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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

for the fiscal year ended December 31, 2023

 

or

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: 000-54942

 

BLUE BIOFUELS, INC.

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

 

Nevada   45-4944960
(State or other jurisdiction of   (IRS Employer
incorporation or organization)   Identification No.)

 

3710 Buckeye Street, Suite 120    
Palm Beach Gardens, FL   33410
(Address of principal executive offices)   (Zip Code)

 

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

 

n/a
Former address if changed since last report

 

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

 

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

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock par value $0.001   BIOF   OTCQB

 

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

 

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

 

Check whether the issuer (1) 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. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232-405 of this chapter) during the preceding 12 months (or for such shorter period of time that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer Emerging Growth Company
       
    Smaller reporting company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes No

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $29,189,366.

 

State the number of shares outstanding of the registrant’s $.001 par value common stock as of the close of business on the latest practicable date (February 29, 2024): 303,115,963.

 

Documents incorporated by reference: None

 

 

 

 
 

 

TABLE OF CONTENTS

 

ITEM 1.   Business 3
       
ITEM 1A.   Risk Factors 5
       
ITEM 1B.   Unresolved Staff Comments 5
       
ITEM 2.   Properties 5
       
ITEM 3.   Legal Proceedings 5
       
ITEM 4.   (Removed and reserved) 5
       
ITEM 5.   Market For Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities 6
       
ITEM 6.   (Removed and reserved) 9
       
ITEM 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation 9
       
ITEM 7A.   Quantitative and Qualitative Disclosure About Market Risk 13
       
ITEM 8.   Financial Statements and Supplementary Data 13
       
ITEM 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14
       
ITEM 9A.   Controls and Procedures 14
       
ITEM 10   Directors, Executive Officers and Corporate Governance 15
       
ITEM 11.   Executive Compensation 19
       
ITEM 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters 23
       
ITEM 13.   Certain Relationships and Related Transactions, and Director Independence 24
       
ITEM 14.   Principal Accountant Fees and Services 25
       
ITEM 15.   Exhibits and Financial Statement Schedules 26
       
SIGNATURES 28

 

2
 

 

FORWARD LOOKING STATEMENTS

 

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

 

ITEM 1. BUSINESS

 

Background

 

Business Overview

 

Blue Biofuels, Inc., was incorporated in Nevada on March 28, 2012, as Alliance Media Group Holdings, Inc. Since December 2013, Blue Biofuels, Inc. (the “Company”) has been a technology company focused on emerging technologies in renewable energy, biofuels, and lignin.

 

In early 2018, the Company’s chief executive officer (“CEO”) Ben Slager invented a new reactor technology with a higher yield and a continuous throughput in the Cellulose-to-Sugar process, or CTS, and the Company filed a process patent application for this technology. Mr. Slager has since further developed the system with the technical staff of the Company. The CTS patent was awarded in 2021 in the United States (U.S. Patent No. 10,994,255) and has subsequently been granted in Japan and El Salvador. The Company also filed this patent in other major jurisdictions of the world including the European Patent Organization, Australia, Brazil, China, the African Regional Intellectual Property Organization, and the Russian Federation. The patent applications are currently pending in all of these international jurisdictions. In addition to this patent, the Company has received one additional patent in the United States (U.S. Patent No. 11,484,858B2), for which it has also applied in all the above-mentioned jurisdictions. Further, the company has filed for 6 other patents in the United States which are currently pending.

 

Mr. Slager has since further developed the system with the technical staff of the Company. The patented CTS process is a continuous mechanical/chemical dry process for breaking down cellulosic material for conversion into biofuels. CTS can break down any cellulosic material – including grasses and agricultural waste. The CTS mechanical/chemical process allows for exact process control to ensure that all the material passing through it does so on the optimum reaction parameters through which optimal efficiency is achieved.

 

The new technology made it worthwhile to financially restructure the Company through Chapter 11. The Company voluntarily filed for Chapter 11 on October 22, 2018, in the U.S. Bankruptcy Court in the Southern District of Florida. The Company exited Chapter 11 on September 18, 2019, while keeping all classes, including shareholders, unimpaired. The bankruptcy case was closed on October 25, 2019.

 

CTS is environmentally friendly in that it recycles the water and catalyst, and it has a low carbon footprint: the amount of added atmospheric carbon created by burning the biofuels produced by the CTS system was absorbed by the plant-based feedstock while growing and is merely released back into the atmosphere. No extra CO2 is released into the atmosphere when our biofuels are burned. This is to be distinguished from fossil fuels because new CO2 is released when fossil fuels are burned.

 

The Company believes a significant difference between CTS cellulosic ethanol and corn ethanol is the wide range of abundantly available feedstocks that CTS can process compared to just corn as the feedstock. The CTS feedstocks are nonfood and have much lower costs than corn. In addition, while in corn ethanol only the corn kernels are used, CTS uses the whole plant or its waste products, meaning it could obtain much higher yields per acre.

 

In 2022, the Company partnered with K.R. Komarek to build its CTS machines going forward. Komarek is an industry leading manufacturing company that builds briquetting machines and compaction/granulation systems with throughput capacities up to 50 tons per hour.

 

In 2023, the Company completed the build-out of a pilot plant based on a modified Komarek machine and is in the process of further testing and optimizing the plant. The Company believes that it can optimize the pre and post processing elements at this pilot scale plant to finalize design and operational parameters to provide operating cost estimates of a full-scale commercial volume system. Due to its mechanical nature and modularity, we anticipate that one plant would have multiple modular CTS systems.

 

In addition, the Company has licensed the Vertimass Process to convert ethanol into sustainable aviation fuel (SAF) and other renewable biofuels including bio-gasoline. The license agreement with Vertimass is the subject to a confidentiality agreement between the parties.

 

3
 

 

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 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, when the Company’s CTS technology is fully commercialized, to build commercial CTS and ethanol facilities on the front-end to produce cellulosic SAF and generate the large D7 RIN and other government credits. Commencing commercial production will require project financing.

 

Any new biofuels plant that is built would require various government permits. In particular, renewable fuels are subject to rigorous testing and premarket approval requirements by the EPA’s Office of Transportation and Air Quality and regulatory authorities in other countries. In the U.S., various federal, and, in some cases, state statutes and regulations also govern or impact the manufacturing, safety, storage and use of renewable fuels. The process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations requires the expenditure of resources. The Company anticipates raising the necessary capital for this as a part of its project-based financing.

