Delaware
|
33-0754902
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
7386 Pershing Ave., University City, Missouri
|
63130
|
|
(Address of principal executive offices)
|
(Zip Code)
|
PART I
|
||
PAGE
|
||
ITEM 1
|
Business
|
3
|
ITEM 1A
|
Risk Factors
|
11
|
ITEM 1B
|
Unresolved Staff Comments
|
18
|
ITEM 2
|
Properties
|
18
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ITEM 3
|
Legal Proceedings
|
18
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ITEM 4
|
Mine Safety Disclosures
|
18
|
PART II
|
||
ITEM 5
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
18
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ITEM 6
|
Selected Financial Data
|
19
|
ITEM 7
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
19
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ITEM 7A
|
Quantitative and Qualitative Disclosures About Market Risk
|
25
|
ITEM 8
|
Financial Statements and Supplemental Data
|
26
|
ITEM 9
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
44
|
ITEM 9A
|
Controls and Procedures
|
44
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ITEM 9B
|
Other Information
|
45
|
PART III
|
||
ITEM 10
|
Directors, Executive Officers and Corporate Governance
|
45
|
ITEM 11
|
Executive Compensation
|
47
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ITEM 12
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
51
|
ITEM 13
|
Certain Relationships and Related Transactions and Director Independence
|
52
|
ITEM 14
|
Principal Accountant Fees and Services
|
53
|
PART IV.
|
||
ITEM 15
|
Exhibits and Financial Statement Schedules
|
53
|
Signatures
|
54
|
|
Index to Exhibits
|
55 |
·
|
our ability to raise additional capital on favorable terms or identify another source of outside liquidity,
|
·
|
our ability to continue operating and to implement our business plan,
|
·
|
the commercial viability of our technologies,
|
·
|
our ability to maintain and enforce our exclusive rights to our technologies,
|
·
|
the demand for and production costs of various energy products that could be made from our biomass,
|
·
|
competition from other alternative energy technologies, and
|
·
|
other risks and uncertainties detailed from time to time in our filings with the SEC.
|
·
|
construct and operate a commercial plant that: (i) processes MSW into cellulosic biomass for conversion into energy or chemical products and (ii) separates recyclables (metals, plastics, glass) for single-stream recycling;
|
·
|
identify and partner with landfill owners, waste haulers and municipalities to identify locations suitable for our technology; and
|
·
|
pursue additional opportunities to implement our technology in commercial settings at transfer stations and landfills in our licensed territories.
|
·
|
Municipal Solid Waste Landfills (“MSWLFs”) - includes municipal solid waste, commercial waste, industrial waste, construction and demolition debris, and bioreactors, and
|
·
|
Mass Burn/Incineration Plants
|
·
|
Dry Scrubbers – these "wash" the air emissions from the WTE process (called the gas stream) and remove any acidic gases by passing the gas stream through a liquid.
|
·
|
Electrostatic Precipitators (ESP) – these use high voltage electricity to remove up to 98% of all particles remaining in the gas stream after passing through the scrubbers, including any heavy metal particles.
|
·
|
Fabric Filters (baghouses) – these consist of a series of nearly two thousand fabric bags made of heat-resistant material which filter remaining particles from the gas stream. This includes any large concentrations of condensed toxic organic compounds (such as dioxins) and heavy metal compounds.
|
·
|
The Clean Air Act, as well as state laws and regulations impacting air emissions, including State Implementation Plans related to existing and new National Ambient Air Quality Standards for ozone and particulate matter. Owners and/or operators of air emission sources are responsible for obtaining permits and for annual compliance and reporting.
|
·
|
The Clean Water Act which requires permits for facilities that discharge wastewaters into the environment.
|
·
|
The Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, which requires certain solid wastes, including hazardous wastes, to be managed pursuant to a comprehensive regulatory regime.
|
·
|
The National Environmental Policy Act, which requires federal agencies to consider potential environmental impacts in their decisions, including siting approvals.
|
·
|
Cellulosic biomass, a decontaminated, homogeneous feedstock that we expect will represent approximately 50 to 60 percent of the incoming MSW and will be suitable for conversion to multiple energy or chemical products, and
|
·
|
Separated recyclables (steel cans and other ferrous materials, aluminum cans, plastics, and glass), which we expect will represent about 25 percent of the MSW input and are sorted and can be sold to recyclers.
|
·
|
the relationship between agitation of the waste material, moisture, and the temperature and pressure of steam in the vessel uses less energy while obtaining a cleaner biomass resource;
|
·
|
the method of introduction of steam into the autoclave vessel, the pressure range, along with the method of full depressurization, and treatment of the steam being vented from the process to prevent air pollution make our process more environmentally friendly than any other means to handle MSW;
|
·
|
the method of mixing the heat and steam with the waste uniformly throughout the vessel creates a homogenous feedstock for fuel production; and
|
·
|
the direct and critical correlation between the length and diameter of the vessel, internal flighting and the total tonnage of waste to be processed for proper mixing and product yield.
|
·
|
obtain additional debt or equity financing,
|
·
|
secure significant government grants, and/or
|
·
|
enter into a strategic alliance with a larger energy or chemical company to provide funding.
|
·
|
we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume; and
|
·
|
stock analysts, stock brokers and institutional investors may be risk-averse and be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.
|
·
|
significant sales of our common stock or other securities in the open market;
|
·
|
speculation in the press or investment community;
|
·
|
actual or anticipated variations in quarterly operating results;
|
·
|
changes in earnings estimates;
|
·
|
publication (or lack of publication) of research reports about us;
|
·
|
increases in market interest rates, which may increase our cost of capital;
|
·
|
changes in applicable laws or regulations, court rulings and other legal actions;
|
·
|
changes in market valuations of similar companies;
|
·
|
additions or departures of key personnel;
|
·
|
actions by our stockholders; and
|
·
|
general market and economic conditions.
|
·
|
control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
|
·
|
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
|
·
|
“boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;
|
·
|
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
|
·
|
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.
|
·
|
exercising voting, redemption and conversion rights to the detriment of the holders of common stock;
|
·
|
receiving preferences over the holders of common stock regarding a surplus of funds in the event of our dissolution or liquidation;
|
·
|
delaying, deferring or preventing a change in control of our company; and
|
·
|
discouraging bids for our common stock.
|
Price Range of Common Stock
|
||||||||
Year Ended December 31, 2013
|
||||||||
First Quarter
|
$ | 0.04 | $ | 0.01 | ||||
Second Quarter
|
$ | 0.04 | $ | 0.02 | ||||
Third Quarter
|
$ | 0.04 | $ | 0.02 | ||||
Fourth Quarter
|
$ | 0.03 | $ | 0.01 | ||||
Year Ended December 31, 2014
|
||||||||
First Quarter
|
$ | 0.04 | $ | 0.01 | ||||
Second Quarter
|
$ | 0.04 | $ | 0.02 | ||||
Third Quarter
|
$ | 0.03 | $ | 0.01 | ||||
Fourth Quarter
|
$ | 0.03 | $ | 0.01 | ||||
Year Ended December 31, 2015
|
||||||||
First Quarter
|
$ | 0.03 | $ | 0.01 | ||||
Second Quarter
|
$ | 0.03 | $ | 0.02 | ||||
Third Quarter
|
$ | 0.04 | $ | 0.02 | ||||
Fourth Quarter
|
$ | 0.04 | $ | 0.01 |
Years ended December 31, | ||||||||||||||||
2015
|
2014
|
Change
|
% Change
|
|||||||||||||
Costs and expenses:
|
||||||||||||||||
General and administrative
|
$ | 363,933 | $ | 425,842 | $ | (61,909 | ) | -15 | % | |||||||
Professional fees
|
81,107 | 92,661 | (11,554 | ) | -12 | % | ||||||||||
445,040 | 518,503 | (73,463 | ) | |||||||||||||
Other expense (income):
|
||||||||||||||||
Interest
|
206,728 | 196,432 | 10,296 | 5 | % | |||||||||||
Interest income, net of accrued interest written-off
|
(1,672 | ) | (3,076 | ) | 1,404 | -46 | % | |||||||||
Net loss applicable to common stockholders
|
$ | 650,096 | $ | 711,859 | $ | (61,763 | ) | -9 | % |
Years ended December 31,
|
||||||||||||||||
2014
|
2013
|
Change
|
% Change
|
|||||||||||||
Costs and expenses:
|
||||||||||||||||
General and administrative
|
$ | 425,842 | $ | 385,719 | $ | 40,123 | 10 | % | ||||||||
Professional fees
|
92,661 | 100,191 | (7,530 | ) | -8 | % | ||||||||||
518,503 | 485,910 | 32,593 | ||||||||||||||
Other expense (income):
|
||||||||||||||||
Interest
|
196,432 | 178,872 | 17,560 | 10 | % | |||||||||||
Interest income, net of accrued interest written-off
|
(3,076 | ) | (8,098 | ) | 5,022 | -62 | % | |||||||||
Net loss applicable to common stockholders
|
$ | 711,859 | $ | 656,684 | $ | 55,175 | 8 | % |
Offering
|
Note Interest
Rate
|
Note Conversion Price
|
Warrant Exercise Price
|
Term
|
Closed or
Open
|
|||||||||
2008 Offering
|
6.0 | % | $ | 0.25 | $ | 0.45 |
One-year
|
Closed
|
||||||
2009 Offering
|
6.0 | % | $ | 0.08 | $ | 0.30 |
One-year
|
Closed
|
||||||
6/10 Offering
|
12.0 | % | $ | 0.08 | $ | 0.30 |
One-year
|
Closed
|
||||||
11/10 Offering
|
6.0 | % | $ | 0.06 | $ | 0.30 |
One-year
|
Closed
|
||||||
5/12 Offering
|
6.0 | % | $ | 0.10 | $ | 0.35 |
18 months
|
Closed
|
||||||
2/14 Offering
|
6.0 | % | $ | 0.10 | n/a |
18 months
|
Closed
|
|||||||
2015 Offering
|
6.0 | % | $ | 0.10 | $ | 0.15 |
18 months
|
Open
|
Exercise
|
As of December 31,
|
|||||||||||||||
Warrants issued to:
|
Price
|
2015
|
2014
|
2013
|
||||||||||||
Noteholders, 11/10 Offering
|
$ | 0.30 | 842,221 | 798,649 | 1,628,126 | |||||||||||
Noteholders, 5/12 Offering (c)
|
$ | 0.35 | - | 571,428 | 1,667,170 | |||||||||||
Noteholder in 2015 Offering
|
$ | 0.15 | 2,550,000 | - | - | |||||||||||
Investors in Subscription Agreements (a)
|
$ | 0.15 | 16,605,000 | 13,605,000 | 6,180,000 | |||||||||||
WL Meyer Legacy Trust
|
$ | 0.05 | 2,300,000 | 2,300,000 | 2,150,000 | |||||||||||
WL Meyer Legacy Trust
|
$ | 0.10 | 150,000 | - | - | |||||||||||
Vertex Energy, Inc. (b)
|
$ | 0.11 | - | - | 1,800,000 | |||||||||||
Vertex Energy, Inc. (b)
|
$ | 0.10 | - | - | 500,000 | |||||||||||
22,447,221 | 17,275,077 | 13,925,296 | ||||||||||||||
(a) Warrants issued to investors under these Subscription Agreements can be exercised anytime within three years from date of Agreement. These warrants currently expire at various dates from August 2016 through May 2018.
|
||||||||||||||||
(b) These warrants expired on October 22, 2014.
|
||||||||||||||||
(c) The last of these warrants expired on July 5, 2015.
|
For the Years Ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net cash used by operating activities
|
$ | (165,301 | ) | $ | (350,202 | ) | $ | (462,947 | ) | |||
Net cash used by investing activities
|
- | - | - | |||||||||
Net cash provided by financing activities
|
168,224 | 349,961 | 405,169 |
Payments due by Period
|
||||||||||||||||||||
Total
|
Less than 1 year
|
1 to 3 years
|
4 to 5 years
|
More than 5 years
|
||||||||||||||||
Convertible Notes (1)
|
$ | 3,561,000 | $ | 3,475,000 | $ | 86,000 | $ | - | $ | - | ||||||||||
WL Meyer Legacy Trust Note (2)
|
115,000 | 115,000 | - | - | - | |||||||||||||||
Operating Lease (3)
|
22,000 | 22,000 | - | - | - | |||||||||||||||
Total contractual obligations
|
$ | 3,698,000 | $ | 3,612,000 | $ | 86,000 | $ | - | $ | - | ||||||||||
(1) Amount represents value of principal amount of notes and estimates for interest. These notes are with various individuals,
|
||||||||||||||||||||
carry one-year or 18-month terms, and are convertible into shares of Common Stock at the noteholders option. As of
|
||||||||||||||||||||
December 31, 2015, approximately $3.3 million of these notes matured (including interest). We will work with the noteholders
|
||||||||||||||||||||
to refinance their notes, convert their notes into shares of Common Stock, or repay the notes.
|
||||||||||||||||||||
(2) Principal and interest of note, secured by a security interest in the PSC Patent, and is due September 17, 2016.
|
||||||||||||||||||||
(3) The lease for our office space has expired and can be extended for two year periods at expiring terms and conditions.
|
·
|
a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit;
|
·
|
liquidity or market risk support to such entity for such assets; or
|
·
|
an obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to, us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging, or research and development services with us.
|
·
|
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
|
·
|
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets, or financial instruments for which significant inputs are observable, either directly or indirectly; and
|
·
|
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
|
CLEANTECH BIOFUELS, INC.
|
||||||||
(formerly Alternative Ethanol Technologies, Inc.)
