NOTES
TO FINANCIAL STATEMENTS
June
30, 2016
NOTE
1 – ORGANIZATION AND BUSINESS DESCRIPTION
Alliance
Bioenergy Plus, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy,
biofuels and new technologies sectors. From inception through December 5, 2014, the Company was known as Alliance Media Group
Holdings, Inc. At inception (March 28, 2012), the Company was organized as a vehicle to engage in the commercial production, distribution
and exploitation of Motion Pictures and other Entertainment products. However, in December 2013, a wholly owned subsidiary of
the Company, AMG Renewables, LLC (“AMG Renewables”), acquired the controlling interest (51%) in AMG Energy Group,
LLC (“AMG Energy”), which owns a fifty percent (50%) interest of Carbolosic, LLC (“Carbolosic”), which
holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428)
known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material
into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal in acquiring
the interest in AMG Energy is to develop the CTS technology to a commercial scale and then seek to license the technology to prospective
licensees. In September 2014, the Company determined to focus all of the Company’s resources and personnel on the Company’s
renewable energy holdings and future energy technologies and to divest the Company of its entertainment-related assets and subsidiaries.
The principal reason for such action was the recognition that the Company’s entertainment-related assets were generating
substantial losses and contributing little value compared to the potential management saw in the energy-related activities and
to provide a clear focus and direction to the Company moving forward. The Company therefore determined at that time to divest
and sell off, close down or discontinue the operations of its entertainment-related subsidiaries. Subsequently, the Company determined
that the name Alliance Media Group Holdings, Inc. was no longer relevant to the new business direction of the Company and, effective
December 5, 2014, amended the Company’s Articles of Incorporation to change the name of the Company to Alliance Bioenergy
Plus, Inc., which is more appropriately descriptive of the new business direction of the Company.
Plan
of Operation
The
Company is focused on one industry – Renewable Energy. Through its wholly-owned subsidiary, AMG Renewables, LLC, which in
turn owns controlling interests in AMG Energy Group, LLC, and Ek Laboratories, Inc., the Company has a strategy that includes
growth in its energy-related activities as well as mergers and acquisitions and start-up activities which are focused on development
of an increasing revenue stream, secure market share and enhancement of shareholder value.
AMG
RENEWABLES, LLC
AMG
Renewables, LLC, a Florida limited liability company (“AMG Renewables”), is a wholly-owned subsidiary of the Company,
created for the purpose of managing and developing the Company’s renewable energy technology enterprises. AMG Renewables
had one wholly-owned subsidiary, Carbolosic Plant 1, LLC, a Florida limited liability company (“Carbolosic Plant 1”),
and two majority owned subsidiaries, AMG Energy Group, LLC, a Florida limited liability company (“AMG Energy”) and
Ek Laboratories, Inc., a Florida corporation (“EK”) formerly known as Central Florida Institute of Science and Technology,
Inc.
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On
December 26, 2013, AMG Renewables acquired the controlling interest (51%) in AMG Energy Group from certain related parties
for a consideration comprising $2,200,000 cash and delivery of 7,266,000 shares of Company Common Stock. In connection with
the transaction, an amount which the Company owed to AMG Energy ($214,894) for various loans and consulting fees was eliminated
in the acquisition. On December 26, 2013, 7,000,000 shares of Company common stock were delivered to AMG Energy Solutions,
Inc. (a related party) and the remaining 266,000 shares of Company common stock were delivered on June 18, 2014 to Wellington
Asset Holdings, Inc. As of June 30, 2016, the Company has paid $168,742 of the $2,200,000 cash payable on account of this
transaction, and as of such date, the Company has not paid the remaining amount, which amount has been recorded on the books
of the Company as a related party payable relating to an acquisition.
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AMG
Energy owns a fifty percent (50%) interest of Carbolosic, LLC, a Delaware limited liability company (“Carbolosic”),
which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428)
known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material
into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal is to develop
this CTS technology to a commercial scale and then seek to license the technology to prospective licensees.
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On
May 13, 2015, AMG Energy entered into a series of agreements with various unrelated third parties, wherein AMG Energy sublicensed
the CTS technology to Naldogen (Pty) Ltd., an existing South African company, which has been renamed Carbolosic Energy SA
PTY LTD (“Carbolosic SA”). Carbolosic SA shall be solely devoted to exploitation of the CTS technology in South
Africa, Lesotho, Swaziland and Botswana and the term of the sublicense is coterminous with the master license (i.e. through
July 1, 2032). The consideration for the grant of the sublicense is $25,000,000 (“License Fee”), which was to
be paid or guaranteed by March 1, 2016. In addition to the license fee, the sublicense holder will pay AMG Energy a royalty
of 3.5% of the revenues on the first CTS plant developed and a 5.0% royalty on the revenues of additional plants developed.
