| Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Going Concern The Company has historically incurred
recurring losses. Management has funded operations primarily through loans from its Chairman/Chief Executive Officer, the private
placement of the CompanyÂ’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 from 2009 to
2015. 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 December 31, 2015, the Company
has negative working capital of approximately $2,260,000. Management has estimated that operating expenses for the next 12 months
will be approximately $1,500,000, excluding engineering costs related to the development of bio-refinery projects. These matters
raise substantial doubt about the CompanyÂ’s ability to continue as a going concern. Throughout 2016, the Company intends
to fund its operations with any additional funding that can be secured in the form of equity or debt. As of March 30, 2015, 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 or at all. 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. Additionally, the CompanyÂ’s Lancaster
plant is currently shovel ready, except for the air permit which the Company will need to renew and only requires minimal capital
to maintain until funding is obtained for the construction. 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 (Note 3), procured all necessary permits for construction of
the plant, and began site clearing and preparation work, signaling the beginning of construction. 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
through such date 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. 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. Significant estimates include, but are not limited to, DOE Grant reimbursements,
valuation of warrants and derivative liabilities, and impairment of long-lived assets. Cash and Cash Equivalents For purpose of the statement of cash
flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to
be cash equivalents. Debt Issuance Costs Debt issuance costs are capitalized
and amortized over the term of the debt using the effective interest method, or expensed upon conversion or extinguishment when
applicable. Costs are capitalized for amounts incurred in connection with proposed financings. In the event the financing related
to the capitalized cost is not successful, the costs are immediately expensed (see Note 5). Accounts Receivable Accounts receivable are reported net
of allowance for expected losses. It represents the amount management expects to collect from outstanding balances. Differences
between the amount due and the amount management expects to collect are charged to operations in the year in which those differences
are determined, with an offsetting entry to a valuation allowance. As of December 31, 2015 and 2014, the Company has no reserve
allowance. Intangible Assets License fees acquired are either expensed
or recognized as intangible assets. The Company recognizes intangible assets when the following criteria are met: 1) the asset
is identifiable, 2) the Company has control over the asset, 3) the cost of the asset can be measured reliably, and 4) it is probable
that economic benefits will flow to the Company. Property and Equipment Property and equipment are stated at
cost. The CompanyÂ’s fixed assets are depreciated using the straight-line method over a period ranging from three to five
years, except land which is not depreciated. Maintenance and repairs are charged to operations as incurred. Significant renewals
and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. During the year ended December
31, 2010, the Company began to capitalize costs in connection with the construction of its Fulton plant, and continued to do so
in 2013 until it was determined that the project should be impaired. A portion of these costs were reimbursed under the Department
of Energy grant discussed in Note 3. The reimbursable portion was treated as a reduction of those costs. Impairment of Long-Lived Assets The Company regularly evaluates whether
events and circumstances have occurred that indicate the carrying amount of property and equipment may not be recoverable. When
factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the potential impairment
by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows
expected from use of the asset and its eventual disposition. If the carrying amount of the asset is determined not to be recoverable,
a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external
appraisals, as applicable. The Company regularly evaluates whether events and circumstances have occurred that indicate the useful
lives of property and equipment may warrant revision. There was no impairment as of December 31, 2015 or 2014. Revenue Recognition The Company will recognize revenues
from 1) consulting services rendered to potential sub licensees for development and construction of cellulose to ethanol projects,
2) sales of ethanol from its production facilities when (a) persuasive evidence that an agreement exists; (b) the products have
been delivered; (c) the prices are fixed and determinable and not subject to refund or adjustment; and (d) collection of the amounts
due is reasonably assured. As discussed in Note 3, the Company
received a federal grant from the United States Department of Energy, (“DOE”). The grant generally provided for payment
in connection with related development and construction costs involving commercialization of our technologies. Grant award reimbursements
were recorded as either contra assets or as revenues depending upon whether the reimbursement is for capitalized construction costs
or expenses paid by the Company. Contra capitalized cost and revenues from the grant were recognized in the period during which
the conditions under the grant had been met and the Company had made payment for the related asset or expense. The Company recognized
DOE unbilled grant receivables for those costs that had been incurred during a period but not yet paid at period end, were otherwise
reimbursable under the terms of the grant, and were expected to be paid in the normal course of business. Realization of unbilled
receivables is dependent on the CompanyÂ’s ability to meet their obligation for reimbursable costs. 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 CompanyÂ’s future cellulose-to-ethanol production facilities. During the years ended December 31, 2015 and
2014, research and development costs included in project development were approximately $609,000 and $774,000, respectively. 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 $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, on April 11, 2014, the Equity Facility was canceled and related convertible note repaid in full. No registration rights penalties
were incurred as part of the repayment. Income Taxes The Company accounts for income taxes
in accordance with ASC 740 “Income Taxes” requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available
operating loss or tax credit carry forwards. This Interpretation sets forth a recognition
threshold and valuation method to recognize and measure an income tax position taken, or expected to be taken, in a tax return.
