ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Three months
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|
|
Three months
|
|
|
|
|
ended
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|
|
ended
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2014
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|
|
2013
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(819,996
|
)
|
|
$
|
(516,768
|
)
|
|
Adjustments to reconcile net loss to net cash
used by operating activities:
|
|
|
|
|
|
|
|
|
|
Non-cash interest expense (Note 9)
|
|
|
338,387
|
|
|
|
177,367
|
|
|
Stock based compensation (Note 9)
|
|
|
-
|
|
|
|
3,000
|
|
|
Debt issuance costs (Note 4)
|
|
|
5,515
|
|
|
|
2,216
|
|
|
Beneficial conversion feature (Note 9)
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|
|
219,752
|
|
|
|
18,400
|
|
|
Allowance for bad debt (Note 5)
|
|
|
-
|
|
|
|
1,400
|
|
|
Recovery of bad debt expense (Note 5)
|
|
|
(13,500
|
)
|
|
|
(18,250
|
)
|
|
Depreciation and amortization
|
|
|
84
|
|
|
|
586
|
|
|
Change in fair value of derivative liability (Note 4)
|
|
|
(123,751
|
)
|
|
|
(13,000
|
)
|
|
Amortization of discount on debentures payable (Note 3)
|
|
|
158,111
|
|
|
|
90,513
|
|
|
Change in non-controlling interest (Note 1)
|
|
|
-
|
|
|
|
(15,940
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts and other receivables
|
|
|
13,500
|
|
|
|
16,693
|
|
|
Work in progress
|
|
|
-
|
|
|
|
18,732
|
|
|
Prepaid expenses and other assets
|
|
|
-
|
|
|
|
313
|
|
|
Accounts payable and accrued expenses
|
|
|
62,250
|
|
|
|
68,373
|
|
|
Related party payables (Note 3)
|
|
|
42,192
|
|
|
|
2,810
|
|
|
Dividends payable (Note 9)
|
|
|
(7,971
|
)
|
|
|
7,940
|
|
|
Interest payable
|
|
|
25,667
|
|
|
|
23,396
|
|
|
Net cash used in operating activities
|
|
|
(99,760
|
)
|
|
|
(132,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
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|
|
|
|
|
|
|
|
|
Purchase of equipment
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|
|
-
|
|
|
|
-
|
|
|
Issuance of notes receivable (Note 5)
|
|
|
-
|
|
|
|
-
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|
|
Net cash used in investing activities
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|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes (Note 4)
|
|
|
180,000
|
|
|
|
32,000
|
|
|
Proceeds from notes payable, related (Note 3)
|
|
|
-
|
|
|
|
4,000
|
|
|
Proceeds from notes payable, other (Note 4)
|
|
|
23,600
|
|
|
|
126,830
|
|
|
Prodeeds from sales of notes receivable (Note 5)
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from sales of common stock (Note 9)
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from sales of subsidiary equity (Notes 1 & 9)
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from sale of subsidiary stock by parent (Notes 1 & 9)
|
|
|
-
|
|
|
|
-
|
|
|
Payments under capital leases (Note 7)
|
|
|
-
|
|
|
|
(389
|
)
|
|
Payments on notes payable (Note 4)
|
|
|
(7,910
|
)
|
|
|
(26,940
|
)
|
|
Payments on notes payable, related (Note 3)
|
|
|
(12,317
|
)
|
|
|
(4,291
|
)
|
|
Payments to placement agents (Note 4)
|
|
|
(11,000
|
)
|
|
|
-
|
|
|
Payments on convertible notes payable (Note 4)
|
|
|
-
|
|
|
|
-
|
|
|
Payments on redemption of preferred stock (Note 4)
|
|
|
-
|
|
|
|
-
|
|
|
Net cash provided by financing activities
|
|
|
172,373
|
|
|
|
131,210
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
72,613
|
|
|
|
(1,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
9,872
|
|
|
|
5,216
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
82,485
|
|
|
$
|
4,207
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
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|
|
|
|
|
|
|
|
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Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest
|
|
$
|
2,699
|
|
|
$
|
6,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash financing transactions:
|
|
|
|
|
|
|
|
|
|
Notes and interest payable converted to stock
|
|
$
|
229,718
|
|
|
$
|
409,652
|
|
See accompanying notes to consolidated financial statements.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1:
Basis of presentation
The interim unaudited financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and for the three and nine month periods ended March 31, 2014 and 2013 include the financial statements of AlumiFuel Power Corporation (the “Company”) and its subsidiaries HPI Partners, LLC (“HPI”), AlumiFuel Power, Inc. (“API”), AlumiFuel Power Technologies, Inc. ("APTI"), Novofuel, Inc. ("Novofuel"), and 58% owned subsidiary AlumiFuel Power International, Inc. ("AFPI").
In February 2014, the Company announced plans to change its strategic direction. In addition, the Company announced that it has formed a new subsidiary, Bitcoin Capital Corporation, to pursue early stage opportunities in Bitcoin and other cryptocurrency. As of the filing of this report, Bitcoin Capital Corporation has not begun operating. The Company also announced that its board of directors had approved a name change to AFPW Holdings, Inc. although the name change has not yet been completed.
Certain information and footnote disclosures normally included in unaudited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. All of the intercompany accounts have been eliminated in consolidation.
The interim unaudited financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2013, notes and accounting policies thereto included in the Company’s Annual Report on Form 10-K.
In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented have been made. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the year.