 

The ethanol industry is competitive with over 200 ethanol plants in the United States alone. Currently, the vast majority use corn as feedstock. Their profitability depends highly on the fluctuations between the price of corn and the price of ethanol. Since the Company does not plan to use corn, and plans on having long-term purchase agreements with cellulosic feedstock suppliers, we anticipate that our profitability will be more consistent. Further, cellulosic biofuels yield much higher incentives than non-cellulosic biofuels.

 

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. The EPA’s final D3 RIN volume mandates for cellulosic biofuel include 840 million gallons for 2023, 1.09 billion gallons for 2024, and 1.38 billion gallons for 2025 (the D3 mandate). This mandate has increased every year and is statutorily mandated to increase in the future and become a larger portion of the full renewable fuels mandate, if and when cellulosic biofuels can be produced profitably in larger and larger quantities. The RFS mandate for 2024 calls for 21.54 billion gallons of total renewable fuel, 15 billion from conventional biofuels (corn ethanol) and 6.54 billion from advanced biofuels, including cellulosic biofuels. The “blend wall” (or upper limit to the amount of ethanol that can be blended into U.S. gasoline and automobile performance and comply with the Clean Air Act) of limiting ethanol content in gasoline to 10%, limits the total amount of ethanol consumed in the United States. Recent proposals have make 15% blending available year around in some states. The value of the D3 RIN fluctuates, but as of this filing, it is approximately $3.06 per gallon of ethanol. For comparison, the D6 RIN for corn ethanol is $0.43. 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 $1.75 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, 2027.

 

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 $66 per metric ton of CO2 reduction. When it is closer to commercial production, the Company plans to analyze the cost effectiveness of applying for these LCFS credits to determine in which state it could earn the most credits.

 

4
 

 

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 not generated any material revenues from its business.

 

Description of the Company’s Securities

 

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

 

Employees

 

The company currently employs five full-time employees, one part-time employee and seven consultants. The Company plans to hire additional employees to more rapidly commercialize its technology.

 

ITEM 1A. RISK FACTORS

 

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

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Offices

 

The Company maintains its corporate office at 3710 Buckeye Street, Suite 120, Palm Beach Gardens 33410. The Company’s telephone number is 888-607-3555. On August 30, 2019, the Company signed a lease for a period of twenty-four (24) months from November 1, 2019, through October 31, 2021. In December 2020, this lease was extended for twelve (12) months, and in August 2022, extended the lease for two more years until October 31, 2024. Annual rent in the latest lease extension commenced at approximately $102,950 per annum and increases on a year-to-year basis by three percent (3%) over the base year. In addition, the Company is obligated to pay an amount equal to 10.41% of the operating expenses of the building together with sales tax on all amounts. This office space includes the Company’s research and demonstration facilities.

 

ITEM 3. LEGAL PROCEEDINGS

 

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

 

ITEM 4. [Removed and reserved]

 

Not applicable.

 

5
 

 

PART II

 

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

 

Market for Registrant’s Common Equity

 

The Company became subject to Securities Exchange Act Reporting Requirements in October 2012. The symbol “BIOF” is assigned for its securities. The Company’s common stock commenced trading on the OTCBB on February 5, 2014, under the symbol ALLM and changed to BIOF on August 27, 2021.

 

On November 13, 2018, the Company filed a Form 15, suspending its duty to file reports under sections 13 and 15(d) of the Securities Exchange Act. The Company has subsequently traded on the Pink Sheets. On January 5, 2021, the Company filed a Form 10 Registration Statement to become fully reporting again and has been fully reporting ever since.

 

Options and Warrants

 

At various times over the years, warrants have been issued for services, as parts of contracts, or in settlement agreements. Warrants also have been issued as a part of some financings.

 

As of the date of filing, not including expired or exercised warrants, the Company has issued warrants to purchase an aggregate of 24,257,643 shares of common stock. The exercise prices associated with these agreements range from $0.05 to $0.30 and terms range from twenty four months to ten (10) years.

 

As of the date of this filing, the company has issued option agreements to its independent directors, officers, employees, and consultants, to purchase an aggregate of 61,555,000 shares of common stock of which 29,955,000 have vested and 31,600,000 have not yet vested. The exercise prices range from $0.05 to $0.20 and terms range from five (5) to ten (10) years.

 

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

 

6
 

 

Holders

 

As of the date of filing, there were 303,115,963 shares of common stock outstanding and approximately 340 stockholders of record.

 

Transfer Agent and Registrar

 

The Company’s transfer agent is ClearTrust, LLC., 16540 Pointe Village Dr., Suite 205, Lutz, FL 33558, Phone: 813-235-4490.

 

Dividend Policy

 

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

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

There are currently, as of the date of filing, fully earned and vested option agreements in place to purchase an aggregate of 29,955,000 shares of common stock under the Company’s 2021 Employee, Director Stock Plan and there are additional agreements vesting over the next 5 years, or conditional upon events, to purchase an additional 31,600,000 shares of common stock.

 

Plan category  Number of Securities to be Issued upon Exercise of outstanding options, warrants, and rights to Executives, Directors, Employees, and Consultants (1)   Weighted-average exercise price of outstanding options, warrants, and rights   Number of securities remaining available for future issuance under equity compensation plans (1) 
Equity Compensation Plans Approved by Securities Holders   52,555,000   $0.12    5,885,791 
Equity Compensation Plans Not Approved by Securities Holders   9,000,000   $0.20    - 
Total   61,555,000   $0.13    5,885,791 

 

  (1) As of December 31, 2023.

 

The Plan provides that awards may be granted to officers, employees, consultants, or directors of the Company and its affiliates (“Eligible Persons”). The Plan permits the board of directors of the Company to grant three types of awards (“Awards”) to Eligible Persons: (a) a stock appreciation right (“Stock Appreciation Right”); (b) a stock option (“Stock Option”); and (c) a stock award (“Stock Award”).

 

Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types: (a) incentive Stock Options; and (b) non-qualified Stock Options. The exercise price per share under a Stock Option is determined by the administrator of the Plan (which is either the entire board or a designated committee comprised solely of independent directors); provided, however, that such exercise price is not less than the fair market value per Purchaser Share on the date the Stock Option is granted, subject to certain exceptions. The term of each Stock Option is fixed by the administrator of the Plan and no incentive Stock Option may be exercisable more than 10 years after the date such incentive Stock Option is granted. The Plan provides that other terms and conditions may be attached to a particular Stock Option, such terms and conditions to be referred to in an option agreement.

