BLUE BIOFUELS, INC. - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarter ended March 31, 2016

Commission File Number: 000-54942

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

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

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

Common Stock $.001 par value

There were 52,166,742 shares of common stock outstanding as of May 13, 2016

TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

Alliance BioEnergy Plus, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

See accompanying notes to financial statements

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Alliance BioEnergy Plus, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

See accompanying notes to financial statements

2

Alliance BioEnergy Plus, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes to financial statements

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ALLIANCE BIOENERGY PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2016

NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION

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

Plan of Operation

The Company is focused on one industry – Renewable Energy. Through its wholly-owned subsidiary, AMG Renewables, LLC, which in turn owns controlling interests in AMG Energy Group, LLC, and Ek Laboratories, Inc., the Company has a strategy that includes growth in its energy-related activities as well as mergers and acquisitions and start-up activities which are focused on development of an increasing revenue stream, secure market share and enhancement of shareholder value.

AMG RENEWABLES, LLC

AMG Renewables, LLC, a Florida limited liability company (“AMG Renewables”), is a wholly-owned subsidiary of the Company, created for the purpose of managing and developing the Company’s renewable energy technology enterprises. AMG Renewables had one wholly-owned subsidiary, Carbolosic Plant 1, LLC, a Florida limited liability company (“Carbolosic Plant 1”), and two majority owned subsidiaries, AMG Energy Group, LLC, a Florida limited liability company (“AMG Energy”) and Ek Laboratories, Inc., a Florida corporation (“EK”) formerly known as Central Florida Institute of Science and Technology, Inc.

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The Company believes that its management and consultants have significant experience in the bio-fuels, renewable energy and chemical manufacturing industries. As of the date of filing, the Company has not generated any revenues from its renewable energy business.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred losses since inception, has a working capital deficiency of $2,245,707 and may be unable to raise further equity. At March 31, 2016 the Company had incurred accumulated losses of $17,738,528 since its inception. The Company expects to incur significant additional liabilities in connection with its start-up activities. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses. These Financial Statements do not include any adjustments related to the recoverability and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty. There are no assurances that the Company will continue as a going concern.

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

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

Through its private offerings, the Company raised $3,730,390 from inception through December 31, 2015 and raised an additional $1,914,470 in the three months ended March 31, 2016.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

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

Stock Compensation

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

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Stock-based Compensation Valuation Methodology

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

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

Accounting and Reporting of Discontinued Operations

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

Property and Equipment

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

Convertible Instruments

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

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

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

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Common Stock Purchase Warrants and Other Derivative Financial Instruments

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

Non-controlling interest in consolidated subsidiaries

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

Investments in non-consolidated affiliates

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

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

Impairment of Long Lived Assets

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

Income Taxes

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

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

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Profit (Loss) per Common Share:

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

Fair Value Measurements

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

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

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

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

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

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

Recent Accounting Pronouncements

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

NOTE 4 – INVESTMENT IN UNCONSOLIDATED AFFILIATES

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

On May 13, 2015, The Company entered an agreement with Carbolosic SA’s shareholders whereby, among other matters, it was agreed that ownership of Carbolosic SA shall be 43.5% for Tes Projects (Pty) Ltd, a South African company (“Tes”), 24.5 % for Spearhead Capital Ltd, a Seychelles company (“Spearhead”), 7.5% for Jupiter Trust, a South African Trust (“Jupiter”) and 24.5% for Alliance BioEnergy Plus, Inc. TES, Spearhead and Jupiter are all unrelated to the Company. The interests of Tes and Jupiter are delivered in consideration of the funding or guarantee of funding of the License Fee; Spearhead’s interest is in consideration of facilitating the Sublicense transaction; and the Company’s interest is in exchange for the delivery to Carbolosic SA of a 24.5% interest in one of the Company’s CTS sugar extracting plants to be developed in the United States. The Company’s investment in Carbolosic SA is accounted for using the equity method of accounting.