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,085 | $ | 162 | ||||
Prepaids and other current assets
|
38,666 | 38,390 | ||||||
41,751 | 38,552 | |||||||
Property and equipment, net
|
- | - | ||||||
Non-Current Assets:
|
||||||||
Technology license
|
1,569,250 | 1,569,250 | ||||||
Patents
|
600,000 | 600,000 | ||||||
Total Assets
|
$ | 2,211,001 | $ | 2,207,802 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 399,297 | $ | 391,997 | ||||
Accrued interest
|
741,139 | 555,189 | ||||||
Accrued payroll and professional fees
|
1,359,257 | 1,093,240 | ||||||
Notes payable, net
|
2,852,447 | 2,846,947 | ||||||
Total Current Liabilities
|
5,352,140 | 4,887,373 | ||||||
Notes Payable - Long-Term
|
85,000 | - | ||||||
STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Preferred stock, $0.001 par value; 10,000,000 authorized shares; no shares
|
||||||||
issued or outstanding
|
- | - | ||||||
Common stock, $0.001 par value; 240,000,000 authorized shares;
|
||||||||
87,488,413 and 86,138,413 shares issued and outstanding at
|
||||||||
December 31, 2015 and 2014, respectively
|
87,488 | 86,138 | ||||||
Additional paid-in capital
|
7,178,514 | 7,089,664 | ||||||
Notes receivable - restricted common stock
|
(126,699 | ) | (140,027 | ) | ||||
Accumulated deficit
|
(10,365,442 | ) | (9,715,346 | ) | ||||
Total Stockholders' Equity (Deficit)
|
(3,226,139 | ) | (2,679,571 | ) | ||||
Total Liabilities and Stockholders' Equity (Deficit)
|
$ | 2,211,001 | $ | 2,207,802 | ||||
|
||||||||
The accompanying notes are an integral part of these financial statements
|
CLEANTECH BIOFUELS, INC.
|
||||||||||||
(formerly Alternative Ethanol Technologies, Inc.)
|
||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||
Years ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Costs and expenses:
|
||||||||||||
General and administrative
|
$ | 363,933 | $ | 425,842 | $ | 385,719 | ||||||
Professional fees
|
81,107 | 92,661 | 100,191 | |||||||||
445,040 | 518,503 | 485,910 | ||||||||||
Other expense (income):
|
||||||||||||
Interest
|
206,728 | 196,432 | 178,872 | |||||||||
Interest income, net of accrued interest written-off
|
(1,672 | ) | (3,076 | ) | (8,098 | ) | ||||||
205,056 | 193,356 | 170,774 | ||||||||||
Income tax benefit
|
- | - | - | |||||||||
Net loss
|
$ | 650,096 | $ | 711,859 | $ | 656,684 | ||||||
Basic and diluted net loss per common share
|
$ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||
Weighted average common shares outstanding
|
87,292,580 | 83,492,089 | 73,824,980 | |||||||||
The accompanying notes are an integral part of these financial statements
|
CLEANTECH BIOFUELS, INC.
|
||||||||||||||||||||
(formerly Alternative Ethanol Technologies, Inc.)
|
||||||||||||||||||||
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
|
||||||||||||||||||||
Notes Rec -
|
||||||||||||||||||||
Additional
|
restricted
|
|||||||||||||||||||
Common Stock
|
Paid-in
|
common
|
Accumulated
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
stock
|
deficit
|
||||||||||||||||
Balances at December 31, 2012
|
72,486,647 | $ | 72,487 | $ | 6,526,876 | $ | (143,853 | ) | $ | (8,346,803 | ) | |||||||||
Issuance of restricted shares to investors in August through
|
||||||||||||||||||||
December at $0.10 per share
|
2,060,000 | 2,060 | 203,940 | - | - | |||||||||||||||
Issuance of shares released from escrow in Nov. at $0.012/share
|
4,000,000 | 4,000 | 44,000 | - | - | |||||||||||||||
Interest on Notes Receivable
|
- | - | - | (8,098 | ) | - | ||||||||||||||
Stock-based compensation
|
- | - | 6,470 | - | - | |||||||||||||||
Net loss
|
- | - | - | - | (656,684 | ) | ||||||||||||||
Balances at December 31, 2013
|
78,546,647 | 78,547 | 6,781,286 | (151,951 | ) | (9,003,487 | ) | |||||||||||||
Issuance of restricted shares to consultant in Jan. at $0.012/share
|
500,000 | 500 | 5,500 | - | - | |||||||||||||||
Issuance of restricted shares to investors during year at $0.10/share
|
2,475,000 | 2,475 | 245,025 | - | - | |||||||||||||||
Issuance of restricted shares to certain board members and an
|
||||||||||||||||||||
employee in April at $0.008/share
|
4,250,000 | 4,250 | 29,750 | - | - | |||||||||||||||
Expiration of Note Receivable in September at $0.10/share
|
(150,000 | ) | (150 | ) | (14,850 | ) | 20,054 | - | ||||||||||||
Conversion of Convertible Note in October at $0.08/share
|
516,766 | 516 | 40,825 | |||||||||||||||||
Interest on Notes Receivable
|
- | - | - | (8,130 | ) | - | ||||||||||||||
Stock-based compensation
|
- | - | 2,128 | - | - | |||||||||||||||
Net loss
|
- | - | - | - | (711,859 | ) | ||||||||||||||
Balances at December 31, 2014
|
86,138,413 | 86,138 | 7,089,664 | (140,027 | ) | (9,715,346 | ) | |||||||||||||
Issuance of restricted shares to employee in Jan. at $0.01/share
|
500,000 | 500 | 4,700 | - | - | |||||||||||||||
Issuance of restricted shares to investors during year at $0.10/share
|
1,000,000 | 1,000 | 99,000 | - | - | |||||||||||||||
Expiration of Note Receivable in February at $0.10/share
|
(150,000 | ) | (150 | ) | (14,850 | ) | 20,049 | - | ||||||||||||
Interest on Notes Receivable
|
- | - | - | (6,721 | ) | - | ||||||||||||||
Net loss
|
- | - | - | - | (650,096 | ) | ||||||||||||||
Balances at December 31, 2015
|
87,488,413 | $ | 87,488 | $ | 7,178,514 | $ | (126,699 | ) | $ | (10,365,442 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
|
CLEANTECH BIOFUELS, INC.
|
||||||||||||
(formerly Alternative Ethanol Technologies, Inc.)
|
||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||
Years Ended December 31,
|
||||||||||||
Operating Activities
|
2015
|
2014
|
2013
|
|||||||||
Net loss applicable to common stockholders
|
$ | (650,096 | ) | $ | (711,859 | ) | $ | (656,684 | ) | |||
Adjustments to reconcile net loss applicable to common
|
||||||||||||
stockholders to net cash used by operating activities:
|
||||||||||||
Items that did not use (provide) cash:
|
||||||||||||
Depreciation
|
- | - | - | |||||||||
Interest income
|
(1,672 | ) | (3,076 | ) | (8,098 | ) | ||||||
Share-based compensation expense
|
- | 2,128 | 6,470 | |||||||||
Issuance of restricted common stock
|
5,200 | 40,000 | - | |||||||||
Changes in operating assets and liabilities that provided
|
||||||||||||
(used) cash, net:
|
||||||||||||
Prepaids and other current assets
|
2,000 | 600 | (4,600 | ) | ||||||||
Accounts payable
|
7,300 | (6,654 | ) | (32,801 | ) | |||||||
Other assets and other liabilities
|
205,950 | 195,712 | 178,129 | |||||||||
Accrued liabilities
|
266,017 | 132,947 | 54,637 | |||||||||
Net cash used by operating activities
|
(165,301 | ) | (350,202 | ) | (462,947 | ) | ||||||
Cash Flows Provided (Used) by Investing Activities
|
||||||||||||
Expenditures for equipment
|
- | - | - | |||||||||
Net cash used by investing activities
|
- | - | - | |||||||||
Cash Flows Provided (Used) by Financing Activities
|
||||||||||||
Advances - related parties
|
(2,276 | ) | 2,461 | 169 | ||||||||
Issuance of Convertible Notes Payable
|
85,000 | 100,000 | 200,000 | |||||||||
Payments on Notes Payable
|
(14,500 | ) | - | (1,000 | ) | |||||||
Sale of common stock
|
100,000 | 247,500 | 206,000 | |||||||||
Net cash provided by financing activities
|
168,224 | 349,961 | 405,169 | |||||||||
Net (decrease) increase in cash and cash equivalents
|
2,923 | (241 | ) | (57,778 | ) | |||||||
Cash and cash equivalents at beginning of period
|
162 | 403 | 58,181 | |||||||||
Cash and cash equivalents at end of period
|
$ | 3,085 | $ | 162 | $ | 403 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 777 | $ | 721 | $ | 744 | ||||||
Supplemental disclosure of noncash investing and financing activities:
|
||||||||||||
Common stock issued to consultant, directors, and employee
|
$ | 5,200 | $ | 40,000 | $ | - | ||||||
Common stock issued for convertible notes converted
|
$ | - | $ | 41,341 | $ | - | ||||||
Common stock released from escrow for acquistion of Biomass
|
$ | - | $ | - | $ | 48,000 | ||||||
The accompanying notes are an integral part of these financial statements
|
·
|
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
|
·
|
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets, or financial instruments for which significant inputs are observable, either directly or indirectly; and
|
·
|
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
|
Dec 31, 2015
|
Dec 31, 2014
|
||||||||
Computers
|
$ | - | $ | - | |||||
Furniture and fixtures
|
15,799 | 15,799 | |||||||
Plant and equipment
|
18,700 | 18,700 | |||||||
34,499 | 34,499 | ||||||||
Accumulated Depreciation
|
(34,499 | ) | (34,499 | ) | |||||
Total | $ | - | $ | - |
Dec 31, 2015
|
Dec 31, 2014
|
|||||||
|
||||||||
|
||||||||
Convertible Notes Payable (2009 Offering), which are made up of various individual notes with an aggregate face value of $199,790 and $224,738 at December 31, 2015 and 2014, respectively, due one year from date of note, interest at 6.0%
|
$ | 199,790 | $ | 224,738 | ||||
Convertible Notes Payable (11/10 Offering), which are made up of various individual notes with an aggregate face value of $1,874,074 and $1,861,003 at December 31, 2015 and 2014, respectively, due one year from date of note, interest at 6.0%
|
1,874,074 | 1,861,003 | ||||||
WL Meyer Legacy Trust (formerly CMS Acquisition LLC) Note Payable, with a face value of $77,696 due on September 17, 2016, interest at 6.0% thru May 15,2011; 10.0% thereafter
|
77,696 | 77,696 | ||||||
Convertible Notes Payable (5/12 Offering), made up of various individual notes with a face value of $583,510, due in 18 months from date of note, interest at 6.0%
|
583,510 | 583,510 | ||||||
Convertible Note Payable (2/14 Offering), which is made up of one note with a face value of $100,000 due in 18 months from date of note, interest at 6.0%
|
100,000 | 100,000 | ||||||
Convertible Note Payable (7.1.2015), which is made up of one note with a face value of $17,377, minimum quarterly payments of $3,000, interest at 6.0%
|
17,377 | - | ||||||
Convertible Note Payable (2015 Offering), which is made up of one note with a face value of $85,000 due in 18 months from date of note, interest at 6.0%
|
85,000 | - | ||||||
Total debt
|
2,937,447 | 2,846,947 | ||||||
Current maturities
|
(2,852,447 | ) | (2,846,947 | ) | ||||
Long-term debt
|
$ | 85,000 | $ | - |
Offering
|
Note Interest Rate
|
Note Conversion Price
|
Warrant Exercise Price
|
Term
|
Closed or Open
|
|||||
2008 Offering
|
6.0%
|
$0.25
|
$0.45
|
One-year
|
Closed
|
|||||
2009 Offering
|
6.0%
|
$0.08
|
$0.30
|
One-year
|
Closed
|
|||||
6/10 Offering
|
12.0%
|
$0.08
|
$0.30
|
One-year
|
Closed
|
|||||
11/10 Offering
|
6.0%
|
$0.06
|
$0.30
|
One-year
|
Closed
|
|||||
5/12 Offering
|
6.0%
|
$0.10
|
$0.35
|
18 months
|
Closed
|
|||||
2/14 Offering
|
6.0%
|
$0.10
|
n/a
|
18 months
|
Closed
|
|||||
2015 Offering
|
6.0%
|
$0.10
|
$0.15
|
18 months
|
Open
|
Exercise
|
As of December 31,
|
|||||||||||||||
Warrants issued to:
|
Price
|
2015
|
2014
|
2013
|
||||||||||||
Noteholders, 11/10 Offering
|
$ | 0.30 | 842,221 | 798,649 | 1,628,126 | |||||||||||
Noteholders, 5/12 Offering (c)
|
$ | 0.35 | - | 571,428 | 1,667,170 | |||||||||||
Noteholder in 2015 Offering
|
$ | 0.15 | 2,550,000 | - | - | |||||||||||
Investors in Subscription Agreements (a)
|
$ | 0.15 | 16,605,000 | 13,605,000 | 6,180,000 | |||||||||||
WL Meyer Legacy Trust
|
$ | 0.05 | 2,300,000 | 2,300,000 | 2,150,000 | |||||||||||
WL Meyer Legacy Trust
|
$ | 0.10 | 150,000 | - | - | |||||||||||
Vertex Energy, Inc. (b)
|
$ | 0.11 | - | - | 1,800,000 | |||||||||||
Vertex Energy, Inc. (b)
|
$ | 0.10 | - | - | 500,000 | |||||||||||
22,447,221 | 17,275,077 | 13,925,296 |
(a) Warrants issued to investors under these Subscription Agreements can be exercised anytime within three years
|
from date of Agreement. These warrants currently expire at various dates from August 2016 through May 2018.