 

In the event an option holder ceases to be an Eligible Person other than by reason of death, disability or cause, the option holder may exercise any Stock Option granted to him or her to the extent that such Stock Option is exercisable on the date of such termination. In the event an option holder ceases to be an Eligible Person by reason of death or disability, the option holder or his or her representative, as applicable, may exercise any Stock Option granted to him or her to the extent that such Stock Option is exercisable on the date of such death or disability. All outstanding and unexercised Stock Options of an option holder will be cancelled in the event that such person ceases to be an Eligible Person by reason of cause.

 

7
 

 

Stock Appreciation Rights may be granted either on a stand-alone basis or in conjunction with all or part of any Stock Option granted under the Plan. Stock Appreciation Rights granted on a stand-alone basis may be exercisable only at such time or times and to such extent as determined by the administrator of the Plan. Stock Appreciation Rights granted in conjunction with all or part of any Stock Option may be exercisable only at the time or times and to the extent that the Stock Options to which they relate are exercisable. Upon the exercise of a Stock Appreciation Right, a holder will be entitled to receive an amount in cash, Purchaser Shares or both, which in the aggregate is equal in value to the difference in the fair market value of the Purchaser Shares at the date of exercise less the fair market value of the Purchaser Shares at the date of grant.

 

Stock Awards may be directly issued under the Plan, subject to such terms, conditions, performance requirements, restrictions, forfeiture provisions, contingencies and limitations as the administrator of the Plan may determine.

 

Subject to adjustment as provided in the Plan, the aggregate number of shares of common stock which may be delivered under the Plan shall not exceed a number equal to 15% of the total number of shares of common stock outstanding. The maximum number of shares of common stock which may be delivered under the Plan shall automatically increase by a number sufficient to cause the number of shares of common stock covered by the Plan to equal 15% of the total number of shares of common stock then outstanding, assuming for this purpose the conversion into common stock of all outstanding securities that are convertible by their terms (directly or indirectly) into common stock. The exercise price per share of common stock purchasable under a Stock Option shall be determined by the administrator of the Plan; provided, however, that the exercise price per share shall be not less than the Fair Market Value (as defined in the Plan) per share on the date the Stock Option is granted, or if the Stock Option is intended to qualify as an Incentive Stock Option and is granted to an individual who is a Ten Percent Holder (as defined in the Plan), not less than 110% of such Fair Market Value per share. The term of each Stock Option shall be fixed by the administrator of the Plan, but no Incentive Stock Option shall be exercisable more than 10 years (or five years in the case of an individual who is a Ten Percent Holder) after the date the Incentive Stock Option is granted.

 

Recent Sales of Unregistered Securities

 

Below is a list of securities sold by the Company from January 1, 2023 through the date of filing which were not registered under the Securities Act.

 

Entity  Date of Investment  Title of Security  Amount of Securities Sold   Consideration
Raymond Leon  01/03/23  Common Stock   200,000   Purchase @ $0.15 per share
James Cherwin  01/30/23  Common Stock   100,000   Purchase @ $0.15 per share
Edmund Burke  01/30/23  Common Stock   4,450,148   Exercise of Warrants
Edmund Burke  01/31/23  Common Stock   1,000,000   Exercise of Warrants
NWBB, Inc.  02/06/23  Common Stock   40,000   Professional Services
Ron Smith  02/06/23  Common Stock   166,666   Purchase @ $0.15 per share
Mark Monahan  02/17/23  Common Stock   333,333   Purchase @ $0.15 per share
Michael Fidler  02/17/23  Common Stock   200,000   Purchase @ $0.15 per share
Joseph Corry  02/17/23  Common Stock   100,000   Purchase @ $0.15 per share
William Newman  02/21/23  Common Stock   100,000   Purchase @ $0.15 per share
Johnny Anastasiades  03/01/23  Common Stock   135,000   Purchase @ $0.15 per share
Jozef Kneppers  03/06/23  Common Stock   1,333,333   Purchase @ $0.15 per share
James & Michelle Dupre  03/06/23  Common Stock   150,000   Purchase @ $0.15 per share
Randall Brodsky  03/07/23  Common Stock   400,000   Purchase @ $0.15 per share
Tamara Chapman Revocable Trust  03/08/23  Common Stock   333,333   Purchase @ $0.15 per share
John Comrie  03/08/23  Common Stock   333,333   Purchase @ $0.15 per share
William Fitzpatrick  03/24/23  Common Stock   100,000   Professional Services
Neil Hendry  04/05/23  Common Stock   66,667   Purchase @ $0.15 per share
NWBB, Inc.  04/10/23  Common Stock   34,194   Professional Services
Clay Taylor TTEE  04/11/23  Common Stock   400,000   Purchase @ $0.15 per share
Kophyo Win  05/05/23  Common Stock   166,667   Purchase @ $0.15 per share
Patrick Simms  05/15/23  Common Stock   500,000   Exercise of Warrants
Mark Monahan  07/19/23  Common Stock   166,667   Purchase @ $0.15 per share
Anthony Santelli Sr.  07/26/23  Common Stock   333,333   Purchase @ $0.15 per share
Kevin McNally  08/11/23  Common Stock   333,333   Purchase @ $0.15 per share
Melvin Eaton  08/15/23  Common Stock   333,333   Purchase @ $0.15 per share
Craig Roger Tarr  08/24/23  Common Stock   1,000,000   Purchase @ $0.15 per share
Vestech Securities  01/26/24  Common Stock   52,500   Professional Services

 

The securities issued in the above-mentioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(a)(2) of that Act and Rules 504 and 506 of Regulation D.

 

8
 

 

ITEM 6. [Removed and reserved]

 

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

 

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

 

Forward-Looking Statements

 

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

 

Business Overview

 

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 the Company filed, and received, two patents for this technology. The CTS process is a continuous mechanical/chemical dry process for converting cellulose material into sugar and lignin.

 

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, and potentially into bio chemicals.

 

In 2022, the Company partnered with K.R. Komarek to build its CTS machines going forward. Komarek is an industry leading manufacturing company that builds briquetting machines and compaction/granulation systems with throughput capacities up to 50 tons per hour. In 2023, the Company completed the build-out of a pilot plant based on a modified Komarek machine and is in the process of further testing and optimizing the plant. The Company believes that it can optimize the pre and post processing elements at this pilot scale plant to finalize design and operational parameters to provide operating cost estimates of a full-scale commercial volume system. Due to its mechanical nature and modularity, we anticipate that one plant would have multiple modular CTS systems.

