was an $126,962 decrease to the previously recorded liabilities resulting in a derivative liability balance of $155,638 at December 31, 2013.
The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
155,638
|
|
9 months
|
|
$
|
0.00005
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
2012 and 2013 Asher Convertible Notes
During the six month period ended June 30, 2012, the Company entered into four separate note agreements with an institutional investor for the issuance of convertible promissory notes in the aggregate amount of $134,000 on the following dates and in the following amounts (together the "2012 Asher Convertible Notes"):
Date of Issue
|
|
Amount
|
|
Due Date
|
1/24/12
|
|
$
|
36,000
|
|
October 19, 2012
|
3/7/12
|
|
$
|
33,000
|
|
December 5, 2012
|
4/12/12
|
|
$
|
32,500
|
|
January 16, 2013
|
5/10/12
|
|
$
|
32,500
|
|
February 13, 2013
|
During the nine month period ended September 30, 2013, the Company entered into note agreements with the same institutional investor for the issuance of convertible promissory notes in the aggregate amount of $50,000 on the following dates and in the following amounts (the "2013 Asher Convertible Notes"):
Date of Issue
|
|
Amount
|
|
Due Date
|
5/31/13
|
|
$
|
27,500
|
|
February 24, 2014
|
7/31/13
|
|
$
|
22,500
|
|
April 22, 2014
|
Together, the above notes comprise the "2012 and 2013 Asher Convertible Notes".
The 2012 and 2013 Asher Convertible Notes are convertible at 50% of the average of the lowest three trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion and carry an interest rate of 8% per annum.
We received net proceeds from the 2012 Asher Convertible Notes of $124,000 after debt issuance costs of $10,000 paid for lender legal fees. As of December 31, 2013, all of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the 2012 Asher Convertible Notes resulted in total initial debt discounts of $134,000 and a total initial loss on the valuation of derivative liabilities of $96,167 for a derivative liability balance of $230,167 total for their issuances
.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
We received net proceeds from the 2013 Asher Convertible Notes of $45,000 after debt issuance costs of $5,000 paid for lender legal fees. These debt issuance costs will be amortized over the terms of the 2013 Asher Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2013, $3,541 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the 2013 Asher Convertible Notes resulted in total initial debt discounts of $50,000 and a total initial loss on the valuation of derivative liabilities of $38,500 for a derivative liability balance of $88,500 total at issuance
.
The fair value of the 2012 and 2013 Asher Convertible Notes were calculated at each issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
1/24/12
|
|
$
|
60,000
|
|
9 months
|
|
$
|
0.0006
|
|
|
$
|
0.0014
|
|
|
|
220
|
%
|
|
|
0.09
|
%
|
3/7/12
|
|
$
|
66,000
|
|
9 months
|
|
$
|
0.0005
|
|
|
$
|
0.0011
|
|
|
|
133
|
%
|
|
|
0.14
|
%
|
4/12/12
|
|
$
|
66,667
|
|
9 months
|
|
$
|
0.00045
|
|
|
$
|
0.0014
|
|
|
|
140
|
%
|
|
|
0.17
|
%
|
5/10/12
|
|
$
|
37,500
|
|
9 months
|
|
$
|
0.0004
|
|
|
$
|
0.0009
|
|
|
|
112
|
%
|
|
|
0.17
|
%
|
5/31/13
|
|
$
|
49,500
|
|
9 months
|
|
$
|
0.0025
|
|
|
$
|
0.0082
|
|
|
|
328
|
%
|
|
|
0.11
|
%
|
7/31/13
|
|
$
|
39,000
|
|
9 months
|
|
$
|
0.00075
|
|
|
$
|
0.0016
|
|
|
|
313
|
%
|
|
|
0.11
|
%
|
During the year ended December 31, 2012, the 2012 Asher Convertible Notes holders converted a total of $28,100 in principal to 2,810,000 shares of our common stock, or $0.01 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $56,200 and as of December 31, 2012, the total face value of the 2012 Asher Convertible Notes outstanding was $105,900.
During the year ended December 31, 2013, the 2012 Asher Convertible Notes holders converted the remaining $105,900 principal and $7,960 in interest to 147,451,365 shares of our common stock, or $0.0007 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $230,167.
During the year ended December 31, 2013, the 2013 Asher Convertible Notes holders converted a total of $10,390 in principal to 97,380,953 shares of our common stock, or $0.0001 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $17,317 and as of December 31, 2013, the total face value of the 2012 Asher Convertible Notes outstanding was $39,610.