|
(b) These warrants expired on October 22, 2014.
|
(c) The last of these warrants expired on July 5, 2015.
|
2015
|
2014
|
2013
|
||||||||||
Risk-free interest rate
|
0.85 | % | n/a | .77%-1.44 | % | |||||||
Dividend yield
|
0 | % | n/a | 0 | % | |||||||
Volatility
|
15.99 | % | n/a | 15.46%-16.49 | % | |||||||
Expected term (years)
|
3.75 | n/a | 3.64 – 4.50 | |||||||||
Weighted-average Fair Value
|
$ | 0.00 | n/a | $ | 0.00 |
For the Year Ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Pre-tax compensation expense:
|
||||||||||||
Stock options
|
$ | - | $ | 2,128 | $ | 6,470 | ||||||
Warrants
|
- | - | - | |||||||||
Total expense
|
- | 2,128 | 6,470 | |||||||||
Tax benefit, net
|
- | - | - | |||||||||
After-tax compensation expense
|
$ | - | $ | 2,128 | $ | 6,470 |
Shares Under Option
|
Weighted-Avg Exercise Price
|
Aggregate
Intrinsic Value
|
||||||||||
Options outstanding as of December 31, 2012
|
10,242,000 | $ | 0.11 | (1 | ) | |||||||
Granted
|
2,000,000 | 0.06 | ||||||||||
Forfeited
|
(295,000 | ) | 0.09 | |||||||||
Options outstanding as of December 31, 2013
|
11,947,000 | 0.10 | (1 | ) | ||||||||
Granted
|
- | - | ||||||||||
Forfeited
|
- | - | ||||||||||
Options outstanding as of December 31, 2014
|
11,947,000 | 0.10 | (1 | ) | ||||||||
Granted
|
350,000 | 0.10 | ||||||||||
Forfeited
|
(100,000 | ) | 0.58 | |||||||||
Options outstanding as of December 31, 2015
|
12,197,000 | 0.10 | (1 | ) | ||||||||
Options exercisable at of December 31, 2015
|
11,688,667 | 0.10 |
(1)
|
The weighted-average exercise price at December 31, 2015, 2014 and 2013 for all options was greater than the fair value of the Company’s common stock on that date, resulting in an intrinsic value of $-0-.
|
Restricted shares issued
|
Weighted-Avg Issuance Price
|
|||||||
Balance as of December 31, 2012
|
1,470,000 | $ | 0.10 | |||||
Granted
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Balance as of December 31, 2013
|
1,470,000 | 0.10 | ||||||
Granted
|
- | |||||||
Forfeited
|
(150,000 | ) | 0.10 | |||||
Balance as of December 31, 2014
|
1,320,000 | 0.10 | ||||||
Granted
|
- | |||||||
Forfeited
|
(150,000 | ) | 0.10 | |||||
Balance as of December 31, 2015
|
1,170,000 | 0.10 |
Year NOL expires:
|
Amount
|
||
2026
|
$ 18,000
|
||
2027
|
149,000
|
||
2028
|
669,000
|
||
2029
|
928,000
|
||
2030
|
28,000
|
||
2032
|
51,000
|
||
2033
|
52,000
|
||
2034
|
18,000
|
||
2035
|
23,000
|
||
$ 1,936,000
|
At December 31,
|
||||||||
2015
|
2014
|
|||||||
Start-up costs
|
$ | 975,000 | $ | 930,000 | ||||
Net operating loss carryforward
|
799,000 | 790,000 | ||||||
Accrual to cash conversion
|
1,687,000 | 1,487,000 | ||||||
Share-based compensation related to stock options
|
312,000 | 312,000 | ||||||
Other
|
6,000 | 6,000 | ||||||
Total
|
3,779,000 | 3,525,000 | ||||||
Valuation allowance
|
(3,779,000 | ) | (3,525,000 | ) | ||||
Net deferred tax asset
|
$ | - | $ | - |
For the quarters ended 2015:
|
||||||||||||||||
Mar 31
|
June 30
|
Sept 30
|
Dec 31
|
|||||||||||||
Costs and expenses:
|
||||||||||||||||
General and administrative
|
$ | 100,418 | $ | 85,278 | $ | 88,278 | $ | 89,959 | ||||||||
Professional fees
|
28,082 | 15,990 | 20,615 | 16,420 | ||||||||||||
128,500 | 101,268 | 108,893 | 106,379 | |||||||||||||
Other expense (income):
|
||||||||||||||||
Interest
|
49,484 | 50,579 | 52,544 | 54,121 | ||||||||||||
Other (income) expense
|
3,341 | (1,631 | ) | (1,669 | ) | (1,713 | ) | |||||||||
Net loss applicable to common stockholders
|
$ | 181,325 | $ | 150,216 | $ | 159,768 | $ | 158,787 | ||||||||
Basic net loss per common share
|
** | ** | ** | ** | ||||||||||||
** - less than $.01 per share
|
For the quarters ended 2014:
|
||||||||||||||||
Mar 31
|
June 30
|
Sept 30
|
Dec 31
|
|||||||||||||
Costs and expenses:
|
||||||||||||||||
General and administrative
|
$ | 96,156 | $ | 135,401 | $ | 102,081 | $ | 92,204 | ||||||||
Professional fees
|
32,705 | 23,576 | 21,080 | 15,300 | ||||||||||||
128,861 | 158,977 | 123,161 | 107,504 | |||||||||||||
Other expense (income):
|
||||||||||||||||
Interest
|
46,738 | 49,158 | 50,444 | 50,092 | ||||||||||||
Other (income) expense
|
(2,083 | ) | (2,114 | ) | 3,002 | (1,881 | ) | |||||||||
Net loss applicable to common stockholders
|
$ | 173,516 | $ | 206,021 | $ | 176,607 | $ | 155,715 | ||||||||
Basic net loss per common share
|
** | ** | ** | ** | ||||||||||||
** - less than $.01 per share
|
Class III Directors: Terms expiring in 2016 | |||
Age
|
Principal Occupation
|
Service as
Director Since
|
|
Edward P. Hennessey
|
57
|
Mr. Hennessey currently is Chief Executive Officer and President of the Company, and serves as Chairman of the Board of Directors, all since 2007. Mr. Hennessey has been the President and CEO of SRS Energy since 2003 and served as President of Supercritical Recovery Systems, Inc. prior to that time since 2002. Mr. Hennessey began his career in Finance with Shearson Lehman Brothers in 1986 and worked in the securities industry from 1986 until 2000.
|
2007
|
James E. Russell
|
83 |
Mr. Russell served for over 30 years as Senior Vice President at Science Applications International Corporation (SAIC). Subsequently, from 2004 to present, he has served as a consultant to SAIC/Leidos and as an independent consultant, private investor, and advisor to over 100 technology companies. He has a BS in Electrical Engineering and continued graduate studies in mathematical statistics. He was inducted to the University of Idaho Academy of Engineers in 2012.
|
2012
|
Name and Principal Position(s) (2)
|
Year
|
Salary
|
Option Awards(1)
|
Total
|
||||||||||
Edward P. Hennessey, President and CEO
|
2014
|
$ | 93,500 | $ | 1,587 | $ | 95,087 | |||||||
2015
|
$ | 22,000 | $ | - | $ | 22,000 | ||||||||
Thomas Jennewein, Chief Financial Officer
|
2014
|
$ | 56,500 | (3 | ) | $ | 541 | $ | 57,041 | |||||
2015
|
$ | 26,200 | (4 | ) | $ | - | $ | 26,200 |
(1)
|
The assumptions made when calculating the amounts in this column are found in footnote 10 to the Consolidated Financial Statements included in this report. The amounts represent the accounting cost in accordance with FASB ASC Topic 718 that the Company recorded in its Statements of Operations in each year.
|
(2)
|
In September 2013, we added, on a part-time basis, a Chief Technology Officer (CTO) and a VP-Business Development (VP-BD). These individuals maintain their engineering consulting firm on a full-time basis and assist our company as needed. Neither receive salary but each receive stock options (the cost of these options is $-0- based on the same calculations and assumptions in (1) above).
|
(3)
|
Salary for 2014 includes a restricted stock grant of common stock valued at $6,000.
|
(4)
|
Salary for 2015 includes a restricted stock grant of common stock valued at $5,200.
|
·
|
provide fair and reasonable compensation that meets the competitive environment for executive talent;
|
·
|
help motivate the members of our executive team for excellent performance; and
|
·
|
align the interests of our executive team members with those of our stockholders and the long-term success of our company.
|
Option Awards | Stock Awards | |||||||||||||||||||
Grant
Date
|
Number of Securities Underlying Unexercised Options (#) - Exercisable
|
Number of Securities Underlying Unexercised Options (#) - Unexercisable (1)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock that have not vested (#)
|
Market value of shares or units of stock that have not vested
|
||||||||||||||
Edward P. Hennessey
|
8/31/2007
|
2,250,000 | - | $ | 0.15 |
8/31/2021
|
$ | - | ||||||||||||
12/4/2008
|
1,200,000 | - | $ | 0.15 |
12/4/2022
|
$ | - | |||||||||||||
8/25/2011
|
2,200,000 | - | $ | 0.055 |
8/25/2018
|
$ | - | |||||||||||||
Thomas G. Jennewein
|
8/31/2007
|
800,000 | - | $ | 0.15 |
8/31/2021
|
$ | - | ||||||||||||
12/4/2008
|
400,000 | - | $ | 0.36 |
12/4/2022
|
$ | - | |||||||||||||
7/6/2010
|
162,000 | - | $ | 0.07 |
7/6/2017
|
$ | - | |||||||||||||
1/4/2011
|
750,000 | - | $ | 0.05 |
1/4/2018
|
$ | - | |||||||||||||
8/25/2011
|
750,000 | - | $ | 0.055 |
8/25/2018
|
$ | - | |||||||||||||
3/12/2013
|
750,000 | - | $ | 0.02 |
3/12/2020
|
$ | - | |||||||||||||
(1) The options shown in this column are nonvested as of December 31, 2015
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||
Number of Shares Acquired on
Exercise (#)
|
Value Realized on Exercise ($)
|
Number of Shares Acquired on Vesting (#)
|
Value Upon Vesting ($) (1)
|
Number of Shares Acquired on Vesting (#)
|
Value Realized on Vesting ($)
|
|||||||||||||||||||||
Edward P. Hennessey
|
- | $ | - | 750,000 | $ | 562,500 | 60,000 | (3 | ) | $ | - | |||||||||||||||
- | $ | - | 1,500,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 1,200,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 2,200,000 | $ | - | (2 | ) | |||||||||||||||||||
Thomas G. Jennewein
|
- | $ | - | 266,667 | $ | 200,000 | 60,000 | (3 | ) | $ | - | |||||||||||||||
- | $ | - | 533,333 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 400,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 162,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 750,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 750,000 | $ | - | (2 | ) | |||||||||||||||||||
- | $ | - | 750,000 | $ | - | (2 | ) | 750,000 | (4 | ) | $ | 6,000 | ||||||||||||||
- | $ | - | - | $ | - | 500,000 | (5 | ) | $ | 5,200 | ||||||||||||||||
(1) Values reflect the market value of our common stock as of the vesting dates. These prices ranged from $0.02 to $0.36.