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The following is a condensed balance sheet of the unconsolidated affiliates as of March 31, 2016 and December 31, 2015 and a comparative statement of operations for the three months ending March 31, 2016 and 2015.

Condensed Balance Sheet of Non-Consolidated Affiliates

NOTE 5 – DEBT

Short Term Notes Payable - Related Parties

Throughout 2013, the Company issued unsecured short-term notes payable to various related parties, including officers and directors of the Company, with a term of one year, which have since been extended. At March 31, 2016 there was one consolidated note outstanding to Palm Beach Energy Solutions, LLC. The note has an outstanding principal balance of $71,000 and bears interest at a rate of 5% per annum. As of March 31, 2016 and December 31, 2015, the total interest accrued on the note was $9,921 and $9,036 respectively.

Short Term Notes Payable – Other

On July 7, 2015, the Company entered into a six month (6) promissory note with St. George Investments, LLC with a face amount of $265,000 less an original issue discount of $65,000. This note does not accrue interest, however in the event of default, the note shall bear interest at the lesser of the rate of eighteen percent (18%) per annum or the maximum rate permitted by law compounding daily. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the company repaid this note in full. The total amount paid was $306,890, which represented a $265,000 principal balance and $41,890 in default interest and early payment penalties.

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Long Term Notes Payable – Other

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

Convertible Debt

On June 30, 2015, the Company entered into a convertible debenture with Iconic Holdings, LLC with a principal balance of $165,000 due on or before June 30, 2016. This note provided for “guaranteed” interest of ten percent (10.0%) of the principal balance outstanding. In addition to the “guaranteed” interest, in the event of default additional interest would accrue at the rate equal to the lower of eighteen percent (18.0%) per annum or the highest rate permitted by law. This note could only be prepaid within the first 180 days along with a prepayment penalty of one hundred ten percent (110%) and increasing ten percent (10%) every sixty (60) days to a maximum of one hundred thirty percent (130%). After 180 days, the note could be converted into the Company’s common stock at a conversion rate equal to sixty percent (60%) of the lowest trading price during the preceding 15 consecutive trading days prior to date of conversion. In addition, in order to obtain this note, the Company issued Iconic Holdings, LLC a five (5) year common stock purchase warrant agreement for up to 50,000 shares with an exercise price of $0.75 per share. These warrants were fully granted and vested at time of issuance and are being amortized over the life of the agreement. In January 2016, Iconic Holdings, LLC converted $95,000 of the principal balance into 891,042 shares of unrestricted common stock and the remaining balance of the note was repaid in full. The total amount paid was $140,950, which represented a $70,000 principal payment and $70,950 in interest and early payment penalties.

On July 10, 2015, the Company entered into a convertible debenture with JSJ Investments, Inc with a principal balance of $150,000 due on or before January 10, 2016. The note accrues interest at a rate of twelve percent (12%) per annum and is convertible into the Company’s common stock one hundred eighty (180) days after the maturity date, in whole or in part at the option of the holder at a conversion price equal to the lower of $0.24 or the lowest trading day price during the twenty (20) trading days preceding the conversion date, less a forty-five percent (45%) discount. After the maturity date, the note cannot be repaid without the holder’s consent and the payment premium increases to one hundred fifty percent (150%). Upon an event of default or after the maturity date, the interest rate shall adjust to eighteen percent (18%) per annum and compound quarterly. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, JSJ Investments attempted to convert a portion of the debt in violation of a mutually agreed upon amendment to the note and mutually agreed upon standstill agreement between the Company and JSJ Investments. The shares in question were returned and cancelled after being notified by the Company’s attorney. In March 2016, JSJ Investments made a second attempt to convert a portion of its debt in violation of the mutually agreed upon amendment to the note. Shares were not converted this time. A third attempt, made in late March 2016, converted $25,000 for 195,924 shares of unrestricted common stock. The conversion violated the terms of the debt agreement and the Company and its counsel have notified JSJ of the violation of the agreement and have recouped all of the issued shares. In April 2016, the Company paid the debenture in full with a payment of $239,055, which represented a $150,000 principal payment and $89,055 in interest and penalties.