 

In addition, the Company has licensed the Vertimass Process to convert ethanol into sustainable aviation fuel (SAF) and other renewable biofuels including bio-gasoline. The license agreement with Vertimass is the subject to a confidentiality agreement between the parties.

 

9
 

 

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 million gallons of Sustainable Aviation Fuel (SAF) and related products, and then expand SAF and related product production to approximately 70 million gallon per year. VertiBlue Fuels plans to initially convert sugarcane ethanol, and then, when the Company’s CTS technology is fully commercialized, to build commercial CTS and ethanol facilities on the front-end 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 $3.06 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 $1.75 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, 2027.

 

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 $66 per metric ton of CO2 reduction. When it is closer to commercial production, the Company plans to analyze 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.

 

10
 

 

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, however it has not generated any revenues from its core business.

 

Capital Formation

 

From January 1, 2023 through the date of filing, 5,950,148 warrants were exercised for proceeds of $97,251.

 

From January 1, 2023 through the date of filing, no options were exercised.

 

From January 1, 2023, through the date of filing, the Company issued 6,684,998 shares at prices ranging from $0.15 to $0.15 per share for proceeds of $1,002,772.

 

From January 1, 2023, through the date of filing, the Company issued 312,500 shares for the conversion of debt for proceeds of $25,000.

 

From January 1, 2023 through the date of filing, the Company issued an aggregate of 226,694 shares of its common stock for services valued at $33,500.

 

From January 1, 2023 through the date of filing, the Company issued an aggregate of 856,500 warrants for services. Using a Black-Scholes asset-pricing model, these warrants were valued at $88,259.

 

Results of Operations

 

Comparison of the year ended December 31, 2023, to December 31, 2022

 

For the year ended December 31, 2023, the Company recognized $0 in revenue and $0 in 2022.

 

For the year ended December 31, 2023, the Company’s general and administrative expenses decreased by $202,170 to $1,339,789 from $1,541,959 in 2022. This decrease is primarily due to the vesting and expensing of options in 2022 valued at $526,636, as compared to $169,382 non-cash stock compensation in 2023.

 

Interest expense increased in the year ended December 31, 2023 by $68,371 to $97,778 from $29,407 in 2022.

 

For the year ended December 31, 2023, the Company received grants valued at $233,5000 versus $13,000 in 2022. The grant money comes from the Department of Energy SBIR Phase I grant.

 

Research and Development

 

The Company expenses all research and development costs as incurred. For the years ended December 31, 2023, and 2022, the amounts charged to research and development expenses were $1,849,967 and $2,350,218, respectively. The decrease is largely due to the vesting of options in 2022 valued at $1,038,953, versus $467,646 in 2023.

 

11
 

 

Liquidity and Capital Resources

 

Liquidity

 

As of December 31, 2023, the Company had $41,007 in cash and total stockholders’ equity as of December 31, 2023, was negative $3,561,082. As of December 31, 2022 the Company had $211,901 in cash and total stockholders’ equity at December 31, 2022 was negative $2,356,917. Total debt, including advances, accounts payable and other notes payable at December 31, 2023, together with interest payable thereon and contingent liabilities, was $4,591,301, an increase of $1,128,465 from December 31, 2022, where it stood at $3,462,836. This increase is primarily attributable to deferred wages of management and board, and notes to related parties of $350,000. $2,738,132 of the remaining debt has been renegotiated to be payable out of future revenue or future profits and otherwise does not come due. $2,417,502 of the $2,738,132 will be discharged if not paid by September 18, 2024.

 

During the fiscal year ended December 31, 2023, the Company’s operating expenses decreased $974,861 to $2,957,415 from $3,932,276 in 2022. This decrease can primarily be attributed to equity-based compensation of $1,565,589 in 2022 due to the vesting of options.

 

During the fiscal year ended December 31, 2023, the Company’s investing activities used $320,504 in cash. This can be attributed to $287,829 used to purchase machinery and equipment and $32,675 in patent costs. These are to be compared to $205,520 cash used in 2022 with $138,170 used to purchase machinery and equipment, and $67,350 in patent costs.

 

During the fiscal year ended December 31, 2023, the Company generated an aggregate of $1,750,023 through its financing activities, which is an increase of $461,123 from $1,288,900 raised during fiscal year ended December 31, 2022. This increase from the prior year can be attributed to $700,000 net proceeds from issuance of convertible notes as compared to zero in 2022, and $1,002,772 raised in private placements as compared to $1,168,000 in 2022, and $97,251 received from the exercise of warrants as compared to $120,900 in 2022, and a $50,000 debt repayment in 2023 versus $0 in 2022.

 

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 $25 million to pay for its share of the Vertiblue Fuels joint venture and start commercial production of Sustainable Aviation Fuel. The Company anticipates 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 $100,000 through the issuance of convertible notes in 2024, $1,800,023 through a private placement, the exercise of warrants and the issuance of convertible notes in 2023, $1,288,900 in 2022, through the issuance of common stock and the exercise of warrants and options, in addition to $14,826,952 raised through the end of 2021 through its private placement offerings, and in addition to capital raised through debt or convertible notes. 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, 2023, the Company had a working capital deficit of $1,426,411 and had incurred accumulated losses of $55,836,780 since its inception. The Company expects to incur significant additional losses in connection with its continued start-up 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, 2023, shareholders’ equity was negative $(3,561,082).

 

There were 302,750,963 shares of common stock issued and outstanding as of December 31, 2023.

 

12
 

 

There were no preferred shares outstanding.

 

The Company has paid no dividends.

 

Critical Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s majority-owned subsidiaries over which the Company exercised control, if any, and there are currently none.

 

Principles of Consolidation

 

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

 

Use of Estimates

 

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

 

Stock Compensation

 

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

 

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 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.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

Item 8. Financial Statements and Supplementary Data.

 

Set forth below are the audited financial statements for the Company for the years ended December 31, 2023, and December 31, 2022, and the report thereon of BF Borgers, P.A.

 

13
 

 

Blue Biofuels, Inc.