|
||||||||||||||||||||||||||
(2) The price of our common stock on these vesting dates was less than or equal to the exercise price of the options.
|
||||||||||||||||||||||||||
(3) Award was granted and vested on December 4, 2008. Each officer issued a promissory note with a $0.36 exercise price.
|
||||||||||||||||||||||||||
(4) Award was granted and vested on April 17, 2014.
|
||||||||||||||||||||||||||
(5) Award was granted and vested on January 15, 2015.
|
Name and
|
Fees earned or
|
Stock
|
Option
|
All other
|
||||||||||||||||
principal position
|
paid in cash
|
Awards
|
Awards (1)
|
compensation
|
Total
|
|||||||||||||||
David Bransby, Director
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
James Russell, Director
|
- | - | - | - | - |
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
||||||
Edward P. Hennessey, Jr. (1)
848 Pennsylvania Ave., Apt A
University City, MO 63130
|
7,443,275 | 8.5 | % | |||||
SRS Legacy Trust(2)
147 N. Meramec, Suite 200
Clayton, MO 63105
|
6,972,214 | 8.0 | % | |||||
W.L. Meyer Legacy Trust
15415 Clayton Rd.
Ballwin, MO 63011
|
5,913,553 | 6.8 | % | |||||
(1)
|
Amount represents shares owned by Supercritical Recovery Systems, Inc., of which Mr. Hennessey serves as President and a Member of the Board of Directors.
|
(2)
|
SRS Legacy Trust is an irrevocable trust of which Edward P. Hennessey, Jr. is a beneficiary. Michael Hennessey, Mr. Hennessey’s brother, has sole voting power, and sole dispositive power with respect to these shares.
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|||||||
Edward P. Hennessey, Jr.
|
13,153,275 | (1 | ) | 14.1 | % | ||||
Thomas Jennewein
|
5,422,000 | (2 | ) | 5.9 | % | ||||
James Russell
|
7,040,000 | (2 | ) | 7.7 | % | ||||
David Bransby
|
1,430,000 | (2 | ) | 1.6 | % | ||||
Total owned by all Executive Officers and Directors
|
27,045,275 | 29.4 | % |
(1)
|
Includes the shares described in (1) to the “Security Ownership of Certain Beneficial Owners” table and the vested portion and the portion that will vest within 60 days hereof of shares of options and restricted stock.
|
(2)
|
Amounts represent the vested portion, and the portion that will vest within 60 days of December 31, 2015, of shares of options and restricted stock, shares held individually, and/or restricted shares purchased through investment in our Equity Offering.
|
Plan Category
|
Number of securities to be issued upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted-Avg 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: 2007 Stock Option Plan
|
13,367,000 | $ | 0.10 | 633,000 | ||||||||
Equity compensation plans not approved by security holders
|
- | - | - | |||||||||
Totals
|
13,367,000 | 633,000 |
For the years ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Audit Fees (1)
|
$ | 13,700 | $ | 13,000 | ||||
Audit-Related Fees
|
- | - | ||||||
Tax Fees (2)
|
2,000 | 2,000 | ||||||
All Other Fees
|
- | - | ||||||
Total Fees
|
$ | 15,700 | $ | 15,000 | ||||
(1) Includes annual financial statement audit. (2) Includes fees for the preparation of the Company's tax returns.
|
(a)
|
The following documents are filed as part of this report:
|
1.
|
Financial Statements:
|
2.
|
Exhibits: See Index to Exhibits for a list of exhibits filed with this Form 10-K. Management contracts and compensatory plans or arrangements are identified with asterisk on the Index to Exhibits.
|
CleanTech Biofuels, Inc.
(registrant)
|
|||
March 28, 2016
|
By:
|
/s/ Edward P. Hennessey, Jr. | |
Edward P. Hennessey, Jr. | |||
Chief Executive Officer | |||
March 28, 2016
|
By:
|
/s/ Thomas G. Jennewein | |
Thomas G. Jennewein | |||
Chief Financial Officer | |||
March 28, 2016
|
By:
|
/s/ Edward P. Hennessey, Jr. | |
Edward P. Hennessey, Jr., Chairman of the Board of
Directors and Chief Executive Officer (principal
executive officer)
|
|||
March 28, 2016
|
By:
|
/s/ Thomas G. Jennewein. | |
Thomas G. Jennewein, Chief Financial Officer
(principal financial and accounting officer)
|
|||
March 28, 2016
|
By:
|
/s/ James Russell | |
James Russell, Director | |||
March 28, 2016
|
By:
|
/s/ Dr. David Bransby | |
David Bransby, Director | |||
Exhibit
Number
|
Description |
2.1
|
Agreement and Plan of Merger and Reorganization by and among Cleantech Biofuels, Inc., Biomass NA Acquisition Subsidiary, Inc. and Biomass North America Licensing, Inc. dated as of July 14, 2008 (incorporated herein by reference to Exhibit 2.1 of the Registrant’s quarterly report on Form 10-Q for the period ended June 30, 2008).
|
3.1
|
Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939). |
3.2
|
Restated By-Laws (incorporated herein by reference to Exhibit 3.2 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
4.2
|
Investors’ Rights Agreement dated as of April 16, 2007 by and among SRS Energy, Inc. and certain Investors (incorporated herein by reference to Exhibit 4.2 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.1
|
Technology License Agreement between Bio Products International, Inc. and SRS Energy, Inc. dated as of March 8, 2007 (incorporated herein by reference to Exhibit 10.4 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.2*
|
2007 Stock Option Plan (incorporated herein by reference to Exhibit 10.7 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.3*
|
Form of Director Stock Option Agreement (incorporated herein by reference to Exhibit 10.8 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.4*
|
Director Stock Purchase Agreement (incorporated herein by reference to Exhibit 10.9 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.5*
|
Employment Agreement – Edward P. Hennessey, Jr. (incorporated herein by reference to Exhibit 10.10 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.6*
|
Form of Employee Agreement – Tom Jennewein (incorporated herein by reference to Exhibit 10.11 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939).
|
10.7* | Form of Employee Stock Option Agreement – Tom Jennewein (incorporated herein by reference to Exhibit 10.12 of the Registrant’s registration statement on Form SB-2 filed on September 10, 2007, File No. 333-145939). |
10.8 | Commercial Lease with Pershing Properties, LLC dated October 12, 2007 (incorporated herein by reference to Exhibit 10.13 of the Registrant’s registration statement on Form SB-2/A filed on November 30, 2007, File No. 333-145939). |
10.9 | Patent Purchase Agreement dated October 22, 2008 by and between Cleantech Biofuels, Inc. and World Waste Technologies, Inc. (incorporated herein by reference to Exhibit 10.15 of the Registrant’s current report on Form 8-K filed on October 27, 2008). |
10.12 | Technology License and Joint Development Agreement among Biomass North America Licensing, Inc., Biomass North America, LLC and Anthony P. Noll (incorporated herein by reference to Exhibit 10.18 of the Registrant’s quarterly report on Form 10-Q for the period ended September 30, 2008). |
10.13* | Form of employee stock purchase agreement entered into with Edward P. Hennessey, Jr., Mike Kime and Tom Jennewein (incorporated herein by reference to Exhibit 10.20 of the Registrant’s annual report on Form 10-K for the period ended December 31, 2008). |
10.16 | Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporate herein by reference to Exhibit 10.20 of the Registrant’s current report on Form 8-K filed on September 8, 2010). |
10.17 | Security Agreement between Cleantech Biofuels, Inc. and CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.21 of the Registrant’s current report on Form 8-K filed on September 8, 2010). |
10.18 | Amendment dated February 11, 2011 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.22 of the Registrant’s current report on Form 8-K filed on February 16, 2011). |
10.19 | Amendment No. 2 dated May 31, 2011 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.23 of the Registrant’s current report on Form 8-K filed on June 1, 2011). |
10.20 | Amendment No. 3 dated July 29, 2011 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.24 of the Registrant’s current report on Form 8-K filed on August 2, 2011). |
10.21* | Form of Employee Stock Option Agreement entered into with Edward P. Hennessey, Jr. and Tom Jennewein (incorporated herein by reference to Exhibit 10.25 of the Registrant’s current report on Form 8-K filed on August 31, 2011). |
10.22* | Form of Director Stock Option Agreement (incorporated herein by reference to Exhibit 10.26 of the Registrant’s current report on Form 8-K filed on October 19, 2011). |
10.23 | Amendment No. 4 dated November 7, 2011 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.27 of the Registrant’s current report on Form 8-K filed on November 10, 2011). |
10.24 | Amendment No. 5 dated March 27, 2012 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.28 of the Registrant’s annual report on Form 10-K for the period ended December 31, 2011). |
10.26 | Engagement Agreement between Cleantech Biofuels, Inc. and Fenton Engineering International dated May 30, 2012 (incorporated herein by reference to Exhibit 10.30 of the Registrant’s current report on Form 8-K filed on June 5, 2012). |
10.27 | Amendment No. 6 dated July 31, 2012 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.29 of the Registrant’s quarterly report on Form 10-Q filed on August 6, 2012). |
10.28 | Amendment No. 7 dated November 1, 2012 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.30 of the Registrant’s quarterly report on Form 10-Q filed on November 6, 2012). |
10.29 | Amendment No. 8 dated January 9, 2013 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.31 of the Registrant’s current report on Form 8-K filed on January 10, 2013). |
10.30 | Amendment No. 9 dated May 8, 2013 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.30 of the Registrant’s quarterly report on Form 10-Q filed on May 13, 2013). |
10.31 | Amended Technology License and Joint Development Agreement, dated November 1, 2013, among CTB Licensing LLC, Biomass North America LLC and Anthony P. Noll (incorporated herein by reference to Exhibit 10.31 of the Registrant’s quarterly report on Form 10-Q filed on November 12, 2013). |
10.32 | Amendment No. 10 dated March 21, 2014 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.32 of the Registrant’s annual report on Form 10-K filed on March 21, 2014). |
10.33 |
Memorandum of Understanding between Cleantech Biofuels, Inc., James Avenue LLC, 25 Van Keuren LLC, and Joseph Smentkowski, Inc. dated October 13, 2014 (incorporated herein by reference to Exhibit 10.33 of the Registrant's current report on Form 8-K filed on October 17, 2014).
|
10.34 |
Amendment No. 11 dated March 17, 2015 to a Promissory Note issued in favor of CMS Acquisition, LLC dated September 1, 2010 (incorporated herein by reference to Exhibit 10.34 of the Registrant's annual report on Form 10-K filed on March 24, 2015).
|
14
|
Code of Ethics (incorporated herein by reference to Exhibit 14 of the Registrant’s annual report on Form 10-KSB for the period ended December 31, 2007).
|
21.1
|
List of Subsidiaries.