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

On July 27, 2015, the Company entered into a convertible debenture with Adar Bays, LLC with a principal balance of $100,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder at a conversion price equal to sixty percent (60%) of the lowest trading day price during the twenty (20) trading days preceding the conversion date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent (150%). Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%) and the interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $149,022, which represented a $100,000 principal payment and $49,022 in interest and early payment penalties.

On July 27, 2015, the Company entered into a convertible debenture with Union Capital, LLC with a principal balance of $100,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder at a conversion price equal to sixty percent (60%) of the lowest trading day price during the twenty (20) trading days preceding the conversion date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent (150%). Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%) and the interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $148,748, which represented a $100,000 principal payment and $48,748 in interest and early payment penalties.

On July 27, 2015, the Company entered into a convertible debenture with LG Capital Funding, LLC with a principal balance of $105,000 due on or before March 27, 2016. The note accrued interest at a rate of eight percent (8%) per annum and was convertible into the Company’s common stock commencing on the 6 month anniversary of the note, in whole or in part at the option of the holder at a conversion price equal to sixty percent (60%) of the lowest trading day price during the fifteen (15) trading days preceding the conversion date. The note also carried a payment premium, wherein if the note was paid before the ninetieth (90) day, then a premium of one hundred thirty-five percent (135%) in addition to outstanding interest was due. If paid between day ninety-one (91) and one hundred fifty-one (151) the premium increased to one hundred forty percent (140%) and if paid between day one hundred fifty-two (152) and the maturity date, then the premium increased to one hundred forty-five percent (145%). After the maturity date, the note could not be repaid without the holder’s consent and the payment premium increased to one hundred fifty percent (150%). Upon an event of default or after the maturity date, the outstanding principal due shall increase by ten percent (10%) and the interest rate shall adjust to twenty-four percent (24%) per annum. In addition, a ten percent (10%) broker commission was paid to Wellington Shields & Co. LLC, which is being amortized over the life of the note. In January 2016, the Company paid the debenture in full with a payment of $156,462, which represented a $105,000 principal payment and $51,462 in interest and early payment penalties.

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On August 10, 2015, the Company entered into a convertible debenture with Vis Vires Group, Inc. with a principal balance of $104,000 due and payable on or before May 4, 2016. The note accrued interest at a rate of eight percent (8.0%) per annum and was convertible into the Company’s common stock, after 180 days, in whole or in part at the option of the holder at a conversion rate equal to the average of the three (3) lowest trading day prices during the ten (10) trading days preceding the conversion date, less a thirty-nine percent (39%) discount. The note also carried a prepayment penalty of one hundred thirty percent (130%) of the then outstanding principal and interest balance due, if the note was paid back within the first one hundred eighty (180) days. After the first 180 days, the then outstanding principal and interest balance shall bear interest at a rate of twenty-two percent (22.0%) per annum and could not be paid until maturity. In January 2016, the Company paid the note in full with a payment of $139,303, which represented a $104,000 principal payment and $35,303 in interest and early payment penalties.

NOTE 6 – STOCKHOLDERS’ EQUITY

In November 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of common stock, one (1) three-year Series C warrant convertible to .5 common share at an exercise price of $0.45 and one (1) three-year series D warrant convertible to .5 common share at an exercise price of $0.65. At December 31, 2015, the Company had sold 960,897 units for aggregate proceeds of $312,000. During the three months ended March 31, 2016 the company sold an additional 500,000 units for aggregate proceeds of $89,000. The offering is ongoing.

During the three months ended March 31, 2016, an additional $115,000 of the Company’s convertible debt converted to 1,048,460 shares of common stock. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversions, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was greater than the conversion price, and therefore a total value of $218,301 was attributed to the beneficial conversion feature.

In January 2016, the Company commenced a new offering of units valued at $0.24 per share. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. During the three months ended March 31, 2016, the Company has sold 1,225,001 units for aggregate proceeds of $294,000. The offering is ongoing.