Financial Statements

Years Ended December 31, 2023, and 2022

 

Index to Financial Statements Page

 

  Page
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2023, and December 31, 2022. F-4
   
Consolidated Statements of Operations for the years ended December 31, 2023, and December 31, 2022. F-5
   
Consolidated Statements of Changes in Stockholder’s Equity for the years ended December 31, 2023, and December 31, 2022. F-6
   
Consolidated Statements of Cash Flows for the years ended December 31, 2023, and December 31, 2022. F-7
   
Notes to the Consolidated Financial Statements F-8

 

F-1

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Blue Biofuels, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of Blue Biofuels, Inc. (the “Company”) as of December 31, 2023, the related statement of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

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’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

  

We determined that there are no critical audit matters.

 

/s BF Borgers CPA PC

 

BF Borgers CPA PC (PCAOB ID 5041)

 

We have served as the Company’s auditor since 2023

Lakewood, CO

March 26, 2024

 

F-2

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors of

Blue Biofuels, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of Blue Biofuels, Inc. (the “Company”) as of December 31, 2022, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. The Company has not generated any significant revenue since inception and has incurred losses since inception. As of December 31, 2022, the Company has incurred losses of $52,781,586. The Company expects to incur significant additional losses and liabilities in connection with its start-up and commercialization activities. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. Continuation as a going concern is dependent on the ability to raise additional capital and financing, though there is no assurance of success. Management’s plans in regard to these matters are also described in Note 2 to the accompanying consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

We determined that there are no critical audit matters.

 

/s/ Prager Metis CPAs, LLC  
   

We have served as the Company’s auditor since 2020. Our Auditor Firm ID is 273.

   
Hackensack, New Jersey  
March 31, 2023  

  

F-3

 

 

Blue Biofuels, Inc.

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2023   December 31, 2022 
ASSETS          
Current assets          
Cash and cash equivalents  $41,008   $211,901 
Prepaid expenses   35,750    43,119 
TOTAL CURRENT ASSETS  $76,758   $255,020 
Other assets          
Property and equipment, net of accumulated depreciation and amortization of $243,089 and $127,178 at December 31, 2023 and December 31,2022, respectively   587,308    420,115 
Security deposits   30,276    30,276 
Right of Use Assets, net of accumulated amortization   81,091    178,399 
Patents   254,786    222,109 
TOTAL OTHER ASSETS  $953,461   $850,899 
TOTAL ASSETS  $1,030,219   $1,105,919 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable  $22,798   $37,135 
Accounts payable - Related Party   72,670   72,670 
Deferred wages and director’s fees - Related party   828,312   307,606 
Right of Use Lease Liability - Current   85,983   95,172 
Chapter 11 Settlement   -   50,000 
Convertible Notes Payable — Related Party   350,000    -  
Interest Payable - Related Party   143,406    76,138 
TOTAL CURRENT LIABILITIES  $1,503,169   $638,721 
Long term liabilities          
Right of Use Lease Liability, net of current portion   -    85,983 
Notes Payable — Related Party   2,821,562    2,521,562 
Notes Payable — Other   266,570    216,570 
TOTAL LONG TERM LIABILITIES  $3,088,132   $2,824,115 
TOTAL LIABILITIES  $4,591,301   $3,462,836 
           
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred stock; $0.001 par value; 10,000,000 shares authorized; zero shares issued and outstanding   -    - 
Common stock; $0.001 par value; 1,000,000,000 shares authorized; 302,750,963 issued and outstanding at December 31, 2023, and 289,941,623 issued and outstanding at December 31, 2022.   302,751    289,942 
Additional paid-in capital   51,972,947    50,134,727 
Accumulated deficit   (55,836,780)   (52,781,586)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)  $(3,561,082)  $(2,356,917)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $1,030,219   $1,105,919 

 

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

 

F-4

 

 

Blue Biofuels, Inc

CONSOLIDATED STATEMENT OF OPERATIONS

 

   2023   2022 
   Year Ended 
   31-Dec 
   2023   2022 
Revenue  $-   $- 
Operating expense:          
General and administrative   1,339,789    1,541,959 
Research & Development   1,849,967    2,350,218 
Loss on disposal of assets   1,159    40,099 
Total operating expenses   3,190,915    3,932,276 
           
Loss from operations:   (3,190,915)   (3,932,276)
           
Other (income) expense:          
Government Grants   (233,500)   - 
Common Stock Recission   -    (1,500)
Interest expense - related party   89,363    26,847 
Interest expense - other   8,416    2,560 
Total other (income) expense   (135,721)   27,907 
           
Income (Loss) before provisions for income taxes  $(3,055,194)  $(3,960,183)
Provisions for income taxes   -     -  
Net Income / (Loss):  $(3,055,194)  $(3,960,183)
           
Net income (loss) per share  $(0.010)  $(0.014)
           
Weighted average common shares outstanding          
Basic   299,950,813    278,830,924 

 

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

 

F-5

 

 

Blue Biofuels, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

 

   Shares   Amount   Shares   Amt   Capital   Deficit   (Deficit) 
   Common Stock   Preferred Stock   Additional Paid-in   Accumulated   Total Stockholder’s 
   Shares   Amount   Shares   Amt   Capital   Deficit   (Deficit) 
Balance as of December 31, 2022   289,941,623   $289,942    -   $-   $50,134,727   $(52,781,586)  $(2,356,917)
Issuance of common stock for services   174,194   $174             $29,126        $29,300 
Issuance of 794,000 warrants for services                       84,677         84,677 
Warrants exercised   5,950,148    5,950              91,301         97,251 
Issuance of common stock and warrants for cash through PPM   6,684,998    6,685              996,087         1,002,772 
Issuance of common stock in exchange for debt                                 - 
Vesting of 4,385,000 options under the employee, director plan                       637,028         637,028 
Net Income (Loss)                  -          (3,055,194)  $(3,055,194)
Balance as of December 31, 2023   302,750,963   $302,751    -   $-   $51,972,946   $(55,836,780)  $(3,561,082)
                                    