Until the $25,000,000 payment has been received, the Company does not consider all of the events required under the agreement
to have been completed. Therefore the Company has not recorded and of the fee in the accompanying financial statements.
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Contemporaneously,
Carbolosic SA’s shareholders entered into an agreement whereby, among other matters, it was agreed that ownership of
Carbolosic SA shall be 43.5% for Tes Projects (Pty) Ltd, a South African company (“Tes”), 24.5 % for Spearhead
Capital Ltd, a Seychelles company (“Spearhead”), 7.5% for Jupiter Trust, a South African Trust (“Jupiter”)
and 24.5% for Alliance BioEnergy Plus, Inc. TES, Spearhead and Jupiter are all unrelated to the Company. The interests of
Tes and Jupiter are delivered in consideration of the funding or guarantee of funding of the License Fee; Spearhead’s
interest is in consideration of facilitating the Sublicense transaction; and the Company’s interest is in exchange for
the delivery to Carbolosic SA of a 24.5% interest in one of the Company’s CTS sugar extracting plants to be developed
in the United States.
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In
February 2016, due to economic and political turmoil in South Africa, members of Tes Projects (Pty) Ltd and Jupiter Trust
resigned from management and from the Board of Carbolosic SA and returned all ownership interest in Carbolosic SA to the Carbolosic
SA treasury. Spearhead Capital intends to continue operations of Carbolosic SA but at this time there is no guarantee that
they will be successful in securing the needed funds or contracts to do so. The Company will evaluate its position in Africa
in the coming months and decide on a path forward.
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Carbolosic
Plant 1 was created in October 2014 for the purpose of being a full scale facility for converting cellulose material into
sugar for use in the biofuels industry as well as other fine chemical manufacturing located in Palm Beach County, FL. In March
2016, Carbolosic Plant 1 was sold to Carbolosic Energy 1, LLLP, a non-related third party, in exchange for satisfaction of
the outstanding $1,250,000 loan and accrued interest between Carbolosic Plant 1 and Carbolosic Energy 1, LLLP.
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EK,
was created in December 2014 under the name Central Florida Institute of Science and Technology, Inc. and changed its name
to Ek Laboratories, Inc. on June 05, 2015. EK was formed as a wholly owned subsidiary of AMG Energy, to serve as a demonstration
and research facility to further develop the CTS process, its uses, and develop new technologies.
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The
Company believes that its management and consultants have significant experience in the bio-fuels, renewable energy and chemical
manufacturing industries. As of the date of filing, the Company has not generated any revenues from its renewable energy business.
NOTE
2 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern, which assumes the Company will realize its assets and discharge
its liabilities in the normal course of business. The Company has not generated any revenue, has incurred losses since inception,
has a working capital deficiency of $1,936,451 and may be unable to raise further equity. At June 30, 2016 the Company had incurred
accumulated losses of $19,189,898 since its inception. The Company expects to incur significant additional liabilities in connection
with its start-up activities. The Company’s ability to continue as a going concern is dependent upon its ability to obtain
the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues
from its operations to pay its operating expenses. These Financial Statements do not include any adjustments related to the recoverability
and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
There are no assurances that the Company will continue as a going concern.
Management
believes that the Company’s future success is dependent upon its ability to achieve profitable operations, generate cash
from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient
cash from operations, sell additional shares of stock or borrow additional funds. The Company’s inability to obtain additional
cash could have a material adverse effect on its financial position, results of operations, and its ability to continue in existence.
These financial statements do not include any adjustments that might result from the outcome of this uncertainty
The
Company intends to raise additional capital, sell licenses to its CTS technology and continue constructing its full scale demonstration
facility which, once operational, is expected to generate cash flow in amounts sufficient to cover the Company’s operating
expenses and debt service.
Through
its private offerings, the Company raised $3,730,390 from inception through December 31, 2015 and raised an additional $2,216,994
in the six months ended June 30, 2016.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles
in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s majority-owned
subsidiaries over which the Company exercises control. Intercompany transactions and balances were eliminated in consolidation.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, after elimination of
intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability
to exercise significant influence over operating and financial policies are accounted for using the equity method. The Company’s
proportionate share of net income or loss of the entity is recorded in the Consolidated Statements of Operations
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the dates presented and reported amounts of revenues and expenses during the reporting periods presented.
Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of impairment
assessment of identifiable intangible assets and valuation allowance for deferred tax assets. Estimates are based on past experience
and other considerations reasonable under the circumstances. Actual results may differ from these estimates.
Cash
and Cash Equivalents
All
highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents.