The evaluation is based on a two-step approach. The first step requires an entity to evaluate whether the tax position would “more
likely than not,” based upon its technical merits, be sustained upon examination by the appropriate taxing authority. The
second step requires the tax position to be measured at the largest amount of tax benefit that is greater than 50 percent likely
of being realized upon ultimate settlement. The Company does not have any uncertain positions which require such analysis. Fair Value of Financial Instruments 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 CompanyÂ’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 December 31, 2015 and 2014. As of December 31, 2015 and 2014, the
warrant liability and derivative liability are considered Level 2 items, see Notes 5, 6, and 9. As of December 31, 2015 and 2014, the
CompanyÂ’s redeemable noncontrolling interest is considered a Level 3 item and changed during 2014 and 2015 due to the following:
Balance as of January 1, 2015 $ 864,867
Net gain attributable to noncontrolling interest 747
Balance at December 31, 2015 $ 865,614 See Note 8 for details of valuation
and changes during the years 2015 and 2014. The carrying amounts reported in the
accompanying consolidated financial statements for current assets and current liabilities approximate the fair value because of
the immediate or short term maturities of the financial instruments. Risks and Uncertainties The CompanyÂ’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 CompanyÂ’s industry segment.
The Company may be subject to federal, state and local environmental laws and regulations. The Company does not anticipate non-compliance
with such laws and does not believe that regulations will have a material impact on the CompanyÂ’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. Concentrations of Credit Risk The Company maintains its cash accounts
in a commercial bank and in an institutional money-market fund account. The total cash balances held in a commercial bank are secured
by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, per insured bank. At times, the Company has cash
deposits in excess of federally insured limits. In addition, the Institutional Funds Account is insured through the Securities
Investor Protection Corporation (“SIPC”) up to $500,000 per customer, including up to $250,000 for cash. At times,
the Company has cash deposits in excess of federally and institutional insured limits. As of December 31, 2015 and 2014, the
Department of Energy made up 100% of Grant Revenues. Management believes the loss of this organization will have a material impact
on the CompanyÂ’s financial position, results of operations, and cash flows. The company is currently investigating alternative
sources of funding. As of December 31, 2014, one customer
made up 100% of the CompanyÂ’s consulting fees revenue. Management believes the loss of consulting to this organization would
have a material impact on the CompanyÂ’s financial position, results of operations, and cash flows. As of December 31, 2015 and 2014 four
and three vendors made up approximately 78% and 60% of accounts payable, respectively. 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. For the
years ended December 31, 2015 and 2014, the Company had no options and 23,528,571 warrants outstanding, respectively, for which
23,528,571 warrants had an exercise price which was in excess of the average closing price of the CompanyÂ’s common stock
during the corresponding years and thus 23,528,571 warrants, respectively, are considered dilutive under the treasury-stock method
of accounting. However, due to the net loss in the periods presented, the warrants effects are antidilutive and therefore, excluded
from diluted EPS calculations. Share-Based Payments The Company accounts for stock options
issued to employees and consultants under ASC 718 “Share-Based Payment”. Under ASC 718, share-based compensation cost
to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the
employeeÂ’s requisite vesting period. The Company measures compensation expense
for its non-employee stock-based compensation under ASC 505 “Equity”. The fair value of the option issued or committed
to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair
value is measured at the value of the CompanyÂ’s common stock on the date that the commitment for performance by the counterparty
has been reached or the counterpartyÂ’s performance is complete. The fair value of the equity instrument is charged directly
to stock-based compensation expense and credited to additional paid-in capital. 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 CompanyÂ’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. 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. Lines of Credit with Share Issuance Shares issued to obtain a line of credit
are recorded at fair value at contract inception. When shares are issued to obtain a line of credit rather than in connection with
the issuance, the shares are accounted for as equity, at the measurement date in accordance with ASC 505-50 “Equity-Based
Payments to Non-Employees.” The issuance of these shares is equivalent to the payment of a loan commitment or access fee,
and, therefore, the offset is recorded akin to debt issuance costs. The deferred fee is amortized using the effective interest
method, or a method that approximates such over the stated term of the line of credit, or other period as deemed appropriate. 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. As
these redeemable noncontrolling interests provide for redemption features not solely within the control of the issuer, we classify
such interests outside of permanent equity in accordance with ASC 480-10, “Distinguishing Liabilities from Equity”.
All redeemable noncontrolling 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 loss available to the Company. The Company accretes the redemption value of the redeemable noncontrolling interest
over the redemption period using the straight-line method. New Accounting Pronouncements On February 25, 2016, the Financial
Accounting Standards Board (FASB) issued authoritative guidance intended to improve financial reporting about leasing transactions.
The new guidance requires entities to recognize assets and liabilities for leases with lease terms of more than 12 months. The
new guidance also requires qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows
arising from leases. The new guidance is effective for the Company beginning January 1, 2019. The Company is evaluating the impact
of the new standard on its consolidated financial statements. In November 2015, the FASB issued authoritative
guidance related to balance sheet classification of deferred taxes. The new guidance requires entities to present deferred tax
assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet. It thus simplifies the current guidance,
which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. Netting of
DTAs and DTLs by tax jurisdiction is still required under the new guidance. The new authoritative guidance is effective for annual
periods, including interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted.
The guidance is not expected to have a material impact on the audited annual financial statements. In May 2014, FASB issued authoritative
guidance that provides principles for recognizing revenue for the transfer of promised goods or services to customers with the
consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires that reporting
companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
On July 9, 2015, FASB agreed to delay the effective date by one year and, accordingly, the new standard is effective for the Company
beginning in the first quarter of fiscal 2018. Early adoption is permitted, but not before the original effective date of the standard.
The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the
cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition
method nor has it determined the impact of the new standard on its consolidated financial statements. In April 2015, the FASB issued authoritative
guidance, which changes the presentation of debt issuance costs in financial statements. Under this authoritative guidance, an
entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset.
Amortization of the costs is reported as interest expense. The new guidance is effective for the Company beginning January 1, 2016.
Early adoption is permitted. The guidance is not expected to have a material impact on the consolidated financial statements. Management does not believe that any
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements. |