At December 31, 2013, the Company revalued the derivative liability balance of the outstanding 2013 Asher Convertible Notes and as a result, for the period from their issuance to December 31, 2013, the Company has recorded an adjustment and decreased the previously recorded liabilities by $9,280 resulting in a derivative liability balance of $79,220 at December 31, 2013.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of the 2013 Asher Convertible Notes was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
79,220
|
|
9 months
|
|
$
|
0.00005
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
February 2013 Notes
In February 2013, an investor purchased a note in the amount of $26,000 from one of our third party note holders (the "February 2013 Notes"). The February 2013 Notes may be converted at any time at the lower of a discount to market of 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion, or $0.00005, as adjusted for splits and other events. This note has an interest rate of 8% per annum and is due in January 2014.
The beneficial conversion feature (an embedded derivative) included in the February 2013 Notes resulted in an initial debt discount of $26,000 and an initial loss on the valuation of derivative liabilities of $26,000 for a derivative liability balance of $52,000 at issuance
.
The fair value of the February 2013 Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
2/13/13
|
|
|
52,000
|
|
1 year
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
296
|
%
|
|
|
0.15
|
%
|
During the year ended December 31, 2013, the note holders converted a total of $26,000 in face value of the February 2013 Notes to 13,852,300 shares of our common stock, or $0.0019 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $52,000 and as of September 30, 2013, the total face value of the February 2013 Notes outstanding was $0.
May 2013 Notes
In May 2013 we issued $2,500 of 8% unsecured convertible note with the same private investor (the “May 2013 Notes”). The May 2013 Notes are due in February 2014 and are convertible at 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the May 2013 Notes resulted in an initial debt discount of $2,500 and an initial loss on the valuation of derivative liabilities of $2,232 for a derivative liability balance of $4,732 at issuance
.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
5/14/13
|
|
$
|
4,732
|
|
1 year
|
|
$
|
0.0013
|
|
|
$
|
0.0025
|
|
|
|
365
|
%
|
|
|
0.11
|
%
|
At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding May 2013 Notes totaling $2,500. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $268 resulting in a derivative liability balance of $5,000 at December 31, 2013.
The fair value of the May 2013 Notes was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
5,000
|
|
1 year
|
|
$
|
0.00005
|
|
|
|
312
|
%
|
|
|
0.13
|
%
|
2013 CareBourn Notes
In the year ended December 31, 2013 a private investor purchased a total of $118,351 in existing notes from one of our third party note holders and loaned an additional $32,000 in new notes for a total of $118,351 (together the “2013 CareBourn Notes”). The assumed notes have an interest rate of 6% per annum. The new notes are due in December 2013 and have an 8% interest rate.
The 2013 Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the lowest closing bid price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the 2013 CareBourn Notes resulted in an initial debt discount of $151,351 and an initial loss on the valuation of derivative liabilities of $91,683 for a derivative liability balance of $242,034 at issuance
.
The fair value of the 2013 CareBourn Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
2/5/13
|
|
$
|
59,683
|
|
6 months
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
271
|
%
|
|
|
0.11
|
%
|
3/7/13
|
|
$
|
15,000
|
|
9 months
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
295
|
%
|
|
|
0.13
|
%
|
3/22/13
|
|
$
|
17,000
|
|
9 months
|
|
$
|
0.00005
|
|
|
$
|
0.0001
|
|
|
|
295
|
%
|
|
|
0.13
|
%
|
11/14/13
|
|
$
|
58,667
|
|
6 months
|
|
$
|
0.0004
|
|
|
$
|
0.0002
|
|
|
|
133
|
%
|
|
|
0.10
|
%
|
During the year ended December 31, 2013, the note holders converted a total of $17,140 in face value of the 2013 CareBourn Notes to 60,100,000 shares of our common stock, or $0.0003 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $30,256 and as of December 31, 2013, the total face value of the 2013 Convertible Notes outstanding was $133,211.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding 2013 Convertible Notes. For the period from their issuance to that date there was an increase of $24,387 to the previously recorded liabilities resulting in a derivative liability balance of $266,421 at December 31, 2013.
