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EX-32.2 - ALLIANCE BIOENERGY PLUS, INC.ex32-2.htm
EX-32.1 - ALLIANCE BIOENERGY PLUS, INC.ex32-1.htm
EX-31.2 - ALLIANCE BIOENERGY PLUS, INC.ex31-2.htm
EX-31.1 - ALLIANCE BIOENERGY PLUS, INC.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934

 

for the fiscal year ended December 31, 2016

 

Transition Report Under Section 13 or 15(D) of the Securities Exchange Act of 1934

 

for the transition period from _______________ to _______________

 

Commission File Number: 333-181633

 

ALLIANCE BIOENERGY PLUS, INC.

(Exact name of small Business Issuer as specified in its charter)

 

Nevada   45-4944960
(State or other jurisdiction of   (IRS Employer
incorporation or organization)   Identification No.)
     
400 N. Congress Avenue, Suite 130    
West Palm Beach, FL   33401
(Address of principal executive offices)   (Zip Code)

 

Issuer’s telephone number, including area code: (888) 607-3555

 

n/a

Former address if changed since last report

 

Securities registered under Section 12(b) of the Exchange Act: None

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, par value $0.001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X].

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Check whether the issuer (1) 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 [  ]

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 [  ] (Do not check if a smaller reporting company)

  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 [X] No

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2016): $13,732,277

 

State the number of shares outstanding of the registrant's $.001 par value common stock as of the close of business on the latest practicable date (April 15, 2017): 71,600,064

 

Documents incorporated by reference: None.

 

 

 

 
 

 

TABLE OF CONTENTS  
   
PART I  
       
ITEM 1.   Business 3
       
ITEM 1A.   Risk Factors 4
       
ITEM 1B.   Unresolved Staff Comments 4
       
ITEM 2.   Properties 4
       
ITEM 3.   Legal Proceedings 5
       
ITEM 4.   Mine Safety Disclosures 5
       
PART II  
       
ITEM 5.   Market For Registrants Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities 5
       
ITEM 6.   Selected Financial Data 10
       
ITEM 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation 10
       
ITEM 7A.   Quantitative and Qualitative Disclosure About Market Risk 15
       
ITEM 8.   Financial Statements and Supplementary Data 15
       
ITEM 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 16
       
ITEM 9A.   Controls and Procedures 16
       
ITEM 9B.   Other Information 17
       
PART III  
       
ITEM 10   Directors, Executive Officers and Corporate Governance 18
       
ITEM 11.   Executive Compensation 20
       
ITEM 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters 22
       
ITEM 13.   Certain Relationships and Related Transactions and Director Independence 23
       
ITEM 14.   Principal Accountant Fees and Services 24
       
PART IV  
       
ITEM 15.   Exhibits, Financial Statement Schedules 26
       
SIGNATURES 27

 

2
 

 

FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Alliance BioEnergy Plus, Inc. and its consolidated subsidiaries (the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in the “Risk Factors” section in Item 1A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

 

PART I

 

ITEM 1. BUSINESS

 

Background

 

Business Overview

 

Alliance Bioenergy Plus, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels and new technologies sectors. From inception through December 5, 2014, the Company was known as Alliance Media Group Holdings, Inc. At inception (March 28, 2012), the Company was organized as a vehicle to engage in the commercial production, distribution and exploitation of Motion Pictures and other Entertainment products. However, in December 2013, a wholly owned subsidiary of the Company, AMG Renewables, LLC (“AMG Renewables”), acquired the controlling interest (51%) in AMG Energy Group, LLC (“AMG Energy”), which owns a fifty percent (50%) interest of Carbolosic, LLC (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal in acquiring the interest in AMG Energy is to develop the CTS technology to a commercial scale and then seek to license the technology to prospective licensees. In September 2014, the Company determined to focus all of the Company’s resources and personnel on the Company’s renewable energy holdings and future energy technologies and to divest the Company of its entertainment-related assets and subsidiaries. The Company therefore determined at that time to divest and sell off, close down or discontinue the operations of its entertainment-related subsidiaries. Subsequently, the Company determined that the name Alliance Media Group Holdings, Inc. was no longer relevant to the new business direction of the Company and, effective December 5, 2014, amended the Company’s Articles of Incorporation to change the name of the Company to Alliance Bioenergy Plus, Inc., which is more appropriately descriptive of the new business direction of the Company.

 

Carbolosic Plant 1, LLC was created in October 2014 as a wholly owned subsidiary of AMG Renewables for the purpose of being a full scale facility for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. In March 2016, Carbolosic Plant 1, LLC was sold to Carbolosic Energy 1, LLLP, a non-related third party, in exchange for satisfaction of an outstanding $1,250,000 loan and $36,488 interest between Carbolosic Plant 1 and Carbolosic Energy 1, LLLP. In connection with the transaction, an amount which the Company had prepaid to Carbolosic Energy 1, LLLP ($122,879) for future marketing and interest was eliminated in the sale.

 

3
 

 

Thereafter, in December 2014, AMG Energy formed AMG Energy formed EK Laboratories, Inc. (originally, Central Florida Institute of Science and Technology, Inc.) (“EK”), to serve as a demonstration and research facility to further develop the CTS process, its uses, and develop new technologies. EK remains a wholly-owned subsidiary of AMG Energy.

 

In July 2016, the Company determined to restructure its energy holdings under a single wholly-owned subsidiary (AMG Energy) such that AMG Energy would own (i) the Company’s fifty percent (50%) interest of Carbolosic (which includes certain licensing rights in North America and Africa) and (ii) the Company’s 100% interest in EK Laboratories, LLC. At the same time, the Company’s interest in Carbolosic Plant 1 was divested. This restructuring was completed on September 19, 2016 when AMG Renewables merged into AMG Energy. Previously, the Company had completed transactions with certain related parties to acquire the remaining 49% of AMG Energy which was not owned by the Company in exchange for an aggregate of 10,240,094 shares of Company common stock and a restructuring of the balance due under a cash payable to the minority AMG Energy Shareholders.

 

The Company continues to be focused on the development and commercialization of the licensed technology it controls through its affiliate Carbolosic, LLC. Through its wholly-owned subsidiary, AMG Energy, the Company owns Ek Laboratories, Inc. and a 50% interest in Carbolosic (which includes certain licensing rights in North America and Africa). The Company has a strategy that includes mergers and acquisitions of existing businesses in the renewable energy and sustainable products industries as well as sublicensing its patented technologies that it controls through a master license with the University of Central Florida under affiliate Carbolosic and start-up activities which are focused on development of an increasing revenue stream, secure market share and enhancement of shareholder value.

 

In February 2017, the Company formed Alliance Bio-Products, Inc., a Florida corporation (“ABIOP”), for the purpose of acquiring and operating a plant for the installation of the Company’s patented CTS process. The Company intends to raise money into ABIOP for this purpose.

 

The Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization as well as the bio-fuels, renewable energy, chemical manufacturing and engineering and industrial construction industries. As of this date, the Company has not generated any revenues from its business.

 

Description of the Company’s Securities

 

The Company is currently authorized to issue 500,000,000 Shares of Common Stock par value $0.001 and 10,000,000 shares of Preferred Stock par value $0.001. Each share of Company Common Stock is entitled to one (1) vote per share.

 

Employees

 

The company currently employs eight full-time employees, one part-time employee and two consultants.

 

ITEM 1A. RISK FACTORS

 

Not required as the Company is a “smaller reporting company.”

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Offices

 

The Company maintains its corporate office at 400 N Congress Avenue, Suite 130, West Palm Beach Florida 33401. The Company’s telephone number is 888-607-3555. In August 2015, the Company renewed its lease for a period of thirty-six (36) months from August 5, 2015 through July 31, 2018. Annual rent commenced at approximately $48,925 per annum and increases on a year-to-year basis by three percent (3%) over the base year. In addition, the Company is obligated to pay an amount equal to 3.76% of the operating expenses of the building together with sales tax on all amounts.

 

EK Laboratories leases office and warehouse space in Longwood, FL, which serves as the Company’s research and demonstration facility. The lease period is for thirty-six (36) months from February 1, 2015 through January 31, 2018. Annual rent commences at approximately $70,620 per annum and increases on a year-to-year basis by five percent (5%) over the prior year.

 

4
 

 

ITEM 3. LEGAL PROCEEDINGS

 

The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business. As of the date of filing, there are no material claims or suits whose outcomes could have a material effect on the Company’s financial statements.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market for Registrant’s Common Equity

 

The Company became subject to Securities Exchange Act Reporting Requirements in October 2012. The symbol “ALLM” is assigned for its securities. The Company’s common stock commenced trading on the OTCBB on February 5, 2014.

 

The following table shows the high and low prices of the Company’s common shares on the OTC Bulletin Board for each quarter since its common stock began to trade on the OTC Bulletin Board in February 2014. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

 

Period  High   Low 
January 1, 2015 – March 31, 2015  $0.65   $0.22 
April 1, 2015 – June 30, 2015  $1.39   $0.07 
July 1, 2015 – September 30, 2015  $0.68   $0.30 
October 1, 2015 – December 31, 2015  $0.55   $0.28 
January 1, 2016 – March 31, 2016  $0.42   $0.15 
April 1, 2016 – June 30, 2016  $0.45   $0.06 
July 1, 2016 – September 30, 2016  $0.42   $0.15 
October 1, 2016 – December 31, 2016  $0.27   $0.18 

 

Options and Warrants

 

In February 2015, the Company began a second round of financing wherein each unit sold consists of one (1) share of common stock, one (1) series A Warrant for a period of three (3) years convertible to .5 Common Share at an exercise price of $0.75 and one (1) series B Warrant for a period of three (3) years convertible to .5 Common Share at an exercise price of $1.50. Through this offering the Company had sold 2,460,202 units.

 

In March 2015, the Company’s Board of Directors approved a resolution to compensate the board’s independent directors with cash or equity per quarter under the Company’s 2012 Employee, Director Stock Plan. Through the date of filing, the company has issued to its independent directors, fifteen (15) option agreements to purchase an aggregate of 755,944 shares of common stock for a period of three (3) years at an average exercise price of $0.16. In addition, the Company has approved nine (9) employee stock option awards to purchase an aggregate of 3,958,469 shares of common stock at an average exercise price of $0.16 and terms ranging from three (3) to ten (10) years.

 

5
 

 

In November 2015, the Company began a third round of financing wherein each unit sold consists of one (1) share of common stock, one (1) series C Warrant for a period of three (3) years convertible to .5 common share at an exercise price of $0.45 and one (1) series D Warrant for a period of three (3) years convertible to .5 common share at an exercise price of $0.65. Through this offering the Company has sold 1,460,898 units.

 

In January 2016, the Company began a fourth round of financing wherein each unit consist of one (1) share of common stock and one (1) series E warrant for a period of five (5) years convertible into one (1) share of common stock at an exercise price of $0.45 per share. Through this offering the Company has sold 4,535,517 units.