Stock
Compensation
The
Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments
include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant
the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist
only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the
provisions of ASC Topic 718, “Stock Compensation” (formerly referred to as SFAS No. 123(R)). Share-based payments
to consultants, service providers and other non-employees are accounted for in accordance with ASC Topic 718, ASC Topic 505, “Equity
Payments to Non-Employees” or other applicable authoritative guidance.
Stock-based
Compensation Valuation Methodology
Stock-based
compensation resulting from the issuance of common stock is calculated by reference to the valuation of the stock on the date
of issuance, the expense being recognized as the compensation is earned. Stock-based compensation expenses related to employee
options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the
stock options or warrants granted is estimated at the grant date, using the Black-Scholes option pricing model, and the expense
is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the
option or warrant. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes
option pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique
characteristics of those equity instruments, using the assumptions noted in the table below. The fair value of the common stock
is determined by the then-prevailing closing market price. Expected volatility was based on the historical volatility of the Company’s
closing day market price per share. The expected term of options and warrants was based upon the life of the option, and the risk-free
rate used was based on the U.S. Treasury Daily Yield Curve Rate.
The
stock compensation issued for services during the six months ended June 30, 2016, was valued on the date of issuance. The following
assumptions were used in calculations of the Black-Scholes option pricing models for warrant-based stock compensation issued in
the six months ended June 30, 2016:
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|
01/01/16
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01/04/16
|
|
|
01/25/16
|
|
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02/01/16
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|
|
03/01/16
|
|
|
03/25/16
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|
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03/31/16
|
|
|
04/01/16
|
|
|
04/16/16
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|
Risk-free interest rate
|
|
|
1.76
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%
|
|
|
1.73
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%
|
|
|
1.47
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%
|
|
|
1.38
|
%
|
|
|
1.31
|
%
|
|
|
1.91
|
%
|
|
|
1.21
|
%
|
|
|
1.24
|
%
|
|
|
1.22
|
%
|
Expected life
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
10
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility
|
|
|
175.11
|
%
|
|
|
174.97
|
%
|
|
|
176.42
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%
|
|
|
175.99
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%
|
|
|
175.28
|
%
|
|
|
176.15
|
%
|
|
|
175.87
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%
|
|
|
175.70
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%
|
|
|
174.48
|
%
|
ALLM common stock fair value
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
$
|
0.37
|
|
|
$
|
0.33
|
|
|
$
|
0.33
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.28
|
|
|
|
04/28/16
|
|
|
04/29/16
|
|
|
05/01/16
|
|
|
06/01/16
|
|
|
06/30/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.28
|
%
|
|
|
1.28
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%
|
|
|
1.28
|
%
|
|
|
1.39
|
%
|
|
|
1.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
173.48
|
%
|
|
|
173.51
|
%
|
|
|
173.51
|
%
|
|
|
174.01
|
%
|
|
|
165.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLM common stock fair value
|
|
$
|
0.26
|
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
$
|
0.36
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Accounting
and Reporting of Discontinued Operations
As
required by the FASB ASC Subtopic 205.20, per ASU 2014-08, Discontinued Operations, a component of an entity or a group of components
of an entity, or a business or nonprofit activity can be classified as discontinued operations if the disposal represents a strategic
shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs:
(i) the criteria in paragraph 205.20.45.1E to be classified as held for sale is met (ii) the component is disposed of by sale,
or (iii) the component is disposed of other than by sale in accordance with paragraph 360.10.45.15 (for example, by abandonment
or in a distribution to owners in a spinoff). Certain components to be disposed of other than by sale shall continue to be classified
as “held and used” until it is disposed of, per the requirements of ASC Subtopic 360.10. Depreciation on these assets
ceases upon their classification as “held and used.” The Company adopted ASU No. 2014-08 effective September 1, 2014.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the
useful lives of the assets, generally 5 to 7 years. Expenditures for additions and improvements are capitalized; repairs and maintenance
are expensed as incurred.
Convertible
Instruments
The
Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives
and Hedging Activities”.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks
of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The
Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated
from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic
value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common
stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under
these arrangements are amortized over the term of the related debt to their stated date of redemption.
Common
Stock Purchase Warrants and Other Derivative Financial Instruments
The
Company classifies as equity any contracts that require physical settlement or net-share settlement or provide it with a choice
of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided
that such contracts are indexed to its own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”).
The Company classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net
cash settle the contract if an event occurs and if that event is outside the Company’s control) or give the counterparty
a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses the
classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether
a change in classification between assets and liabilities is required.
Non-controlling
interest in consolidated subsidiaries
The
accompanying consolidated financial statements include the accounts of Alliance BioEnergy Plus, Inc. and those subsidiaries that
the Company has the ability to control either through voting rights or means other than voting rights. For these subsidiaries,
the Company records 100% of the revenues, expenses, cash flows, assets and liabilities in its consolidated financial statements.
For subsidiaries that the Company controls but hold less than 100% ownership, a non-controlling interest is recorded in the consolidated
income statement to reflect the non-controlling interest’s share of the net income (loss), and a non-controlling interest
is recorded in the consolidated balance sheet to reflect the non-controlling interest’s share of the net assets of the subsidiary.
Investments
in non-consolidated affiliates
Investments
in non-consolidated affiliates are accounted for using the equity method or cost basis depending upon the level of ownership and/or
the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When
the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s
proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment
are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional
losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently
reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the
period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value
that is other than temporary has occurred.
The
Company’s investment in Carbolosic, LLC is accounted for using the equity method of accounting. The Company monitors its
investment for impairment at least annually and make appropriate reductions in the carrying value if it determines that an impairment
charge is required based on qualitative and quantitative information.
Impairment
of Long Lived Assets
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group
may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable,
the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected
to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the
carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds
the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less
costs to sell.
Income
Taxes
The
Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.”
Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and
(ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available
positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC
Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions
for any of the reporting periods presented.
Profit
(Loss) per Common Share:
Basic
profit (loss) per share amounts have been calculated using the weighted-average number of common shares outstanding during each
reporting period. Diluted loss per share has been calculated using the weighted-average number of common shares plus the potentially
dilutive effect of securities such as outstanding options and warrants. The computation of potential common shares has been performed
using the treasury stock method. The warrants and options are antidilutive for all periods presented. When net loss is reported,
diluted and basic net loss per share amounts are the same as the impact of potential common shares is antidilutive.
Fair
Value Measurements
The
Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value
as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair
value measurements.
The
estimated fair value of certain financial instruments, payables to related parties, and accounts payable and accrued expenses
are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
Recent
Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies
that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting
pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on
its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash
flows when implemented.
NOTE
4 – INVESTMENT IN UNCONSOLIDATED AFFILIATES
On
December 26, 2013, AMG Renewables, LLC, a Florida limited liability company (“AMG Renewables”), a wholly-owned subsidiary
of the Company, acquired the controlling interest (51%) in AMG Energy Group, LLC a Florida limited liability company (“AMG
Energy”) from certain related parties. AMG Energy owns a fifty percent (50%) interest of Carbolosic, LLC, a Delaware limited
liability company (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s
patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry
process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing.
The results of AMG Renewables and AMG Energy are consolidated in the Company’s financial statements. AMG Energy’s
investment in Carbolosic is accounted for using the equity method of accounting.
On
May 13, 2015, The Company entered an agreement with Carbolosic SA’s shareholders whereby, among other matters, it was agreed
that ownership of Carbolosic SA shall be 43.5% for Tes Projects (Pty) Ltd, a South African company (“Tes”), 24.5 %
for Spearhead Capital Ltd, a Seychelles company (“Spearhead”), 7.5% for Jupiter Trust, a South African Trust (“Jupiter”)
and 24.5% for Alliance BioEnergy Plus, Inc. TES, Spearhead and Jupiter are all unrelated to the Company. The interests of Tes
and Jupiter are delivered in consideration of the funding or guarantee of funding of the License Fee; Spearhead’s interest
is in consideration of facilitating the Sublicense transaction; and the Company’s interest is in exchange for the delivery
to Carbolosic SA of a 24.5% interest in one of the Company’s CTS sugar extracting plants to be developed in the United States.
The Company’s investment in Carbolosic SA is accounted for using the equity method of accounting.
The
following is a condensed balance sheet of the unconsolidated affiliates as of June 30, 2016 and December 31, 2015 and a comparative
statement of operations for the three and six months ending June 30, 2016 and 2015.
Condensed
Balance Sheet of Non-Consolidated Affiliates
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
49
|
|
|
$
|
83
|
|
Total Current Assets
|
|
|
49
|
|
|
|
83
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Prepaid Expenses
|
|
|
17,500
|
|
|
|
-
|
|
Total Other Assets
|
|
|
17,500
|
|
|
|
-
|
|
TOTAL ASSETS
|
|
$
|
17,549
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
297,177
|
|
|
$
|
238,399
|
|
Interest payable
|
|
|
21,467
|
|
|
|
12,864
|
|
Current notes payable
|
|
|
627,794
|
|
|
|
539,189
|
|
TOTAL CURRENT LIABILITIES
|
|
|
946,438
|
|
|
|
790,452
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(928,889
|
)
|
|
|
(790,369
|
)
|
TOTAL EQUITY
|
|
|
(928,889
|
)
|
|
|
(790,369
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
17,549
|
|
|
$
|
83
|
|
Condensed
Statement of Operations of Non-Consolidated Affiliate
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
June 30, 2016
|
|
|
June 30,2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties
|
|
|
17,500
|
|
|
|
10,000
|
|
|
|
35,000
|
|
|
|
20,000
|
|
General and administrative
|
|
|
62,554
|
|
|
|
72,617
|
|
|
|
152,686
|
|
|
|
139,619
|
|
Total operating expenses
|
|
|
(80,054
|
)
|
|
|
(82,617
|
)
|
|
|
(187,686
|
)
|
|
|
(159,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
4,640
|
|
|
|
2,750
|
|
|
|
8,603
|
|
|
|
4,928
|
|
Total other expenses
|
|
|
(4,640
|
)
|
|
|
(2,750
|
)
|
|
|
(8,603
|
)
|
|
|
(4,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(84,694
|
)
|
|
$
|
(85,367
|
)
|
|
$
|
(196,289
|
)
|
|
$
|
(164,547
|
)
|
NOTE
5 – DEBT
Short
Term Notes Payable - Related Parties
Throughout
2013, the Company issued unsecured short-term notes payable to various related parties, including officers and directors of the
Company, with a term of one year, which have since been extended. At June 30, 2016 there was one consolidated note outstanding
to Palm Beach Energy Solutions, LLC. The note has an outstanding principal balance of $71,000 and bears interest at a rate of
5% per annum. As of June 30, 2016 and December 31, 2015, the total interest accrued on the note was $10,806 and $9,036 respectively.
Short
Term Notes Payable – Other
On
July 7, 2015, the Company entered into a six month (6) promissory note with St. George Investments, LLC with a face amount of
$265,000 less an original issue discount of $65,000. This note does not accrue interest, however in the event of default, the
note shall bear interest at the lesser of the rate of eighteen percent (18%) per annum or the maximum rate permitted by law compounding
daily. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized
over the life of the note. In January 2016, the company repaid this note in full. The total amount paid was $306,890, which represented
a $265,000 principal balance and $41,890 in default interest and early payment penalties.
Long
Term Notes Payable – Other
During
the year ended December 31, 2014, Carbolosic Plant 1, LLC, a wholly owned subsidiary, entered into an agreement with Carbolosic
Energy 1, LLLP to begin receiving long term loans, pursuant to the U.S. EB-5 Immigrant Investor Program, to develop a CTS demonstration
facility. These loans were to be issued in multiple advances, each in an amount greater than or equal to $500,000 up to the target
loan amount of $33,000,000. The initial term on each of these loans was five (5) years from the date of each advance and bear
interest at a rate of 4.31% per annum. The Company could earn a 0.51% rate discount if the first five years of interest due to
lender was paid within 15 days of each advance. In addition, these loans could not be prepaid and were secured by all assets of
the Company. The Company received two (2) long term notes payable, with a combined principal balance of $1,250,000 in the year
ended December 31, 2014. The company had taken advantage of the 0.51% rate discount on one of these notes payable, with a principal
amount of $500,000, and issued a $95,000 interest payment to the Lender on December 9, 2014. In January 2015, the Company made
a $4,162 interest payment towards the second note. In March 2016, Carbolosic Plant 1 was sold to Carbolosic Energy 1, LLLP, a
non-related third party, in exchange for satisfaction of the outstanding $1,250,000 loan and $36,488 interest. In connection with
the transaction, an amount which the Company had prepaid to Carbolosic Energy 1, LLLP ($122,879) for future marketing and interest
was eliminated in the sale.
Convertible
Debt
On
June 30, 2015, the Company entered into a convertible debenture with Iconic Holdings, LLC with a principal balance of $165,000
due on or before June 30, 2016. This note provided for “guaranteed” interest of ten percent (10.0%) of the principal
balance outstanding. In addition to the “guaranteed” interest, in the event of default additional interest would accrue
at the rate equal to the lower of eighteen percent (18.0%) per annum or the highest rate permitted by law. This note could only
be prepaid within the first 180 days along with a prepayment penalty of one hundred ten percent (110%) and increasing ten percent
(10%) every sixty (60) days to a maximum of one hundred thirty percent (130%). After 180 days, the note could be converted into
the Company’s common stock at a conversion rate equal to sixty percent (60%) of the lowest trading price during the preceding
15 consecutive trading days prior to date of conversion. In addition, in order to obtain this note, the Company issued Iconic
Holdings, LLC a five (5) year common stock purchase warrant agreement for up to 50,000 shares with an exercise price of $0.75
per share. These warrants were fully granted and vested at time of issuance and are being amortized over the life of the agreement.
In January 2016, Iconic Holdings, LLC converted $95,000 of the principal balance into 891,042 shares of unrestricted common stock
and the remaining balance of the note was repaid in full. The total amount paid was $140,950, which represented a $70,000 principal
payment and $70,950 in interest and early payment penalties.
