Attached files
file | filename |
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EX-32.1 - EX-32.1 - Bluefire Renewables, Inc. | v193969_ex32-1.htm |
EX-31.1 - EX-31.1 - Bluefire Renewables, Inc. | v193969_ex31-1.htm |
EX-31.2 - EX-31.2 - Bluefire Renewables, Inc. | v193969_ex31-2.htm |
EX-32.2 - EX-32.2 - Bluefire Renewables, Inc. | v193969_ex32-2.htm |
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 SECURITIES
EXCHANGE
ACT OF 1934
For
the quarterly period ended June 30, 2010
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from __________ to __________
Commission
File No. 000-52361
BLUEFIRE
RENEWABLES, INC.
(formerly
BLUEFIRE ETHANOL FUELS, INC.)
(Exact
Name of Registrant in its Charter)
Nevada
|
20-4590982
|
|
(State
or Other Jurisdiction of
|
(IRS
Employer
|
|
Incorporation)
|
Identification
No.)
|
31
MUSICK
IRVINE,
CALIFORNIA 92618
(Address
of Principal Executive Offices)(Zip Code)
(949)
588-3767
Registrant’s
Telephone Number
Copies
to:
Joseph
M. Lucosky, Esq.
195
Rt. 9 South, 2nd Floor
Manalapan,
NJ, 07726
Tel
No.: (732)409-1212
Fax
No.: (732) 577-1188
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
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), 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 ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
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 August 16, 2010, there were 28,544,965 shares outstanding of the
registrant’s common stock.
TABLE
OF CONTENTS
PART I
- FINANCIAL INFORMATION
|
|||
Item
1.
|
FINANCIAL
STATEMENTS (UNAUDITED)
|
3
|
|
Consolidated
Balance Sheets
|
3
|
||
Consolidated
Statements of Operations
|
4
|
||
Consolidated
Statements of Cash Flows
|
5
|
||
Notes
to Consolidated Financial Statements
|
6
|
||
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
12
|
|
Item
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
16
|
|
Item
4.
|
CONTROLS
AND PROCEDURES
|
16
|
|
PART
II - OTHER INFORMATION
|
|||
Item
1.
|
LEGAL
PROCEEDINGS
|
17
|
|
Item
1A.
|
RISK
FACTORS
|
17
|
|
Item
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
17
|
|
Item
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
17
|
|
Item
4.
|
(REMOVED
& RESERVED)
|
17
|
|
Item
5.
|
OTHER
INFORMATION
|
17
|
|
Item
6.
|
|
EXHIBITS
|
17
|
2
Item
1. FINANCIAL STATEMENTS
(FORMERLY BLUEFIRE
ETHANOL FUELS, INC.)
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
|
|
June 30, 2010
|
December 31,
2009
|
|
||||
|
|
(unaudited)
|
|
|
(audited)
|
|
||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
1,654,282
|
$
|
2,844,711
|
||||
Accounts
receivable
|
32,000
|
-
|
||||||
Department
of Energy grant receivable
|
255,869
|
207,380
|
||||||
Department
of Energy - unbilled receivables
|
189,558
|
-
|
||||||
Prepaid
expenses
|
67,587
|
50,790
|
||||||
Total
current assets
|
2,199,296
|
3,102,881
|
||||||
Debt
issuance costs
|
189,280
|
150,000
|
||||||
Property,
plant and equipment, net of accumulated depreciation of $56,326 and
$44,130, respectively
|
504,358
|
167,995
|
||||||
Total
assets
|
$
|
2,892,934
|
$
|
3,420,876
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$
|
901,010
|
$
|
335,547
|
||||
Accrued
liabilities
|
110,971
|
245,394
|
||||||
Total
current liabilities
|
1,011,981
|
580,941
|
||||||
Long
term stock liability
|
77,826
|
2,274,393
|
||||||
Total
liabilities
|
1,089,807
|
2,855,334
|
||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, no par value, 1,000,000 shares authorized; none issued and
outstanding
|
-
|
-
|
||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; 28,514,965
and 28,296,965 shares issued; and 28,482,793 and 28,264,793
outstanding, as of June 30, 2010 and December 31, 2009,
respectively
|
28,514
|
28,296
|
||||||
Additional
paid-in capital
|
14,066,824
|
14,033,792
|
||||||
Treasury
stock at cost, 32,172 shares at June 30, 2010 and December 31,
2009
|
(101,581
|
)
|
(101,581
|
)
|
||||
Deficit
accumulated during the development stage
|
(12,190,630
|
)
|
(13,394,965
|
)
|
||||
Total
stockholders’ equity
|
1,803,127
|
565,542
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
2,892,934
|
$
|
3,420,876
|
See
accompanying notes to consolidated financial statements
3
BLUEFIRE
RENEWABLES, INC. AND SUBSIDIARIES
(FORMERLY BLUEFIRE
ETHANOL FUELS, INC.)