|
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended
|
31.2 |
Certification of principal financial officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended
|
32.1 |
Certificate (Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) of Chief Executive Officer
|
32.2
|
Certificate (Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) of principal financial officer
|
Date: March 28, 2016
|
/s/ Edward P. Hennessey, Jr. | ||
Edward P. Hennessey, Jr. | |||
Chief Executive Officer | |||
Date: March 28, 2016
|
/s/ Thomas G. Jennewein | ||
Thomas G. Jennewein | |||
Chief Financial Officer
|
|||
Date: March 28, 2016
|
By:
|
/s/ Edward P. Hennessey, Jr. | |
Edward P. Hennessey, Jr. | |||
Chief Executive Officer |
Date: March 28, 2016
|
/s/ Thomas G. Jennewein | ||
Thomas G. Jennewein | |||
Chief Financial Officer
|
|||
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Mar. 24, 2016 |
Jun. 30, 2015 |
|
Document And Entity Information | |||
Entity Registrant Name | CleanTech Biofuels, Inc. | ||
Entity Central Index Key | 0001411036 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 1,713,098 | ||
Entity Common Stock, Shares Outstanding | 92,338,413 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2015 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Stockholders Equity | ||
Preferred Stock par value | $ 0.001 | $ 0.001 |
Preferred Stock Shares Authorized | 10,000,000 | 10,000,000 |
Common Stock par value | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 240,000,000 | 240,000,000 |
Common Stock Shares Issued | 87,488,413 | 86,138,413 |
Common Stock Shares Outstanding | 87,488,413 | 86,138,413 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Costs and expenses: | |||
General and administrative | $ 363,933 | $ 425,842 | $ 385,719 |
Professional fees | 81,107 | 92,661 | 100,191 |
Costs and Expenses | 445,040 | 518,503 | 485,910 |
Other expense (income): | |||
Interest | 206,728 | 196,432 | 178,872 |
Interest income, net of accrued interest written-off | (1,672) | (3,076) | (8,098) |
Total Other expense (income) | 205,056 | 193,356 | 170,774 |
Income tax benefit | 0 | 0 | 0 |
Net loss | $ 650,096 | $ 711,859 | $ 656,684 |
Basic and diluted net loss per common share | $ 0.01 | $ 0.01 | $ 0.01 |
Weighted average common shares outstanding | 87,292,580 | 83,492,089 | 73,824,980 |
1. Organization and Business |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 1 - Organization and Business | Alternative Ethanol Technologies, Inc. (the Company), was incorporated in Delaware on December 20, 1996. Effective August 2, 2007, the Company changed its name to CleanTech Biofuels, Inc. Except where otherwise noted, the words we, us, our, and similar terms, as well as CleanTech or the Company, refer to CleanTech Biofuels, Inc. and its subsidiaries, collectively.
On March 27, 2007, the Company acquired SRS Energy, Inc., a Delaware corporation (SRS Energy), pursuant to an Agreement and Plan of Merger and Reorganization. In accordance with the merger agreement, SRS Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, merged with and into SRS Energy. The merger was consummated on May 31, 2007 and resulted in SRS Energy becoming a wholly-owned subsidiary of the Company. As a result of the merger, the stockholders of SRS Energy surrendered all of their issued and outstanding common stock and received shares of the Companys common stock, $.001 par value per share (Common Stock). The former parent of SRS Energy, Supercritical Recovery Systems, Inc., immediately prior to the merger, distributed 78.8% of its 96% ownership in SRS Energy to its shareholders on a pro rata basis. For accounting purposes, because the Company had been a public shell company prior to the merger, the merger was treated as an acquisition of the Company and a recapitalization of SRS Energy.
The Company is in its development stage and has been engaged in technology development and pre-operational activities since its formation. The Company is currently seeking outside sources of funding that will provide the capital for us to design, build, and operate a commercial biomass recovery plant that will allow us to produce biomass feedstock for customer evaluation, trial purchases, and/or be used in equipment selection for power generation and possibly combined heat and power (CHP) production. Initially, the biomass feedstock output is expected to be sold or provided to electric utilities, power and steam producers, power and CHP equipment suppliers, and biofuel research firms for evaluation. In addition to seeking a source of funding for plant development, the Company hopes to license and/or develop potential commercial projects as they present themselves. All of our developments plan to focus on cleaning and separating MSW into its component parts in order to obtain: (i) a homogenous feedstock of cellulosic biomass for producing energy and other chemical products and (ii) recyclable products (metals, plastics, aluminum). Our plans may also include the possibility of operating a MSW transfer station where we could install our technology.
The Company has no operating history as a producer of biomass or energy sources and has not constructed any plants to date. We have no revenues and will be required to secure outside funding in order to execute our business plan and commercialize our products. Our current cash is not sufficient to fund our current operations. Our liabilities are substantially greater than our current available funds and current assets. Although we continue to seek additional financing through the sale of additional equity, various government funding opportunities and/or possibly through strategic alliances with larger energy or waste management companies, we have not had recent success securing meaningful amounts of financing. The Company will require substantial additional financing to implement its business plan and it may be unable to obtain the capital required to do so. If we are not able to immediately and successfully raise additional capital and/or achieve profitability or positive cash flow, we may not be able to continue operations. |
2. Summary of Significant Accounting Policies |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||
Notes to Financial Statements | |||||||
Note 2 - Summary of Significant Accounting Policies | Use of Estimates - The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.
Consolidation - The financial statements include the accounts of CleanTech Biofuels, Inc. and its wholly owned subsidiaries, SRS Energy, Inc. and CTB Licensing, LLC. All significant intercompany transactions and balances are eliminated in consolidation.
Research and Development Costs - Research and development expenditures (which are comprised of costs incurred in performing research and development activities including wages and associated employee benefits, facilities and overhead costs), including payments to collaborative research partners are expensed as incurred.
Impairment of Long-Lived Assets - The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable primarily through reviewing changes in business plans and use of such assets. When factors indicate that an asset should be evaluated for possible impairment, the Company reviews long-lived assets to assess future use or recoverability of such asset. Impairments are recognized in earnings to the extent that the carrying value exceeds fair value.
Intellectual Property - Intellectual property, consisting of our licensed/owned patents and other proprietary technology, are stated at cost and will be amortized on a straight-line basis over their economic estimated useful life. Costs and expenses incurred in creating intellectual property are expensed as incurred. The cost of purchased intellectual property is capitalized. Amortization of these assets has not yet begun as the assets have not been placed in service as we have not yet commenced operations.
Property, plant and equipment - Newly acquired property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets, on the straight-line method for financial reporting purposes. Expenditures for maintenance and repairs are charged to expense as incurred.
Income Taxes - The Company accounts for income taxes in accordance with accounting guidance, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between financial statement and tax accounting methods and any available operating loss or tax credit carry forwards. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses and tax credits that are available to offset future taxable income.
The standards on accounting for uncertainty in income taxes (incorporated into the FASB Accounting Standards Codification (Codification) Topic 740, Income Taxes) clarify the accounting and recognition for income tax positions taken or expected to be taken in the Companys income tax returns. The Companys income tax filings are subject to audit by various taxing authorities. The Companys open audit periods are 2012-2015. In evaluating the Companys tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes their estimates are appropriate based on facts and circumstances.
Convertible Notes Payable and Warrants The Company has issued various Convertible Promissory Notes (the Notes). These Notes may be converted at the option of the note holder into shares of the Companys common stock. Additionally, some of these Notes carry warrants for shares of the Companys common stock. These Notes have been recorded as debt (notes payable) in the financial statements, net of discounts, if any, for the conversion and warrant features. The discounts have been amortized on a straight-line basis over the term of each note.
Stock-based compensation - The Company accounts for stock-based compensation in accordance with accounting guidance that requires measuring all stock-based compensation awards at fair value and recognizing an expense in the financial statements. In March 2007, the Company adopted the 2007 Stock Option Plan (Stock Plan) for its employees, officers, directors and consultants. The Company has reserved a maximum of 14,000,000 shares of common stock to be issued for stock options or shares of restricted stock under the Stock Plan. We compensate certain employees, officers, directors and consultants with stock-based payment awards and recognize compensation costs for these awards based on their fair values and expense is recognized over the requisite service period. The fair values of certain awards are estimated on the grant date using the Black-Scholes-Merton option-pricing formula, which incorporates certain assumptions including the expected term of an award and expected stock price volatility. Our key assumptions are described in further detail in the Share-Based Payments Note to the Consolidated Financial Statements.
Fair Value Measurement - We use fair value accounting and reporting to specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
As of December 31, 2015 and 2014, and during the years ended December 31, 2015, 2014, and 2013, we utilized Level 1 inputs to determine the fair value of cash equivalents and we utilized Level 2 inputs to determine the fair value of certain long-lived assets.
Restricted Stock Compensation From time to time, we issue restricted Common Stock to employees, directors, and consultants as compensation. The cost of these grants is recorded in general and administrative expense. The cost is determined using the amount of shares granted at a discount to the market value on the date of the grant. The discount is applied for a Lack of Marketability due to: (i) shares issued are unregistered shares and subject to Rule 144 of the Securities Act of 1933, (ii) minimal trading activity in our shares, only about 1/3rd of which are registered and free-trading shares, and (iii) the Company has yet to begin operations and has had no revenue. The Company issued shares in 2014 and 2015 as detailed further in Note 10, and in 2016 as detailed in Note 13.
Contingent Liabilities We are, from time to time, subject to litigation to our business. Assessments regarding the ultimate cost of lawsuits require judgments concerning matters such as the anticipated outcome of negotiations, the number and cost of pending and future claims, and the impact of evidentiary requirements. A significant amount of judgment and use of estimates is required to quantify our ultimate exposure in these matters. We regularly review the valuation of these liabilities and account for changes in circumstances for ongoing and emerging issues. The Company intends to defend itself vigorously in all litigation.
Dividends - We have no material operating history and therefore have had no earnings to distribute to stockholders. We currently intend to retain our earnings, if any, and reinvest them in the development and growth of our business and do not foresee payment of a dividend in any upcoming fiscal period.
Net Loss per Common Share - The Company calculates basic loss per share ("EPS") and diluted EPS. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS would reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. As of December 31, 2015, 2014 and 2013, the Company had options, warrants and convertible notes to purchase an aggregate of approximately 87 million, 78 million and 71 million shares of common stock, respectively, that were excluded from the calculation of diluted loss per share as their effects would have been anti-dilutive. Therefore, the Company only presents basic loss per share on the face of the statements of operations and in its disclosure of unaudited quarterly financial data in Note 14.
Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." This ASU amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements and related disclosures.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entitys ability to continue as a Going Concern. This ASU provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements and requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. This new guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We are currently assessing the impact the guidance will have on our consolidated financial statements and related disclosures.
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. This ASU removes 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 U.S. 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 a development stage entity that in prior years it had been in the development stage. This new guidance is effective for annual periods beginning on or after December 15, 2014 and interim periods within those years. Early application is permitted. The Company elected to early adopt this ASU for the annual period ended December 31, 2014. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU will supersede most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also specifies new accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers. This new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early application not permitted. In August 2015, the FASB approved a one-year deferral of the effective date of this ASU. This standard will now become effective beginning with the first quarter 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation by raising the threshold for a disposal to qualify as discontinued operations. This ASU will also require entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. This new guidance is effective for annual periods beginning on or after December 15, 2014 and interim periods within those years. Beginning in 2015, we will apply the new guidance, as applicable, to future disposals of components or classifications as held for sale.
There were various other accounting standards updates recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries, and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. |
3. Mergers/Acquisitions |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 3 - Mergers/Acquisitions | On September 15, 2008, the Company consummated the acquisition of Biomass North America Licensing, Inc. (Biomass) pursuant to a merger between Biomass and a wholly-owned subsidiary of the Company (with Biomass as the surviving subsidiary of the Company) in accordance with an Agreement and Plan of Merger by and between the Company and Biomass. By virtue of the merger, the Company acquired a license agreement pursuant to which the Company holds a license in the United States and Canada to use patented technology licensed from Biomass North America, LLC, the former parent of Biomass (the Licensor), to clean and separate MSW (the Biomass Recovery Process). In July 2010, the United States Patent and Trademark Office issued US patent number 7,745,208 for this process (the BRP Patent).