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 had no revenue during the nine months ended March 31, 2014, and has an accumulated deficit of $23,759,329 from its inception through that date. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
Interim financial data presented herein are unaudited.
AlumiFuel Power International, Inc.
In February 2010, the Company formed its subsidiary, AFPI. The total number of AFPI shares outstanding at December 31, 2013 and March 31, 2014 was 68,114,864.
The value of all shares of AFPI held by the Company have been eliminated on consolidation of the financial statements at March 31, 2014 as intercompany accounts. At March 31, 2014 there were 28,511,985 shares held by shareholders other than the Company representing 42% of the outstanding common shares of AFPI as of that date. This represents a non-controlling interest in AFPI that totaled $4,029,324 based on AFPI's outstanding total equity of $9,625,594 at March 31, 2014. In addition, $16,231 in the net loss of AFPI of $117,377 for the three months ended March 31, 2014 has been attributed to the non-controlling interest of those stockholders.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:
Summary of Significant Accounting Policies
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 March 31, 2014 were $-0-.
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.
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.
Financial Instruments
At March 31, 2014, the fair value of the Company’s financial instruments approximate their carrying value based on their terms and interest rates.
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.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loss per Common Share
Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods ended March 31, 2014 and March 31, 2013, as the impact of the potential common shares, which totaled approximately 1,562,280,400 (March 31, 2014) and 40,073,500 (March 31, 2013), would be anti-dilutive and decrease loss per share. Therefore, diluted loss per share presented for three month periods ended March 31, 2014 and 2013 is equal to basic loss per share.
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.
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".
Recently issued accounting pronouncements
Management reviewed accounting pronouncements issued during the three months ended March 31, 2014, and no pronouncements were adopted.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3:
Related Party
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 $30,000 for each of the three months ended March 31, 2014 and 2013. 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 $21,000 for each of the three months ended March 31, 2014 and 2013. As of March 31, 2014 and 2013, the Company owed $377,892 and $287,192, 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 three month periods ended March 31, 2014 and 2013, the Company recorded $1,907 and $1,354, respectively to a corporation owned by Messrs. Fong and Olson under this bonus program. At March 31, 2014 and 2013, respectively, there was $4,955 and $2,337 payable under the bonus plan.
In the three month periods ended March 31, 2014 and 2013, 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 three month periods ended March 31, 2014 and 2013, these management fees totaled $19,500. As of March 31, 2014 and 2013, the Company owed $10,770 and $22,069 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 $1,500 per month in 2014 and $1,200 per month in 2013. 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 $4,500 the three months ended March 31, 2014 and $3,600 for the same period in 2013. A total of $10,000 and $4,000 in rent expense was accrued but unpaid at March 31, 2014 and 2013, respectively.
Accounts payable to related parties consisted of the following at March 31, 2014:
|
Management fees, rent and bonus payable to officers
|
|
$
|
403,617
|
|
|
|
|
|
|
|
|
Accrued expenses payable to subsidiary officer
|
|
|
28,921
|
|
|
|
|
|
|
|
|
Total accounts payable, related party
|
|
$
|
432,538
|
|
Related Party Notes Payable
AlumiFuel Power Corporation
At March 31, 2014 and 2013, the Company owed $500 and $0, respectively, to its president for loans made to it from time-to-time in demand notes with 8% interest. There was $38 and $0 in accrued interest payable at March 31, 2014 and 2013, respectively.
At both March 31, 2014 and 2013, the Company owed the president of APTI $1,511 in loans in demand notes with 8% interest. As of March 31, 2014 and 2013 there was accrued interest payable of $395 and $274, respectively.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 2014 and 2013, the Company owed $6,000 and $12, respectively, to a company owned by its president in demand notes with 8% interest. There were payments totaling $7,317 in principal and $228 in accrued interest during the 2014 period and $291 in principal and $9 in interest during the 2013 period to amounts previously owed. There was $13 and $0 in accrued interest payable at March 31, 2014 and 2013, respectively.
At both March 31, 2014 and 2013, the Company owed $5,435 to a company affiliated with its Secretary in demand notes with 8% interest. There was $1,171 and $735 in accrued interest payable at March 31, 2014 and 2013, respectively.
At both March 31, 2014 and 2013, the Company owed $2,165 in principal in certain promissory notes issued to a partnership affiliated with the Company’s president with interest rate of 8% and due on demand. As of March 31, 2014 and 2013, the Company owed $672 and $499, respectively, in accrued interest on these notes.
At both March 31, 2014 and 2013, the Company owed a partnership affiliated with its president and secretary $5,000 in a note with an interest rate of 8% per annum and due on demand. As of both March 31, 2014 and 2013, $1,988 and $1,587 in accrued interest was payable at those dates, respectively.
At both March 31, 2014 and 2013, the Company owed $9,590 to a corporation affiliated with the Company's officers in demand notes with interest at 8%. There was $2,006 and $1,239 in accrued interest payable on these notes at March 31, 2014 and 2013, respectively.
At both March 31, 2014 and 2013, the Company owed $350 to a corporation affiliated with the Company's officers in demand notes with an interest rate of 8%. There was $314 and $286 in accrued interest payable on these notes at March 31, 2014 and 2013, respectively.
At December 31, 2013, the Company owed a corporation owned by the Company's secretary $4,000 and in demand notes with interest of 8% per annum. There was $0 and $2,500 loaned during the three month periods ended March 31, 2014 and 2013, respectively, along with payments of $4,000 in principal and $3 in accrued interest during the 2014 period and $2,500 in principal and $2 in interest during the 2013 period. As a result of these transactions, there was no principal or interest payable on these notes at March 31, 2014 and 2013.