The fair value of the 2013 Convertible Notes was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
64,000
|
|
6 months
|
|
$
|
0.00035
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
$
|
202,421
|
|
9 months
|
|
$
|
0.00035
|
|
|
|
138
|
%
|
|
|
0.09
|
%
|
JMJ Convertible Note
In June 2013 we issued $16,500 of 12% unsecured convertible note with a private investor (the “JMJ Convertible Note”). The JMJ Convertible Note is due in May 2014 and is convertible at 60% of the lowest trading price per share of the Company’s common stock for the twenty-five (25) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the JMJ Convertible Note resulted in an initial debt discount of $16,500 and an initial loss on the valuation of derivative liabilities of $15,180 for a derivative liability balance of $31,680 at issuance
.
The fair value of the JMJ Convertible Note was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
6/6/13
|
|
$
|
31,660
|
|
1 year
|
|
$
|
0.0025
|
|
|
$
|
0.0073
|
|
|
|
367
|
%
|
|
|
0.14
|
%
|
During the year ended December 31, 2013, the note holders converted a total of $2,200 in face value of the 2013 CareBourn Notes to 22,000,000 shares of our common stock, or $0.0001 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $3,667 and as of December 31, 2013, the total face value of the 2013 Convertible Notes outstanding was $14,300.
At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding JMJ Convertible Note. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and decreased the previously recorded liabilities by $7,847 resulting in a derivative liability balance of $23,833 at December 31, 2013.
The fair value of the JMJ Convertible Note was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
23,833
|
|
1 year
|
|
|
0.00006
|
|
|
|
312
|
%
|
|
|
0.013
|
%
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Bohn Convertible Note
In May 2013 we issued a $20,000 8% unsecured convertible note with a private investor (the “Bohn Convertible Note”). The Bohn Convertible Note is due in November at a conversion price of 75% of the lowest trading price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the Bohn Convertible Note resulted in an initial debt discount of $20,000 and an initial loss on the valuation of derivative liabilities of $11,429 for a derivative liability balance of $31,429 at issuance
.
The fair value of the Bohn Convertible Note was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
6/6/13
|
|
$
|
31,249
|
|
6 months
|
|
$
|
0.0028
|
|
|
$
|
0.0060
|
|
|
|
292
|
%
|
|
|
0.08
|
%
|
At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding Bohn Convertible Note. Therefore, for the period from its issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $8,571 resulting in a derivative liability balance of $40,000 at December 31, 2013.
The fair value of the Bohn Convertible Note was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
40,000
|
|
6 months
|
|
$
|
0.0003
|
|
|
|
139
|
%
|
|
|
0.09
|
%
|
Wexford Convertible Note
In May 2013, we issued a $75,000 convertible note to the former landlord of API as part of a settlement agreement with respect to a Judgment by Confession entered against API in the Court of Common Pleas Philadelphia County in Philadelphia as described more fully in Note 7 - Commitments and Contingencies below. This note is due in May 2014 and carries an interest rate of 8% per annum. This note may be converted at any time beginning on November 30, 2013 into shares of our common stock at the average of the lowest three (3) Trading Prices for the common stock during the ten trading days prior to the Conversion Date. As this note is convertible at market, there is no imbedded derivative and therefore no corresponding derivative liability.
WHC Capital Note
During the year ended December 31, 2013, an unaffiliated institutional investor purchased three notes totaling $19,900 from one of our third party note holders and issued a new notes in the amount of $10,000 for a total of $29,900 in amounts due (the "WHC Notes"). The WHC Notes may be converted at any time at a discount to market of 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion as adjusted for splits and other events. This notes have an interest rate of 8% per annum and are due in June 2014.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The beneficial conversion feature (an embedded derivative) included in the WHC Notes resulted in an initial debt discount of $29,900 and an initial loss on the valuation of derivative liabilities of $25,178 for a derivative liability balance of $55,078 at issuance
.
The fair value of the WHC Notes was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
7/25/13
|
|
|
18,078
|
|
11 months
|
|
|
0.00115
|
|
|
|
0.0019
|
|
|
|
337
|
%
|
|
|
0.12
|
%
|
8/13/13
|
|
|
7,000
|
|
11 months
|
|
|
0.0005
|
|
|
|
0.0014
|
|
|
|
396
|
%
|
|
|
0.11
|
%
|
11/26/13
|
|
|
20,000
|
|
12 months
|
|
|
0.00015
|
|
|
|
0.0005
|
|
|
|
305
|
%
|
|
|
0.13
|
%
|
12/6/13
|
|
|
10,000
|
|
12 months
|
|
|
0.00015
|
|
|
|
0.0005
|
|
|
|
305
|
%
|
|
|
0.13
|
%
|
During the year ended December 31, 2013, the note holders converted a total of $13,688 in face value and $78 in interest of the WHC Notes to 61,828,388 shares of our common stock, or $0.0002 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $23,280 and as of December 31, 2013, the total face value of the WHC Notes outstanding was $16,212.
