UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION~~
~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2014~~2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ______________ to ______________

Commission file number 000-25367

FUEL PERFORMANCE SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		88-0357508
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7777 Bonhomme Avenue, Suite 1920 St. Louis, Missouri		63105
7777 Bonhomme Avenue, Suite 1920St. Louis, Missouri		63105
(Address of principal executive offices)		(Zip Code)

Registrant’'s telephone number, including area code: (314) 727-3333

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value

(Title of Class)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’'s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’'s most recently completed second fiscal quarter (June 30, ~~2014~~2015) was $2411,~~295~~267,~~530~~375.

Indicate the number of shares outstanding of each of the registrant’'s classes of common stock, as of the latest practicable date. 203,758,698 as of March 3130, ~~2015~~2016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

FUEL PERFORMANCE SOLUTIONS, INC.

(Formerly Known As INTERNATIONAL FUEL TECHNOLOGY, INC.)

FORM 10-K

For The Fiscal Year Ended December 31, ~~2014~~2015

INDEX

Part I
Item 1.	Business	34
Item 1A.	Risk Factors	1216
Item 1B.	Unresolved Staff Comments	1721
Item 2.	Properties	1721
Item 3.	Legal Proceedings	1722
Item 4.	Mine Safety Disclosures	1722
Part II
Item 5.	Market for Registrant’'s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1823
Item 6.	Selected Financial Data	1823
Item 7.	Management’'s Discussion and Analysis of Financial Condition and Results of Operations	1823
Item 8.	Financial Statements and Supplementary Data	2430
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2430
Item 9A.	Controls and Procedures	2430
Item 9B.	Other Information	2631
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	2732
Item 11.	Executive Compensation	2934
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3237
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3439
Item 14.	Principal Accountant Fees and Services	3440
Part IV
Item 15.	Exhibits and Financial Statement Schedules	3641
Signatures		3844
Exhibit Index

FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this document that are based on management’'s current reasonable expectations, estimates and projections. Words such as “"expects,”" “"anticipates,”" “"intends,”" “"plans,”" “"believes,”" “"estimates,”" variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks include, but are not limited to, risks relating to economic, competitive and other factors affecting our operations, markets, products and services and marketing and sales strategies, as well as the risks noted under the section in this report entitled “"Risk Factors.”" We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances.

PART I

Item 1. Business

INTRODUCTION

Fuel Performance Solutions, Inc. (the “"Company,”" “"we,”" “"us”" or “"our”") ~~was~~is ~~incorporated~~an inemerging ~~Nevada~~technology oncompany ~~April~~in 9,the ~~1996~~green byspace. aThe ~~team~~efficacy ofand ~~individuals~~commercial ~~who~~viability ~~sought to address the challenges~~ of ~~reducing~~our ~~harmful~~proprietary ~~emissions~~technology ~~while~~is atvalidated ~~the~~by ~~same time improving~~ the ~~operating~~commitment ~~performance of internal combustion engines, especially with respect to fuel economy~~ and ~~engine~~growing ~~cleanliness.~~efforts ~~After~~of our ~~incorporation,~~renowned ~~our~~distribution ~~initial~~partners: ~~focus~~Unipart ~~was~~Rail ~~product research and development~~("Unipart"), ~~but~~Brenntag ~~over~~AG ~~the~~("Brenntag") ~~past~~and ~~few~~Nordmann ~~years,~~Rassmann ~~our~~("NRC") ~~efforts~~ have ~~been~~all ~~directed~~vetted ~~to commercializing~~ our ~~product~~technology ~~slate, primarily DiesoLiFTTM~~ and ~~the~~committed ~~PerfoLiFTTM~~substantial ~~Series,~~resources ~~for~~to ~~use~~building ~~with~~their ~~diesel~~efforts ~~fuel~~to ~~and~~market ~~bio-diesel fuel blends, by focusing on marketing, sales~~ and ~~distribution~~sell ~~efforts~~out ~~in conjunction with our distribution partners~~products. ~~On February 5, 2014, the Company changed its name from International Fuel Technology, Inc. to Fuel Performance Solutions, Inc.~~

~~For~~We ~~information~~provide ~~regarding~~fuel ~~revenues~~performance ~~from~~solutions ~~external~~and ~~customers~~emissions ~~attributed~~reductions benefits to ~~our~~major ~~domestic~~end-users ~~operations~~of ~~and~~liquid tohydro ~~all~~carbon ~~foreign~~fuels ~~countries,~~(diesel; ~~see~~bio-diesel; ~~Note~~heating 1.oil; ~~Nature~~gasoline; ofmarine ~~Business~~gas oil; and ~~Significant~~heavy ~~Accounting~~fuel ~~Policies~~oil) toin ~~our financial statements for~~ the ~~fiscal~~rail, ~~years~~road ~~ended~~transport ~~December~~(fleet 31operators), ~~2014~~stationary power generation and ~~2013~~marine industries.

AtAll ~~December~~of ~~31,~~the ~~2014,~~fuel weperformance ~~had~~solutions 4we ~~full-time~~provide ~~employees.~~incorporate ~~None~~the use of our ~~employees~~proprietary isliquid ~~represented~~fuel byadditive aformulations ~~labor~~that ~~union~~enhance orthe isperformance ~~subject~~of topetroleum-based afuels ~~collective~~and ~~bargaining~~renewable ~~agreement~~liquid fuels. We believe that use of our ~~employee~~proprietary ~~relations~~fuel ~~are~~additive ~~good~~formulations with a base fuel: enhances the combustion process which increases fuel economy; reduces harmful emissions; stabilizes the fuel; increases fuel lubricity; acts as a detergent to clean the fuel system; co-solves free water in the fuel system; reduces corrosion and microbial contamination in the fuel system; and when used in bio-fuels, increases fuel oxidation stability and reduces deposit formation.

We ~~provide~~believe ~~fuel~~our ~~performance~~flagship ~~solutions~~product, toDiesoLiFTTM, ~~major~~is ~~end-users~~the oftop ~~liquid~~performing ~~hydro~~fuel ~~carbon~~additive ~~fuels~~formulation ~~(diesel;~~for ~~bio-diesel;~~improving ~~heating~~fuel ~~oil;~~economy, ~~gasoline;~~consistently ~~marine~~demonstrating ~~gas~~the ~~oil;~~ability ~~and~~to ~~heavy~~improve fuel ~~oil)~~economy, inon ~~the rail~~average, ~~road~~by ~~transport~~five (~~fleet operators~~5), ~~stationary power generation and marine industries~~percent.

~~Through~~Use ~~our network~~ of ~~prominent~~the ~~distribution~~Company's ~~partners,~~products ~~which~~will ~~includes~~also ~~Unipart~~result ~~Group~~in ~~(“Unipart”), Nordmann Rassmann (“NRC”) and Brenntag AG (“Brenntag”), we have~~ a ~~number~~dramatic reduction of ~~(1)~~harmful ~~programs~~emissions ~~and~~associated ~~(2)~~with ~~products~~diesel ~~that provide critical~~ fuel ~~system~~consumption. ~~benefits~~Extensive tolaboratory ~~end-users~~testing ~~allowing~~over ~~them~~the ~~to:~~last ~~enhance~~ten ~~the~~years, ~~performance~~which ~~and~~includes ~~life~~test ofresults ~~their~~from ~~equipment;~~2016, ~~boost~~has ~~productivity;~~clearly ~~reduce~~demonstrated ~~downtime;~~that ~~and~~use ~~increase~~of ~~profitability.~~DiesoLiFTTM will:

~~All of the fuel performance solutions we provide incorporate the use of our proprietary liquid fuel additive formulations that enhance the performance of petroleum~~ -~~based~~ ~~fuels~~reduce ~~and~~particulate ~~renewable~~emissions, ~~liquid fuels. We believe that use of our proprietary fuel additive formulations with~~ a ~~base~~known ~~fuel:~~carcinogen, ~~enhances~~by ~~the~~amounts ~~combustion~~in ~~process; stabilizes~~ the ~~fuel;~~20% ~~improves fuel economy; reduces harmful emissions; increases fuel lubricity; acts as a detergent~~ to ~~clean~~45% ~~the fuel system~~range; co -~~solves~~ ~~free~~reduce ~~water~~smoke ~~in the fuel system~~emissions; ~~reduces corrosion~~ and - ~~microbial~~reduce ~~contamination~~greenhouse ingas ~~the~~emissions ~~fuel~~(CO2 ~~system;~~ and ~~when used in bio-fuels, increases fuel oxidation stability and reduces deposit formation~~NOx).

Unlike traditional fuel additives, which are derived from petroleum, our products are derived from a mixture of complex substances that utilize, in part, naturally occurring fractions that are bio-degradable. Our additive products are easily blended into motor fuels (usually through splash blending), or combined with base motor fuels plus other fuel formulations, including bio-diesel, synthetic diesel, ethanol and urea/water, creating environmentally-friendly finished fuel blends.

We have developed a slate of fuel additive products (see Products below) for use with diesel, pure bio-diesel, bio-diesel fuel blends, gasoline, gasoline ethanol blends and kerosene (heating oil) fuels.

~~The~~Over ~~manufacture~~ten years of ~~our~~extensive ~~products~~research isand ~~outsourced~~development towhich ~~Brenntag~~included ~~pursuant~~numerous tolaboratory atests ~~manufacturing~~at ~~and~~prominent ~~supply~~facilities ~~agreement~~all over the world (~~see~~United ~~Manufacturing~~States, ~~Partner~~Canada, ~~below~~Europe, Brazil, South Africa, China and Thailand) has confirmed the efficacy of our technology. We have completed customer-focused field demonstration trials which has validated independent laboratory test results. We have a number of customers that have been using our products for years with positive results. We believe our proprietary fuel additive formulations have been fully vetted and there is no technology risk.

WeThrough ~~have~~our ~~funded~~network ~~and~~of ~~completed~~prominent ~~several~~distribution ~~independent~~partners, ~~laboratory~~which ~~testing~~includes ~~efforts~~Unipart, ~~conducted~~NRC byand ~~various~~Brenntag, ~~well-regarded~~we ~~laboratories~~have ina ~~the~~number ~~United~~of ~~States,~~programs ~~Canada,~~and ~~Europe,~~products ~~Brazil,~~that ~~South~~provide ~~Africa,~~critical ~~China~~fuel ~~and~~system ~~Thailand~~benefits to ~~confirm~~end-users ~~the~~allowing ~~efficacy~~them ofto: ~~our~~enhance ~~technology.~~the Weperformance ~~have~~and ~~completed~~life ~~customer-focused~~of ~~field~~their ~~demonstration~~equipment; ~~testing,~~boost ~~which~~productivity; ~~has~~reduce ~~validated~~downtime; ~~independent~~increase ~~laboratory~~profitability; ~~test~~and ~~results.~~reduce Weharmful ~~have~~emissions. aBecause ~~number~~ of ~~customers~~these ~~that~~relationships ~~have~~with ~~been~~prominent ~~using~~distribution ~~our~~partners, ~~products~~we ~~for~~believe ~~years~~there ~~with~~is ~~positive~~minimal ~~results~~commercial roll-out risk.

~~With~~The ~~the~~manufacture ~~increasing~~of ~~public~~our ~~and~~products ~~private~~is ~~pressure~~outsourced to ~~reduce~~Brenntag ~~the~~pursuant ~~level~~to ofa ~~harmful~~manufacturing ~~engine~~and ~~emissions,~~supply ~~combined~~agreement ~~with~~(see ~~the~~Manufacturing ~~uncertain~~Partner ~~cost~~below). Because of ~~base~~this ~~fuel~~relationship, we ~~believe~~are ~~our~~able ~~technology and its further development is poised~~ to ~~become~~deliver ~~one~~quantity of ~~the~~quality ~~leading~~products ~~fuel~~on ~~performance~~a ~~enhancement~~timely ~~technologies~~basis. ~~available~~We tobelieve ~~facilitate~~there ~~the~~is ~~worldwide~~minimal ~~effort~~manufacturing ~~to address these issues~~risk.

We believe there is huge need in the marketplace for our products and fuel performance solutions programs. Due to the increasing public and private pressure to reduce the level of harmful emissions and the engine operator's desire to improve the operating performance of their equipment, we believe our products and fuel performance solutions are well-positioned to capitalize on these market dynamics.

Of particular note, the Company, in conjunction with distribution partner Unipart, has developed the Fuel Efficiency Management Program (the "Program") (see below).

THE FUEL EFFICIENCY MANAGEMENT PROGRAM

The Program is a comprehensive fuel management system that provides road transport and rail operators a complete tanker to trailer solution for optimizing fuel quality and performance, while at the same time reducing harmful emissions. The Program was developed in the second half of 2014 by the Company and distribution partner Unipart to address the pervasive fuel performance problems and issues experienced by rail and road transport fleet operators.

The mandate to incorporate bio-diesel into the diesel fuel stream in the United Kingdom and Europe has created fuel storage and equipment performance issues. The use of bio-diesel does provide emissions benefits. However, there are many drawbacks associated with bio-diesel use: it is not a stable fuel (it oxidizes and creates deposits); has a lower volumetric energy density than regular diesel (lower fuel economy and less power); naturally contains more water (fosters microbial contamination and sludge formation in tanks); causes corrosion and spray hole blockage of fuel injectors; causes seal failures; and causes fuel filter plugging.

As a result, rail and road transport fleet operators in the United Kingdom and Europe are experiencing: less fuel economy; less than optimal equipment performance; increased equipment maintenance expense; increased downtime of equipment; fuel tank and storage issues; poor fuel quality issues; and difficulty maintaining fuel within specification.

Perhaps the biggest concern caused by extended bio-diesel use relates to engine warranties. Once in-specification fuel is delivered to an end-user, the quality of that fuel and the responsibility to maintain that fuel in-specification transfers to the end-user. If the end-user fuel tank and/or fuel system is compromised due to sludge, microbial contamination, water and/or deposits, the fuel immediately becomes out-of-specification thereby nullifying the engine warranty.

The Program offered by Unipart and us mitigates all risks associated with bio-diesel fuel use and provides rail and road transport fleet operators the ability to maximize the performance and efficiency of their equipment.

The Program consists of: fuel tank testing; fuel tank cleaning (our PerfoClean product is used); fuel additive dosing equipment; the DiesoLiFT^TM fuel additive formulation; and on-going fuel and fuel tank analysis and monitoring. The Program ensures that end-users are maintaining in-specification fuel and optimizing the performance of their equipment.

Unipart has established business partnerships with vendors who supply tank testing, tank cleaning, fuel additive dosing and on-going fuel and fuel tank testing equipment. The cornerstone of the Program is DiesoLiFT^TM, our proprietary fuel additive formulation that is proven to: restore lost fuel economy and power loss associated with bio-diesel use; maintain fuel system cleanliness; provide fuel stability by controlling oxidation and deposit formation; and reduce harmful emissions.

COMMERICAL UPDATE

Although 2015 was not a great year in terms of revenues, we believe it was the most productive year in our history in terms of repositioning the Company for future success. All three of our major distribution partners, Unipart, Brenntag and NRC, saw unique and growing opportunities in the marketplace for our proprietary products and programs. As a result, all three distribution partners reorganized their efforts on our behalf and committed additional resources in 2015 to better capitalize on the growing opportunities they foresee.

This repositioning by our distribution partners in 2015 had a negative effect on our revenues in the short term, but has provided us with a greater platform to succeed going forward.

Unipart: Since the third quarter of 2014, our commercial efforts have been focused on the development of, preparation for, and the launch of the Program in conjunction with Unipart.

Since that time period, in consultation with Unipart, we put all of our DiesoLiFT^TM sales and marketing efforts in the United Kingdom and Europe on hold pending the proper development of the Program. Equipment vendors for all aspects of the Program have now been sourced and vetted and the deliberate pace to ensure the Program was ready for proper deployment has reached the launch point. Unipart now has a group set up for the specific purpose of commercializing DiesoLiFT^TM. Unipart continues to commit more time, efforts and resources toward making the Program a success.

In the third quarter of 2015, we expanded our marketing and distribution agreement with Unipart. The revised marketing and distribution agreement with Unipart provides Unipart exclusive distribution rights for DiesoLiFT^TM for the rail industry worldwide; exclusive distribution rights for DiesoLiFT^TM for commercial and public service vehicle and retail markets in the United Kingdom and the Republic of Ireland, Australia, South Africa and theMiddle East; exclusive distribution rights for GasoLift^TMfor all sectors in the United Kingdom and The Republic of Ireland; and non-exclusive distribution rights for DiesoLiFT^TM and GasoLiFT^TMworldwide.

In addition, Unipart has been granted exclusive distribution rights for PerfoClean in the United Kingdom and the Republic of Ireland and non-exclusive distribution rights worldwide. PerfoClean is the Company's proprietary formulation specifically designed to clean bulk fuel storage tanks.

Unipart adopted the Program in its own fleet of distribution vehicles in 2015 and is actively involved in commercial projects with numerous road transport operators (both private and public sector), rail operators (both passenger and freight) and fuel wholesalers. We expect additional deployments of the Program in the second quarter of 2016.

The Program is our primary business focus and will be the primary driver of our future revenues and profits.

Brenntag: In 2015, Brenntag made the decision to reevaluate their efforts on our behalf. After extensive analysis, and as part of their strategic fuel business planning, Brenntag decided there was a compelling opportunity to put in place a more organized and concerted marketing and sales approach to our product line. Brenntag has completed its market by market studies and will roll-out their revised marketing and sales plan for distribution of our products across Europe in the second quarter of 2016.

Brenntag will also continue to sell our products to Bardahl, Lubrichim, ETSP, Lubro and Eurol, who all repackage the products and sell to retail customers under their own brand name.

Going forward, we expect Brenntag to execute on their revised plan and ramp up their selling efforts of our products to: the road transport industry (fleets); refineries and fuel distributors; bio-diesel manufacturers; and the marine industry.

NRC:In 2015, NRC decided to reevaluate their efforts on our behalf. After extensive review, NRC concluded there was compelling opportunity to more aggressively market and sell our unique fuel additives formulations. As a result, the entire Company product line was moved out of NRC's new business division and into their Oleochemicals, Lubes & Growth division. This transition provides NRC with more resources to market and sell our products.

We are in the process of updating and expanding our distribution agreement with NRC to reflect the increased resources that NRC is now dedicating to the marketing and sales of our proprietary fuel additive formulations.

The primary thrust of NRC efforts will continue to be with our PerfoLiFT^TM line of bio-diesel stabilization additives used to stabilize and prolong the shelf life of bio-diesel fuels or all underlying sources. NRC continues to receive orders from and sell our products to some of the largest bio-diesel manufacturers in Europe.

Despite the fact that sales of our PerfoLiFT^TM BD-Series product line to NRC decreased during 2015, compared to 2014, we expect NRC to increase its sales of our PerfoLiFT^TM BD-Series of bio-diesel stability additives in 2016 and beyond through increased sales to existing accounts and sales to new accounts.

NRC has also begun to market our products to the marine industry and to some road transport fleets.

TECHNOLOGY

Our fuel additive formulations are composed of a mixture of complex chemical molecules which, when blended into a base fuel, lower that base fuel’'s overall surface tension at liquid-air, liquid-liquid, and liquid-solid (pipe wall) interfaces. This promotes lubricity and detergency and allows for improved atomization of the fuel in the induction and combustion chambers, resulting in a more complete and efficient burn, improving fuel economy and reducing harmful emissions.

Once our additive is blended with a base fuel, the blend forms into and remains a stable solution. No additional mixing or agitation is required for the fuel blend to remain perfectly mixed.

The following summarizes the primary benefits of our technology:

· Fuel economy: The reduction in the fuel’'s overall surface tension as it enters the combustion chamber allows for improved atomization, resulting in a more complete burn. The engine, therefore, is effectively maximizing the inherent energy in the fuel. Fuel economy is also enhanced by (i) increased lubricity which reduces friction in the fuel system, and (ii) the detergency effect which prevents the deterioration of engine performance caused by detrimental deposits. · Emissions: The improved atomization of the fuel, resulting from the use of our additives, provides for a more complete combustion of the fuel. As a result, the amount of harmful carbon monoxide, unburned hydrocarbons and particulate matter ("PM") emissions are reduced significantly. The increased fuel efficiency and economy resulting from the use of our additive means that less fuel has to be burned for the same power output. Therefore, for the same power output, less CO2 and NOx (both "greenhouse" gases) are released into the atmosphere. · Lubricity: The inherent lubricity properties of our additive formulations increase the lubricity of the fuel. This occurs because the additive will adsorb to the sides of the engine fuel system. This has the effect of coating the fuel system and reducing the friction created as the fuel flows through it. · Detergency: Because our additive formulations are detergents, they will act to constantly clean the fuel system and engine. The detrimental deposits, which might occur in ordinary use, are washed out and retained by fuel and lube oil filters. · Co-solvency: An important benefit of our additive technology is the ability to hold limited amounts of ethanol and/or water in gasoline and diesel as a stable, homogeneous fuel. This is possible because our additives are based on physical chemistry that enables the water and/or ethanol molecules to be distributed throughout the fuel in a stable and homogeneous single phase, preventing phase separation and enhancing uniform combustion. · Microbial contamination: If small amounts of water are present in the fuel, and phase separation occurs, aerobic and anaerobic bacterial and fungal growths may occur in the aqueous phase. The co-solving effect of our additives prevents phase separation from occurring and eliminates the environment for microbial growth. This curbs foaming and limits the formation of corrosive organic acids. This also reduces the need for bio-cides to treat the fuel, which can be expensive and difficult to handle. · Foam reduction: Diesel fuel tends to generate foam as it is pumped into vehicle tanks. The foaming of the fuel will slow the process of completely filling the vehicle tanks, and will result in fuel overflow and spills. Treating commercial diesel with our additive technology significantly reduces the volume of foam generated during filling, and will dramatically reduce the time of foam disappearance. · Corrosion inhibitors: Our fuel additives are natural corrosion inhibitors. When the additive molecules adsorb to the side of the fuel system, they provide a protective coating. Also, the ability to co-solve any free water in the fuel, and prevent phase separation, helps prevent any corrosion that may occur due to the aqueous phase. · Reduced maintenance: The combined effects of improved lubricity, detergency, water co-solvency, corrosion inhibition, and cleaner burn resulting from the use of our additive technology extend the service life of the engine and parts, while reducing maintenance costs. · Oxidation stability: Our PerfoLiFTTM BD-Series and AO-Series products are powerful antioxidants which provide superior oxidation stability to pure bio-diesel fuel and fuel blends containing bio-diesel, as well as pure hydrocarbon fuels. · Deposit formation control: Our PerfoLiFTTM BD-Series and AO-Series products excel at stabilizing bio-diesels and fuel blends containing bio-diesel, as well as pure hydrocarbon fuels during long storage periods and at preventing deposit formation.

4Research and development costs are expensed as incurred. Research and development expense from services received from external vendors for 2015 and 2014 was $0 and $24,090, respectively.

· Emissions: The improved atomization of the fuel, resulting from the use of our additives, provides for a more complete combustion of the fuel. As a result, the amount of harmful carbon monoxide, unburned hydrocarbons and particulate matter (“PM”) emissions are reduced significantly. The increased fuel efficiency and economy resulting from the use of our additive means that less fuel has to be burned for the same power output. Therefore, for the same power output, less carbon dioxide and nitrogen oxides (“NOx”) (both “greenhouse” gases) are released into the atmosphere. · Co-solvency: An important benefit of our additive technology is the ability to hold limited amounts of ethanol and/or water in gasoline and diesel as a stable, homogeneous fuel. This is possible because our additives are based on physical chemistry that enables the water and/or ethanol molecules to be distributed throughout the fuel in a stable and homogeneous single phase, preventing phase separation and enhancing uniform combustion. · Microbial contamination: If small amounts of water are present in the fuel, and phase separation occurs, aerobic and anaerobic bacterial and fungal growths may occur in the aqueous phase. The co-solving effect of our additives prevents phase separation from occurring and eliminates the environment for microbial growth. This curbs foaming and limits the formation of corrosive organic acids. This also reduces the need for bio-cides to treat the fuel, which can be expensive and difficult to handle. · Corrosion inhibitors: Our fuel additives are natural corrosion inhibitors. When the additive molecules adsorb to the side of the fuel system, they provide a protective coating. Also, the ability to co-solve any free water in the fuel, and prevent phase separation, helps prevent any corrosion that may occur due to the aqueous phase. · Reduced maintenance: The combined effects of improved lubricity, detergency, water co-solvency, corrosion inhibition, and cleaner burn resulting from the use of our additive technology extend the service life of the engine and parts, while reducing maintenance costs. · Oxidation stability: Our PerfoLiFTTM BD-Series and AO-Series products are powerful antioxidants which provide superior oxidation stability to pure bio-diesel fuel and fuel blends containing bio-diesel, as well as pure hydrocarbon fuels. · Deposit formation control: Our PerfoLiFTTM BD-Series and AO-Series products excel at stabilizing bio-diesels and fuel blends containing bio-diesel, as well as pure hydrocarbon fuels during long storage periods and at preventing deposit formation.8

Research and development costs are expensed as incurred. Research and development expense from services received from external vendors for 2014 and 2013 was $24,090 and $80,689, respectively.

INTELLECTUAL PROPERTY

We have been granted United States patent number 7,374,588 on our original additive formulation based on nitrogen donors. We have also filed patent applications for a similar but upgraded formulation in the United States and 3 other countries.

We have made the following progress related to intellectual property advancements pertaining to fuel additive, additive-containing fuel composition, and method of manufacture:

	·	we were granted Japanese Patent No. 4,767,466;

	·	we were granted European Patent EP 1,246,894 B; and

	·	we were granted United States Patent No. 8,147,566.

We have also filed an international patent application, under the Patent Cooperation Treaty, covering our technology in certain foreign countries.

The patents obtained and these patent applications protect our technology in many countries. Additional patent applications for extension of our technology are constantly evaluated as additional scientific and technical data and laboratory testing results become available. The patent application process is important to us, but we will also continue to rely on trade secrets.

We also have trademark protection for DiesoLiFT™, PerfoLiFT™, GasoLiFT™ and KeroLiFT™ in a certain number of countries.

INDEPENDENT DEMONSTRATION AND TESTING

There are 2 primary methods of product demonstration: laboratory bench tests and field-based demonstration testing. We utilize both demonstration methods to further develop the body of test data necessary to support marketing and sales efforts. We believe that it is important to develop and manage specific testing protocols for field-based demonstrations and to adhere to already developed, industry recognized testing standards when engaged in laboratory bench tests. Numerous variables exist in any testing protocol and if not carefully managed, a change in one variable can skew test results. To address this challenge, we use our best efforts to ensure standardized testing and demonstration evaluation protocols, both industry prescribed and custom developed, whenever laboratory or field-based demonstration is undertaken. The use of these protocols allows us to: (i) effectively analyze and interpret test results; (ii) ensure testing is structured and conducted in a controlled way; (iii) ensure we will have full access to all testing results conducted by third parties; and (iv) assist our marketing and sales efforts through potential client recognition of and attention to results generated from industry adopted testing protocols.

In addition to extensive field-based customer demonstrations completed or under way, we have funded extensive laboratory bench testing at numerous well-known independent testing laboratories, including:

	·	mi Technology, United Kingdom;

	·	Southwest Research Institute, United States;

	·	Forest Engineering Research Institute of Canada – FERIC;

	·	Motive Power, United States;

	·	Gerotek, South Africa;

	·	South African Bureau of Standards;

	·	Prodrive Ltd, United Kingdom;

	·	BfB Laboratories, Belgium;

	·	National Institute of Technology – INT, Brazil;

	·	Technological Institute for Development - LacTec, Brazil;

	·	Technology Research Institute, Brazil;

	·	MTEC, Thailand; and

	·	Tsinghua University, China.

Test results have confirmed the effectiveness of our additive formulations. In particular, our fuel blends tested have achieved: (i) an increase in fuel economy; (ii) an increase in lubricity; and (iii) a reduction in harmful emissions.

610

PRODUCTS

We currently have the following product lines that are being marketed around the world:

Diesel

· DiesoLiFTTM 10 – fuel consumption and emissions reducing additive – increase engine power (diesel) – bio-degradable · DiesoLiFTTM FEB – fuel consumption and emissions reduction, power increase – stabilizing B-5 to B-30 bio-diesel blends · DiesoLiFTTM EM-1 – engine power increase (diesel) – bio-degradable · PerfoLiFTTM PP-Series – performance packages, based on our fuel efficient technology · PerfoLiFTTM C-Series – Cetane index boosters · PerfoLiFTTM D-Series – detergents · PerfoLiFTTM LI-Series – lubricity improvers. · PerfoClean – provides superior tank cleaning and protection properties to diesel fuel storage tanks

Bio-diesel

PerfoLiFT^TM BD-Series – anti-oxidants/stabilizers for bio-diesel

~~LFO – Kerosene –~~ Heating oil

	·	KeroLiFT^TM10 – increases fuel efficiency and calorific value – reduces emissions and smoke – system cleaner – bio-degradable

	·	PerfoLiFT^TM HO-Series – calorific value, boiler efficiency, combustion, cold flow, soots, smoke and acidity, system cleaner, rust and corrosion

Gasoline

	·	GasoLiFT^TM 10 – fuel consumption and emissions reducing additive – increase engine power (gasoline) – bio-degradable

	·	GasoLiFT^TM EM-2 – engine power increase (gasoline) – bio-degradable

	·	PerfoLiFT^TM PP-Series – performance packages, based on our fuel efficient technology

	·	PerfoLiFT^TM O-Series – octane index boosters

Diesel and Gasoline

· PerfoLiFTTM AO-Series – anti-oxidants · PerfoLiFTTM AC-Series – anti-corrosions ~~· PerfoLiFTTM LI-Series – lubricity improvers~~.

In addition, we are able to develop tailor-made products meeting specific customer requirements.

MANUFACTURING PARTNER

The manufacture of our products is outsourced to Brenntag. Brenntag is a global leader in the distribution and manufacture of industrial and specialty chemicals and additives and lubricants. Brenntag has a global network of more than 400 locations in 70 countries and annual sales of $13 billion.

In July 2008, we signed a manufacturing agreement with Brenntag that covers existing and to-be-developed fuel performance enhancement additive products utilizing our technology. The agreement also provides for Brenntag and us to cooperate and work together to optimize the effectiveness of and reduce the manufacturing and supply costs of the additive product formulations, as well as to collaborate on product research and development activities. We have worked closely with Brenntag for years and believe the relationship to be solid. The manufacturing agreement has a 15-year term. Either party may terminate the manufacturing agreement by providing the other party advance notice at least 180 days before the desired termination date.

Because of this relationship, we are able to deliver quantity of quality products on a timely basis.

We are also in negotiations with Brenntag for the manufacture of our products in Brazil and the United States.

REGULATORY ISSUES

Government regulations across the globe regarding motor fuels are continually changing. Most regulation focuses on fuel emissions. However, there is also growing concern about dependence on hydrocarbon-based fuels. This is driving legislation and regulation toward mandating alternative fuels such as bio-fuels and providing incentives for their development and use. Fuels regulation exists at various levels of government and enforcement around the globe. However, we believe the consistent pattern of regulations designed to reduce harmful emissions and reduce dependence on oil for fuel needs will only become more stringent. We believe this will be an advantage to us as many of our products reduce fuel consumption and improve performance of alternative fuel blends. We believe that as fuels regulatory compliance becomes more burdensome to fuel manufacturers, suppliers and users, demand for our products should increase. One of our strategies is to monitor government fuel related regulatory activity in the countries strategic to our business plan. This surveillance program is designed to support the product development and intellectual property process to ensure our products respond to the changing regulatory climate and are protected as quickly as possible to maintain competitive advantage. The surveillance program also supports the marketing of our products to accentuate their attributes in helping customers meet the new regulatory compliance directives.

As an example, in January 2000, the Environmental Protection Agency in the United States (“"EPA”") enacted a stringent and far-reaching set of diesel emission standards that requires the significant reduction in harmful emissions, especially PM and NOx. These regulations were phased in beginning in 2004, with PM in diesel emissions to be reduced by 90% and NOx to be reduced by 95%. Of equal importance to diesel fuel producers, the EPA ~~also~~mandated ~~requires~~that 97% of the sulfur currently in diesel fuel be eliminated beginning in 2006. The elimination of sulfur in diesel fuel ~~will~~did ~~likely~~ cause a decrease in diesel fuel lubricity. WeOur ~~believe that our~~ products are well-positioned to benefit from the more stringent environmental rules, as tests have shown positive PM reduction effects and increased lubricity attributes when our products are added to base diesel fuel.

Another example is the regulation passed applicable to the European Union (“"EU”") regarding the use of bio-fuels (bio-diesel and ethanol). The EU is supporting bio-fuels with the aim of reducing “"greenhouse gas”" emissions, boosting the de-carbonization of transport fuels, diversifying fuel supply sources, offering new income opportunities in rural areas and developing long term replacements for fossil fuel. In May 2003, the European Parliament and the Council adopted the “"Directive on the promotion of the use of bio-fuels or other renewable fuels for transport.”" This Directive ~~aims~~aimed at promoting the use of bio-fuels or other renewable fuels to replace diesel or petroleum for transport purposes, with a view to contribute to objectives such as improving the security of energy supply, reducing “"greenhouse gas”" emissions and creating new opportunities for sustainable rural development. The Directive ~~requires~~required member states to ensure that a minimum proportion of bio-fuels and other renewable fuels for transport are placed on the market and, to that effect, set indicative targets as a percent of energy content of the fossil fuels replaced. Reference values for these targets were: 2% for the end of 2005 and 5.75% for the end of 2010, on the basis of energy content of all petroleum and diesel for transport purposes. Member states were allowed to deviate from the reference values but if they did so, they were required to report their motivations for the deviation to the Commission.

8However, despite the transport sector experiencing continued growth in renewable fuel share, the 2010 target was not met. In January 2011, the EU commission issued its new "Energy 2020" strategy, which calls for the use of 10% renewable energy in the transport sector by 2020. Member states expect to meet this new target by using first generation bio-fuels (bio-diesel and bio-ethanol) which will be the predominant bio-energy sources over the period to 2020.

~~However,~~There ~~despite~~is now a general consensus within the ~~transport~~EU ~~sector~~towards ~~experiencing~~the ~~continued~~generalization ~~growth~~of inB-7 ~~renewable~~over ~~fuel~~the ~~share~~next few years, ~~the~~while ~~2010~~B-10 is the target ~~was~~for ~~not~~implementation ~~met.~~between Innow ~~January~~and ~~2011,~~2020 ~~the~~in EUorder ~~commission~~to ~~issued~~meet ~~its~~the ~~new~~Commission's “"Energy 2020”" ~~strategy,~~plan. ~~which~~Due ~~calls~~to ~~for~~next ~~the~~generation ~~use~~engine oftechnology constraints, B-10% ~~renewable~~will ~~energy~~likely inbe the ~~transport~~highest ~~sector~~concentration bybio-diesel ~~2020.~~fuel ~~Member~~blend ~~states~~ever ~~expect~~offered toat ~~meet~~the ~~this~~fuel ~~new~~pump. ~~target~~However, byhigher ~~using~~concentration ~~first generation~~ bio-~~fuels (bio-~~diesel ~~and~~fuel ~~bio~~blends such as B-~~ethanol)~~30 ~~which~~are already used and will be ~~the~~increasingly ~~predominant~~used in captive fleets. As bio-~~energy~~diesel ~~sources~~percentage ~~over~~content increases in a base fuel, the ~~period~~need for oxidation control and storage stability also increases, making our PerfoLiFTTM BD-Series and DiesoLiFTTM FEB products even more beneficial to ~~2020~~users.

There is now a general consensus within the EU towards the generalization of B-7 over the next few years, while B-10 is the target for implementation between now and 2020 in order to meet the Commission’s “Energy 2020” plan. Due to next generation engine technology constraints, B-10 will likely be the highest concentration bio-diesel fuel blend ever offered at the fuel pump. However, higher concentration bio-diesel fuel blends such as B-30 are already used and will be increasingly used in captive fleets. As bio-diesel percentage content increases in a base fuel, the need for oxidation control and storage stability also increases, making our PerfoLiFTTM BD-Series and DiesoLiFTTM FEB products even more beneficial to users.13

In the United States, there are current efforts to encourage the development of alternative fuels and the required use of ethanol. In an effort to reduce dependence on foreign oil and keep up with increasing demand for petroleum products, the United States Department of Energy (“"DOE”") has created and sponsored programs that encourage the use of these alternative fuels. The programs, such as the one derived from the Energy Policy and the ethanol and bio-diesel subsidy programs implemented by the DOE and other government agencies, in response to the 2005 energy legislation, provide significant incentives for the adoption of targeted fuel blends, the performance of which can be enhanced by the use of our products. We believe our products are well-positioned to help fuel producers and consumers comply with current and future fuels related regulatory standards and take advantage of existing incentive programs in the United States and the rest of the world.

INDUSTRY AND COMPETITION

Our product slate and business is a part of the hydrocarbon fuels and lubricants additive industry. The industry is composed of a few relatively large companies and a large number of smaller participants. We fall into the latter category. The large firms capture their revenue through sales of proprietary, branded products, or by sales to fuel refiners to meet state and federal fuel specifications, or fuel wholesalers and retailers trying to differentiate their own branded products. The common denominator is that all industry participants produce products which are added to hydrocarbon fuels to allow the fuel, or the overall fuel system, to perform better with the additive than without. Industry participants generally do not make the fuel itself.

The main thrust of industry participants’' products centers around improved engine cleanliness and efficiency (e.g., detergency characteristics applicable to fuel injector nozzles), improved fuel flow (e.g., mitigation of fuel problems caused by low ambient temperature) and fuel system protection (e.g., improved lubricity). These are common focus areas for the full range of gasoline and distillate fuels. Additives designed to address specific problem areas in specific fuel applications (e.g., Cetane improver in diesel fuel) and static electricity dissipation in turbine engines is also significant.

Our primary market is fuel economy improvement. Although many companies make claims regarding the ability of their respective products to improve fuel economy, we are not aware of any fuel additive formulation that has consistently demonstrated the ability to achieve the fuel economy improvement demonstrated by our products in independent laboratory testing and field-based demonstrations. Virtually every gallon of diesel fuel, bio-diesel fuel blend, gasoline and kerosene consumed in the world today is a potential market for our products.

MARKETING AND SALES

Marketing and sales is primarily outsourced to a group of prominent distribution partners with existing customers and channels. Through our distribution partners, we offer comprehensive fuel performance solutions to major end-users of diesel fuel and bio-diesel fuel blends: centrally-fueled road transport operators; rail operators; stationary power generation operators; and the marine vessel operators. From fuel testing, tank testing, tank cleaning, dosing equipment and to ongoing fuel testing and the products needed to enhance and maintain fuel performance, the Company and its group of prominent distribution partners provide end-users a cradle to grave solution to maximize the performance of their equipment. We have a number of distribution agreements and partnerships in place:

Unipart: Unipart is a multinational, supply chain, manufacturing and consultancy company headquartered in Cowley, Oxfordshire, England. It has operations in Europe, North America, Australia and Japan and works across a variety of sectors that include automotive, rail, marine and leisure. Unipart employs 10,000 people and has annual revenues of approximately $1.7 billion. Unipart’'s initial focus is in the rail industry and road transport industries in the United Kingdom and Europe.

Brenntag: Brenntag is a global leader in the distribution and manufacture of industrial and specialty chemicals and additives and lubricants. Brenntag has a global network of more than 400 locations in 70 countries and annual sales of $13 billion. Brenntag is marketing and distributing our products to its customer base with an initial focus in Europe.

NRC: NRC is a leading international distributor of specialty chemicals, lubricants and fuel additives. NRC sells its portfolio of high quality products throughout Germany, Austria, Central and Eastern Europe, Scandinavia and Switzerland. NRC, founded in 1912, has annual revenues of $450 million.

IPU Group: IPU Group designs, manufactures and distributes high quality parts and systems for critical diesel and gas engine applications. Their core business is power generation - virtually every diesel generation manufacturer is a client – but they also provide engineered solutions to the oil and gas, marine, industrial engines, mining and land-based industries. Their initial focus will be to market, sell, distribute and provide aftermarket support for PerfoClean. PerfoClean is a new product specifically designed to provide superior cleaning and protection properties for diesel fuel storage tanks.

~~Commercial~~The ~~Update~~Company was incorporated in Nevada on April 9, 1996 by a team of individuals who sought to address the challenges of reducing harmful emissions while at the same time improving the operating performance of internal combustion engines, especially with respect to fuel economy and engine cleanliness.

~~Thanks~~After ~~primarily~~our toincorporation, ~~the efforts of~~ our ~~distribution~~initial ~~partners,~~focus wewas ~~have~~product ~~made~~research ~~meaningful~~and ~~commercial~~development, ~~progress~~but over the ~~last~~past few years., ~~Revenues~~our ~~increased~~efforts ~~over~~have ~~140%~~been indirected ~~2014~~to ~~compared~~commercializing toour ~~2013.~~product ~~Revenues~~slate, ~~more~~primarily ~~than~~DiesoLiFTTM ~~doubled~~and inthe ~~2013~~PerfoLiFTTM ~~compared~~Series, tofor ~~2012.~~use ~~Going~~with ~~forward~~diesel fuel and bio-diesel fuel blends, ~~our~~by ~~distribution~~focusing ~~partners~~on ~~will~~marketing, ~~continue~~sales toand bedistribution ~~the~~efforts ~~primary~~in ~~drivers~~conjunction ofwith our ~~commercial~~distribution ~~progress~~partners.

~~Unipart: We~~On ~~expanded~~February ~~our~~5, ~~marketing and distribution agreement with Unipart in~~ 2014 ~~and additional amendments are pending. For example~~, ~~Unipart and~~ the Company ~~are~~changed inits ~~the~~name ~~process~~from ofInternational ~~launching~~Fuel ~~a comprehensive fuel solutions program (the “Program”) in the United Kingdom within the rail and road transport markets~~Technology, ~~and~~Inc. ~~in Europe within the rail market,~~ to ~~address~~Fuel ~~the~~Performance ~~pressing needs that end-users have with fuel quality~~Solutions, ~~storage and performance~~Inc.

InFor ~~the~~information ~~United~~regarding ~~Kingdom~~revenues ~~and~~from ~~Europe,~~external ~~the~~customers ~~mandate~~attributed to ~~incorporate~~our ~~bio-diesel~~domestic ~~into~~operations ~~the~~and ~~diesel~~to ~~fuel~~all ~~stream~~foreign ~~has~~countries, ~~created~~see ~~fuel~~Note ~~storage and equipment performance problems~~1. ~~The~~Nature ~~use~~ of ~~bio-diesel~~Business ~~does provide emissions benefits. However, there are many drawbacks associated with bio-diesel use: it is not a stable fuel (it oxidizes~~ and ~~creates~~Significant ~~deposits);~~Accounting ~~has~~Policies ato ~~lower~~our ~~volumetric~~financial ~~energy~~statements ~~density~~for ~~than~~the ~~regular~~fiscal ~~diesel~~years ~~(lower~~ended ~~fuel~~December ~~economy~~31, ~~and~~2015 ~~less power); naturally contains more water (fosters microbial contamination~~ and ~~sludge formation in tanks); causes corrosion and spray hole blockage of fuel injectors; causes seal failures; and causes fuel filter plugging~~2014.

10Because we outsource both manufacturing and distribution, we have a number of persons working on our behalf in those functional areas and therefore do not need a large work force of full-time employees. At December 31, 2015, we had 5 full-time employees. None of our employees is represented by a labor union or is subject to a collective bargaining agreement. We believe that our employee relations are good.

The Program offered by Unipart and us mitigates all risk associated with bio-diesel fuel use and provides the end-user the ability to maximize the performance and efficiency of their equipment.

The Program consists of: fuel tank testing; fuel tank cleaning (our PerfoClean product is used); fuel additive dosing equipment; the DiesoLiFTTM fuel additive formulation; and on-going fuel and fuel tank analysis and monitoring. The Program ensures that end-users are maintaining in-specification fuel and optimizing the performance of their equipment.

Unipart has established business partnerships with vendors who supply tank testing, tank cleaning, fuel additive dosing and on-going fuel and fuel tank testing equipment. The cornerstone of the Program is DiesoLiFTTM, our proprietary fuel additive formulation that is proven to: restore lost fuel economy and power loss associated with bio-diesel use; maintain fuel system cleanliness; and provide fuel stability by controlling oxidation and deposit formation.

During 2014 Unipart made a number purchases of DiesoLiFTTM and is poised to roll out the Program to a number of rail and road transport operators in the United Kingdom and Europe.

Brenntag: In 2014, Brenntag commenced the ramp up of its sales and marketing efforts on our behalf. Brenntag has introduced our products to a number of its customers and made its first sale into the marine market in 2014. Brenntag also sells our products to Bardahl and Lubrichim, who both repackage the products and sell to retail customers under their own brand name.

Going forward, we expect Brenntag to continue to ramp up their sales and marketing on our behalf by selling our products to: the road transport industry (fleets); refineries and fuel distributors; bio-diesel manufacturers; and the marine industry.

NRC: NRC continued to sell our products to some of the largest bio-diesel manufacturers in Europe in 2014. In addition, they have a number of road transport and rail opportunities pending.

Going forward, we expect NRC to increase its sales of our PerfoLiFTTM BD-Series of bio-diesel stability additives through increased sales to existing and sales to new accounts. NRC has also begun to market our products to the marine industry.

United States: We have a number of road transport operators using our products, one such account for over eight years. We are also involved in a project with one of the largest municipal fleets in the United States.

Our project with a United States-based retail fuel distribution company is progressing and is expected roll out in the second quarter of 2015. This retail distribution company will be adding our DiesoLiFTTM and GasoLiFTTM to diesel and gasoline, respectively, to create premium blends for both types of fuel for sale at the retail pump in the United States.

Available Information

Our website is www.fuelperformancesolutions.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “"Exchange Act”"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “"SEC”"). The contents of our website are not incorporated by reference into this annual report on Form 10-K.

Item 1A. Risk Factors

Because we have transitioned from a development stage to a commercialization phase for our products with a new technology and little market and sales visibility, we may not be able to create market demand for our products.

We are currently engaged in extensive marketing and sales efforts, including additional laboratory testing and customer field-based demonstration testing to generate purchasing interest in our products. We have only a limited marketing history. There is a substantial risk of failure associated with development stage businesses attempting to make the transition to self-sustaining commercial entities because of the lack of established customer relationships and knowledge and acceptance of the new products being marketed. We have experienced in the past, are continuing to experience, and may experience in the future, some of the problems, delays and expenses associated with this transition, many of which are beyond our control, including but not limited to those depicted below:

	·	substantial delays and expenses related to testing and further development of our products;

	·	customer resistance relating to the marketing of a new product in the fuel additive marketplace;

	·	competition from larger and more established companies; and

	·	lack of market acceptance of our new products and technologies.

Recent declines in the price of oil could adversely affect our business.

The recent decline in the price of oil and resulting decline in fuel prices could cause customers to be less concerned about fuel efficiency. This could reduce demand for our products.

We have a history of operating losses and due to our current lack of sustainable sales and the possibility of not achieving our sales goals, we may not become profitable or be able to sustain profitability.

Since our inception we have incurred significant net losses. We reported net losses of $1,~~658~~926,~~154~~595 and $1,~~394~~658,~~596~~154 for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014, respectively. Our accumulated deficit as of December 31, ~~2014~~2015 was $7274,~~785~~712,~~601~~196. We expect to continue to incur net losses in the near to mid-term future. The magnitude of these losses will depend, in large part, on our ability to realize product sales revenue from the marketing and sale of our products. To date, we have not had any material operating revenue from the sale of our products and there can be no assurance we will be able generate material revenues. Our ability to generate revenues will be dependent upon, among other things, being able to (1) overcome negative connotations on the part of industrial fuel consumers regarding fuel additives in general; (2) convince potential customers of the efficacy and economic and environmental benefits of our products; and (3) generate the acceptance of our technology and products by potential customers and thereby create the opportunity to sell our products at a sufficient profit margin. Because we do not yet have a material, recurring revenue stream resulting from the sale of our products, there can be no assurance that we will be successful in these efforts. Should we achieve profitability, there is no assurance we can maintain, or increase, our level of profitability in the future.

1216

Our independent registered public accounting firm has substantial doubt as to our ability to continue as a going concern.

As a result of our losses to date, potential losses in the future, current limited capital resources and accumulated deficit, our independent registered public accounting firm has concluded that there is substantial doubt as to our ability to continue as a going concern, and accordingly, has modified their report on our December 31, ~~2014~~2015 financial statements included in this annual report on Form 10-K in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. These factors may make it more difficult for us to obtain additional funding to meet our obligations. Our continuation is dependent upon our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. We anticipate that we will continue to incur significant losses at least until successful commercialization of one or more of our products, and we may never operate profitably in the future.

We have identified a material weakness in our internal control over financial reporting and as such, a material misstatement of the annual or interim financial statements may not be prevented or detected on a timely basis.

We identified a material weakness in our internal control over financial reporting in ~~2013~~2014 and ~~2014~~2015. The material weakness relates to the fact that we have limited accounting personnel with sufficient expertise, accounting knowledge and training in United States generally accepted accounting principles (“"GAAP”") and financial reporting requirements. Specifically, we lack sufficient personnel to anticipate, identify, resolve and review complex accounting issues and to complete a timely review of the financial statements. This material weakness was not corrected during ~~2014~~2015. See Item 9A, “"Controls and Procedures”" for additional information. We cannot be assured that additional material weaknesses, significant deficiencies and control deficiencies in our internal control over financial reporting will not be identified in the future. If we fail to achieve and maintain effective controls and procedures for financial reporting, we may be unable to provide timely and accurate financial information. This may cause investors to lose confidence in our reported financial information. This may also have an adverse effect on the trading price of our common stock, give rise to an investigation by the SEC, and possible civil or criminal sanctions. Additionally, ineffective internal control over financial reporting could place us at increased risk of fraud or misuse of corporate assets.

We have only a limited product sales history upon which to base any projection of the likelihood we will prove successful; therefore, we may not achieve profitable operations, or even generate meaningful operating revenues.

Our fuel performance enhancing technology is a relatively new approach to increasing fuel performance in internal combustion engines and, therefore, may never prove commercially viable on a wide-scale basis. It is possible that we may not be able to reproduce, on a sustainable basis, the preliminary performance results achieved in certain of our research and development and field-based demonstration efforts.

We are not certain how many laboratory and customer field-based demonstration test programs will be necessary to demonstrate to potential customers sufficient fuel economy and other economic and environmental benefit from our products, nor is there any assurance that such test programs, even if positive results are observed, will convince potential customers of the efficacy of our products leading to subsequent sales orders. The success of any given product in the marketplace is dependent upon many factors, with one of the most important factors being the ability to demonstrate a sustainable and meaningful economic benefit to product end-users. If our products are unable to provide this sustainable economic benefit, or potential customers do not recognize these economic benefits, our business could fail.

1317

If projected sales and revenues do not materialize as planned, we will require additional financing to continue operations.

Based on our current cash position, and projected sales for ~~2015~~2016, ~~a $1,000,000 equity commitment from one of our Directors, of which $500,000 is still available,~~ we believe we have sufficient funds available to provide resources for our operations through the end of ~~the~~May ~~third quarter of 2015~~2016. However, failure to achieve significant, sustained sales and revenues by the end of this period would require us to obtain additional financing. We believe we have access to capital from existing shareholders and, in addition, management is currently in discussions with its investment banker ~~and with a strategic investor~~ regarding an equity investment. However, we can make no assurances that additional capital will be available to us from these sources. Cash requirements during the next 12-month period are expected to average approximately $~~120~~100,000 per month. In addition, unexpected changes may occur in our current operations that could exhaust available cash resources sooner than anticipated. If anticipated product sales do not materialize, or are significantly less than anticipated, we will need to raise additional funds to continue operations. If this future financing is not available, our business may fail. We currently have no other firm commitments from third parties to provide any additional financing. Consequently, we cannot assure investors that additional financing, if necessary, will be available to us on acceptable terms, or at all.

We are exposed to risks associated with the prolonged worldwide economic slowdowns and related political uncertainties.

We are subject to macro-economic fluctuations in the United States, the countries of Europe and the economies of other countries throughout the world. Concerns about consumer and investor confidence, volatile corporate profits, reduced capital spending, international conflicts, terrorist and military activity, civil unrest and pandemic illness could cause a slowdown in customer orders. In addition, political and social turmoil related to international conflicts and terrorist acts may put further pressure on economic conditions in the United States and abroad.

Our financial performance depends on varying conditions in the markets we are trying to penetrate, particularly the general industrial markets. Demand in these markets fluctuates in response to overall economic conditions. A weakened economy may result in decreased demand for our products, and economic uncertainties may cause our customers or prospective customers to continue to defer or reduce spending on the products we provide, which could reduce future earnings and cash flow.

Furthermore, adverse economic conditions or economic uncertainty may cause some of our customers or vendors to reduce or discontinue operations, which may adversely affect our operations. If, as a result of adverse economic conditions, any of our customers enter bankruptcy or liquidate their operations, our revenues and accounts receivable could be materially adversely affected.

We are dependent on third parties for the distribution of our products outside North America and they may experience the same delays, customer acceptance problems or other product commercialization issues we have experienced, which could negatively impact our commercialization efforts in these regions.

We have entered into distribution and sales agency agreements with certain third parties to help us achieve rapid customer trialing and acceptance of our products, and to oversee certain elements of our field-based demonstration testing program. If these third parties elect to discontinue their efforts, we may not be able to commercialize our products in a timely manner, or to commercialize them at all.

Although certain of these agreements contain progress milestones, we are not able to control the amount of time and effort these third parties put forth on our behalf. It is possible that any of these third parties may not perform as expected, may not achieve the contractual milestones and may breach or terminate their agreements with us before completing their work. Any failure of a third party to provide the services for which we have contracted could prevent or significantly delay us from commercializing our products.

1418

As we currently purchase all of our product supply requirements from outside sources and have no in-house product manufacturing capability, any business complications arising with either our suppliers or with our relationships with our suppliers could create adverse consequences with our product supply chain.

We currently contract with outside specialty chemical manufacturing companies for the production and supply of 100% of our product needs. We have no in-house product manufacturing capability and, therefore, are exposed to potential product supply disruptions caused by adverse business circumstances with our suppliers (for example, raw material shortages, plant breakdowns and other adverse circumstances affecting the supply of our products from suppliers). There can be no assurances that, in the event of a supply disruption, we would be able to quickly contract with another manufacturer for the continued supply of our products. We, therefore, could be without adequate supply of our products and could lose sales for an extended period of time as a result.

There is a risk that one or more of the raw material suppliers currently supplying raw materials to our contract manufacturer could stop making a building block raw material necessary for production of our product and, therefore, cause a supply shortage until substitution raw materials could be identified and located.

If the supplier were no longer able to obtain building block raw materials necessary for production of our product, suitable substitutes would have to be identified and obtained. There can be no assurances that, in the event of a raw material supply disruption, our manufacturers would be able to quickly identify and obtain a suitable substitute component and, therefore, we could be without product inventory and could lose sales for an extended period of time.

Products developed by our competitors could severely impact our product commercialization and customer acceptance efforts, thereby reducing the sales of our products and severely impacting our ability to meet our sales goals or to continue operations.

We face competition from companies who are developing and marketing products similar to those we are developing and marketing. The petroleum/fossil fuels industry has spawned a large number of efforts to create technologies that help improve the performance of internal combustion engines and reduce harmful emissions. Some of these companies have significantly greater marketing, financial and managerial resources than us. We cannot provide any assurance that our competitors will not succeed in developing and distributing products that will render our products obsolete or non-competitive. Such competition could potentially force us out of business.

Our products are designed for use in internal combustion engines and the development of alternative engine design and technology could severely reduce the market potential for our products.

Our products are designed for, and marketed to, customers utilizing internal combustion engines. Significant efforts now exist to develop alternatives to internal combustion engines. In addition, the regulatory environment is becoming increasingly restrictive with regard to the performance of internal combustion engines and the harmful emissions they produce. If alternatives to internal combustion engines become commercially viable, it is possible that the potential market for our products could be reduced, if not eliminated.

1519

If we are unable to protect our technology and intellectual property from use by competitors, there is a risk that we will sustain losses, or that our business could fail.

Our success will depend, in part, on our ability to obtain and enforce intellectual property protection for our technology in both the United States and other countries. We have taken steps to protect our intellectual property through patent applications in the United States Patent and Trademark Office and its international counterparts under the Patent Cooperation Treaty. We cannot provide any assurance that patents will be issued as a result of these applications or that, with respect to any patents, issued or pending, the claims allowed are, or will be, sufficiently broad enough to protect the key aspects of our technology, or that the patent laws will provide effective legal or injunctive remedies to stop any infringement of our patents. In addition, we cannot provide assurance that any patent rights owned by us will not be challenged, invalidated or circumvented, or that our competitors will not independently develop or patent technologies that are substantially equivalent or superior to our technology. If we are forced to defend our patents in court, well-funded adversaries could use such actions as part of a strategy for depleting the resources of a small company such as ours. We cannot provide assurance that we will have sufficient resources to successfully prosecute our interests in any litigation that may be brought.

Because of the nature of our products, we may be subject to government approvals and regulations that reduce or prevent our ability to commercialize our products, increase our costs of operations and decrease our ability to generate income.

We are subject to United States and international laws and regulations regarding the products we sell. There is no single regulatory authority to which we must apply for certification or approval to sell our products in the United States, or outside its borders. Any changes in policy or regulations by regulatory agencies in countries in which we intend to do business may cause delays or rejections of our attempts to obtain necessary approvals for the sale of our products.

There can be no assurance that we will obtain regulatory approvals and certifications for our products in all of the markets we seek to conduct business. Even if we are granted such regulatory approvals and certifications, we may be subject to limitations imposed on the use of our products. In the future, we may be required to comply with certain restrictive regulations, or potential future regulations, rules, or directives that could adversely impact our ability to sell our products. We cannot guarantee that restrictive regulations will not, in the future, be imposed. Such potential regulatory conditions or compliance with such regulations may increase our cost of operations or decrease our ability to generate income.

We create products that may have harmful effects on the environment if not stored and handled properly prior to use, which could result in significant liability and compliance expense.

The blending of base fuels with our current or future products involves the controlled use of materials that could be hazardous to the environment. We cannot eliminate the risk of accidental contamination or discharge to the environment of these materials and any resulting problems that occur. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We may be named a defendant in any suit that arises from the improper handling, storage or disposal of these products. We could be subject to civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, these materials. Claimants may sue us for injury or contamination that results from use by third parties of our products, and our liability may exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and sales and marketing efforts. Although we carry product and general liability insurance with limits we deem sufficient, there can be no assurance that an event, or series of events, will not occur that will require, in the aggregate, resources in excess of these limits.

If we lose any key personnel or are unable to attract qualified personnel and consultants, we may lose business prospects and sales, or be unable to otherwise fully operate our business.

We are dependent on the principal members of our management staff, the loss of any of whom could impair our product development and commercialization efforts underway. Furthermore, we depend on our ability to attract and retain additional qualified personnel to develop and manage our future business and markets. We may have to recruit qualified personnel with competitive compensation packages, equity participation and other benefits that may reduce the working capital available for our operations. We cannot provide assurance that we will be able to obtain qualified personnel on reasonable terms, or that we will be able to retain our existing management staff.

We may have difficulties managing growth, which could lead to lost sales opportunities.

While we have not yet achieved any meaningful, sustained revenues through the sale of our products, should certain events occur, such as a large recurring order from a well-known company or endorsement of our products from a well-known commercial entity, sales may escalate rapidly. Rapid growth could strain our human and infrastructure resources, potentially leading to higher operating costs, lost sales opportunities, or both. Our ability to manage operations and control growth will be dependent upon our ability to improve our operational, financial and management controls, reporting systems and procedures, and to attract and retain adequate numbers of qualified employees. Should we be unable to successfully provide the resources needed to manage growth, product sales and customer satisfaction could suffer and higher costs and losses could occur.

Our shares are quoted on the OTC Market Group’'s ~~OTCQB~~OTCPink marketplace and are subject to a high degree of volatility and liquidity risk.

Our common stock is currently quoted on the OTC Market Group’'s ~~OTCQB~~OTCPink marketplace. As such, we believe our stock price is more volatile and the share liquidity characteristics to be of higher risk than if we were listed on one of the national exchanges. Also, if our stock were no longer quoted on ~~OTCQB~~OTCPink, the ability to trade our stock would become even more limited and investors may not be able to sell their shares.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We maintain our administrative offices at 7777 Bonhomme Avenue, Suite 1920, St. Louis, Missouri 63105 pursuant to a lease agreement. The lease agreement, which expires on April 30, 2017, provides for a base rent of $3,687 per month, subject to an annual escalation adjustment and has a five-year lease renewal option.

We believe our current facilities are adequate to meet current and near-term operating requirements.

Item 3. Legal Proceedings

We are periodically subject to various lawsuits and claims with respect to matters arising out of the normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes, after consulting with counsel, that it is more likely than not that the ultimate liabilities resulting from such lawsuits and claims will not materially affect our financial position, results of operations or liquidity.

On July 31, 2006, we received notice from the American Arbitration Association (“"AAA”") of a Demand for Arbitration dated July 27, 2006 received by the AAA naming the Company as Respondent and TPG Capital Partners (“"TPG”"), the prior Blencathia Acquisition Corporation (“"Blencathia”") owner, as the Claimant. The arbitration had been requested by TPG to resolve an alleged aggregate proceeds shortfall from the sale of the Company’'s securities issued in the Blencathia merger. TPG has claimed they sold some or all of the 312,000 shares and the sales have not generated at least $500,000 of proceeds, as guaranteed in the merger documents.

In an effort to resolve this matter prior to submission to binding arbitration, both TPG and the Company participated in a non-binding mediation conference on January 30, 2007, which did not resolve the matter. Informal discussions are ongoing. It is not expected that the ultimate settlement of this matter, considering we have recorded a liability for the shortfall amount, will have an additional adverse material effect on the Company. Since 2009, we have made payments to TPG totaling $160,000 to reduce the recorded liability. The remaining liability balance is $190,000 at December 31, ~~2014~~2015.

Item 4. Mine Safety Disclosures

Not applicable.

1722

PART II

Our common stock is quoted on OTC Market Group’'s ~~OTCQB~~OTCPink marketplace under the symbol “"IFUE.”" The Company elected to not pay the annual OTCQB listing fee and as a result was relegated to the OTCPink effective January 29, 2016. The table below shows the range of high and low sales prices on a quarterly basis for the two most recently completed fiscal years. The quotations shown reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	2014				2013
	2015				2014
	High		Low		High		Low
First Quarter	$	0.~~2205~~0875	$	0.~~026~~0548	$	0.102205	$	0.06026
Second Quarter	$	0.~~245~~0826	$	0.120411	$	0.10245	$	0.0312
Third Quarter	$	0.160474	$	0.090261	$	0.0716	$	0.0309
Fourth Quarter	$	0.~~0911~~0323	$	0.~~0411~~018	$	0.040911	$	0.020411

As of the close of business on March 2728, ~~2015~~2016, the last reported sales price per share of our common stock was $0.0803. As of March 2728, ~~2015~~2016, we estimate there were 2,~~243~~290 record holders of our common stock. Such number does not include persons whose shares are held by a bank, brokerage house or clearing company, but does include such bank, brokerage houses and clearing companies.

Historically, we have not declared or paid a cash dividend to shareholders. Our Board of Directors (the “"Board”") presently intends to retain any future earnings to finance our operations and does not expect to authorize cash dividends in the foreseeable future.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’'s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’'s discussion and analysis of certain significant factors that have affected our financial condition, results of operations and cash flows during the periods included in the accompanying financial statements. This discussion should be read in conjunction with the financial statements and notes included elsewhere in this annual report on Form 10-K as well as the “"Risk Factors”" described in Item 1A of this annual report on Form 10-K and the cautionary note Forward-Looking Statements above.

1823

Overview

We are a fuel performance enhancement technology company transitioning to a commercial enterprise. We believe the macroeconomic environment for our technology and products is excellent now and will continue to be so for the foreseeable future. We believe mandates to reduce emissions and ever-increasing fuel environmental regulations will likely result in increased demand for additive products to help offset adverse fuel performance and engine impacts resulting from these regulations. We believe our products and technology are uniquely positioned to benefit from this macro environment by offering fuel performance enhancement solutions that specifically address these macro developments and trends.

Results of Operations

Comparison of the Twelve Months Ended December 31, ~~2014~~2015 and the Twelve Months Ended December 31, ~~2013~~2014

Net Revenues

Net revenue for the twelve months ended December 31, ~~2014~~2015 was $1455,~~726~~932,~~619,~~ as compared to $~~704~~1,~~189~~726,619 for the twelve-month period ended December 31, ~~2013~~2014. This ~~increase~~decrease in net revenue was primarily due to ~~increased~~decreased sales volume from our distributor network ($1,~~035~~245,~~541~~839) as all three of our primary distribution partners reevaluated and then reorganized their internals efforts on our behalf to better position themselves to capitalize on what they believe is a compelling growth opportunity in the marketplace for our products; and decreased sales volume to end-user customers ($1324,~~111~~848).

Sales revenue for ~~2014~~2015 was split between sales to our distributor network (9692% of sales revenue) and end-user customers (48% of sales revenue). Sales revenue for ~~2013~~2014 was split between sales to our distributor network (8996% of sales revenue) and end-user customers (114% of sales revenue).

Sales revenue generated during ~~2014~~2015 and ~~2013~~2014 resulted primarily from the sale of the PerfoLiFTTM Series and DiesoLiFTTM.

Operating Expenses

Total operating expense was $21,~~920~~813,~~874~~408 for the twelve months ended December 31, ~~2014~~2015 (including non-cash stock-based compensation expense of $2148,~~991,091~~767), as compared to $2,~~034~~920,~~884~~874 for the twelve-month period ended December 31, ~~2013~~2014 (including non-cash stock-based compensation expense of $162,~~875~~991,091). This $~~885~~1,~~990~~107,466 ~~increase~~decrease from the prior period was primarily attributable ana ~~increase~~decrease in cost of operations due to ~~increased~~decreased sales and ana ~~increase~~decrease in non-cash stock-based compensation expense, partially offset by a gain on deferred revenue liability of $2,998,242 recorded during the twelve months ended December 31, 2014, which is more fully described below.

Cost of Operations

Cost of operations for the twelve months ended December 31, ~~2014~~2015 was $1396,~~269~~380,~~081,~~ as compared to $~~603~~1,~~189~~269,081 for the twelve-month period ended December 31, ~~2013~~2014. This ~~increase~~decrease of $~~665~~872,~~892~~701 was primarily attributable to ana ~~increase~~decrease in sales revenues and a $44,518 write off of certain inventory, primarily in the United States, which has sat idle for at least a one-year period. In the event that such inventory is subsequently sold to customers, we will record a gain on the recovery of inventory sold to customers. See Note 13. Inventory Write Off to our financial statements.

~~Selling, General and Administrative Expense~~24

Selling, ~~general~~General and ~~administrative~~Administrative expense for the twelve months ended December 31, 2014 was $4,685,844 (including non-cash stock-based compensation expense of $2,991,091), as compared to $1,351,006 (including non-cash stock-based compensation of $16,875) for the twelve-month period ended December 31, 2013, representing a $3,334,838 increase from the prior period.Expense

19Selling, general and administrative expense for the twelve months ended December 31, 2015 was $1,417,028 (including non-cash stock-based compensation expense of $148,767), as compared to $4,685,844 (including non-cash stock-based compensation of $2,991,091) for the twelve-month period ended December 31, 2014, representing a $3,268,816 decrease from the prior period.

The ~~increase~~decrease in selling, general and administrative expense was primarily due to:

· a $2,~~974~~842,~~216~~324 ~~increase~~decrease in non-cash stock-based compensation expense primarily related to the cancellation of certain options previously granted to employees and Directors and new option grants to employees, Directors and non-employee consultants during the twelve months ended December 31, 2014 and no such activity during the twelve months ended December 31, 2015; · a $~~170~~157,~~875~~140 decrease in write ~~off~~offs of accounts receivable charged to bad debt expense during the twelve months ended December 31, ~~2014~~2015, ~~(no~~compared ~~bad~~to ~~debt~~the ~~expense~~twelve ~~write~~months ~~offs~~ended ~~were~~December ~~recorded~~31, ~~during 2013)~~2014; · an approximate $~~150~~157,000 ~~increase~~decrease in United Kingdom sales and marketing expenses during ~~2014~~the ~~due~~twelve months ended December 31, 2015 compared to anthe ~~increased~~twelve ~~focus~~months onended December 31, 2014 as our United Kingdom ~~sales~~distribution partner increased their support level during the current year; and · an approximate $~~106~~36,000 ~~increase~~decrease in accounting fees related to audit services conducted for our ~~2013~~2015 annual report and ~~2014~~2015 quarterly reviews conducted by our independent registered accounting firm (nocompared ~~such~~to ~~activities~~increased ~~were~~fees ~~conducted~~ during ~~2013);~~the ~~and~~twelve ·months anended ~~approximate~~December ~~$142~~31,~~000~~ ~~decrease~~2014 inas ~~salary~~we ~~expense~~changed ~~(and~~auditors ~~related~~during ~~payroll~~2014 ~~taxes)~~and ~~for~~had ~~the~~a ~~comparable~~cumulative ~~periods~~audit ~~primarily~~for ~~due to~~ the ~~number~~years of2011-2013 ~~employees~~since onno ~~payroll~~such ~~decreasing~~activities ~~from~~had ~~the~~previously ~~prior~~been ~~comparable~~conducted ~~period~~during 2013).

Research and Development Expense

Research and development expense was $~~24,090~~0 and $8024,~~689~~090 for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014, respectively. This decrease can be attributable to ~~less~~no extensive use of external vendors relating to United Kingdom field-based demonstration testing in ~~2014~~2015, compared to ~~2013~~2014.

Gain on Accounts Payable Write Off

Gain on accounts payable write off was $~~59,899~~0 and $059,899 for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014, respectively. This ~~increase~~decrease relates to the write off of certain outstanding payable balances that were dated at least five years before December 31, 2014. See Note 1112. Accounts Payable to our financial statements.

Gain on Deferred Revenue Liability Write Off

Gain on deferred revenue liability was $0 and $2,998,242 ~~and $0~~ for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014, respectively. ~~The~~This ~~increase~~decrease relates to the first quarter of 2014 write off of a previously recorded obligation due to the expiration of the relevant statute of limitations. See Note 89. Deferred Revenue to our financial statements.

~~Interest Income (Expense), Net~~ 25

Interest ~~income (expense)~~Expense, ~~net~~Net was $(191,247) and $99 for the twelve months ended December 31, 2014 and December 31, 2013, respectively. The increase in interest income (expense), net is primarily attributable to interest expense recorded relating to our third quarter 2014 convertible note financing. See Note 6. Convertible Note Payable to our financial statements.

~~Gain~~Interest onexpense, ~~Derivative~~net ~~Liability~~was $793,345 and $191,247 for the twelve months ended December 31, 2015 and December 31, 2014, respectively. The increase in interest expense, net is primarily attributable to interest expense recorded relating to our third quarter 2014 convertible note financing and third quarter 2015 note financing. See Note 6. Convertible Notes Payable and Note 7. Notes Payable to our financial statements.

Gain on ~~derivative~~Derivative liability was $114,848 and $0 for the twelve months ended December 31, 2014 and December 31, 2013, respectively. The gain on derivative liability recorded during 2014 was primarily attributable to certain warrants issued that are subject to dilutive adjustments for share issuances (full ratchet reset features) tied to future issuances of our equity securities. Because of these characteristics, our derivative liability must be measured at fair value and re-evaluated at the end of each reporting period. The mark-to-market of the derivative liability at December 31, 2014 caused such gain.Liability

20Gain on derivative liability was $224,226 and $114,848 for the twelve months ended December 31, 2015 and December 31, 2014, respectively. The gain on derivative liability recorded during the twelve months ended December 31, 2015 and 2014 was primarily attributable to certain warrants issued that are subject to dilutive adjustments for share issuances (full ratchet reset features) tied to future issuances of our equity securities. Because of these characteristics, our derivative liability must be measured at fair value and re-evaluated at the end of each reporting period. The mark-to-market of the derivative liability at December 31, 2015 and December 31, 2014, respectively, caused such gains.

Loss on Conversion of Debt From Related Party

Loss on conversion of debt from a related party was $~~387,500~~0 and $0387,500 for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014, respectively. During the twelve months ended December 31, 2014, we converted $550,000 of notes payable to related parties, triggering this prior year loss.

Provision for Income Taxes

We have operated at a net loss since inception and have not recorded or paid any income taxes, other than for non-cash deferred tax expense related to a basis difference between financial reporting and tax reporting goodwill. We have significant net operating loss (“"NOL”") carry-forwards that would be recognized at such time as we demonstrate the ability to operate on a profitable basis for an extended period of time. The deferred income tax asset resulting primarily from the NOL carry-forwards has been fully reserved with a valuation allowance. Because goodwill is not depreciated and has an indefinite life for book purposes, the deferred tax liability related to the book to tax basis difference is not offset against the deferred tax assets when establishing our valuation allowance.

Net Loss

Net loss for the twelve months ended December 31, ~~2014~~2015 was $1,~~658~~926,~~154~~595, as compared to $1,~~394~~658,~~596~~154 for the twelve months ended December 31, ~~2013~~2014. The increase in net loss was primarily due to ana ~~increase~~decrease in gross margin from sales ($397,986), a decrease in non-cash stock-based compensation expense ($2,~~974~~842,~~216~~324), ~~bad~~a ~~debt~~decrease ~~expense~~in ~~recorded~~gain ~~2014~~on ~~($170,875),~~a ~~United~~deferred ~~Kingdom~~revenue ~~sales~~liability ~~and~~write ~~marketing~~off ~~expenses~~ (~~approximately~~ $~~150~~2,~~000)~~998, ~~accounting fees (approximately $106,000~~242), ~~interest~~a ~~income~~decrease ~~(expense),~~in ~~net~~loss ~~($191,247)~~on ~~and~~ conversions of related party notes ($387,500), asand ~~described~~a ~~above.~~decrease ~~These~~in ~~increases~~gain ~~were~~on ~~partially~~accounts ~~offset~~payable bywrite anoff ~~increase~~($59,899). inThese ~~gross~~decreases, ~~margin~~along ~~from~~with ~~sales~~the ~~($356,538),~~additional adecreases ~~gain~~explained onabove ain ~~deferred~~the ~~revenue~~Selling, ~~liability~~General ~~write~~and ~~off~~Administrative Expense section ($2bad debt expense,~~998,242),~~ aUnited ~~gain~~Kingdom onsales ~~accounts~~and ~~payable~~marketing ~~write~~expenses ~~off~~and ~~($59,899~~accounting fees), awere ~~gain~~partially onoffset ~~derivative~~by ~~liability~~increases in interest expense, net ($~~114~~602,~~848~~098) and an aincrease ~~decrease~~ in ~~salary~~gain ~~expense~~on ~~(approximately~~derivative liability ($~~142~~109,~~000~~378). The basic and diluted net loss per common share for the twelve months ended December 31, ~~2014~~2015 and December 31, ~~2013~~2014 was $(0.01) for both of the respective periods.

~~Recently Issued Accounting Pronouncements~~26

~~Management~~Recently ~~does~~Issued ~~not~~Accounting ~~believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.~~Pronouncements

~~Critical~~Management ~~Accounting~~does ~~Policies~~not ~~and~~believe ~~Estimates~~that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.

~~Derivative~~Critical ~~Financial~~Accounting ~~Instruments~~Policies and Estimates

WeDerivative evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in our statements of operations. For stock-based derivative financial instruments, we use a Lattice Model option pricing model, in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) ASC 815-15, “Derivatives and Hedging,” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.Instruments

21We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in our statements of operations. For stock-based derivative financial instruments, we use a Lattice Model option pricing model, in accordance with the Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") ASC 815-15, "Derivatives and Hedging," to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Revenue Recognition

We recognize revenue from the sale of our products when the price is fixed and determinable, persuasive evidence of an arrangement exists, the products are shipped, and title and risk of loss has passed to the buyer and collectability of the resulting receivable is reasonably assured. The majority of our revenues is from sales to product distributors. Product distributors do not have the option to return product that is not immediately sold to an end-user. Therefore, our revenue recognition is not conditional on whether a distributor is able to sell product to an ultimate product end-user. Our sales policies for end-users are consistent with product distributor sales policies.

Beginning in May 2013, as an effort to address our outstanding payable balance with and at the request of our product manufacturer, our non-United States customers began remitting receivable payments directly to our product manufacturer in lieu of remitting payment directly to us. Under this arrangement, we still maintained the risks and benefits related to sending the product to each customer and thus recorded sales revenues (and associated cost of sales) applying the gross reporting treatment for each transaction pursuant to ASC 605-45, “"Principal Agent Considerations.”" During the first quarter of 2014 (and continuing through December 31, 2015), we once again began collecting payments directly from our non-United States customers and paying our product manufacturer separately for the corresponding cost of manufactured goods.

Investor Warrant Modifications

The Company and the Board from time to time have authorized the modification to the terms of certain prior warrant issuances. We analyze such modifications under ASC 718 “"Compensation-Stock Compensation”" (“"ASC 718”") and ASC 505, “"Equity Based Payments to Non-Employees”" (“"ASC 505”") and have historically determined that no gain or loss is recognized upon the modification due to the warrants having been issued to an investor and investor awards not being subject to either ASC 718 or ASC 505.

~~Valuation of goodwill~~ 27

WeValuation account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of ~~an asset has decreased below its carrying value. In addition, ASC 350 requires that~~ goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

We ~~completed~~account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an ~~evaluation~~interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at ~~December~~the ~~31,~~reporting ~~2014~~unit ~~and~~level ~~2013~~(operating segment or one level below an operating segment) on an annual basis and ~~determined~~between annual tests when circumstances indicate that ~~there~~the ~~was~~recoverability noof the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. WeSignificant ~~employed~~judgments arequired ~~qualitative~~to ~~evaluation~~estimate ~~for~~the ~~our~~fair ~~2014~~value of reporting units include estimating future cash flows, determining appropriate discount rates and ~~2013~~other ~~analyses~~assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

22We completed an evaluation of goodwill at December 31, 2015 and 2014 and determined that there was no impairment. We employed a qualitative evaluation for our 2015 and 2014 analyses.

Liquidity and Capital Resources

A critical component of our operating plan affecting our ability to execute the product commercialization process is the cash resources needed to pursue our marketing and sales objectives. Until we are able to generate positive and sustainable operating cash flow, our ability to attract additional capital resources in the future will be critical to continue the funding of our operations.

In its audit report dated March 3130, ~~2015 report~~2016, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

While we cannot make any assurances as to the accuracy of our projections of future capital needs, based on our current cash available as of March 2728, ~~2015~~2016 (approximately $~~240~~150,000), receivable collections expected to be received within the next 30 days (approximately $35,000) and a remaining $500,000 balance from a $1,000,000 equity commitment from one of our Directors (see Equity Commitment in Note 5 to our financial statements), we have adequate cash and cash equivalents balances and commitments to fund operations through the end of ~~the~~May ~~third quarter of 2015~~2016. Management implemented a salary deferral program for all employees during 2011 to conserve our cash position. This salary deferral program has continued.

We have been funded ~~over~~since ~~the~~inception ~~last~~primarily ~~three years~~ by ~~private~~unregistered ~~investments~~sales ~~into~~of ~~the~~ Company restricted stock, ~~primarily~~generally ~~from~~to existing shareholders. We have also relied on a $1,000,000 inequity ~~the~~commitment ~~form~~from one of ~~restricted~~our ~~stock~~Directors, Rex Carr, of which $500,000 remains available (See Note 5. WeEquity ~~believe~~Commitment weand ~~still~~Related ~~have~~Party ~~access~~Transactions to ~~capital~~our ~~from~~financial ~~existing~~statements). ~~shareholders~~Rex ~~and~~Carr inpassed ~~addition~~away on April 27, ~~management~~2015. isOn ~~currently~~April in30, ~~discussions~~2015, ~~with~~the ~~its~~Company ~~investment~~elected ~~banker~~Glenn ~~and~~Carr ~~with~~as a ~~strategic~~Director ~~investor~~to ~~regarding~~its anBoard. ~~equity~~Glenn ~~investment~~Carr ~~that~~is ~~would~~the ~~allow~~son usof toRex ~~operate~~Carr. ~~for~~The Company believes that the ~~foreseeable~~equity ~~future~~commitment of Rex Carr will be honored by his estate. However, we can make no assurances ~~that~~as ~~additional capital will be available~~ to usthe ~~from~~timing ~~either~~ of ~~these~~when ~~sources.~~the ~~Therefore,~~estate ifmay webe ~~are~~settled, ~~unable~~and tohow ~~secure~~much ~~additional~~we ~~capital,~~may wereceive ~~will~~once ~~need~~the toestate ~~curtail~~is ~~operations~~settled.

~~Cash~~In ~~used in operating activities was $1~~addition,~~387,767~~ ~~for~~during the ~~twelve~~third ~~months~~quarter ~~ended~~of ~~December 31,~~ 2014, aswe ~~compared~~obtained toadditional ~~cash~~funding ~~used~~ in ~~operating~~the ~~activities~~form of ~~$1,066,590~~a ~~for~~convertible ~~the~~notes ~~twelve~~payable ~~months~~(see ~~ended~~Note ~~December 31, 2013~~6. ~~The~~Convertible ~~increase~~Notes inPayable ~~cash~~to ~~flow~~our ~~used~~financial instatements) ~~operating~~and ~~activities~~during ~~was~~the ~~due~~third ~~primarily~~quarter toof an2015, ~~increase~~we inobtained ~~our~~additional ~~accounts~~funding ~~receivable~~in ~~balance,~~the ~~net~~form of ~~bad~~a ~~debt~~subordinated ~~write~~notes ~~off~~payable (~~$429,184)~~see ~~and~~Note a7. ~~reduction~~Notes inPayable to our ~~accrued~~financial ~~compensation~~statements). ~~balance~~We ~~($155,436),~~also ~~partially~~obtained ~~offset~~funding byin anthe ~~increase~~first inquarter ~~our~~of ~~accounts~~2016 ~~payable~~in ~~balance,~~the ~~net~~form of ~~the~~subordinated ~~gain~~notes on(see ~~accounts~~Note ~~payable~~15. ~~write~~Subsequent ~~off~~Events ~~($232,944~~to our financial statements).

~~Cash~~We ~~provided~~are bycurrently ~~financing~~in ~~activities~~discussions ~~was~~with ~~$1,701,555~~our ~~for~~investment ~~the~~banker ~~twelve~~and ~~months~~a ~~ended~~number ~~December~~of ~~31,~~potential ~~2014,~~investors ~~as compared~~ to ~~$1,232,157~~raise ~~for~~additional ~~the twelve months ended December 31, 2013~~capital. ~~During~~We ~~2014,~~believe we ~~raised~~will ~~$836,055~~be ~~upon~~successful ~~the~~in ~~private~~raising ~~placement~~additional ofcapital ~~31,978,094~~to ~~restricted~~fund ~~shares of~~ our ~~common~~operations, ~~stock~~but toif ~~accredited investors. In addition,~~ we ~~received~~are ~~gross~~unable ~~proceeds~~to ofsecure ~~$1,000,000~~additional ~~from the issuance of a convertible note during the third quarter of 2014. During 2013~~capital, we ~~raised~~will ~~$882,157~~need ~~upon the private placement of 32,482,820 restricted shares of our common stock~~ to ~~accredited~~curtail ~~investors~~operations. ~~We also received net proceeds of $350,000 in the form of notes payable from related parties during 2013.~~

~~Net cash increased by $313,288 for the twelve months ended December 31, 2014, as compared to an increase in net cash of $165,567 for the twelve months ended December 31, 2013.~~28

~~During~~Cash used in operating activities was $847,492 for the twelve months ended December 31, ~~2014~~2015, ~~and~~as compared to cash used in operating activities of $1,387,767 for the twelve months ended December 31, ~~2013~~2014. The decrease in cash flow used in operating activities was due primarily to a decrease in our accounts receivable balance, wenet ~~did~~of ~~not~~bad ~~make~~debt ~~significant~~write ~~investments~~off ($803,027) primarily due to timing of fourth quarter 2014 receivable collections collected in ~~property~~early ~~and~~2015, ~~equipment~~an ~~and~~increase doin ~~not~~accrued ~~anticipate~~compensation ~~doing~~balance so($105,554), partially offset by a reduction in our accounts payable balance, net of the ~~immediate~~gain ~~future~~on accounts payable write off ($435,782) primarily due to fourth quarter 2014 vendor payables for product manufacturing being paid in early 2015.

~~Working~~Cash ~~capital~~provided ~~deficit~~by atfinancing ~~December~~activities 31was $342,900 ~~2014~~for ~~was~~the ~~$(825~~twelve months ended December 31,~~938)~~ 2015, as compared to $(41,~~541~~701,~~929)~~555 atfor the twelve months ended December 31, ~~2013~~2014. During the third quarter of 2015, we received gross proceeds of $380,000 from the issuance of notes. During 2014, we raised $836,055 upon the private placement of 31,978,094 restricted shares of our common stock to accredited investors. In addition, we received gross proceeds of $1,000,000 from the issuance of a convertible note during the third quarter of 2014.

23Net cash decreased by $504,592 for the twelve months ended December 31, 2015, as compared to an increase in net cash of $313,288 for the twelve months ended December 31, 2014.

~~The~~During ~~negative~~the ~~working~~twelve ~~capital~~months ~~balance~~ended ~~for~~ December 31, ~~2014~~2015 ~~is negatively impacted by the net $(329,825) impact of the deferred financing cost asset~~ and ~~the derivative liability that was recorded during the twelve months ended~~ December 31, 2014., ~~The~~we ~~negative~~did ~~working~~not ~~capital~~make ~~amount~~significant ~~for~~investments ~~2013~~in isproperty ~~strongly~~and ~~impacted~~equipment byand ~~the~~do ~~approximate~~not $3anticipate ~~million~~doing ~~deferred~~so ~~revenue~~in ~~liability~~the ~~recorded~~immediate ~~on our balance sheet at December 31, 2013~~future. ~~This deferred revenue liability was written off during 2014.~~

~~Effective~~Working ~~October~~capital ~~27,~~deficit ~~1999,~~at weDecember ~~merged~~31, ~~with~~2015 ~~Blencathia. Blencathia~~ was ~~a public shell company with immaterial assets and liabilities and 312~~$(2,~~000 shares outstanding at the time of the merger~~917, ~~which it redeemed and cancelled upon the merger. In exchange~~250), weas ~~issued~~compared ~~312,000 of our common shares~~ to ~~the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of~~ $~~500~~(825,~~000.~~938) ~~Any~~at ~~excess~~December proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 31231,~~000~~ ~~shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing loss per share~~2014.

InThe ~~2006,~~negative weworking ~~learned~~capital ~~that~~balance ~~the~~for ~~prior~~December ~~Blencathia owner had~~31, in2015 ~~fact,~~is ~~sold~~negatively ~~the~~impacted ~~312,000~~by ~~shares~~continued ~~for~~operational ~~aggregate~~cash ~~proceeds~~burn ofto ~~approximately~~fund ~~$150,000,~~ongoing ~~without~~operations ~~our~~during ~~consent. Accordingly, in~~ the ~~fourth~~twelve ~~quarter~~months ofended ~~2006,~~December ~~we recorded $500~~31,~~000~~ of2015 ~~general~~and ~~expenses (representing~~ the ~~cost~~reclassification of ~~the~~a ~~1999~~note ~~merger)~~payable and ~~the~~associated ~~deemed~~accrued ~~issuance~~interest ofpayable ~~approximately~~from ~~$150,000~~a oflong ~~common~~term ~~stock.~~liability ~~Since 2009, we have made payments~~ to ~~the~~a ~~prior~~current ~~Blencathia~~liability ~~owner~~at inDecember ~~the aggregate of $160~~31,~~000~~ ~~reducing this obligation~~2015. The ~~remaining~~negative ~~$190,000~~working ~~obligation~~capital ~~has~~balance ~~been~~for ~~reflected~~December as31, a2014 ~~current~~is ~~accrued~~negatively ~~expense.~~impacted Weby ~~are~~the innet ~~negotiations~~$(329,825) ~~with~~impact of the ~~prior~~deferred ~~Blencathia~~financing ~~owner~~cost toasset ~~resolve this obligation~~ and ~~may ultimately settle~~ the ~~obligation~~derivative ~~with~~liability ~~either~~that ~~cash~~was orrecorded ~~equity~~during ~~securities~~the ~~with~~twelve amonths ~~lower~~ended ~~market~~December ~~value. Beginning in 2006~~31, ~~the 312,000 shares have been reflected as outstanding for earnings per share computations~~2014.

Effective October 27, 1999, we merged with Blencathia. Blencathia was a public shell company with immaterial assets and liabilities and 312,000 shares outstanding at the time of the merger, which it redeemed and cancelled upon the merger. In exchange, we issued 312,000 of our common shares to the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of $500,000. Any excess proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 312,000 shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing loss per share.

In 2006, we learned that the prior Blencathia owner had, in fact, sold the 312,000 shares for aggregate proceeds of approximately $150,000, without our consent. Accordingly, in the fourth quarter of 2006, we recorded $500,000 of general expenses (representing the cost of the 1999 merger) and the deemed issuance of approximately $150,000 of common stock. Since 2009, we have made payments to the prior Blencathia owner in the aggregate of $160,000 reducing this obligation. The remaining $190,000 obligation has been reflected as a current accrued expense. We are in negotiations with the prior Blencathia owner to resolve this obligation and may ultimately settle the obligation with either cash or equity securities with a lower market value. Beginning in 2006, the 312,000 shares have been reflected as outstanding for earnings per share computations.

Item 8. Financial Statements and Supplementary Data

Financial statements specified by this Item, together with the report relating thereto of MaloneBailey, LLP, are presented following Item 15 of this annual report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, ~~2014~~2015. Based on these evaluations, the principal executive officer and principal financial officer have identified a material weakness in our internal control over financial reporting. Because of the material weakness and our previous inability to timely file our periodic reports with the SEC, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at December 31, ~~2014~~2015.

24Management's Report on Internal Control Over Financial Reporting

~~Management’s~~Our ~~Report~~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) and Rule 15d-15(f) promulgated under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2015, based on the framework in Internal Control-Integrated ~~Over~~Framework ~~Financial~~issued ~~Reporting~~by the Committee of Sponsoring Organizations of the Treadway Commission. Based on these evaluations under the framework in Internal Control-Integrated Framework, we identified a material weakness in our internal control over financial reporting. As a result, our management concluded that our internal control over financial reporting was not effective as of December 31, 2015.

Our 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) and Rule 15d-15(f) promulgated under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on these evaluations under the framework in Internal Control-Integrated Framework, we identified a material weakness in our internal control over financial reporting. As a result, our management concluded that our internal control over financial reporting was not effective as of December 31, 2014.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During our ~~2014~~2015 reviews of internal controls, management identified the following material weakness: the Company has limited accounting personnel with sufficient expertise, accounting knowledge and training in GAAP and financial reporting requirements. Specifically, the Company lacks sufficient personnel to anticipate, identify, resolve and review complex accounting issues and to complete a timely review of the financial statements. This material weakness was not corrected during ~~2014~~2015.

This control deficiency resulted in recorded material adjustments to the financial statements for non-cash stock-based compensation and also resulted in adjustments to financial statement presentation. There is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. However, our management team performed analysis and procedures to ensure that the financial statements included in this annual report on Form 10-K were prepared in conformity with GAAP, with specific focus on those areas that would be impacted by the material weakness identified. As a result, our management believes that the financial statements included in this annual report on Form 10-K present fairly, in all material respects, our financial position, results of operations and our cash flows for the periods presented.

Management does consult with outside advisers and its independent registered public accounting firm regarding certain reporting issues.

Management has discussed the material weakness and related corrective actions with the Audit Committee and our independent registered public accounting firm. Other than as described above, we are not aware of any other material weakness in our internal control over financial reporting. 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 risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Remediation Plan

Although as of December 31, ~~2014~~2015, we had not yet remediated the material weakness in our internal control over financial reporting identified during our 2008 through ~~2014~~2015 reviews, management has initiated the following remediation steps to address the material weakness described above:

	·	We will continue to focus on improving the skill sets of our accounting and finance function, through education and training;

	·	We will continue to consider the engagement of qualified professional consultants to assist us in cases where we do not have sufficient internal resources, with management reviewing both the inputs and outputs of the services;

	·	Upon the successful completion of a financing sufficient to support operations for at least two years, we will consider the hiring of additional accounting and finance staff with the commensurate knowledge, experience and training necessary to complement the current staff in the financial reporting functions; and

	·	We will further develop our financial statement closing and reporting practices to include additional levels of checks and balances in our procedures and timely review.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year ended December 31, ~~2014~~2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as discussed above, we have identified a material weakness in our internal control over financial reporting.

This annual report on Form 10-K does not include an attestation report of our independent auditors regarding internal control over financial reporting. Management's report was not subject to attestation by our independent auditors pursuant to temporary rules of the SEC that permit our company to provide only management's report in this annual report.

Item 9B. Other Information

None.

2631

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following are the names of our executive officers and Directors, their present positions with the Company and certain biographical information.:

Name	Age	Position(s) and Offices Held with the Company	Dates in Position or Office
Jonathan R. Burst	5657	Chief Executive Officer and Chairman of the Board	1999-Present (Chief Executive Officer); 2000-Present (Chairman of the Board)
Stuart D. Beath	5657	Chief Financial Officer	2007-Present
Rex Carr	88	Director	2002-Present
Rex Carr *	88	Director	2002-2015
Michael Gianino	5657	Director	2012-Present
David B. Norris	6667	Director	2000-Present
Glenn Carr *	45	Director	2015-Present

*Rex Carr passed away on April 27, 2015. On April 30, 2015, the Company elected Glenn Carr to its Board. Glenn Carr is the son of Rex Carr.

All Directors hold office until the next annual meeting of shareholders or until their successors are elected and qualified. At present, our Articles of Incorporation provide for not less than 1 nor more than 9 directors. Currently, we have 4 directors. Our by-laws permit the Board to fill any vacancy and such director may serve until the next annual meeting of shareholders or until his successor is elected and qualified. Officers serve at the discretion of the Board.

Background of Directors and Executive Officers:

JONATHAN R. BURST has served as our Chief Executive Officer since 1999, and as the President of the Company from 1999 to 2000 and 2002 to 2005. Mr. Burst has also served as a Director and Chairman of the Board since 2000. Mr. Burst founded Burcor International in 1998, primarily an insurance brokerage firm, and has served as President since its inception. Mr. Burst received a bachelor of arts degree in economics from the University of Missouri in 1981.

STUART D. BEATH has served as our Chief Financial Officer since 2007. From 2001 until his appointment as Chief Financial Officer, Mr. Beath served as our Director of Corporate Development. Prior to joining the Company, Mr. Beath was a First Vice President and served in the Corporate Finance Department of Stifel, Nicolaus & Company, Incorporated, a brokerage and investment banking firm, from 1993 to 1997. Mr. Beath was also a member of the Board of Directors of Anchor Gaming from 1994 to 2001, serving on the Board’'s Audit Committee. From 1987 to 1993, Mr. Beath served in the Corporate Finance Department of A.G. Edwards & Sons, Inc., a brokerage and investment banking firm, where he was an Assistant Vice President of the Firm. Mr. Beath earned a bachelor of arts degree from Williams College in 1981 and a masters in business administration degree from the Darden School at the University of Virginia in 1987.

27MICHAEL GIANINO has served as a Director of the Company since 2012. Mr. Gianino has served as the owner/President of Homewatch CareGivers of St. Louis, a home health care agency that provides non-medical in-home assistance primarily to the elderly, since 2001. Prior to 2001, Mr. Gianino was employed at Anheuser-Busch, Inc., serving in a variety of positions within Anheuser-Busch's Field Sales Department.

REX CARR has served as a Director of the Company since 2002. Mr. Carr has been the managing partner of the Rex Carr Law Firm, a law firm with offices in East St. Louis, Illinois, St. Louis, Missouri and Belleville, Illinois, since 2004. Until 2003, Mr. Carr was the senior partner of a 36-person law firm, Carr, Korein, and Tillery, with offices in Missouri and Illinois, for more than 5 years. Mr. Carr is admitted to practice in the United States Supreme Court and the Illinois and Missouri Supreme Courts.32

MICHAEL GIANINO has served as a Director of the Company since 2012. Mr. Gianino has served as the owner/President of Homewatch CareGivers of St. Louis, a home health care agency that provides non-medical in-home assistance primarily to the elderly, since 2001. Prior to 2001, Mr. Gianino was employed at Anheuser-Busch, Inc., serving in a variety of positions within Anheuser-Busch’s Field Sales Department.

DAVID B. NORRIS has served as a Director of the Company since 1999. Mr. Norris founded and owns Addicks Services, Inc., a construction company, and has served as its Vice President since 1983.

GLENN CARR has served as Director of the Company since April 30, 2015. Since 1999, Mr. Glenn Carr has been an owner/President of French Country Waterways, Ltd., a luxury, small-ship cruise company based in Duxbury, Massachusetts, that provides high-end cruises on the inland waterways of France.

Family Relationships

There are no family relationships among our Directors and executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, requires our executive officers and Directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, Directors and greater than 10% beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely upon our review of copies of such forms received by us, we believe that, during the fiscal years ended December 31, ~~2014~~2015, the following persons did not timely file Forms 3, Forms 4 and Forms 5 reporting beneficial ownership of our securities and/or changes therein.:

	2014
	2015
Reporting Person	Number of Known Failures to File Required Form		Number of Transactions Not Reported
Jonathan R. Burst		41		42
Rex Carr		3		3
Stuart D. Beath		1		2
Michael Gianino		1		12
David B. Norris		31		31

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to the Chief Executive Officer, the Chief Financial Officer, senior financial officers and employees with financial reporting responsibilities. A copy will be provided at no charge. Requests can be sent to Fuel Performance Solutions, Inc., 7777 Bonhomme Avenue, Suite 1920, St. Louis, Missouri 63105, attention Thomas M. Powell.

Audit Committee

We have a separately designated Audit Committee. Mr. Norris currently is the only member of our Audit Committee.

The Board has determined that Mr. Norris, an independent member of the Board, satisfies all of the criteria to be an “"audit committee financial expert”" as defined in Item 407(d)(5)(ii) of Regulation S-K.

Procedures for Nominating Directors

There have been no material changes to the procedures by which security holders may recommend nominees to the Board since the filing of our quarterly report on Form 10-Q for the fiscal quarter ended September 30, ~~2014~~2015.

Item 11. Executive Compensation

~~2014~~2015 Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation paid or to be paid by us as well as certain other compensation awarded to, earned by and paid to, during the indicated fiscal years, to the Chief Executive Officer and Chief Financial Officer.:

Name and Principal Position	Year		Salary($)		~~Salary ($)~~		Option Awards($)		~~Option Awards ($)~~		All Other Compensation($)		~~All Other Compensation ($)~~		Total($)		~~Total ($)~~
Jonathan R. Burst,	2015	~~2014~~	$	-	$	-	$	-	$	~~929,688~~	~~(5)~~$	312,052	$(1)	~~334,765~~	~~(1)~~$	312,052	$	~~1,264,453~~
Chief Executive Officer	2014	~~2013~~		-		-		929,688	(5)	-		334,765	(2)	~~324,663~~	~~(2)~~	1,264,453		~~324,663~~
		2012				52,154				-				381,245				433,399
	2013			-				-				324,663				324,663
Stuart D. Beath,	2015	~~2014~~		99,635		~~112,500~~		-		~~529,262~~	~~(5)~~	84,238	(3)	~~69,412~~	~~(3)~~	183,873		~~711,174~~
Chief Financial Officer	2014	~~2013~~		112,500		~~112,500~~		529,262	(5)	-		69,412	(4)	~~64,346~~	~~(4)~~	711,174		~~176,846~~
		2012				139,739				-				66,179				205,918
	2013			112,500				-				64,346				176,846

1) Includes (i) $184,385 of cash payments made to Burcor Capital, LLC, a company owned by Mr. Burst, in lieu of salary due to Mr. Burst, (ii) $97,615 of deferred salary owed to Mr. Burst (see "Executive Officer Base Salaries" below), (iii) $27,874 of health insurance coverage for Mr. Burst and his family, and (iv) $2,178 of life insurance premiums paid by us. 2) Includes (i) $178,962 of cash payments made to Burcor Capital, LLC, a company owned by Mr. Burst, in lieu of salary due to Mr. Burst, (ii) $103,038 of deferred salary owed to Mr. Burst (see “"Executive Officer Base Salaries”" below), (iii) $30,289 of health insurance coverage for Mr. Burst and his family, (iv) $2,178 of life insurance premiums paid by us, and (v) $20,298 of non-cash expense recorded for the grant of 500,000 options for Board services provided. The non-cash expense represents the aggregate grant date fair value computed in accordance with ASC 718. See Note 4. Stock Options to our financial statements for ASC 718 assumptions. These fully vested options were valued based on the closing price of our stock on the grant date ($0.06 on January 22, 2014). 3) Represents $33,873 of health insurance coverage for Mr. Beath and his family and $50,365 of deferred salary owed to Mr. Beath. See "Executive Officer Base Salaries" below. 4) Represents $31,912 of health insurance coverage for Mr. Beath and his family and $37,500 of deferred salary owed to Mr. Beath. See "Executive Officer Base Salaries" below.

2) Includes (i) $223,702 of payments made to Burcor Capital, LLC, a company owned by Mr. Burst, in lieu of salary due to Mr. Burst, (ii) $70,500 of deferred salary owed to Mr. Burst (see “Executive Officer Base Salaries” below), (iii) $28,283 of health insurance coverage for Mr. Burst and his family, and (iv) $2,178 of life insurance premiums paid by us.34

3) Represents $31,912 of health insurance coverage for Mr. Beath and his family and $37,500 of deferred salary owed to Mr. Beath. See “Executive Officer Base Salaries” below.

4) Represents $26,846 of health insurance coverage for Mr. Beath and his family and $37,500 of deferred salary owed to Mr. Beath. See “Executive Officer Base Salaries” below.

5)	Represents the grant date fair value for options granted as compensation for employment services. Key assumptions used in determining the fair value (pursuant to ASC 718) of these options include the following:

Measurement date(s):	January 22, 2014			May 22, 2014
Fair value per option:	$	0.041		$	0.136
Risk-free interest rate:		0.65	%		0.59	%
Dividend yield:		-			-
Volatility factor:		1.16			1.25
Expected option life:	5 years			5 years

Executive Officer Base Salaries

For the fiscal year ended December 31, 2011, Mr. Burst’'s and Mr. Beath’'s annual base salaries were $400,000 and $175,000, respectively. In May 2011, the Company instituted a policy pursuant to which all employees, including our named executive officers (“"NEOs”"), agreed to defer receipt of earned salary until further notice. Since May 2011, Messrs. Burst and Beath have continually deferred their earned salaries at various deferral levels. In general, the portion of earned salary deferred by both Messrs. Burst and Beath has been at least 25%. In addition, starting in 2013, the basis for earned salary accruals for Messrs. Burst and Beath was reduced to $282,000 and $150,000, respectively. For 2015, cash received for salaries for Messrs. Burst and Beath was $184,385 and $99,635, respectively. For 2014, cash received for salaries for Messrs. Burst and Beath was $178,962 and $112,500, respectively.