Balance as of December 31, 2021   274,003,883   $274,004    -   $-   $47,151,353   $(48,821,403)  $(1,396,046)
Issuance of common stock for services   812,119   812             135,738        136,550 
Issuance of 77,333 warrants for services                       9,773         9,773 
Warrants exercised   7,000,000    7,000              98,000         105,000 
Issuance of common stock and warrants for cash through PPM   7,786,664    7,787              1,160,213         1,168,000 
Issuance of common stock in exchange for debt                                 - 
Vesting of 12,560,000 options under the employee, director plan                       1,565,589         1,565,589 
Employee stock options exercised   350,000    350              15,550         15,900 
Stock Recinded   (11,043)   (11)             (1,489)        (1,500)
Net Income (Loss)                  -          (3,960,183)  (3,960,183)
Balance as of December 31, 2022   289,941,623   $289,942    -   $-   $50,134,727   $(52,781,586)  $(2,356,917)

 

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

 

F-6

 

 

Blue Biofuels, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Year Ended   For the Year Ended 
   31-Dec-23   31-Dec-22 
Cash flows from operating activities          
Net Income (Loss)  $(3,055,194)  $(3,960,183)
Reconciliation of net loss to net cash used in operating activities          
Depreciation and amortization   216,785    138,464 
Stock based compensation for services   29,300    136,550 
Recission of stock   -    (1,500)
Net Issuance of options and warrants for services   721,705    1,575,362 
Loss on Disposal of assets   1,159    40,099 
Changes in operating assets and liabilities          
Prepaid expenses   7,368    1,933 
Accrued interest - related party   67,269    26,846 
Accounts payable and accrued liabilities   506,369    92,887 
Right of use lease   (95,172)   (86,601)
Net cash used in operating activities   (1,600,411)   (2,036,143)
           
Cash flows from investing activities          
Net purchase of property and equipment   (287,828)   (138,170)
Patent Costs   (32,677)   (67,350)
Net cash from (used in) investing activities   (320,505)   (205,520)
           
Cash flows from financing activities          
Net proceeds from issuance of common stock   1,002,772    1,168,000 
Net proceeds from issuance of convertible notes   700,000    - 
Proceeds from exercise of warrants and options   97,251    120,900 
Payment of debt   (50,000)   - 
Net cash provided by financing activities   1,750,023    1,288,900 
           
Net increase (decrease) in cash and cash equivalents   (170,893)   (952,763)
           
Cash and cash equivalent at beginning of the period   211,901    1,164,664 
Cash and cash equivalent at end of the period  $41,008   $211,901 
           
Supplemental disclosure of cash flow information          
Cash paid during the period for          
Interest  $-   $- 
Taxes  $-   $- 
           
Supplemental schedule of non-cash activities          
Issuance of warrants for services  $84,677   $9,773 
Issuance of common stock for services  $29,300   $136,550 
Cashless conversion of warrants/options   -     -  
Conversion of convertible debenture to common stock  $-   $- 

 

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

 

F-7

 

 

Blue Biofuels, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION

 

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 the Company filed, and received, two patents for this technology (U.S. Patent No. 10,994,255 and 11,484,858B2), and has subsequently been granted the firrst in Japan and El Salvador. The Company also filed for both patent in other major jurisdictions of the world including the European Patent Organization, Australia, Brazil, China, the African Regional Intellectual Property Organization, and the Russian Federation. The patent applications are currently pending in all of these international jurisdictions. Further, the company has filed for 6 other patents in the United States which are currently pending.

 

The CTS process is a continuous mechanical/chemical dry process for converting cellulose material into sugar and lignin. 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, and potentially into bio chemicals.

 

In 2022, the Company partnered with K.R. Komarek to build its CTS machines going forward. Komarek is an industry leading manufacturing company that builds briquetting machines and compaction/granulation systems with throughput capacities up to 50 tons per hour. In 2023, the Company completed the build-out of a pilot plant based on a modified Komarek machine and is in the process of further testing and optimizing the plant. The Company believes that it can optimize the pre and post processing elements at this pilot scale plant to finalize design and operational parameters to provide operating cost estimates of a full-scale commercial volume system. Due to its mechanical nature and modularity, we anticipate that one plant would have multiple modular CTS systems.

 

In addition, the Company has licensed the Vertimass Process to convert ethanol into sustainable aviation fuel (SAF) and other renewable biofuels including bio-gasoline. The license agreement with Vertimass is the subject to a confidentiality agreement between the parties.

 

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 million gallons of Sustainable Aviation Fuel (SAF) and related products, and then expand SAF and related product production to approximately 70 million gallon per year. VertiBlue Fuels plans to initially convert sugarcane ethanol, and then, when the Company’s CTS technology is fully commercialized, to build commercial CTS and ethanol facilities on the front-end to produce cellulosic SAF and generate the large D7 RIN and other government credits. Commencing commercial production will require project financing.

 

F-8

 

 

NOTE 2 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any significant revenue since inception and has incurred losses since inception. As of December 31, 2023, the Company has incurred accumulated losses of $55,836,780. The Company expects to incur significant additional losses and liabilities in connection with its start-up and commercialization activities. These factors, among others, raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments related to the recoverability and classifications of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty. There are no assurances that the Company will continue as a going concern.

 

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

 

The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our supply chain, employees, and potential future customers. Our office and lab have remained open during the pandemic. Nevertheless, the pandemic slowed our ability to commercialize our process in two ways: by adversely affecting our ability to raise capital, and by adversely affecting the supply chain of laboratory equipment and various parts of upgrades to our CTS system, which slowed the development of our prototypes. Supply chain issues also delayed the delivery of various parts of our pilot plant. The extent to which our operations may be further impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. We may experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), access to supplies, capital, and fundamental support services (such as shipping and transportation). Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Furthermore, the effects of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”).

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, after elimination of intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. All material intercompany transactions and balances were eliminated in consolidation.

 

Use of Estimates

 

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

 

F-9

 

 

Cash and Cash Equivalents

 

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

 

Stock Compensation

 

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation”. Share-based payments to consultants, service providers and other non-employees are accounted for in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.