As of March 31, 2014 and 2013, the Company owed two companies and an individual affiliated with its officers a total of $2656 in interest on notes paid in periods prior to 2014. At March 31, 2013, the Company owed two companies affiliated with its officers a total of $2,365 in interest on notes paid in periods prior to 2012.
HPI Partners, LLC
In 2009, various notes issued by HPI were converted to equity by its officers. Following those conversions, $235 in interest remained due and payable, which was outstanding at both March 31, 2014 and 2013.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total
Total notes and interest payable to related parties consisted of the following at March 31, 2014 and 2013:
|
|
|
2014
|
|
|
2013
|
|
|
Notes payable to officers; interest at 8% and due on demand
|
|
$
|
500
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable to affiliates of Company officers; interest at 8% and due on demand
|
|
|
30,051
|
|
|
|
26,916
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, related party
|
|
|
30,551
|
|
|
|
26,916
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payable related party
|
|
|
9,488
|
|
|
|
7,532
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, related party
|
|
$
|
40,039
|
|
|
$
|
34,448
|
|
Note 4:
Notes Payable
AlumiFuel Power Corporation
At March 31, 2014 and 2013, the Company owed $105,405 and $174,252, respectively, to an unaffiliated trust at an interest rate of 8% and due on demand. During the three months ended March 31, 2014, the trust loaned the Company $10,400 and sold $59,500 in principal on these notes to unaffiliated third parties that became convertible notes. In addition, the trust converted $7,600 of these notes to common stock during the same period. Please see convertible notes below and Note 9 “Capital Stock” below for further information on these transactions. During the three months ended March 31, 2013, the trust loaned the Company $49,600 and sold $18,400 in principal on these notes to an unaffiliated third party that converted that balance to common stock of the Company. The Company made payments on these notes during the three month period ended March 31, 2014 totaling $7,910 in principal and $2,290 in accrued interest. The Company made payments on these notes during the three month period ended March 31, 2013 totaling $6,100 in accrued interest. There was $14,262 and $10,575 in accrued interest payable on these notes at March 31, 2014 and 2013, respectively.
At both March 31, 2014 and 2013, the Company owed $32,732 to an unaffiliated third party with interest payable at 8% and due on demand. There was $6,227 and $3,608 in accrued interest payable on these notes at March 31, 2014 and 2013, respectively.
At March 31, 2014 and 2013, the Company owed an unaffiliated third party $43,086 and $87,088, respectively. These notes are due on demand and carry an interest rate of 8%. There was $28,421 loaned during the three month period ended March 31, 2013. There was $7,166 and $4,668 in accrued interest payable at March 31, 2014 and 2013, respectively.
At March 31, 2014 and 2013, the Company owed an unaffiliated third party $13,000 and $113,000, respectively. There as $113,000 payable on these notes at December 31, 2013 and during the three months ended March 31, 2014, $100,000 of these notes was reissued as a convertible note as explained more fully under “Convertible Notes” below. A total of $13,500 was loaned and repaid during the three month period ended March 31, 2013. These notes carry current interest rates of 8% per annum. As of March 31, 2014 and 2013, there was $19,796 and $9,209 in accrued interest payable on these notes.
As of both March 31, 2014 and 2013, we owed an unaffiliated third party $6,000 in a demand note with 8% interest. As of March 31, 2014 and 2013, there was $1,066 and $585 in accrued interest payable on this note.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2010 a note payable in the amount of $30,000 was issued and repaid to an unaffiliated third party leaving an interest balance due of $57. This amount remained unpaid as of both March 31, 2014 and 2013.
During the year ended December 31, 2011, a note for $6,800 was purchased by a third party investor and converted to 22,666 shares of the Company’s common stock. The shares were never issued. As a result, the Company has agreed to allow this noteholder to complete a new conversion of this note as of February 2014 for a total of 34,000,000 shares or $0.0002 per share.
AlumiFuel Power, Inc.
AlumiFuel Power, Inc. owes $1,050 in unpaid interest on notes issued prior to 2013.
AlumiFuel Power International, Inc.
In February 2011, an unaffiliated third party loaned the Company $75,000. This note called for a payment of $50,000 in thirty days with a balance due no later than 90 days from its issuance and carries and interest rate of 12% per annum. The $50,000 was repaid during the quarter ended June 30, 2011. No further payments have been made on this note leaving a balance due at both March 31, 2014 and 2013 of $25,000 with interest payable of $9,526 (2014) and $6,526 (2013).
During the quarter ended June 30, 2012, $26,100 in accrued interest payable to an unaffiliated third party was converted to a convertible promissory note leaving an interest balance due of $5 at both March 31, 2014 and 2013.
At March 31, 2014 the company owed $203,430 from unaffiliated third parties paid in Euros totaling 154,250. This amount represented $35,310 as of March 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 March 31, 2014 and 2013, there was a total of $13,460 and $296, respectively, in interest payable on these notes.
HPI Partners, LLC
In 2009, various notes issued by HPI were converted to equity by third parties. Following those conversions, $647 in interest remained due and payable, which was outstanding at both March 31, 2014 and 2013.