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three
Months
ended June
30,
|
For the Three
Months
ended June
30,
|
For the Six
Months
ended June
30,
|
For the Six
Months
ended June
30,
|
From March
28, 2006
(inception)
Through
June 30,
|
|
|||||||||||||
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|||||
Revenues:
|
||||||||||||||||||||
Consulting
fees
|
$
|
34,125
|
$
|
-
|
$
|
47,196
|
$
|
14,570
|
$
|
115,766
|
||||||||||
Department
of energy grant
|
141,432
|
67,724
|
416,422
|
111,320
|
5,790,573
|
|||||||||||||||
Department
of energy - unbilled grant Revenue
|
950
|
-
|
950
|
-
|
950
|
|||||||||||||||
Total
revenues
|
176,507
|
67,724
|
464,568
|
125,890
|
5,907,289
|
|||||||||||||||
Operating
expenses:
|
||||||||||||||||||||
Project
development
|
233,056
|
333,485
|
715,795
|
643,389
|
17,954,997
|
|||||||||||||||
General
and administrative
|
327,877
|
520,371
|
741,591
|
1,097,356
|
13,776,221
|
|||||||||||||||
Related
party license fee
|
-
|
-
|
-
|
-
|
1,000,000
|
|||||||||||||||
Total
operating expenses
|
560,933
|
853,856
|
1,457,386
|
1,740,745
|
32,731,218
|
|||||||||||||||
Operating
loss
|
(384,426
|
)
|
(786,132
|
)
|
(992,818
|
)
|
(1,614,855
|
)
|
(26,823,929
|
)
|
||||||||||
Other
income and (expense):
|
||||||||||||||||||||
Gain
(loss) from change in fair value of warrant liability
|
308,876
|
(3,109,463
|
)
|
2,196,567
|
(2,912,480
|
)
|
2,764,028
|
|||||||||||||
Other
income
|
131
|
1,501
|
586
|
7,203
|
255,759
|
|||||||||||||||
Financing
related charge
|
-
|
-
|
-
|
-
|
(211,660
|
)
|
||||||||||||||
Amortization
of debt discount
|
-
|
-
|
-
|
-
|
(676,982
|
)
|
||||||||||||||
Interest
expense
|
-
|
-
|
-
|
-
|
(56,097
|
)
|
||||||||||||||
Related
party interest expense
|
-
|
-
|
-
|
-
|
(64,966
|
)
|
||||||||||||||
Loss
on extinguishment of debt
|
-
|
-
|
-
|
-
|
(2,818,370
|
)
|
||||||||||||||
Loss
on the retirements of warrants
|
-
|
-
|
-
|
-
|
(146,718
|
)
|
||||||||||||||
Total
other income and (expense)
|
|
309,007
|
|
(3,107,962
|
)
|
|
2,197,153
|
|
(2,905,277
|
)
|
|
(955,006
|
)
|
|||||||
Income
(loss) before income taxes
|
(75,419
|
)
|
(3,894,094
|
)
|
1,204,335
|
(4,520,132
|
)
|
(27,778,935
|
)
|
|||||||||||
Provision
for income taxes
|
-
|
-
|
-
|
-
|
83,147
|
|||||||||||||||
Net
income (loss)
|
$ |
(75,419
|
)
|
$ |
(3,894,094
|
)
|
$ |
1,204,335
|
$ |
(4,520,132
|
)
|
$ |
(27,862,082
|
)
|
||||||
Basic
and diluted loss per common share
|
$
|
(0.00
|
)
|
$
|
(0.14
|
)
|
$
|
0.04
|
$
|
(0.16
|
)
|
|||||||||
Weighted
average common shares outstanding, basic and diluted
|
28,363,271
|
28,104,518
|
28,314,579
|
28,102,709
|
|
See
accompanying notes to consolidated financial statements
4
BLUEFIRE
RENEWABLES, INC. AND SUBSIDIARIES
(FORMERLY BLUEFIRE
ETHANOL FUELS, INC.)