 

In March 2016, the Company began a fifth round of financing wherein each unit consist of three million seven hundred seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000) series F warrants for a period of five (5) years at an exercise price of $0.25 per share. Each warrant is convertible into one (1) share of common stock. Through this offering the Company has sold 2 units.

 

In October 2016, the Company began a sixth round of financing wherein each unit consist of one (1) share of common stock and one (1) series E warrant for a period of five (5) years convertible into one (1) share of common stock at an exercise price of $0.45 per share. Through this offering the Company has sold 2,362,550 units.

 

Through the date of filing, the Company has issued warrants to purchase an aggregate of 12,236,625 shares of common stock. The exercise prices associated with these agreements range from $0.13 to $2.00 and terms range from three (3) to five (5) years.

 

Other than the foregoing agreements, none of the Company’s shares of Common Stock are subject to outstanding options or warrants.

 

Holders

 

As of the date of filing, there were 71,600,064 shares of common stock outstanding and approximately 234 stockholders of record

 

Transfer Agent and Registrar

 

The Company’s transfer agent is Interwest Transfer Co., Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT, Phone: 801-272-9294.

 

Dividend Policy

 

The Company has never paid any cash dividends on its Common Stock and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company intends to retain future earnings to fund ongoing operations and future capital requirements of its business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon the Company’s financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

There are currently twenty-four (24) outstanding options to purchase an aggregate of 4,714,413 shares of common stock under the Company’s 2012 Employee, Director Stock Plan. In addition, 500,000 shares of common stock had been issued under the plan to a former employee, however these shares were rescinded in March 2017. The Company had fourteen (14) outstanding options to purchase an aggregate of 2,300,690 shares of common stock as of December 31, 2015.

 

Plan Category    Number of Securities to
be issued upon exercise
of outstanding options,
warrants and rights
   Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
 
   (a)   (b)   (c) 
Equity compensation plans approved by security holders     4,714,413   $0.45    10,288,205 
Equity compensation plans not approved by security holders     -0-    -0-    -0- 
Total     4,714,413   $0.45    10,288,205 

 

6
 

 

Recent Sales of Unregistered Securities

 

Below is a list of securities sold by the Company from January 1, 2016 through the date of filing which were not registered under the Securities Act.

 

Name of Purchaser  Date of Sale  Title of Security  Amount of Securities Sold  Consideration
             
Luna Consultant Group, LLC  01/01/16  Common Stock  10,000  Professional services
Mimi Galbo  01/04/16  Common Stock  2,500  Professional services
James Dryer  01/04/16  Common Stock  2,500  Professional services
Iconic Holdings, LLC  01/06/16  Common Stock  233,147  Note conversion
Richard Bindler Revocable Trust  01/08/16  Common Stock  100,000  Purchased @ $0.23 per share
Group 10 Holdings, LLC  01/13/16  Common Stock  157,418  Note conversion
Richard Bindler Revocable Trust  01/20/16  Common Stock  150,000  Purchased @ $0.17 per share
Steven Sadaka  01/20/16  Common Stock  250,000  Purchased @ $0.17 per share
Iconic Holdings, LLC  01/22/16  Common Stock  657,895  Note conversion
Luna Consultant Group, LLC  01/25/16  Common Stock  400,000  Professional services
Rolnick Family LP  01/26/16  Common Stock  100,000  Purchased @ $0.24 per share
Fedelta Capitello, LLC  01/27/16  Common Stock  100,000  Purchased @ $0.24 per share
Matthew & Casey Shore  01/27/16  Common Stock  100,000  Purchased @ $0.24 per share
Nancy Burgess & David Gross  01/29/16  Common Stock  100,000  Purchased @ $0.24 per share
Jason Taylor  01/29/16  Common Stock  200,000  Purchased @ $0.24 per share
David Kantor  02/02/16  Common Stock  208,333  Purchased @ $0.24 per share
Oren Kantor  02/02/16  Common Stock  208,334  Purchased @ $0.24 per share
Carbolosic Energy 1, LLLP  03/17/16  Common Stock  3,717,785  Purchased @ $0.21 per share
USREDA, LLC  03/17/16  Common Stock  3,717,785  Purchased @ $0.21 per share
A.J. Enterprises, LLP  03/30/16  Common Stock  208,334  Purchased @ $0.24 per share
Dale A. Morrell  04/14/16  Common Stock  108,433  Purchased @ $0.24 per share
Robert Stephens Cates  04/19/16  Common Stock  100,000  Purchased @ $0.24 per share
Steven Sadaka  04/28/16  Common Stock  250,000  Professional Services
Jacob Consulting, LLC  04/29/16  Common Stock  650,000  Professional Services
Bindler Investment Group, LLC  05/04/16  Common Stock  100,000  Purchased @ $0.24 per share
Richard Bindler Revocable Trust  05/04/16  Common Stock  150,000  Purchased @ $0.24 per share
James Dryer  05/04/16  Common Stock  80,000  Professional Services
Mimi Galbo  05/04/16  Common Stock  80,000  Professional Services
Kent Jones  05/06/16  Common Stock  200,000  Purchased @ $0.24 per share
New Direction IRA, Inc. FBO Kent Jones  05/06/16  Common Stock  200,000  Purchased @ $0.24 per share
Steven Nelson  05/11/16  Common Stock  (250,000)  Rescinded Common Stock
Mishawn Nelson  05/11/16  Common Stock  (200,000)  Rescinded Common Stock
Major League Services Investment & Holdings Corp.  05/31/16  Common Stock  52,083  Purchased @ $0.24 per share
James Dryer  06/04/16  Common Stock  5,000  Professional Services

 

7
 

 

Mimi Galbo  06/04/16  Common Stock  5,000  Professional Services
Nancy Burgess & David Gross  06/10/16  Common Stock  150,000  Purchased @ $0.24 per share
Alissa Shapiro  06/17/16  Common Stock  100,000  Purchased @ $0.24 per share
Gavriele Kantor  06/17/16  Common Stock  100,000  Purchased @ $0.24 per share
James Dryer  07/04/16  Common Stock  5,000  Professional Services
Mimi Galbo  07/04/16  Common Stock  5,000  Professional Services
Harry Grossman  07/04/16  Common Stock  20,000  Professional Services
Animated Family Films, Inc.  07/08/16  Common Stock  2,899,710  Acquisition #3
H&K Investments One, LLC  07/08/16  Common Stock  482,580  Acquisition #3
Steven Dunkle  07/08/16  Common Stock  1,696,770  Acquisition #3
Mark W. Koch  07/08/16  Common Stock  1,204,950  Acquisition #3
Daniel de Liege  07/08/16  Common Stock  2,415,990  Acquisition #3
Newport Coast Securities, Inc.  07/13/16  Common Stock  75,000  Professional Services
John D. Lane  07/14/16  Common Stock  100,000  Purchased @ $0.24 per share
Process Engineering Associates  07/21/16  Common Stock  100,000  Professional Services
John D. Lane  07/27/16  Common Stock  250,000  Purchased @ $0.24 per share
Michael & Roslynn Levine  07/27/16  Common Stcok  100,000  Purchased @ $0.24 per share
Gerard Vincent David  08/01/16  Common Stock  100,000  Purchased @ $0.24 per share
Newport Coast Securities, Inc.  08/01/16  Common Stock  20,000  Professional Services
CTWC, LLC  08/04/16  Common Stock  1,330,094  Acquisition #3
Wellington Asset Holdings, Inc.  08/04/16  Common Stock  210,000  Acquisition #3
Toby & Kim David  08/05/16  Common Stock  50,000  Purchased @ $0.24 per share
Steven Sadaka  08/23/16  Common Stock  250,000  Purchased @ $0.24 per share
Nancy Burgess & David Gross  08/31/16  Common Stock  250,000  Purchased @ $0.24 per share
Fedelta Capitello, LLC  08/31/16  Common Stock  250,000  Purchased @ $0.24 per share
TPL Investments, LLC  08/31/16  Common Stock  100,000  Purchased @ $0.24 per share
Harry Grossman  08/31/16  Common Stock  8,000  Professional Services
AES Capital Partners  08/31/16  Common Stock  500,000  Purchased @ $0.24 per share
Richard Bindler Revocable Trust  09/13/16  Common Stock  100,000  Purchased @ $0.24 per share
Harry Grossman  09/30/16  Common Stock  8,000  Professional Services
Freedom Investors Corp.  10/01/16  Common Stock  32,600  Professional Services
JMJ Financial  10/24/16  Common Stock  2,685,000  Note Conversion
JMJ Financial  10/24/16  Common Stock  20,000  Exercised Warrants
Steven Sadaka  10/25/16  Common Stock  125,000  Purchased @ $0.20 per share
Mark & Michelle Viner  10/25/16  Common Stock  125,000  Purchased @ $0.20 per share
Audie & Eileen Rolnick  10/31/16  Common Stock  50,000  Purchased @ $0.20 per share
Harry Grossman  10/31/16  Common Stock  8,000  Professional Services
Freedom Investors Corp.  11/01/16  Common Stock  20,000  Professional Services
Joseph A Galbo  11/01/16  Common Stock  12,500  Professional Services
Bruce Greenberg  11/03/16  Common Stock  250,000  Purchased @ $0.20 per share
John Orlando  11/09/16  Common Stock  125,000  Purchased @ $0.20 per share
JMJ Financial  11/15/16  Common Stock  11,043  Exercised Warrants
Elizabeth Jacobs  11/22/16  Common Stock  125,000  Purchased @ $0.20 per share

 

8
 

 

JMJ Financial  11/25/16  Common Stock  215,000  Note Conversion
Harry Grossman  11/30/16  Common Stock  8,000  Professional Services
Joseph A Galbo  12/01/16  Common Stock  12,500  Professional Services
Freedom Investors Corp.  12/01/16  Common Stock  20,000  Professional Services
Steven Sadaka  12/05/16  Common Stock  300,000  Professional Services
Vecchitto FLP Valori, LLC  12/07/16  Common Stock  500,000  Purchased @ $0.20 per share
Steven Sadaka  12/07/16  Common Stock  200,000  Purchased @ $0.20 per share
Miklos Hegyi  12/14/16  Common Stock  50,050  Purchased @ $0.20 per share
Annie Bindler  12/16/16  Common Stock  50,000  Purchased @ $0.20 per share
Zac Bindler  12/16/16  Common Stock  50,000  Purchased @ $0.20 per share
Richard Bindler Revocable Trust  12/16/16  Common Stock  100,000  Purchased @ $0.20 per share
Nadia Marrese  12/21/16  Common Stock  50,000  Purchased @ $0.20 per share
Ken Hickman  12/21/16  Common Stock  2,500  Professional Services
Phillip Barnhart  12/27/16  Common Stock  100,000  Purchased @ $0.20 per share
Michael Geisler  12/27/16  Common Stock  50,000  Purchased @ $0.20 per share
Ken Hickman  12/27/16  Common Stock  2,381  Professional Services
JMJ Financial  12/29/16  Common Stock  (20,000)  Rescinded Common Stock
William Hough  12/30/16  Common Stock  250,000  Purchased @ $0.20 per share
Harry Grossman  12/31/16  Common Stock  8,000  Professional Services
Steven Sadaka  12/31/16  Common Stock  50,000  Professional Services
Joseph A Galbo  01/01/17  Common Stock  12,500  Professional Services
Kel Mar Construction Corp  01/30/17  Common Stock  62,500  Purchased @ $0.20 per share
Gretchen Hickman  01/31/17  Common Stock  25,000  Purchased @ $0.20 per share
Nadia Marrese  01/31/17  Common Stock  25,000  Purchased @ $0.20 per share
Harry Grossman  01/31/17  Common Stock  8,000  Professional Services
Ken Hickman  01/31/17  Common Stock  2,500  Professional Services
Joseph A Galbo  02/01/17  Common Stock  12,500  Professional Services
Lucas Hoppel  02/02/17  Common Stock  150,000  Inducement to secure a debt note
Harry Grossman  02/28/17  Common Stock  8,000  Professional Services
Joseph A Galbo  03/01/17  Common Stock  12,500  Professional Services
David Matthews  03/10/17  Common Stock  (500,000)  Rescinded Employment Stock
Steven Tureff & Donnis Newman  03/20/17  Common Stock  50,000  Purchased @ $0.20 per share
Ken Hickman  03/20/17  Common Stock  3,571  Professional Services
Harry Grossman  03/31/17  Common Stock  8,000  Professional Services
Joseph A Galbo  04/01/17  Common Stock  12,500  Professional Services

 

The securities issued in the above mentioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(2) of that Act and Rules 505 and 506 of Regulation D.