Total
Notes and interest payable to others consisted of the following at March 31, 2014 and 2013:
|
|
|
2014
|
|
|
2013
|
|
|
Notes payable, non-affiliates; interest at 8% and due on demand
|
|
$
|
200,223
|
|
|
$
|
424,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, non-affiliates; interest at 10% and due in March 2014-February 2015
|
|
|
203,430
|
|
|
|
35,310
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, non-affiliates; interest at 12% and due on demand
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
428,653
|
|
|
|
485,180
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payable, non-affiliates
|
|
|
73,262
|
|
|
|
37,226
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal and interest payable, other
|
|
$
|
501,905
|
|
|
$
|
522,406
|
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain of our demand promissory notes contain provisions for conversion to common stock at market price on the date of conversion.
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”). Of that amount, $10,000 of these debentures remained unpaid as of March 31, 2014.
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 remaining 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
|
|
|
11/15/2009
|
|
$
|
77,778
|
|
3 years
|
|
$
|
0.045
|
|
|
$
|
0.09
|
|
|
|
193
|
%
|
|
|
1.38
|
%
|
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.
At March 31, 2014, 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 March 31, 2014.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the Debentures was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
13,333
|
|
3 years
|
|
$
|
0.000675
|
|
|
|
435
|
%
|
|
|
.875
|
%
|
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. In January 2014, the Company agreed to allow the investor it convert $1,700 of this note to stock at a discount to market of 50%. Accordingly, 34,000,000 shares were issued at a conversion price of $0.00005 per share.
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.
During the three months ended March 31, 2014, the holders converted a total of $3,055 in face value of the debentures to 5,208,028 shares of our common stock, or $0.0006 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $6,109 and as of March 31, 2014, the total face value of the Debentures outstanding was $23,045.
At March 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 March 31, 2014, the Company has recorded an adjustment and increased the previously recorded liabilities by $3,684 resulting in a derivative liability balance of $40,970 at March 31, 2014.
The fair value of the January 2012 Interest Note was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
40,970
|
|
12 months
|
|
$
|
0.0003
|
|
|
|
340
|
%
|
|
|
0.125
|
%
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 Asher Convertible Notes
During the year ended December 31, 2013, the Company entered into note agreements with an 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
|
The 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 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.
During the quarter ended March 31, 2013, the 2013 Asher Convertible Notes holders converted the remaining principal balance of $39,610 plus $2,200 in interest to 228,309,524 shares of our common stock, or $0.00018 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $79,220.
2014 Asher Convertible Notes
During the three months ended March 31, 2014, the Company entered into a note agreement with an institutional investor for the issuance of convertible promissory notes in the aggregate amount of $22,500 on the following dates and in the following amounts (the "2014 Asher Convertible Notes"):
|
Date of Issue
|
|
Amount
|
|
Due Date
|
|
1/28/14
|
|
$
|
22,500
|
|
October 22, 2014
|
The 2014 Asher Convertible Notes are convertible at 50% of the average of the lowest three closing bid 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 2014 Asher Convertible Notes of $20,000 after debt issuance costs of $2,500 paid for lender legal fees. These debt issuance costs will be amortized over the terms of the 2014 Asher Convertible Notes or such shorter period as the Notes may be outstanding. As of March 31, 2014, $556 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the 2014 Asher Convertible Notes resulted in total initial debt discounts of $22,500 and a total initial loss on the valuation of derivative liabilities of $17,500 for a derivative liability balance of $45,000 total 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
|
|
|
1/28/14
|
|
$
|
22,500
|
|
9 months
|
|
$
|
0.0001
|
|
|
$
|
0.0009
|
|
|
|
279
|
%
|
|
|
0.09
|
%
|
During the quarter ended March 31, 2013, the 2014 Asher Convertible Notes holders converted the remaining principal balance of $39,610 plus $2,200 in interest to 228,309,524 shares of our common stock, or $0.00018 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $79,220.
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding 2014 Asher Notes. Therefore, for the period from its issuance to March 31, 2014, the Company has recorded an expense and decreased the previously recorded liabilities by $10,000 resulting in a derivative liability balance of $35,000 at March 31, 2014.
The fair value of 2015 Asher Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
35,000
|
|
9 months
|
|
$
|
0.000045
|
|
|
|
260
|
%
|
|
|
0.10
|
%
|
October 2012 Convertible Notes
In October 2012 we issued $10,000 of 8% unsecured convertible debenture with a private investor that were 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. As of December 31, 2013, the balance remaining on these notes was $2,980.
The beneficial conversion feature (an embedded derivative) included in the October Notes resulted in an initial debt discount of $10,000 and an initial loss on the valuation of derivative liabilities of $10,000 for a derivative liability balance of $20,000 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
|
|
|
10/17/12
|
|
$
|
10,000
|
|
1 year
|
|
$
|
0.00005
|
|
|
$
|
0.0002
|
|
|
|
236
|
%
|
|
|
0.18
|
%
|
During the three months ended March 31, 2013, the holders converted the remaining $2,980 in face value plus $920 in interest to 77,998,200 shares of our common stock, or $0.00005 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $10,000 and the balance due on the notes 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”).
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.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The beneficial conversion feature (an embedded derivative) included in the May 2013 Notes resulted in an initial debt discount of $2,500 and an initial loss on the valuation of derivative liabilities of $2,232 for a derivative liability balance of $4,732 at issuance.
During the three months ended March 31, 2013, the holders converted the remaining $2,500 in face value plus $222 in interest to 16,009,824 shares of our common stock, or $0.00006 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $4,732 and the balance due on the notes was 0.