Upon consummation of the merger, the Company paid $20,000 in cash and issued a promissory note in the original principal amount of $80,000 bearing interest at an annual rate of 6% to a shareholder of the Licensor. This note has been paid in full. Additionally, the Company issued to the four shareholders of the Licensor a total of 1,895,000 shares of Common Stock and deposited an additional 4,000,000 shares of Common Stock into an escrow account (collectively, the Shares). The Shares were issued as part of the merger consideration received by the shareholders of the Licensor. In accordance with a November 2013 amendment, the Company has an exclusive license in the United States and Canada to use the Biomass Recovery Process and includes no performance requirements on the Company; the license agreement is for a term of 21 years from the date of the amendment or the life of any patent issued for the Biomass Recovery Process, including any amendments, modifications or extensions; the license requires that the Company pay a royalty in the amount of $2.00 per ton of MSW used in the Biomass Recovery Process to the Licensor; and the Company released the 4,000,000 shares of common stock to the Licensor previously held in escrow since the merger. The Company has recorded a long-term asset of approximately $1.6 million which it will begin to amortize upon utilizing the license in our operations. |
4. Property and Equipment |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4 - Property and Equipment | At December 31, our property and equipment consisted of:
For the years ended December 31, 2015 and 2014, we had no depreciation expense. |
5. Patent |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 5 - Patent | The Company owns US Patent No. 6,306,248 (the PSC Patent), which is the underlying technology upon which the BRP Patent is based. The Company acquired the PSC Patent on October 22, 2008 pursuant to a Patent Purchase Agreement (Agreement) with World Waste Technologies, Inc. (WWT). As part of the acquisition of the PSC Patent, we also became the licensor of such technology under the existing license agreement between Bio-Products International, Inc., the licensee (Bio-Products) and WWT. The Company has paid WWT $600,000 and issued warrants to purchase 1,800,000 shares of Common Stock at $0.10 per share and 500,000 shares of Common Stock at $0.11 per share. WWT assigned all of its rights, title and interest in the note, warrants, security agreement and purchase agreement to Vertex Energy, Inc. (Vertex) as a result of a merger in March 2009. The warrants had an exercisable term of five years which expired on October 22, 2014. The cost of the PSC Patent acquisition of $600,000 is recorded as a long-term asset on the Balance Sheet.
On September 1, 2010, the Company issued a promissory note to CMS Acquisition, LLC (CMS) in the amount of $100,000 and bearing interest at 6.0% per annum. The note is secured with a security interest in the PSC Patent. In connection with the financing, the Company issued a warrant to CMS to purchase 2,000,000 shares of Common Stock at a price of $0.05 per share. The warrant is exercisable at any time for five years from the date of issuance or re-issuance. The note was originally to mature on February 28, 2011. The Company and CMS have entered into various amendments extending the due date, the most recent of which was March 17, 2015, which extended the due date to September 17, 2016. As consideration in these amendments, the Company has: (i) paid $25,000 in February 2011 towards accrued interest to date and principal on the Note (ii) increased the interest rate to 10% as of May 15, 2011, (iii) re-dated the original warrants to March 17, 2015, (iv) issued new warrants for 300,000 shares of Common Stock with an exercise price of $0.05 and exercisable at any time until March 17, 2020, (v) issued new warrants for 150,000 shares of Common Stock with an exercise price of $0.10 and exercisable at any time until March 17, 2020, and (vi) the Company has approved the assignment of the note by CMS to the WL Meyer Legacy Trust as of the March 17, 2015 amendment. |
6. Technology Licenses |
12 Months Ended |
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Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 6 - Technology Licenses | Biomass North America Licensing, Inc. We own an exclusive license in the United States and Canada to use the Biomass Recovery Process (See Note 3 Mergers/Acquisitions). We have recorded a long-term asset of approximately $1.6 million for the value of this license. Amortization of this asset will begin upon commencement of the use of the Biomass Recovery Process.
In accordance with a November 2013 amendment, the Company has an exclusive license in the United States and Canada to use the Biomass Recovery Process and includes no performance requirements on the Company; the license agreement is for a term of 21 years from the date of the amendment or the life of any patent issued for the Biomass Recovery Process, including any amendments, modifications or extensions; and the license requires that the Company pay a royalty in the amount of $2.00 per ton of MSW used in the Biomass Recovery Process to the Licensor.
Bio-Products International, Inc. As disclosed in Note 5 - Patent, the Company acquired the PSC Patent in 2008 and as a result, became the licensor to Bio-Products for the PSC Patent pursuant to a Master License Agreement dated as of August 18, 2003 (the PSC License Agreement). Pursuant to the terms of the PSC License Agreement, Bio-Products (a wholly-owned subsidiary of Clean Earth Solutions, Inc., CES) is the exclusive licensee of the PSC Patent and has the right to sublicense the technology that is part of the PSC Patent (but not the BRP Patent) to any party. In addition, we are entitled to be paid 5% of any revenue derived by Bio-Products from the use of the technology and 40% of any sublicensing fees paid to Bio-Products for the use of the technology. The Master License Agreement is for a term of 20 years that commenced on August 18, 2003. On September 22, 2010, the Company sent a Notice of Breach to Bio-Products, which included removing the exclusivity of the license. We received a response from Bio-Products on November 5, 2010 disputing our claims. In February 2011, we became aware that Bio-Products effected a transfer of the license in violation of the PSC License Agreement. As a result, on March 21, 2011, we sent a notice of termination to Bio-Products and the transferee terminating the License Agreement. In June 2011, Steve Vande Vegte, a shareholder in CES, filed a lawsuit against various parties, including the Company. The only Cause of Action against the Company is for Declaratory Relief seeking to avoid our March 2011 termination of the license to which Mr. Vande Vegte is not a party. On August 5, 2011, the Company filed a demurrer requesting that the court dismiss the case on the grounds that Mr. Vande Vegte lacks standing to pursue a claim concerning the license and that the claim raised in the complaint is not ripe. The court granted our demurrer to dismiss Cleantech from this lawsuit on December 8, 2011.
All intangible assets are reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. An impairment charge is recognized if the carrying amount of an intangible asset exceeds its implied fair value. |
7. Debt |
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Note 7 - Debt |
Convertible Notes Payable - Since September 2008, the Company has conducted six offerings of units comprised of a convertible promissory note and a warrant, and one offering of a convertible note (with no warrant), having the terms set forth below:
Each note holder retains the option of a cash repayment of the note plus interest, or the note can be converted at any time during the term of the note or prior to the closing of any Qualifying Equity Financing (minimum capital received of $5 million), into shares of Common Stock at the conversion price noted above. All notes have been recorded as debt (notes payable) in the financial statements, net of discounts for the conversion and warrant features (except for the 11/10, 5/12, 2/14, and 2015 Offerings which carried no discounts). See Subsequent Event footnote for further disclosure regarding our notes.
2008 Offering - During September 2008, the Company commenced an offering of units and raised a total of $642,000 of investment proceeds through March 31, 2009. As of March 31, 2010, all of these notes had either been converted to shares of our common stock or exchanged into our 2009 Offering (resulting in new notes with a total face value of $539,829, which included the original principal and interest through the date of exchange).
2009 Offering - During April 2009, the Company commenced an offering of units and raised a total of $1,198,500 of investment proceeds through August 2010. Three notes have been converted to shares of Common Stock (one each in 2009, 2010, and 2014). Beginning in March 2011, certain notes were exchanged into our 11/10 Offering or our 7.1.15 Note Payable. As a result, as of December 31, 2015, we had $199,790 face value of notes outstanding, which includes the exchanged notes from our 2008 Offering. All of these notes have matured. We plan to work with each remaining note holder to exchange, convert or repay these notes.
6/10 Offering - During June 2010, the Company commenced an offering of units and raised a total of $75,000 of investment proceeds in one note. Upon maturity in June 2011, this note was exchanged into our 11/10 Offering. As a result, the balance due on this offering is $-0-.
11/10 Offering - During November 2010, the Company commenced an offering of units and raised a total of $451,713 of investment proceeds. Three notes were converted to shares of common stock during 2011 and four notes were converted to shares of common stock in 2012. As of December 31, 2015, we had $1,874,074 face value of notes outstanding, which includes the exchanged notes from our 2009 Offering. As of December 31, 2015, approximately $1.75 million of these notes matured. We plan to work with each remaining note holder to exchange, convert or repay these notes.
5/12 Offering - During May 2012, the Company commenced an offering of units and raised a total of $583,510 of investment proceeds. As of December 31, 2015, all of these notes were outstanding and have matured. We plan to work with each remaining note holder to exchange, convert or repay these notes.
2/14 Offering - During February 2014, the Company commenced an offering of units and raised a total of $100,000 of investment proceeds in one note. As of December 31, 2015, this note is outstanding and has matured. We plan to work with the note holder to exchange, convert or repay this note.
2015 Offering - During September 2015, the Company commenced an offering of units and, as of December 31, 2015, had raised a total of $85,000 of investment proceeds.
WL Meyer Legacy Trust (formerly CMS Acquisition, LLC) Note Payable - In September 2010, the Company issued a note in the amount of $100,000 (interest at 6.0% per annum through May 15, 2011 and 10.0% thereafter and secured by a security interest in the PSC Patent) and issued warrants to purchase 2,000,000 shares of Common Stock at a price of $0.05 per share. The note is due the earlier of: (i) September 17, 2016 pursuant to an amendment on March 17, 2015 or (ii) the date on which $500,000 or more in the aggregate is raised by the Company in future offerings. The warrants are exercisable at any time for five years from the date of issuance or reissuance. The value of these warrants has been recorded as a contra-balance amount discount with the note and was fully amortized (interest expense) as of February 28, 2011 (the original due date). As consideration in these amendments, the Company has: (i) paid $25,000 in February 2011 towards accrued interest to date and principal on the note, (ii) increased the interest rate to 10% as of May 15, 2011, (iii) re-dated the original warrants to March 17, 2015, (iv) issued new warrants for 300,000 shares of Common Stock with an exercise price of $0.05 and exercisable at any time until March 17, 2020, (v) issued new warrants for 150,000 shares of Common Stock with an exercise price of $0.10 and exercisable at any time until March 17, 2020, and (vi) the Company has approved the assignment of the note by CMS to the WL Meyer Legacy Trust as of the March 17, 2015 amendment. As of December 31, 2015, $77,696 face value of this note is outstanding.
7.1.15 Convertible Note Payable - On July 1, 2015, one noteholder in our 2009 Offering exchanged two notes into this note. This new note carries a 6% annual interest, compounded annually, and is due in quarterly installment payments: the greater of $3,000 or 10% of all investment proceeds received during the calendar quarter preceding the quarterly installment payment. As of December 31, 2015, the principal balance of this note was $17,377.
The discounts on all notes payable have been amortized on a straight-line basis over the original term of each note. All discounts were fully amortized and expensed as of June 30, 2011. The following is a summary of warrants issued and outstanding as of the dates below, at the exercise price and the amount of shares of Common Stock (these warrants have not been exercised or converted to common shares):
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8. Stockholders' Equity (Deficit) |
12 Months Ended |
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Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 8 - Stockholders' Equity (Deficit) | In August 2013, the Company commenced an offering of units, under a Subscription Agreement, at a purchase price of $1,000 per unit (Equity Offering 8/13). Each unit consists of: (i) 10,000 shares of the Companys authorized but unissued restricted Common Stock and (ii) warrants to purchase 30,000 additional shares of Common Stock for a three-year period from the date of issuance of the units at an initial exercise price of $0.15 per share. As of December 31, 2015, the Company issued 5,535,000 restricted shares (at $0.10 per share) of our Common Stock in exchange for $553,500 in investment in this offering. See Subsequent Event footnote for further updates to this offering and other share grants affecting Stockholders Equity.
In November 2013, the Company released 4,000,000 shares (at $0.012 per share) from escrow in accordance with the amended technology license previously disclosed in footnote 6.
In January 2014, the Company issued 500,000 restricted shares (at $0.012 per share) of our Common Stock per the consulting agreement with GWS Environmental Consultants. GWS has certain expertise and contacts in the collection, recycling, transfer, and disposal of MSW and will provide the Company consulting for a three-year period regarding these items.
In April 2014, the Board approved a grant to certain Board members and management for an aggregate of 4,250,000 shares of restricted common stock (at $0.008 per share). In January 2015, the Board approved a grant to a member of management for 500,000 shares of restricted common stock ($0.01 per share). The Board granted these awards in recognition of the efforts of the recipients towards the furtherance and implementation of the Companys strategic plan and to induce the recipients to continue those efforts on behalf of the Company. Based on the foregoing, the Board determined such grants were in the best interest of the Company and its stockholders.
In September 2014, a note receivable from a former director matured and was not paid. The note was originally issued in September 2009 to purchase shares of our common stock. As a result, 150,000 shares of restricted common stock, issued at $0.10 per share were forfeited and cancelled. In February 2015, a note receivable from a former director matured and was not paid. The note was originally issued in February 2010 to purchase shares of our common stock. As a result, 150,000 shares of restricted common stock, issued at $0.10 per share were forfeited and cancelled.