At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding WHC Notes. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $22,654 resulting in a derivative liability balance of $32,424 at December 31, 2013.
The fair value of the WHC Notes was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
10,000
|
|
11 months
|
|
|
0.00005
|
|
|
|
278
|
%
|
|
|
0.13
|
%
|
$
|
22,424
|
|
12 months
|
|
|
0.0005
|
|
|
|
312
|
%
|
|
|
0.013
|
%
|
Schaper Note
In December 2013 we issued a $15,000 8% unsecured convertible note with a private investor (the “Schaper Note”). The Schaper Note is due in August 2014 at a conversion price of 50% of the lowest three trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the Schaper Note resulted in an initial debt discount of $15,000 and an initial loss on the valuation of derivative liabilities of $5,000 for a derivative liability balance of $20,000 at issuance
.
The fair value of the Schaper Note was calculated at issue date utilizing the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
12/3/13
|
|
$
|
20,000
|
|
9 months
|
|
$
|
0.00015
|
|
|
$
|
0.0004
|
|
|
|
252
|
%
|
|
|
0.12
|
%
|
At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding Schaper Note. Therefore, for the period from its issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $10,000 resulting in a derivative liability balance of $30,000 at December 31, 2013.
The fair value of Schaper Note was calculated at December 31, 2013 utilizing the following assumptions:
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
$
|
30,000
|
|
9 months
|
|
$
|
0.00005
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Debentures and convertible notes and interest payable consisted of the following at December 31, 2012 and 2011:
Short-term liabilities:
|
|
2012
|
|
|
2012
|
|
|
|
|
|
|
|
|
Convertible debentures; non-affiliates; interest at 6% and due December 2013; outstanding principal of $10,000 face value; net of discount of $0
|
|
|
10,000
|
|
|
|
44,395
|
|
|
|
|
|
|
|
|
|
|
2012 & 2013 Convertible Notes; non-affiliate, interest at 8%; due May 2012-April 2014; $39,610 face value net of discount of $18,650
|
|
|
20,960
|
|
|
|
102,289
|
|
|
|
|
|
|
|
|
|
|
January 2012 Convertible Notes; non-affiliate; interest at 8%; due January 2013
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
January 2012 Interest Note; non-affiliate; interest at 8%; due January 2013; $26,100 face value net of discount of $0
|
|
|
26,100
|
|
|
|
26,100
|
|
|
|
|
|
|
|
|
|
|
October 2012 Convertible Notes; non-affiliate; interest at 8%; due October 2013; $5,480 face value net of discount of $938
|
|
|
4,542
|
|
|
|
5,729
|
|
|
|
|
|
|
|
|
|
|
October/November Convertible Notes; non-affiliate; interest at 8%; $82,299 face value net of discount of $0
|
|
|
78,099
|
|
|
|
15,734
|
|
|
|
|
|
|
|
|
|
|
2013 CareBourn Notes; non-affiliate; interest at 6-8%; due August 2013 to August 2014; $133,211 face value net of discount of $44,000
|
|
|
89,211
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
JMJ Convertible Notes; non-affiliate; interest at 12%; due June 2014; $14,300 face value net of discount of $3,667
|
|
|
10,633
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Bohn Convertible Note; non-affiliate; interest at 8%; due November 2013; $20,000 face value net of discount of $0
|
|
|
20,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Wexford Convertible Note; non-affiliate; interest at 8%; $75,000 face value net of discount of $0
|
|
|
75,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
WHC Convertible Note; non-affiliate; interest at 8%; $16,212 face value net of discount of $12,184
|
|
|
4,028
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Schaper Note; non-affiliate; interest at 8%; due August 2014; face value $15,000 net of discount of $13,333
|
|
|
1,667
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total short-term convertible notes
|
|
$
|
390,240
|
|
|
$
|
244,247
|
|
|
|
|
|
|
|
|
|
|
Interest payable, short-term convertible notes
|
|
|
93,347
|
|
|
|
68,476
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, short-term convertible notes
|
|
$
|
483,587
|
|
|
$
|
315,640
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures; non-affiliates; interest at 6% and due September 2015; outstanding principal of $35,000 face value; net of discount of $32,083
|
|
|
-
|
|
|
|
2,917
|
|
|
|
|
|
|
|
|
|
|
Interest payable, long-term convertible notes
|
|
|
-
|
|
|
|
729
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, other
|
|
$
|
-
|
|
|
$
|
3,646
|
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 4. OTHER SELLING GENERAL AND ADMINISTRATIVE EXPENSES
Other selling general and administrative expense for the years ended December 31, 2013 and 2012 consisted of the following:
|
|
Year ended December 31, 2013
|
|
|
Year ended December 31, 2012
|
|
General and administrative
|
|
$
|
128,889
|
|
|
$
|
197,952
|
|
Legal and accounting
|
|
|
29,611
|
|
|
|
32,600
|
|
Professional services
|
|
|
175,974
|
|
|
|
191,471
|
|
Bad debt expense
|
|
|
11,122
|
|
|
|
8,780
|
|
Recovery of allowed for debt
|
|
|
(120,750
|
)
|
|
|
(45,154
|
)
|
Salaries
|
|
|
200,000
|
|
|
|
227,533
|
|
|
|
$
|
424,846
|
|
|
$
|
613,182
|
|
NOTE 5. NOTES RECEIVABLE
At December 31, 2013 and 2012, there were $152,353 and $307,578 in loans due the Company from FastFunds Financial Corporation (“FFFC”), an affiliate in which the Company is a minority stockholder, to assist FFFC in payment of its ongoing payment obligations and protect the Company's investment. Of this amount, $1,900 was advanced in 2013 and $8,780 was loaned in 2012. During the years ended December 31, 2013 and 2012, FFFC was able to repay $120,750 and $46,255 in principal and $17,325 in interest on these loans. Each of these loans carries an interest rate of 8% per annum and are due on demand. Management of the Company evaluated the likelihood of payment on these notes and has determined that an allowance of the entire balance due is appropriate. Accordingly, the Company recorded bad debt expense of $1,900 in the year ended December 31, 2013 and $8,780 in the year ended December 31, 2012 that is included in other selling, general and administrative expenses on the Company’s statement of operations for each period. The Company has allowed for all interest due on these notes and did not record any interest receivable during the years ended December 31, 2013 and 2012. Given the uncertainty of payments on these notes, if payments of interest are received they are considered interest income that is offset against interest expense.
As of December 31, 2013 and 2012, the Company had $8,000 due from an affiliated publicly traded company. This note carries interest at 8% per annum and is due on demand. The entire principal balance of $8,000 plus $1,222 and $743 in accrued interest remained receivable at December 31, 2012 and 2011, respectively. Management of the Company evaluated the likelihood of payment on these notes and has determined that an allowance of the entire balance due is appropriate. Accordingly, the Company recorded bad debt expense of $9,383 in the year ended December 31, 2013 that is included in other selling, general and administrative expenses on the Company’s statement of operations for each period. The Company also recorded bad debt expense of $1,222 in interest owed as of September 30, 2013, which is considered interest income and offset against income expense, and is no longer recording interest receivable on these notes.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 6. CAPITAL STOCK
On September 12, 2012, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 3,010,000,000 shares to 7,510,000,000 shares, of which 10,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective September 6, 2012, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on September 6, 2012.
Effective on April 24, 2013, the Company effectuated a 1 for 200 reverse stock split. As a result of this transaction, a total of 6,406,699,320 shares of issued and outstanding pre-split common stock became 32,033,497 shares of post-split common stock. The Company filed a Certificate of Change with the Secretary of State of Nevada, pursuant to which the Company effectuated the reverse split as well as decreased the authorized capital stock of the Company from 7,510,000,000 shares to 760,000,000 shares, of which 750,000,000 shares are $0.001 par value common stock and 10,000,000 shares may be $0.001 par value preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. As a result of the reverse split, the number of shares outstanding and per share information for all prior periods presented have been retroactively restated to reflect the new capital structure.
On October 14, 2013, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 510,000,000 shares to 760,000,000 shares, of which 10,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective October 11, 2013, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on October 11, 2013.
Common Stock
During the year ended December 31, 2012, the Company issued 10,000,000 shares of common stock in a private placement to unaffiliated investors for total proceeds of $5,000 or $0.0005 per share. We recorded $6,000 in "stock compensation cost" in our statements of operations for the year ended December 31, 2012 to record the beneficial conversion feature relating to the difference between the market price and the sales price on the date of issuance.