November Convertible Notes
In November 2012 a private investor purchased a total of $111,600 in existing notes from one of our third party note holders (together the “November Notes”). The notes were amended to include a maturity date that is nine months from the amendment date or August 2013 and have an 8% interest rate. At December 31, 2013, there was $77,519 in principal on these notes outstanding.
The November Notes are convertible at 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 November Notes resulted in an initial debt discount of $111,600 and an initial loss on the valuation of derivative liabilities of $111,500 for a derivative liability balance of $222,600 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
|
|
|
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 three months ended March 31, 2014, the debenture holders converted a total of $39,969 in face value and $3,840 of the debentures to 182,957,251 shares of our common stock, or $0.00024 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $46,900 and as of March 31, 2014, the total face value of the Debentures outstanding was $37,850.
At March 31, 2014, the Company revalued the derivative liability balance of the remaining outstanding Debentures. For the period from their issuance to March 31, 2014, there was an $163,722 decrease to the previously recorded liabilities resulting in a derivative liability balance of $58,878 at March 31, 204.
The fair value of the Debentures was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
58,878
|
|
9 months
|
|
$
|
0.000045
|
|
|
|
260
|
%
|
|
|
0.10
|
%
|
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.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 2013 Convertible Notes are convertible at a conversion price for each share of common stock equal to 50% of the lowest closing bid price per share of the 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
|
%
|
As of December 31, 2013, the total face value of the 2013 Convertible Notes outstanding was $133,211.
During the three months ended March 31, 2014, the note holders converted a total of $59,544 in face value and $2,168 in interest of the 2013 CareBourn Notes to 221,994,870 shares of our common stock, or $0.00028 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $119,087 and as of March 31, 2014, the total face value of the 2013 Convertible Notes outstanding was $73,667.
At March 31, 2014, 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 $114,593 at March 31, 2014.
The fair value of the 2013 Convertible Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
91,260
|
|
6 months
|
|
$
|
0.00045
|
|
|
|
237
|
%
|
|
|
0.07
|
%
|
|
$
|
23,333
|
|
9 months
|
|
$
|
0.00045
|
|
|
|
260
|
%
|
|
|
0.10
|
%
|
2014 CareBourn Notes
During the three months ended March 31, 2014, an institutional investor converted $100,000 in promissory notes due from the Company to a convertible note due September 30, 2014. In addition, our president, converted $35,000 in fees due him from our subsidiary AFPI into convertible due October 2, 2014. This investor also loaned the Company an additional $10,000 that is due August 18, 2014. These notes total $145,000 (together the “2014 CareBourn Notes) and all bear interest at 8% per annum and are convertible at a conversion price for each share of common stock equal to 50% of the lowest closing bid price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The beneficial conversion feature (an embedded derivative) included in the 2014 CareBourn Notes resulted in an initial debt discount of $145,000 and an initial loss on the valuation of derivative liabilities of $140,556 for a derivative liability balance of $285,556 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
|
|
|
1/1/14
|
|
$
|
200,000
|
|
9 months
|
|
$
|
0.0001
|
|
|
$
|
0.0003
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
|
1/2/14
|
|
$
|
70,000
|
|
9 months
|
|
$
|
0.0001
|
|
|
$
|
0.0003
|
|
|
|
258
|
%
|
|
|
0.11
|
%
|
|
2/18/14
|
|
$
|
15,556
|
|
6 months
|
|
$
|
0.0009
|
|
|
$
|
0.00045
|
|
|
|
250
|
%
|
|
|
0.07
|
%
|
At March 31, 2014, the Company revalued the derivative liability balance of the remaining outstanding 2014 CareBourn Notes. For the period from their issuance to that date there was an decrease of $60,000 to the previously recorded liabilities resulting in a derivative liability balance of $225,556 at March 31, 2014.
The fair value of the 2014 CareBourn Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
15,556
|
|
6 months
|
|
$
|
0.00045
|
|
|
|
237
|
%
|
|
|
0.07
|
%
|
|
$
|
210,000
|
|
9 months
|
|
$
|
0.00045
|
|
|
|
260
|
%
|
|
|
0.10
|
%
|
JMJ Convertible Note
In June 2013 we issued $16,500 of 12% unsecured convertible note with a private investor (the “JMJ Convertible Note”).
Among other terms of the offering, the JMJ Convertible Note is due in May 2014 (the “Maturity Date”), unless prepayment is required in certain events, as called for in the agreements. The JMJ Convertible Note is convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 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. In addition, the JMJ Convertible Note provides for adjustments in the case of certain corporate actions.
The JMJ Convertible Note bears interest at twelve percent (12%) per annum, unless paid within the first three months in which case no interest is due, payable (i) upon conversion, or (ii) on the Maturity Date, in cash or shares of our common stock at the Conversion Price. In the event of a default, the company would owe 150% of the outstanding principal balance plus accrued interest.
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
|
%
|
The total face value of the 2013 Convertible Notes outstanding was $14,300 at December 31, 2013.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the three months ended March 31, 2014, the note holders converted a total of $14,300 in face value and $2,167 in interest of the 2013 CareBourn Notes to 131,866,680 shares of our common stock, or $0.00012 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $23,833 and as of March 31, 2014, the total face value of the 2013 Convertible Notes outstanding was $0.
Bohn Convertible Note
In May 2013 we issued a $20,000 8% unsecured convertible note with a private investor (the “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 March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Bohn Convertible Note. Therefore, for the period from their issuance to March 31, 2014, the Company has recorded an expense and increased the previously recorded liabilities by $1,905 resulting in a derivative liability balance of $33,334 at March 31, 2014.