In October 2014, the Company issued 516,766 shares of restricted Common Stock ($0.08 per share) to an investor upon the conversion of a Convertible Note. |
9. Related Party Transactions |
12 Months Ended |
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Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 9 - Related Party Transactions | The Company has entered into stock purchase agreements with its executive officers and certain members of the Board of Directors. The executive officers and directors issued notes to the Company in exchange for their stock purchases. These notes and accumulated interest are recorded as notes receivable in Stockholders Deficit.
In September 2013, the Company hired, on a part-time basis, a Chief Technology Officer (CTO) and a VP-Business Development (VP-BD). These individuals maintain their engineering firm Fenton Engineering International (FEI) on a full-time basis and receive no salary in their part-time positions but are eligible for grants of stock options. We have used and continue to use their services. As of December 31, 2015, all amounts have been paid to FEI except for approximately $48,000.
Beginning in 2009, the Company has provided advances to two employees Ed Hennessey and Mike Kime. Mr. Kime resigned from his positions with the Company effective June 21, 2010. As of December 31, 2015 and 2014, the aggregate balances of advances totaled approximately $33,000 and $31,000, respectively. The balances are included in Prepaids and Other Current Assets on the Balance Sheet.
Two members of our current Board of Directors, James Russell and David Bransby, are parties in investments made in our convertible note offerings. As of December 31, 2015 and 2014, the aggregate amount due on these investments, including interest, is approximately $677,000 and $557,000, respectively. |
10. Share-based Payments |
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Note 10 - Share-based Payments | The Company recognizes share-based compensation expense for all share-based payment awards including stock options and restricted stock issued to employees, directors and consultants and is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The Company has no awards with market or performance conditions.
In March 2007, the Company assumed and adopted the 2007 Stock Option Plan (Stock Plan) for its employees, directors and consultants, which includes an equity compensation plan for non-employee directors pursuant to which stock options and shares of restricted stock may be granted. The Company currently has reserved a maximum of 14,000,000 shares of common stock to be issued for stock options or restricted shares awarded under the Stock Plan.
In February 2015, the Company granted options under the Stock Plan to purchase an aggregate of 350,000 shares of Common Stock to a consultant in which one-half vested immediately and the remaining options vest in February 2016, with an exercise price of $0.10. As of December 31, 2015, none of these options were cancelled or expired and 175,000 shares of these options were vested.
The estimated fair value of stock option grants is computed using the binomial option-pricing model. Generally, expected volatility is based on historical periods commensurate with contractual term of options. However, since we have no history of stock price volatility as a public company at the time of the grants, we calculated volatility by considering historical volatilities of public companies in our industry. The fair value for options granted was determined at the date of grant. The following assumptions were used for options granted in the corresponding year (no options were issued in 2014).
Stock option expense is recognized in the statements of operations ratably over the vesting period based on the number of options that are expected to ultimately vest. Our options have characteristics significantly different from those of traded options and changes in the assumptions can materially affect the fair value estimates. The following table presents the components of share-based compensation recorded as general and administrative expense (no new option grants were made in 2014 expense in 2014 relates to option grants made in prior years).
Related to all grants, the Company currently has no compensation expense for stock options for 2015. The potential tax benefit realizable for the anticipated tax deductions of the exercise of share-based payments pertaining to stock options totaled approximately $312,000 at December 31, 2015. However, due to the uncertainty that the tax benefits will be realized, these potential benefits were not recognized currently.
As of December 31, 2015, there was no unrecognized compensation cost related to all share-based payment arrangements. There are 508,333 options granted that are not yet vested as of December 31, 2015 and have a weighted-average exercise price of $0.10. These options will vest as follows: 175,000 shares in February 2016 and 333,333 shares in September 2016.
A summary of the Company's stock option activity and related information as of and for the three years ended December 31, 2015, is set forth in the following table:
The following table summarizes information about the Company's issuances of restricted stock as of and for the three years ended December 31, 2015:
The Company issued the following grants of restricted Common Stock outside of the Stock Plan: (i) in January 2015 for 500,000 shares to a member of management, (ii) in January 2014 for 500,000 shares to a consultant to provide services regarding the collection, recycling, transfer, and disposal of MSW, and (iii) in April 2014, to certain Board members and management for 4,250,000 shares. The shares issued to Board members and management were in recognition of the efforts of the recipients towards the furtherance and implementation of the Companys strategic plan and to induce the recipients to continue those efforts on behalf of the Company. Total expense related to these grants for the years ended December 31, 2015 and 2014 were $5,200 and $40,000, respectively, and is included in our general and administrative expense and professional fees expense, respectively. |
11. Income Taxes |
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Note 11 - Income Taxes | The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The Company incurred no income taxes for the years ended December 31, 2015, 2014 and 2013. The expected income tax benefit and resulting deferred tax asset for the years ended December 31, 2015, 2014 and 2013 is approximately $254,000, $278,000 and $256,000, respectively. These benefits are the result of temporary differences (start-up costs, stock compensation and other items) and operating loss carryforwards. The difference between the expected income tax benefit and non-recognition of an income tax benefit in each period is the result of a valuation allowance applied to deferred tax assets. A valuation allowance in the same amount of the benefit has been provided to reduce the deferred tax asset, as realization of the asset is not assured.
At December 31, 2015, the Company has the following net operating loss (NOL) carryforwards which are available to offset future taxable income.
This NOL results in a net deferred tax asset of approximately $799,000 for which the Company has recorded a full valuation allowance. The NOL carryforwards may be limited under the Change of Control provisions of the Internal Revenue Code section 382. Temporary differences which give rise to net deferred tax assets are:
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12. Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 12 - Commitments and Contingencies | Commitments Lease The Company leases approximately 1,800 square feet of office space for use as our corporate office, located at 7386 Pershing Ave. in St. Louis, Missouri. The original lease term expired and can be extended for two year periods at expiring terms and conditions (current term ends December 2016). Our monthly rent under the lease is $1,800 plus the cost of utilities.
Contingencies The Company currently has no open litigation or claims. |
13. Subsequent Events |
12 Months Ended |
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Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 13 - Subsequent Events | All of the promissory notes in our 2009, 5/12, and 2/14 Offerings and certain notes in our 11/10 Offering are now due. As of March 24, 2016, approximately $3.4 million is currently due, including interest. We are working with each remaining note holder to exchange, convert or repay these promissory notes.
In September 2015, the Company commenced a convertible note payable offering (2015 Offering). As of March 24, 2016, the Company has raised $85,000 of investment proceeds.
In August 2013, the Company commenced an offering of units, under a Subscription Agreement, at a purchase price of $1,000 per unit (Equity Offering 8/13). Each unit consists of: (i) 10,000 shares of the Companys authorized but unissued restricted Common Stock and (ii) warrants to purchase 30,000 additional shares of Common Stock for a three-year period from the date of issuance of the units at an initial exercise price of $0.15 per share. As of March 24, 2016, the Company has issued 6,385,000 restricted shares of our Common Stock in exchange for $638,500 in investment in this offering.
In February 2016, the Board approved common stock grants to a member of management, and certain board members, for 4.0 million shares, in the aggregate, of restricted common stock. Additionally, the Board approved the issuance of stock option agreements to a member of management and certain consultants for the purchase of 3.5 million shares, in the aggregate, of common stock. The Board granted these awards in recognition of the efforts of the recipients towards the furtherance and implementation of the Companys strategic plan and to induce the recipients to continue those efforts on behalf of the Company. Based on the foregoing, the Board determined the grants were in the best interest of the Company and its stockholders. All of the share grant awards vest immediately and were issued pursuant to Regulation D promulgated under the Securities Act of 1933, as amended (the Act), or Section 4(a)(2) of the Act, and will therefore be restricted securities as such term is used in Rule 144 of the Act. The value of this share grant, $52,800, will be recorded as selling, general & administrative expense. The option agreements were issued outside of the Companys 2007 Stock Option Plan and carry the following terms: seven year agreements, vesting in thirds ratably over three years, and are exercisable at the Companys closing stock price as of the date of the grant. The value of these options, if any, will be recorded as share-based comp in selling, general, & administrative expense.
In February 2016, the Company issued a stock option agreement to a consultant for the purchase of 100,000 shares of common stock. The option agreement was issued outside of the Companys 2007 Stock Option Plan and carries the following terms: seven-year agreement, vesting in thirds ratably over three years, and are exercisable at the Companys closing stock price as of the date of the grant. The value of these options, if any, will be recorded as share-based comp in selling, general, & administrative expense. |
14. Quarterly Financial Data (Unaudited) |
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Note 14 - Quarterly Financial Data (Unaudited) | The results of operations by quarter were as follows:
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2. Summary of Significant Accounting Policies (Policies) |
12 Months Ended | ||||||
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Dec. 31, 2015 | |||||||
Notes to Financial Statements | |||||||
Use of Estimates | Use of Estimates - The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates. |
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Consolidation | Consolidation - The financial statements include the accounts of CleanTech Biofuels, Inc. and its wholly owned subsidiaries, SRS Energy, Inc. and CTB Licensing, LLC. All significant intercompany transactions and balances are eliminated in consolidation. |
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Research and Development Costs | Research and Development Costs - Research and development expenditures (which are comprised of costs incurred in performing research and development activities including wages and associated employee benefits, facilities and overhead costs), including payments to collaborative research partners are expensed as incurred. |
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets - The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable primarily through reviewing changes in business plans and use of such assets. When factors indicate that an asset should be evaluated for possible impairment, the Company reviews long-lived assets to assess future use or recoverability of such asset. Impairments are recognized in earnings to the extent that the carrying value exceeds fair value. |
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Intellectual Property | Intellectual Property - Intellectual property, consisting of our licensed/owned patents and other proprietary technology, are stated at cost and will be amortized on a straight-line basis over their economic estimated useful life. Costs and expenses incurred in creating intellectual property are expensed as incurred. The cost of purchased intellectual property is capitalized. Amortization of these assets has not yet begun as the assets have not been placed in service as we have not yet commenced operations. |
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Property, plant and equipment | Property, plant and equipment - Newly acquired property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets, on the straight-line method for financial reporting purposes. Expenditures for maintenance and repairs are charged to expense as incurred. |
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Income Taxes | Income Taxes - The Company accounts for income taxes in accordance with accounting guidance, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between financial statement and tax accounting methods and any available operating loss or tax credit carry forwards. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses and tax credits that are available to offset future taxable income.
The standards on accounting for uncertainty in income taxes (incorporated into the FASB Accounting Standards Codification (Codification) Topic 740, Income Taxes) clarify the accounting and recognition for income tax positions taken or expected to be taken in the Companys income tax returns. The Companys income tax filings are subject to audit by various taxing authorities. The Companys open audit periods are 2012-2015. In evaluating the Companys tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes their estimates are appropriate based on facts and circumstances. |
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Convertible Notes Payable and Warrants | Convertible Notes Payable and Warrants The Company has issued various Convertible Promissory Notes (the Notes). These Notes may be converted at the option of the note holder into shares of the Companys common stock. Additionally, some of these Notes carry warrants for shares of the Companys common stock. These Notes have been recorded as debt (notes payable) in the financial statements, net of discounts, if any, for the conversion and warrant features. The discounts have been amortized on a straight-line basis over the term of each note. |
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Stock-based compensation | Stock-based compensation - The Company accounts for stock-based compensation in accordance with accounting guidance that requires measuring all stock-based compensation awards at fair value and recognizing an expense in the financial statements. In March 2007, the Company adopted the 2007 Stock Option Plan (Stock Plan) for its employees, officers, directors and consultants. The Company has reserved a maximum of 14,000,000 shares of common stock to be issued for stock options or shares of restricted stock under the Stock Plan. We compensate certain employees, officers, directors and consultants with stock-based payment awards and recognize compensation costs for these awards based on their fair values and expense is recognized over the requisite service period. The fair values of certain awards are estimated on the grant date using the Black-Scholes-Merton option-pricing formula, which incorporates certain assumptions including the expected term of an award and expected stock price volatility. Our key assumptions are described in further detail in the Share-Based Payments Note to the Consolidated Financial Statements. |
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Fair Value Measurement | Fair Value Measurement - We use fair value accounting and reporting to specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
As of December 31, 2015 and 2014, and during the years ended December 31, 2015, 2014, and 2013, we utilized Level 1 inputs to determine the fair value of cash equivalents and we utilized Level 2 inputs to determine the fair value of certain long-lived assets. |
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Restricted Stock Compensation | Restricted Stock Compensation From time to time, we issue restricted Common Stock to employees, directors, and consultants as compensation. The cost of these grants is recorded in general and administrative expense. The cost is determined using the amount of shares granted at a discount to the market value on the date of the grant. The discount is applied for a Lack of Marketability due to: (i) shares issued are unregistered shares and subject to Rule 144 of the Securities Act of 1933, (ii) minimal trading activity in our shares, only about 1/3rd of which are registered and free-trading shares, and (iii) the Company has yet to begin operations and has had no revenue. The Company issued shares in 2014 and 2015 as detailed further in Note 10, and in 2016 as detailed in Note 13. |
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Contingent Liabilities | Contingent Liabilities We are, from time to time, subject to litigation to our business. Assessments regarding the ultimate cost of lawsuits require judgments concerning matters such as the anticipated outcome of negotiations, the number and cost of pending and future claims, and the impact of evidentiary requirements. A significant amount of judgment and use of estimates is required to quantify our ultimate exposure in these matters. We regularly review the valuation of these liabilities and account for changes in circumstances for ongoing and emerging issues. The Company intends to defend itself vigorously in all litigation. |
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Dividends | Dividends - We have no material operating history and therefore have had no earnings to distribute to stockholders. We currently intend to retain our earnings, if any, and reinvest them in the development and growth of our business and do not foresee payment of a dividend in any upcoming fiscal period. |
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Net Loss per Common Share | Net Loss per Common Share - The Company calculates basic loss per share ("EPS") and diluted EPS. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS would reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. As of December 31, 2015, 2014 and 2013, the Company had options, warrants and convertible notes to purchase an aggregate of approximately 87 million, 78 million and 71 million shares of common stock, respectively, that were excluded from the calculation of diluted loss per share as their effects would have been anti-dilutive. Therefore, the Company only presents basic loss per share on the face of the statements of operations and in its disclosure of unaudited quarterly financial data in Note 14. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." This ASU amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements and related disclosures.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entitys ability to continue as a Going Concern. This ASU provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements and requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. This new guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We are currently assessing the impact the guidance will have on our consolidated financial statements and related disclosures.