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASHFLOWS
(Unaudited)
|
|
For the Six
Months Ended
June 30,
|
For the Six
Months Ended
June 30,
|
From March 28,
2006 (inception)
Through June 30,
|
|
|||||||
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$
|
1,204,335
|
$
|
(4,520,132
|
)
|
$
|
(27,862,082
|
)
|
||||
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
||||||||||||
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
|
||||||||||
Loss
(gain) from change in the fair value of warrant
liability
|
(2,196,567
|
)
|
2,912,480
|
(2,764,028
|
)
|
|||||||
Common
stock issued for interest on Convertible notes
|
-
|
-
|
55,585
|
|||||||||
Discount
on sale of stock associated with private placement
|
-
|
-
|
211,660
|
|||||||||
Share-based
compensation
|
33,250
|
17,118
|
11,371,379
|
|||||||||
Depreciation
|
12,549
|
11,578
|
56,683
|
|||||||||
Changes
in operating assets and liabilities:
|
-
|
|||||||||||
Accounts
receivable
|
(32,000
|
)
|
-
|
(32,000
|
)
|
|||||||
Department
of Energy grant receivable
|
(49,439
|
)
|
624,290
|
(256,819
|
)
|
|||||||
Prepaid
expenses and other current assets
|
(32,517
|
)
|
2,987
|
(83,309
|
)
|
|||||||
Accounts
payable
|
54,389
|
(375,280
|
)
|
389,934
|
||||||||
Accrued
liabilities
|
(134,422
|
)
|
(5,728
|
)
|
110,974
|
|||||||
License
fee payable to related party
|
-
|
(970,000
|
)
|
-
|
||||||||
Net
cash used in operating activities
|
(1,140,422
|
)
|
(2,302,687
|
)
|
(15,246,502
|
)
|
||||||
Cash
flows from investing activities:
|
||||||||||||
Acquisition
of property and equipment
|
(10,727
|
)
|
-
|
(222,855
|
)
|
|||||||
Cash
flows from financing activities:
|
||||||||||||
Repurchases
of common stock held in treasury
|
-
|
-
|
(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
|
-
|
-
|
14,360,000
|
|||||||||
Proceeds
from Convertible notes payable
|
-
|
-
|
2,500,000
|
|||||||||
Repayment
of notes payable
|
-
|
-
|
(500,000
|
)
|
||||||||
Proceeds
from related party notes payable
|
-
|
-
|
116,000
|
|||||||||
Repayment
of related party notes payable
|
-
|
-
|
(116,000
|
)
|
||||||||
Debt
issuance costs
|
(39,280
|
)
|
-
|
(189,280
|
)
|
|||||||
Retirement
of Aurarian warrants
|
-
|
-
|
(220,000
|
)
|
||||||||
Net
cash provided by financing activities
|
(39,280
|
)
|
-
|
17,123,639
|
||||||||
Net
decrease in cash and cash equivalents
|
(1,190,429
|
)
|
(2,302,687
|
)
|
1,654,282
|
|||||||
Cash
and cash equivalents beginning of period
|
2,844,711
|
2,999,599
|
-
|
|||||||||
Cash
and cash equivalents end of period
|
$
|
1,654,282
|
$
|
696,912
|
$
|
1,654,282
|
||||||
Supplemental
disclosures of cash flow information
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$
|
-
|
$
|
13,700
|
$
|
56,893
|
||||||
Income
taxes
|
$
|
-
|
$
|
-
|
$
|
18,096
|
||||||
Supplemental
schedule of non-cash investing and financing activities:
|
||||||||||||
Conversion
of senior secured convertible notes payable
|
$
|
-
|
$
|
-
|
$
|
2,000,000
|
||||||
Interest
converted to common stock
|
$
|
-
|
$
|
-
|
$
|
55,569
|
||||||
Fair
Value of warrants issued to placement agents
|
$
|
-
|
$
|
-
|
$
|
725,591
|
||||||
Accounts
payable, net of reimbursement, included in
construction-in-progress
|
$ | 348,623 | $ | - | $ | 348,623 |
See
accompanying notes to consolidated financial statements
5
(FORMERLY
BLUEFIRE ETHANOL FUELS, INC)
(A
DEVELOPMENT-STAGE COMPANY)
NOTE
1 - ORGANIZATION AND BUSINESS
BlueFire
Ethanol, Inc., a wholly-owned subsidiary of BlueFire Renewables, Inc. (formerly
BlueFire Ethanol Fuels, Inc.) (“BlueFire” or the “Company”) 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.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management’s
Plans
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, and Department of Energy reimbursements
commencing in 2008 through the current date. The Company may encounter
difficulties in establishing operations due to the time frame of developing,
constructing and ultimately operating the planned bio-refinery
projects.
As of
June 30, 2010, the Company has working capital of approximately $1,200,000.
Management has estimated that operating expenses for the next twelve months will
be approximately $1,800,000, excluding engineering costs related to the
development of bio-refinery projects. These operating expenses can be reduced by
approximately $250,000 by implementing certain cost cutting measures. Throughout
2010, the Company intends to fund its operations with its current working
capital, and proceeds from reimbursements under the Department of Energy
contract. The Company expects the current resources available to them will be
sufficient for a period of approximately ten months before implementing cost
cutting measures, or in excess of twelve months after such measures are
implemented. Management has determined that these general expenditures will be
reduced and additional capital will be required in the form of equity or debt
securities. There are no assurances that management will be able to raise
capital on terms acceptable to the Company.
6
Additionally,
the Company’s proposed Lancaster plant is currently shovel ready 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 uses in prior years.
As of
June 30, 2010 the Company’s proposed plant in Fulton, Mississippi was awaiting
its storm water pollution prevention plan approval. This is one of the last
permits to secure before ground can be broken on the Fulton
project.
We
estimate the total cost of the bio-refineries, including contingencies to be in
the range of approximately $300 million to $310 million for the DOE plant in
Fulton, Mississippi and approximately $100 million to $120 million for the
Lancaster, California plant. These cost approximations do not reflect any
decrease in raw materials or any savings in construction cost that might be
realized by the weak world economic environment. The Company is currently in
discussions with potential sources of financing for these facilities but no
definitive agreements are in place.
Basis
of Presentation
The
accompanying unaudited 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
financial statements should be read in conjunction with the audited financial
statements of the Company for the year ended December 31, 2009. The
results of operations for the six months ended June 30, 2010, are not
necessarily indicative of the results that may be expected for the full
year.
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 the three and six
months ended June 30, 2010, and for the period from March 28, 2006 (Inception)
to June 30, 2010, research and development costs included in Project Development
expense were approximately $233,000, $716,000 and
$17,955,000, respectively.
7
Fair
Value of Financial Instruments
On
January 1, 2009, the Company adopted ASC 820 (“ASC 820”) Fair Value Measurements
and Disclosures. The Company did not record an adjustment to retained
earnings as a result of the adoption of the guidance for fair value
measurements, and the adoption did not have a material effect on the Company’s
results of operations.
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.
As of
June 30, 2010, the Company’s warrant liability is considered a level 2 item, see
Note 4.
Income
(loss) per Common Share
The
Company presents basic income (loss) per share (“EPS”) and diluted EPS on the
face of the consolidated statement of operations. Basic income (loss) per share
is computed as net income (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 June 30, 2010, the
Company had 3,287,159 options and 6,813,494 warrants outstanding, 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 as dilutive under the treasury-stock method of accounting. As
of June 30, 2009, the Company had 3,287,159 options and 7,386,694 warrants
to purchase shares of common stock that were excluded from the calculation of
diluted loss per share as their effects would have been anti-dilutive due to the
loss.
Share-Based
Payments
The
Company accounts for stock options issued to employees and consultants under ASC
718 formerly SFAS No. 123(R), “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
employee's requisite vesting period.
The
Company measures compensation expense for its non-employee stock-based
compensation under ASC 505 formerly EITF No. 96-18 “Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” (“EITF 96-18”). 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 Company's common stock on the date that
the commitment for performance by the counterparty has been reached or the
counterparty'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.
Property,
Plant and Equipment
Property,
plant and equipment, is recorded at cost. Depreciation expense is computed using
the straight–line method over the estimated useful lives of the assets,
generally three to seven years leasehold, except for leasehold improvements
which are amortized over the lease term. Depreciation for
construction-in-progress does not commence until the asset is ready for
use. Maintenance and repairs are charged to expense as
incurred.
Costs
incurred relating to construction-in-progress for plant facilities are
capitalized when those costs are for the active development of the
facility. Those costs include interest when such costs qualify for
capitalization. Interest capitalization ceases when the construction
of a facility is complete and available for use. During the six
months ended June 30, 2010, and 2009, the Company did not capitalize any
interest costs related to construction-in-progress. When capitalized
costs qualify for reimbursement under the DOE grant, the reimbursement on those
costs reduces the value of construction-in-progress.
As of
June 30, 2010, the Company had net construction-in-progress of $343,404 included
in property, plant and equipment on the accompanying balance sheet.
Recent
Accounting Pronouncements
In
January 2010, the Financial Accounting Standards Board (“FASB”) amended
authoritative guidance for improving disclosures about fair-value measurements.
The updated guidance requires new disclosures about recurring or nonrecurring
fair-value measurements including significant transfers into and out of Level 1
and Level 2 fair-value measurements and information on purchases, sales,
issuances, and settlements on a gross basis in the reconciliation of Level 3
fair-value measurements. The guidance also clarified existing fair-value
measurement disclosure guidance about the level of disaggregation, inputs, and
valuation techniques. The guidance became effective for interim and annual
reporting periods beginning on or after December 15, 2009, with an
exception for the disclosures of purchases, sales, issuances and settlements on
the roll-forward of activity in Level 3 fair-value measurements. Those
disclosures will be effective for fiscal years beginning after December 15,
2010 and for interim periods within those fiscal years. The Company does not
expect that the adoption of this guidance will have a material impact on the
consolidated financial statements.