The fair value of the Bohn Convertible Note was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
31,111
|
|
6 months
|
|
$
|
0.000045
|
|
|
|
238
|
%
|
|
|
0.07
|
%
|
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 Notes
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.
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.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
|
%
|
As of December 31, 2013, the total face value of the WHC Notes outstanding was $16,212.
During the three months ended March 31, 2014, the note holders converted a total of $11,212 in face value and $286 in interest of the WHC Notes to 74,426,542 shares of our common stock, or $0.00015 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $22,424 and as of March 31, 2014, the total face value of the WHC Notes outstanding was $5,000.
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding WHC Notes. Therefore, for the period from their issuance to March 31, 2014, 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 March 31, 2014.
The fair value of the WHC Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
8,889
|
|
12 months
|
|
|
0.00045
|
|
|
|
340
|
%
|
|
|
0.13
|
%
|
During the three months ended March 31, 2014, WHC purchased additional notes totaling $49,600 from one of our third party note holders and issued a new notes in the amount of $20,000 for a total of $69,600 in amounts due (the "WHC 2104 Notes"). The WHC 2014 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 March 2015.
The beneficial conversion feature (an embedded derivative) included in the WHC 2014 Notes resulted in an initial debt discount of $49,600 and an initial loss on the valuation of derivative liabilities of $59,765 for a derivative liability balance of $129,365 at issuance.
The fair value of the WHC 2014 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
|
|
3/6/14
|
93,365
|
12 months
|
0.00085
|
0.0015
|
338%
|
0.12%
|
|
3/14/14
|
7,000
|
11 months
|
0.0005
|
0.0014
|
338%
|
0.12%
|
During the three months ended March 31, 2014, the note holders converted a total of $20,267 in face value of the WHC 2014 Notes to 106,426,542 shares of our common stock, or $0.0006 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $38,150 and as of March 31, 2014, the total face value of the WHC 2014 Notes outstanding was $49,333.
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding WHC 2014 Notes. Therefore, for the period from their issuance to March 31, 2014, the Company has recorded an expense and increased the previously recorded liabilities by $41,662 resulting in a derivative liability balance of $87,703 at March 31, 2014.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the WHC 2014 Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
87,703
|
|
12 months
|
|
|
0.00045
|
|
|
|
340
|
%
|
|
|
0.13
|
%
|
Schaper Notes
In December 2013 we issued a $15,000 8% unsecured convertible note with a private investor and in January 2014 issued an additional $10,000 note under the same terms (together the “Schaper Notes”). The Schaper Notes are due in August and October 2014 and have 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 Notes resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $15,000 for a derivative liability balance of $40,000 at issuance.
The fair value of the Schaper 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
|
|
|
12/3/13
|
|
$
|
20,000
|
|
9 months
|
|
$
|
0.00015
|
|
|
$
|
0.0004
|
|
|
|
252
|
%
|
|
|
0.12
|
%
|
|
1/28/14
|
|
$
|
20,000
|
|
9 months
|
|
$
|
0.0008
|
|
|
$
|
0.0009
|
|
|
|
278
|
%
|
|
|
0.08
|
%
|
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Schaper Notes. Therefore, for the period from its issuance to March 31, 2014, the Company has recorded an expense and decreased the previously recorded liabilities by $1,111 resulting in a derivative liability balance of $38,889 at March 31, 2014.
The fair value of Schaper Notes was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
38,889
|
|
9 months
|
|
$
|
0.000045
|
|
|
|
260
|
%
|
|
|
0.10
|
%
|
JSJ Notes
In February 2014 we issued a $25,000 12% unsecured convertible note with a private investor (the “JSJ Convertible Note”). This note is due on August 14, 2014 and is convertible into common stock at 50% of the lowest three closing bid prices for the twenty (20) days immediate preceding the date of conversion.
The beneficial conversion feature (an embedded derivative) included in the JSJ Convertible Note resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $8,333 for a derivative liability balance of $33,333 at issuance.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the JSJ 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
|
|
|
2/19/14
|
|
$
|
33,333
|
|
9 months
|
|
$
|
0.0003
|
|
|
$
|
0.0016
|
|
|
|
250
|
%
|
|
|
0.08
|
%
|
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding JSJ Convertible Note. Therefore, for the period from their issuance to March 31, 2014, the Company increased the previously recorded liabilities by $5,556 resulting in a derivative liability balance of $38,889 at March 31, 2014.
The fair value of the JSJ Convertible Note was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
38,889
|
|
9 months
|
|
$
|
0.000045
|
|
|
|
238
|
%
|
|
|
0.07
|
%
|
LG Funding Notes
In February 2014 we issued a $40,000 8% unsecured convertible note with a private investor (the “LG Convertible Note”). This note is due on February 15, 2015 and is convertible into common stock at 50% of the lowest closing bid price for the ten (10) days immediate preceding the date of conversion.
We received net proceeds from the LG Convertible Note of $38,000 after debt issuance costs of $2,000. These debt issuance costs will be amortized over the terms of the LG Convertible Notes or such shorter period as the Notes may be outstanding. As of March 31, 2014, $167 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the LG Convertible Note resulted in an initial debt discount of $40,000 and an initial loss on the valuation of derivative liabilities of $5,000 for a derivative liability balance of $45,000 at issuance.
The fair value of the LG 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
|
|
|
2/24/14
|
|
$
|
45,000
|
|
1 year
|
|
$
|
0.0008
|
|
|
$
|
0.0021
|
|
|
|
338
|
%
|
|
|
0.12
|
%
|
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding LG Convertible Note. Therefore, for the period from their issuance to March 31, 2014, the Company has recorded an expense and increased the previously recorded liabilities by $26,111 resulting in a derivative liability balance of $71,111 at March 31, 2014.
The fair value of the LG Convertible Note was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
71,111
|
|
1 year
|
|
$
|
0.000045
|
|
|
|
340
|
%
|
|
|
0.13
|
%
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Iconic Notes
In February 2014 we issued a $27,500 5% unsecured convertible note with a private investor (the “Iconic Convertible Note”). This note is due on February 26, 2015 and is convertible into common stock at 50% of the lowest trading price for the twenty-five (25) days immediate preceding the date of conversion.
We received net proceeds from the Iconic Convertible Note of $25,000 after debt issuance costs of $2,500. These debt issuance costs will be amortized over the terms of the Iconic Convertible Notes or such shorter period as the Notes may be outstanding. As of March 31, 2014, $208 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the Iconic Convertible Note resulted in an initial debt discount of $27,500 and an initial loss on the valuation of derivative liabilities of $27,500 for a derivative liability balance of $55,000 at issuance.
The fair value of the Iconic 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
|
|
|
3/3/14
|
|
$
|
55,000
|
|
1 year
|
|
$
|
0.0002
|
|
|
$
|
0.0018
|
|
|
|
338
|
%
|
|
|
0.12
|
%
|
At March 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Iconic Convertible Note. Therefore, for the period from their issuance to March 31, 2014, the Company decreased the previously recorded liabilities by $6,111 resulting in a derivative liability balance of $48,889 at March 31, 2014.
The fair value of the Iconic Convertible Note was calculated at March 31, 2014 utilizing the following assumptions:
|
Fair Value
|
|
Term
|
|
Assumed
Conversion
Price
|
|
|
Volatility
Percentage
|
|
|
Interest
Rate
|
|
|
$
|
48,889
|
|
1 year
|
|
$
|
0.000045
|
|
|
|
340
|
%
|
|
|
0.13
|
%
|
ADAR Convertible Note
On March 31, 2013 we issued a $25,000 8% unsecured convertible note with a private investor (the “ADAR Convertible Note”). This note is due on February 20, 2015 and is convertible into common stock at 50% of the lowest closing bid price for the ten (10) days immediate preceding the date of conversion.
We received net proceeds from the ADAR Convertible Note of $23,500 after debt issuance costs of $1,500. These debt issuance costs will be amortized over the terms of the ADAR Convertible Notes or such shorter period as the Notes may be outstanding. As of March 31, 2014, $0 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the ADAR Convertible Note resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $55,000 for a derivative liability balance of $80,000 at issuance.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the ADAR 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
|
|
|
3/31/14
|
|
$
|
80,000
|
|
1 year
|
|
$
|
0.00045
|
|
|
$
|
0.0008
|
|
|
|
340
|
%
|
|
|
0.13
|
%
|
Debentures and convertible notes and interest payable consisted of the following at March 31, 2014:
|
Short-term liabilities:
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures; non-affiliates; interest at 6% and due December 2013; outstanding principal of $10,000 face value; net of discount of $0
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
January 2012 Convertible Notes; non-affiliate; interest at 8%; due January 2013
|
|
|
48,300
|
|
|
|
|
|
|
|
|
January 2012 Interest Note; non-affiliate; interest at 8%; due January 2013; $26,100 face value net of discount of $0
|
|
|
23,045
|
|
|
|
|
|
|
|
|
2014 Asher Convertible Notes; non-affiliate, interest at 8%; due May 2012; $22,500 face value net of discount of $21,389
|
|
|
1,111
|
|
|
|
|
|
|
|
|
November Convertible Notes; non-affiliate; interest at 8%; $37,850 face value net of discount of $0
|
|
|
37,850
|
|
|
|
|
|
|
|
|
2013 CareBourn Notes; non-affiliate; interest at 8%; $73,667 face value net of discount of $14,667
|
|
|
59,000
|
|
|
|
|
|
|
|
|
2014 CareBourn Notes; non-affiliate; interest at 8%; $145,000 face value net of discount of $95,833
|
|
|
49,167
|
|
|
|
|
|
|
|
|
Bohn Convertible Note; non-affiliate; interest at 8%; $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 Notes; non-affiliate; interest at 8%; $54,333 face value net of discount of $51,782
|
|
|
2,551
|
|
|
|
|
|
|
|
|
Schaper Notes; non-affiliate; interest at 8%; due August 2014; face value $25,000 net of discount of $16,111
|
|
|
8,889
|
|
|
|
|
|
|
|
|
JSJ Notes; non-affiliate; interest at 12%; due August 2014; face value $25,000 net of discount of $18,750
|
|
|
6,250
|
|
|
|
|
|
|
|
|
LG Funding Notes; non-affiliate; interest at 8%; due February 2015; face value $40,000 net of discount of $36,667
|
|
|
3,333
|
|
|
|
|
|
|
|
|
Iconic Notes; non-affiliate; interest at 5%; due February 2015; face value $27,500 net of discount of $24,063
|
|
|
3,437
|
|
|
|
|
|
|
|
|
ADAR Notes; non-affiliate; interest at 8%; due February 2015; face value $25,000 net of discount of $25,000
|
|
|
-
|
|
|
|
|
|
|
|
|
Total short-term convertible notes
|
|
$
|
347,933
|
|
|
|
|
|
|
|
|
Interest payable, short-term convertible notes
|
|
|
91,221
|
|
|
|
|
|
|
|
|
Total principal and interest payable, short-term convertible notes
|
|
$
|
439,154
|
|
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5:
Notes Receivable
At March 31, 2014 there was $138,853 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. During the three months ended March 31, 2014, FFFC was able to repay $13,500 in principal on these loans. 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. The Company has allowed for all interest due on these notes and did not record any interest receivable during the three month period ended March 31, 2014. As of March 31, 2013, FFFC owed the Company $254,353 and paid $18,250 against these notes. Given the uncertainty of payments on these notes, if payments are received they are considered recovery of allowed for debt in the case of principal and recorded in "other income (expense)" in our statements of operations while interest income is offset against interest expense.