 

9
 

 

Purchases of Equity Securities

 

The Company has never purchased nor does it own any equity securities of any other issuer.

 

ITEM 6. SELECTED FINANCIAL DATA

 

As a smaller reporting company it is not required to provide the information required by this Item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion should be read in conjunction with the Company’s audited financial statements and the notes thereto.

 

Forward-Looking Statements

 

This annual report contains forward-looking statements and information relating to the Company that are based on the beliefs of its management as well as assumptions made by, and information currently available to, its management. When used in this report, the words “believe,” “anticipate,” “expect,” “estimate,” “intend”, “plan” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that the Company desires to effect; Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks”; and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The accompanying information contained in this registration statement, including, without limitation, the information set forth under the heading “Management’s Discussion and Analysis and Plan of Operation -- Risk Factors” identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to the Company are expressly qualified in their entirety by the foregoing cautionary statement.

 

Business Overview

 

Alliance Bioenergy Plus, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels and new technologies sectors. In December 2013, a wholly owned subsidiary of the Company, AMG Renewables, LLC (“AMG Renewables”), acquired the controlling interest (51%) in AMG Energy Group, LLC (“AMG Energy”) and the remaining 49% was then acquired in 2016. AMG Energy Group, owns a fifty percent (50%) interest of Carbolosic, LLC (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal in acquiring the interest in AMG Energy is to develop the CTS technology to a commercial scale and then seek to license the technology to prospective licensees.

 

Plan of Operation

 

The Company is focused on the development and commercialization of the licensed technology it controls through its affiliate Carbolosic, LLC. Through its wholly-owned subsidiary, AMG Energy, the Company owns Ek Laboratories, Inc. and a 50% interest in Carbolosic (which includes certain licensing rights in North America and Africa). The Company has a strategy that includes mergers and acquisitions of existing businesses in the renewable energy and sustainable products industries as well as sublicensing its patented technologies that it controls through a master license with the University of Central Florida under affiliate Carbolosic and start-up activities which are focused on development of an increasing revenue stream, secure market share and enhancement of shareholder value.

 

10
 

 

AMG ENERGY GROUP, LLC

 

AMG Energy, a wholly-owned subsidiary of the Company, was created for the purpose of holding, managing and developing the Company’s renewable energy technology enterprises. These interests comprise ownership of 100% of EK Laboratories, Inc., a Florida corporation (“EK”) formerly known as Central Florida Institute of Science and Technology, Inc. and a fifty percent (50%) interest in Carbolosic, LLC, a Delaware limited liability company (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal is to develop this CTS technology to a commercial scale and then seek to acquire existing bioenergy and ethanol plants to install the CTS technology as well as license the technology to prospective licensees. EK was formed to serve as a pilot plant and research facility to further develop the CTS process, its uses, and develop new technologies.

 

The Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization as well as bio-fuels, renewable energy, chemical manufacturing, engineering and industrial construction industries. As of this date, the Company has not generated any revenues from its business.

 

Capital Formation

 

In February 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of common stock, one (1) three-year Series A warrant convertible to .5 common share at an exercise price of $0.75 and one (1) three-year series B warrant convertible to .5 common share at an exercise price of $1.50. As of the date of filing, the Company has sold 2,460,198 units for aggregate proceeds of $850,209 in 2015 and zero in 2016. The offering is ongoing.

 

In November 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of common stock, one (1) three-year Series C warrant convertible to .5 common share at an exercise price of $0.45 and one (1) three-year series D warrant convertible to .5 common share at an exercise price of $0.65. As of the date of filing, the Company has sold 1,460,897 units for aggregate proceeds of $401,000. The Company sold 960,897 units in 2015 and 500,000 units in 2016. The offering is ongoing.

 

During the fiscal years ended December 31, 2016 and December 31, 2015, principal in the amount of $508,892 was converted to 3,948,460 shares of common stock and a $90,000 note balance converted to 250,000 shares of common stock respectively. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversion, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was greater than the conversion price, and therefore a total value of $491,408 and $0, respectively, was attributed to the beneficial conversion features.

 

In January 2016, the Company commenced a new offering of units valued at $0.24 per share. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. As of the date of filing, the Company has sold 4,535,517 units for aggregate proceeds of $1,068,524. The offering is ongoing.

 

In March 2016, the Company commenced a new offering of units valued at $765,735. Each units consist of three million seven hundred seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000) five-year series F warrants convertible to one (1) share of common stock each at an exercise price of $0.25. As of the date of filing, the Company has sold 2 units for aggregate proceeds of $1,531,470.

 

In July 2016, the Company entered into a series of transactions with certain related parties to acquire the remaining 49% of AMG Energy Group, LLC for an aggregate of 10,240,094 shares of Company common stock

 

In October 2016, the Company commenced a new offering of units valued at $0.20 per share. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. As of the date of filing, the Company has hold 2,362,550 units for aggregate proceeds of $472,510. The offering is ongoing.

 

From January 1, 2016 through the date of filing, the Company has issued 1,982,552 shares of Company common stock for services valued at $677,441.

 

From January 1, 2016 through the date of filing, the Company issued an aggregate of 8,117,668 warrants for services, of which 11,043 have been exercised. At the time of exercise, the fair value was greater than the exercise price, and therefore a total value of $3,313 was attributed to the exercise. Using a Black-Scholes asset pricing model, these warrants were valued at $1,223,738 and carry a derivative feature valued at $794,000. These warrant agreements have terms ranging from three years (3) to five years (5) with exercise prices ranging from the lowest trade price in the prior ten days to exercise to two dollars ($2.00) per share.

 

11
 

 

From January 1, 2016 through the date of filing, the Company issued options to its independent directors to purchase an aggregate of 330,254 shares of common stock for a period of three (3) years at an average exercise price of $0.45. In addition, the Company also approved employee stock options to purchase 2,416,803 shares of common stock at an average exercise price of $0.45 and terms ranging from three (3) to ten (10) years. Using a Black-Scholes asset pricing model, these agreements were valued at $558,720. Furthermore, in March 2017, the Company rescinded 500,000 shares of common stock previously awarded to an employee of the Company and also adjusted the exercise price on all outstanding employee options to $0.16 per share.

 

Going Concern

 

The Company has incurred losses since inception, has a working capital deficiency, and may be unable to raise further equity. At December 31, 2016 the Company had a working capital deficiency of $2,946,647 and had incurred accumulated losses of $25,822,515, of which $18,251,753 is non-cash, since its inception. The Company expects to incur significant additional losses in connection with its continued start-up activities. As a result, the report of the Company’s independent registered public accounting firm on the Company’s financial statements for the period ended December 31, 2016 contains an emphasis of matter paragraph regarding the Company’s ability to continue as a going concern based upon recurring operating losses and its need to obtain additional financing to sustain operations. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses. Furthermore, these financial statements do not include any adjustments related to the recoverability and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.

 

Through its private offerings, the Company raised $1,162,209 for the year ended December 31, 2015 and an additional $3,079,004 in the year ended December 31, 2016. As of the date of filing, the company has received an additional $102,500 through its private offerings.

 

Results of Operations

 

Comparison of the year ended December 31, 2016 to December 31, 2015

 

For the year ended December 31, 2016 the Company’s general and administrative expenses decreased by approximately $1,031,331 to $4,299,501 from $5,330,832 for the year ended December 31, 2015. This decrease is primarily the result of a $1,056,304 reduction in legal, accounting and consulting fees from $2,790,830 to $1,734,527, of which $1,392,614 is non-cash stock compensation. Simultaneously, the Company recognized a $125,962 increase in marketing expenses from $164,977 to $290,939. The Company recognized no revenues from continuing operations during the fiscal year ended December 31, 2016 or December 31, 2015.

 

Interest expense increased in the year ended December 31, 2016 by approximately $1,086,207 to $1,275,601 from $189,394. This increase was primarily the result of derivative costs of approximately $784,815 along with the prepayment of $1,264,000 in short term debt notes which incurred $401,664 in prepayment penalties and the addition of seven notes payable issued in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. These notes accrued an aggregate of $59,126 during the year ended December 31, 2016.

 

For the year ended December 31, 2015 the Company’s equity loss in an unconsolidated affiliate increased by approximately $3,186,465 to $3,366,819 from $180,354 in 2015. A portion of this loss was due to recording 50% of the $331,147 loss incurred by the affiliate, which totals $165,573. In addition, the Company recorded a non-cash impairment of $3,207,701 on the value of the CTS license held by the affiliate. Although the Company feels that the license has increased in value with continued research and development, due to the market price set by the acquisition of the remaining 49% of AMG Energy Group along with no current financial contracts involving the CTS license, the Company believes it is appropriate to value the license at the market value.

 

For the year ended December 31, 2016, the Company recognized a $528,510 non-cash expense resulting from the loss on extinguishment of debt. The Company recognized a $125,861 expense in 2015.

 

12
 

 

For the year ended December 31, 2016, the Company’s discontinued operations showed an increase of $492,215 to $1,160,484 from a $668,269 gain during the year ended December 31, 2015. This gain is primarily the result of the sale of Carbolosic Plant 1 to an unrelated third party, whereas the gain in 2015 was the result of $700,000 in cancelled debt resulting from a settlement in connection with certain ongoing litigation.

 

Research and development (R&D) costs for the year ended December 31, 2016 were $19,510, a decrease of $8,133 from $27,642 for the year ended December 31, 2015. The decrease in R&D expenses is the result of the opening of Ek Laboratories, Inc. in June 2015 and its purchases of gasses and other fine grade materials used in the CTS process.