During the year ended December 31, 2012, we issued a total of 3,353,204,766 shares of our common stock on the conversion of $493,893 in principal and interest on our various convertible promissory notes. In addition to the face value of the notes, the Company recorded $711,709 in additional expense for the derivative liability for a total cost to the Company of $1,205,602 or $0.00036 per share.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During the year ended December 31, 2012, we issued 66,300,000 shares of our common stock to a noteholder upon conversion of $33,150 in promissory notes. In addition to the face value of the notes, the Company recorded $58,410 in additional expense for the difference between the conversion price ($0.0005) and the market price on the issuance dates for a total cost to the Company of $91,560 or $0.0014 per share.
During the year ended December 31, 2012, we executed a consulting agreement with an unaffiliated third party through which we paid the consultant 20,000,000 shares of our common stock valued at $20,000 reflecting the market price on the date of issuance.
During the year ended December 31, 2012, we issued 60,000,000 shares to three unaffiliated purchasers of common stock that participated in private placements of our common stock in the previous six months. Due to delays in issuing the stock to these investors, the Company agreed to lower the purchase price for the shares to $0.003 per share. We recorded a total of $60,000 as "stock compensation cost" in our statements of operations for the nine months ended September 30, 2012 based on the market value of these shares on the date of issuance.
During the year ended December 31, 2012, 6,250 shares ($6,250) of our Series B Preferred Stock were converted to 10,593,220 shares of our common stock.
During the year ended December 31, 2013, we issued a total of 607,322,918 shares of our common stock on the conversion of $447,941 in principal and interest on our various convertible promissory notes. In addition to the converted principal and interest on the notes, the Company recorded $445,537 in additional expense for the derivative liability for a total cost to the Company of $893,478 or $0.0015 per share.
During the year ended December 31, 2013, we issued 1,840,000 shares of our common stock to a noteholder upon conversion of $18,400 in promissory notes. In addition to the face value of the notes, the Company recorded $18,400 in additional expense for the difference between the conversion price ($0.01) and the market price on the issuance dates for a total cost to the Company of $36,800 or $0.02 per share.
Preferred Stock
During the year ended December 31, 2012, 6,250 shares ($6,250) of our Series B Preferred Stock were converted to 10,593,220 shares of our common stock. We recorded an expense of $8,580 for the difference in the conversion price ($0.00059) and the market price on the conversion date. This amount is included in "stock based compensation" on our statements of operations.
Also during the year ended December 31, 2012, we redeemed a total of 110,857 shares ($110,857) of our Series B Preferred Stock. The Series B Preferred includes a redemption premium of 5% during the first year of issuance therefore the total redemption amount was $116,400. The balance of $5,543 for the redemption premium was recorded as interest expense on our statements of operations in the year ended December 31, 2012.
As a result of these transactions there were 404,055 shares of our Series B Preferred Stock outstanding at December 31, 2012 and 2013. There were $78,071 and $45,747 in dividends payable on our Series B Preferred stock at December 31, 2013 and 2012, respectively, including $32,324 and $33,344 in dividends accrued for the years then ended.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Warrants
In August 2012, the Company issued a total of 150,000,000 warrants to certain warrant holders that were officers and or consultants to API upon the condition that each holder agreed to cancel 35,000,000 warrants issued in July 2011 held by them. Accordingly, the previously issued warrants were cancelled and a total of 150,000,000 new warrants were issued. These warrants vested immediately, are exercisable for a period of five years, and are exercisable at $0.002 per share. These shares were valued at $15,000 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in year ended December 31, 2012 using the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
8/1/2012
|
|
$
|
15,000
|
|
5 years
|
|
$
|
0.002
|
|
|
$
|
0.0001
|
|
|
|
241
|
%
|
|
|
0.5
|
%
|
In May 2012, we executed a consulting agreement with an unaffiliated third party through which we issued three year warrants to purchase up to 30,000,000 shares of our common stock at exercise prices of $0.0015 (10,000,000 shares), $0.002 (10,000,000 shares) and $0.004 (10,000,000 shares). These warrants were valued at $25,000 using the Black-Scholes option pricing model. As the consulting agreement carries a six month term, the value of the warrants totaling $25,000 was expensed over that six month term of the agreement and is included in "stock-based compensation" at December 31, 2012. The value was determined using the Black Scholes option pricing model using the following assumptions:
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
5/1/2012
|
|
$
|
25,000
|
|
3 years
|
|
$
|
0.0015 - $.0040
|
|
|
$
|
0.001
|
|
|
|
181
|
%
|
|
|
0.25
|
%
|
In March 2013, we issued a total of 150,000 warrants to an unaffiliated third party that are exercisable for a period of three years at an exercise price of $0.02 per share. These warrants were valued at $3,000 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in the nine month period ended September 30, 2013.