8
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, which is
now located in Fulton, Mississippi. During October 2007, the Company
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
December 2009, as a result of the American Recovery and Reinvestment Act, the
DOE increased Award 2 to a total of $81 million for Phase II of its DOE
Biorefinery project. This is in addition to a renegotiated Phase I funding
for development of the DOE Biorefinery of approximately $7 million out of
the previously announced $10 million total. This brings the total eligible
funds for DOE Biorefinery to approximately $88 million. The Company has
completed negotiations with the DOE for Phase II of its DOE Biorefinery project
and the funds have been obligated.
To date,
the Company has received reimbursements of approximately $6,316,000 under these
awards.
In 2009,
our operations have been financed to a large degree through funding provided by
the U.S Department of Energy. 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. Although we finalized Award 1 with a total reimbursable
amount of $6,425,564, and through June 30, 2010, we have an unreimbursed amount
of approximately $109,759 available to us under the award, we cannot guarantee
that we will continue to receive grants, loan guarantees, or other funding for
our projects from the U.S. Department of Energy.
NOTE
4 - OUTSTANDING WARRANT LIABILITY
Effective
January 1, 2009, we adopted the provisions of Derivatives and Hedging (“ASC
815”) formerly EITF 07-5, "Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). 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 have an exercise price of $2.90; 5,962,563 warrants expire in December
2012 and 426,800 expire August 2010. 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.
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 set to expire in August 2010, and the 5,962,963
warrants set to expire in December 2012, the Company recognized a gain of
approximately $309,000 and $2,197,000 from the change in fair value of
these warrants for the three and six months ended June 30, 2010,
respectively.
9
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, all future changes in the fair value of these warrants
will be recognized currently in earnings until such time as the warrants are
exercised or expire. These common stock purchase warrants do not trade in an
active securities market, and as such, we estimate the fair value of these
warrants quarterly using the Black-Scholes option pricing model using the
following assumptions:
June
30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Annual
dividend yield
|
-
|
-
|
||||||
Expected
life (years) of August 2007 issuance
|
0.14
|
0.64
|
||||||
Expected
life (years) of December 2007 issuance
|
2.50
|
3.00
|
||||||
Risk-free
interest rate
|
.61
|
%
|
2.69
|
%
|
||||
Expected
volatility of August 2007 issuance
|
85
|
%
|
101
|
%
|
||||
Expected
volatility of December 2007 issuance
|
98
|
%
|
95
|
%
|
Expected
volatility is based primarily on historical volatility. Historical
volatility for the August 2007 and December 2007 issuances were 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
5 - COMMITMENTS AND CONTINGENCIES
Professional
Service Agreements
As of
June 30, 2010, the Company has contracts with several engineering firms. During
the six months ended June 30, 2010, the Company paid approximately $1,030,000 to
various engineering firms.
Related-Party
Line of Credit
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. In October 2009, $175,000 was utilized from the line of
credit and in November 2009, the balance was paid in full along with
approximately $500 interest. As of June 30, 2010, there were no amount
outstanding and the line of credit was deemed cancelled as the Company did not
anticipate utilizing funds from the line of credit.
NOTE 6 - STOCKHOLDERS’
EQUITY
Stock-Based
Compensation under the Company’s Employee Stock Option Plan
During
the six months ended June 30, 2010 and 2009, and for the period from March 28,
2006 (Inception) to June 30, 2010, the Company amortized stock-based
compensation, including consultants, of approximately $0, $0, and $4,487,000 to
general and administrative expenses and $0, $0, and $4,368,000 to project
development expenses, respectively. There is no additional future
compensation expense to record as of June 30, 2010 based on the previous
awards.
Shares
Issued for Services
On August
27, 2009, the Company entered into a six month consulting agreement with Mirador
Consulting, Inc (the “Consulting Agreement”). Pursuant to the Consulting
Agreement, the Company will receive services in connection with mergers and
acquisitions, corporate finance, corporate finance relations, introductions to
other financial relations companies and other financial services. As
consideration for these services, the Company will make monthly cash payments of
$3,000 and has issued, or will issue, 200,000 shares of the Company’s common
stock in exchange for $200. The Company valued the shares at $0.80 based upon
the closing price of the Company’s common stock on the date of the Consulting
Agreement. Under the terms of the Consulting Agreement, the shares did not have
any future performance requirement nor were they cancellable. The Company
expensed the entire value on the date of the Consulting Agreement and recorded
to general and administrative expense. Under the terms of the Consulting
Agreement the Company was to issue 100,000 shares upon execution of the
agreement and November 15, 2009. On May 24, 2010, the Company issued the
remaining 100,000 shares.
During
the six months ended June 30, 2010, the Company issued 118,000 shares of common
stock for legal and professional services provided. In connection with this
issuance the Company recorded $33,250 in legal and professional fees expense
which is included in general and administrative expense. The Company valued the
shares using the closing market price on the date of issuance. The Company
expensed the shares on the date of issuance as the services had been provided
and there was no future performance criteria.