 

Stock-based Compensation Valuation Methodology

 

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

 

The stock compensation issued for services during the years ended December 31, 2023, and December 31, 2022, were valued on the date of issuance. The following assumptions were used in calculations of the Black-Scholes option pricing models for warrant-based stock compensation issued in the years ended December 31, 2023, and December 31, 2022:

 

   1/5/22   4/19/22   6/21/22   9/30/22   12/30/22 
Risk-free interest rate   1.71%   2.93%   3.38%   4.06%   3.99%
Expected life   10 years    10 years    5 years    5 years    5 years 
Expected dividends   0%   0%   0%   0%   0%
Expected volatility   133.99%   133.42%   134.52%   128.59%   124.11%
BIOF common stock fair value  $0.259   $0.165   $0.167   $0.167   $0.145 

 

   2/10/23   2/14/23   3/1/23   3/31/23   4/5/23   4/11/23 
Risk-free interest rate   3.93%   3.77%   4.01%   3.60%   3.30%   3.54%
Expected life   5 years    10 years    10 years    5 years    10 years    5 years 
Expected dividends   0%   0%   0%   0%   0%   0%
Expected volatility   123.25%   123.26%   123.52%   120.71%   119.51%   119.39%
BIOF common stock fair value  $0.159   $0.159   $0.177   $0.166   $0.154   $0.145 

 

F-10

 

 

   4/26/23   6/5/23   7/13/23   7/26/23   10/16/23   11/1/23   12/27/23 
Risk-free interest rate   3.46%   3.77%   3.93%   3.86%   4.72%   4.67%   3.78%
Expected life   5 years    7 years    5 years    5 years    5 years    5 years    5 years 
Expected dividends   0%   0%   0%   0%   0%   0%   0%
Expected volatility   119.28%   103.20%   90.70%   87.22%   81.19%   81.11%   91.10%
BIOF common stock fair value  $0.165   $0.170   $0.160   $0.160   $0.131   $0.123   $0.106 

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets, generally 5 to 10 years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

 

Patent Capitalization

 

If a product is currently under research and development and is not currently approved for market, costs incurred in connection with patent applications should generally be expensed in the income statement because there is uncertainty as to the future economic benefit of the asset. Conversely, if a product is approved for market (as is the case of the end product ethanol), or if future economic benefit is probable, or if an alternative future use is available to the Company, then such patent costs can be capitalized and amortized over the expected life of the patent(s). Since the Company’s primary end products are expected to be sugar, ethanol, and SAF, which are in wide use, the Company has determined that it is reasonable to capitalize the patent costs associated with its CTS process.

 

Research and Development

 

The Company expenses all research and development costs as incurred. For the years ended December 31, 2023, and December 31, 2022, the amounts charged to research and development expenses were $1,849,967 and $2,350,218, respectively.

 

Revenue Recognition

 

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. Under ASC 606, revenue is recognized when the following criteria are met:

 

  1. persuasive evidence of an arrangement exists;
  2. product has been delivered or the services have been rendered to the customer;
  3. the sales price is fixed or determinable; and,
  4. collectability of the fee or sales price is reasonably assured.

 

The Company currently has no customers. The Company’s revenues are expected to be derived principally from products sold through joint ventures and corporate owned plants. However, no sales have occurred through those revenue streams to date. The company will recognize revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms.

 

F-11

 

 

Convertible Instruments

 

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

 

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

 

The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. As of December 31, 2023, the Company has convertible instruments but none that have intrinsic value to conversion options, hence no bifurcation is necessary.

 

Accounting for Derivative Instruments

 

The Company issues debentures where the number of shares into which a debenture can be converted is not fixed. (For example, when a debenture converts at a discount to market based on the stock price on the date of conversion.) The Company analyzes the embedded conversion option of the convertible debentures to determine if it should be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature. The discount is then amortized over the life of the debenture and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability is charged to additional paid-in capital. For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility. As of December 31, 2023, the Company has no derivative instruments.

 

Common Stock Purchase Warrants and Other Derivative Financial Instruments

 

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

 

Investments in non-consolidated affiliates

 

Investments in non-consolidated affiliates are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company monitors its investment 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. As of December 31, 2023, the Company had no investments in non-consolidated affiliates.

 

F-12

 

 

Impairment of Long-Lived Assets

 

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

 

Income Taxes

 

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

 

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

 

Profit (Loss) per Common Share:

 

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

 

Fair Value Measurements

 

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

 

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

 

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

 

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

 

F-13

 

 

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

 

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

 

At December 31, 2022, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.

 

Recent Accounting Pronouncements

 

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

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

PROPERTY AND EQUIPMENT  Life   December 31, 2023   December 31, 2022 
Building and Improvements   15   $9,370   $9,370 
Machinery and Equipment   10   $795,606   $512,450 
Furniture and Fixtures   5   $13,596   $13,649 
Computer Equipment   3   $11,825   $11,824 
Property and Equipment, gross       $830,397   $547,293 
Less Accumulated Depreciation       $(243,089)  $(127,178)
Property and Equipment       $587,308   $420,115 

 

Total depreciation expense was $119,476 and $55,601 for the years ended December 31, 2023, and 2022, respectively.

 

In the fiscal year ended December 31, 2023, the Company disposed of laboratory equipment and machinery that was no longer in use for a total of $3500 that was originally purchased for $8171 and that had accumulated depreciation of $3,513, thereby taking a loss of $1,158 on the disposal of assets. In the fiscal year ended December 31, 2022, the Company disposed of laboratory equipment and machinery that was no longer in use for a total of $1,185 that originally was purchased for $240,898 and that had accumulated depreciation of $199,614, thereby taking a loss of $40,099 on the disposal of assets.

 

NOTE 5 – PATENTS

 

The Company has obtained two patents and has applied for three more patents on its technology, and has also applied for international patents. The Company has capitalized the legal and filing fees in the amount of $254,786 as of December 31, 2023.

 

F-14

 

 

NOTE 6 – DEBT

 

Details of each remaining debt, including those that have been paid off or renegotiated during 2023, are indicated below.

 

Notes Payable – Related Parties

 

On December 13, 2023, and also on August 10, 2023, and on June 30, 2023, the Company entered into a long-term convertible notes with board member Chris Kneppers, with principal balances of $10,000, $50,000 and $50,000, respectively, that are to be repaid when the Company receives $5 million in equity investment. The Notes carry a 10% interest per annum. The Notes are convertible, at the option of the lender, into common shares of the Company at 15 cents per share, plus a warrant with a strike price of 25 cents per share and a 5-year expiration, for a total of 733,333 shares and warrants.

 

On November 11, 2023, and also on July 7, 2023, the Company entered into two long-term convertible notes with board member Edmund Burke, with a total principal balance of $15,000 and $25,000, respectively, that are to be repaid when the Company receives an equity investment of at least $3 million. Otherwise, they accrued warrants, with a strike price of 15 cents and an expiration of 5 years, at the rate of 50,000 and 30,000 respectively every 12 months instead of interest, with a minimum of 80,000 warrants. The Notes may convert into common stock at $0.13/share at the option of the holder for a total of 307,692 shares.