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
3/7/13
|
|
$
|
3,000
|
|
3 years
|
|
$
|
0.001
|
|
|
$
|
0.0001
|
|
|
|
275
|
%
|
|
|
0.38
|
%
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In May 2013, we issued a total of 40,000 warrants to an unaffiliated third party that are exercisable for a period of three years at an exercise price of $0.01 per share. These warrants were valued at $239 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in the nine month period ended September 30, 2013.
Issuance
Date
|
|
Fair Value
|
|
Term
|
|
Conversion
Price
|
|
|
Market Price on
Grant Date
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
5/14/13
|
|
$
|
239
|
|
3 years
|
|
$
|
0.01
|
|
|
$
|
0.006
|
|
|
|
287
|
%
|
|
|
0.25
|
%
|
A summary of the activity of the Company’s outstanding warrants at December 31, 2012 and December 31, 2013 is as follows:
|
|
Warrants
|
|
|
Weighted-average exercise price
|
|
|
Weighted-average grant date fair value
|
|
Outstanding and exercisable at December 31, 2012
|
|
|
940,000
|
|
|
$
|
0.40
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
190,000
|
|
|
|
0.016
|
|
|
|
0.017
|
|
Expired/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at December 31, 2013
|
|
|
1,130,000
|
|
|
$
|
0.43
|
|
|
$
|
0.07
|
|
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31, 2012:
Exercise price range
|
|
|
Number of options outstanding
|
|
|
Weighted-average exercise price
|
|
Weighted-average remaining life
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
40,000
|
|
|
|
0.01
|
|
2.4 years
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.20 to $0.80
|
|
|
|
1,050,000
|
|
|
|
0.39
|
|
2.3 years
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.00
|
|
|
|
40,000
|
|
|
|
2.00
|
|
2.9 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,130,000
|
|
|
$
|
0.43
|
|
2.5 years
|
Stock Options
On March 4, 2009, our board of directors authorized our 2009 Stock Incentive Plan which was amended on May 6, 2009 and approved by our stockholders effective on May 26, 2009. The plan allows for the issuance of up to 20,000,000 shares of our common stock through one or more incentive grants including stock options, stock appreciation rights, stock awards, restricted stock issuances and performance shares to officers, directors, employees and consultants of the Company. The plan is administered by our board of directors.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
All options outstanding at December 31, 2012 are fully vested and exercisable. A summary of outstanding stock option balances under 2009 Stock Incentive Plan at December 31, 2011 and at December 31, 2013 is as follows:
2009 Stock Incentive Plan
|
|
Options
|
|
|
Weighted-average exercise price
|
|
|
Weighted-average remaining contractual life (years)
|
|
|
Aggregate intrinsic value
|
|
Outstanding at December 31, 2012
|
|
|
100,000
|
|
|
$
|
15.00
|
|
|
|
1.7
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
December 31, 2013
|
|
|
100,000
|
|
|
$
|
15.00
|
|
|
|
0.8
|
|
|
$
|
0
|
|
NOTE 7. COMMITMENTS AND CONTINGENCIES
Payroll Liabilities
Following the formation of API in May 2008, HPI hired certain former employees of Hydrogen Power, Inc. and maintained an office in Seattle, Washington for a period of approximately five months. During that time, API paid wages to these employees without the benefit of a payroll management service. Upon API's move from Seattle to Philadelphia, Pennsylvania in October 2008, the Company retained the services of a payroll management service to handle its payroll functions. During the period from May to October 2008, the Company recorded $52,576 in payroll liabilities due from wages paid to its employees and has been recording estimated penalties and interest quarterly on the balance. During the year ended December 31, 2012, the Company recorded additional estimated penalty and interest expense of $14,860 for an estimated balance due at that date of $118,647. During the year ended December 31, 2013, the Company recorded additional estimated penalty and interest expense of $15,436 for an estimated balance due at that date of $134,083. This amount is included on the balance sheets at December 31, 2013 and 2012 as “payroll liabilities”.
