UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2014
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 000-52361
BLUEFIRE RENEWABLES, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-4590982 | |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
31 Musick
Irvine, CA 92618
(Address of principal executive offices)
(949) 588-3767
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | [ ] | Accelerated filer | [ ] | |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 20, 2014, there were 156,704,560 shares outstanding of the registrant’s common stock.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements | F-1 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 10 | |
| Item 4. | Controls and Procedures | 11 | |
| PART II – OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 11 | |
| Item 1A. | Risk Factors | 11 | |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 12 | |
| Item 3 | Defaults Upon Senior Securities | 12 | |
| Item 4. | Mine Safety Disclosures | 12 | |
| Item 5. | Other Information | 12 | |
| Item 6. | Exhibits | 12 | |
| Signatures | 13 | ||
| 2 |
PART I – FINANCIAL INFORMATION
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 66,042 | $ | 46,992 | ||||
| Department of Energy grant receivable | 111,327 | - | ||||||
| Costs of financing | - | 1,031 | ||||||
| Prepaid expenses | 26,924 | 4,636 | ||||||
| Total current assets | 204,293 | 52,659 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $106,237 and $106,041, respectively | 111,045 | 111,240 | ||||||
| Total assets | $ | 315,338 | $ | 163,899 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 833,177 | $ | 1,108,684 | ||||
| Accrued liabilities | 371,644 | 272,910 | ||||||
| Convertible notes payable, net of discount of $25,949 and $75,695, respectively | 336,551 | 322,385 | ||||||
| Line of credit, related party | 11,230 | 11,230 | ||||||
| Note payable to a related party | 200,000 | 200,000 | ||||||
| Derivative liability | 206,715 | 122,309 | ||||||
| Total current liabilities | 1,959,317 | 2,037,518 | ||||||
| Outstanding warrant liability | 470 | 58 | ||||||
| Total liabilities | 1,959,787 | 2,037,576 | ||||||
| Redeemable noncontrolling interest | 858,416 | 856,044 | ||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, no par value, 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value; 500,000,000 shares authorized; 143,804,560 and 73,486,861 shares issued; and 143,772,388 and 68,910,395 outstanding, as of March 31, 2014 and December 31, 2013, respectively | 143,804 | 68,943 | ||||||
| Additional paid-in capital | 16,300,922 | 16,123,744 | ||||||
| Treasury stock at cost, 32,172 shares at March 31, 2014 and December 31, 2013 | (101,581 | ) | (101,581 | ) | ||||
| Deficit accumulated during the development stage | (18,846,010 | ) | (18,820,827 | ) | ||||
| Total stockholders’ deficit | (2,502,865 | ) | (2,729,721 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 315,338 | $ | 163,899 | ||||
See accompanying notes to consolidated financial statements
| F-1 |
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months ended March 31, 2014 | For the Three Months ended March 31, 2013 | From March 28, 2006 (inception) Through March 31, 2014 | ||||||||||
| Revenues: | ||||||||||||
| Consulting fees | $ | 85,520 | $ | 2,020 | $ | 371,500 | ||||||
| Department of Energy grant revenue | 525,586 | 66,111 | 8,480,365 | |||||||||
| Department of Energy - unbilled grant revenue | - | - | 197,041 | |||||||||
| Total revenues | 611,106 | 68,131 | 9,048,906 | |||||||||
| Cost of revenue | ||||||||||||
| Consulting revenue | - | - | 61,391 | |||||||||
| Gross margin | 611,106 | 68,131 | 8,987,515 | |||||||||
| Operating expenses: | ||||||||||||
| Project development, including stock based compensation of $0, $0, and $4,468,490, respectively | 213,925 | 118,387 | 20,212,230 | |||||||||
| General and administrative, including stock based compensation of $36,977, $9,075, and $6,521,736, respectively | 293,352 | 222,339 | 19,075,379 | |||||||||
| Impairment loss | - | - | 1,162,148 | |||||||||
| Related party license fee | - | - | 1,000,000 | |||||||||
| Total operating expenses | 507,277 | 340,726 | 41,449,757 | |||||||||
| Operating income (loss) | 103,829 | (272,595 | ) | (32,462,242 | ) | |||||||
| Other income and (expense): | ||||||||||||
| Other income | - | - | 256,295 | |||||||||
| Financing related charge | - | - | (211,660 | ) | ||||||||
| Amortization of debt discount | (50,218 | ) | (39,678 | ) | (1,081,994 | ) | ||||||
| Interest expense | (15,656 | ) | (98,486 | ) | (477,080 | ) | ||||||
| Related party interest expense | (337 | ) | (457 | ) | (176,280 | ) | ||||||
| Loss on extinguishment of debt | - | - | (2,818,370 | ) | ||||||||
| Loss on warrant modification | - | - | (803,704 | ) | ||||||||
| Gain on settlement of accounts payable and accrued liabilities | 95,990 | - | 275,863 | |||||||||
| Deobligation of Department of Energy billings in excess of estimated earnings | - | - | 354,000 | |||||||||
| Gain (Loss) from change in fair value of warrant liability | (412 | ) | 14,119 | 2,966,946 | ||||||||
| Gain (Loss) from change in fair value of derivative liability | (154,264 | ) | (30,731 | ) | 17,971 | |||||||
| Loss on excess fair value of derivative liability | - | - | (124,883 | ) | ||||||||
| Loss on the retirements of warrants | - | - | (146,718 | ) | ||||||||
| Total other income and (expense) | (124,897 | ) | (155,233 | ) | (1,969,614 | ) | ||||||
| Loss before income taxes | (21,068 | ) | (427,828 | ) | (34,431,856 | ) | ||||||
| Provision for income taxes | 1,743 | 1,105 | 89,690 | |||||||||
| Net loss | $ | (22,811 | ) | $ | (428,933 | ) | $ | (34,521,546 | ) | |||
| Net income (loss) attributable to noncontrolling interest | 2,372 | (2,057 | ) | (4,083 | ) | |||||||
| Net loss attributable to controlling interest | $ | (25,183 | ) | $ | (426,876 | ) | $ | (34,517,463 | ) | |||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) | ||||||
| Weighted average common shares outstanding, basic and diluted | 110,302,236 | 33,906,109 | ||||||||||
See accompanying notes to consolidated financial statements
| F-2 |
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, 2014 | For the Three Months Ended March 31, 2013 | From March 28, 2006 (inception) Through March 31, 2014 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | (22,811 | ) | $ | (428,933 | ) | $ | (34,521,546 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| (Gain) loss from change in the fair value of warrant liability | 412 | (14,119 | ) | (2,966,946 | ) | |||||||
| (Gain) loss from change in fair value of derivative liability | 154,264 | 30,731 | (17,971 | ) | ||||||||
| Loss on excess fair value of derivative liability | - | - | 124,883 | |||||||||
| Founders’ shares | - | - | 17,000 | |||||||||
| Costs associated with purchase of Sucre Agricultural Corp | - | - | (3,550 | ) | ||||||||
| Interest expense on beneficial conversion feature of convertible notes | - | - | 676,983 | |||||||||
| Loss on extinguishment of convertible debt | - | - | 2,718,370 | |||||||||
| Loss on retirement of warrants | - | - | 146,718 | |||||||||
| Common stock issued for interest on convertible notes | - | - | 55,585 | |||||||||
| Discount on sale of stock associated with private placement | - | - | 211,660 | |||||||||
| Accretion of discount on note payable to related party | - | - | 83,736 | |||||||||
| Debt issuance costs for rejected loan guarantees | - | - | 583,634 | |||||||||
| Gain on settlement of accounts payable and accrued liabilities | (95,990 | ) | - | (275,863 | ) | |||||||
| Loss on warrant modification | - | - | 803,704 | |||||||||
| Impairment of property and equipment | - | - | 1,162,148 | |||||||||
| Share-based compensation | 36,977 | 9,075 | 11,762,533 | |||||||||
| Unrealized Department of Energy unbilled receivables | - | - | 20,116 | |||||||||
| Amortization | 51,249 | 107,425 | 606,786 | |||||||||
| Depreciation | 196 | 1,533 | 106,594 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | - | (2,020 | ) | - | ||||||||
| Department of Energy unbilled grant receivable | - | - | 42,183 | |||||||||
| Department of Energy grant receivable | (111,327 | ) | - | (111,327 | ) | |||||||
| Prepaid expenses and other current assets | (22,288 | ) | (6,579 | ) | (26,925 | ) | ||||||
| Accounts payable | (109,166 | ) | 72,413 | 1,151,909 | ||||||||
| Accrued liabilities | 102,534 | 157,534 | 508,356 | |||||||||
| Net cash used in operating activities | (15,950 | ) | (72,940 | ) | (17,141,230 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisition of property and equipment | - | - | (217,636 | ) | ||||||||
| Construction in progress | - | (35,459 | ) | (1,116,307 | ) | |||||||
| Net cash used in investing activities | - | (35,459 | ) | (1,333,943 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Cash paid for treasury stock | - | - | (101,581 | ) | ||||||||
| Cash received in acquisition of Sucre Agricultural Corp. | - | - | 690,000 | |||||||||
| Proceeds from sale of stock through private placement | - | - | 544,500 | |||||||||
| Proceeds from exercise of stock options | - | - | 40,000 | |||||||||
| Proceeds from issuance of common stock | - | - | 14,745,000 | |||||||||
| Proceeds from convertible notes payable | 35,000 | 80,000 | 3,040,500 | |||||||||
| Repayment of notes payable | - | - | (500,000 | ) | ||||||||
| Proceeds from related party line of credit/notes payable | - | - | 335,230 | |||||||||
| Repayment from related party line of credit/notes payable | - | - | (124,000 | ) | ||||||||
| Debt issuance costs | - | - | (658,434 | ) | ||||||||
| Retirement of warrants | - | - | (220,000 | ) | ||||||||
| Proceeds from sale of LLC Unit | - | - | 750,000 | |||||||||
| Net cash provided by financing activities | 35,000 | 80,000 | 18,541,215 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 19,050 | (28,399 | ) | 66,042 | ||||||||
| Cash and cash equivalents beginning of period | 46,992 | 59,603 | - | |||||||||
| Cash and cash equivalents end of period | $ | 66,042 | $ | 31,204 | $ | 66,042 | ||||||
| Supplemental disclosures of cash flow information Cash paid during the period for: | ||||||||||||
| Interest | $ | - | $ | - | $ | 61,445 | ||||||
| Income taxes | $ | - | $ | - | $ | 27,100 | ||||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||||||
| Conversion of convertible notes payable into common stock | $ | 32,500 | $ | 50,000 | $ | 2,219,000 | ||||||
| Interest converted to common stock | $ | 1,300 | $ | - | $ | 64,329 | ||||||
| Fair value of warrants issued to placement agents | $ | - | $ | - | $ | 725,591 | ||||||
| Accounts payable, net of reimbursement, included in construction-in-progress | $ | - | $ | - | $ | 45,842 | ||||||
| Discount on related party note payable | $ | - | $ | - | $ | 83,736 | ||||||
| Accretion of redeemable noncontrolling interest | $ | - | $ | - | $ | 112,500 | ||||||
| Derivative liability reclassed to additional paid-in capital | $ | - | $ | 44,649 | $ | 169,301 | ||||||
| Discount on convertible notes payable | $ | 2,500 | $ | - | $ | 169,570 | ||||||
| Convertible loans issued in connection with the Liabilities Purchase Agreement | $ | - | $ | - | $ | 75,000 | ||||||
| Accounts payable and accrued liabilities paid in common stock | $ | - | $ | - | $ | 146,080 | ||||||
See accompanying notes to consolidated financial statements
| F-3 |
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
BlueFire Ethanol, Inc. (“BlueFire”) was incorporated in the state of Nevada on March 28, 2006 (“Inception”). BlueFire was established to deploy the commercially ready and patented process for the conversion of cellulosic waste materials to ethanol (“Arkenol Technology”) under a technology license agreement with Arkenol, Inc. (“Arkenol”). BlueFire’s use of the Arkenol Technology positions it as a cellulose-to-ethanol company with demonstrated production of ethanol from urban trash (post-sorted “MSW”), rice and wheat straws, wood waste and other agricultural residues. The Company’s goal is to develop and operate high-value carbohydrate-based transportation fuel production facilities in North America, and to provide professional services to such facilities worldwide. These “biorefineries” will convert widely available, inexpensive, organic materials such as agricultural residues, high-content biomass crops, wood residues, and cellulose from MSW into ethanol.
On July 15, 2010, the board of directors of BlueFire, by unanimous written consent, approved the filing of a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of State of Nevada, changing the Company’s name from BlueFire Ethanol Fuels, Inc. to BlueFire Renewables, Inc. On July 20, 2010, the Certificate of Amendment was accepted by the Secretary of State of Nevada.
On November 25, 2013, the Company filed an amendment to the Company’s articles of incorporation with the Secretary of State of the State of Nevada, to increase the Company’s authorized common stock from one hundred million (100,000,000) shares of common stock, par value $0.001 per share, to five hundred million (500,000,000) shares of common stock, par value $0.001 per share.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The Company is a development-stage company which has incurred losses since Inception. Management has funded operations primarily through proceeds received in connection with the reverse merger, loans from its majority shareholder, the private placement of the Company’s common stock in December 2007 for net proceeds of approximately $14,500,000, the issuance of convertible notes with warrants in July and in August 2007, various convertible notes, and Department of Energy reimbursements throughout 2009 to 2014. The Company may encounter further difficulties in establishing operations due to the time frame of developing, constructing and ultimately operating the planned bio-refinery projects.
As of March 31, 2014, the Company has negative working capital of approximately $1,755,000. Management has estimated that operating expenses for the next 12 months will be approximately $1,700,000, excluding engineering costs related to the development of bio-refinery projects. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Throughout the remainder of 2014, the Company intends to fund its operations with remaining reimbursements under the Department of Energy contract as available, as well as seek additional funding in the form of equity or debt. The Company’s ability to get reimbursed under the DOE contract is dependent on the availability of cash to pay for the related costs and the availability of funds remaining under the contract after the discontinuance of the Department of Energy contract further disclosed in Note 3. As of May 20, 2014, the Company expects the current resources available to them will only be sufficient for a period of approximately one month unless significant additional financing is received. Management has determined that the general expenditures must be reduced and additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we may consume all of our cash reserved for operations. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. The financial statements do not include any adjustments that might result from these uncertainties.
| F-4 |
Additionally, the Company’s Lancaster plant is currently shovel ready, except for the air permit which the Company will need to renew as stated below, and only requires minimal capital to maintain until funding is obtained for the construction. The preparation for the construction of this plant was the primary capital use in 2009. In December 2011, BlueFire requested an extension to pay the project’s permits for an additional year while we awaited potential financing. The Company has let the air permits expire as there were no more extensions available and management deemed the project not likely to start construction in the short-term. BlueFire will need to resubmit for air permits once it is able to raise the necessary financing. This project shall continue once we receive the funding necessary to construct the facility.
As of December 31, 2010, the Company completed the detailed engineering on our proposed Fulton Project, procured all necessary permits for construction of the plant, and began site clearing and preparation work, signaling the beginning of construction. As of March 31, 2014, all site preparation activities have been completed, including clearing and grating of the site, building access roads, completing railroad tie-ins to connect the site to the rail system, and finalizing the layout plan to prepare for the site foundation. As of December 31, 2013, the construction-in-progress was deemed impaired due to the discontinuance of future funding from the DOE further described in Note 3.
We estimate the total construction cost of the bio-refineries to be in the range of approximately $300 million for the Fulton Project and approximately $100 million to $125 million for the Lancaster Biorefinery. These cost approximations do not reflect any increase/decrease in raw materials or any fluctuation in construction cost that would be realized by the dynamic world metals markets or inflation of general costs of construction. The Company is currently in discussions with potential sources of financing for these facilities but no definitive agreements are in place. The Company cannot continue significant development or furtherance of the Fulton project until financing for the construction of the Fulton plant is obtained.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities Exchange Commission. Certain information and disclosures normally included in the annual financial statements prepared in accordance with the accounting principles generally accepted in the Unites States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of BlueFire Renewables, Inc., and its wholly-owned subsidiary, BlueFire Ethanol, Inc. BlueFire Ethanol Lancaster, LLC, BlueFire Fulton Renewable Energy LLC (excluding 1% interest sold) and SucreSource LLC are wholly-owned subsidiaries of BlueFire Ethanol, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.
Project Development
Project development costs are either expensed or capitalized. The costs of materials and equipment that will be acquired or constructed for project development activities, and that have alternative future uses, both in project development, marketing or sales, will be classified as property and equipment and depreciated over their estimated useful lives. To date, project development costs include the research and development expenses related to the Company’s future cellulose-to-ethanol production facilities. During three months ended March 31, 2014 and 2013 and for the period from March 28, 2006 (Inception) to March 31, 2014, research and development costs included in Project Development were approximately $214,000, $118,000, and $15,744,000, respectively.
| F-5 |
Convertible Debt
Convertible debt is accounted for under the guidelines established by Accounting Standards Codification (“ASC”) 470-20 “Debt with Conversion and Other Options”. ASC 470-20 governs the calculation of an embedded beneficial conversion, which is treated as an additional discount to the instruments where derivative accounting (explained below) does not apply. The amount of the value of warrants and beneficial conversion feature may reduce the carrying value of the instrument to zero, but no further. The discounts relating to the initial recording of the derivatives or beneficial conversion features are accreted over the term of the debt.
The Company calculates the fair value of warrants and conversion features issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing employee options for purposes of ASC 718 “Compensation – Stock Compensation”, except that the contractual life of the warrant or conversion feature is used. Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense.
The Company accounts for modifications of its BCF’s in accordance with ASC 470-50 “Modifications and Extinguishments”. ASC 470-50 requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment.
Equity Instruments Issued with Registration Rights Agreement
The Company accounts for these penalties as contingent liabilities, applying the accounting guidance of ASC 450 “Contingencies”. This accounting is consistent with views established in ASC 825 “Financial Instruments”. Accordingly, the Company recognizes damages when it becomes probable that they will be incurred and amounts are reasonably estimable.
In connection with the Company signing the $10,000,000 Purchase Agreement with LPC, the Company was required to file a registration statement related to the transaction with the SEC covering the shares that may be issued to LPC under the Purchase Agreement within ten days of the agreement, and the registration statement was to be declared effective by March 31, 2011. The registration statement was declared effective on May 10, 2011, without any penalty, and LPC did not terminate the Purchase Agreement.
In connection with the Company signing the $2,000,000 Equity Facility with TCA on March 28, 2012, the Company agreed to file a registration statement related to the transaction with the Securities and Exchange Commission (“SEC”) covering the shares that may be issued to TCA under the Equity Facility within 45 days of closing. Although under the Registration Rights Agreement the registration statement was to be declared effective within 90 days following closing, it was not declared effective. The Company was working with TCA to resolve this issue and subsequent to March 31, 2014, the Equity Facility was canceled and related convertible note repaid in full. No penalties were incurred as part of the repayment.
| F-6 |
Fair Value of Financial Instruments
The Company follows the guidance of ASC 820 – “Fair Value Measurement and Disclosure”. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company did not have any level 1 financial instruments at March 31, 2014 or December 31, 2013.
As of March 31, 2014, the Company’s warrant liability and derivative liability are considered level 2 items (see Notes 4 and 5).
As of March 31, 2014 and December 31, 2013 the Company’s redeemable noncontrolling interest is considered a level 3 item and changed during the three months ended March 31, 2014 as follows.
| Balance at December 31, 2013 | $ | 856,044 | ||
| Net loss attributable to noncontrolling interest | 2,372 | |||
| Balance at March 31, 2014 | $ | 858,416 |
Risks and Uncertainties
The Company’s operations are subject to new innovations in product design and function. Significant technical changes can have an adverse effect on product lives. Design and development of new products are important elements to achieve and maintain profitability in the Company’s industry segment. The Company may be subject to federal, state and local environmental laws and regulations. The Company does not anticipate expenditures to comply with such laws and does not believe that regulations will have a material impact on the Company’s financial position, results of operations, or liquidity. The Company believes that its operations comply, in all material respects, with applicable federal, state, and local environmental laws and regulations.
Loss per Common Share
The Company presents basic loss per share (“EPS”) and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. As of March 31, 2014 and 2013, the Company had 428,571 and 928,571 warrants, respectively, for which all of the exercise prices were in excess of the average closing price of the Company’s common stock during the corresponding quarter and thus no shares are considered dilutive under the treasury stock method of accounting and their effects would have been antidilutive due to the loss.
Derivative Financial Instruments
We do not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of our financial instruments. However, under the provisions ASC 815 – “Derivatives and Hedging” certain financial instruments that have characteristics of a derivative, as defined by ASC 815, such as embedded conversion features on our Convertible Notes, that are potentially settled in the Company’s own common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even when the terms of the underlying contracts do not provide for net-cash settlement. Derivative financial instruments are initially recorded, and continuously carried, at fair value each reporting period.
| F-7 |
The value of the embedded conversion feature is determined using the Black-Scholes option pricing model. All future changes in the fair value of the embedded conversion feature will be recognized currently in earnings until the note is converted or redeemed. Determining the fair value of derivative financial instruments involves judgment and the use of certain relevant assumptions including, but not limited to, interest rate risk, credit risk, volatility and other factors. The use of different assumptions could have a material effect on the estimated fair value amounts.
Redeemable - Noncontrolling Interest
Redeemable interest held by third parties in subsidiaries owned or controlled by the Company is reported on the consolidated balance sheets outside permanent equity. All non-controlling interest reported in the consolidated statements of operations reflects the respective interests in the income or loss after income taxes of the subsidiaries attributable to the other parties, the effect of which is removed from the net income or loss available to the Company. The Company accretes the redemption value of the redeemable non-controlling interest over the redemption period.
New Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
NOTE 3 - DEVELOPMENT CONTRACTS
Department of Energy Awards 1 and 2
In February 2007, the Company was awarded a grant for up to $40 million from the U.S. Department of Energy’s (“DOE”) cellulosic ethanol grant program to develop a solid waste biorefinery project at a landfill in Southern California. During October 2007, the Company finalized Award 1 for a total approved budget of just under $10,000,000 with the DOE. This award was a 60%/40% cost share, whereby 40% of approved costs may be reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. In October 2009, the Company received from the DOE a one-time reimbursement of approximately $3,841,000. This was primarily related to the Company amending its award to include costs previously incurred in connection with the development of the Lancaster site which have a direct attributable benefit to the Fulton Project.
In December 2009, as a result of the American Recovery and Reinvestment Act, the DOE increased the Award 2 to a total of $81 million for Phase II of its Fulton Project. This is in addition to a renegotiated Phase I funding for development of the biorefinery of approximately $7 million out of the previously announced $10 million total. This brought the DOE’s total award to the Fulton project to approximately $88 million. The Company is currently drawing down on funds for Phase II of its Fulton Project.
In June 2011, it was determined that the Company had received an overpayment of approximately $354,000 from the cumulative reimbursements of the DOE grants under Award 1 for the period from inception of the award through December 31, 2010. The overpayment was a result of estimates made on the indirect rate during the reimbursement process over the course of the award. In 2012, the Company proceeded with the close out of Award 1, and in September 2012 Award 1 was officially closed and the overpayment was deobligated. The Company was notified of the deobligation in the fourth quarter of 2012.
Since 2009, our operations had been financed to a large degree through funding provided by the DOE. We rely on access to this funding as a source of liquidity for capital requirements not satisfied by the cash flow from our operations. If we are unable to access government funding our ability to finance our projects and/or operations and implement our strategy and business plan will be severely hampered.
On December 23, 2013, the Company received notice from the DOE indicating that the DOE would no longer provide funding under Award 2 due to the Company’s inability to comply with certain deadlines related to providing certain information to the DOE with respect to the Company’s future financing arrangements for the Fulton Project. The Company is seeking to re-establish funding under Award 2 and has initiated the appeals process with the DOE. The Company shall exhaust all options available to it in order to reverse the DOE’s decision. Until the Company is notified of the outcome of its appeal, we still have approximately $730,000 available under the grant prior to September 30, 2014. We cannot guarantee that we will continue to receive grants, loan guarantees, or other funding for our projects from the DOE.
As of March 31, 2014, the Company has received reimbursements of approximately $12,440,492 under these awards.
| F-8 |
NOTE 4 - CONVERTIBLE NOTES PAYABLE
On March 28, 2012 the Company entered into a $300,000 promissory note with a third party. See Note 9 for additional information.
From time-to-time the Company enters into convertible notes with Asher Enterprises, Inc. Under the terms of these notes, the Company is to repay any principal balance and interest, at 8% per annum at a given maturity date which is generally less than one year. The Company has the option to prepay the convertible promissory notes prior to maturity at varying prepayment penalty rates specified under the agreement. The convertible promissory notes are convertible into shares of the Company’s common stock after six months as calculated by multiplying 58% (42% discount to market) by the average of the lowest three closing bid prices during the 10 days prior to the conversion date.
The Company determined that since the conversion prices are variable and do not contain a floor, the conversion feature represents a derivative liability upon the ability to convert the loan after the six month period specified above. Since the conversion feature is only convertible after six months, there is no derivative liability upon issuance. However, the Company will account for the derivative liability upon the passage of time and the note becoming convertible if not extinguished, as defined above.
On July 31, 2012, the Company issued a convertible note of $63,500 to Asher Enterprises, Inc. with terms identified above, maturity date of May 2, 2013, and a conversion start date of January 27, 2013
The Company calculated the derivative liability using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of approximately $47,000, resulting in a discount to the note. The discount was amortized over the term of the note and accelerated as the note was converted. As of March 31, 2014, all amounts outstanding in relation to this note have been converted to equity through the issuance of 1,642,578 shares of common stock.
On October 11, 2012, the Company issued a convertible note of $37,500 to Asher Enterprises, Inc. with terms identified above, maturity date of July 15, 2013, and a conversion start date of April 9, 2013.
The Company calculated the derivative liability using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of approximately $66,000, resulting in a discount to the note and an additional day one charge of $28,507 for the excess value of the derivative liability over the face value of the note. The excess value was recognized as an expense in the accompanying statement of operations. The discount was amortized over the term of the note. As of March 31, 2014 the note was fully converted through the issuance of 2,262,860 shares of common stock.
On December 21, 2012, the Company agreed to a convertible note of $32,500 to Asher Enterprises, Inc, which was funded and effective in January 2013 with terms identified above, maturity date of September 26, 2013 and a conversion start date of June 19, 2013.
The Company calculated the derivative liability using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of approximately $15,600, resulting in a discount to the note. The discount was amortized over the term of the note and accelerated as the note was converted. As of March 31, 2014, the note was fully converted into 4,017,599 shares of common stock.
On February 11, 2013, the Company agreed to a convertible note of $53,000 to Asher Enterprises, Inc. with terms identified above, maturity date of November 13, 2013, and a conversion start date of August 10, 2013.
| F-9 |
The Company calculated the derivative liability using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of approximately $49,500, resulting in a discount to the note. The discount was amortized over the term of the note and accelerated as the note was converted. As of March 31, 2014, the entire discount was amortized to interest expense, with no remaining unamortized discount and the note was fully converted into 9,689,211 shares of common stock.
On June 13, 2013, the Company agreed to a convertible note of $32,500 to Asher Enterprises, Inc. with terms identified above, maturity date of March 17, 2014, and a conversion start date of December 10, 2013.
The Company calculated the derivative liability using the Black-Scholes pricing model for the note upon the initial date the note became convertible and recorded the fair market value of the derivative liability of approximately $28,000, resulting in a discount to the note. The discount was amortized over the term of the note and accelerated as the note was converted. As of March 31, 2014, the entire discount was amortized to interest expense, with no remaining unamortized discount and the note was fully converted into 22,207,699 shares of common stock. See below for assumptions used in valuing the derivative liability.
On December 19, 2013, the Company agreed to a convertible note of $37,500 to Asher Enterprises, Inc. which was funded and effective in January 2014 with terms identified above and a maturity date of December 23, 2014. Since the conversion feature is only convertible after six months, there is no derivative liability. However, the Company will account for the derivative liability upon the passage of time and the note becoming convertible if not extinguished, as defined above.
Using the Black-Scholes pricing model, with the range of inputs listed below, we calculated the fair market value of the conversion feature at inception (as applicable), at each conversion event, and at quarter end. Based on valuation conducted during the quarter and at March 31, 2014 of derivative liabilities related to Asher Enterprises, Inc. notes, the Company recognized a loss on derivative liabilities of $51,741, which is included in the accompanying statement of operations within Gain (loss) from change in fair value of derivative liabilities.
During the three months ending March 31, 2014, the range of inputs used to calculate derivative liabilities noted above were as follows:
| Three months ending | ||||
| March 31, 2014 | ||||
| Annual dividend yield | - | |||
| Expected life (years) | 0.04 - 0.18 | |||
| Risk-free interest rate | 0.04 - 0.07 | % | ||
| Expected volatility | 196.87 | % | ||
In addition, fees paid to secure the convertible debt were accounted for as deferred financing costs and capitalized in the accompanying balance sheet or considered an on-issuance discount to the notes. The deferred financing costs and discounts, as applicable, are amortized over the term of the notes.
Tarpon Bay Convertible Notes
Pursuant to a 3(a)10 transaction with Tarpon Bay Partners LLC (“Tarpon”), on November 4, 2013, the Company issued to Tarpon a convertible promissory note in the principal amount of $25,000 (the “Tarpon Initial Note”). Under the terms of the Tarpon Initial Note, the Company shall pay Tarpon $25,000 on the date of maturity which was January 30, 2014. This note is convertible by Tarpon into the Company’s Common Shares at a 50% discount to the lowest closing bid price for the Common Stock for the twenty (20) trading days ending on the trading day immediately before the conversion date.
| F-10 |
Also pursuant to the 3(a)10 transaction with Tarpon, on December 23, 2013, the Company issued a convertible promissory note in the principal amount of $50,000 in favor of Tarpon as a success fee (the “Tarpon Success Fee Note”). The Tarpon Success Fee Note is due on June 30, 2014. The Tarpon Success Fee Note is convertible into shares of the Company’s common stock at a conversion price for each share of Common Stock at a 50% discount from the lowest closing bid price in the twenty (20) trading days prior to the day that Tarpon requests conversion
Each of the above notes were issued without funds being received. Accordingly, the notes were issued with a full on-issuance discount that will be amortized over the term of the notes. During the three months ended March 31, 2014, amortization of approximately $27,886 was recognized to interest expense related to the discounts on the notes.
Because the conversion price is variable and does not contain a floor, the conversion feature represents a derivative liability upon issuance. Accordingly, the Company calculated the derivative liability using the Black-Sholes pricing mode for the notes upon inception, resulting in a day one loss of approximately $96,000. The derivative liability was marked to market as of March 31, 2014 which resulted in a loss of approximately $102,995. The Company used the following assumptions as of March 31, 2014 and December 31, 2013:
| March 31, 2014 | December 31, 2013 | |||||||
| Annual dividend yield | 0 | % | 0 | % | ||||
| Expected life (years) | 0.001 - 0.25 | 0.8 | ||||||
| Risk-free interest rate | 0.03 - 0.05 | % | 0.02 | % | ||||
| Expected volatility | 234.84 | % | 159 | % | ||||
As of March 31, 2014, the Company amortized $1,031 in deferred financing costs with $0 remaining.
As of March 31, 2014, the Company amortized on issuance discounts totaling $50,218 with approximately $25,949 in remaining of on-issuance discounts.
NOTE 5 - OUTSTANDING WARRANT LIABILITY
Effective January 1, 2009, we adopted the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. As a result of adopting ASC 815, 6,962,963 of our issued and outstanding common stock purchase warrants previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment. These warrants had an exercise price of $2.90; 5,962,563 warrants were set to expire in December 2012 and 1,000,000 expired August 2010 (See Note 7). As such, effective January 1, 2009 we reclassified the fair value of these common stock purchase warrants, which have exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue in August 2007 and December 2007. On January 1, 2009, we reclassified from additional paid-in capital, as a cumulative effect adjustment, $15.7 million to beginning retained earnings and $2.9 million to a long-term warrant liability to recognize the fair value of such warrants on such date.
The Company assesses the fair value of the warrants quarterly based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.
In connection with the 5,962,963 warrants that expired in December 2012, the Company recognized gains of approximately $0, $0, and $2,516,000 from the change in fair value of these warrants during the quarters ended March 31, 2014 and 2013 and the period from Inception to March 31, 2014.
On October 19, 2009, the Company cancelled 673,200 warrants for $220,000 in cash. These warrants were part of the 1,000,000 warrants issued in August 2007, and were set to expire August 2010. Prior to October 19, 2009, the warrants were previously accounted for as a derivative liability and marked to their fair value at each reporting period in 2009. The Company valued these warrants the day immediately preceding the cancellation date which indicated a gain on the change in fair value of $208,562 and a remaining fair value of $73,282. Upon cancellation the remaining value was extinguished for payment of $220,000 in cash, resulting in a loss on extinguishment of $146,718. In connection with the remaining 326,800 warrants that expired in August 2010, the Company recognized a gain of $117,468 for the change in fair value of these warrants during the year ended December 31, 2009.
| F-11 |
These common stock purchase warrants were initially issued in connection with two private offerings, our August 2007 issuance of 689,655 shares of common stock and our December 2007 issuance of 5,740,741 shares of common stock. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, changes in the fair value of these warrants are recognized in earnings until such time as the warrants are exercised or expire. These warrants either expired or were exercised in 2012 and accordingly no revaluation was necessary as of March 31, 2014 or December 31, 2013. See Note 9.
The Company issued 428,571 warrants to purchase common stock in connection with the Stock Purchase Agreement entered into on January 19, 2011 with Lincoln Park Capital, LLC (See Note 9). These warrants are accounted for as a liability under ASC 815. The Company assesses the fair value of the warrants quarterly based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.
| March 31, 2014 | December 31, 2013 | |||||||
| Annual dividend yield | - | - | ||||||
| Expected life (years) of | 1.80 | 2.05 | ||||||
| Risk-free interest rate | 0.44 | % | 0.38 | % | ||||
| Expected volatility | 207.71 | % | 150 | % | ||||
In connection with these warrants, the Company recognized a gain/(loss) on the change in fair value of warrant liability of approximately $(400), $14,000, and $125,000 during the three months ended March 31, 2014 and 2013, and for the period from Inception to March 31, 2014.
Expected volatility is based primarily on historical volatility. Historical volatility was computed using weekly pricing observations for recent periods that correspond to the expected life of the warrants. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants. The Company currently has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Fulton Project Lease
On July 20, 2010, the Company entered into a thirty year lease agreement with Itawamba County, Mississippi for the purpose of the development, construction, and operation of the Fulton Project. At the end of the primary 30 year lease term, the Company shall have the right for two additional thirty year terms. The current lease rate is computed based on a per acre rate per month that is approximately $10,300 per month. The lease stipulates the lease rate is to be reduced at the time of the construction start by a Property Cost Reduction Formula which can substantially reduce the monthly lease costs. The lease rate shall be adjusted every five years to the Consumer Price Index.
Rent expense under non-cancellable leases was approximately $30,900, $30,900, and $462,000 during the three months ended March 31, 2014 and 2013 and the period from Inception to March 31, 2014, respectively.
As of March 31, 2014 and December 31, 2013, $0, and $233,267 of the monthly lease payments were included in accounts payable on the accompanying balance sheets. During 2013, the County of Itawamba forgave approximately $96,000 in lease payments. As of March 31, 2014, the Company made lease payments of approximately $168,000. In addition, during the quarter, the County of Itawamba gave the Company credit for past site preparation reimbursements provided to the County through DOE reimbursements totaling approximately $96,000 which was recorded as a gain in the accompanying statement of operations. Accordingly the remaining balance due was relieved and the Company is no longer deemed to be in default.
| F-12 |
Legal Proceedings
On February 26, 2013, the Company received notice that the Orange County Superior Court (the “Court”) issued a Minute Order (the “Order”) in connection with certain shareholders’ claims of breach of contract and declaratory relief related to 5,740,741 warrants (the “Warrants”) issued by the Company.
Pursuant to the Order, the Court ruled in favor of the shareholders on the two claims, finding that the Warrants contain certain anti-dilution protective provisions which provide for the re-adjustment of the exercise price of such Warrants upon certain events and that such exercise price per share of the Warrants must be decreased to $0.00.
The Company has considered these warrants exercised based on the notice of exercise received from the respective shareholders in December 2012.
On March 7, 2013, the shareholders making claims provided their request for judgment based on the Order received, which has been initially refused by the Court via a second minute order received by the Company on April 8, 2013. On April 15, 2013, the Company’s counsel submitted a proposed judgment to the Court as per the Courts request, which followed the Order and provided for no monetary damages against the Company. On May 14, 2013, this proposed judgment was approved by the Court (“Judgment”).
On June 20, 2013, the Company filed motions to vacate the Judgment, a motion for a new trial, and a motion to stay enforcement of the Judgment, all of which were denied on June 27, 2013.
On August 2, 2013, pursuant to the exercise notice of the Warrants, and the Order, the Company issued 5,740,741 shares to certain shareholders. See Note 9 for additional information.
Other than the above, we are currently not involved in litigation that we believe will have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision is expected to have a material adverse effect.
NOTE 7 - RELATED PARTY TRANSACTIONS
On December 15, 2010, the Company entered into a loan agreement (the “Loan Agreement”) by and between Arnold Klann, the Chief Executive Officer, Chairman of the board of directors and majority shareholder of the Company, as lender (the “Lender”), and the Company, as borrower. Pursuant to the Loan Agreement, the Lender agreed to advance to the Company a principal amount of Two Hundred Thousand United States Dollars ($200,000) (the “Loan”). The Loan Agreement requires the Company to (i) pay to the Lender a one-time amount equal to fifteen percent (15%) of the Loan (the “Fee Amount”) in cash or shares of the Company’s common stock at a value of $0.50 per share, at the Lender’s option; and (ii) issue the Lender warrants allowing the Lender to buy 500,000 common shares of the Company at an exercise price of $0.50 per common share, such warrants to expire on December 15, 2013. The Company has promised to pay in full the outstanding principal balance of any and all amounts due under the Loan Agreement within thirty (30) days of the Company’s receipt of investment financing or a commitment from a third party to provide One Million United States Dollars ($1,000,000) to the Company or one of its subsidiaries (the “Due Date”), to be paid in cash. These warrants expired on December 15, 2013.
The fair value of the warrants was $83,736 as determined by the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 112.6%, risk-free interest rate of 1.1%, dividend yield of 0%, and a term of three (3) years.
The proceeds were allocated to the warrants issued to the note holder based on their relative fair values which resulted in $83,736 allocated to the warrants. The amount allocated to the warrants resulted in a discount to the note. The Company amortized the discount over the estimated term of the Loan using the straight line method due to the short term nature of the Loan. The Company estimated the Loan would be paid back during the quarter ended September 30, 2011. During the three months ended March 31, 2014 and 2013, and for the period from March 28, 2006 (Inception) to March 31, 2014, the Company amortized the discount to interest expense of approximately $0, $0, and $83,736, respectively.
During the three months ended March 31, 2014 and 2013, and for the period from March 28, 2006 (Inception) to March 31, 2014, the Company recognized interest expense of approximately $0, $0, and $30,000, respectively.
| F-13 |
NOTE 8 - REDEEMABLE NONCONTROLLING INTEREST
On December 23, 2010, the Company sold a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC (“BlueFire Fulton” or the “Fulton Project”), to an accredited investor for a purchase price of $750,000 (“Purchase Price”). The Company maintains a 99% ownership interest in the Fulton Project. In addition, the investor received a right to require the Company to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future contingent events based upon obtaining financing for the construction of the Fulton Project. The third party equity interests in the consolidated joint ventures are reflected as redeemable noncontrolling interests in the Company’s consolidated financial statements outside of equity. The Company accreted the redeemable noncontrolling interest for the total redemption price of $862,500 through the estimated forecasted financial close, originally estimated to be the end of the third quarter of 2011.
Net income (loss) attributable to the redeemable noncontrolling interest during for the three months ended March 31, 2014 and 2013 and for the period from Inception to March 31, 2014 was $2,372, $(2,057), and $(4,083), respectively which netted against the value of the redeemable non-controlling interest in temporary equity. The allocation of net loss was presented on the statement of operations.
NOTE 9 - STOCKHOLDERS’ DEFICIT
Stock-Based Compensation
During the three months ended March 31, 2014 and 2013, and for the period from March 28, 2006 (Inception) to March 31, 2014, the Company recognized stock-based compensation, including consultants, of approximately $37,000, $9,100, and $6,522,000 to general and administrative expenses and $0, $0, and $4,468,000 to project development expenses, respectively. There is no additional future compensation expense to record as of March 31, 2014 based on the previous awards.
Stock Purchase Agreement
On January 19, 2011, the Company signed a $10 million purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), an Illinois limited liability company. The Company also entered into a registration rights agreement with LPC whereby we agreed to file a registration statement related to the transaction with the U.S. Securities & Exchange Commission (“SEC”) covering the shares that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the Purchase Agreement the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase Agreement. The registration statement was declared effective on May 10, 2011, without any penalty.
After the SEC had declared effective the registration statement related to the transaction, the Company had the right, in their sole discretion, over a 30-month period to sell the shares of common stock to LPC in amounts from $35,000 and up to $500,000 per sale, depending on the Company’s stock price as set forth in the Purchase Agreement, up to the aggregate commitment of $10 million.
There were no upper limits to the price LPC would pay to purchase our common stock and the purchase price of the shares related to the $10 million funding were based on the prevailing market prices of the Company’s shares immediately preceding the time of sales without any fixed discount, and the Company controlled the timing and amount of any sales of shares to LPC. LPC did not have the right or the obligation to purchase any shares of our common stock on any business day that the price of our common stock was below $0.15. The Purchase Agreement contained customary representations, warranties, covenants, closing conditions and indemnification and termination provisions by, among and for the benefit of the parties. LPC had covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares of common stock. The Purchase Agreement was terminated in July 18, 2013.
| F-14 |
Upon signing the Purchase Agreement, BlueFire received $150,000 from LPC as an initial purchase under the $10 million commitment in exchange for 428,571 shares of our common stock and warrants to purchase 428,571 shares of our common stock at an exercise price of $0.55 per share. The warrants contain a ratchet provision in which the exercise price will be adjusted based on future issuances of common stock, excluding certain issuances; if issuances are at prices lower than the current exercise price (see Note 6). The warrants have an expiration date of January 2016.
Concurrently, in consideration for entering into the $10 million agreement, we issued to LPC 600,000 shares of our common stock as a commitment fee and shall issue up to 600,000 shares pro rata as LPC purchases up to the remaining $9.85 million.
During the three months ended March 31, 2014 and 2013 and the period from Inception to March 31, 2014 the Company drew $0, $0, and $385,000 on the Purchase Agreement.
Equity Facility Agreement
On March 28, 2012, BlueFire finalized a committed equity facility (the “Equity Facility”) with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“TCA”), whereby the parties entered into (i) a committed equity facility agreement (the “Equity Agreement”) and (ii) a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the terms of the Equity Agreement, for a period of twenty-four (24) months commencing on the date of effectiveness of the Registration Statement (as defined below), TCA committed to purchase up to $2,000,000 of BlueFire’s common stock, par value $0.001 per share (the “Shares”), pursuant to Advances (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Equity Agreement is equal to ninety-five percent (95%) of the lowest daily volume weighted average price of BlueFire’s common stock during the five (5) consecutive trading days after BlueFire delivers to TCA an Advance notice in writing requiring TCA to advance funds (an “Advance”) to BlueFire, subject to the terms of the Equity Agreement. The “Registrable Securities” include (i) the Shares; and (ii) any securities issued or issuable with respect to the Shares by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As further consideration for TCA entering into and structuring the Equity Facility, BlueFire paid to TCA a fee by issuing to TCA shares of BlueFire’s common stock that equal a dollar amount of $110,000 (the “Facility Fee Shares”). It is the intention of BlueFire and TCA that the value of the Facility Fee Shares shall equal $110,000. In the event the value of the Facility Fee Shares issued to TCA does not equal $110,000 after a nine month evaluation date, the Equity Agreement provides for an adjustment provision allowing for necessary action (either the issuance of additional shares to TCA or the return of shares previously issued to TCA to BlueFire’s treasury) to adjust the number of Facility Fee Shares issued. BlueFire also entered into the Registration Rights Agreement with TCA. Pursuant to the terms of the Registration Rights Agreement, BlueFire is obligated to file a registration statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “SEC’) to cover the Registrable Securities within 45 days of closing. BlueFire must use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC by a date that is no later than 90 days following closing.
In connection with the issuance of approximately 280,000 shares for the $110,000 facility fee as described above, the Company capitalized said amount within deferred financings costs in the accompanying balance sheet as of March 31, 2012, along with other costs incurred as part Equity Facility and the Convertible Note described below. Additional costs related to the Equity Facility and paid from the funds of the Convertible Note described below, were approximately $60,000. Aggregate costs of the Equity Facility were $170,000. Because these costs were to access the Equity Facility, earned by TCA regardless of the Company drawing on the Equity Facility, and not part of a funding, they are treated akin to debt costs The deferred financings costs related to the Equity Facility were amortized over one (1) year on a straight-line basis. The Company believed this accelerated amortization, which is less than the two year Equity Facility term, was appropriate based on substantial doubt about the Company’s ability to continue as a going concern. As of December 31, 2012, the Company determined that it was not probable the Registration Statement would become effective under the original structure of the agreement and accordingly, wrote off all remaining deferred financing costs related to the Equity Agreement.
| F-15 |
On March 28, 2012, BlueFire entered into a security agreement (the “Security Agreement”) with TCA, related to a $300,000 convertible promissory note issued by BlueFire in favor of TCA (the “Convertible Note”). The Security Agreement grantsed to TCA a continuing, first priority security interest in all of BlueFire’s assets, wheresoever located and whether now existing or hereafter arising or acquired. On March 28, 2012, BlueFire issued the Convertible Note in favor of TCA. The maturity date of the Convertible Note was March 28, 2013, and the Convertible Note bears interest at a rate of twelve percent (12%) per annum with a default rate of eighteen percent (18%) per annum. The Convertible Note was convertible into shares of BlueFire’s common stock at a price equal to ninety-five percent (95%) of the lowest daily volume weighted average price of BlueFire’s common stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note had the option to be prepaid in whole or in part at BlueFire’s option without penalty. The proceeds received by the Company under the purchase agreement were used for general working capital purposes which include costs reimbursed under the DOE cost share program.
In connection with the Convertible Note, approximately $93,000 was withheld and immediately disbursed to cover costs of the Convertible Note and Equity Facility described above. The costs related to the Convertible Note were $24,800 which were capitalized as deferred financing costs; were amortized on a straight-line basis over the term of the Convertible Note. In addition, $7,500 was dispersed to cover legal fees. After all costs, the Company received approximately $207,000 in cash from the Convertible Note. Amortization of the deferred financing costs during the quarters ended March 31, 2014 and 2013 was approximately $0 and $38,600, respectively. As of March 31, 2014, there were no remaining deferred financing costs.
This note contained an embedded conversion feature whereby the holder could convert the note at a discount to the fair value of the Company’s common stock price. Based on applicable guidance the embedded conversion feature was considered a derivative instrument and bifurcated. This liability is recorded on the face of the financial statements as “derivative liability”, and must be revalued each reporting period.
The Company discounted the note by the fair market value of the derivative liability upon inception of the note. This discount was accreted back to the face value of the note over the note term.
Using the Black-Scholes pricing model, with the inputs listed below, we calculated the fair market value of the conversion feature to be $161,570 at the notes inception. The Company revalued the conversion feature at March 31, 2014 in the same manner with the inputs listed below and recognized a gain on the change in fair value of the derivative liability on the accompanying statement of operations of $2,600.
| March 31, 2014 | December 31, 2013 | March 28, 2012 | ||||||||||
| Annual dividend yield | - | - | - | |||||||||
| Expected life (years) | 0.00 | 0.00 | 1.00 | |||||||||
| Risk-free interest rate | 0.03 | % | 0.01 | % | 0.19 | % | ||||||
| Expected volatility | 234.84 | % | 159 | % | 119.00 | % | ||||||
This note was repaid in full subsequent to March 31, 2014; see Note 10.
Liability Purchase Agreement
On December 9, 2013, The Circuit Court of the Second Judicial Circuit in and for Leon County, Florida (the “Court”), entered an order (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, in accordance with a stipulation of settlement (the “Settlement Agreement”) between the Company, and Tarpon Bay Partners, LLC, a Florida limited liability company (“Tarpon”), in the matter entitled Tarpon Bay Partners, LLC v. BlueFire Renewables, Inc., Case No. 2013-CA-2975 (the “Action”). Tarpon commenced the Action against the Company on November 21, 2013 to recover an aggregate of $583,710 of past-due accounts payable of the Company, which Tarpon had purchased from certain creditors of the Company pursuant to the terms of separate receivable purchase agreements between Tarpon and each of such vendors (the “Assigned Accounts”), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain legal, accounting, financial services, and the repayment of aged debt. The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement became effective and binding upon the Company and Tarpon upon execution of the Order by the Court on December 9, 2013. Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by Tarpon will not exceed 9.99% of the Company’s Common Stock. In connection with the Settlement Agreement, the Company relied on the exemption from registration provided by Section 3(a)(10) under the Securities Act.
| F-16 |
Pursuant to the terms of the Settlement Agreement approved by the Order, the Company shall issue and deliver to Tarpon shares (the “Settlement Shares”) of the Company’s Common Stock in one or more tranches as necessary, and subject to adjustment and ownership limitations, sufficient to generate proceeds such that the aggregate Remittance Amount (as defined in the Settlement Agreement) equals the Claim. In addition, pursuant to the terms of the Settlement Agreement, the Company issued to Tarpon a convertible promissory note in the principal amount of $25,000 (the “Tarpon Initial Note”). Under the terms of the Tarpon Initial Note, the Company shall pay Tarpon $25,000 on the date of maturity which is January 30, 2014. This Note is convertible by Tarpon into the Company’s Common Shares (See Note 4).
Pursuant to the fairness hearing, the Order, and the Company’s agreement with Tarpon, on December 23, 2013, the Company issued the Tarpon Success Fee Note in the principal amount of $50,000 in favor of Tarpon as a commitment fee. The Tarpon Success Fee Note is due on June 30, 2014. The Tarpon Success Fee Note is convertible into shares of the Company’s common stock (See Note 4).
In connection with the settlement, on December 18, 2013 the Company issued 6,619,835 shares of Common Stock to Tarpon in which gross proceeds of $29,802 were generated from the sale of the Common Stock. In connection with the transaction, Tarpon received fees of $7,450 and providing payments of $22,352 to settle outstanding vendor payables. During the three months ended March 31, 2014, the Company issued Tarpon 48,110,000 shares of Common Stock from which gross proceeds of $130,668 were generated from the sale of the Common Stock. In connection with the transaction, Tarpon received fees of $32,667 and providing payments of $98,001 to settle outstanding vendor payables. Any shares not used by Tarpon are subject to return to the Company. Accordingly, the Company accounts for these shares as issued but not outstanding until the shares have been sold by Tarpon and the proceeds are known. Net proceeds received by Tarpon are included as a reduction to accounts payable or other liability as applicable, as such funds are legally required to be provided to the party Tarpon purchased the debt from. Subsequent to March 31, 2014, the Company issued additional shares of common stock to Tarpon. See Note 10.
Warrants Exercised
Some of our warrants contain a provision in which the exercise price is to be adjusted for future issuances of common stock at prices lower than their current exercise price.
In 2012, certain shareholders’ owning an aggregate of 5,740,741 warrants made claims of the Company that the exercise price of their warrants should have been adjusted due to a certain issuance of common shares by the Company (see Note 6). The Company believed that said issuance would not trigger adjustment based on the terms of the respective agreements.
On December 4, 2012, these shareholders presented exercise forms to the Company to exercise all 5,740,741 warrants for a like amount of common shares. The warrants were exercised at $0.00, which is the amount the shareholders’ believed the new exercise price should be based the ratchet provision and their claims.
On February 26, 2013, the Company received notice that the Court issued an Order in connection with these certain shareholders’ claims of breach of contract and declaratory relief related to 5,740,741 warrants issued by the Company.
Pursuant to the Order, the Court ruled in favor of the shareholders on the two claims, finding that the Warrants contain certain anti-dilution protective provisions which provide for the re-adjustment of the exercise price of such Warrants upon certain events and that such exercise price per share of the Warrants must be decreased to $0.00.
The Company has considered these warrants exercised based on the notice of exercise received from the respective shareholders in December 2012. The Company determined, that based on the Order by the Court a ratchet event had taken place based on the Order and claims made. The Company used December 4, 2012 as the date in which the new terms were considered to be in force based on the Shareholders’ notice to exercise on that date and the Courts subsequent Order that allowed the Shareholders to do so.
| F-17 |
As such, the modification of the exercise price was treated as an extinguishment of the warrants under the previous terms, with a revaluation of the warrants with new terms. As such, the warrant liability was valued immediately before extinguishment with the gain/loss recognized through earnings and remaining value reclassified to equity. Because there was only approximately one week of remaining life under the unmodified terms and because the previous exercise price was out of the money ($2.90) compared to the price of our common stock on the day of extinguishment ($0.14), the warrant value upon extinguishment was considered to be near zero based on a Black-Scholes calculation, which also used volatility of 104.2% and risk-free rate of 0.07%.
In addition, the new warrant liability was valued immediately after the modification but prior to the exercise by the Shareholders with the new value being recognized through earnings. The “new” warrants had a fixed price, fixed number of shares, and effectively no ratchet provision based on the Order. There were no circumstances at that time that would require or allow for net cash settlement. As such, the warrants qualified for equity accounting under ASC 815. The Company valued the warrants with new terms at approximately $804,000 based on the fair value of the Company’s common stock on December 4, 2012 ($0.14) as it was considered an immediate exercise and therefore, the value of the shares was known on the date of exercise. Accordingly, the warrants were considered committed shares to be issued in the consolidated balance sheets as of December 31, 2012. On August 2, 2013, the Company issued these 5,740,741 shares and the value transferred to additional paid-in capital.
NOTE 10 -SUBSEQUENT EVENTS
Subsequent to March 31, 2014, the Company paid off the senior secured convertible note and accrued interest thereon, along with other fees due TCA for total payment of approximately $459,000. See Note 9 for more information on the note.
Subsequent to March 31, 2014, the Company received investments totaling $350,000 from an investor in the form of a debenture with warrants.
Subsequent to March 31, 2014 the Company issued 12,900,000 shares of common stock to Tarpon pursuant to the Settlement Agreement.
| F-18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the SEC contain or may contain forward-looking statements and information that are (collectively, the “Filings”) based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.
PLAN OF OPERATION
Our primary business encompasses development activities culminating in the design, construction, ownership and long-term operation of cellulosic ethanol production biorefineries utilizing the licensed Arkenol Technology in North America. Our secondary business is providing support and operational services to Arkenol Technology based biorefineries worldwide. As such, we are currently in the development-stage of finding suitable locations and deploying project opportunities for converting cellulose fractions of municipal solid waste and other opportunistic feedstock into ethanol fuels.
Our initial planned bio-refineries in North America are projected as follows:
| ● | A bio-refinery, costing approximately $100 million to $125 million, that will process approximately 190 tons of green waste material annually to produce roughly 3.9 million gallons of ethanol annually. On November 9, 2007, we purchased the facility site which is located in Lancaster, California for the BlueFire Ethanol Lancaster project (“Lancaster Bio-refinery”). Permit applications were filed on June 24, 2007, to allow for construction of the Lancaster Bio-refinery. On or around July 23, 2008, the Los Angeles Planning Commission approved the use permit for construction of the plant. However, a subsequent appeal of the county decision, which BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of the now non-appealable permit approval to December 12, 2008. On February 12, 2009, we were issued our “Authority to Construct” permit by the Antelope Valley Air Quality Management District. In 2009 the Company submitted an application for a $58 million dollar loan guarantee for the Lancaster Bio-refinery with the DOE Program DE-FOA-0000140 (“DOE LGPO”), which provided federal loan guarantees for projects that employed innovative energy efficiency, renewable energy, and advanced transmission and distribution technologies. In 2010, the Company was informed that the loan guarantee for the planned bio-refinery in Lancaster, California, was rejected by the DOE due to a lack of definitive contracts for feedstock and off-take at the time of submittal of the loan guarantee for the Lancaster Bio-refinery, as well as the fact that the Company was also pursuing a much larger project in Fulton, Mississippi. In December 2011, BlueFire requested an extension to pay the project’s permits for an additional year while we awaited potential financing. The Company has since let the air permits expire as there were no more extensions available and management deemed the project not likely to start construction in the short-term. BlueFire will need to resubmit for air permits once it is able to raise necessary financing. The Company sees the project on hold until we receive the funding to construct the facility. We have completed the detailed engineering and design on the project and are seeking funding in order to build the facility. Additionally, the Company’s Lancaster plant is currently shovel ready, except for the air permit which the Company will need to renew as stated above, and only requires minimal capital to maintain until funding is obtained for the construction. Although the Company originally intended to use this proposed facility for their first cellulosic ethanol refinery plant, the Company is now considering using it as a bio-refinery to produce products other than cellulosic ethanol, such as higher value chemicals that would yield fuel additives that that could improve the project economics for a smaller facility. The preparation for the construction of this plant was the primary capital use in prior years. Although the Company is actively seeking financing for this project no definitive agreements are in place. |
| 3 |
| ● | A bio-refinery proposed for development and construction previously in conjunction with the DOE, previously located in Southern California, and now located in Fulton, Mississippi, which will process approximately 700 metric dry tons of woody biomass, mill residue, and other cellulosic waste to produce approximately 19 million gallons of ethanol annually (“Fulton Project”). We estimate the total construction cost of the Fulton Project to be in the range of approximately $300 million. In 2007, we received an Award from the DOE of up to $40 million for the Fulton Project. On or around October 4, 2007, we finalized Award 1 for a total approved budget of just under $10,000,000 with the DOE. This award is a 60%/40% cost share, whereby 40% of approved costs may be reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. In 2008, the Company began to draw down on the Award 1 monies that were finalized with the DOE. As our Fulton Project developed further, the Company was able to begin drawing down on Award 2, the second phase of DOE monies. On December 4, 2009, the DOE announced that the total award for this project has been increased to a maximum of $88 million under the American Recovery and Reinvestment Act of 2009 (“ARRA”) and the Energy Policy Act of 2005. As of September 12, 2012 Award 1 was officially closed, although the Company was not notified until after our September 30, 2012 quarterly report was filed. As of December 31, 2013, BlueFire has been reimbursed approximately $11,914,906 from the DOE under this award. On December 23, 2013, the Company received notice from the DOE indicating that the DOE would no longer provide funding under the DOE Grant for the development of the Fulton Project due to the Company’s inability to comply with certain deadlines related to providing certain information to the DOE with respect to the Company’s future financing arrangements for the Fulton Project. The Company is seeking to re-establish funding under the DOE Grant and has initiated the appeals process with the DOE. The Company shall exhaust all options available to it in order to reverse the DOE’s decision. The Company cannot make any assurances that the DOE’s decision will be reversed on appeal or that such an appeal will be heard at all. In 2010, BlueFire signed definitive agreements for the following three crucial contracts related to the Fulton Project: (a) feedstock supply with Cooper Marine, (b) off-take for the ethanol of the facility with Tenaska, and (c) the construction of the facility with MasTec. Also in 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed both the FEL-2 and FEL-3 stages of engineering readying the facility for construction. As of November 2010, the Fulton Project has all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project’s application will not move forward until such time as the project has raised the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the USDA, which would represent substantially all of the funding shortfall on the project. In October 2011, BlueFire was notified by its lender (“Lender”) for the Company’s USDA loan guarantee application that the USDA sent the Lender notice that they were currently ineligible to participate in the USDA Bio-refinery Assistance Program. The USDA offered to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity to provide any new information and potential alternatives for the USDA’s consideration. As of March 31, 2014, no significant progress had been made with the USDA or the Lender and thus the Company has abandoned the pursuit of the USDA Loan Guarantee program. The Company may reapply at a later date. In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China’s fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire has transitioned away from Huadian to pursue opportunities with a larger, better equipped Chinese Engineering Procurement Construction company. In tandem with the new EPC contractor, the company is engaging Chinese banks to provide the debt financing for the Fulton Project. BlueFire is currently in negotiations but no definitive agreements have yet been executed. In Mid 2013, the company began developing a new integration concept in regards to the Fulton project where a wood pellet facility would be integrated into the ethanol facility to provide a stronger financing package. A preliminary design package and due diligence has been completed. The Company continues to explore this option and will utilize whichever plant design is the most beneficial for financing. |
| 4 |
Several other opportunities are being evaluated by us in North America, although no definitive agreements have been reached.
| ● | In November 2011, BlueFire created SucreSource LLC, a wholly owned subsidiary specifically tasked to partner with synergistic back end companies that need cellulosic sugars as a feedstock for their fermentation or chemical processes. SucreSource will utilize the Arkenol process to provide the front end technology to partner with these companies. | |
| ● | In February of 2012, SurceSource announced its first client GS Caltex, a South Korean petroleum company. In the same month, it received the first payment under the Professional Services Agreement (PSA) for work on a facility in South Korea. As of March 31, 2014, SucreSource has completed and fulfilled all initial work and obligations under the fixed portion of the agreement. Anticipated 2014 work product and additional services will be billed on an hourly basis when services are performed. |
BlueFire’s capital requirement strategy for its planned bio-refineries are as follows:
| ● | Obtain additional operating capital from joint venture partnerships, Federal or State grants or loan guarantees, debt financing or equity financing to fund our ongoing operations and the development of initial bio-refineries in North America. Although the Company is in discussions with potential financial and strategic sources of financing for their planned bio-refineries, no definitive agreements are in place. | |
| ● | The 2008 Farm Bill, Title IX (Energy Title) and subsequent funding Bills provides grants for demonstration scale Bio-refineries, and loan guarantees for commercial scale Bio-refineries that produce advanced Biofuels (i.e., any fuel that is not corn-based). Section 9003 includes a Loan Guarantee Program under which the USDA could provide loan guarantees up to $250 million to fund development, construction, and retrofitting of commercial-scale refineries. Section 9003 also includes a grant program to assist in paying the costs of the development and construction of demonstration-scale bio-refineries to demonstrate the commercial viability which can potentially fund up to 50% of project costs. BlueFire plans to pursue all available opportunities within the Farm Bill and the subsequent funding Bills, although initial attempts have been unsuccessful. | |
| ● | Utilize remaining proceeds from reimbursements under the DOE contract. | |
| ● | The Company shall apply for public funding to leverage private capital raised by us, as applicable. |
DEVELOPMENTS IN BLUEFIRE’S BIOREFINERY ENGINEERING AND DEVELOPMENT
In 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed the Front-End Loading (FEL) stages 2 and FEL-3 of engineering for the Fulton Project readying the facility for construction. FEL is the process for conceptual development of processing industry projects. This process is used in the petrochemical, refining, and pharmaceutical industries. Front-End Loading is also referred to as Front-End Engineering Design (FEED).
| 5 |
There are three stages in the FEL process:
| FEL-1 | FEL-2 | FEL-3 | ||
| * Material Balance | * Preliminary Equipment Design | * Purchase Ready Major Equipment Specifications | ||
| * Energy Balance | * Preliminary Layout | * Definitive Estimate | ||
| * Project Charter | * Preliminary Schedule | * Project Execution Plan | ||
| * Preliminary Estimate | * Preliminary 3D Model | |||
| * Electrical Equipment List | ||||
| * Line List | ||||
| * Instrument Index |
As of November 2010, the Fulton Project had all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project’s application would not move forward until such time as the project has raised the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the U.S. Department of Agriculture (“USDA”) under Section 9003 of the 2008 Farm Bill, as defined below (“USDA LG”). In October 2011, BlueFire was notified by its lender (“Lender”) for the Company’s USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible to participate in the USDA Bio-refinery Assistance Program. The USDA offered to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity to provide any new information and potential alternatives for the USDA’s consideration. As of March 31, 2014, no significant progress has been made with the USDA or the Lender and thus the Company has abandoned the pursuit of the USDA Loan Guarantee program. In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China’s fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire has transitioned away from Huadian to pursue opportunities with a larger, better equipped Chinese Engineering Procurement Construction company. In tandem with the new EPC contractor, the company is engaging Chinese banks to provide the debt financing for the Fulton Project. BlueFire is currently in negotiations but no definitive agreements have yet been executed.
On September 27, 2010, the Company announced a contract with Cooper Marine & Timberlands to provide feedstock for the Company’s planned Fulton Project for a period of up to 15 years. Under the agreement, Cooper Marine & Timberlands (“CMT”) will supply the project with all of the feedstock required to produce approximately 19-million gallons of ethanol per year from locally sourced cellulosic materials such as wood chips, forest residual chips, pre-commercial thinnings and urban wood waste such as construction waste, storm debris, land clearing; or manufactured wood waste from furniture manufacturing. Under the Agreement, CMT will pursue a least-cost strategy for feedstock supply made possible by the project site’s proximity to feedstock sources and the flexibility of BlueFire’s process to use a wide spectrum of cellulosic waste materials in pure or mixed forms. CMT, with several chip mills in operation in Mississippi and Alabama, is a member company of Cooper/T. Smith one of America’s oldest and largest stevedoring and maritime related firms with operations on all three U.S. coasts and foreign operations in Central and South America.
| 6 |
On September 20, 2010, the Company announced an off-take agreement with Tenaska BioFuels, LLC (“TBF”) for the purchase and sale of all ethanol produced at the Company’s planned Fulton Project. Pricing of the 15-year contract follows a market-based formula structured to capture the premium allowed for cellulosic ethanol compared to corn-based ethanol giving the Company a credit worthy contract to support financing of the project. Despite the long-term nature of the contract, the Company is not precluded from the upside in the coming years as fuel prices rise. TBF, a marketing affiliate of Tenaska, provides procurement and marketing, supply chain management, physical delivery, and financial services to customers in the agriculture and energy markets, including the ethanol and biodiesel industries. In business since 1987, Tenaska is one of the largest independent power producers.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2014 Compared to the Three Months Ended March 31, 2013
Revenue
Revenues for the three months ended March 31, 2014 and 2013, were approximately $611,000 and $68,000, respectively. Revenue in both 2014 and 2013 was primarily related to federal grant revenue from the DOE. The federal grant generally provides for reimbursement in connection with related development costs involving commercialization of our technologies. The increase in revenue is made up of two sources: (i) increased revenue from DOE reimbursements in 2014 as certain salary costs are no longer being capitalized to construction-in-progress as they were in 2013 for which the reimbursement offset construction-in-progress costs, and (ii) the Company received approximately $84,000 in revenue as a commitment fee from GS Caltex.
The commitment fee from GS Caltex was earned upon receipt as no services, current or future, were required to be performed as part of the fee. Accordingly, there are no corresponding costs of sales. In the future, the Company will incur costs of sales when hourly consulting fees are incurred.
Project Development
For the first quarter in 2014, our project development costs were approximately $214,000, compared to project development costs of $118,000 for the same period during 2013. The increase in project development costs is mainly due to the fact that a portion of engineering salaries were capitalized to construction-in-progress during the first quarter of 2013, whereas they were expensed in the similar 2014 period. The change in classification was due to the impairment of construction-in-progress during 2013 and the Company no longer capitalizing those costs.
General and Administrative Expenses
General and administrative expenses were approximately $293,000 for the first quarter of 2014, compared to $222,000 for the same period in 2013. The increase in general and administrative costs is mainly due to increased costs relating to insurance and certain legal costs as well as stock based compensation cost increases as part of the Tarpon Bay 3(a)10 transaction.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operations through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders and outside investors. In addition, in the past we have received funds under the grant received from the DOE. Our principal use of funds has been for the further development of our bio-refinery projects, for capital expenditures and general corporate expenses. As our projects are developed to the point of construction, we anticipate significant purchases of long lead time item equipment for construction if the requisite capital can be obtained. As of March 31, 2014, we had cash and cash equivalents of approximately $66,000. As of May 20, 2014, we had cash and cash equivalents of approximately $48,700.
Historically, we have funded our operations though the following transactions:
In February 2009, the Company obtained a line of credit in the amount of $570,000 from Arkenol Inc., its technology licensor, to provide additional liquidity to the Company as needed, the credit line was ultimately paid back during 2009 and cancelled.
In October 2009, the Company received additional funds of approximately $3,800,000 from the DOE, due to the success in amending its DOE award to include costs previously incurred in connection with the development of the Lancaster Bio-refinery which have a direct attributable benefit to the Fulton Project. The funds were used to fund operations for the remainder of 2009 and most of 2010.
| 7 |
On December 15, 2010, the Company entered into a $200,000 loan agreement (“Loan”) with Arnold Klann, the Chief Executive Officer (“CEO/Lender”). The Loan requires the Company to (i) pay to the CEO/Lender a one-time amount equal to fifteen percent (15%) of the Loan in cash or shares of the Company’s common stock at a value of $0.50 per share, at the CEO/Lender’s option; and (ii) issue the CEO/Lender warrants allowing the CEO/Lender to buy 500,000 common shares of the Company at an exercise price of $0.50 per common share, such warrants to expire on December 15, 2013. The Company has promised to pay in full the outstanding principal balance of any and all amounts due under the Loan Agreement within thirty (30) days of the Company’s receipt of investment financing or a commitment from a third party to provide $1,000,000 to the Company or one of its subsidiaries. The proceeds from this loan were used to fund operations.
On December 23, 2010, the Company sold a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC (“BlueFire Fulton” or the “Fulton Project”), to an accredited investor for a purchase price of $750,000 (“Purchase Price”). The Company maintains a 99% ownership interest in BlueFire Fulton. In addition, the investor received a right to require the Company to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future contingent events based upon obtaining financing for the construction of the Fulton Project.
On November 10, 2011, the Company obtained a line of credit in the amount of $40,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional liquidity to the Company as needed, at his sole discretion. Under the terms of the note, the Company is to repay any principal balance and interest, at 12% per annum, within 30 days of receiving qualified investment financing of $100,000 or more. As of May 20, 2014, the outstanding balance on the line of credit is approximately $11,230.
On January 19, 2011, the Company signed a $10 million purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), an Illinois limited liability company. The Company also entered into a registration rights agreement with LPC whereby we agreed to file a registration statement related to the transaction with the U.S. Securities & Exchange Commission (“SEC”) covering the shares that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the Purchase Agreement the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase Agreement. The registration statement was declared effective on May 10, 2011, without any penalty.
After the SEC declared effective the registration statement related to the transaction, the Company has the right, in its sole discretion, over a 30-month period to sell shares of common stock to LPC in amounts from $35,000 and up to $500,000 per sale, depending on the Company’s stock price, and under certain conditions, as set forth in the Purchase Agreement, up to the aggregate commitment of $10 million.
On March 28, 2012, the Company finalized a $2,000,000 Equity Facility with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“TCA”). The Company also entered into a Registration Rights Agreement with TCA whereby we agreed to file a registration statement related to the transaction with the SEC covering the shares that may be issued to TCA under the Equity Facility within 45 days of closing. Although under the Registration Rights Agreement the registration statement was to be declared effective within 90 days following closing, it has yet to be declared effective. The Company is working with TCA to resolve this issue.
On March 28, 2012, the Company finalized a $300,000 secured convertible promissory note in favor of TCA (the “Convertible Note”). The maturity date of the Convertible Note is March 28, 2013, and the Convertible Note bears interest at a rate of twelve percent per annum with a default rate of eighteen percent per annum. The Convertible Note is convertible into shares of the Company’s common stock and may be prepaid in whole or in part at the Company’s option without penalty.
On July 31, 2012, the Company borrowed $63,500 under a short-term convertible note payable with a third party. Under the terms of the agreement, the note incurs interest at eight percent per annum and was due on May 2, 2013. The note is convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement. This note and all accrued interest has been converted into common stock.
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On October 11, 2012, the Company borrowed $37,500 under a short-term convertible note payable with a third party. Under the terms of the agreement, the note incurs interest at eight percent per annum and was due on July 15, 2013. The note was convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement.
On December 21, 2012, the Company borrowed $32,500 under a short-term convertible note payable with a third party. Under the terms of the agreement, the note incurs interest at eight percent per annum and was due on September 26, 2013. The note was convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement.
On February 11, 2013, the Company borrowed $53,000 under a short-term convertible note payable with a third party. Under the terms of the agreement, the note incurs interest at eight percent per annum and was due on November 13, 2013. The note was convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement.
On June 13, 2013, the Company borrowed $32,500 under a short-term convertible note payable with a third party. Under the terms of the agreement, the note incurred interest at eight percent per annum and was due on March 17, 2014. The note was convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement.
On December 19, 2013, the Company entered into an agreement to borrow $37,500 under a short-term convertible note payable with a third party which was funded and effective in January 2014. Under the terms of the agreement, the note incurs interest at eight percent per annum and is due on December 23, 2014. The note is convertible into common shares at any time after six months at a discount to the then market price of our common stock. The Company may prepay the convertible debt, prior to maturity at varying prepayment penalty rates specified under the agreement.
Management has estimated that operating expenses for the next twelve months will be approximately $1,700,000, excluding engineering costs related to the development of bio-refinery projects. These matters raise substantial doubt about the Company’s ability to continue as a going concern. For the remainder of 2014, the Company intends to fund its operations with reimbursements under the Department of Energy contract, from the sale of Fulton Project equity ownership, and from the sale of debt or equity instruments. The Company’s ability to get reimbursed under the DOE contract is dependent on the availability of cash to pay for the related costs and the availability of funds remaining under the contract after the discontinuance of the Department of Energy contract further disclosed in Note 3. As of May 20, 2014, there is approximately $730,000 available to the Company under the contract and the remaining money could still be available pending the results of the appeal. As of May 20, 2014, the Company expects the current resources, as well as the resources available in the short term under various financing mechanisms, will only be sufficient for a period of approximately one month, depending upon certain funding conditions contained herein, unless significant additional financing is received. Management has determined that general expenditures have been reduced as much as is possible without affecting operations and that additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results.
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Changes in Cash Flows
During the three months ended March 31, 2014 and 2013, we used cash of approximately $16,000 and $73,000 in operating activities. During the 2014 period we had a net loss of approximately $22,800, which was offset by non-cash charges of approximately $147,000 and operating assets and liabilities of approximately $(132,747). During the 2013 period, we had a net loss of approximately $429,000, which was offset by non-cash charges of approximately $135,000 and operating assets and liabilities of approximately $221,000. The decrease in cash used in operating activities is a reflection of reduced overheads and G&A expenses.
During the three months ended March 31, 2014, we invested approximately $0 net of DOE reimbursements in construction activities at our Fulton Project, compared with $35,000, net of DOE reimbursements in the similar period in 2013. This decrease was due to the decision to impair the property and equipment assets at the end of 2013, and such costs no longer being capitalized to construction-in-progress.
During the three months ended March 31, 2014, we had positive cash flow from financing activities of approximately $35,000 compared to approximately $80,000 for the same period in 2013, both of which were from the issuance of convertible notes. The decrease was due to the Company not entering into convertible note agreements in 2014 at the same rate as in 2013.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
The methods, estimates, and judgment we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has defined “critical accounting policies” as those accounting policies that are most important to the portrayal of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate to the fair value of warrant liabilities. We also have other key accounting estimates and policies, but we believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period. For additional information see Note 2, “Summary of Significant Accounting Policies” in the notes to our reviewed financial statements appearing elsewhere in this quarterly report and our annual audited financial statements appearing on Form 10-K. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available, and actual results may differ significantly from these estimates.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
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Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
(b) Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On February 26, 2013, the Company received notice that the Orange County Superior Court (the “Court”) issued a Minute Order (the “Order”) in connection with certain shareholders’ claims of breach of contract and declaratory relief related to 5,740,741 warrants (the “Warrants”) issued by the Company.
Pursuant to the Order, the Court ruled in favor of the shareholders on the two claims, finding that the Warrants contain certain anti-dilution protective provisions which provide for the re-adjustment of the exercise price of such Warrants upon certain events and that such exercise price per share of the Warrants must be decreased to $0.00.
The Company has considered these warrants exercised based on the notice of exercise received from the respective shareholders in December 2012.
On March 7, 2013, the shareholders making claims provided their request for judgment based on the Order received, which was initially refused by the Court via a second minute order received by the Company on April 8, 2013. On April 15, 2013, the Company’s counsel submitted a proposed judgment to the Court as per the Courts request, which followed the Order and provided for no monetary damages against the Company. On May 14, 2013, this proposed judgment was approved by the Court (“Judgment”).
On June 20, 2013, the Company filed motions to vacate the Judgment, a motion for a new trial, and a motion to stay enforcement of the Judgment, all of which were denied on June 27, 2013.
On August 2, 2013, pursuant to the exercise notice of the Warrants, and the Order, the Company issued 5,740,741 shares to certain shareholders. See Note 9 in the accompanying notes to consolidated financial statements for additional information.
Other than as disclosed above, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2013, filed with the SEC on April 15, 2014.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
See Note 4 for information related to Convertible Notes Payable. Other than the information presented in Note 4 there were no unregistered sales of the Company’s equity securities during the quarter ended March 31, 2014 that were not previously reported in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
As of the date of this Quarterly Report on Form 10Q, the Company was in default with regard to its payment obligations, on a convertible note issued in favor of TCA on March 28, 2012, in the aggregate principal amount of $300.000 (the “TCA note”). On April 11, 2014, the Company paid the balance of the TCA Note and is no longer in default on any senior securities. See Note 10 for additional information.
Item 4. Mine Safety Disclosures.
Not applicable.
Not applicable.
| Exhibit No. | Description | |
| 31.1 | Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
| 31.2 | Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
| 32.1 | Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
| 32.2 | Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
* Filed herewith.
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Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BLUEFIRE RENEWABLES, INC. | ||
| Date: May 20, 2014 | By: | /s/ Arnold Klann |
| Name: | Arnold Klann | |
| Title: | Chief Executive Officer | |
(Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | ||
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