In March 2016, the Company commenced a new offering of units valued at $765,735. Each unit consists of three million seven hundred seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000) five-year series F warrants convertible to one (1) share of common stock each at an exercise price of $0.25. As of the date of filing, the Company has sold 2 units totaling 7,435,570 shares of common stock and 9,000,000 warrants for aggregate proceeds of $1,531,470.

During the three months ended March 31, 2016, the Company issued 415,000 shares of Company common stock for services valued at $164,500.

During the three months ended March 31, 2016, the Company issued an aggregate of 425,000 warrants for services. Using a Black-Scholes asset pricing model, these warrants were valued at $129,572. These warrant agreements have terms ranging from three years (3) to five years (5) with exercise prices ranging from forty-five cents ($0.45) to two dollars ($2.00) per share.

During the three months ended March 31, 2016, the Company issued options to its independent directors to purchase an aggregate of 35,400 shares of common stock for a period of three (3) years at an average exercise price of $0.45. In addition, the Company also approved employee stock options to purchase 250,000 shares of common stock at an average exercise price of $0.30 and a term of five (5) years. In addition, 333,334 options issued under an employment agreement became fully vested. Using a Black-Scholes asset pricing model, these agreements were valued at $190,720.

During the three months ended March 31, 2016, the Company received $6,526 in disgorgement from certain shareholders and officers.

NOTE 7 – SEGMENT INFORMATION

The company operates in one segment and does not have any revenue to date.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lease

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

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

Rent expense for the three months ended March 31, 2016 and March 31, 2015 was $31,496 and $34,428 respectively.

NOTE 9 – RELATED PARTY TRANSACTIONS

Related Transactions

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

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

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

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

NOTE 10 – DISCONTINUED OPERATIONS

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

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

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

NOTE 11 – SUBSEQUENT EVENTS

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

Since April 1, 2016, the Company has issued 250,000 shares of common stock for services valued at $65,000.

Since April 1, 2016, the Company has issued an aggregate of 510,000 warrants for services. Using a Black-Scholes asset pricing model, these warrants were valued at $123,845. These warrant agreements have a term of five years (5) and an exercise price of forty-five cents ($0.45) per share.

Since April 1, 2016, the Company has sold 208,433 units for aggregate proceeds of 50,024 through its January 2016 offering.

On April 20, 2016 the entered into an agreement with the newly formed innovative technology fund of JMJ Financial Group, out of their California office. The Agreement provides a line of credit to the Company of up to $1,000,000 and may be drawn down over the course of one year and that the Company issue one million three hundred eighty eight thousand eight hundred and eighty six warrants with a five year term and cashless exercise price equal to the lesser of $.30 per share or the lowest trade price in the preceding ten trading days. Using a Black-Scholes asset-pricing model, these warrants were valued at $352,878. The terms of the agreement provide that any draw be in the form of a convertible note that matures at twelve months and carries a one-time interest rate of ten percent. Ninety eight percent of the notes may be paid early at one hundred and eighty days from their issuance for an early payment penalty of thirty percent. After one hundred and eighty days repayment requires the holders consent. The notes may be converted into shares of the Company at a discount of twenty five percent to the lowest trade price in the preceding ten days, only after 180 days from the Effective Date of the Agreement. The notes also carry a one-time ten percent original issue discount.

On April 25, 2016 the Company drew $500,000 against the aforementioned agreement under the terms and conditions previously disclosed.

On April 25, 2016, the Company repaid its convertible debenture with JSJ Investments, Inc. The total amount paid was $239,055 representing a $150,000 principal payment and $89,055 in interest and penalties.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The following discussion should be read in conjunction with our unaudited financial statements and the notes thereto.

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Forward-Looking Statements

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

Business Overview

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

Plan of Operation

The Company is focused on one industry – Renewable Energy. Through its wholly-owned subsidiary, AMG Renewables, LLC, which in turn owns controlling interests in AMG Energy Group, LLC, and EK Laboratories, Inc., the Company has a strategy that includes growth in its energy-related activities as well as mergers and acquisitions and start-up activities which are focused on development of an increasing revenue stream, secure market share and enhancement of shareholder value.