As of March 31, 2014, 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 in accrued interest remained receivable and has been allowed for given management’s assessment that recovery of these amounts is unlikely.
Note 6:
Other Expense
Other expense for the three and nine month periods ended March 31, 2014 and 2013 consisted of the following:
|
|
|
Three months ended
March 31,
2014
|
|
|
Three months ended
March 31,
2013
|
|
|
General and administrative
|
|
$
|
31,504
|
|
|
$
|
29,227
|
|
|
Salaries and employee benefits
|
|
|
53,846
|
|
|
|
58,550
|
|
|
Legal and accounting
|
|
|
17,050
|
|
|
|
8,500
|
|
|
Bad debt expense
|
|
|
-
|
|
|
|
1,400
|
|
|
Recovery of allowed for debt
|
|
|
(13,500
|
)
|
|
|
(18,250
|
)
|
|
Professional services
|
|
|
29,546
|
|
|
|
43,549
|
|
|
|
|
$
|
118,446
|
|
|
$
|
122,976
|
|
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 for an estimated balance due at December 31, 2012 of $118,647. During the three months ended March 31, 2014 an additional expense of $11,253 was recorded for a total accrued balance of $130,170 as of that date. This amount is included on the balance sheets at March 31, 2014 as “payroll liabilities”.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Office Lease Agreement
Effective on July 1, 2009, API entered into a lease for office and laboratory space in the University City Science Center in Philadelphia, Pennsylvania. Totaling approximately 2,511 square feet, the term of the agreement was for five years and six months expiring on December 31, 2014. In addition, the Company was obligated to pay certain common area maintenance fees of $1,886 per month during 2011.
In November 2011, the Company determined it could no longer sustain the significant payments under the lease and vacated the premises. On November 30, 2011, API was notified that a Judgment by Confession had been entered against it in the Court of Common Pleas Philadelphia County in Philadelphia, Pennsylvania by Wexford-UCSC II, L.P., its former landlord. The Judgment by Confession assesses total damages of $428,232, which is comprised of the following: $73,995 for unpaid monthly rent, maintenance fees, interest and late charges for the period through November 30, 2011; attorney's fees of $5,000; rent and maintenance charges of $10,020 for December 2011; and the value of future rent payments for the period from January 1, 2012 to December 31, 2014 of $339,217. The complaint alleged a breach of contract and event of default for API related to this lease. 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.
Note 8:
Income Tax
The Company records its income taxes in accordance with Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes”. The Company has incurred significant net operating losses since inception resulting in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense resulted in $-0- income taxes.
Note 9:
Capital Stock
Common Stock
During the three month period ended March 31, 2014, we issued a total of 970,770,919 shares of our common stock on the conversion of $210,218 in principal and interest on our various convertible promissory notes. In addition to the converted principal and interest on the notes, the Company recorded $379,721 in additional expense for the derivative liability for a total cost to the Company of $589,939 or $0.0006 per share.
During the three month period ended March 31, 2014, we issued 204,180,232 shares of our common stock to a noteholder upon conversion of $19,200 in promissory notes. In addition to the face value of the notes, the Company recorded $219,752 in additional expense for the difference between the conversion price and the market price on the issuance dates for a total cost to the Company of $36,800 or $0.0012 per share.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Warrants
A summary of the activity of the Company’s outstanding warrants at December 31, 2013 and March 31, 2014 is as follows:
|
|
|
Warrants
|
|
|
Weighted-average
exercise price
|
|
|
Weighted-average grant date fair value
|
|
|
Outstanding and exercisable at December 31, 2013
|
|
|
1,130,000
|
|
|
$
|
0.43
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at March 31, 2014
|
|
|
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 March 31, 2014:
|
Exercise price range
|
|
|
Number of options outstanding
|
|
|
Weighted-average exercise price
|
|
Weighted-average
remaining life
|
|
|
|
|
|
|
|
|
|
|
|
$
0.01
|
|
|
|
40,000
|
|
|
|
0.01
|
|
2.2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
0.20 to $0.80
|
|
|
|
1,050,000
|
|
|
|
0.39
|
|
2.2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
2.00
|
|
|
|
40,000
|
|
|
|
2.00
|
|
2.7 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,130,000
|
|
|
$
|
0.43
|
|
2.3 years
|
Note 10:
Subsequent Events
Subsequent to March 31, 2014, the Company has issued 320,588,523 shares of common stock upon the conversion of $116,620 in principal and interest on certain convertible promissory notes issued by the Company.
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.