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. This ASU removes 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 U.S. 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 a development stage entity that in prior years it had been in the development stage. This new guidance is effective for annual periods beginning on or after December 15, 2014 and interim periods within those years. Early application is permitted. The Company elected to early adopt this ASU for the annual period ended December 31, 2014. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU will supersede most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also specifies new accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers. This new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early application not permitted. In August 2015, the FASB approved a one-year deferral of the effective date of this ASU. This standard will now become effective beginning with the first quarter 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation by raising the threshold for a disposal to qualify as discontinued operations. This ASU will also require entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. This new guidance is effective for annual periods beginning on or after December 15, 2014 and interim periods within those years. Beginning in 2015, we will apply the new guidance, as applicable, to future disposals of components or classifications as held for sale.
There were various other accounting standards updates recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries, and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. |
4. Property and Equipment (Tables) |
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7. Debt (Tables) |
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10. Share-based Payments (Tables) |
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11. Income Taxes (Tables) |
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14. Quarterly Financial Data (Unaudited) (Tables) |
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Operations by quarter |
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2. Summary of Significant Accounting Policies (Details Narrative) - shares |
12 Months Ended | ||
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Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
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Notes to Financial Statements | |||
Anti-dilutive securrities | 87,000,000 | 78,000,000 | 71,000,000 |
4. Property and Equipment (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Property And Equipment Details | ||
Computers | $ 0 | $ 0 |
Furniture and fixtures | 15,799 | 15,799 |
Plant and equipment | 18,700 | 18,700 |
Gross total | 34,499 | 34,499 |
Accumulated Depreciation | (34,499) | (34,499) |
Total | $ 0 | $ 0 |
4. Property and Equipment (Details Narrative) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
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Property And Equipment Details Narrative | |||
Depreciation expense | $ 0 | $ 0 | $ 0 |
7. Debt (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Debt | ||
Total debt | $ 2,937,447 | $ 2,846,947 |
Current maturities | (2,852,447) | (2,846,947) |
Long-term portion, less current maturities | 85,000 | 0 |
2009 Offering [Member] | ||
Debt | ||
Total debt | 199,790 | 224,738 |
11/10 Offering [Member] | ||
Debt | ||
Total debt | 1,874,074 | 1,861,003 |
WL Meyer Legacy Trust Note Payable [Member] | ||
Debt | ||
Total debt | 77,696 | 77,696 |
05/12 Offering [Member] | ||
Debt | ||
Total debt | 583,510 | 583,510 |
02/14 Offering [Member] | ||
Debt | ||
Total debt | 100,000 | 100,000 |
(7.1.2015) [Member] | ||
Debt | ||
Total debt | 17,377 | 0 |
2015 Offering [Member] | ||
Debt | ||
Total debt | $ 85,000 | $ 0 |
7. Debt (Details 1) - $ / shares |
12 Months Ended | ||
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Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
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Number of warrants issued | 22,447,221 | 17,275,077 | 13,925,296 |
11/10 Offering | |||
Number of warrants issued | 842,221 | 798,649 | 1,628,126 |
Warrant exercise price | $ 0.30 | ||
05/12 Offering | |||
Number of warrants issued | 0 | 571,428 | 1,667,170 |
Warrant exercise price | $ 0.35 | ||
2015 Offering [Member] | |||
Number of warrants issued | 2,550,000 | 0 | 0 |
Warrant exercise price | $ 0.15 | ||
Investor In Subscription Agreements | |||
Number of warrants issued | 16,605,000 | 13,605,000 | 6,180,000 |
Warrant exercise price | $ 0.15 | ||
WL Meyer Legacy Trust [Member] | |||
Number of warrants issued | 2,300,000 | 2,300,000 | 2,150,000 |
Warrant exercise price | $ 0.05 | ||
WL Meyer Legacy Trust 1 [Member] | |||
Number of warrants issued | 150,000 | 0 | 0 |
Warrant exercise price | $ 0.10 | ||
Vertex 1 [Member] | |||
Number of warrants issued | 0 | 0 | 1,800,000 |
Warrant exercise price | $ 0.11 | ||
Vertex 2 [Member] | |||
Number of warrants issued | 0 | 0 | 500,000 |
Warrant exercise price | $ 0.10 |
9. Related Party Transactions (Details Narrative) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Related Party Transactions | ||
Amount paid to FEI | $ 48,000 | |
Aggregate balances of advances, employees | 33,000 | $ 31,000 |
Aggregate amount of investments, including interest by board members | $ 677,000 | $ 557,000 |
10. Share-based Payments (Details) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Risk-free interest rate, minimum | 0.77% | ||
Risk-free interest rate | 0.85% | 0.00% | |
Risk-free interest rate, maximum | 1.44% | ||
Dividend yield | 0.00% | 0.00% | 0.00% |
Volatility, minimum | 15.46% | ||
Volatility | 15.99% | 0.00% | |
Volatility, maximum | 16.49% | ||
Expected term (years) | 3 years 9 months | 0 years | |
Weighted-average Fair Value | $ 0.00 | $ 0.00 | $ 0.00 |
Minimum [Member] | |||
Expected term (years) | 3 years 7 months 21 days | ||
Maximum [Member] | |||
Expected term (years) | 4 years 6 months |
10. Share-based Payments (Details 1) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Pre-tax compensation expense: | |||
Stock options | $ 0 | $ 2,128 | $ 6,470 |
Warrants | 0 | 0 | 0 |
Total expense | 0 | 2,128 | 6,470 |
Tax benefit, net | 0 | 0 | 0 |
After-tax compensation expense | $ 0 | $ 2,128 | $ 6,470 |
10. Share-based Payments (Details 2) - $ / shares |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
||||
Stock option activity | ||||||
Options outstanding, begining | 11,947,000 | 11,947,000 | 10,242,000 | |||
Granted | 350,000 | 2,000,000 | ||||
Forfeited | (100,000) | (295,000) | ||||
Options outstanding, ending | 12,197,000 | 11,947,000 | 11,947,000 | |||
Options exercisable | 11,688,667 | |||||
Options outstanding, weighted average exercise price, begining | $ 0.10 | $ 0.10 | $ 0.11 | |||
Granted, weighted average exercise price | 0.10 | 0.06 | ||||
Forfeited, weighted average exercise price | 0.58 | 0.09 | ||||
Options outstanding at, weighted average exercise price, begining | 0.10 | $ 0.10 | 0.10 | |||
Options exercisable at weighted average exercise price | 0.10 | |||||
Options outstanding, Aggregate intrinsic value, begining | [1] | 0 | 0 | 0 | ||
Options outstanding, Aggregate intrinsic value, ending | [1] | 0 | $ 0 | $ 0 | ||
Options exercisable at Aggregate intrinsic value | [1] | $ 0 | ||||
|
10. Share-based Payments (Details 3) - Restricted Stock [Member] - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Restricted shares issued | |||
Beginning balance | 1,320,000 | 1,470,000 | 1,470,000 |
Granted | 0 | 0 | 0 |
Forfeited | (150,000) | (150,000) | 0 |
Ending Balance | 1,170,000 | 1,320,000 | 1,470,000 |
Restricted Stock Weighted-Avg Issuance Price | |||
Weighted Average Price, Beginning | $ 0.10 | $ 0.10 | $ 0.10 |
Weighted Average Price, restricted stock granted | 0.00 | ||
Weighted Average Price, restricted stock forfeited | 0.10 | 0.10 | 0.00 |
Weighted Average Price, Ending | $ 0.10 | $ 0.10 | $ 0.10 |
11. Income Taxes (Details) |
Dec. 31, 2015
USD ($)
|
---|---|
Net operating loss | $ 1,936,000 |
Year 2026 | |
Net operating loss | 18,000 |
Year 2027 | |
Net operating loss | 149,000 |
Year 2028 | |
Net operating loss | 669,000 |
Year 2029 | |
Net operating loss | 928,000 |
Year 2030 | |
Net operating loss | 28,000 |
Year 2032 | |
Net operating loss | 51,000 |
Year 2033 | |
Net operating loss | 52,000 |
Year 2034 | |
Net operating loss | 18,000 |
Year 2035 | |
Net operating loss | $ 23,000 |
11. Income Taxes (Details 1) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Income Taxes Details 1 | ||
Start-up costs | $ 975,000 | $ 930,000 |
Net operating loss carryforward | 799,000 | 790,000 |
Accrual to cash conversion | 1,687,000 | 1,487,000 |
Share-based compensation related to stock options | 312,000 | 312,000 |
Other | 6,000 | 6,000 |
Total | 3,779,000 | 3,525,000 |
Valuation allowance | (3,779,000) | (3,525,000) |
Net deferred tax asset | $ 0 | $ 0 |
11. Income Taxes (Details Narrative) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Income Taxes Details Narrative | |||
Expected income tax benefit and resulting deferred tax asset | $ 254,000 | $ 278,000 | $ 256,000 |
Net deferred tax asset | $ 799,000 |
14. Quarterly Financial Data (Unaudited) (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Costs and expenses: | |||||||||||
General and administrative | $ 89,959 | $ 88,278 | $ 85,278 | $ 100,418 | $ 92,204 | $ 102,081 | $ 135,401 | $ 96,156 | $ 363,933 | $ 425,842 | $ 385,719 |
Professional fees | 16,420 | 20,615 | 15,990 | 28,082 | 15,300 | 21,080 | 23,576 | 32,705 | 81,107 | 92,661 | 100,191 |
Costs and Expenses | 106,379 | 108,893 | 101,268 | 128,500 | 107,504 | 123,161 | 158,977 | 128,861 | 445,040 | 518,503 | 485,910 |
Other expense (income): | |||||||||||
Interest | 54,121 | 52,544 | 50,579 | 49,484 | 50,092 | 50,444 | 49,158 | 46,738 | 206,728 | 196,432 | 178,872 |
Other (income) expense | (1,713) | (1,669) | (1,631) | 3,341 | (1,881) | 3,002 | (2,114) | (2,083) | (1,672) | (3,076) | (8,098) |
Net loss applicable to common stockholders | $ 158,787 | $ 159,768 | $ 150,216 | $ 181,325 | $ 155,715 | $ 176,607 | $ 206,021 | $ 173,516 | $ 650,096 | $ 711,859 | $ 656,684 |
14. Quarterly Financial Data (Unaudited) (Details Narrative) - $ / shares |
3 Months Ended | 12 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|||||||||||
Quarterly Financial Data Details Narrative | |||||||||||||||||||||
Basic net loss per common share less than | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.00 | [1] | $ 0.01 | $ 0.01 | $ 0.01 | ||
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