AMG RENEWABLES, LLC

AMG Renewables, LLC, a Florida limited liability company (“AMG Renewables”), is a wholly-owned subsidiary of the Company, created for the purpose of managing and developing the Company’s renewable energy technology enterprises. AMG Renewables has two majority owned subsidiaries, AMG Energy Group, LLC, a Florida limited liability company (“AMG Energy”) and Ek Laboratories, Inc, a Florida corporation (“EK”).

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The Company believes that its management and consultants have significant experience in the bio-fuels, renewable energy and chemical manufacturing industries. As of this date, the Company has not generated any revenues from its renewable energy business.

Capital Formation

From January 1, 2016 through the date of filing, the Company has issued 665,000 shares of Company common stock for services valued at $229,500.

From January 1, 2016 through the date of filing, the Company issued an aggregate of 935,000 warrants for services. Using a Black-Scholes asset pricing model, these warrants were valued at $253,417. These warrant agreements have terms of five years (5) with exercise prices ranging from forty-five cents ($0.45) to two dollars ($2.00) per share.

From January 1, 2016 through the date of filing, the Company issued options to its independent directors to purchase an aggregate of 35,400 shares of common stock for a period of three (3) years at an average exercise price of $0.45. In addition, the Company also approved employee stock options to purchase 250,000 shares of common stock at an average exercise price of $0.35 and a five year (5) term. In addition, 333,334 options became fully vested during the period. Using a Black-Scholes asset pricing model, these agreements were valued at $190,720.

In November 2015, the Company commenced a new offering of units valued at eight-five (85%) percent of the average of the last three days closing market share price. Each unit consists of one (1) share of common stock, one (1) three-year Series C warrant convertible to .5 common share at an exercise price of $0.45 and one (1) three-year series D warrant convertible to .5 common share at an exercise price of $0.65. From January 1, 2016 through the date of filing, the company has sold 500,000 units for aggregate proceeds of $89,000. The offering is ongoing.

In January 2016, the Company commenced a new offering of units valued at $0.24 per share. Each unit consist of one (1) share of common stock and one (1) five-year Series E warrant convertible to one (1) common share at an exercise price of $0.45. As of the date of filing, the Company has sold 1,433,434 units for aggregate proceeds of $344,024. The offering is ongoing.

In March 2016, the Company commenced a new offering of units valued at $765,735. Each unit consists of three million seven hundred seventeen thousand seven hundred eighty-five (3,717,785) shares of common stock and four million five hundred thousand (4,500,000) five-year series F warrants convertible to one (1) share of common stock each at an exercise price of $0.25. As of the date of filing, the Company has sold 2 units totaling 7,435,570 shares of common stock and 9,000,000 warrants for aggregate proceeds of $1,531,470.

From January 1, 2016 through the date of filing, $115,000 of the Company’s convertible debt converted to 1,048,460 shares of common stock. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversions, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was greater than the conversion price, and therefore a total value of $218,301 was attributed to the beneficial conversion feature.

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In April 2016, the Company issued 1,388,886 warrants to acquire a convertible note. Each warrant is convertible into one (1) share of common stock at an exercise price of $0.30 per share or the lowest trade price in the preceding 10 trading days. The term on these warrants is 5 years. Using a Black-Sholes asset pricing model, the warrants were valued at $352,878.

Going Concern

The Company has incurred losses since inception, has a working capital deficiency, and may be unable to raise further equity. At March 31, 2016 the Company had a working capital deficiency of $2,245,707 and had incurred accumulated losses of $17,738,528 since its inception. The Company expects to incur significant additional losses in connection with its continued start-up activities. As a result, the report of the Company’s independent registered public accounting firm on the Company’s financial statements for the period ended December 31, 2015 contains an emphasis of matter paragraph regarding the Company’s ability to continue as a going concern based upon recurring operating losses and its need to obtain additional financing to sustain operations. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses. Furthermore, these Financial Statements do not include any adjustments related to the recoverability and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.

Through its private offerings, the Company raised $1,162,209 for the year ended December 31, 2015 and an additional $1,914,470 in the three months ended March 31, 2016.

Results of Operations

Comparison of the period ended March 31, 2016 to March 31, 2015

For the three months ended March 31, 2016, the Company’s general and administrative expenses increased by approximately $262,368 to $1,281,623 from $1,019,255 in the three months ended March 31, 2015. This increase is primarily the result of a $291,930 increase in professional fees, $80,349 increase in loan fees and $37,367 increase in marketing fees, while simultaneously decreasing payroll expense by $150,615 and decreasing travel $16,696. Of the $1,280,066 general and administrative expense, approximately 60% or $763,989 is non-cash equity compensation.

Interest expense increased in the three months ended March 31, 2016 by approximately $414,012 to $428,985 from $14,973 during the three months ended March 31, 2015. The increase was the result of $401,661 in early payment penalties and $27,324 interest accrued on notes payable.

For the three months ended March 31, 2016, the Company’s equity loss in its unconsolidated affiliates increased $1,740 to $41,330 from $39,590 during the three months ended March 31, 2015.

The Company’s discontinued operations showed a loss of $3,198 for the three months ended March 31, 2016, compared to a $678,360 gain incurred in the three months ended March 31, 2015. This loss was the result of legal fees in connection with ongoing litigation. These amounts are the result of the Company’s decision in September 2014 to divest the Company of its entertainment-related assets and subsidiaries and to focus all of the Company’s resources and personnel on the Company’s renewable energy holdings and future energy technologies.

Research and development (R&D) expenses for the three months ended March 31, 2016 were $4,234 as opposed to zero for the three months ended March 31, 2015. The increase in R&D expenses is the result of the opening of Ek Laboratories, Inc. in June 2015 and its purchases of gasses and other fine grade materials used in the CTS process.

Liquidity and Capital Resources

Liquidity

As of March 31, 2016 the Company had $61,164 in cash and total stockholders’ equity was $6,197,642. Total debt from continuing operations, including advances, accounts payable and other notes payable at March 31, 2016, together with interest payable thereon, was $2,626,294 a decrease of $2,470,388 from $5,096,682 at December 31, 2015. This decrease is attributable to the satisfaction of $1,250,000 in long term debt and the repayment of $1,114,000 in convertible debt.

During the three months ended March 31, 2016, the Company’s continuing operating activities used $832,240 in cash. This use can be attributed to the sale of Carbolosic Plant 1 which resulted in an aggregate net amount of $1,163,609.

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During the three months ended March 31, 2016 the Company’s investing activities used $87,448 in cash, which $81,249 was advanced to Carbolosic, LLC mainly for payment of the minimum annual royalty.

During the three months ended March 31, 2016, the Company generated $921,996 through its financing activities. This can primarily be attributed to the retirement of $734,000 in convertible debt and $265,000 in notes payable, while simultaneously raising $1,914,470 through its ongoing offerings.

Capital Resources

At this time, the Company has limited liquidity and capital resources. To continue funding the Company’s operations, the company will need to generate revenue and/or will require additional funding for ongoing operations and to finance such projects it may identify. As of March 31, 2016, the Company has raised $1,914,470 in addition to $3,730,390 raised through December 31, 2015 for a total of $5,644,860 through its private placement offerings. However, there is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.

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

Critical Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) for interim financial information set forth in Regulation S-X and include the assets, liabilities, revenues and expenses of the Company’s majority-owned subsidiaries over which the Company exercises control. Intercompany transactions and balances were eliminated in consolidation. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other period. For further information, refer to the financial statements and footnotes thereto for the period ended December 31, 2015.

Principles of Consolidation

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

Use of Estimates

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

Stock Compensation

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

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Convertible Instruments

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

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

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

Recent Accounting Pronouncements

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

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

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

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Off-Balance Sheet Arrangements

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

Seasonality

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

Inflation

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

Contractual Obligations

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

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

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s President (“President”), the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation the Company’s CEO, President and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2016 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

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

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

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

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

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

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

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

Remediation Plan

Management is sensitive to the issues presented and intends to take appropriate action when the Company’s financial resources permit. In April 2014, the Company hired a Corporate Controller and intends to hire additional support staff when its financial resources permit. Management will continue to review and make necessary changes to the overall design of its internal control environment.

(c) Reclassification of prior Period Financial Statements

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

(d) Changes in Internal Control over Financial Reporting

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

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business. As of the date of filing, the only material litigation, claims or suits whose outcomes could have a material effect on the Company’s financial statements are as follows:

Creative Licensing Litigation.

During 2013, the Company’s wholly-owned subsidiary, AMG Television, LLC (“AMG Television”), had entered into agreements (collectively, the “Creative Licensing Agreement”) to acquire (i) the partially completed American Idol style reality series World Star (formerly Recreating A Legend) for a $600,000 cash payment plus 1,600,000 shares of Company Common Stock and (ii) the completed documentary Making of a Saint: The Journey to Sainthood for a $100,000 cash payment plus 267,000 shares of Company Common Stock. Subsequently, on April 25, 2014, the Company and AMG Television notified the sellers that it was rescinding both transactions due to a breach of the Creative Licensing Agreement in that the sellers misled AMG Television regarding the status and ownership of the rights and failed to provide agreed documentation required in order to permit exploitation of the projects. In the legal action filed in the Circuit Court of the 15th Judicial Circuit in Palm Beach County Florida (Alliance Media Group Holdings, Inc. and AMG Television, LLC v. Creative Licensing International, LLC, et. al. case no. 502014CA005033XXXXMBAF), the Company and AMG Television allege that Creative Licensing International, LLC and 28 individual defendants (including Roy A. Sciacca and Lisa Colletti) breached the Creative Licensing Agreement and fraudulently induced AMG Television to enter into the Creative Licensing Agreement. The Company and AMG Television amended their complaint in the matter on May 14, 2014. The Company and AMG Television are seeking the rescission of the Creative Licensing Agreement, return of the Company stock issued and cash delivered in connection therewith and other and further damages suffered by the Company in an amount to be determined at the time of trial. As of December 31, 2014, The Company and AMG Television had reached settlements (the “Settlement”) with seven of the twenty-eight named defendants and the Company had canceled a net of 116,872 shares of common stock which have been tendered to the Company. In February 2015, the Company reached a settlement of the case with respect to the principal defendants, Roy A. Sciacca and Lisa Colletti whereby Sciacca and Colletti agreed to return an aggregate of 960,215 shares of previously issued stock to the Company and the Company agreed to issue 500,000 new shares of stock to them. In connection with the Settlement with Sciacca and Colletti, the Company has recovered a net of 497,555 shares issued in connection with the Creative Licensing transaction. In the aggregate, the Company has now recovered 614,424 of the 1.867 million shares issued in connection with the transaction. In addition, in connection with the Settlement, the Company recovered an additional 500,000 of the 800,000 shares of Company stock which had been previously issued in connection with payment for purported management services to be provided by certain of the defendants. The Company continues to believe that its position in the litigation is well-taken and supported by the facts and will continue to proceed with respect to the remaining defendants. The litigation is in its early stages and the Company cannot project whether it will achieve a successful result in connection with the remainder of the action or any other related actions. Discovery has yet to be commenced and no trial date has been set. If the matter is taken to conclusion, the Company could incur additional legal expenses in an amount which cannot be determined or estimated at this time.

Other than the aforementioned matter, there are no other legal proceedings which are pending or have been threatened against the Company or any of its officers, directors or control persons of which management is aware.

ITEM 1A. RISK FACTORS.

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

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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SIGNATURES

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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EXHIBIT INDEX

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