10
NOTE
7 –SUBSEQUENT EVENT
On July
15, 2010, the Company renewed all of its existing Directors’ appointments, as
well as electing a new Director and issued 6,000 shares to each and paid $5,000
to the three outside members. Pursuant to the Board of Director agreements, the
Company's in-house board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was
determined to be approximately $7,200 based on the fair market value of the
Company's common stock of $0.24 on the date of the grant.
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.
11
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 Bluefire
Renewables, Inc. (“Bluefire” or the “Company”) from time to time with the United
States Securities and Exchange Commission (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, 2009 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 biorefineries in North America are projected as
follows:
·
|
A
biorefinery 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 Biorefinery”). Permit applications were filed on
June 24, 2007, to allow for construction of the Lancaster Biorefinery. 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.
We have completed the detailed engineering and design on the project and
are seeking funding in order to build the facility. We estimate the total
cost including contingencies to be in the range of approximately $100
million to $125 million for this first plant. This amount is significantly
greater than our previous estimations communicated to the public. This is
due in part to a combination of significant increases in materials costs
on the world market from the last estimate till now, and the complexity of
our first commercial deployment. At the end of 2008 and early 2009, prices
for materials have declined, and we expect, that items like structural and
specialty steel may continue to decline in price in 2010 with other
materials of construction following suit. The cost approximations above do
not reflect any decrease in raw materials or any savings in construction
cost. We are currently in discussions with potential sources of financing
for this facility but no definitive agreements are in
place.
|
12
·
|
A
biorefinery proposed for development and construction in conjunction with
the U.S. 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 annually
to produce approximately 19 million gallons of ethanol annually (“DOE
Biorefinery”). We have received an Award from the DOE of up to $40 million
for the Facility. 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 approve costs may be reimbursed by
the DOE pursuant to the total $40 million award announced in February
2007. On December 4, 2009, the DOE announced that the 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 June 30, 2010, BlueFire has been reimbursed
approximately $6,316,000 from the DOE under this award. On or around
February 23, 2010, we announced that we submitted an application for a
$250 million dollar loan guarantee for this planned biorefinery. The
application, filed under the DOE Program DE-FOA-0000140, which provides
federal loan guarantees for projects that employ innovative energy
efficiency, renewable energy, and advanced transmission and distribution
technologies, was submitted on February 15, 2010, and serves as a phase
one application in a two phase approval process. If approved, the loan
guarantee will secure a substantial portion of the total
costs to construct the facility, although there is no assurance
that the loan guarantee will be approved. We are in the detailed
engineering phase for this project and expect to have all necessary
permits for this facility by this summer, putting the Company on a path to
commence construction by the end of 2010. At this time the remainder of
financing for this project is yet to be
determined.
|
·
|
Several
other opportunities are being evaluated by us in North America, although
no definitive agreements have been
reached.
|
BlueFire’s
capital requirement strategy for its planned biorefineries 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 biorefineries
in North America. Although the Company is in discussions with potential
financial and strategic sources of financing for their planned
biorefineries no definitive agreements are in
place.
|
·
|
The
Energy Policy Act of 2005 provides for grants and loan guarantee programs
to incentivize the growth of the cellulosic ethanol market. These programs
include a Cellulosic Biomass Ethanol and Municipal Solid Waste Guarantee
Program under which the U.S. Department of Energy (“DOE”) could provide
loan guarantees up to $250 million per qualified project. BlueFire
plans to pursue all available opportunities within EPAct
2005.
|
·
|
The
2008 Farm Bill, Title IX (Energy Title) provides grants for demonstration
scale Biorefineries, and loan guarantees for commercial
scale Biorefineries that produce advanced Biofuels (i.e.,
any fuel that is not corn-based). Section 9003 includes a Loan
Guarantee Program under which the U.S.D.A. 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 biorefineries 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.
|
13
·
|
Utilize
proceeds from reimbursements under the DOE
contract.
|
·
|
As
available and as applicable to our business plans, applications for public
funding will be submitted to leverage private capital raised by
us.
|
RECENT
DEVELOPMENTS IN BLUEFIRE’S BIOREFINERY ENGINEERING AND DEVELOPMENT
On May
27, 2009, we announced that Solazyme, Inc., a renewable oil production company
and leading algal synthetic biology company, is testing sugars, produced through
the Company’s patented process, for compatibility with its renewable oil process
to produce the oil cost effectively and at scale.
On
October 15, 2009, BlueFire announced the strategic relocation of its second
planned biorefinery (DOE Facility) to Fulton, Mississippi.
During
the first half on 2010, BlueFire continued to develop the engineering package
for the DOE Facility, and completed the Front-End Loading (FEL) 2 stage of
engineering for the DOE Facility. 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). BlueFire is currently working on
completing the FEL-3 engineering for the DOE facility that will ready the
facility for construction.
There are
three stages in the FEL process:
FEL-1
|
FEL-2
|
FEL-3
|
||
*
Material Balance
|
*
Preliminary Equipment Design
|
*
Detailed Engineering
|
||
*
Energy Balance
|
*
Preliminary Layout
|
*
Purchase Ready Major Equipment Specifications
|
||
*
Project Charter
|
*
Preliminary Schedule
|
*
Definitive Estimate
|
||
*
Preliminary Estimate
|
*
Project Execution Plan
|
|||
*
Preliminary 3D Model
|
||||
*
Electrical Equipment List
|
||||
*
Line List
|
||||
|
|
*
Instrument Index
|
On July
15, 2010, BlueFire announced the appointment of Roger L. Petersen to its Board
of Directors. Roger L. Petersen, age 59, currently serves as the President of
Montana Horizons, LLC, a Montana limited liability company which he founded in
2006, that provides support for utility mergers and acquisitions and energy
development projects. From 1995 to 2006, Mr. Petersen served as the President of
PPL Development Company, a wholly-owned subsidiary of PPL Corporation (NYSE:
PPL) (“PPL”), which focused on corporate growth through asset acquisition and
corporate mergers. From 2001 to 2003, Mr. Petersen served as the President of
PPL Global, Inc, a wholly-owned subsidiary of PPL, which managed all
international acquisitions and operations for PPL. From 1999 to 2001, Mr.
Petersen served as President and Chief Executive Officer of PPL Montana, LLC, a
wholly-owned subsidiary of PPL, which operates coal-fired and hydroelectric
generating facilities at 13 sites in the State of Montana. Mr. Petersen also
served as the Vice President and Chief Executive Officer of PPL Global, Inc, a
wholly-owned subsidiary of PPL, from 1995 to 1998, which developed and acquired
assets in the United Kingdom, Chile, El Salvadore, Peru, Bolivia, and the United
States. He served on several corporate boards in the United Kingdom,
Chile and El Salvador. Prior to joining PPL, he was Vice President of Operations
for Edison Mission Energy, a subsidiary of Edison International, and held
various engineering and project management positions at Fluor Engineers and
Constructors. Mr. Petersen earned his B.S. in Mechanical engineering
from South Dakota State University and his Masters of Engineering from
California Polytechnic Institute.
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. Our Board of
Directors and management believe that changing our name to BlueFire Renewables,
Inc. more accurately reflects our primary business plan expanding the focus from
just building cellulosic ethanol projects to include other advanced biofuels,
biodiesel, and other drop-in biofuels as well as synthetic lubricants. On July
20, 2010, the Certificate of Amendment was accepted by the Secretary of State of
Nevada.
14
RESULTS OF
OPERATIONS
Three months Ended June 30, 2010
Compared to the three months Ended June 30, 2009
Revenue
Revenue for
the three months ended June 30, 2010 and 2009, was approximately $177,000 and
$68,000, respectively, and was primarily related to a federal grant from the
United States Department of Energy, (“U.S. DOE” or “DOE”). The grant
generally provides for reimbursement in connection with related development and
construction costs involving commercialization of our
technologies.
Project Development
For the
three months ended June 30, 2010, our project development costs were
approximately $233,000, compared to project development costs of $333,000 for
the same period during 2009. The decrease in project development
costs is mainly due to the commencement of capitalized costs related to the
Fulton facility.
General and Administrative
Expenses
General and Administrative Expenses were
approximately $328,000 for
the three months ended June 30, 2010, compared to $520,000 for the same period
in 2009. The decrease in general and administrative costs is mainly due to the
increased activity at the project level, mostly related to the Fulton
facility.
Interest Income
Interest income for the three months
ended June 30, 2010, was approximately $130, compared to $1,500 for the same
period in 2009, in each case, related to funds invested. The decrease in
interest income from the same period in 2009 is mainly due to the fact that our
investment account balance was depleted as we used the funds in operations, and
that our rate of return on the account decreased dramatically as it was tied to
short-term interest rates.
Six months Ended June 30,
2010 Compared to the six
months Ended June 30, 2009
Revenue
Revenue for
the six months ended June 30, 2010 and 2009, was approximately $465,000 and
$126,000, respectively, and was primarily related to a federal grant from the
United States Department of Energy, (“U.S. DOE” or “DOE”). The grant
generally provides for reimbursement in connection with related development and
construction costs involving commercialization of our
technologies.
Project Development
For the
six months ended June 30, 2010, our project development costs were approximately
$716,000, compared to project development costs of $643,000 for the same period
during 2009. The increase in project development costs is due to the
increased activity in the design and engineering development of the Fulton Plant
in the first quarter prior to commencement of capitalization.