On
July 10, 2015, the Company entered into a convertible debenture with JSJ Investments, Inc with a principal balance of $150,000
due on or before January 10, 2016. The note accrues interest at a rate of twelve percent (12%) per annum and is convertible into
the Company’s common stock one hundred eighty (180) days after the maturity date, in whole or in part at the option of the
holder at a conversion price equal to the lower of $0.24 or the lowest trading day price during the twenty (20) trading days preceding
the conversion date, less a forty-five percent (45%) discount. After the maturity date, the note cannot be repaid without the
holder’s consent and the payment premium increases to one hundred fifty percent (150%). Upon an event of default or after
the maturity date, the interest rate shall adjust to eighteen percent (18%) per annum and compound quarterly. In addition, a ten
percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note.
In January 2016, JSJ Investments attempted to convert a portion of the debt in violation of a mutually agreed upon amendment to
the note and mutually agreed upon standstill agreement between the Company and JSJ Investments. The shares in question were returned
and cancelled after being notified by the Company’s attorney. In March 2016, JSJ Investments made a second attempt to convert
a portion of its debt in violation of the mutually agreed upon amendment to the note. Shares were not converted this time. A third
attempt, made in late March 2016, converted $25,000 for 195,924 shares of unrestricted common stock. The conversion violated the
terms of the debt agreement and the Company and its counsel notified JSJ of the violation of the agreement and have recouped all
of the issued shares. In April 2016, the Company paid the debenture in full with a payment of $239,055, which represented a $150,000
principal payment and $89,055 in interest and penalties.
On
July 10, 2015 the Company entered into a secured convertible debenture with Group 10 Holdings, LLC with a principal balance of
$275,000, less a ten percent (10%) original issue discount and was due on or before July 10, 2016. Group10 Holdings, LLC was granted
a security interest in the South African agreement sub-licensed by AMG Energy Group. This note accrued interest at a rate of twelve
percent (12%) per annum and was convertible into the Company common stock one hundred eighty (180) days after the issuance date
in whole or in part at the option of the holder at a conversion price equal to forty-two cents ($0.42); provided, however, that
if the closing price was less than forty cents ($0.40) for any three (3) consecutive trading days, then the conversion price shall
adjust to the lowest trading day price during the thirty-five (35) trading days prior, less a forty-five percent (45%) discount.
Repayment of the note included a prepayment penalty if the note was paid back within the first one hundred eighty (180) days and
could not be repaid after day one hundred eighty (180) without the holders consent. The prepayment penalty if paid back within
the first ninety (90) days was equal to one hundred five percent (105%) of the principal balance; paid between day ninety-one
(91) and day one hundred twenty (120) the prepayment penalty was equal to one hundred fifteen percent (115%) of the principal
balance; paid between day one hundred twenty-one (121) and day one hundred seventy-nine (179) the prepayment penalty increased
to one hundred twenty-five percent (125%) of the principal balance. In addition, a ten percent (10%) broker commission was paid
to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, Group 10 Holdings, LLC
converted $20,000 of its principal balance into 157,418 shares of unrestricted common stock and the Company paid the remaining
debenture in full with a payment of $340,468, which represented a $255,000 principal payment and $85,068 in interest and early
payment penalties.
On
July 27, 2015, the Company entered into a convertible debenture with Adar Bays, LLC with a principal balance of $100,000 due on
or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s
common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder at a conversion
price equal to sixty percent (60%) of the lowest trading day price during the twenty (20) trading days preceding the conversion
date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one
hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred
fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152)
and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note
could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent (150%).
Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%) and the
interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission was paid
to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the
debenture in full with a payment of $149,022, which represented a $100,000 principal payment and $49,022 in interest and early
payment penalties.
On
July 27, 2015, the Company entered into a convertible debenture with Union Capital, LLC with a principal balance of $100,000 due
on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the
Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder
at a conversion price equal to sixty percent (60%) of the lowest trading day price during the twenty (20) trading days preceding
the conversion date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then
a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one
(91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred
fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity
date, the note could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent
(150%). Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%)
and the interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission
was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company
paid the debenture in full with a payment of $148,748, which represented a $100,000 principal payment and $48,748 in interest
and early payment penalties.
On
July 27, 2015, the Company entered into a convertible debenture with LG Capital Funding, LLC with a principal balance of $105,000
due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into
the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder
at a conversion price equal to sixty percent (60%) of the lowest trading day price during the fifteen (15) trading days preceding
the conversion date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then
a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one
(91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred
fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity
date, the note could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent
(150%). Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%)
and the interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission
was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company
paid the debenture in full with a payment of $156,462, which represented a $105,000 principal payment and $51,462 in interest
and early payment penalties.