 

In June 2023, the Company entered into a short-term convertible note with board member Chris Kneppers, with a principal balance of $100,000, that if it’s not paid by December 6, 2023, it automatically extends for another 6 months. It’s convertible at the option of the lender into common stock at $0.13/share for a total of 769,231 shares.

 

In April 2023, the Company entered into a long-term convertible note with board member Edmund Burke, with a principal balance of $150,000, that is to be repaid when the Company receives an equity investment of at least $1.5 million. Otherwise, it accrued warrants, with a strike price of 15 cents and an expiration of 5 years, at the rate of 100,000 every 6 months instead of interest. It may convert into common stock at $0.13/share at the option of the holder for a total of 1,153,846 shares.

 

In January 2023, the Company entered into a short-term convertible note with board member Chris Kneppers, with a principal balance of $250,000, that if it’s not paid by July 4, 2023, it converts at the option of the Company into common stock at $0.13/share for a total of 1,923,077 shares. This debt remains on the books because the Company hadn’t converted it into shares as of the end of 2023.

 

In July 2016, the Company issued six (6) short-term notes payable to related parties in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. These notes had a value of $2,002,126 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the notes was $278,795 and $176,460 respectively. All of the notes were due on August 4, 2017 and then were in default. However, the notes were held by related parties with the understanding that the notes were not to be paid until the Company begins generating profit. The Company renegotiated some of these notes during its Chapter 11 proceedings, whereas others failed to submit a claim and were discharged upon the Court’s Confirmation Order approving the Company’s Chapter 11 Plan on September 18, 2019. The renegotiated amounts, as per the Plan Confirmation are all to be paid from 50% of the future net profits and discharged to the extent unpaid five years after the Plan effective date of September 18, 2019. These amount are 1) Mark Koch $240,990 plus 6% interest on any portion not repaid within 12 months of the Company’s first reported quarterly net profit; 2) Animated Family Films $579,942 out of the Company’s net profits plus 6% interest; 3) Steven Dunkle, CTWC, & Wellington Asset Holdings $1.5 million plus 6% interest once there is positive quarterly EBITDA from the first plant of Company, or, at its option, may convert that into an equity investment in the first plant of the Company, measured by a percentage of the total cost to build, subject to a minimum equity interest of 1.25% in said plant.

 

On February 28, 2018, the Company entered into a short-term loan with Steven Sadaka, with a principal balance of $100,000 due and payable on May 1, 2018. The note does not accrue interest, however the Company provided 2,000,000 inducement shares to secure the note. These inducement shares were valued at $84,000 and are being amortized over the life of the note. The note’s maturity date was extended to 7/1/2018. If the note is not repaid at maturity, then an additional 5,000,000 shares of common stock will be due. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $100,000 is to be paid out of future gross revenues to satisfy this note in full, with no additional shares to be issued.

 

On May 15, 2018, the Company entered into a short term loan with Christopher Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019. The note carried an interest rate of 5% plus the company issued 1,250,000 inducement shares to secure the note as well as 1,000,000 warrants with a $0.10 strike price and with a 5-year expiration. These inducement shares were valued at $36,250 and are being amortized over the life of the note; the warrants had a value of $24,449. On August 25, 2018, this note was restructured to remove the warrants. As of June 30, 2018 accrued interest on this note is $315. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $50,315 is to be paid out of future gross revenues.

 

F-15

 

 

On May 15, 2018, the Company entered into a short term loan with Pamela Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019. The note carried an interest rate of 5% plus the company issued 1,250,000 inducement shares to secure the note as well as 1,000,000 warrants with a $0.10 strike price and with a 5-year expiration. These inducement shares were valued at $36,250 and are being amortized over the life of the note; the warrants had a value of $24,449. On August 25, 2018, this note was restructured to remove the warrants. As of June 30, 2018 accrued interest on this note is $315. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $50,315 is to be paid out of future gross revenues.

 

Notes Payable – Chapter 11 Settlement

 

On July 18, 2018, the Company’s former Controller Dennis Lenaburg sued the Company for $2,694,577 dollars plus stock warrants in the Circuit Court of the 15th Judicial Circuit in Palm Beach County, Florida. That lawsuit was moved to the Bankruptcy Court when the Company entered Chapter 11 on October 22, 2018. The Company filed a Complaint against Lenaburg on November 16, 2018, in the bankruptcy court in the Southern District of Florida. The bankruptcy judge ordered mediation, and a settlement was reached that paid Lenaburg $13,650 upon Plan Confirmation and a $50,000 claim payable no later than three years after the Plan effective date, plus 1.5 million common stock warrants with a strike price of $0.30/share and a ten-year expiration period. The $50,000 claim was fully paid in Q1 2023. Nothing remains due on this Settlement.

 

Notes Payable – Other

 

In July 2016, the Company issued a short-term note payable to a third party in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. The note had a principal balance of $96,570 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the note was $14,382 and $8,588 respectively. The note was due on August 4, 2017 and was then in default. The Company renegotiated this note during its Chapter 11 proceedings, and as per the Plan Confirmation, now the $96,570 is to be paid with no interest out of the same 50% of the future net profits of the Company as the notes mentioned above, if any, or discharged to the extent unpaid five years after September 18, 2019.

 

In November 2017, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $143,000 due and payable on May 30, 2018. The note carries an 8% one-time interest charge, a $43,000 original issue discount and a 35% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 500,000 inducement shares to secure the note, and may have to provide additional shares on the note’s 6-month anniversary if the Company’s share price declines. These inducement shares were valued at $39,500 and were amortized over the life of the note. The note can be repaid, without prepayment penalties, within the first 90 days. Thereafter, the note will incur a 120% prepayment penalty of the then outstanding principal and interest due. In May 2018, the company made two principal payments totaling $40,000. The note went into default on June 1, 2018 and incurred a 40% penalty of the outstanding balance immediately prior to the default event. On August 30, 2018, Hoppel sued the Company in Superior Court of the State of California County of San Diego Central District. That case was staid on October 22, 2018 when the Company filed for Chapter 11 protection in the US Bankruptcy Court in the Southern District of Florida. Negotiations took place and a settlement was reached on this note and a subsequent note, and confirmed as part of the Plan Confirmation Order, that Hoppel would be paid a total of $100,000 out of 5% of the future gross revenue of the Company.

 

In February 2018, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $