Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

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

Forward-Looking Statements

This annual report contains forward-looking statements and information relating to the Company that are based on the beliefs of its management as well as assumptions made by, and information currently available to, its management. When used in this report, the words "believe," "anticipate," "expect," "estimate," "intend", "plan" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management's current view of the Company concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that the Company desires to effect; Securities and Exchange Commission regulations which affect trading in the securities of "penny stocks"; and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The accompanying information contained in this 10-K, identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to the Company are expressly qualified in their entirety by the foregoing cautionary statement.

Business Overview

Blue Biofuels, Inc (the "Company") is a technology company focused on emerging technologies in the renewable energy, biofuels, and lignin technologies sectors.

In early 2018, our chief executive officer ("CEO") Ben Slager invented a new technology system referred to as Cellulose-to-Sugar or CTS, and, to date, the Company filed, and received, three patents for this technology. The CTS process is a continuous mechanical/chemical process for converting cellulose material into sugar and lignin. Three additional patent applications have been filed and are pending.

The CTS system converts plant-based feedstock into one primary product, soluble sugars, which can be further processed into cellulosic ethanol and other biofuels like jet fuel, bio-gasoline, and potentially into bio chemicals.

In 2025, the Company finalized the upscaling, testing, and optimizing of the pilot plant and is in the process of finalizing design and operational parameters for cost estimates of a full-scale commercial volume system.

In addition, the Company has licensed the Vertimass Process to convert ethanol into sustainable aviation fuel (SAF) and other renewable biofuels including bio-gasoline.

Plan of Operation

The total process from cellulosic feedstock to SAF consists basically of three steps:

	1)	Conversion from feedstock to fermentable cellulosic sugars (CTS)
	2)	Ferment the cellulosic sugars into cellulosic ethanol.
	3)	Covert the ethanol into SAF and related products. This third step happens with the Vertimass technology which the Company has licensed.

In January 2024, the Company formed a 50-50 joint venture partnership with Vertimass called VertiBlue Fuels, LLC, that has the mission to build an ethanol-to-SAF facility in Florida with the initial goal to produce around 10-25 million gallons of Sustainable Aviation Fuel (SAF), and then expand SAF production to approximately 70 million gallon per year. VertiBlue Fuels plans to initially convert sugarcane ethanol, and then, as soon as the Company's first CTS technology factory is finalized, switch to cellulosic ethanol. The plan is to build commercial CTS and ethanol facilities on the front-end of ethanol-to-SAF facilities to produce cellulosic SAF and generate the large D7 RIN and other government credits. Commencing commercial production will require project financing.

The Energy Policy Act of 2005, which included the Renewable Fuel Standard Program enforced by the US Environmental Protection Agency ("EPA"), mandates a certain amount of renewable fuel be blended into the transportation fuel used by all vehicles in the country. This Program provides monetary incentives to companies that produce renewable transportation fuel, and establishes Renewable Identification Numbers ("RINs") or credits for each gallon of renewable transportation fuel produced in the United States, and breaks down those fuels into different D-codes depending on the source of the renewable fuel. D3 is the code for renewable ethanol that comes from cellulosic materials. (D6 is for corn ethanol). The value of the D3 RIN fluctuates, but as of this filing, it is approximately $2.48 per gallon of ethanol. To profit from these incentives, the Company plans to apply for these D3 RIN credits as it brings its first plant into commercial operation.

Section 45Z of the Inflation Reduction Act passed on August 16, 2022, offers a Clean Fuel Production Credit (CFPC) per gallon of transportation fuel produced with a base amount of 20 cents per gallon or up to $1 per gallon for a qualified facility (depending on its carbon index) that was built while paying at least prevailing wages and which met apprenticeship requirements. For sustainable aviation fuel, those figures are 35 cents and $1.00 per gallon respectively. The Company plans to apply for CFPC credits when it begins building its commercial facilities. The CFPC currently does not apply to transportation fuel sold after December 31, 2029.

A Low Carbon Fuel Standard Credit (LCFS) is offered by various states (primarily California) for any amount of reduced CO2 in the production lifecycle of transportation fuels as compared to the amount of CO2 emitted in the production lifecycle of fossil fuels. The production lifecycle includes transportation costs to the point of use. California is currently offering around $71 per metric ton of CO2 reduction. When it is closer to commercial production, the Company plans to analyse the cost effectiveness of applying for these LCFS credits to determine in which state it could earn the most credits.

At commercial scale, management expects to be able to earn substantial renewable fuel credits and produce sustainable ethanol, sustainable aviation fuel, and other sustainable biofuels more profitably than they could be from existing commercial corn ethanol producers. Cellulosic ethanol comes with a much more valuable D3 RIN credit as compared to the D6 RIN allocated to corn ethanol; cellulosic SAF comes with a very valuable D7 RIN, and cellulosic bio-gasoline comes with a valuable D3 RIN. The Company also expects to receive Clean Fuel Production Credits related to section 45Z of the Inflation Reduction Act, and the Company also plans to pursue Low Carbon Fuel Standard Credits.

After its first plant is profitable, the Company intends to grow with additional plants in the United States and explore international growth by either licensing the CTS technology or forming joint ventures with foreign domestic partners to build plants.

The Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization. As of this date, the Company has generated $194,319 in revenue not including government grants, however it has not generated any revenues from its core business.

Results of Operations

Comparison of the year ended December 31, 2025, to December 31, 2024

For the year ended December 31, 2025, the Company has a net loss of $2,874,601 as compared to a net loss of $1,418,981 in 2024. This was primarily attributed to a gain on extinguishment of debt of $2,417,502 in 2024.

For the year ended December 31, 2025, the Company recognized $0 in revenue and $0 in 2024.

For the year ended December 31, 2025, the Company's general and administrative expenses decreased by $316,313 to $1,409,793 from $1,726,106 in 2024. This decrease is primarily due to higher professional fees and stock-based compensation in 2024.

During the fiscal year ended December 31, 2025, the Company's operating expenses decreased $341,746 to $3,715,133 from $4,056,879 in 2024. This decrease can primarily be attributed to stock-based compensation of $1,674,710 in 2024 due to the vesting and expensing of options versus $956,611 in 2025.

Interest expense- related party decreased in the year ended December 31, 2025 by $30,270 from $54,747 in 2024 to $24,477 in 2025.

For the year ended December 31, 2024, the Company was awarded a grant valued at $1,150,000, of which $865,000 was recognized as grant income in 2025 versus $285,000 in 2024. The grant money in both years comes from the Department of Energy SBIR Phase II grant.

Research and Development

The Company expenses all research and development costs as incurred. For the years ended December 31, 2025, and 2024, the amounts charged to research and development expenses were $2,305,340 and $2,329,413, respectively. The decrease is largely due to the vesting and expensing of options in 2025 valued at $606,837, versus $1,114,160 in 2024 offset by bonuses of $514,265 in 2025 versus $4,500 in 2024.

Liquidity and Capital Resources

Liquidity

As of December 31, 2025, the Company had $65,200 in cash and stockholders' deficit of $3,706,083 versus $48,797 and $2,845,903 in 2024. Total current liabilities is $2,984,402 compared to $2,212,115 at December 31, 2024. This increase is primarily attributable to deferred wages and bonuses of management and deferred directors fees. Long-term liabilities at December 31, 2025 total $2,129,060 as compared to $2,023,375 in 2024. The increase is attributable to $185,000 additional notes payable to related parties.

During the fiscal year ended December 31, 2025, the Company's investing activities used $137,345 in cash versus $115,791 in 2024. This increase can be attributed to $50,000 deposit on land and $68,898 used to purchase machinery and equipment in 2025 versus $71,138 in 2024, as well as $18,447 spent on patents in 2025 versus $44,653 in 2024.

During the fiscal year ended December 31, 2025, the Company generated an aggregate of $998,750 through its financing activities versus $1,127,000 in fiscal year 2024, which is a decrease of $128,250. This decrease from the prior year can be attributed to $185,000 net proceeds raised in convertible notes versus $930,000 offset by $745,000 raised in private placements as compared to $197,000 in 2024. There was also $68,750 received from the exercise of options and warrants in 2025 as compared to $0 in 2024.

Capital Resources

At this time, the Company has limited liquidity and capital resources. To continue funding its operations, the Company will need to generate revenue or obtain additional financing for current and future operations. The Company anticipates needing around $90 million to pay for its share of the VertiBlue Fuels joint venture and start commercial production of Sustainable Aviation Fuel. The Company anticipates raising the majority of this through project financing, and generating revenue from this joint venture 18-24 months from financing. There is no guarantee that we will achieve all of the additional funding that is needed.

As of the date of filing, the Company has raised $185,000 through the issuance of convertible notes in 2025, $68,750 from the exercise of warrants, and $745,000 from the issuance of common stock, in addition to $272,000 raised in 2026 thus far. The Company also was awarded a grant for $1,150,000 from the Department of Energy, $865,000 of which was received in 2025 and $285,000 of which was received in 2024. The Company raised $1,127,000 through a private placement and the issuance of convertible notes in 2024, in addition to $16,963,625 raised through the end of 2023 through its private placement offerings, and in addition to $2,245,916 in capital raised through notes that have been converted, in addition to other notes currently on the books. However, there is no guarantee that the Company will be able to raise any additional capital on terms acceptable to the Company.

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

Going Concern

The Company has incurred losses since inception, and it may be unable to raise further capital. At December 31, 2025, the Company had a working capital deficit of $2,907,651 and had incurred accumulated losses of $60,130,362 since its inception. The Company expects to incur significant additional losses in connection with its start-up and commercialization activities. As disclosed in Note 2 to the financial statements, there is substantial doubt as to the Company's ability to continue as a going concern based upon recurring operating losses and its need to obtain additional financing to sustain operations. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses.

Equity

As of December 31, 2025, shareholders' equity was negative $3,706,083.

There were 317,872,112 shares of common stock issued and outstanding as of December 31, 2025.

There were no preferred shares outstanding.

The Company has paid no dividends.

Critical Accounting Estimates

Use of Estimates

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

Stock Compensation

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company's common stock or financial instruments that grant the recipient the right to acquire shares of the Company's common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, "Stock Compensation". We account for all share-based payments and awards under the fair value-based method. We account for the granting of stock options and warrants using the fair value method whereby all awards will be recorded at fair value on the date of the grant. The fair value of all stock options and warrants is expensed over their vesting period with a corresponding increase to additional paid-in capital. The fair value of stock options and warrants is determined using a Black-Scholes valuation model. Option pricing models require the input of subjective assumptions including the length of time employees will retain their vested stock options and warrants before exercising them, expected share price volatility, and interest rate. The fair value of share-based awards is based on the valuation of the common stock on the date of grant. The fair value of time-based awards that are ultimately expected to vest is recognized as an expense on a straight-line basis over the requisite service period. The fair value of performance-based awards is adjusted for the probability of achieving the performance conditions and is recognized on a straight-line basis over the term of the award agreement. Changes in the input assumptions for options and warrants can materially affect the fair value estimate and the Company's net loss.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. The Company monitors its investment in property, equipment, and patents and trademarks for impairment at least annually and makes appropriate reductions in the carrying value if it determines that an impairment charge is required based on qualitative and quantitative information.