 

Liquidity and Capital Resources

 

Liquidity

 

As of December 31, 2016 the Company had $49,680 in cash. Total Stockholders’ Equity at December 31, 2016 was $5,341,905. Total debt from continuing operations, including advances, accounts payable and other notes payable at December 31, 2016, together with interest payable thereon, was $3,640,992 a decrease of $1,455,690 from $5,096,682 at December 31, 2015.

 

During the fiscal year ended December 31, 2016, the Company’s continuing operating activities increased $262,160 to $2,241,708 from $1,979,548 at December 31, 2015. This expense can primarily be attributed to $1,036,015 used in payroll, $341,913 in legal, accounting and consulting fees and $126,692 in rent fees.

 

During the fiscal year ended December 31, 2016, the Company’s investing activities used $205,572 in cash. This use can be attributed to $18,037 used to purchase machinery and equipment, $58,476 in capitalized engineering costs and $131,719 advanced to Carbolosic, LLC for operational costs.

 

During the fiscal year ended December 31, 2016, the Company generated an aggregate of $2,438,031 through its financing activities. This increase of $25,137 from the prior year can primarily be attributed to a $1,986,796 increase in the sale of common stock through the Company’s private offerings, while simultaneously repaying $1,149,000 in short-term debt notes and securing $796,000 less in convertible during the year.

 

Capital Resources

 

At this time, the Company has limited liquidity and capital resources. To continue funding the Company’s operations, the company will need to generate revenue and/or will require additional funding for ongoing operations and to finance such projects it may identify. As of the date of filing, the Company has raised $6,901,894 through its private placement offerings, however there is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.

 

The inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement its business plan of operations and jeopardize the viability of the Company. In that case, the Company may need to reevaluate and revise its operations.

 

Critical Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s majority-owned subsidiaries over which the Company exercises control. Intercompany transactions and balances were eliminated in consolidation.

 

13
 

 

Principles of Consolidation

 

The Company’s consolidated financial statements include the accounts of the Company and its subsidiaries, after elimination of intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. The Company’s proportionate share of net income or loss of the entity is recorded in the Consolidated Statements of Earnings.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates presented and reported amounts of revenues and expenses during the reporting periods presented. Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of impairment assessment of identifiable intangible assets and valuation allowance for deferred tax assets. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.

 

Stock Compensation

 

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation” (formerly referred to as SFAS No. 123(R)). Share-based payments to consultants, service providers and other non-employees are accounted for under in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

Accounting for Derivative Instruments

 

The Company issues debentures where the number of shares into which a debenture can be converted is not fixed. For example, when a debenture converts at a discount to market based on the stock price on the date of conversion. In such instances, the embedded conversion option of the convertible debentures is bifurcated from the host contract and recorded at their fair value. In accounting for derivatives, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature. The discount is then amortized over the life of the debenture and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability is charged to additional paid-in capital. For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

 

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer in a development stage that in prior years it had been in the development stage.

 

14
 

 

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company adopted ASU No. 2014-10 effective July 31, 2014.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Seasonality

 

The Company’s operating results are not affected by seasonality.

 

Inflation

 

The Company’s business and operating results are not affected in any material way by inflation.

 

Contractual Obligations

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Set forth below are the audited financial statements for the Company for the years ended December 31, 2016 and December 31, 2015, and the report thereon of Paritz & Co., P.A.

 

15
 

 

Index to Financial Statements Page

 

  Page
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015 F-3
   
Consolidated Statements of Operations for the years ended December 31, 2016 December 31, 2015 F-4
   
Consolidated Statements of Changes in Stockholder’s Equity for the years ended December 31, 2016 and December 31, 2015 F-5
   
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and December 31, 2015 F-6
   
Notes to the Consolidated Financial Statements F-7

 

F-1 
 

 

 

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

 

 

The Board of Directors and Shareholders

Alliance Bioenergy Plus, Inc. and Subsidiaries

West Palm Beach, Florida

 

We have audited the accompanying consolidated balance sheet of Alliance Bioenergy Plus, Inc. and Subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alliance Bioenergy Plus, Inc. and Subsidiaries Inc. as of December 31, 2016 and 2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not generated any revenue, has recurring losses since inception and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

/s/ Paritz & Company, P.A.

 

Hackensack, New Jersey

April 15, 2017

 

F-2 
 

 

Alliance BioEnergy Plus, Inc.

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2016   December 31, 2015 
ASSETS          
Current assets          
Cash and cash equivalents  $49,680   $62,054 
Prepaid expenses   680,813    743,738 
Deferred financing costs   -    54,278 
TOTAL CURRENT ASSETS   730,493    860,070 
           
PROPERTY AND EQUIPMENT, AT COST, NET OF ACCUMULATED DEPRECIATION OF $133,771 AND $59,919 AT DECEMBER 31, 2016 AND DECEMBER 31, 2015, RESPECTIVELY   254,761    310,576 
           
Other assets          
Security deposits   16,305    18,965 
Capitalized fees   260,497    202,021 
Investment in and advances to an unconsolidated affiliate   7,756,989    7,433,024 
TOTAL OTHER ASSETS   8,033,791    7,654,010 
TOTAL ASSETS  $9,019,045   $8,824,656 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued liabilities  $341,688   $387,442 
Payable relating to an acquisition - Related party   -    2,031,258 
Short term note payable – Related party   2,073,126    71,000 
Short-term note payable – Other   96,570    265,000 
Convertible debentures payable – Other, net of discount of $73,334 & $0   88,329    999,000 
Interest payable – Related Party   68,929    9,036 
Interest payable – Other   58,350    83,946 
Derivative liabilities   

914,000

    - 
Current liabilities of discontinued operations   36,148    36,148 
TOTAL CURRENT LIABILITIES   

3,677,140

    3,882,830 
Long term liabilities          
Long term notes payable – Other   -    1,250,000 
TOTAL LONG TERM LIABILITIES   -    1,250,000 
TOTAL LIABILITIES   

3,677,140

    5,132,830 
           
STOCKHOLDER’S EQUITY          
Preferred stock; $0.001 par value; 10,000,000 shares authorized; zero shares issued and outstanding   -    - 
Common stock; $0.001 par value; 500,000,000 shares authorized; 71,707,493 shares issued and outstanding at December 31, 2016 and 41,084,279 shares issued and outstanding at December 31, 2015   71,707    41,084 
Stock Subscription Receivable   (75,000)   (5,000)
Additional paid-in capital   31,167,713    21,160,997 
Accumulated deficit   

(25,822,515

)   (17,052,797)
Total stockholders’ equity   

5,341,905

    4,144,284 
Non-controlling interest   -    (452,458)
TOTAL STOCKHOLDER’S EQUITY   

5,341,905

    3,691,826 
           
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY  $9,019,045   $8,824,656 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-3 
 

 

Alliance BioEnergy Plus, Inc.

CONSOLIDATED STATEMENT OF OPERATIONS

 

   For The Year Ended   For The Year Ended 
   December 31, 2016   December 31, 2015 
         
Revenues  $-   $- 
           
Operating expenses:          
General and administrative   4,299,501    5,330,832 
Total operating expenses   4,299,501    5,330,832 
           
Loss from operations:   (4,299,501)   (5,330,832)
           
Other (income) expense:          
Equity loss in unconsolidated affiliates   159,118    180,354 

Loss on impairment

   3,207,701    - 
Loss on extinguishment of debt   

528,510

    125,861 
Change in fair value of embedded derivative liability   

7,313

      
Interest expense – related party   59,892    3,582 
Interest expense and prepayment penalties – other   

1,215,709

    185,812 
Total other (income) expense   

(5,178,243

)   (495,609)
           
Loss from continuing operations:   

(9,477,744

)   (5,826,441)
           
Discontinued operations:          
Loss from discontinued operations   3,125    31,731 

Gain on disposal of subsidiary

   

(1,163,609

)     
Debt forgiveness   -    (700,000)
Income gain from discontinued operations:   1,160,484   668,269 
           
Net loss:   

(8,317,260

)   (5,158,172)
Net loss attributable to non-controlling interest:   452,458    (313,701)
Net loss attributable to Company:  $

(8,769,718

)  $(4,844,471)
           
Basic and diluted net loss per share:          
Continuing operations   (0.16)   (0.16)
Discontinued operations   0.02    0.02
Net loss per share:  $(0.14)  $(0.14)
           
Weighted average common shares outstanding:          
Basic and Diluted   57,623,600    38,988,918 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-4 
 

 

Alliance BioEnergy Plus, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

   Common Stock   Preferred Stock   Stock Subscription   Additional Paid -in   Accumulated   Non-controlling   Total Stockholder’s 
   Shares   Amount   Shares   Amount   Receivable   Capital   Deficit   Interest   (Deficiency) 
Balance as of January 1, 2015   40,340,738   $40,341    -    -   $(10,000)  $16,374,470   $(12,208,326)  $(138,757)  $4,057,728 
Issuance of common stock for services   1,670,000    1,670    -    -    5,000    848,730    -    -    855,400 
Rescission of common stock   (4,600,000)   (4,600)   -    -    -    4,600    -    -    - 
Issuance of 4,130,000 warrants for services   -    -    -    -    -    2,074,698    -    -    2,074,698 
Rescission of 2,500,000 warrants   -    -    -    -    -    (255,612)   -    -    (255,612)
Issuance of common stock and warrants for cash through PPM   3,421,096    3,421    -    -    -    1,158,788    -    -    1,162,209 
Common stock issued under employee, director plan   500,000    500    -    -    -    239,500    -    -    240,000 
Issuance of 1,967,356 options under employee, director plan   -    -    -    -    -    625,575    -    -    625,575 
Issuance of common stock in connection with conversion of notes payable   250,000    250    -    -    -    89,750    -    -    90,000 
Cancellation of common stock from acquisition (1)   (497,555)   (498)   -    -    -    498    -    -    - 
Expiration of 500,000 options   -    -    -    -    -    -    -    -    - 
Net loss   -    -    -    -    -    -    (4,844,471)   (313,701)   (5,158,172)
Balance as of December 31, 2015   41,084,279   $41,084    -   $-   $(5,000)  $21,160,997   $(17,052,797)  $(452,458)  $3,691,826 
Issuance of common stock for services   1,752,481    1,752    -    -    -    635,964    -    -    637,716 
Issuance of 4,496,648 warrants for services   -    -    -    -    -    1,188,632    -    -    1,188,632 
Issuance of common stock and warrants for cash through PPM   14,671,136    14,672    -    -    (70,000)   3,134,333    -    -    3,079,005 
Issuance of common stock for an acquisition (2)   10,240,094    10,240    -    -    -    3,481,387    -    -    3,491,627 
Issuance of 2,747,057 options under the employee, director plan   -    -    -    -    -    558,720    -    -    558,720 
Issuance of common stock in connection with conversion of notes payable   3,948,460    3,948    -    -    -    996,352    -    -    1,000,300 
Issuance of common stock in connection with warrant conversion   11,043    11    -    -    -    4,802    -    -    4,813 
Disgorgement of short swing stock profits   -    -    -    -    -    6,526    -    -    6,526 
Net gain / (loss)   -    -    -    -    -    -    