Outstanding Equity Awards at ~~2014~~2015 and ~~2013~~2014 Fiscal Year-End

The following table provides information on all restricted stock, stock options and stock appreciation rights awards (if any) held by our NEOs as of December 31, ~~2014~~2015 and as of December 31, ~~2013.~~2014:

	Option Awards (as of December 31, 2014)								Option Awards (as of December 31, 2013)
	Option Awards (as of December 31, 2015)										Option Awards (as of December 31, 2014)
Name	No. of Securities Underlying Unexercised Options Exercisable(#)		No. of Securities Underlying Unexercised Options Unexercisable(#)		OptionExercisePrice($)		~~OptionExpirationDate~~	OptionExpirationDate	~~No. of Securities Underlying Unexercised Options Exercisable(#)~~		No. of Securities Underlying Unexercised Options Exercisable(#)		~~No. of Securities Underlying Unexercised Options Unexercisable(#)~~		No. of Securities Underlying Unexercised Options Unexercisable(#)		~~OptionExercisePrice($)~~		OptionExercisePrice($)	~~OptionExpirationDate~~	OptionExpirationDate
Jonathan R. Burst		7,401,200		-	$	0.05	~~1/31/2019~~	1/31/2019		-		7,401,200		-		-		NA		NA0.05	1/31/2019
		5,000,000		-	$	0.15	~~5/22/2019~~	5/22/2019		-		5,000,000		-		-		NA		NA0.15	5/22/2019
		-		-		NA	NA			780,000				-			$	0.13		12/31/2014
Stuart D. Beath		3,000,000		-	$	0.05		1/31/2019				3,000,000				-				0.05	1/31/2019
		-		-		NA	NA			1,040,000				-			$	0.24		12/31/2014
		3,000,000		-	$	0.15		5/22/2019				3,000,000				-				0.15	5/22/2019
		-		-		NA	NA			4,600,000				-			$	0.48		12/31/2014
		-		-		NA	NA			10,000				-			$	0.09		12/31/2014
Stuart D. Beath		3,000,000		-	$	0.05	1/31/2019			-				-				NA		NA
		3,000,000		-	$	0.15	5/22/2019			-				-				NA		NA
		-		-		NA	NA			200,000				-			$	0.25		8/2/2014
		-		-		NA	NA			1,352,000				-			$	0.48		12/31/2014

3035

~~2014~~2015 and ~~2013~~2014 Director Compensation

Directors do not receive any cash compensation for their services as members of the Board, although they are reimbursed for certain expenses incurred in connection with attendance at Board and Committee meetings.

Historically, each non-employee and employee Director was entitled to an annual award of 10,000 restricted shares or an immediately vesting option to purchase 10,000 shares of our common stock as compensation for their services as Board members. In addition, each Board member was entitled to receive 1,000 shares of restricted stock or an option to purchase 1,000 shares of our common stock for every 3 Board meetings attended.

However, during 2013, the Company and the Board undertook a review of its Director compensation policy. This review was not finalized during 2013. During 2014, the Company addressed its Director compensation policy with grants of stock options to Board members. Future Board compensation will be determined on a case by case basis. No stock option grants were granted to Board members in their capacity as Board members during 2015.

Board members are also eligible to receive discretionary grants of common stock under the Consultant and Employee Stock Compensation Plan and grants of stock options, stock appreciation rights and restricted stock pursuant to the Amended and Restated LTIP.

The following table provides information related to the compensation of our non-NEO Directors for fiscal ~~2014~~2015 and ~~2013~~2014. For information regarding our Chairman and Chief Executive Officer’'s ~~2014~~2015 and ~~2013~~2014 compensation, see the ~~2014~~2015 Summary Compensation table.

Name	Year		Stock Awards($)		~~Stock Awards($)~~		Option Awards($)		~~Option Awards ($)~~		All Other Compensation($)		~~All Other Compensation($)~~		Total($)		~~Total($)~~
Rex Carr (1)	2015	~~2014~~	$	-	$	-	$	-	$	~~435,974 (2~~	)$	-	$	-	$	-	$	~~435,974~~
		2013				-				-				-				-
	2014			-				435,974	(2)			-				435,974
Michael Gianino (3)	2015	~~2014~~		-		-		-		~~156,195 (2~~	)	-		-		-		~~156,195~~
		2013				-				-				-				-
	2014			-				156,195	(2)			-				156,195
David B. Norris (4)	2015	~~2014~~		-		-		-		~~172,895 (2~~	)	-		-		-		~~172,895~~
		2013				-				-				-				-
	2014			-				172,895	(2)			-				172,895
Glenn Carr (5)	2015			-				-				-				-
	2014			-			NA				NA				NA

(1) Mr. Rex Carr’ passed away on April 27, 2015. Mr. Rex Carr's estate and previously Mr. Rex Carr's Company equity holdings as of both December 31, ~~2014~~2015 and ~~2013~~2014 includes 23,820,298 ~~and 17,320,298~~ shares, respectively, of restricted common stock owned by R.C. Holding Company, of which Mr. Rex Carr iswas a Director, President and 41% stockholder. Mr. Rex Carr isand now his estate are deemed to be the beneficial owner of these shares. Mr. Rex Carr's estate and previously Mr. Rex Carr also owned 125,000 shares of common stock as of both December 31, ~~2014~~2015 and ~~2013~~2014, and 8,324,901 ~~and 4,824,901~~ shares, respectively, of restricted common stock as of both December 31, ~~2014~~2015 and ~~2013~~2014. Mr. Rex Carr also had 4,321,960 ~~and 700,760~~ vested options/warrants to purchase shares of our common stock as of both December 31, ~~2014~~2015 and ~~2013~~2014, respectively, and 10,000 restricted common shares as of both December 31, ~~2014~~2015 and ~~2013~~2014, obtained from Board services provided from 2002 to date. Mr. Glenn Carr, Rex Carr's son, is the executor of Rex Carr's estate.

3136

(2) Represents the grant date fair value for options granted as compensation for Board services. Key assumptions used in determining the fair value (pursuant to ASC 718) of these options include the following:

Measurement date(s):	January 22, 2014			May 22, 2014
Fair value per option:	$	0.041		$	0.136
Risk-free interest rate:		0.65	%		0.59	%
Dividend yield:		-			-
Volatility factor:		1.16			1.25
Expected option life:	5 years			5 years

(3) Mr. Gianino’'s Company equity holdings as of ~~both~~ December 31, ~~2014~~2015 and ~~2013~~2014 include 2,~~830~~880,893 and 2,830,893 shares, respectively, of common stock. Mr. Gianino also held 1,500,000 ~~and 10,000~~ vested options to purchase shares of our common stock as of both December 31, ~~2014~~2015 and ~~2013~~2014 for Board services provided from 2012 to date. Mr. Gianino also held 350,000 and 250,000 vested warrants to purchase shares of our common stock as of December 31, ~~2014~~2015 and ~~2013~~2014, respectively.

(4) Mr. Norris’' Company equity holdings as of December 31, ~~2014~~2015 and ~~2013~~2014 include 31,~~744~~244,425 and 13,~~244~~744,425 shares, respectively, of restricted common stock. Mr. Norris also held 1,927,840 ~~and 98,640~~ vested options to purchase shares of our common stock as of both December 31, ~~2014~~2015 and ~~2013~~2014, ~~respectively,~~ and 10,000 restricted common shares obtained from Board services provided from 2000 to the respective date as of both December 31, ~~2014~~2015 and ~~2013~~2014.

(5) In addition to the holdings specified in footnote (1) above pursuant to the Rex Carr estate, Mr. Glenn Carr also holds 301,725 shares of our common stock as of December 31, 2015.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding the ownership of our common stock as of March 2730, ~~2015~~2016 by (i) each person known by us to own beneficially more than 5% of our common stock; (ii) each Director of the Company; (iii) each executive officer named in the Summary Compensation Table (see “"Executive Compensation”"); and (iv) all Directors and executive officers of the Company as a group. This table is based upon information supplied by officers, directors and principal stockholders. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.:

	As of March 27, 2015
	As of March 30, 2016
Name of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership (2)		%of Common Stock (2)
Jonathan R. Burst (3)		15,~~121~~996,677		67.9836	%
Stuart D. Beath (4)		6,~~349~~499,024		3.0310	%
Rex Carr (5)		36,602,159		17.59	%
Glenn Carr (5)		36,903,884		17.74	%
Michael Gianino (6)		4,~~580~~980,893		2.2342	%
David B. Norris (7)		53,~~682~~182,265		21.7655	%
All directors and executive officers as a group (5 persons) (8)		6867,~~336~~562,~~018~~743		29.6516	%
John M. Hennessy (9)		1415,~~127~~500,~~320~~967		67.6829	%

(1) Unless otherwise indicated, the principal address of each of the stockholders named in this table is: c/o Fuel Performance Solutions, Inc., 7777 Bonhomme Avenue, Suite 1920, St. Louis, Missouri 63105.

(2) The number of shares beneficially owned includes shares of common stock that the owner or owners had the right to acquire on or within 60 days of March 27, 2015, including through the exercise of options or warrants. Also included are restricted shares of common stock, over which the owner or owners have voting power, but no investment power. Calculation based on 203,758,698 common shares outstanding as of March 27, 2015 and calculated in accordance with Rule 13d-3 under the Exchange Act.37

32(2) The number of shares beneficially owned includes shares of common stock that the owner or owners had the right to acquire on or within 60 days of March 30, 2016, including through the exercise of options or warrants. Also included are restricted shares of common stock, over which the owner or owners have voting power, but no investment power. Calculation based on 203,758,698 common shares outstanding as of March 30, 2016 and calculated in accordance with Rule 13d-3 under the Exchange Act.

(3) Includes 52,000 restricted shares of common stock owned by Burcor Capital, LLC, of which Mr. Burst is an executive officer, as of March 2730, ~~2015~~2016. Mr. Burst is deemed to be the beneficial owner of such shares. It also includes 1213,~~734~~484,533 shares issuable upon the exercise of options/warrants as of March 2730, ~~2015~~2016.

(4) Represents ~~349~~399,024 shares of common stock as of March 2730, ~~2015~~2016, and 6,~~000~~100,000 shares issuable upon exercise of options/warrants as of March 2730, ~~2015~~2016, respectively.

(5) ~~Includes~~The estate of Mr. Rex Carr, which Mr. Glenn Carr is the executor, includes 23,820,298 shares of restricted common stock owned by R.C. Holding Company, of which Mr. Rex Carr iswas a director, President and 41% stockholder, as of March 2730, ~~2015~~2016. Mr. Rex Carr's estate is deemed to be the beneficial owner of these shares. ~~Also~~The estate of Rex Carr also includes 125,000 shares of common stock as of March 2730, ~~2015~~2016, and 8,324,901 shares of restricted common stock owned by the estate of Mr. Rex Carr as of March 2730, ~~2015~~2016. Amount also includes 4,321,960 shares issuable upon exercise of options/warrants as of March 1630, ~~2015~~2016 held by the Rex Carr estate; and 10,000 restricted common shares as of March 2730, ~~2015~~2016, obtained from Board services provided by Mr. Rex Carr from 2002 to ~~date~~2015. Amount also includes 301,725 shares of common stock as of March 30, 2016 held directly by Mr. Glenn Carr.

(6) Represents 2,~~830~~880,893 shares of common stock as of March 2730, ~~2015~~2016, and 12,~~750~~100,000 shares issuable upon exercise of options/warrants as of March 2730, ~~2015~~2016.

(7) Represents 31,~~754~~254,425 shares of common stock as of March 2730, ~~2015~~2016, and 1,927,840 shares issuable upon exercise of options as of March 2730, ~~2015~~2016.

(8) Includes 2027,~~734~~934,333 shares issuable upon exercise of options/warrants as of March 2730, ~~2015~~2016.

(9) Represents 6,~~437~~562,500 shares of common stock held directly by Mr. Hennessy and 78,~~689~~938,~~820~~467 shares issuable upon exercise of warrants held directly by Mr. Hennessy as of March 2730, ~~2015~~2016. Mr. Hennessy’'s principal address is 47 West Lake Road, Tuxedo Park, NY 10987.

Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, ~~2014~~2015

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders (1) (2)

6468,~~056~~344,~~124~~551

0.12

~~608~~776,~~040~~760

Total

6468,~~056~~344,~~124~~551

0.12

~~608~~776,~~040~~760

(1) Includes options granted to employees, Directors and non-employees under our original Long Term Incentive Plan, our Amended and Restated LTIP and under other arrangements, and options and warrants issued to non-employees under other arrangements. Other arrangements include warrants issued to non-employees in relation to certain equity raise activities and option grants to certain employees and non-employees whose underlying common shares are not registered under the Securities Act of 1933, as amended, or any state securities laws.

(2) See Note 3. Stockholders’' Equity (Deficit) and Note 4. Stock Options to our financial statements.

3338

Effective December 11, 2007, we received an investment commitment from Rex Carr, a Director of the Company and a holder of over 5% of our common stock. See Note 5. Equity Commitment inand ~~Note~~Related 5Party Transactions to our financial statements. Pursuant to the terms of the commitment, ~~Mr.~~Rex Carr ~~has~~ agreed to invest up to an aggregate of $1,000,000 in ~~our~~the ~~stock~~Company, at such time or times as we may request, in the form of a purchase or purchases of our restricted common stock. We may elect to draw from the commitment at one time or from time to time; provided, however, that the aggregate of such draws may not exceed $1,000,000. IfWe ~~and~~have ~~when~~drawn wedown ~~elect~~$500,000 toof ~~utilize~~the ~~available~~ commitment ~~funds,~~and weissued ~~will issue~~ to ~~Mr.~~Rex Carr that number of our shares of ~~our~~ restricted common stock equal to the value of the investment then provided to us. The number of shares to be issued ~~will~~was be calculated based on the closing price of our common stock as quoted on OTC Market Group’'s OTCQB marketplace on the date of the sale. There is no stipulation regarding the duration of this commitment. The total amount available under this commitment is $500,000 as of December 31, ~~2014~~2015.

OnRex ~~February~~Carr 6,passed ~~2014~~away on April 27, in2015. ~~exchange~~On ~~for~~April ~~the~~30, ~~cancellation~~2015, ofthe aCompany ~~cumulative~~elected ~~$500,000~~Glenn ~~loan~~Carr ~~balance~~to ~~with~~its MrBoard. Glenn Carr, weis ~~agreed~~the toson ~~sell~~of 10Rex Carr,~~000,000~~ ~~restricted~~a ~~shares~~deceased Director of ~~our~~the ~~common~~Company. ~~stock~~The toCompany ~~Mr.~~believes that the equity commitment of Rex Carr ~~(or~~referenced ~~entities~~above ~~controlled~~will be honored by ~~Mr.~~his ~~Carr)~~estate. NoHowever, ~~principal~~we orcan ~~interest~~make ~~relating~~no assurances as to the ~~cancelled~~timing ~~loan~~of ~~balance~~when ~~was~~the ~~paid~~estate bymay usbe settled, and how much we may receive once the estate is settled.

On February 6, 2014, in exchange for the cancellation of a cumulative $500,000 loan balance with Rex Carr, we agreed to sell 10,000,000 restricted shares of our common stock to Rex Carr (or entities controlled by Rex Carr). No principal or interest relating to the cancelled loan balance was paid by us.

On February 4, 2013, David B. Norris, a Director of the Company, loaned us $50,000. The terms of this loan did not require the payment of interest and did not require repayment of the principal by a certain date. On February 6, 2014, in exchange for the cancellation of this $50,000 loan with Mr. Norris, we agreed to sell 2,500,000 restricted shares of our common stock to Mr. Norris. No principal or interest relating to the cancelled loan was paid by us.

On ~~March~~August 121, ~~2013~~2015, ~~Jonathan R~~Messrs. Burst, ~~our~~Gianino ~~Board Chairman~~ and ~~Chief~~Norris ~~Executive~~(all ~~Officer,~~Directors ~~loaned~~of usthe ~~$50~~Company),~~000.~~ Inalong ~~exchange~~with ~~for~~our ~~the~~Chief ~~receipt~~Financial byOfficer usStuart ofD. ~~$50~~Beath,~~000,~~ weentered ~~agreed~~into tocertain ~~repay~~transactions ~~the~~with ~~principal amount of~~ the ~~loan.~~Company ~~On April 30, 2013~~ and ~~May~~investors ~~24,~~as ~~2013,~~described wefurther ~~made payments~~ in ~~the~~Note ~~amount~~5. ofEquity ~~$20,000~~Commitment and ~~$30,000,~~Related ~~respectively,~~Party toTransactions Mrand Note 7. ~~Burst~~Notes inPayable ~~repayment~~to ofour ~~the~~financial ~~loan~~statements.

Mr. Norris is an independent Director, as such term is defined in the listing standards of The Nasdaq Stock Market, Inc. (“"Nasdaq”").

The Company does not have a separately designated nominating committee for its Board. Each of the following directors is not deemed to be independent, as such term is defined in the Nasdaq listing standards: Mr. Burst and Mr. Glenn Carr.

Item 14. Principal Accountant Fees and Services

Services Provided by our Independent Registered Public Accountants

MaloneBailey, LLP served as our independent registered public accountants for the fiscal years ended December 31, ~~2014~~2015 and ~~2013~~2014. Aggregate fees for professional services rendered for the Company by MaloneBailey, LLP for the fiscal years ended December 31, ~~2014~~2015 and ~~2013~~2014 were as follows:

	Fiscal year ended December 31,
	Fiscal year endedDecember 31,
	2014		2013
	2015		2014
Audit fees	$	5259,~~500~~000	$	3552,~~000~~500
Audit-related fees		-		-
Tax fees		-		-
All other fees		-		-
	$	5259,~~500~~000	$	3552,~~000~~500

Audit Fees

Audit fees were for professional services rendered for the audits of our financial statements and for review of the financial statements included in our quarterly reports on Form 10-Q for the quarterly periods during the ~~2014~~2015 and ~~2013~~2014 fiscal years.

Audit-related Fees

During the ~~2014~~2015 and ~~2013~~2014 fiscal years, our independent registered public accountants did not provide any assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not reported under the caption “"Audit Fees”" above. Therefore, there were no audit-related fees billed or paid during the ~~2014~~2015 and ~~2013~~2014 fiscal years.

Tax Fees

As our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning during the fiscal years ended December 31, ~~2014~~2015 and ~~2013~~2014, no tax fees were billed or paid during those fiscal years.

All Other Fees

Our independent registered public accountants did not provide any products and services not disclosed in the table above during the ~~2014~~2015 and ~~2013~~2014 fiscal years. As a result, there were no other fees billed or paid during those fiscal years.

Audit Committee Pre-approval Policies and Procedures

The Audit Committee has certain policies and procedures in place requiring the pre-approval of audit and non-audit services to be performed by our independent registered public accountants. Such pre-approval can be given as part of the Audit Committee’'s approval of the scope of the engagement of the independent public registered accountants or on an individual basis. The approved non-audit services must be disclosed in our periodic reports filed with the SEC. The Audit Committee can delegate the pre-approval of non-auditing services to one or more of its members, but the decision must be presented to the full Audit Committee at the next scheduled meeting. The charter prohibits us from retaining our independent registered public accounting firm to perform specified non-audit functions, including (i) bookkeeping, financial information systems design and implementation; (ii) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (iii) actuarial services; and (iv) internal audit outsourcing services. All work performed by our independent registered public accountants for us in ~~2014~~2015 and ~~2013~~2014 was pre-approved by the Audit Committee.

3540

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report

	1.	Financial statements

		See index to financial statements and supporting schedules on page F-1 of this annual report on Form 10-K.

	2.	Financial statement schedules

		All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.

	3.	Exhibits

		The following exhibits are filed as part of the report or are incorporated by reference:

EXHIBITS

3.1	Articles of Incorporation of the Company and all amendments (Filed as Exhibit 3.1 to the registrant’'s annual report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference).
3.2	Certificate of Amendment to Articles of Incorporation of the Company (Filed as Exhibit 3.2 to the registrant’'s annual report on Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference).
3.3	~~By-laws~~Certificate of Amendment to Articles of Incorporation of the Company (Filed as Exhibit 3.23 to the registrant’'s annual report on Form 10-K for the fiscal year ended December 31, ~~1999~~2013 and incorporated herein by reference).
4.1	Form of 10% Senior Convertible Note issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 4.1 to the registrant’s current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
3.4	Certificate of Amendment to Articles of Incorporation of the Company. **
4.2	Form of Warrant issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 4.2 to the registrant’s current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
3.5	By-laws of the Company (Filed as Exhibit 3.2 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference).
4.3	Form of Warrant issued to the Benchmark Company LLC and its affiliates, dated August 22, 2014 (Filed as Exhibit 4.3 to the registrant’s registration statement on Form S-1/A filed on November 6, 2014 and incorporated herein by reference).
10.1	Form of Registration Rights Agreement issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 10.2 to the registrant’s current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
10.2	Consultant and Employee Stock Option Plan (Filed as Exhibit 10 to the registrant’s registration statement on Form S-8 filed on February 7, 2000 and incorporated herein by reference). *

3641

10.3	Long Term Incentive Plan (Filed as Exhibit 10.2 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference). *
4.1	Form of 10% Senior Convertible Note issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 4.1 to the registrant's current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
10.4	Amended and Restated Long Term Incentive Plan (Filed as Exhibit 10.3 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2006 and incorporated herein by reference). *
4.2	Form of Warrant issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 4.2 to the registrant's current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
10.5	Form of Amended and Restated Long Term Incentive Plan Stock Option Agreement (Filed as Exhibit 10.4 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference). *
4.3	Form of Warrant issued to the Benchmark Company LLC and its affiliates, dated August 22, 2014 (Filed as Exhibit 4.3 to the registrant's registration statement on Form S-1/A filed on November 6, 2014 and incorporated herein by reference).
10.6	Form of Stock Option Agreement (Filed as Exhibit 10.5 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference). *
4.4	Form of 10% Subordinated Note issued to the Purchasers under the Securities Purchase Agreement, dated August 21, 2015. **
10.7	Jonathan R. Burst Employment Agreement (Filed as Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 13, 2009 and incorporated herein by reference). *
4.5	Form of Warrant issued to the Purchasers under the Securities Purchase Agreement and Form of Warrant issued to the Benchmark Company LLC and its affiliates, both dated August 21, 2015. **
10.8	Stuart D. Beath Employment Agreement (Filed as Exhibit 10.2 to the registrant’s current report on Form 8-K filed on November 13, 2009 and incorporated herein by reference). *
10.1	Form of Registration Rights Agreement issued to the Purchasers under the Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 10.2 to the registrant's current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
10.9	Non-Statutory Stock Option Agreement between the Company and Stuart D. Beath, dated July 2, 2007 (Filed as Exhibit 10.2 to the registrant’s current report on Form 8-K filed on July 3, 2007 and incorporated herein by reference). *
10.2	Consultant and Employee Stock Option Plan (Filed as Exhibit 10 to the registrant's registration statement on Form S-8 filed on February 7, 2000 and incorporated herein by reference). *
10.10	Equity Investment Commitment between Rex Carr and the Company dated December 11, 2007 (Filed as Exhibit 10.12 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2007, incorporated herein by reference).
10.11	Form of Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 10.1 to the registrant’s current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).
14	Code of Business Conduct and Ethics (Filed as Exhibit 14 to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2005, incorporated herein by reference).
21	Subsidiaries
31.1	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.LAB	XBRL Taxonomy Extension Labe Linkbase
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

______________

10.3	Long Term Incentive Plan (Filed as Exhibit 10.2 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference). *

10.4	Amended and Restated Long Term Incentive Plan (Filed as Exhibit 10.3 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2006 and incorporated herein by reference). *

10.5	Form of Amended and Restated Long Term Incentive Plan Stock Option Agreement (Filed as Exhibit 10.4 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference). *

10.6	Form of Stock Option Agreement (Filed as Exhibit 10.5 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference). *

10.7	Jonathan R. Burst Employment Agreement (Filed as Exhibit 10.1 to the registrant's current report on Form 8-K filed on November 13, 2009 and incorporated herein by reference). *

10.8	Stuart D. Beath Employment Agreement (Filed as Exhibit 10.2 to the registrant's current report on Form 8-K filed on November 13, 2009 and incorporated herein by reference). *

10.9	Non-Statutory Stock Option Agreement between the Company and Stuart D. Beath, dated July 2, 2007 (Filed as Exhibit 10.2 to the registrant's current report on Form 8-K filed on July 3, 2007 and incorporated herein by reference). *

10.10	Equity Investment Commitment between Rex Carr and the Company dated December 11, 2007 (Filed as Exhibit 10.12 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2007, incorporated herein by reference).

10.11	Form of Securities Purchase Agreement, dated August 22, 2014 (Filed as Exhibit 10.1 to the registrant's current report on Form 8-K filed on August 28, 2014 and incorporated herein by reference).

10.12	Form of Securities Purchase Agreement, dated August 21, 2015. **

14	Code of Business Conduct and Ethics (Filed as Exhibit 14 to the registrant's annual report on Form 10-K for the fiscal year ended December 31, 2005, incorporated herein by reference).

21	Subsidiaries. **

31.1	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended. **

31.2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended. **

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS	XBRL Instance Document **

101.SCH	XBRL Taxonomy Extension Schema **

101.PRE	XBRL Taxonomy Extension Presentation Linkbase **

101.LAB	XBRL Taxonomy Extension Labe Linkbase **

101.CAL	XBRL Taxonomy Extension Calculation Linkbase **

101.DEF	XBRL Taxonomy Extension Definition Linkbase **

_____________

* Management contract or other compensatory plan, contract or arrangement.

** Filed herewith.

(b) The exhibits filed with this annual report are listed under Item 15(a)(3), immediately above.

3743

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FUEL PERFORMANCE SOLUTIONS, INC.(Registrant)
By:	/s/ Jonathan R. Burst	Date: March 3130, ~~2015~~2016
	Jonathan R. Burst
	Chief Executive Officer

Pursuant to the requirements of 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.

By:	/s/ Jonathan R. Burst	Date: March 3130, ~~2015~~2016
	Jonathan R. Burst
	Chairman of the Board and Chief Executive Officer(Principal executive officer)

By:	/s/ Stuart D. Beath	Date: March 3130, ~~2015~~2016
	Stuart D. Beath
	Chief Financial Officer (Principal financial and accounting officer)

By:	/s/ ~~Rex~~Glenn Carr	Date: March 3130, ~~2015~~2016
	Rex Carr
	Glenn Carr
	Director

By:	/s/ Michael Gianino	Date: March 3130, ~~2015~~2016
	Michael Gianino
	Director

By:	/s/ David B. Norris	Date: March 3130, ~~2015~~2016
	David B. Norris
	Director

3844

FUEL PERFORMANCE SOLUTIONS, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm		F-2
Financial Statements
Balance Sheets as of December 31, 2014 and 2013		F-3
Balance Sheets as of December 31, 2015 and 2014		F-3
Statements of Operations for the years ended December 31, 2014 and 2013		F-4
Statements of Operations for the years ended December 31, 2015 and 2014		F-4
Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2014 and 2013		F-5
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2015 and 2014		F-5
Statements of Cash Flows for the years ended December 31, 2014 and 2013		F-6
Statements of Cash Flows for the years ended December 31, 2015 and 2014		F-6
Notes to Audited Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Fuel Performance Solutions, Inc.

St. Louis, Missouri

We have audited the accompanying balance sheets of Fuel Performance Solutions, Inc. (the “"Company”") as of December 31, ~~2014~~2015 and ~~2013~~2014, and the related statements of operations, changes in stockholders’' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’'s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2014~~2015 and ~~2013~~2014, and the related results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring loss from operations and has a working capital deficit. This factor raises substantial doubt about the Company’'s ability to continue as a going concern. Management’'s plans in regard to this matter also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

www.malone-bailey.com

Houston, Texas

March 3130, ~~2015~~2016

F-2

FUEL PERFORMANCE SOLUTIONS, INC.

BALANCE SHEETS

	December 31,2014			December 31,2013
	December 31,2015			December 31,2014
ASSETS
Current assets
Cash and cash equivalents	$	~~530~~25,~~201~~609		$	~~216~~530,~~913~~201
Accounts receivable		338,572			10,781
Accounts receivable, net		20,476			338,572
Inventory		8010,~~247~~750			3380,~~784~~247
Deferred financing cost		~~127~~57,~~555~~877			-127,555
Prepaid expenses and other assets		3827,~~937~~112			2838,~~284~~937
Total current assets		1141,~~115,512~~824			~~289~~1,~~762~~115,512
Goodwill		2,211,805			2,211,805
Total assets	$	32,~~327~~353,~~317~~629		$	23,~~501~~327,~~567~~317
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current liabilities
Accounts payable	$	~~507~~287,~~044~~221		$	~~350~~507,~~984~~044
Accrued compensation		787,026			742,465
Convertible notes payable, net of discount of $92,803 and $0, respectively		999,697			-
Note payable to related parties		-			550,000
Convertible note payable – related party, net of discount of $4,885 and $0, respectively		52,615			-
Deferred revenue		-			2,998,242
Accrued interest		158,997			-
Derivative liability		457,380			-
Accrued interest – related party		8,368			-
Accrued compensation		937,141			787,026
Derivative liability		425,035			457,380
Other accrued expenses		190,000			190,000
Total current liabilities		13,~~941~~059,~~450~~074			41,~~831~~941,~~691~~450
Convertible note payable, net of discount of $550,975 and $0, respectively		541,525			-
Long term liabilities
Convertible note payable – related party, net of discount of $28,999 and $0, respectively		28,501			-
Convertible notes payable, net of discount of $0 and $550,975, respectively		-			541,525
Accrued interest		39,917			-
Convertible note payable – related party, net of discount of $0 and $28,999, respectively		-			28,501
Accrued interest – related party		2,101			-
Notes payable, net of discount of $175,823 and $0, respectively		194,177			-
Deferred rent		10,028			12,573
Notes payable – related party, net of discount of $15,243 and $0, respectively		29,757			-
Accrued interest		12,874			39,917
Accrued interest – related party		1,565			2,101
Deferred rent		6,428			10,028
Deferred income taxes		723,000			723,000
Total long term liabilities		1967,~~345,072~~801			~~735~~1,~~573~~345,072
Total liabilities		34,~~286~~026,~~522~~875			53,~~567~~286,~~264~~522
Commitments and contingencies
Stockholders’ equity (deficit)
Stockholders' equity (deficit)
Common stock, $0.01 par value, 350,000,000 and 250,000,000 shares authorized; 203,758,698 and 158,280,604 (net of 1,440,000 shares held in treasury stock) shares issued and outstanding at December 31, 2014 and 2013, respectively		2,051,987			1,597,206
Common stock, $0.01 par value, 350,000,000 shares authorized; 203,758,698 (net of 1,440,000 shares held in treasury stock) shares issued and outstanding at both December 31, 2015 and 2014		2,051,987			2,051,987
Treasury stock		(664,600	)		(664,600	)
Discount on common stock		(819,923	)		(819,923	)
Additional paid-in capital		72,~~258~~471,~~932~~486			6772,~~949~~258,~~067~~932
Accumulated deficit		(7274,~~785~~712,~~601~~196	)		(7172,~~127~~785,~~447~~601	)
Total stockholders’ equity (deficit)		40,795			(3,065,697	)
Total stockholders' equity (deficit)		(1,673,246	)		40,795
Total liabilities and stockholders’ equity (deficit)	$	3,327,317		$	2,501,567
Total liabilities and stockholders' equity (deficit)	$	2,353,629		$	3,327,317

See accompanying Notes to Financial Statements.

F-3

FUEL PERFORMANCE SOLUTIONS, INC.

STATEMENTS OF OPERATIONS

	Year Ended December 31,2014			Year Ended December 31,2013
	Year Ended December 31,2015			Year Ended December 31,2014
Net revenues	$	1455,~~726,619~~932		$	~~704~~1,~~189~~726,619
Operating expenses
Cost of operations		1396,~~269,081~~380			~~603~~1,~~189~~269,081
Selling, general and administrative expense		41,~~685~~417,~~844~~028			14,~~351~~685,~~006~~844
Research and development expense		~~24,090~~-			8024,~~689~~090
Gain on accounts payable write off		~~(59,899~~-	)		-(59,899	)
Gain on deferred revenue write off		~~(2,998,242~~-	)		-(2,998,242	)
Total operating expenses		21,~~920~~813,~~874~~408			2,~~034~~920,~~884~~874
Net loss from operations		(1,~~194~~357,~~255~~476	)		(1,~~330~~194,~~695~~255	)
Interest income (expense), net		(191,247	)		99
Interest expense, net		(793,345	)		(191,247	)
Gain on derivative liability		~~114~~224,~~848~~226			-114,848
Loss on conversion of debt from related party		~~(387,500~~-	)		-(387,500	)
Net loss before income taxes		(1,~~658~~926,~~154~~595	)		(1,~~330~~658,~~596~~154	)
Income tax provision		-			64,000
Net loss	$	(1,926,595	)	$	(1,658,154	)
Net loss	$	(1,658,154	)	$	(1,394,596	)
Basic and diluted net loss per common share	$	(0.01	)	$	(0.01	)
Weighted-average common shares outstanding, basic and diluted		~~196~~203,~~487~~758,~~778~~698			~~133~~196,~~559~~487,~~623~~778

See accompanying Notes to Financial Statements.

F-4

FUEL PERFORMANCE SOLUTIONS, INC.

STATEMENTS OF STOCKHOLDERS’' EQUITY (DEFICIT)

	Common Stock Shares			Common Stock Amount			Treasury Stock			Discount on Common Stock			Additional Paid-In Capital		Accumulated Deficit			Total
Balance, December 31, 2012		127,050,284		$	1,270,503		$	(664,600	)	$	(819,923	)	$	67,376,738	$	(69,732,851	)	$	(2,570,133	)
Issuance of stock for cash		32,482,820			324,828			-			-			557,329		-			882,157
Issuances of stock for services		187,500			1,875			-			-			15,000		-			16,875
Net loss		-			-			-			-			-		(1,394,596	)		(1,394,596	)
Balance, December 31, 2013		159,720,604		$	1,597,206		$	(664,600	)	$	(819,923	)	$	67,949,067	$	(71,127,447	)	$	(3,065,697	)
Issuance of stock for cash		31,978,094			319,781			-			-			516,274		-			836,055
Issuance of stock for conversion of debt from related parties		12,500,000			125,000			-			-			812,500		-			937,500
Issuances of stock for services		1,000,000			10,000			-			-			60,000		-			70,000
Expense relating to stock option grants		-			-			-			-			2,921,091		-			2,921,091
Net loss		-			-			-			-			-		(1,658,154	)		(1,658,154	)
Balance, December 31, 2014		205,198,698		$	2,051,987		$	(664,600	)	$	(819,923	)	$	72,258,932	$	(72,785,601	)	$	40,795
Expense relating to stock option grants		-			-			-			-			148,767		-			148,767
Cancellation of 2015 Affiliate Shares (See Note 7)		(2,075,000	)		(20,750	)		-			-			20,750		-			-
Issuance of 2015 Affiliate Shares (See Note 7)		2,075,000			20,750			-			-			43,037		-			63,787
Net loss		-			-			-			-			-		(1,926,595	)		(1,926,595	)
Balance, December 31, 2015		205,198,698		$	2,051,987		$	(664,600	)	$	(819,923	)	$	72,471,486	$	(74,712,196	)	$	(1,673,246	)

See accompanying Notes to Financial Statements.

F-5

FUEL PERFORMANCE SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS

	Year Ended			Year Ended
	December 31,			December 31,
	2014			2013
	2015			2014
Cash flows from operating activities
Net loss	$	(1,~~658~~926,~~154~~595	)	$	(1,~~394~~658,~~596~~154	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt provision		~~170~~13,~~875~~735			-170,875
Non-cash stock-based compensation		~~70,000~~-			1670,~~875~~000
Non-cash option expense		2148,~~921,091~~767			-2,921,091
Gain on deferred revenue write off		~~(2,998,242~~-	)		-(2,998,242	)
Gain on derivative liability		(114,848	)		-
Loss on inventory write off		44,518			-
Gain on accounts payable write off		(59,899	)		-
Gain on derivative liability		(224,226	)		(114,848	)
Loss on conversion of debt from related party		387,500			-
Gain on accounts payable write off		-			(59,899	)
Amortization of debt discount		112,704			-
Loss on conversion of debt from related party		-			387,500
Amortization of deferred financing cost		36,995			-
Amortization of debt discount		534,112			112,704
Deferred income tax provision		-			64,000
Amortization of deferred financing cost		119,553			36,995
Change in assets and liabilities:
Accounts receivable		~~(498~~304,~~666~~361	)		~~101~~(498,~~393~~666	)
Inventory		~~(46~~24,~~463~~979	)		26(46,~~445~~463	)
Prepaid expense and other assets		~~(10~~11,~~653~~825	)		(210,~~327~~653	)
Accounts payable		~~215~~(219,~~959~~823	)		~~(76~~215,~~884~~959	)
Accrued interest payable		39131,~~917~~954			-39,917
Accrued interest payable – related party		27,~~101~~833			-2,101
Accrued compensation		44185,~~561~~115			~~199~~44,~~997~~561
Deferred rent		(23,~~545~~600	)		(12,~~493~~545	)
Net cash used in operating activities		(1847,~~387,767~~492	)		(1,~~066~~387,~~590~~767	)
Cash flows from financing activities
Gross proceeds from issuance of convertible note		950,000			-
Gross proceeds from issuance of convertible notes		-			950,000
Gross proceeds from issuance of convertible note – related party		~~50,000~~-			-50,000
Proceeds from issuance of note payable to related parties		-			450,000
Gross proceeds from issuance of notes payable		370,000			-
Principal payments on debt due to related party		-			(100,000	)
Gross proceeds from issuance of notes payable - related party		10,000			-
Payments made for deferred financing cost		(~~135~~37,~~000~~100	)		-(135,000	)
Proceeds from issuance of common stock		~~836,055~~-			~~882~~836,~~157~~055
Net cash provided by financing activities		1342,~~701,555~~900			1,~~232~~701,~~157~~555
Net increase in cash and cash equivalents		313,288			165,567
Net increase (decrease) in cash and cash equivalents		(504,592	)		313,288
Cash and cash equivalents, beginning		~~216~~530,~~913~~201			51216,~~346~~913
Cash and cash equivalents, ending	$	~~530~~25,~~201~~609		$	~~216~~530,~~913~~201
Supplemental disclosure of cash flow information:
Cash paid during the year ended December 31:
Interest	$	-		$	-
Income taxes	$	-		$	-
Non-cash transactions:
Conversion of related party notes to common stock	$	~~550,000~~-		$	-550,000
Debt discount due to derivative liability	$	~~295,773~~-		$	-295,773
Debt discount due to warrant issued with convertible note	$	246,905		$	-
Debt discount due to derivative liability on warrants issued with convertible notes	$	-		$	246,905
Convertible note original issuance cost	$	150,000		$	-
Debt discount due to derivative liability on warrants issued with notes payable	$	179,106		$	-
Deferred financing cost due to derivative liability for warrant	$	29,550		$	-
Convertible notes original issuance cost	$	-		$	150,000
Deferred financing cost due to derivative liability for warrant	$	12,775		$	29,550
Debt discount due to 2015 Affiliate Shares issued with notes payable	$	63,787		$	-
Notes payable issued for accrued compensation	$	35,000		$	-

See accompanying Notes to Financial Statements.

F-6

FUEL PERFORMANCE SOLUTIONS, INC.

Note 1. Nature of Business and Significant Accounting Policies

Nature of Business

Fuel Performance Solutions, Inc. (the “"Company,”" “"we,”" “"us”" or “"our”") is a company that was incorporated under the laws of the State of Nevada on April 9, 1996. On February 5, 2014, the Company changed its name from International Fuel Technology, Inc. to Fuel Performance Solutions, Inc. We have developed a family of fuel additive product formulations. These unique fuel blends have been created to improve fuel economy, enhance lubricity (reducing engine wear and tear) and lower harmful engine emissions, while decreasing reliance on petroleum-based fuels through the use of more efficient, alternative and renewable fuels. We began transitioning from a development stage technology company to a commercial entity during 2002 and have been increasing our product marketing and sales efforts since. We are now focused on continuing to develop the body of evidence of the efficacy of our products applicable to a wide range of markets and industries within these markets through additional industry specific laboratory testing and customer field-based demonstration testing. In addition, we are continuing to strengthen our distributor and customer contact base. Marketing and sales efforts, in conjunction with the additional industry specific testing, will complete our transition to a commercial enterprise.

During 2015, our net revenues were split in the following manner: 8% to United States end-user customers and 92% to international distributors and end-user customers. 80% of our net revenues for 2015 were concentrated among 1 customer.

During 2014, our net revenues were split in the following manner: 3% to United States end-user customers and 97% to international distributors and end-user customers. 88% of our net revenues for 2014 were concentrated among 2 customers.

~~During~~At ~~2013~~December 31, ~~our~~2015, ~~net revenues were split in the following manner: 9~~100% toof ~~United~~our ~~States~~accounts ~~end-user~~receivable ~~customers~~balance ~~and~~was ~~91%~~attributable to ~~international~~1 ~~distributors~~customer. ~~and~~At ~~end-user~~December ~~customers.~~31, 922014, 82% of our ~~net~~accounts ~~revenues~~receivable ~~for~~balance ~~2013~~was ~~were~~attributable ~~concentrated~~to ~~among~~4 5 customers.

AtCustomers ~~December~~whose ~~31,~~revenues ~~2014,~~exceeded 8210% of our ~~accounts~~total ~~receivable~~revenues ~~balance~~for ~~was~~2015 ~~attributable~~and to2014 4are ~~customers.~~listed ~~At December 31, 2013, 100% of our accounts receivable balance was attributable to 3 customers.~~below:

Customers whose revenues exceeded 10% of our total revenues for 2014 and 2013 are listed below:

Customer Name	2015			2014

Nordmann, Rassmann		80	%		75	%
Unipart Group	NA				13	%

Customer Name	2014			2013
Nordmann, Rassmann		75	%		74	%
Unipart Group		13	%		-
Next Group Brazil		-			12	%

Net revenues related to shipments into various foreign countries were $417,532 and $1,669,037 during 2015 and 2014, respectively. The following table breaks out net revenues by foreign country:

Net revenues related to shipments into various foreign countries were $1,669,037 and $640,004 during 2014 and 2013, respectively. The following table breaks out net revenues by foreign country:

Country	2015		2014

Czech. Republic	$	71,806	$	127,980
Cyprus		-		5,665
France		38,919		29,843
Germany		290,658		1,103,970
Romania		-		68,336
United Kingdom		16,149		333,243
	$	417,532	$	1,669,037

Country	2014		2013
Brazil	$	-	$	88,361
Czech. Republic		127,980		139,640
Cyprus		5,665		12,175
France		29,843		14,495
Germany		1,103,970		310,649
Romania		68,336		68,631
United Kingdom		333,243		6,053
	$	1,669,037	$	640,004

F-7

We currently utilize Brenntag AG (“"Brenntag) as our contracted product manufacturer. Brenntag independently purchases required raw materials to manufacture our product. For the years ended December 31, ~~2014~~2015 and ~~2013~~2014, 100% of our product manufacturing has been handled by Brenntag.

Summaries of our significant accounting policies follow:

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with United States generally accepted accounting principles (“"GAAP”") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and trade receivables. We place our cash with high credit quality financial institutions. At times such cash may be in excess of the Federal Deposit Insurance Corporation ("FDIC") limit. With respect to trade receivables, we routinely assess the financial strength of our customers and, as a consequence, believe that our receivable credit risk exposure is limited.

Related Parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Revenue Recognition

We recognize revenue from the sale of our products when the price is fixed and determinable, persuasive evidence of an arrangement exists, the products are shipped, and title and risk of loss has passed to the buyer and collectability of the resulting receivable is reasonably assured. A majority of our revenues is from sales to product distributors. Product distributors do not have the option to return product that is not immediately sold to an end-user. Therefore, our revenue recognition is not conditional on whether a distributor is able to sell product to an ultimate product end-user. Our sales policies for end-users are consistent with product distributor sales policies.

Beginning in May 2013, as an effort to address our outstanding payable balance with and at the request of our product manufacturer, our non-United States customers began remitting receivable payments directly to our product manufacturer in lieu of remitting payment directly to us. Under this arrangement, we still maintained the risks and benefits related to sending the product to each customer and thus recorded sales revenues (and associated cost of sales) applying the gross reporting treatment for each transaction pursuant to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ASC 605-45, "Principal Agent Considerations." During the first quarter of 2014 (and continuing through December 31, 2015), we once again began collecting payments directly from our non-United States customers and paying our product manufacturer separately for the corresponding cost of manufactured goods.

F-8

Beginning in May 2013, as an effort to address our outstanding payable balance with and at the request of our product manufacturer, our non-United States customers began remitting receivable payments directly to our product manufacturer in lieu of remitting payment directly to us. Under this arrangement, we still maintained the risks and benefits related to sending the product to each customer and thus recorded sales revenues (and associated cost of sales) applying the gross reporting treatment for each transaction pursuant to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ASC 605-45, “Principal Agent Considerations.” During the first quarter of 2014, we once again began collecting payments directly from our non-United States customers and paying our product manufacturer separately for the corresponding cost of manufactured goods.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and temporary investments with a maturity of three months or less. We maintain cash in a bank account, which, at times, exceeds federally insured limits. We have experienced no losses relating to these excess amounts of cash in a bank.

We utilize a cash management program that assesses daily cash requirements. Excess funds are invested in overnight repurchase agreements backed by United States Treasury securities. Repurchase agreements are not deposits, are not insured or guaranteed by the United States government, the FDIC or any other government agency, and involve investment risk including possible loss of principal.

In addition, during 2014, we established a bank facility that has the functionality to hold cash in various international denominations. As of December 31, 2015, we did not have any cash balances held in international denominations and therefore no marking-to-market was required. As of December 31, 2014, we only had international funds held in euros. The balance of this euro account was marked-to-market as of December 31, 2014.

Accounts Receivable

An allowance for doubtful accounts is maintained at a level we believe sufficient to cover potential losses based on historical trends and known current factors impacting our customers. We have determined that an allowance for doubtful accounts was not necessary as of December 31, ~~2014~~2015 and ~~2013~~2014. We did, however, write off $13,735 and $170,875 of accounts receivable ~~from 2013 and 2014~~ that was expensed in 2015 and 2014, respectively.

Inventory

Inventory, which consists solely of finished product, is valued at the lower of cost or market, based on the first-in, first-out (“"FIFO”") method, or market, and reflects the purchased cost from vendors. Although we maintain minimal inventory levels in the United States at external storage facilities, the majority of our inventory is manufactured based on customer demand and immediately shipped to customers upon completion. The raw material components required to manufacture our products reside at our product manufacturer’'s facilities and are not owned by us.

During 2015, we wrote off $44,518 of certain inventory, primarily in the United States, which has sat idle for at least a one-year period. In the event that such inventory is subsequently sold to customers, we will record a gain on the recovery of inventory sold to customers. See Note 13. Inventory Write Off to our financial statements.

Goodwill

We account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

We completed an evaluation of goodwill at December 31, ~~2014~~2015 and ~~2013~~2014 and determined that there was no impairment. We employed a qualitative evaluation for the ~~2014~~2015 and ~~2013~~2014 analyses.

F-9

Income Taxes

We account for income taxes utilizing ASC 740, “"Income Taxes.”" ASC 740 requires the measurement of deferred tax assets for deductible temporary differences and operating loss carry-forwards, and of deferred tax liabilities for taxable temporary differences. Measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not included in the measurement. We recognize the amount of taxes payable or refundable for the current year and recognize deferred tax liabilities and assets for the expected future tax consequences of events and transactions that have been recognized in our financial statements or tax returns. We currently have substantial net operating loss (“"NOL”") carry-forwards. We have recorded a 100% valuation allowance against net deferred tax assets due to uncertainty of their ultimate realization. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Research and Development

Research and development costs are expensed as incurred. Expense for services received from external vendors for ~~2014~~2015 and ~~2013~~2014 was $~~24,090~~0 and $8024,~~689~~090, respectively.

Advertising Expenses

Advertising costs are expensed as incurred and amounted to $~~173~~16,~~763~~735 and $56173,~~219~~763 in ~~2014~~2015 and ~~2013~~2014, respectively.

Basic and Diluted Net Earnings (Loss) Per Common Share

We account for earnings per share pursuant to ASC 260, “"Earnings per Share,”" which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. As there was a net loss for the periods, basic and diluted loss per share is the same for the years ended December 31, ~~2014~~2015 and ~~2013~~2014, respectively.

Derivative Financial Instruments

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in our statements of operations. For stock-based derivative financial instruments, we use a Lattice Model option pricing model, in accordance with ASC 815-15, “"Derivatives and Hedging,”" to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

F-10

Fair Value of Financial Instruments

We measure our financial assets and liabilities in accordance with the requirements of ASC 820, “"Fair Value Measurements and Disclosures.”" ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

F-10

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’'s best estimate of fair value.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value as of December 31, ~~2014~~2015, and December 31, ~~2013~~2014:

Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
December 31, 2015
Derivative liability	$	-	$	-	$	425,035	$	425,035
December 31, 2014
Derivative liability	$	-	$	-	$	457,380	$	457,380
December 31, 2013
Derivative liability	$	-	$	-	$	-	$	-

Employee Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, “"Compensation-Stock Compensation”" (“"ASC 718). ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

F-11

Non-Employee Stock-Based Compensation

We account for stock-based compensation in accordance with the provision of ASC 505, “"Equity Based Payments to Non-Employees”" (“"ASC 505”"), which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instruments vest.

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

Note 2. Substantial Doubt About Ability to Continue as a Going Concern

Our financial statements are presented on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred significant losses since inception and currently have and previously from time to time have had limited funds with which to operate. These conditions raise substantial doubt as to the Company’'s ability to continue as a going concern. Management is in the process of executing a strategy based upon marketing technologies that offer enhanced engine performance and greater fuel economy along with pollution control benefits.

During the third quarter of 2014, we raised funds with the issuance of a convertible note. We have been funded since inception primarily by unregistered sales of Company restricted stock, generally to existing shareholders. We believe we still have access to capital from existing shareholders and in addition, management is in the process of executing a plan that we believe will provide us with sufficient funds to allow us to operate through the end of the third quarter of 2015. Specifically, management is currently in discussions with its investment banker and with a strategic investor regarding an equity investment that would allow us to operate for the foreseeable future. However, we can make no assurances that additional capital will be available to us from these sources. Therefore, if we are unable to secure additional capital, we will need to curtail operations.F-11

We have been funded since inception primarily by unregistered sales of Company restricted stock, generally to existing shareholders. We have also relied on a $1,000,000 equity commitment from one of our Directors, Rex Carr, of which $500,000 remains available (See Note 5. Equity Commitment and Related Party Transactions to our financial statements). Rex Carr passed away on April 27, 2015. On April 30, 2015, the Company elected Glenn Carr as a Director to its Board of Directors (the "Board"). Glenn Carr is the son of Rex Carr. The Company believes that the equity commitment of Rex Carr will be honored by his estate. However, we can make no assurances as to the timing of when the estate may be settled, and how much we may receive once the estate is settled.

In addition, during the third quarter of 2014, we obtained additional funding in the form of a convertible notes payable (see Note 6. Convertible Notes Payable to our financial statements) and during the third quarter of 2015, we obtained additional funding in the form of a subordinated notes payable (see Note 7. Notes Payable to our financial statements). We also obtained funding in the first quarter of 2016 in the form of subordinated notes (see Note 15. Subsequent Events to our financial statements).

We are currently in discussions with our investment banker and a number of potential investors to raise additional capital. We believe we will be successful in raising additional capital to fund our operations, but if we are unable to secure additional capital, we will need to curtail operations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Note 3. Stockholders’' Equity (Deficit)

On May 22, 2014, we filed a certificate of amendment to our Articles of Incorporation increasing the number of our authorized shares from 250,000,000 to 350,000,000 shares with the Nevada Secretary of State.

Effective October 27, 1999, we merged with Blencathia Acquisition Corporation (“"Blencathia”"). Blencathia was a public shell company with immaterial assets and liabilities and 312,000 shares outstanding at the time of the merger, which it redeemed and cancelled upon the merger. In exchange, we issued 312,000 of our common shares to the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of $500,000. Any excess proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 312,000 shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing earnings per share prior to 2006.

~~F-12~~In 2006, we learned that the prior Blencathia owner had, in fact, sold the 312,000 shares for aggregate proceeds of approximately $150,000, without our consent. Accordingly, in the fourth quarter of 2006, we recorded $500,000 of general expenses (representing the cost of the 1999 merger) and the deemed issuance of approximately $150,000 of common stock. The remaining $350,000 obligation was reflected as a current accrued expense. Beginning in 2006, the 312,000 shares have been reflected as outstanding for earnings per share computations. During 2009 and 2010, we made payments totaling $160,000 to the prior Blencathia owner. We did not make any payments to the prior Blencathia owner during 2011, 2012, 2013, 2014 or 2015. The related current accrued expense balance remains at $190,000 at the end of 2015. We are in negotiations with the prior Blencathia owner to resolve this obligation and may ultimately settle the obligation with either cash or equity securities with a lower market value.