General and Administrative
Expenses
General and Administrative Expenses were
approximately $742,000 for the six months ended June 30, 2010, compared to
$1,097,000 for the same
period in 2009. The decrease in general and administrative costs is mainly due
to the increased activity at the project level, mostly related to the Fulton
facility.
Interest Income
Interest income for the six months ended
June 30, 2010, was approximately $600, compared to $7,200 for
the same period in 2009, in each case, related to funds invested. The decrease
in interest income from the same period in 2009 is mainly due to the fact that
our investment account balance was depleted as we used the funds in operations, and that our rate of
return on the account decreased dramatically as it was tied to short-term
interest rates.
15
LIQUIDITY
AND CAPITAL RESOURCES
Our
principal sources of liquidity consist of cash and cash equivalents.
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. Our principal use of funds has been
for the further development of our Biorefinery projects, for capital
expenditures and general corporate expenses. As of June 30, 2010, we had cash
and cash equivalents of approximately $1,625,000. However, as of August 15,
2010, the Company has approximately $1,694,000 in cash as a result of proceeds
of approximately $324,000 from reimbursements under the Department of Energy
contract. Management has estimated that operating expenses for the next
twelve months will be approximately $1,800,000, excluding engineering costs
related to the development of bio-refinery projects. These operating expenses
can be reduced by approximately $250,000 by implementing certain cost cutting
measures including a reduction of headcount, reducing employee benefits and/or
salary deferral, as needed. Management believes that our Company’s cash will be
sufficient to meet our working capital requirements for the next twelve month
period by implementing these cost cutting measures.
We expect
to rely upon funds raised from private placements, as well as future equity and
debt offerings, current and future grant opportunities, as well as the
$3,800,000 received from the DOE in October 2009, to implement our growth plan
and meet our liquidity needs going forward. Management believes that our
Company’s cash will be sufficient to meet our working capital requirements for
the next twelve month period, but will not be sufficient to move forward beyond
the development stage of either of our first two Projects, at which point
further funding will be necessary. However, we cannot assure you that such
financing will be available to us on favorable terms, or at all. If, after
utilizing the existing sources of capital available to the Company, further
capital needs are identified and we are not successful in obtaining the
financing, we may be forced to curtail our existing or planned future
operations.
16
In
addition, as our biorefinery projects develop to the point of construction, we
anticipate significant purchases of long lead time item equipment for
construction.
The
Company is currently in discussions with potential financial and strategic
sources of financing for both the Lancaster and DOE Biorefineries but no
definitive agreements are in place.
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.
Item
4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls
and Procedures. Our Chief Executive Officer and Chief Financial Officer
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 Chief
Executive and Chief Financial Officer 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 Chief 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.
Our Chief
Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.
17
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations. Smaller reporting companies employ fewer individuals and find
it difficult to properly segregate duties. Often, one or two individuals
control every aspect of the Company’s operation and are in a position to
override any system of internal control. Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.
Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
Company’s internal control over financial reporting as of June 30, 2010. In
making this assessment, our Chief Executive Officer and Chief Financial
Officer used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework. Based on this evaluation, Our Chief Executive Officer and Chief
Financial Officer concluded that, as of June 30, 2010, our internal control over
financial reporting was effective.
(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.
PART
II - OTHER INFORMATION
Item
1. LEGAL PROCEEDINGS
We are
not currently 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.
Item 1A. RISK
FACTORS
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, 2009, filed with the SEC on March 30, 2010.
Item
2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
There
were no unregistered sales of Equity Securities and Use of Proceeds during the
period ended June 30, 2010.
Item
3. DEFAULTS UPON SENIOR
SECURITIES
There has
been no default in the payment of principal, interest, sinking or purchase fund
installment, or any other material default, with respect to any indebtedness of
the Company.
Item
4. (REMOVED & RESERVED)
Item
5. OTHER INFORMATION
There is
no other information required to be disclosed under this item which was not
previously disclosed.
Item
6. EXHIBITS
Exhibit
Number
|
Description of Document
|
|
31.1
|
Rule
13a-14(a)/ 15d-14(a) Certification of Arnold Klann, Principal Executive
Officer of the Company.
|
|
31.2
|
Rule
13a-14(a)/ 15d-14(a) Certification of Christopher Scott, Principal
Accounting Officer of the Company.
|
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350 of Arnold Klann, Principal Executive
Officer of the Company.
|
|
32.2
|
|
Certification
Pursuant to 18 U.S.C. Section 1350 of Christopher Scott, Principal
Accounting Officer of the
Company.
|
18
SIGNATURES
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.
Dated:
August 17, 2010
|
BLUEFIRE
RENEWABLES, INC.
|
/s/
Arnold Klann
|
|
Arnold
Klann
|
|
Chief
Executive Officer
|
|
/s/
Christopher Scott
|
|
Christopher
Scott
|
|
Chief
Financial Officer
|
19