(8,769,718

)   452,458    

(8,317,260

)
Balance as of December 31, 2016   71,707,493   $71,707    -    -    (75,000)  $31,167,713   $

(25,822,515

)  $-   $

5,341,905

 

 

(1) Stock issued for rights to two partially-completed television series “World Star” and “Making of a Saint: The Journey to Sainthood”

 

(2) Stock issued in conjunction with the acquisition of the remaining 49% ownership of AMG Energy Group

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-5 
 

 

Alliance BioEnergy Plus, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For The Year Ended   For The Year Ended 
   December 31, 2016   December 31, 2015 
Cash flows from operating activities          
Net loss from continuing operations   

(9,477,744

)   (5,826,441)
Net income (loss) from discontinued operations   1,160,484   668,269 
Net loss  $

(8,317,260

)  $(5,158,172)
Reconciliation of net loss to net cash used in operating activities          
Depreciation and amortization   73,852    233,758 
Amortization of non-cash compensation   584,567    - 
Extinguishment of debt   

528,510

    125,861 
Non-cash interest expense   

783,536

    

(244,000

)

Change in fair value of embedded derivative liability

   

7,313

    - 
Stock based compensation for services   568,799    676,525 
Issuance of warrants for services   585,678    1,669,006 
Stock based compensation awarded under employee, director plan   -    240,000 
Issuance of options awarded under employee, director plan   558,720    625,575 
Equity loss in an unconsolidated affiliates   159,118    180,354 
Impairment of the license   3,207,701    - 
Changes in operating assets and liabilities          
Prepaid expenses   27,351    55,829 
Accrued interest – other   10,891    185,812 
Accounts payable and accrued liabilities   140,000    98,173 
Net cash (used in) operating activities – continuing operations   (2,241,708)   (1,979,548)
Changes in discontinued operations assets and liabilities          
Accounts payable and accrued liabilities   -    (1,656)
Gain on disposal of subsidiary   

(1,163,609

)   

-

 
Legal settlement relating to an acquisition   -    (700,000)
Net cash (used in) operating activities – discontinued operations   (3,125)   (33,387)
Net cash (used in) operating activities   (2,244,833)   (2,012,935)
           
Cash flows from investing activities          
Purchase of property and equipment   (18,037)   (214,225)
Security deposit   2,660    (11,687)
Capitalized fees   (58,476)   (202,021)
Advances to an unconsolidated affiliate   (131,719)   (115,941)
Net cash (used in) investing activities – continuing operations   (205,572)   (543,874)
Net cash (used in) investing activities – discontinued operations   -    - 
Net cash (used in) investing activities   (205,572)   (543,874)
           
Cash flows from financing activities          
Proceeds from short-term note payable – related party   -    10,290 
Proceeds from short-term note payable – other   -    265,000 
Proceeds from warrant exercise   1,500    - 
Proceeds from issuance of common stock   3,079,005    1,162,209 
Proceeds from issuance of convertible debt   500,000    1,296,000 
Repayment of convertible debt   (884,000)   (310,283)
Repayment of short-term note payable – related party   -    (10,290)
Repayment of short-term note payable – other   (265,000)   - 
Payment of accrued interest   -    (32)
Disgorgement of short-swing stock profits   6,526    - 
Net cash provided by financing activities – continuing operations   2,438,031    2,412,894 
Net cash provided by financing activities – discontinued operations   -    - 
Net cash provided by financing activities   

2,438,031

    2,412,894 
           
Net (decrease) in cash and cash equivalents   (12,374)   (143,915)
           
Cash and cash equivalent at beginning of the period   62,054    205,969 
Cash and cash equivalent at end of the period  $49,680   $62,054 
           
Supplemental disclosure of cash flow information          
Cash paid during the period for          
Interest  $512,046   $59,527 
Taxes   -    - 
           
Supplemental schedule of non-cash activities          
Conversion of convertible debenture to common stock  $1,003,613   $90,000 
Common stock issued for future services   68,917    178,875 
Warrants issued for future services   602,954    405,692 
Rescinded warrants   -    (255,612)
Common stock issued for an acquisition   3,491,627    - 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-6 
 

 

Alliance BioEnergy Plus, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION

 

Alliance Bioenergy Plus, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels and new technologies sectors. From inception through December 5, 2014, the Company was known as Alliance Media Group Holdings, Inc. At inception (March 28, 2012), the Company was organized as a vehicle to engage in the commercial production, distribution and exploitation of Motion Pictures and other Entertainment products. However, in December 2013, a wholly owned subsidiary of the Company, AMG Renewables, LLC (“AMG Renewables”), acquired the controlling interest (51%) in AMG Energy Group, LLC (“AMG Energy”), which owns a fifty percent (50%) interest of Carbolosic, LLC (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The Company’s goal in acquiring the interest in AMG Energy was to develop the CTS technology to a commercial scale and then seek to license the technology to prospective licensees. In September 2014, the Company determined to focus all of the Company’s resources and personnel on the Company’s renewable energy holdings and future energy technologies and to divest the Company of its entertainment-related assets and subsidiaries. The Company therefore determined at that time to divest and sell off, close down or discontinue the operations of its entertainment-related subsidiaries. Effective December 5, 2014, amended the Company’s Articles of Incorporation to change the name of the Company to Alliance Bioenergy Plus, Inc., which is more appropriately descriptive of the new business direction of the Company.

 

Commencing in March 2016, the Company commenced action to restructure its energy-related holdings through the following transactions;

 

1) In March 2016, AMG Renewables, a wholly-owned subsidiary of the Company, sold its interest in Carbolosic Plant 1 to Carbolosic Energy 1, LLLP, an unrelated third party, in exchange for satisfaction of the outstanding $1,250,000 loan and $36,488 interest between Carbolosic Plant 1 and Carbolosic Energy 1, LLLP. In connection with the transaction, an amount which the Company had prepaid to Carbolosic Energy 1, LLLP ($122,879) for future marketing and interest was eliminated in the sale.

 

2) In July 2016, the Company determined to restructure its energy holdings under a single wholly-owned subsidiary (AMG Energy) such that AMG Energy would own (i) the Company’s fifty percent (50%) interest of Carbolosic (which includes certain licensing rights in North America and Africa) and (ii) the Company’s 100% interest in EK Laboratories, Inc. At the same time, the Company’s interest in Carbolosic Plant 1 was divested. This restructuring was completed on September 19, 2016 when AMG Renewables merged into AMG Energy. Previously, the Company had completed transactions with certain related parties to acquire the remaining 49% of AMG Energy which was not owned by the Company in exchange for an aggregate of 10,240,094 shares of Company common stock and a restructuring of the balance due under a cash payable to the minority AMG Energy Shareholders.

 

Plan of Operation

 

The Company is now focused on the development and commercialization of the licensed technology it controls through its affiliate Carbolosic, LLC. Through its wholly-owned subsidiary, AMG Energy, the Company owns Ek Laboratories, Inc. and a 50% interest in Carbolosic (which includes certain licensing rights in North America and Africa). The Company has a strategy that includes mergers and acquisitions of existing businesses in the renewable energy and sustainable products industries as well as sub-licensing its patented technologies that it controls through a master license with the University of Central Florida under affiliate Carbolosic and start-up activities which are focused on development of an increasing revenue stream, secure market share and enhancement of shareholder value.

 

NOTE 2 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred losses since inception, has a working capital deficiency of $2,946,647 and may be unable to raise further equity. At December 31, 2016 the Company had incurred accumulated losses of $25,822,515, of which $18,251,753 is non-cash, since its inception. The Company expects to incur significant additional liabilities in connection with its start-up activities. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses. These financial statements do not include any adjustments related to the recoverability and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty. There are no assurances that the Company will continue as a going concern.

 

F-7 
 

 

Management believes that the Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of stock or borrow additional funds. The Company’s inability to obtain additional cash could have a material adverse effect on its financial position, results of operations, and its ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty

 

The Company intends to raise additional capital, sell licenses to its CTS technology and continue constructing its full scale demonstration facility which, once operational, is expected to generate cash flow in amounts sufficient to cover the Company’s operating expenses and debt service.

 

Through its private offerings, the Company raised $1,162,209 for the year ended December 31, 2015 and an additional $3,079,004 in the year ended December 31, 2016.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s majority-owned subsidiaries over which the Company exercises control. Intercompany transactions and balances were eliminated in consolidation.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, after elimination of intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. The Company’s proportionate share of net income or loss of the entity is recorded in the Consolidated Statements of Operations

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates presented and reported amounts of revenues and expenses during the reporting periods presented. Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of impairment assessment of identifiable intangible assets and valuation allowance for deferred tax assets. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates

 

Cash and Cash Equivalents

 

All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents.

 

Stock Compensation

 

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation” (formerly referred to as SFAS No. 123(R)). Share-based payments to consultants, service providers and other non-employees are accounted for in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.

 

F-8 
 

 

Stock-based Compensation Valuation Methodology

 

Stock-based compensation resulting from the issuance of common stock is calculated by reference to the valuation of the stock on the date of issuance, the expense being recognized as the compensation is earned. Stock-based compensation expenses related to employee options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the stock options or warrants granted is estimated at the grant date, using the Black-Scholes option pricing model, and the expense is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes option pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique characteristics of those equity instruments, using the assumptions noted in the table below. The fair value of the common stock is determined by the then-prevailing closing market price. Expected volatility was based on the historical volatility of the Company’s closing day market price per share. The expected term of options and warrants was based upon the life of the option, and the risk-free rate used was based on the U.S. Treasury Daily Yield Curve Rate.

 

The stock compensation issued for services during the year ended December 31, was valued on the date of issuance. The following assumptions were used in calculations of the Black-Scholes option pricing models for warrant-based stock compensation issued in the year ended December 31, 2016:

 

   01/01/16   01/04/16   01/25/16   02/01/16   03/01/16   03/25/16   03/31/16   04/01/16 
Risk-free interest rate   1.76%   1.73%   1.47%   1.38%   1.31%   1.91%   1.21%   1.24%
Expected life   5 years    5 years    5 years    5 years    5 years    10 years    5 years    5 years 
Expected dividends   0%   0%   0%   0%   0%   0%   0%   0%
Expected volatility   175.11%   174.97%   176.42%   175.99%   175.28%   176.15%   175.87%   175.70%
ALLM common stock fair value  $0.30   $0.30   $0.40   $0.37   $0.33   $0.33   $0.30   $0.30 

 

   04/16/16   04/28/16   04/29/16   05/01/16   06/01/16   06/30/16   07/01/16   08/01/16 
Risk-free interest rate   1.22%   1.28%   1.28%   1.28%   1.39%   1.01%   1.00%   1.06%
Expected life   5 years    5 years    5 years    5 years    5 years    5 years    5 years    5 years 
Expected dividends   0%   0%   0%   0%   0%   0%   0%   0%
Expected volatility   174.48%   173.48%   173.51%   173.51%   174.01%   165.31%   165.40%   164.69%
ALLM common stock fair value  $0.28   $0.26   $0.23   $0.23   $0.36   $0.36   $0.39   $0.35 

 

   09/30/16   10/24/16   11/01/16   11/15/16   12/01/16   12/21/16   12/31/16 
Risk-free interest rate   1.14%   1.27%   1.30%   1.68%   1.90%   2.04%   1.93%
Expected life   5 years    5 years    5 years    5 years    5 years    5 years    5 years 
Expected dividends   0%   0%   0%   0%   0%   0%   0%
Expected volatility   156.06%   151.13%   148.28%   147.15%   142.70%   141.28%   140.48%
ALLM common stock fair value  $0.26   $0.26   $0.24   $0.25   $0.22   $0.20   $0.20 

 

Accounting and Reporting of Discontinued Operations

 

As required by the FASB ASC Subtopic 205.20, per ASU 2014-08, Discontinued Operations, a component of an entity or a group of components of an entity, or a business or nonprofit activity can be classified as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs: (i) the criteria in paragraph 205.20.45.1E to be classified as held for sale is met (ii) the component is disposed of by sale, or (iii) the component is disposed of other than by sale in accordance with paragraph 360.10.45.15 (for example, by abandonment or in a distribution to owners in a spinoff). Certain components to be disposed of other than by sale shall continue to be classified as “held and used” until it is disposed of, per the requirements of ASC Subtopic 360.10. Depreciation on these assets ceases upon their classification as “held and used.” The Company adopted ASU No. 2014-08 effective September 1, 2014.

 

F-9 
 

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets, generally 5 to 7 years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

 

Convertible Instruments

 

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

Accounting for Derivative Instruments

 

The Company issues debentures where the number of shares into which a debenture can be converted is not fixed. For example, when a debenture converts at a discount to market based on the stock price on the date of conversion. In such instances, the embedded conversion option of the convertible debentures is bifurcated from the host contract and recorded at their fair value. In accounting for derivatives, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature. The discount is then amortized over the life of the debenture and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability is charged to additional paid-in capital. For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility.

 

Common Stock Purchase Warrants and Other Derivative Financial Instruments

 

The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide it with a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to its own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). The Company classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses the classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

 

Non-controlling interest in consolidated subsidiaries

 

The accompanying consolidated financial statements include the accounts of Alliance BioEnergy Plus, Inc. and those subsidiaries that the Company has the ability to control either through voting rights or means other than voting rights. For these subsidiaries, the Company records 100% of the revenues, expenses, cash flows, assets and liabilities in its consolidated financial statements. For subsidiaries that the Company controls but hold less than 100% ownership, a non-controlling interest is recorded in the consolidated income statement to reflect the non-controlling interest’s share of the net income (loss), and a non-controlling interest is recorded in the consolidated balance sheet to reflect the non-controlling interest’s share of the net assets of the subsidiary.

 

Investments in non-consolidated affiliates

 

Investments in non-consolidated affiliates are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

The Company’s investment in Carbolosic, LLC is accounted for using the equity method of accounting. The Company monitors its investment for impairment at least annually and make appropriate reductions in the carrying value if it determines that an impairment charge is required based on qualitative and quantitative information.

 

F-10 
 

 

Impairment of Long Lived Assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

 

Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

Profit (Loss) per Common Share:

 

Basic profit (loss) per share amounts have been calculated using the weighted-average number of common shares outstanding during each reporting period. Diluted loss per share has been calculated using the weighted-average number of common shares plus the potentially dilutive effect of securities such as outstanding options and warrants. The computation of potential common shares has been performed using the treasury stock method. The warrants and options are antidilutive for all periods presented. When net loss is reported, diluted and basic net loss per share amounts are the same as the impact of potential common shares is antidilutive.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, payables to related parties, and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

F-11 
 

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company used Level 3 inputs for its valuation methodology for the conversion option liability in determining the fair value using a Black-Scholes option-pricing model with the following assumption inputs:

 

   December 31, 2015     December 31, 2016 
Annual dividend yield   -      - 
Expected life (years)   -      4.30 
Risk-free interest rate   -     1.93%
Expected volatility   -     24% - 163%

 

   

Fair Value Measurements at

December 31, 2016

 
    Using Fair Value Hierarchy 
    Level 1   Level 2   Level 3 
Liabilities             
Embedded derivative liabilities – (Warrant)    

-

    

-

    794,000 
Embedded derivative liabilities – (Debenture)    -    

-

    120,000 
Total            914,000 

 

  

Fair Value Measurements at

December 31, 2015

 
   Using Fair Value Hierarchy 
   Level 1   Level 2   Level 3 
Liabilities            
Embedded derivative liabilities   -    

-

    - 
Total           - 

 

For the year ended December 31, 2016, the Company recognized a loss of $7,313 on the change in fair value of derivative liabilities. At December 31, 2016, the Company did not identify any other assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

 

NOTE 4 – INVESTMENT IN UNCONSOLIDATED AFFILIATES

 

On December 26, 2013, AMG Renewables, LLC, a Florida limited liability company (“AMG Renewables”), a wholly-owned subsidiary of the Company, acquired the controlling interest (51%) in AMG Energy Group, LLC a Florida limited liability company (“AMG Energy”) from certain related parties and subsequently acquired the remaining 49% in 2016. AMG Energy owns a fifty percent (50%) interest of Carbolosic, LLC, a Delaware limited liability company (“Carbolosic”), which holds an exclusive worldwide license to the University of Central Florida’s patented technology (U.S. Patent 8,062,428) known as “CTS™”. The CTS technology is a mechanical/chemical, dry process for converting cellulose material into sugar for use in the biofuels industry as well as other fine chemical manufacturing. The results of AMG Renewables and AMG Energy are consolidated in the Company’s financial statements. AMG Energy’s investment in Carbolosic is accounted for using the equity method of accounting.

 

The following is a condensed balance sheet and statement of operations of the unconsolidated affiliate as of December 31, 2016 and 2015.

 

Condensed Balance Sheet of Non-Consolidated Affiliate

 

   December 31, 2016   December 31, 2015 
ASSETS          
Current Assets          
Cash and cash equivalents  $199   $83 
TOTAL ASSETS  $199   $83 
           
LIABILITIES AND STOCKHOLDERS EQUITY          
Current Liabilities          
Accounts payable and accrued liabilities  $406,474   $238,399 
Interest payable   31,309    12,864 
Current notes payable   657,585    539,189 
TOTAL CURRENT LIABILITIES   1,095,369    790,452 
           
STOCKHOLDERS EQUITY          
Accumulated deficit   (1,095,170)   (790,369)
TOTAL EQUITY   (1,095,170)   (790,369)
           
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY  $199   $83 

  

F-12 
 

 

Condensed Statement of Operations of Non-Consolidated Affiliate

 

   For The Year Ended   For The Year Ended 
   December 31, 2016   December 31, 2015 
         
Revenues  $-   $- 
           
Operating Expenses          
Royalties   70,000    47,500 
Legal fees   56,633    107,959 
General and administrative   185,866    207,038 
Total operating expenses   (312,519)   (362,497)
           
Other expenses          
Interest expense   18,627    11,646 
Total other expenses   (18,627)   (11,646)
           
Loss from operations  $(331,147)  $(374,143)

 

NOTE 5 – DEBT

 

Short Term Notes Payable—Related Parties

 

Throughout 2013, the Company issued unsecured short-term notes payable to various related parties, including officers and directors of the Company, with a term of one year, which have since been extended. At December 31, 2016 there was one consolidated note outstanding to Palm Beach Energy Solutions, LLC. The note has an outstanding principal balance of $71,000 and bears interest at a rate of 5% per annum. As of December 31, 2016 and December 31, 2015, the total interest accrued on the note was $12,596 and $9,036 respectively.

 

In July 2016, the Company issued 6 short-term notes payable to related parties in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. These notes have an aggregate value of $2,002,126 and accrue interest at a rate of six percent (6%) per annum. As of December 31, 2016 the total interest accrued on the notes was $56,332. All of the notes are coming due on August 4, 2017.

 

Short Term Notes Payable – Other

 

On July 7, 2015, the Company entered into a six month promissory note with St. George Investments, LLC with a face amount of $265,000 less an original issue discount of $65,000. This note does not accrue interest. In addition, a ten percent broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the company repaid this note in full. The total amount paid was $306,890, which represented a $265,000 principal balance and $41,890 in default interest and early payment penalties.

 

In July 2016, the Company issued a short-term note payable to a third party in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. The note has a principal balance of $96,570 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2016 the total interest accrued on the note was $2,794. The note is coming due on August 4, 2017.

 

Long Term Notes Payable – Other

 

During the year ended December 31, 2014, Carbolosic Plant 1, LLC, a wholly owned subsidiary, entered into an agreement with Carbolosic Energy 1, LLLP to begin receiving long term loans, pursuant to the U.S. EB-5 Immigrant Investor Program, to develop a CTS demonstration facility. These loans were to be issued in multiple advances, each in an amount greater than or equal to $500,000 up to the target loan amount of $33,000,000. The initial term on each of these loans was five (5) years from the date of each advance and bear interest at a rate of 4.31% per annum. The Company could earn a 0.51% rate discount if the first five years of interest due to lender was paid within 15 days of each advance. In addition, these loans could not be prepaid and were secured by all assets of the Company. The Company received two (2) long term notes payable, with a combined principal balance of $1,250,000 in the year ended December 31, 2014. The company had taken advantage of the 0.51% rate discount on one of these notes payable, with a principal amount of $500,000, and issued a $95,000 interest payment to the Lender on December 9, 2014. In January 2015, the Company made a $4,162 interest payment towards the second note. In March 2016, Carbolosic Plant 1 was sold to Carbolosic Energy 1, LLLP, a non-related third party, in exchange for satisfaction of the outstanding $1,250,000 loan and $36,488 interest. In connection with the transaction, an amount which the Company had prepaid to Carbolosic Energy 1, LLLP ($122,879) for future marketing and interest was eliminated in the sale.

 

F-13 
 

 

Convertible Debt

 

On June 30, 2015, the Company entered into a convertible debenture with Iconic Holdings, LLC with a principal balance of $165,000 due on or before June 30, 2016. This note provided for “guaranteed” interest of ten percent (10.0%) of the principal balance outstanding. This note could only be prepaid within the first 180 days along with a prepayment penalty of one hundred ten percent (110%) and increasing ten percent (10%) every sixty (60) days to a maximum of one hundred thirty percent (130%). After 180 days, the note could be converted into the Company’s common stock at a conversion rate equal to sixty percent (60%) of the lowest trading price during the preceding 15 consecutive trading days prior to date of conversion. In addition, in order to obtain this note, the Company issued Iconic Holdings, LLC a five (5) year common stock purchase warrant agreement for up to 50,000 shares with an exercise price of $0.75 per share. These warrants were fully granted and vested at time of issuance and are being amortized over the life of the agreement. In January 2016, Iconic Holdings, LLC converted $95,000 of the principal balance into 891,042 shares of unrestricted common stock and the remaining balance of the note was repaid in full. The total amount paid was $140,950, which represented a $70,000 principal payment and $70,950 in interest and early payment penalties.

 

On July 10, 2015, the Company entered into a convertible debenture with JSJ Investments, Inc with a principal balance of $150,000 due on or before January 10, 2016. The note accrues interest at a rate of twelve percent (12%) per annum and is convertible into the Company’s common stock one hundred eighty (180) days after the maturity date. After the maturity date, the note cannot be repaid without the holder’s consent. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In April 2016, the Company paid the debenture in full with a payment of $239,055, which represented a $150,000 principal payment and $89,055 in interest and penalties.

 

On July 10, 2015 the Company entered into a secured convertible debenture with Group 10 Holdings, LLC with a principal balance of $275,000, less a ten percent (10%) original issue discount and was due on or before July 10, 2016. Group10 Holdings, LLC was granted a security interest in the South African agreement sub-licensed by AMG Energy Group. This note accrued interest at a rate of twelve percent (12%) per annum and was convertible into the Company common stock one hundred eighty (180) days after the issuance date in whole or in part at the option of the holder at a conversion price equal to forty-two cents ($0.42); provided, however, that if the closing price was less than forty cents ($0.40) for any three (3) consecutive trading days, then the conversion price shall adjust to the lowest trading day price during the thirty-five (35) trading days prior, less a forty-five percent (45%) discount. Repayment of the note included a prepayment penalty if the note was paid back within the first one hundred eighty (180) days and could not be repaid after day one hundred eighty (180) without the holders consent. The prepayment penalty if paid back within the first ninety (90) days was equal to one hundred five percent (105%) of the principal balance; paid between day ninety-one (91) and day one hundred twenty (120) the prepayment penalty was equal to one hundred fifteen percent (115%) of the principal balance; paid between day one hundred twenty-one (121) and day one hundred seventy-nine (179) the prepayment penalty increased to one hundred twenty-five percent (125%) of the principal balance. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, Group 10 Holdings, LLC converted $20,000 of its principal balance into 157,418 shares of unrestricted common stock and the Company paid the remaining debenture in full with a payment of $340,468, which represented a $255,000 principal payment and $85,068 in interest and early payment penalties.

 

On July 27, 2015, the Company entered into a convertible debenture with Adar Bays, LLC with a principal balance of $100,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $149,022, which represented a $100,000 principal payment and $49,022 in interest and early payment penalties.

 

On July 27, 2015, the Company entered into a convertible debenture with Union Capital, LLC with a principal balance of $100,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $148,748, which represented a $100,000 principal payment and $48,748 in interest and early payment penalties.

 

F-14 
 

 

On July 27, 2015, the Company entered into a convertible debenture with LG Capital Funding, LLC with a principal balance of $105,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $156,462, which represented a $105,000 principal payment and $51,462 in interest and early payment penalties.

 

On August 10, 2015, the Company entered into a convertible debenture with Vis Vires Group, Inc. with a principal balance of $104,000 due and payable on or before May 4, 2016. The note accrued interest at a rate of eight percent (8.0%) per annum and was convertible into the Company’s common stock, after 180 days, in whole or in part at the option of the holder. The note also carried a prepayment penalty of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note was paid back within the first one hundred eighty (180) days. In January 2016, the Company paid the note in full with a payment of $139,303, which represented a $104,000 principal payment and $35,303 in interest and early payment penalties.

 

On April 25, 2016, the Company entered into a 12 month convertible debenture with JMJ Financial with a principal balance of $555,556. The note carries a 10% one-time interest charge, a 10% original issue discount and a 75% warrant coverage of the amount funded, totaling an aggregate value of $416,666 [$555,556 x 75% = $416,666]. The note may only be paid up to 98% of the balance due within the first 180 days at a 30% premium. After 180 days, the note cannot be repaid without the holders consent. The note is convertible after 180 days at a 25% discount to the lowest trade price in the preceding 10 trading days. Per the warrant coverage feature, the Company issued the investor 1,388,886 warrants with a 5 year term and a cashless exercise price equal to the lesser of $0.30 per share or the lowest trade price in the 10 preceding trading days. The warrant agreement also contains a down-round ratchet provision allowing the holder to increase its warrant count. The number of warrants to issue is calculated by dividing the aggregate value by the lower of $0.30 or the lowest trade price in the 10 preceding trading days. As of December 31, 2016, JMJ Financial has converted $393,892 at $0.135825 per share into 2,900,000 shares of common stock. In addition, JMJ Financial has exercised its warrant agreement ratchet rights, resulting in 3,067,668 [$416,666 / $0.135825 = 3,067,668] warrants outstanding. As of December 31, 2016, the holder had exercised warrants to purchase 11,043 of Company common stock. Using a Black-Scholes Floating Strike Lookback Call Option model, these warrants were valued at $580,000 along with a derivative liability of $214,000 at December 31, 2016.

 

Derivative Liabilities

 

The embedded conversion features of the above convertible notes payable and warrants contain discounted conversion prices and ratchet provisions and should be recognized as derivative instruments. Such embedded conversion features should be bifurcated and accounted for at fair value. As of the year ended December 31, 2016 and December 31, 2015, the Company had a derivative liability balance of $914,000 and $0, respectively. The Company uses the Black Scholes Model to calculate derivate liability.

 

Fair Value of Embedded Derivative Liabilities:
      
December 31, 2014  $- 
      
Addition   - 
Converted   -
Change in Fair Market Value   - 

As of December 31, 2015

  $- 
      
Addition   

1,275,547

 

Converted

   (494,721)
Changes in fair value of derivative liabilities   

7,313

 
As of December 31, 2016  $

914,000

 

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

The total number of shares of capital stock, which the Company has authority to issue, is five hundred ten million (510,000,000), five hundred million (500,000,000) of which are designated as common stock at $0.001 par value (the “Common Stock”) and ten million (10,000,000) of which are designated as preferred stock par value $0.001 (the “Preferred Stock”). As of December 31, 2016, the Company had 71,707,493 shares of Common Stock issued and outstanding and no shares of Preferred Stock were issued. Holders of shares of Common stock shall be entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The Common Stock does not have cumulative voting rights. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend. The Company has yet to designate any rights, preferences and privileges for any of its authorized Preferred Stock.

 

F-15 
 

 

In February 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of Common Stock, one (1) three-year Series A Warrant convertible to .5 Common Share at an exercise price of $0.75 and one (1) three-year series B Warrant convertible to .5 Common Share at an exercise price of $1.50. As of December 31, 2015, the Company has sold 2,460,198 units for aggregate proceeds of $850,209. Zero units were sold in 2016. The offering is ongoing.

 

In November 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of Common Stock, one (1) three-year Series C Warrant convertible to .5 Common Share at an exercise price of $0.45 and one (1) three-year series D Warrant convertible to .5 Common Share at an exercise price of $0.65. The Company sold 960,897 units for aggregate proceeds of $312,000 and 500,000 units for aggregate proceeds of $89,000 in the years ended December 31, 2015 and December 31, 2016 respectively. The offering is ongoing.

 

In January 2016, the Company commenced a new offering of units valued at $0.24 per unit. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. As of December 31, 2016, the Company has sold 4,535,517 units for aggregate proceeds of $1,068,524. The offering is ongoing.

 

In March 2016, the Company commenced a new offering of units valued at $765,735. Each unit consists of three million seven hundred seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000) five-year series F warrants convertible to one (1) share of common stock each at an exercise price of $0.25. As of December 31, 2016, the Company has sold 2 units for aggregate proceeds of $1,531,470. The offering is ongoing.

 

In April 2016, the Company entered into a 12 month convertible debenture with JMJ Financial. To obtain the note, the Company issued the holder 1,388,886 warrants with a 5 year term and a cashless exercise price equal to the lesser of $0.30 per share or the lowest trade price in the 10 preceding trading days. In the year ending December 31, 2016, JMJ Financial has exercised its warrant agreement ratchet rights, thus rescinding 1,388,886 warrants and reissuing 3,067,668 warrants. SEE NOTE 5. As of December 31, 2016, the holder had exercised warrants to purchase 11,043 shares of Company common stock.

 

In July 2016, the Company entered into a series of transactions with certain related parties to acquire the remaining 49% of AMG Energy Group, LLC for an aggregate of 10,240,094 shares of Company common stock

 

In October 2016, the Company commenced a new offering of units valued at $0.20 per share. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. As of December 31, 2016, the Company has hold 2,200,050 units for aggregate proceeds of $390,010. The offering is ongoing.

 

In the year ended December 31, 2016, the Company issued an aggregate of 1,752,481 shares of its common stock for services valued at $637,716.

 

In the year ended December 31, 2016, the Company issued an aggregate of 4,800,000 warrants for services. Using a Black-Scholes asset pricing model, these warrants were valued at $1,188,632. These warrant agreements have terms ranging from three years (3) to five years (5) with exercise prices ranging from forty-five cents ($0.45) to two dollars ($2.00) per share.

 

In the year ended December 31, 2016, the Company issued options to its independent directors to purchase an aggregate of 330,254 shares of common stock for a period of three (3) years at average exercise price of $0.45. In addition, the Company also approved employee stock options to purchase 2,416,803 shares of common stock at an average exercise price of $0.45 and terms ranging from three (3) to ten (10) years. Using a Black-Scholes asset pricing model, these agreements were valued at $558,720.

 

During the fiscal years ended December 31, 2016 and December 31, 2015, principal in the amount of $508,892 was converted to 3,948,460 shares of common stock and a $90,000 note balance converted to 250,000 shares of common stock respectively. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversion, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was greater than the conversion price, and therefore a total value of $411,192 and $218,301, respectively, was attributed to the beneficial conversion features.

 

F-16 
 

 

In the year ended December 31, 2016, the Company received $6,526 in disgorgement from certain shareholders and officers.

 

NOTE 7 – SEGMENT INFORMATION

 

The Company is comprised of three segments. Alliance BioEnergy Plus, Inc. is the parent corporation. AMG Energy Group is a wholly owned subsidiary with the rights to the CTS license. EK Laboratories is wholly owned subsidiary of AMG Energy Group and is responsible for the further research and development of the CTS technology.

 

   December 31, 
   2016   2015 
Revenue:          
Alliance BioEnergy Plus, Inc.  $-   $- 
AMG Energy Group, LLC   -    - 

EK Laboratories, Inc.

   -    - 
Total Revenue   -    - 
Loss From Continuing Operations          
Alliance BioEnergy Plus, Inc.  $

5,360,542

    5,185,672 
AMG Energy Group, LLC   3,589,912    221,127 

EK Laboratories, Inc.

   527,290    419,642 

Total Loss From Continuing Operations

   

9,477,744

    5,826,441 
Total Assets:          
Alliance BioEnergy Plus, Inc.  $738,904    859,364 
AMG Energy Group, LLC   7,757,077    7,444,581 

EK Laboratories, Inc.

   523,064    520,711 
Total Assets   9,019,045    8,824,656 

 

NOTE 8 – INCOME TAXES

 

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended December 31, 2016 and 2015 to the Company’s effective tax rate is as follows:

 

   Years Ended 
   December 31, 2016   December 31, 2015 
Statutory federal income tax rate   -34%   -34%
State income tax, net of federal benefits   -6%   -6%
Valuation Allowance   40%   40%
Income tax provision (benefit)   0%   0%

 

The benefit for income tax is summarized as follows:

 

   Years Ended 
   December 31, 2016   December 31, 2015 
Federal          
Current  $-   $- 
Deferred   

(2,981,704

)   (1,647,120)
State          
Current   -    - 
Deferred   

(526,183

)   (290,668)
Change in valuation allowance   

3,507,887

    1,937,788 
Income tax provision (benefit)  $-   $- 

 

F-17 
 

 

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2016 and 2015 are as follows:

 

   Years Ended 
   December 31, 2016   December 31, 2015 
Deferred tax asset          
Net operating loss carryovers  $

10,329,006

   $6,821,119 
Valuation Allowance   

(10,329,006

)   (6,821,119)
Deferred tax asset, net of allowance  $-   $- 

 

As of December 31, 2016 and 2015, the Company had $25,822,515 and $17,052,797 of Federal net operating loss carryovers (“NOLs”) which begin to expire in 2033.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

The Company files U.S. Federal and Florida tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2012. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business.

 

Leases

 

In August 2015, the Company renewed its lease for a period of thirty-six (36) months from August 5, 2015 through July 31, 2018. Annual rent commenced at approximately $48,925 per annum and increases on a year-to-year basis by three percent (3%) over the Base Year. In addition, the Company is obligated to pay an amount equal to 3.76% of the operating expenses of the building together with sales tax on all amounts.

 

EK Laboratories leases office and warehouse space in Longwood, FL, which serves as the Company’s research and demonstration facility. The lease period is for thirty-six (36) months from February 1, 2015 through January 31, 2018. Annual rent commences at approximately $70,620 per annum and increases on a year-to-year basis by five percent (5%) over the prior year.

 

Rent expense for the year ended December 31, 2016 and December 31, 2015 was $126,692 and $122,165 respectively.

 

As of December 31, 2016, the total future minimum lease payments in respect of leased premises are as follows:

 

YEAR ENDED  MINIMUM DUE 
2017   128,508 
2018   38,295 
2019   - 
      
TOTAL  $275,327 

 

F-18 
 

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

Related Transactions

 

1) Mark W. Koch, Daniel de Liege and Johan Sturm are principals of AMG Energy Solutions, Inc, which owns 43% of AMG Energy Group, LLC. The company owns the remaining 51% of AMG Energy Group, LLC (see NOTE 4, above). Mark W. Koch and Johan Sturm are greater than 5% shareholders in the Company.

 

2) Short-term notes payable and convertible notes issued to related parties are described in NOTE 5.

 

3) In January 2015, the Company entered into a consulting agreement with a company owned by Mark W. Koch named Prelude Motorsports, Inc, which calls for semi-monthly payments of $10,000. Under the terms of the consulting agreement, the consultant will review and provide input on a variety of areas including corporate structure, marketing materials, website and promotional pieces; provide introductions to various organizations and individuals who might support the Company’s business development efforts. This agreement was cancelled on March 31, 2016.

 

4) On April 16, 2016, the Company entered into a 45 month consulting agreement with a company owned by Mark W. Koch named CK Energy, which calls for semi-monthly payment of $9,860 through September 2016. The agreement also provides the consultant with 500,000 warrants exercisable at $0.50, 1,000,000 warrants exercisable at $0.75 and 1,000,000 warrants exercisable at $1.00 all with a five year term. Using a Black-Scholes asset pricing model, these warrants have been valued at $643,245 and are being amortized over the life of the agreement. Under the terms of the consulting agreement, the consultant will review and provide input on a variety of areas including corporate structure, marketing materials, website and promotional pieces; provide introductions to various organizations and individuals who might support the Company’s business development efforts.

 

5) On July 21, 2016, the Company entered into a series of transactions with certain related parties to acquire the remaining 49% of AMG Energy Group, LLC for an aggregate of 10,240,094 shares of Company common stock and a restructuring of the balance due under the original cash payable. The Company expects these transactions to be completed in the near future upon satisfaction of certain pre-closing conditions.

 

The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.

 

NOTE 11 – DISCONTINUED OPERATIONS

 

On September 1, 2014, the Company determined the need to focus its resources and personnel on the Company’s renewable energy holdings and future energy technologies and to divest the company of its entertainment-related assets and subsidiaries. The principal reasons for such action is the expense, liability and losses that have been generated by the entertainment-related assets and to provide a clear focus and direction to the Company moving forward. Specifically, the Board approved the divesting, selling off, closing down or discontinuing of the operations of its entertainment-related subsidiaries, including but not limited to Prelude Pictures Entertainment, LLC, AMG Live, LLC, AMG Restaurant Operations, LLC (including The New York Sandwich Co.), AMG Music, LLC, AMG Releasing, LLC and AMG Television, LLC.

 

In March 2016, AMG Renewables, a wholly-owned subsidiary of the Company, sold its interest in Carbolosic Plant 1 to Carbolosic Energy 1, LLLP, an unrelated third party, in exchange for satisfaction of the outstanding $1,250,000 loan and $36,488 interest between Carbolosic Plant 1 and Carbolosic Energy 1, LLLP. In connection with the transaction, an amount which the Company had prepaid to Carbolosic Energy 1, LLLP ($122,879) for future marketing and interest was eliminated in the sale.

 

Below is a reconciliation of the total assets and liabilities of the discontinued operations, which are presented separately on the balance sheet.

 

   December 31, 2016   December 31, 2015 
         
Carrying amounts of major classes of assets included as part of discontinued operations          
Prepaid expenses   -    - 
Total assets of the discontinued operation  $-   $- 
           
Carrying amounts of major classes of liabilities included as part of discontinued operations          
Accounts payable and accrued liabilities  $36,148   $36,148 
Total liabilities of the discontinued operation  $36,148   $36,148 

 

F-19 
 

 

Below is a reconciliation of the net loss of the discontinued operations, which are presented separately on the statement of operations.

 

   December 31, 
   2016   2015 
Major line items constituting pretax profit (loss) of discontinued operations          
Revenue  $-   $- 
Gain on disposal of subsidiary   

1,163,609

    

-

 
Selling, general and administrative   (3,125)   (31,731)
Debt forgiveness from legal settlement   -    700,000 
Gain from discontinued operations  $1,160,484  $668,269 

 

NOTE 12 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were available to be issued. Based on this evaluation, the Company has identified the following subsequent events:

 

From December 31, 2016 through the date of filing, the Company sold 162,500 units for $32,500 in connection with its 6th round offering.

 

From December 31, 2016 through the date of filing, the Company issued 80,071 shares of common stock for services valued at $12,725.

 

In January 2017, 250,000 warrants issued for services vested. Using a Black-Scholes asset pricing model, these warrants were valued at $35,106.

 

In January 2017, the Company received $70,000 of its stock subscription receivable.

 

In January 2017, the Company secured a $20,000 short-term bridge loan from a shareholder of the Company. This note did not bear interest and was repaid in February 2017.

 

In January 2017, the Company entered into a convertible debenture with Power Up Lending Group, Ltd. with a principal balance of $153,000 due and payable on or before October 29, 2017. The note accrues interest at a rate of twelve percent (12.0%) per annum and is convertible into the Company’s common stock at a 39% discount, after 180 days, in whole or in part at the option of the holder. The note also carried a prepayment penalty, adjusting every 30 days to a maximum of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note is paid back within the first one hundred eighty (180) days.

 

In February 2017, the Company entered into a twelve month promissory note with an officer of the Company with a principal amount of $20,000 and bearing 5% interest per annum. The note was repaid in February 2017.

 

In February 2017, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $165,000 due and payable on October 2, 2017. The note carries an 8% one-time interest charge, a $15,000 original issue discount and a 35% conversion discount to the lowest trade price in the prior 25 trading days. In addition, the Company provided 150,000 inducement shares to secure the note, and may have to provide additional shares on the note’s 6 month anniversary if the Company’s share price declines. The note can be repaid, without prepayment penalties, within the first 90 days. Thereafter, the note will incur a one hundred twenty percent (120%) prepayment penalty of the then outstanding principal and interest due.

 

In February 2017, the Company formed Alliance Bio-Products, Inc., a Florida corporation (“ABIOP”), for the purpose of acquiring and operating a plant for the installation of the Company’s patented CTS process. The Company intends to raise money into ABIOP for this purpose.

 

In March 2017, the Company rescinded 500,000 shares of common stock previously issued under the Company’s 2012 Employee, Director Stock Plan.

 

F-20 
 

 

ITEM 9. – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. – CONTROLS AND PROCEDURES

 

(a) Disclosure Controls and Procedures

 

The Company is required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its chief executive officer (also its principal executive officer) and its chief financial officer (also its principal financial and accounting officer) to allow for timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s President (“President”), the Company’s principal executive officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation the Company’s CEO, President and CFO concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2016 to a reasonable assurance level to enable the Company to record, process, summarize and report information required under the Securities and Exchange Commission’s rules in a timely fashion. This conclusion resulted from the lack of separation of duties within the Company.

 

(b) Management’s Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, 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 of America and includes those policies and procedures that:

 

  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
     
  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
     
  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

16
 

 

As of December 31, 2016, management assessed the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013) and SEC guidance on conducting such assessments. Based on that evaluation, the Company concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of its internal controls over financial reporting that adversely affected its internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board was (a) the lack of a functioning audit committee, (b) there are insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements, (c) there is a lack of expertise with US generally accepted accounting principles and SEC rules and regulations for review of critical accounting areas and disclosures and material non-standard transactions and (d) lack of effective oversight during the financial close process resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. The aforementioned material weaknesses were identified by the Company’s management in connection with the review of its financial statements for the year ended December 31, 2016.

 

Management believes that the material weakness set forth above did not have an effect on its financial results. However, management believes that the lack of a functioning audit committee, coupled with not having individuals on staff or retainer with a thorough knowledge of US GAAP and SEC rules and regulations and lack of effective oversight on the financial close process results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in its financial statements in future periods.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by its registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Remediation Plan

 

Management is sensitive to the issues presented and intends to take appropriate action when the Company’s financial resources permit. Management intends to hire additional support staff when its financial resources permit and it will continue to review and make necessary changes to the overall design of its internal control environment.

 

(c) Reclassification of prior Period Financial Statements

 

Certain items previously reported have been reclassified to conform with the current year’s presentation.

 

(d) Changes in Internal Control over Financial Reporting

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. – OTHER INFORMATION

 

None

 

17
 

 

PART III

 

ITEM 10. – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors, Executive Officers and Significant Employees

 

The following table sets forth information with respect to the Company’s directors and executive officers. Other than these persons, there are no significant employees.

 

Name    Age   Position and Offices 
Daniel de Liege   50   Chief Executive Officer, President and Director
Charles F. Sills   72   Director
George D. Bolton   67   Director
Troy Lorenz   54   Director
Benjamin Slager &