Office Lease Agreement
Effective on July 1, 2009, API entered into a lease for office and laboratory space in the University City Science Center in Philadelphia, Pennsylvania. Totaling approximately 2,511 square feet, the term of the agreement was for five years and six months expiring on December 31, 2014. In addition, the Company was obligated to pay certain common area maintenance fees of $1,886 per month during 2011.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In November 2011, the Company determined it could no longer sustain the significant payments under the lease and vacated the premises. On November 30, 2011, API was notified that a Judgment by Confession had been entered against it in the Court of Common Pleas Philadelphia County in Philadelphia, Pennsylvania by Wexford-UCSC II, L.P., its former landlord. The Judgment by Confession assesses total damages of $428,232, which is comprised of the following: $73,995 for unpaid monthly rent, maintenance fees, interest and late charges for the period through November 30, 2011; attorney's fees of $5,000; rent and maintenance charges of $10,020 for December 2011; and the value of future rent payments for the period from January 1, 2012 to December 31, 2014 of $339,217. The complaint alleged a breach of contract and event of default for API related to this lease. As of March 31, 2013, the Company had recorded $67,429 in rent expense that was included in "accounts payable, other" as of that date. The additional judgment amount totaling $360,803 was expensed as "litigation contingency" on our statements of operations and is recorded under the same name as a liability on balance sheets at March 31, 2013.
We reached a Settlement Agreement with Wexford-UCSC II, L.P. in May 2013. Pursuant to the terms of the Settlement Agreement, the Company paid a cash payment of $2,000 and issued a Convertible Promissory Note in the amount of $75,000, as described more fully as "Wexford Convertible Note" in Note 3 - Notes Payable above. Also pursuant to the terms of the Settlement Agreement, AlumiFuel Power, Inc., AlumiFuel Power Corporation and all affiliated entities and persons have been fully released. As a result of this settlement, we recorded a gain of $351,232 listed as litigation contingency under "other income (expense" on our statements of operations for the difference between the total assessed damages of $428,232 and the settlement amount valued at $77,000.
Capital Leases
In April 2010 we leased a copier for a period of three years at $129 per month. The contract includes a buyout at lease end for $1 at which time we will own the machine. We have capitalized the value of this machine at January 1, 2011 in the amount of $3,499 based on the then current value with an expected life of 5 years from the lease date and are depreciating this asset over that period. That amount was included in "property and equipment" under the assets portion of our balance sheet with the corresponding liability for future payments placed under "capital leases" in our liabilities. As each monthly payment was made, the amount under capital leases was reduced to reflect the balance due under the lease. As of the March 31, 2013 payment, the lease was completed. During the year ended December 31, 2013, a total of $387 was reduced in the "capital leases" account for payments made during the period resulting in a Capital leases liability of 0.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 8. INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate to the effective rate follows for the years ended December 31, 2013 and 2012:
|
|
For the
year ended December 31,
|
|
|
For the
year ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
U.S. statutory federal rate
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
State income tax rate
|
|
|
4.63
|
%
|
|
|
4.63
|
%
|
Net operating loss for which no tax
|
|
|
|
|
|
|
|
|
benefit is currently available
|
|
|
-38.63
|
%
|
|
|
-38.63
|
%
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
At December 31, 2013, deferred tax assets consisted of a net tax asset of $8,862,200, due to operating loss carry forwards of $22,940,825, which was fully allowed for, in the valuation allowance of $8,862,400. The valuation allowance offsets the net deferred tax asset for which there is no assurance of recovery. The increase in the deferred tax assets and the corresponding valuation allowance during the year ended December 31, 2013 was $458,200 based on the $8,403,800 reported by the Company at December 31, 2012. The net operating loss carry forward expires through the year 2033.
The valuation allowance is evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change as defined in Section 382 of the Internal Revenue Code, the Company's tax net operating loss carry forwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.
NOTE 9. SUBSEQUENT EVENTS
On January 22, 2014, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 760,000,000 shares to 760,000,000 shares, of which 3,510,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective January 21, 2014, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on January 20, 2014.
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.
AlumiFuel Power (CE) (USOTC:AFPW)
Historical Stock Chart
From Aug 2024 to Sep 2024
AlumiFuel Power (CE) (USOTC:AFPW)
Historical Stock Chart
From Sep 2023 to Sep 2024