On
August 10, 2015, the Company entered into a convertible debenture with Vis Vires Group, Inc. with a principal balance of $104,000
due and payable on or before May 4, 2016. The note accrued interest at a rate of eight percent (8.0%) per annum and was convertible
into the Company’s common stock, after 180 days, in whole or in part at the option of the holder at a conversion rate equal
to the average of the three (3) lowest trading day prices during the ten (10) trading days preceding the conversion date, less
a thirty-nine percent (39%) discount. The note also carried a prepayment penalty of one hundred thirty percent (130%) of the then
outstanding principal and interest balance due, if the note was paid back within the first one hundred eighty (180) days. After
the first 180 days, the then outstanding principal and interest balance shall bear interest at a rate of twenty-two percent (22.0%)
per annum and could not be paid until maturity. In January 2016, the Company paid the note in full with a payment of $139,303,
which represented a $104,000 principal payment and $35,303 in interest and early payment penalties.
On
April 25, 2016, the Company entered into a 12 month convertible debenture with JMJ Financial with a principal balance of $555,556.
The note carries a 10% one-time interest charge, a 10% original issue discount and a 75% warrant coverage. The note may only be
paid up to 98% of the balance due within the first 180 days at a 30% premium. After 180 days, the note cannot be repaid without
the holders consent. The note is convertible after 180 days at a 25% discount to the lowest trade price in the preceding 10 trading
days. To obtain the note, the Company issued the investor 1,388,886 warrants with a 5 year term and a cashless exercise price
equal to the lesser of $0.30 per share or the lowest trade price in the 10 preceding trading days. As of June 30, 2016, using
a Black-Scholes asset pricing model, these warrants were valued at $471,303.
NOTE
6 – STOCKHOLDERS’ EQUITY
In
November 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three
days closing market share price. Each unit consists of one (1) share of common stock, one (1) three-year Series C warrant convertible
to .5 common share at an exercise price of $0.45 and one (1) three-year series D warrant convertible to .5 common share at an
exercise price of $0.65. At December 31, 2015, the Company had sold 960,897 units for aggregate proceeds of $312,000. During the
six months ended June 30, 2016 the company sold an additional 500,000 units for aggregate proceeds of $89,000. The offering is
ongoing.
During
the six months ended June 30, 2016, an additional $115,000 of the Company’s convertible debt converted to 1,048,460 shares
of common stock. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the
intrinsic value of such conversions, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments
set out above, the fair value of the stock was greater than the conversion price, and therefore a total value of $218,301 was
attributed to the beneficial conversion feature.
In
January 2016, the Company commenced a new offering of units valued at $0.24 per share. Each unit consist of one (1) share of common
stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. During the six
months ended June 30, 2016, the Company has sold 2,485,516 units for aggregate proceeds of $596,524. The offering is ongoing.
In
March 2016, the Company commenced a new offering of units valued at $765,735. Each unit consists of three million seven hundred
seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000)
five-year series F warrants convertible to one (1) share of common stock each at an exercise price of $0.25. During the six months
ended June 30, 2016, the Company has sold 2 units totaling 7,435,570 shares of common stock and 9,000,000 warrants for aggregate
proceeds of $1,531,470.
During
the six months ended June 30, 2016, the Company issued 1,035,000 shares of Company common stock for services valued at $451,300.
During
the six months ended June 30, 2016, the Company issued an aggregate of 5,078,886 warrants for services. Using a Black-Scholes
asset pricing model, these warrants were valued at $1,422,055. These warrant agreements have terms ranging from three years (3)
to five years (5) with exercise prices ranging from forty-five cents ($0.45) to two dollars ($2.00) per share.
During
the six months ended June 30, 2016, the Company issued options to its independent directors to purchase an aggregate of 65,228
shares of common stock for a period of three (3) years at an average exercise price of $0.45. In addition, the Company also approved
employee stock options to purchase 250,000 shares of common stock at an average exercise price of $0.30 and a term of five (5)
years. In addition, 333,334 options issued under an employment agreement became fully vested. Using a Black-Scholes asset pricing
model, these agreements were valued at $200,720.
During
the six months ended June 30, 2016, the Company received $6,526 in disgorgement from certain shareholders and officers.
NOTE
7 – SEGMENT INFORMATION
The
company operates in one segment and does not have any revenue to date.
NOTE
8 - COMMITMENTS AND CONTINGENCIES
Lease
The
Company has leased office space pursuant to a lease for a period of thirty-six (36) months from August 5, 2015 through July 31,
2018. Annual rent commenced at approximately $48,925 per annum and increases on a year-to-year basis by three percent (3%) over
the Base Year. In addition, the Company is obligated to pay an amount equal to 3.76% of the operating expenses of the building
together with sales tax on all amounts.
EK
Laboratories leases office and warehouse space in Longwood, FL, which serves as the Company’s research and demonstration
facility. The lease period is for thirty-six (36) months from February 1, 2015 through January 31, 2018. Annual rent commences
at approximately $70,620 per annum and increases on a year-to-year basis by five percent (5%) over the prior year. The Company
also has the right to purchase the property during the lease term.
Rent
expense for the three months ended June 30, 2016 and June 30, 2015 was $31,516 and $42,408 respectively. Rent expense for the
six months ended June 30, 2016 and June 30 2015 was $63,012 and $76,836 respectively.
NOTE
9 – RELATED PARTY TRANSACTIONS
Related
Transactions
1)
Mark W. Koch, Daniel de Liege and Johan Sturm are principals of AMG Energy Solutions, Inc, which owns 43% of AMG Energy Group,
LLC. The company owns the remaining 51% of AMG Energy Group, LLC (see NOTE 4, above). Mark W. Koch and Johan Sturm are greater
than 5% shareholders in the Company.
2)
Short-term notes payable issued to related parties are described in NOTE 5.
3)
In January 2015, the Company entered into a consulting agreement with a company owned by Mark W. Koch named Prelude Motorsports,
Inc, which calls for semi-monthly payments of $10,000. Under the terms of the consulting agreement, the consultant will review
and provide input on a variety of areas including corporate structure, marketing materials, website and promotional pieces; provide
introductions to various organizations and individuals who might support the Company’s business development efforts. This
agreement was cancelled on March 31, 2016.
4)
On April 16, 2016, the Company entered into a 33 month consulting agreement with a company owned by Mark W. Koch named CK Energy,
which calls for semi-monthly payment of $9,860 through September 2016. The agreement also provides the consultant with 500,000
warrants exercisable at $0.50, 1,000,000 warrants exercisable at $0.75 and 1,000,000 warrants exercisable at $1.00 all with a
five year term. Using a Black-Scholes asset pricing model, these warrants have been valued at $643,245 and are being amortized
over the life of the agreement. Under the terms of the consulting agreement, the consultant will review and provide input on a
variety of areas including corporate structure, marketing materials, website and promotional pieces; provide introductions to
various organizations and individuals who might support the Company’s business development efforts.
The
officers and directors for the Company are involved in other business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between
the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
NOTE
10 – DISCONTINUED OPERATIONS
On
September 1, 2014, the Company determined the need to focus its resources and personnel on the Company’s renewable energy
holdings and future energy technologies and to divest the company of its entertainment-related assets and subsidiaries. The principal
reasons for such action is the expense, liability and losses that have been generated by the entertainment-related assets and
to provide a clear focus and direction to the Company moving forward. Specifically, the Board approved the divesting, selling
off, closing down or discontinuing of the operations of its entertainment-related subsidiaries, including but not limited to Prelude
Pictures Entertainment, LLC, AMG Live, LLC, AMG Restaurant Operations, LLC (including The New York Sandwich Company, LLC), AMG
Music, LLC, AMG Releasing, LLC and AMG Television, LLC.
Below
is a reconciliation of the total assets and liabilities of the discontinued operations, which are presented separately on the
balance sheet.
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Carrying amounts of major classes of assets included as part of discontinued
operations
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
-
|
|
Total assets of the discontinued operation
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts of major classes of liabilities included as part of discontinued
operations
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
36,148
|
|
|
$
|
36,148
|
|
Total liabilities of the discontinued operation
|
|
$
|
36,148
|
|
|
$
|
36,148
|
|
Below
is a reconciliation of the net loss of the discontinued operations, which are presented separately on the statement of operations.
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Major line items constituting pretax profit (loss) of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Selling, general and administrative
|
|
|
73
|
|
|
|
(7,377
|
)
|
|
|
(3,125
|
)
|
|
|
(29,018
|
)
|
Debt forgiveness from legal settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
700,000
|
|
Gain (Loss) from discontinued operations
|
|
$
|
73
|
|
|
$
|
(7,377
|
)
|
|
$
|
(3,125
|
)
|
|
$
|
670,982
|
|
NOTE
11 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date the financial statements were available to be issued. Based on this evaluation,
the Company has identified the following subsequent events:
Since
July 1, 2016, the Company has sold 600,000 units for aggregate proceeds of $144,000 through its January 2016 offering.
Since
July 1, 2016, the Company has issued 225,000 shares of common stock for services valued at $80,750.
Since
July 1, 2016, the Company has issued an aggregate of 10,000 warrants for services. Using a Black-Scholes asset pricing model,
these warrants were valued at $3,441. These warrant agreements have a term of five years (5) and an exercise price of forty-five
cents ($0.45) per share.