InDuring ~~2006~~2015, we ~~learned~~did ~~that~~not ~~the~~sell ~~prior~~any ~~Blencathia owner had, in fact, sold the 312,000~~ shares ~~for~~to ~~aggregate~~accredited ~~proceeds of approximately $150,000, without our consent~~investors. ~~Accordingly~~However, ~~in the fourth quarter of 2006,~~ we ~~recorded~~issued ~~$500~~2,075,000 ofrestricted ~~general~~common ~~expenses~~shares ~~(representing the cost~~ of ~~the~~our ~~1999 merger) and the deemed issuance of approximately $150,000 of common~~ stock. ~~The~~related ~~remaining~~to ~~$350,000 obligation was reflected as~~ a ~~current~~2015 ~~accrued~~note ~~expense.~~issuance ~~Beginning in 2006,~~ (the ~~312,000~~"2015 ~~shares~~Affiliate ~~have been reflected as outstanding for earnings per share computations~~Shares"). ~~During~~See ~~2009~~Note ~~and 2010, we made payments totaling $160,000 to the prior Blencathia owner~~7. WeNotes ~~did~~payable ~~not make any payments~~ to ~~the~~our ~~prior~~financial ~~Blencathia owner during 2011, 2012, 2013 or 2014~~statements. The ~~related~~2015 ~~current~~Affiliate ~~accrued~~Shares ~~expense~~were ~~balance~~contributed ~~remains~~from atexisting ~~$190,000~~shareholdings ~~at the end~~ of ~~2014.~~related Weparty ~~are~~Board inmembers ~~negotiations with the prior Blencathia owner to resolve this obligation~~ and ~~may~~did ~~ultimately~~not ~~settle~~increase the ~~obligation~~total ~~with~~number ~~either~~of ~~cash~~our orcommon ~~equity~~shares ~~securities with a lower market value~~outstanding.

During 2014, we sold an aggregate total of 31,978,094 shares to accredited investors which yielded aggregate proceeds of $836,055.

~~During 2013, we sold an aggregate total of 32,482,820 shares to accredited investors which yielded aggregate proceeds of $882,157.~~F-12

AOn ~~detachable~~April ~~warrant~~12, to2013, ~~purchase~~our Board authorized and approved the extension of expiration date and change of exercise price for 2,000,000 investor warrants granted to a ~~share~~warrant holder for the purchase of ~~our~~the Company's common stock. ~~accompanied~~The ~~certain~~outstanding share ~~purchases~~purchase inwarrants ~~these~~originally ~~offerings.~~had ~~The~~a 4March 23,~~875,000~~ ~~aggregate~~2014 ~~warrants~~expiration ~~issued~~date ~~during~~and ~~2013~~an ~~each~~exercise ~~have~~price of $0.25. Now the warrant shall expire on April 11, 2018 with an exercise price of $0.1025. We analyzed the modification under ASC 718 and ~~were~~ASC ~~exercisable~~505 ~~immediately~~and determined no gain or loss is recognized upon the modification due to the warrant having been issued to an investor and upinvestor awards are not subject to 5either ~~years~~ASC 718 or ASC 505.

OnDuring ~~April 12~~2015, ~~2013,~~we ~~our~~issued ~~Board of Directors (the “Board”) authorized and approved the extension of expiration date and change of exercise price for 2~~4,~~000~~150,000 investor warrants ~~granted~~pursuant to a ~~warrant~~note ~~holder~~financing ~~for~~and ~~the~~an ~~purchase~~additional of296,000 ~~the Company’s common stock. The outstanding share purchase~~ warrants ~~originally~~for ~~had~~the aplacement ~~March~~agent ~~23,~~that ~~2014~~secured ~~expiration~~the ~~date~~note ~~and~~financing. anSee ~~exercise~~Note ~~price~~7. ofNotes $0Payable.~~25.~~ ~~Now~~During ~~the~~2015, ~~warrant~~we ~~shall~~also ~~expire~~issued ~~on April~~ 11,147 ~~2018~~investor ~~with~~warrants anpursuant ~~exercise~~to ~~price~~certain ofprior ~~$0.25.~~investor Wewarrant ~~analyzed~~issuances ~~the~~that ~~modification~~are ~~under~~subject ~~ASC 718 and ASC 505 and determined no gain or loss is recognized upon the modification due~~ to ~~the~~dilutive ~~warrant~~adjustments ~~having~~for ~~been~~share ~~issued~~issuances to(full anratchet ~~investor~~reset ~~and~~features) ~~investor~~tied ~~awards are not subject~~ to ~~either~~future ~~ASC~~issuances ~~718~~of orour ~~ASC~~equity ~~505~~securities.

During 2014, we issued 6,666,667 investor warrants pursuant to a convertible note financing and an additional 800,000 warrants for the placement agent that secured the convertible note financing. See Note 6. Convertible ~~Note~~Notes Payable. During 2014, we also issued 1,418,987 ~~investors~~investor warrants pursuant to certain prior investor warrant issuances that are subject to dilutive adjustments for share issuances (full ratchet reset features) tied to future issuances of our equity securities.

~~During~~No ~~2013,~~shares wewere issued ato ~~cumulative~~Directors ~~total~~for ofDirector-related ~~187,500~~services ~~common~~in ~~shares~~2015. toDuring a2014, ~~non-employee~~1,000,000 ~~consulting~~restricted ~~entity for services. These~~ shares were ~~valued~~issued atto ~~the~~a ~~respective~~Director ~~settlement~~for ~~dates’~~services ~~quoted~~which ~~market prices and~~ resulted in ~~an aggregate of~~ $1670,~~875~~000 of ~~recorded~~ non-cash stock-based compensation expense ~~during 2013~~.

~~During~~As ~~the~~of ~~third~~December ~~quarter~~31, of2015 ~~2013~~and 2014, ~~250~~we have 32,~~000~~613,551 and 28,156,404 warrants ~~associated~~outstanding, ~~with~~respectively. aThese ~~prior~~warrants ~~financing~~were ~~expired~~issued as part of equity and/or debt funding efforts that occurred in 2009, 2011, 2012, 2013, 2014 and 2015.

During 2014, 1,000,000 restricted shares were issued to a Director for services which resulted in $70,000 of non-cash stock-based compensation expense. No shares were issued to Directors for Director-related services in 2013.

Year Warrants Issued	No. of Warrants Issued		Warrant Exercise Price		Warrant Expiration Date

2009		2,000,000	$	0.15	2018
2011		2,570,750	$	0.25	2016
2012		9,825,000	$	0.10	2017
2013		4,875,000	$	0.10	2018
2014		7,466,667	$	0.12	2019
2014		1,418,987	$	0.15	2018
2015		4,446,000	$	0.12	2020
2015		11,147	$	0.15	2020

~~F-13~~No warrants were exercised during 2015 or 2014.

As of December 31, 2014 and 2013, we have 28,156,404 and 21,595,750 warrants outstanding, respectively. These warrants were issued as part of equity funding efforts that occurred in 2009, 2011, 2012, 2013 and 2014.

Year Warrants Issued	No. ofWarrants Issued		WarrantExercise Price		WarrantExpiration Date
2009		2,325,000	$	0.25		2014
2009		2,000,000	$	0.15		2018
2011		2,570,750	$	0.25		2016
2011		250,000	$	0.25		2013
2012		9,825,000	$	0.10		2017
2013		4,875,000	$	0.10		2018
2014		7,466,667	$	0.12		2019
2014		1,418,987	$	0.15		2018

No warrants were exercised during 2014 or 2013.

Further information relating to warrants is as follows:

				Weighted		Weighted
	NumberofShares			WeightedAverageExercisePrice		WeightedAverageRemainingLife (In Years)
	Number			Average		Average
	of			Exercise		Remaining
	Shares			Price		Life
Outstanding at December 31, 2012		16,970,750		$	0.16		3.55
Granted		4,875,000		$	0.10		4.26
Expired		(250,000	)	$	0.25		-
Outstanding at December 31, 2013		21,595,750		$	0.15		3.35
Granted		8,885,654		$	0.12		4.42
Expired		(2,325,000	)	$	0.25		-
Outstanding at December 31, 2014		28,156,404		$	0.12		3.26
Granted		4,457,147		$	0.12		4.67
Outstanding at December 31, 2015		32,613,551		$	0.12		2.59

The intrinsic value (difference between the warrant exercise price and our stock share price) attributable to warrants issued was $0 at both December 31, ~~2014~~2015 and ~~2013~~2014.

F-13

Note 4. Stock Options

Long Term Incentive Plan

On October 23, 2001, the Board adopted our Long Term Incentive Plan (“"LTIP”"). The Board is responsible for the administration of this LTIP, and is the approval authority for all option grant awards under this plan. Subject to the express provisions of the LTIP, the Board shall have full authority and sole and absolute discretion to interpret and amend this LTIP, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations which it believes to be necessary or advisable in administering this LTIP.

On October 22, 2006, our Board adopted the Amended and Restated LTIP. This plan expires on October 21, 2016.

The maximum number of shares of common stock as to which awards may be granted under this plan, subject to subsequent amendments, is 18,200,000 shares (updated to reflect the 4% dividend issued during the first quarter of 2009). The common stock issued upon exercise of options or on grant of stock awards may be shares previously authorized but not yet issued or shares which have been issued and reacquired by the Company as treasury stock. The Board may increase the maximum number of shares of common stock as to which awards may be granted at such time as it deems advisable.

The following tables summarize information about stock options issued to employees and Directors during the 2 years ended December 31, 2015:

	Shares			Exercise price per share	Weighted-average exercise price		Aggregate intrinsic value

Outstanding at December 31, 2013		9,489,120		$0.09-0.50	$	0.41		-

Granted		30,276,000		$0.05-0.15	$	0.10		-
Cancelled		(7,070,400	)	$0.09-0.50	$	0.39		-
Expired		(2,220,000	)	$0.18-0.48	$	0.46		-
Outstanding at December 31, 2014		30,474,720		$0.05-0.50	$	0.10	$	404,337

Expired		(168,720	)	$0.10-0.50	$	0.37
Outstanding at December 31, 2015		30,306,000		$0.05-0.17	$	0.10	$	-

Options exercisable at December 31, 2015		29,639,333		$0.05-0.17	$	0.10
Options exercisable at December 31, 2014		27,641,386		$0.05-0.50	$	0.10

The following table summarizes information about employee stock options outstanding at December 31, 2015:

	Options outstanding						Options exercisable
Exercise price range	Number outstanding at December 31, 2015		Weighted-average remaining contractual life (years)		Weighted-average exercise price		Number exercisable at December 31, 2015		Weighted-average exercise price

$0.05 - $0.10		15,286,000		3	$	0.05		14,619,333	$	0.05

$0.11 - $0.17		15,020,000		3	$	0.15		15,020,000	$	0.15

		30,306,000		3	$	0.10		29,639,333	$	0.10

F-14

The following tables summarize information about stock options issued to employees and Directors during the 2 years ended December 31, 2014:

	Shares			Exercise priceper share	Weighted-average exercise price		Aggregateintrinsic value
Outstanding at December 31, 2012		11,497,120		$0.09-0.96	$	0.43
Expired		(2,008,000	)	$0.21-0.96	$	0.53
Outstanding at December 31, 2013		9,489,120		$0.09-0.50	$	0.41
Granted		30,276,000		$0.05-0.15	$	0.10
Cancelled		(7,070,400	)	$0.09-0.50	$	0.39
Expired		(2,220,000	)	$0.18-0.48	$	0.46
Outstanding at December 31, 2014		30,474,720		$0.05-0.50	$	0.10	$	404,337
Options exercisable at December 31, 2014		27,641,386		$0.05-0.50	$	0.10
Options exercisable at December 31, 2013		9,489,120		$0.09-0.50	$	0.41

The following table summarizes information about employee stock options outstanding at December 31, 2014:

	Options outstanding						Options exercisable
Exercise price range	~~Number~~Numberoutstanding ~~outstanding~~ at December 31,2014		Weighted-average remaining contractuallife (years)		Weighted-averageexercise price		~~Number~~Numberexercisable ~~exercisable~~ at December 31,2014		Weighted-averageexercise price
$0.05 - $0.25		30,348,880		4	$	0.10		27,515,546	$	0.10
$0.26 - $0.50		125,840		1	$	0.44		125,840	$	0.44
		30,474,720		4	$	0.10		27,641,386	$	0.10

The following table summarizes information about ~~employee~~ stock options ~~outstanding~~issued atto non-employees during the 2 years ended December 31, ~~2013~~2015:

	Options outstanding									Options exercisable
	Shares			Exercise priceper share		Weighted-average exercise price			Aggregateintrinsic value
Exercise price range	Number outstanding at December 31,2013			Weighted-average remaining contractuallife (years)			Weighted-averageexercise price			Number exercisable at December 31,2013		Weighted-averageexercise price
Outstanding at December 31, 2013		4,137,599		$0.25-0.50		$	0.46			-
$0.09 - $0.25		2,435,760			1		$	0.20			2,435,760	$	0.20
Granted		5,730,000		$0.05-0.25		$	0.18			-
$0.26 - $0.50		7,053,360			1		$	0.48			7,053,360	$	0.48
Cancelled		(1,907,000	)	$0.10-0.48		$	0.37			-
		9,489,120			1		$	0.41			9,489,120	$	0.41
Expired		(2,535,599	)	$0.25-0.50			-			-
Outstanding at December 31, 2014		5,425,000		$0.05-0.25		$	0.19		$	8,700
Outstanding at December 31, 2015		5,425,000		$0.05-0.25		$	0.19		$	-
Options exercisable at December 31, 2015		5,425,000		$0.05-0.25		$	0.19
Options exercisable at December 31, 2014		5,425,000		$0.05-0.25		$	0.19

Stock option expense recorded in 2015 and 2014 is as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014
Awards to employees/Directors	$	148,767	$	2,492,541
Awards to non-employees		-		428,550
Total stock option expense	$	148,767	$	2,921,091

F-15

The following table summarizes information about stock options issued to non-employees during the 2 years ended December 31, 2014:

	Shares			Exercise priceper share	Weighted-average exercise price		Aggregateintrinsic value
Outstanding at December 31, 2012		4,781,599		$0.25-0.96	$	0.49
Expired		(644,000	)	$0.25-0.96	$	0.57
Outstanding at December 31, 2013		4,137,599		$0.25-0.50	$	0.46
Granted		5,730,000		$0.05-0.25	$	0.18
Cancelled		(1,907,000	)	$0.10-0.48	$	0.37
Expired		(2,535,599	)	$0.25-0.50		-
Outstanding at December 31, 2014		5,425,000		$0.05-0.25	$	0.19	$	8,700
Options exercisable at December 31, 2014		5,425,000		$0.05-0.25	$	0.19
Options exercisable at December 31, 2013		4,132,399		$0.25-0.50	$	0.46

Stock option expense recorded in 2014 and 2013 is as follows:

	Year Ended December 31,2014		Year Ended December 31,2013
Awards to employees/Directors	$	2,492,541	$	-
Awards to non-employees		428,550		-
Total stock option expense	$	2,921,091	$	-

Employee and Director Awards

We did not grant any stock options to employees or Directors for Director-related services during 2015. 168,720 fully vested options previously granted to employees and Directors (in their capacity as Directors) expired during 2015.

During 2014, we issued 22,651,200 options to employees and 7,624,800 options to Directors for Director-related services. These option grants were issued in conjunction with the cancellation of 7,070,400 options that had previously been issued to employees and Directors. We calculated the fair value of the to-be cancelled options on the cancellation date and netted the fair value against the fair value of the new grant options. The cancellation of these options resulted in $36,446 of stock option expense reversal. In addition, 2,220,000 fully vested options previously granted to employees and Directors (in their capacity as Directors) expired during 2014.

During 2013, we did not grant any options to employees or to Directors in their capacity as Directors. In addition, 2,008,000 fully vested options previously granted to employees and Directors (in their capacity as Directors) expired during 2013.

F-16

The following table provides the primary assumptions used to value employee and Director non-cash stock-based compensation for the years indicated:

	Year Ended December 31,2014				Year EndedDecember 31, 2013
	Year Ended December 31,2015			Year EndedDecember 31,2014
Weighted-average fair value of options granted	$	~~0.09~~NA		$	NA0.09
Weighted-average assumptions:
Risk-free interest rate	NA	~~0.67~~	%		NA0.67
Dividend yield	NA	-			NA-
Expected volatility	NA	~~1.92~~			NA1.92
Expected option life (years)	NA	5			NA5

As of December 31, ~~2014~~2015, there was $~~149,671~~903 of total unrecognized compensation cost related to outstanding options granted to employees and Directors. As of December 31, ~~2013~~2014, there was $0149,671 of total unrecognized compensation cost related to outstanding options granted to employees and Directors ~~as all options previously granted to employees and Directors were fully vested as of December 31, 2013~~.

Non-employee awards

We did not grant any stock options to non-employees during 2015. During 2014, we granted 5,730,000 stock options to non-employees. WeDuring 2014, we also cancelled 1,907,000 stock options previously granted to non-employees, resulting in $3, 653 of stock option expense reversal. 2,535,599 fully vested options previously granted to non-employees expired in 2014.

We did not ~~grant~~receive ~~any~~proceeds for stock options toexercised ~~non-employees~~ during ~~2013.~~2015 ~~However,~~or ~~644~~2014,~~000~~ ~~fully~~as ~~vested~~no options ~~previously~~were ~~granted to non-employees expired in 2013~~exercised.

~~We did not receive proceeds for stock options exercised during 2014 or 2013, as no options were exercised.~~F-16

Services performed by non-employees who were granted options include product/distribution consulting, technology consulting, investor relations and legal services. The weighted-average fair value for such options that have had a fair value calculation applied (~~$0.08~~NA for ~~2014~~2015 and NA$0.08 for ~~2013~~2014) was estimated at the date of grant using a Black-Scholes option pricing model. The following weighted-average assumptions were used for the 2014 grants: risk-free interest rate of 0.43%, volatility factor of 2.13, and a weighted-average expected life of the option of approximately 4.40 years.

The weighted-average remaining contractual term (in years) of the non-employee options outstanding at December 31, ~~2014~~2015 and ~~2013~~2014 is 21.57 and 02.7357, respectively.

The aggregate intrinsic value (defined as the excess of the market price of our common stock as of the end of the period over the exercise price of the related stock options) for all stock options (employee, Director and non-employee) outstanding and exercisable as of December 31, ~~2014~~2015 and ~~2013~~2014 was $~~413,037~~0 and $0413,037 for the respective periods.

Note 5. Equity Commitment and Related Party Transactions

On August 2221, ~~2014~~2015, the Company ~~borrowed~~issued $5025,000 ~~from~~of notes payable to Jonathan Burst, our Board chairman and Chief Executive Officer, $10,000 to Michael Gianino, a Director on our Board and $10,000 to Stuart D. ~~This~~Beath, ~~loan~~our ~~was~~Chief Financial Officer. These loans were pursuant to the ~~convertible~~notes ~~note~~ payable transaction discussed in Note 67. ~~Convertible~~Notes ~~Note~~ Payable below. Total cash proceeds from the $45,000 of related party notes payable is $10,000, while the remaining $35,000 is offset with accrued compensation.

On August 22, 2014, the Company issued $50,000 of notes payable to Jonathan Burst, our Board chairman and Chief Executive Officer. This loan was pursuant to the convertible note payable transaction discussed in Note 6. Convertible Notes Payable below.

Effective December 11, 2007, we received an investment commitment from Rex Carr, a Director of the Company and a holder of over 5% of our common stock. Pursuant to the terms of the commitment, Mr. Rex Carr agreed to invest up to an aggregate of $1,000,000 in the Company, at such time or times as we may request, in the form of a purchase or purchases of our restricted common stock. We may elect to draw from the commitment at one time or from time to time; provided, however, that the aggregate of such draws may not exceed $1,000,000. We have drawn down $500,000 of the commitment and issued to Mr. Rex Carr that number of our shares of restricted common stock equal to the value of the investment then provided to us. The number of shares to be issued was calculated based on the closing price of our common stock as quoted on OTC Market Group's OTCQB marketplace on the date of the sale. There is no stipulation regarding the duration of this commitment. The total amount available under this commitment is $500,000 as of December 31, 2015.

Rex Carr passed away on April 27, 2015. On April 30, 2015, the Company elected Glenn Carr to its Board. Glenn Carr is the son of Rex Carr, a deceased Director of the Company. The Company believes that the equity commitment of Rex Carr referenced above will be honored by his estate. However, we can make no assurances as to the timing of when the estate may be settled, and how much we may receive once the estate is settled.

As of December 31, 2013, the Company owed $500,000 to Mr. Rex Carr. The terms of the loans associated with this cumulative loan balance did not require the payment of interest and did not require repayment of the principal by a certain date. On February 6, 2014, we issued 10,000,000 restricted shares of Company common stock in exchange for the cancellation of this note payable from a related party in the aggregate (face amount) of $500,000. The fair value of the shares issued based on the February 6, 2014 closing price of our stock ($0.075) was $750,000. This conversion of notes payable from a related party to restricted shares of our common stock was treated separately from the equity commitment in place with Mr. Rex Carr.

F-17

~~Effective~~On ~~December~~February 114, ~~2007~~2013, weDavid ~~received~~B. ~~an investment commitment from Rex Carr~~Norris, a Director of the Company, ~~and~~loaned aus ~~holder~~$50,000. ofThe ~~over~~terms 5% of ~~our~~this ~~common~~loan ~~stock.~~did ~~Pursuant~~not torequire the ~~terms~~payment of ~~the~~interest ~~commitment,~~and ~~Mr.~~did ~~Carr~~not ~~has~~require ~~agreed~~repayment ~~to invest up to an aggregate~~ of ~~$1,000,000 in~~ the ~~Company,~~principal atby ~~such time or times as we may request, in the form of~~ a ~~purchase~~certain ~~or purchases of our restricted common stock~~date. WeThis ~~may~~loan ~~elect~~was toconverted ~~draw from the commitment at one time or from time~~ to ~~time; provided~~2, ~~however~~500,000 ~~that~~shares ~~the aggregate~~ of ~~such~~the ~~draws~~Company's ~~may~~common ~~not~~stock ~~exceed~~on ~~$1,000,000.~~February ~~If and when we elect to utilize available commitment funds~~6, ~~we will issue to Mr~~2014. ~~Carr~~The ~~that~~fair ~~number of our shares of restricted common stock equal to the~~ value of the ~~investment then provided to us. The number of~~ shares ~~to be~~ issued ~~will be calculated~~ based on the February 6, 2014 closing price of our ~~common~~ stock ~~as quoted on OTC Market Group’s OTCQB marketplace on the date of the sale~~($0.075) ~~There~~was ~~is no stipulation regarding the duration of this commitment. As of December 31, 2014,~~ $~~500~~187,~~000 remains available under this equity commitment~~500.

AsIn ofconjunction ~~December~~with ~~31, 2013,~~ the ~~Company~~conversion ~~owed~~of ~~$500,000 to~~ Mr. Rex Carr.'s ~~The terms of the loans associated with this cumulative loan balance did not require the payment of interest~~ and ~~did not require repayment of the principal by a certain date~~Mr. OnNorris' ~~February~~notes ~~6, 2014, we issued 10,000,000 restricted shares of Company common stock in exchange for the cancellation of this note~~ payable from a related party into ~~the~~equity, ~~aggregate~~we ~~(face~~recorded ~~amount)~~a of $~~500~~387,~~000.~~500 ~~The~~loss ~~fair value of the shares issued based~~ on the ~~February 6, 2014 closing price of our stock ($0.075) was $750,000. This~~ conversion of ~~notes payable from a~~ related party notes to ~~restricted shares of~~ our ~~common~~income ~~stock~~statement ~~was~~during ~~treated separately from~~ the ~~equity~~twelve ~~commitment~~months inended ~~place~~December ~~with~~31, Mr2014. ~~Carr.~~

OnNote February 4, 2013, David B. Norris, a Director of the Company, loaned us $50,000. The terms of this loan did not require the payment of interest and did not require repayment of the principal by a certain date. This loan was converted to 2,500,000 shares of the Company’s common stock on February 6~~, 2014~~. ~~The~~Convertible ~~fair~~Notes ~~value of the shares issued based on the February 6, 2014 closing price of our stock ($0.075) was $187,500.~~Payable

InOn ~~conjunction~~August 22, 2014 (the "2014 Closing Date"), we closed a financing transaction by entering into a Securities Purchase Agreement dated August 22, 2014 (the "2014 Securities Purchase Agreement") with certain funds and investors signatory to such 2014 Securities Purchase Agreement (the ~~conversion~~"2014 Purchasers") for an aggregate subscription amount of ~~Mr.~~$1,000,000 ~~Carr’s~~(the ~~and~~"2014 ~~Mr.~~Purchase ~~Norris’~~Price") ~~notes~~of ~~payable~~which $50,000 is from a related party. Pursuant to ~~equity~~the 2014 Securities Purchase Agreement, we ~~recorded~~issued athe following to the 2014 Purchasers: (i) 10% Convertible Promissory Notes with an aggregate principal amount of $~~387~~1,~~500~~150,000 ~~loss~~(the on"2014 Notes"), and (ii) warrants to purchase an aggregate of 6,666,667 shares of the ~~conversion~~Company's common stock, par value $0.01 per share, for an exercise price of ~~related~~$0.12 ~~party~~per ~~notes~~share tofor ~~our~~a ~~income~~period ~~statement~~of ~~during~~five (5) years from the ~~twelve~~effective ~~months~~date ~~ended~~of ~~December~~the ~~31,~~registration statement (the "2014 Warrants").

In 2013, we received $450,000 of advances from related parties and made payments to related parties of $100,000. The advances were received from the following: Mr. Carr ($350,000), Mr. Norris ($50,000) and Mr. Burst ($50,000). The payments made (in aggregate) to related parties during 2013 consisted of the following: Mr. Carr ($50,000) and Mr. Burst ($50,000).

Note 6. Convertible Note Payable

On August 22, 2014 (the “Closing Date”), we closed a financing transaction by entering into a Securities Purchase Agreement dated August 22, 2014 (the “Securities Purchase Agreement”) with certain funds and investors signatory to such Securities Purchase Agreement (the “Purchasers”) for an aggregate subscription amount of $1,000,000 (the “Purchase Price”) of which $50,000 is from a related party. Pursuant to the Securities Purchase Agreement, we issued the following to the Purchasers: (i) 10% Convertible Promissory Notes with an aggregate principal amount of $1,150,000 (the “Notes”), and (ii) warrants to purchase an aggregate of 6,666,667 shares of the Company’s common stock, par value $0.01 per share, for an exercise price of $0.12 per share for a period of five (5) years from the effective date of the registration statement (the “Warrants”).

F-18

We recorded $150,000 of original issuance cost related to this transaction, which we have recorded as debt discount.

The terms of the 2014 Notes and the 2014 Warrants are as follows:

10% Convertible Promissory Notes

The total principal amount of the 2014 Notes is issued with a 115% premium to the subscription amount. The 2014 Notes accrue interest at a rate equal to 10% per annum and have a maturity date of February 22, 2016. Subsequent to December 31, 2015, the maturity date of the 2014 Notes was extended to April 30, 2016 (see Note 15. Subsequent Events to our financial statements). The 2014 Notes are convertible any time after the issuance date of the 2014 Notes. The 2014 Purchasers have the right to convert the 2014 Notes into shares of the Company’'s common stock at a conversion price equal to $0.10 per share, subject to standard adjustments for stock dividends, stock splits, subsequent equity sales, subsequent rights offerings and pro rata distributions. While the 2014 Notes are outstanding, in the event of a subsequent equity sale at a price lower than the conversion price of $0.10 per share, the conversion price of the 2014 Notes shall be reduced to the lower conversion price. The 2014 Notes can be redeemed under certain conditions and the Company can force the conversion of the 2014 Notes in the event certain equity conditions are met.

In the event of default, the 2014 Purchasers have the right to require the Company to repay in cash all or a portion of the 2014 Notes at a price equal to 125% of the aggregate principal amount of the 2014 Notes plus all accrued but unpaid interest.

We recorded $125,347 and $42,018 of interest expense related to the issuance of the 2014 Notes during the twelve months ended December 31, 2015 and 2014, respectively.

F-18

Warrants

The 2014 Warrants are exercisable in whole or in part, at an initial exercise price per share of $0.12, subject to adjustment. The exercise price and number of shares of the Company’'s common stock issuable under the 2014 Warrants (the “"2014 Warrant Shares”") are subject to adjustments for stock dividends, splits, combinations, subsequent rights offerings, pro rata distributions and any issuance of securities below the exercise price of the 2014 Warrants. While the 2014 Warrants are outstanding, in the event of a subsequent equity sale including a warrant exercise price lower than the exercise price of $0.12 per share, the exercise price of the 2014 Warrants shall be reduced to the lower exercise price. Any adjustment to the exercise price shall similarly cause the number of 2014 Warrant Shares to be adjusted so that the total value of the 2014 Warrants may increase, provided, that in no event shall the number of 2014 Warrant Shares exceed 200% of the original number of 2014 Warrant Shares originally issued.

In addition to the 2014 Warrants described above, the Company also issued 800,000 warrants to a placement agent assisting with the convertible note transaction. The terms of the placement agent warrants are the same as of the terms of the 2014 Warrants explained above.

Registration Rights Agreement

In connection with the sale of the 2014 Notes and 2014 Warrants pursuant to the 2014 Securities Purchase Agreement, the Company entered into a registration rights agreement (the “"2014 Registration Rights Agreement”") with the 2014 Purchasers, pursuant to which the Company agreed to register all of the shares of common stock underlying the 2014 Notes and the shares of common stock underlying the 2014 Warrants (together, the “"2014 Registrable Securities”") on a Form S-1 registration statement (the “"2014 Registration Statement”") to be filed with the SEC within thirty (30) calendar days following the 2014 Closing Date (the “"2014 Filing Deadline”") and to use its best efforts to cause the 2014 Registration Statement to be declared effective under the Securities Act within one hundred (100) calendar days following the 2014 Closing Date (the “"2014 Effectiveness Deadline”"). The 2014 Registration Statement became effective November 26, 2014.

F-19

Deferred Financing Cost

In connection with the convertible note transaction explained above, the Company paid $55,000 for legal fees and $80,000 for placement agent fees. In addition, $29,550 was also recorded to deferred financing costs related to the fair value valuation of the placement agent warrants. $110,547 and $36,995 of deferred financing costs was amortized during the twelve months ended December 31, 2015 and 2014, respectively. The deferred financing cost balance related to the 2014 Notes is $17,008 and $127,555 as of December 31, 2015 and December 31, 2014, respectively.

Derivative

Because the above convertible ~~debt~~2014 Notes and ~~warrants~~2014 Warrants have full reset adjustments tied to future issuances of equity securities by the Company, itthey isare subject to derivative liability treatment under ASC 815-40-15, “ "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’'s Own Stock” " (“"ASC 815-40-15”"). ASC 815-40-15 requires as of the date the convertible ~~debt~~2014 Notes and ~~warrants~~2014 Warrants are issued, the derivative liability to be measured at the fair value and re-evaluated at the end of each reporting period. See Note 78. Derivative Liability.

On issuance date the fair value of the derivative liability for both the convertible debt and warrants was $295,773 and $246,905, respectively. Therefore a total of $692,678 (including $150,000 original issuance costs) of debt discount was recorded. During the twelve months ended December 31, 2014, $112,704 was recorded as amortization of debt discount. As of December 31, 2014, the convertible debt has a balance of $541,525, net of $550,975 of debt discount and accrued interest of $39,917.F-19

AsDebt ~~of December 31, 2014, the related party convertible note has a balance of $28,501, net of $28,999 of debt discount and accrued interest of $2,101.~~Discount

~~Note~~On 7issuance date, the fair value of the derivative liability for both the convertible 2014 Notes and 2014 Warrants was $295,773 and $246,905, respectively. ~~Derivative~~Therefore ~~Liability~~a total of $692,678 (including $150,000 original issuance costs) of debt discount was recorded. $458,172 and $112,704 was recorded as amortization of debt discount during the twelve months ended December 31, 2015 and 2014, respectively.

~~During~~As ~~2009, we granted a warrant to purchase 2,000,000 shares~~ of ~~the~~December ~~Company’s common stock to an accredited investor in conjunction with equity raise efforts. On April 12~~31, ~~2013~~2015, ~~our Board authorized and approved~~ the ~~extension~~convertible of2014 ~~the~~Notes ~~expiration~~have ~~date and~~ a ~~change~~balance of ~~exercise price for this warrant. The outstanding share purchase warrant originally had a March 23~~$999,697, ~~2014~~net ~~expiration date and an exercise price~~ of $~~0.25.~~92,803 ~~The~~of ~~new~~debt ~~modified terms extended the warrant expiration date to April 11~~discount, ~~2018~~ and ~~reduced~~accrued ~~the~~interest ~~exercise~~of ~~price to~~ $0158,997.~~25.~~ ~~The exercise price is also subject to dilutive adjustments for share issuances (full ratchet reset features).~~ As of December 31, 2014, the ~~exercise~~convertible ~~price~~2014 ~~has~~Notes ~~been~~have ~~reduced~~a tobalance ~~$0.15~~of ~~and an additional 1~~$541,~~418~~525,~~987~~ ~~warrants~~net ~~are~~of to$550,975 beof ~~issued~~debt todiscount, ~~the~~and ~~investor~~accrued ~~due~~interest toof ~~the reset features~~$39,917.

OnAs ~~August~~of 22December 31, ~~2014~~2015, wethe ~~issued~~related 6party convertible 2014 Note has a balance of $52,~~666~~615,~~667~~ ~~warrants~~net toof ~~investors~~$4,885 ~~and~~of ~~800~~debt discount,~~000~~ ~~warrants~~and toaccrued ainterest ~~placement~~of ~~agent~~$8,368. ~~The~~As ~~exercise~~of ~~price~~December of31, ~~these~~2014, ~~warrants~~the isrelated ~~also~~party ~~subject~~convertible to2014 ~~dilutive~~Note ~~adjustments~~has ~~for~~a ~~share~~balance ~~issuance~~of ~~(full~~$28,501, ~~ratchet~~net ~~reset~~of ~~features).~~$28,999 ~~See~~of ~~Note~~debt 6.discount, ~~Convertible~~and ~~Note~~accrued ~~Payable~~interest of $2,101.

~~Because~~Note ~~these~~7. ~~convertible~~Notes debt and warrants have full reset adjustments tied to future issuances of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15, which requires as of the date the convertible debt and warrants are issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.Payable

~~Key~~On ~~assumptions~~August ~~used~~21, 2015 (the "2015 Closing Date"), we closed a financing transaction by entering into a Securities Purchase Agreement dated August 21, 2015 (the "2015 Securities Purchase Agreement") with certain funds and investors signatory to ~~determine~~such 2015 Securities Purchase Agreement (the ~~fair~~"2015 ~~value~~Purchasers") for an aggregate subscription amount of $415,000 (the ~~convertible~~"2015 ~~note~~Purchase ~~follows~~Price") of which $45,000 is from related parties (see Note 5. Equity Commitment and Related Party Transactions). Pursuant to the 2015 Securities Purchase Agreement, we issued the following to the 2015 Purchasers: (i) 10% Promissory Notes with an aggregate principal amount of $415,000 (the "2015 Notes"), and (ii) warrants to purchase an aggregate of 4,150,000 sharesof the Company's common stock, par value $0.01 per share, for an exercise price of $0.12 per share for a period of five (5) years from the Securities Purchase Agreement date (the "2015 Warrants"). The 2015 Notes are subordinated to the 2014 Notes.

Stock price volatility (one-year measurement):
August 22, 2014 measurement	219	%
December 31, 2014 measurement	192	%
Probability of default triggering 21% interest rate, increasing 1% per month to a maximum of 10% with a 125% penalty	0	%
Probability of the Company redeeming the convertible note (with 130% penalty): projected initially at 0% of the time, increasing 1% monthly to a maximum of 5% (from alternative financing being available for a redemption event to occur)
Conversion behavior - holder automatically converts the convertible note at a maximum of 2 times the conversion price

In addition, we issued 2,075,000 restricted common shares of our stock to the 2015 Purchasers, previously defined above as the 2015 Affiliate Shares. The 2015 Affiliate Shares have a fair value of $63,787 and were valued based on the closing price of our common stock on August 21, 2015. The 2015 Affiliate Shares were contributed from existing shareholdings of related party Board members and did not increase the total number of our common shares outstanding.

The terms of the 2015 Notes and the 2015 Warrants are as follows:

10% Promissory Notes

The total principal amount of the 2015 Notes is $415,000. The 2015 Notes accrue interest at a rate equal to 10% per annum and have a maturity date of August 21, 2017. The 2015 Notes can be redeemed by the Company at any time without penalty.

In the event of default, the 2015 Purchasers have the right to require the Company to repay in cash all or a portion of the 2015 Notes at a price equal to 125% of the aggregate principal amount of the 2015 Notes plus all accrued but unpaid interest.

We recorded $14,440 and $0 of interest expense related to the issuance of the 2015 Notes during the twelve months ended December 31, 2015 and 2014, respectively.

F-20

~~Key assumptions used to determine the fair value of the warrants follows:~~Warrants

Stock price volatility (one-year measurement):
August 22, 2014 measurement	219	%
December 31, 2014	192	%
Exercise behavior – warrant exercise at target prices 2 times the higher of the projected reset price or stock price

The 2015 Warrants are exercisable in whole or in part, at an initial exercise price per share of $0.12, subject to adjustment. The exercise price and number of shares of the Company's common stock issuable under the 2015 Warrants (the "2015 Warrant Shares") are subject to adjustments for stock dividends, splits, combinations, subsequent rights offerings, pro rata distributions and any issuance of securities below the exercise price of the 2015 Warrants. While the 2015 Warrants are outstanding, in the event of a subsequent equity sale including a warrant exercise price lower than the exercise price of $0.12 per share, the exercise price of the 2015 Warrants shall be reduced to the lower exercise price. Any adjustment to the exercise price shall similarly cause the number of 2015 Warrant Shares to be adjusted so that the total value of the 2015 Warrants may increase.

AsIn ofaddition ~~December~~to 31the 2015 Warrants described above, ~~2013~~the Company also issued 296,000 wewarrants ~~determined~~to a placement agent assisting with the ~~fair~~2015 ~~value~~Notes transaction. The terms of the ~~warrant’s~~placement ~~derivative~~agent ~~liability~~warrants toare bethe ~~nominal~~same as of the terms of the 2015 Warrants explained above.

AsDeferred ofFinancing December 31, 2014, the fair value of the total convertible debt and warrant’s derivative liability is $457,380 and we recognized a gain on derivative liability of $114,848 for the twelve months ended December 31, 2014.Cost

In connection with the note transaction explained above, the Company paid $7,500 for legal fees and $29,600 for placement agent fees. In addition, $12,775 was also recorded to deferred financing costs related to the fair value valuation of the placement agent warrants. $9,006 and $0 of deferred financing costs was amortized during the twelve months ended December 31, 2015 and 2014, respectively. The deferred financing cost balance related to the 2015 Notes is $40,869 and $0 as of December 31, 2015 and December 31, 2014, respectively.

Derivative

Because the above 2015 Notes and 2015 Warrants have full reset adjustments tied to future issuances of equity securities by the Company, they are subject to derivative liability treatment under ASC 815-40-15. ASC 815-40-15 requires as of the date the 2015 Notes and 2015 Warrants are issued, the derivative liability to be measured at the fair value and re-evaluated at the end of each reporting period. See Note 8. Derivative Liability.

Debt Discount

On issuance date, the fair value of the derivative liability for the 2015 Warrants was $179,106. Also, the relative fair value of the 2015 Affiliate Shares was $63,787. Therefore a total of $242,893 of debt discount was recorded. $51,826 and $0 was recorded as amortization of debt discount during the twelve months ended December 31, 2015 and 2014, respectively.

As of December 31, 2015, the 2015 Notes have a balance of $194,177, net of $175,823 of debt discount, and accrued interest of $12,874.

As of December 31, 2015, the related party 2015 Notes have a balance of $29,757, net of $15,243 of debt discount, and accrued interest of $1,565.

F-21

Note 8. Derivative Liability

During 2009, we granted a warrant to purchase 2,000,000 shares of the Company's common stock to an accredited investor in conjunction with equity raise efforts. On April 12, 2013, our Board authorized and approved the extension of the expiration date and a change of exercise price for this warrant. The outstanding share purchase warrant originally had a March 23, 2014 expiration date and an exercise price of $0.25. The new modified terms extended the warrant expiration date to April 11, 2018 and reduced the exercise price to $0.226. The exercise price is also subject to dilutive adjustments for share issuances (full ratchet reset features). As of December 31, 2015 and December 31, 2014, the exercise price has been reduced to approximately $0.15 and an additional 1,430,134 (as of September 30, 2015) and 1,418,987 (as of December 31, 2014) warrants, respectively, are to be issued to the investor due to the reset features.

On August 21, 2015, we issued 4,150,000 warrants to investors and 296,000 warrants to a placement agent. The exercise price of these warrants is also subject to dilutive adjustments for share issuance (full ratchet reset features). See Note 7. Notes Payable.

On August 22, 2014, we issued 6,666,667 warrants to investors and 800,000 warrants to a placement agent. The exercise price of these warrants is also subject to dilutive adjustments for share issuance (full ratchet reset features). See Note 6. Convertible Notes Payable.

Because the convertible 2014 Notes, 2014 Warrants and 2015 Warrants all have full reset adjustments tied to future issuances of equity securities by the Company, they are subject to derivative liability treatment under ASC 815-40-15, which requires as of the date the convertible 2014 Notes, 2014 Warrants and 2015 Warrants are issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.

Key assumptions used to determine the fair value of the convertible 2014 Notes are as follows:

Stock price volatility (one-year measurement):
December 31, 2014 measurement	192	%
December 31, 2015 measurement	174	%
Probability of default triggering 21% interest rate, increasing 1% per month to a maximum of 10% with a 125% penalty	0	%
Probability of the Company redeeming the convertible 2014 Notes (with 130% penalty): projected initially at 0% of the time, increasing 1% monthly to a maximum of 5% (from alternative financing being available for a redemption event to occur)
Conversion behavior - holder automatically converts the convertible 2014 Notes at a maximum of 2 times the conversion price.

F-22

Key assumptions used to determine the fair value of the 2014 Warrants and 2015 Warrants are as follows:

Stock price volatility (one-year measurement):
December 31, 2014 measurement	192	%
August 21, 2015 measurement	158	%
December 31, 2015 measurement	174	%
Exercise behavior – warrant exercise at target prices 2 times the higher of the projected reset price or stock price.

As of December 31, 2015, the fair value of the total convertible 2014 Notes, 2014 Warrants and 2015 Warrants' derivative liability is $425,035 and we recognized a gain on derivative liability of $224,226 and $114,848 for the twelve months ended December 31, 2015 and 2014, respectively.

As of December 31, 2014, the fair value of the total convertible 2014 Notes and 2014 Warrants' derivative liability is $457,380.

The following table summarizes the derivative liability included in the balance sheet:

Balance at December 31, 2013	$	-
Debt discount due to convertible note		295,773
Debt discount due to 2014 Notes	$	295,773
Debt discount due to warrant issued with debt		246,905
Debt discount due to warrants issued with 2014 Notes	$	246,905
Deferred financing cost due to derivative liability for placement agent warrant	$	29,550
Gain on change of fair value	$	(114,848	)
Balance at December 31, 2014	$	457,380
Debt discount due to warrants issued with 2015 Notes	$	179,106
Deferred financing cost originated from derivative liability	$	12,775
Gain on change of fair value	$	(224,226	)
Balance at December 31, 2015	$	425,035

~~Note~~The 8.following ~~Deferred~~table ~~Revenue~~summarizes information about warrants outstanding as of December 31, 2015:

On February 26, 2009, we received the first purchase order pursuant to a Memorandum of Understanding (“MOU”) with Libya Oil Holdings Limited, Tamoil, Libya Africa Investment Portfolio and Vision Oil Services Ltd (“VOS”). Pursuant to the MOU, VOS paid for the purchase of 600 metric tons of DiesoLiFTTM 10 at a price of 6,000 Euros (approximately $7,600) per metric ton from us. We received cash proceeds of approximately $3 million from VOS in February 2009. No such revenues had been recorded to date relating to this order because there has been no requested delivery of the product. We have had no communication with VOS in over five years and believe they have ceased all activities on our behalf.

Total # of warrants issued and outstanding		32,613,551
Weighted-average exercise price	$	0.12
Remaining life (in years)		2.59
Intrinsic value	$	-

F-23

Note 9. Deferred Revenue

On February 26, 2009, we received the first purchase order pursuant to a Memorandum of Understanding ("MOU") with Libya Oil Holdings Limited, Tamoil, Libya Africa Investment Portfolio ad Vision Oil Services Ltd ("VOS"). Pursuant to the MOU, VOS paid for the purchase of 600 metric tons of DiesoLiFT^TM 10 at a price of 6,000 Euros (approximately $7,600) per metric ton from us. We received cash proceeds of approximately $3 million from VOS in February 2009. No such revenues had been recorded to date relating to this order because there has been no requested delivery of the product. We have had no communication with VOS in over five years and believe they have ceased all activities on our behalf.

Based upon a written legal opinion received during the first quarter of 2014, it was determined that effective February 2014, we were no longer obligated to present the nearly $3 million deferred revenue liability on our balance sheet as the statute of limitations period for our performance obligation has passed. In conjunction with this determination, we recorded a gain on deferred revenue liability write off of approximately $3 million during the twelve months ended December 31, 2014.

Note 910. Income Taxes

We use the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.

FWe have historically incurred losses from operations and therefore had no tax liability. The net deferred asset generated by the NOL carry-21forward has been fully reserved. The cumulative NOL carry-forward is approximately $50.1 million and $47.9 million as of December 31, 2015 and 2014, respectively, and will begin expiring in 2017.

WeDeferred ~~have~~tax ~~historically~~assets ~~incurred~~consist ~~losses~~of ~~from~~the ~~operations~~tax ~~and~~effect ~~therefore~~of ~~had~~NOL nocarry-forwards. ~~tax~~We ~~liability.~~have ~~The~~provided ~~net~~a ~~deferred~~full ~~asset~~valuation ~~generated~~allowance byon the ~~NOL~~deferred ~~carry-forward~~tax ~~has~~assets ~~been~~because ~~fully~~of ~~reserved.~~the ~~The~~uncertainty ~~cumulative~~regarding ~~NOL~~their ~~carry-forward~~realizability. isHowever, ~~approximately~~because ~~$47.9~~goodwill ~~million~~is not depreciated and ~~$46~~has ~~million~~an ~~for~~indefinite ~~2014~~life ~~and~~for ~~2013~~book purposes, ~~respectively~~the ~~and~~deferred ~~will~~tax ~~begin~~liability ~~expiring~~related into ~~2017~~the book to tax basis difference is not offset against the deferred tax assets when establishing our valuation allowance.

Deferred tax assets consist of the tax effect of NOL carry-forwards. We have provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding their realizability. However, because goodwill is not depreciated and has an indefinite life for book purposes, the deferred tax liability related to the book to tax basis difference is not offset against the deferred tax assets when establishing our valuation allowance. Accordingly, we recorded $64,000 of non-cash deferred income tax expense, which increased the deferred tax liability, during the twelve months ended December 31, 2013. Deferred tax assets consist of the following:

	Year ended December 31,
	Year endedDecember 31,
	2014			2013
	2015			2014
Deferred tax asset	$	1920,~~161~~138,~~984~~621		$	1819,~~406~~161,~~251~~984
Valuation allowance		(1920,~~161~~138,~~984~~621	)		(1819,~~406~~161,~~251~~984	)
Deferred tax liability	$	723,000		$	723,000

~~Note 10. Lease Commitments~~F-24

WeNote ~~entered into an operating lease for office space on January 1, 2002 that, as extended, now expires on April 30, 2017~~11. ~~Rent~~Lease ~~expense was $43,937 and $43,457 during the fiscal years ended December 31, 2014 and 2013, respectively. We entered into a new 5-year office equipment lease in July 2014.~~Commitments

~~Future~~We ~~minimum~~entered into an operating lease ~~payments~~for office space on January 1, 2002 that, as ofextended, now expires on April 30, 2017. Rent expense was $44,706 and $43,937 during the fiscal years ended December 31, 2015 and 2014, ~~are~~respectively. ~~displayed~~We ~~below:~~entered into a new 5-year office equipment lease in July 2014.

Year ending December 31,
2015	$	48,820
2016	$	49,874
2017	$	17,918
2018	$	1,764
2019	$	882
Total minimum lease payments	$	119,258

Future minimum lease payments as of December 31, 2015 are displayed below:

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Year ending December 31,
2016	$	49,874
2017	$	17,918
2018	$	1,764
2019	$	882
2020	$	-
Total minimum lease payments	$	70,438

~~Future~~Note ~~minimum~~12. ~~lease~~Accounts ~~payments as of December 31, 2013 are displayed below:~~Payable

Year ending December 31,
2014	$	47,206
2015	$	47,056
2016	$	48,110
2017	$	16,154
2018	$	-
Total minimum lease payments	$	158,526

Note 11. Accounts Payable

As of December 31, 2014, we recognized a $59,899 gain on write off of accounts payable. The invoice and contracts for the total of $59,899 were dated at least five years before December 31, 2014. Based on a written legal opinion received during the third quarter of 2014, it was determined that effective September 30, 2014, we were no longer obligated to present the $59,899 of accounts payable on our balance sheet as the statute of limitation period for our payment obligation has passed. In conjunction with this determination, we recorded a gain on accounts payable write off of $59,899 during the twelve months ended December 31, 2014.

Note 1213. ~~Legal~~Inventory ~~Proceedings~~Write Off

During the twelve months ended December 31, 2015, we recognized a $44,518 loss on write off of inventory primarily residing in the United States. As the inventory is not obsolete, we will record a gain on write off of inventory in the event that such inventory is subsequently sold.

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Note 14. Legal Proceedings

On July 31, 2006, we received notice from the American Arbitration Association (“"AAA”") of a Demand for Arbitration dated July 27, 2006 received by the AAA naming the Company as Respondent and TPG Capital Partners (“"TPG”"), the prior Blencathia owner, as the Claimant. The arbitration had been requested by TPG to resolve an alleged aggregate proceeds shortfall from the sale of our securities issued in the Blencathia merger. TPG has claimed they sold some or all of the 312,000 shares and the sales have not generated at least $500,000 of proceeds, as guaranteed in the merger documents.

In an effort to resolve this matter prior to submission to binding arbitration, both TPG and the Company participated in a non-binding mediation conference on January 30, 2007, which did not resolve the matter. Informal discussions are ongoing. It is not expected that the ultimate settlement of this matter, considering we have recorded a liability for the shortfall amount, will have an additional adverse material effect on the Company. Since 2009, the Company has made payments to TPG totaling $160,000 to reduce the recorded liability. The remaining recorded liability balance is $190,000 at December 31, ~~2014~~2015 and ~~2013~~2014, respectively.

~~F-23~~We are a defendant in litigation with a former employee regarding accrued but unpaid salary. We are in discussions for settlement of this claim and have accrued an amount that we believe will resolve this matter.

Note 15. Subsequent Events

Subsequent to December 31, 2015, we received a cumulative total of $373,750 in the form of subordinated notes; $273,750 from external investors and $100,000 from two Directors of the Company (the "2016 Interim Financing"). The 2016 Interim Financing notes include the issuance of ten (10) warrants to purchase shares of our common stock for every United States dollar invested. The 2016 Interim Financing notes' warrants have an exercise price of $0.05 and mature five years from the issuance date. The 2016 Interim Financing notes provide for a return of principal with a 1.5 factor, with a maturity date of April 30, 2016, or sooner depending on whether the Company is able to secure long term capital prior to April 30, 2016. If the 2016 Interim Financing notes are not repaid by April 30, 2016, they will begin accruing simple interest at an annual rate of 10% on a principal amount calculated by taking the original investment amount multiplied by the 1.5 factor.

As a result of the 2016 Interim Funding, and pursuant to a binding memorandum of understanding between the Company and all of the 2014 Note holders, the maturity date of the 2014 Notes was extended from February 22, 2016 to April 30, 2016.

On March 25, 2016, we filed a certificate of amendment to our Articles of Incorporation increasing the number of our authorized shares from 350,000,000 to 750,000,000 shares with the Nevada Secretary of State.

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