UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the Quarter ended
Commission
File Number:
(Exact name of small Business Issuer as specified in its charter)
| (State or other jurisdiction | (IRS Employer | |
| of incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
n/a
Former name or former address if changed since last report
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| 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) 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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 ☐ | 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
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 (May 18, 2024): .
EXPLANATORY NOTE
TABLE OF CONTENTS
| Page | ||
| PART I—FINANCIAL INFORMATION | ||
| ITEM 1. | Condensed and Consolidated Financial Statements (unaudited) | 4 |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| ITEM 4. | Controls and Procedures | 20 |
| PART II—OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 21 |
| ITEM 1A. | Risk Factors | 21 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| ITEM 3. | Defaults Upon Senior Securities | 22 |
| ITEM 4. | Mine Safety Disclosures | 22 |
| ITEM 5. | Other Information | 22 |
| ITEM 6. | Exhibits | 22 |
| Signatures | 23 |
| 2 |
PART I – FINANCIAL INFORMATION
TABLE OF CONTENTS
| 3 |
Blue Biofuels, Inc.
Financial Statements
Period Ended March 31, 2024
UNAUDITED FINANCIAL STATEMENTS
OF
BLUE BIOFUELS, INC.
Blue Biofuels, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | $ | $ | ||||||
| Other assets | ||||||||
| Property and equipment, net of accumulated depreciation and amortization of $ | $ | |||||||
| Security deposits | ||||||||
| Right of Use Assets, net of accumulated amortization | ||||||||
| Patents | ||||||||
| TOTAL OTHER ASSETS | $ | $ | ||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | ||||||||
| Accounts payable - Related Party | ||||||||
| Deferred wages and directors fees - Related party | ||||||||
| Right of Use Lease Liability - Current | ||||||||
| Convertible Notes Payable — Other | ||||||||
| Convertible Notes Payable — Related Party | ||||||||
| Interest Payable - Related Party | ||||||||
| TOTAL CURRENT LIABILITIES | $ | $ | ||||||
| Long term liabilities | ||||||||
| Convertible Notes Payable – Related Party | ||||||||
| Convertible Notes Payable – Other | ||||||||
| Legacy Notes Payable — Related Party | ||||||||
| Legacy Notes Payable — Other | ||||||||
| TOTAL LONG TERM LIABILITIES | $ | $ | ||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 8) | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock; $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock; $ par value; shares authorized; issued and outstanding at March 31, 2024, and shares issued and outstanding at December 31, 2023. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
| 4 |
Blue Biofuels, Inc
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
| Three Months Ended | ||||||||
| 31-Mar | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Operating expense: | ||||||||
| General and administrative | ||||||||
| Research & Development | ||||||||
| Loss on disposal of assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations: | ( | ) | ( | ) | ||||
| Other (income) expense: | ||||||||
| Interest expense - related party | ||||||||
| Interest expense - other | ||||||||
| Total other (income) expense | ||||||||
| Income (Loss) before provisions for income taxes | $ | ( | ) | $ | ( | ) | ||
| Provisions for income taxes | ||||||||
| Net Income / (Loss): | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) per share | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding | ||||||||
| Basic and Diluted | ||||||||
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
| 5 |
Blue Biofuels, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock for services | $ | $ | $ | |||||||||||||||||
| Issuance of common stock and warrants for cash through PPM | ||||||||||||||||||||
| Warrants exercised | ||||||||||||||||||||
| Vesting of options under the employee, director plan | ||||||||||||||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock for services | $ | $ | $ | |||||||||||||||||
| Issuance of | ||||||||||||||||||||
| Vesting of options and repricing of options under the employee, director plan | ||||||||||||||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
| 6 |
Blue Biofuels, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | For the Three Months Ended | |||||||
| 31-Mar-24 | 31-Mar-23 | |||||||
| Cash flows from operating activities | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Reconciliation of net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation or services | ||||||||
| Loss on Disposal of assets | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued interest - related party | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Right of use lease | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Net Purchase of property and equipment | ( | ) | ||||||
| Patent Costs | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from exercise of warrants and options | ||||||||
| Chapter 11 Settlement | ( | ) | ||||||
| Net Proceeds from the issuance of Convertible Notes | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalent at beginning of the period | ||||||||
| Cash and cash equivalent at end of the period | $ | $ | ||||||
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
| 7 |
Blue Biofuels, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION
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.
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 March 31, 2024, the Company has incurred accumulated losses of $
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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
| 8 |
Operating results for the three months ended March 31, 2024, may not be indicative of full year 2024 results.
In management’s opinion, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair statement of our financial position as of March 31, 2024, and our results of operations, changes in stockholders’ deficit and cash flows for the three months ended March 31, 2024 and 2023.
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, 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.
| 1/2/24 | 1/8/24 | 3/28/24 | ||||||||||
| Risk-free interest rate | % | % | % | |||||||||
| Expected life | years | years | years | |||||||||
| Expected dividends | % | % | % | |||||||||
| Expected volatility | % | % | % | |||||||||
| BIOF common stock fair value | $ | $ | $ | |||||||||
| 9 |
Research and Development
The
Company expenses all research and development costs as incurred. For the three months ended March 31, 2024, and March 31, 2023, the amounts
charged to research and development expenses were $
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.
Basic Net income (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 common stock that potentially could be issued upon the conversion of convertible notes or upon the exercise of outstanding options and warrants. The computation of potential common shares has been performed using the treasury stock method. Due to net losses, all potential dilutive securities 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.
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 | March 31, 2024 | December 31, 2023 | |||||||||
| Building and Improvements | $ | $ | ||||||||||
| Machinery and Equipment | ||||||||||||
| Furniture and Fixtures | ||||||||||||
| Computer Equipment | ||||||||||||
| $ | $ | |||||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||||||
| Property and Equipment | $ | $ | ||||||||||
Total
depreciation expense was $
| 10 |
NOTE 5 – PATENTS
The
Company has been granted one patent on its technology and one continuation patent, has filed for three others that are pending, and has
also applied for international patents. The Company has capitalized the legal and filing fees in the amount of $
NOTE 6 – DEBT
Notes Payable – Related Parties
In
Q1 2024, the Company issued convertible notes to board member Chris Kneppers totaling $
In
2023, the Company entered into long-term convertible notes with board member Chris Kneppers, with principal balances of $
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 $
In
June 2023, the Company entered into a short-term convertible note with board member Chris Kneppers, with a principal balance of $
In
April 2023, the Company entered into a long-term convertible note with board member Edmund Burke, with a principal balance of $
In
January 2023, the Company entered into a short-term convertible note with board member Chris Kneppers, with a principal balance of $
| 11 |
Legacy Notes Payable – Related Party
On
May 31, 2019, the Company entered into an agreement with Chris and Pamela Jemapete such that its debt of $
On
May 20, 2019, the Company entered into an agreement with Steven Sadaka such that the $
Between
November 30, 2018 and December 14, 2018, the Company entered into agreements to renegotiate various debts owed to founders and related
parties. These agreements were subject to the bankruptcy Court’s plan confirmation. The Plan, which was confirmed by the Court
on September 18, 2019, indicated that the debt to Mark Koch shall be $
Notes Payable – Other
In Q1 2024, the Company issued convertible notes to 4 different individuals totaling $
In December 2023, the Company issued a convertible note to one individual for $
Legacy Notes Payable – Other
On
March 19, 2019, the Company entered into an agreement with Lucas Hoppel, such that its combined debt on two notes shall be reduced to
$
On
March 27, 2019, the Company entered into an agreement with another creditor, such that its debt will be reduced from $
On
November 30, 2018, the Company entered into an agreement with a third party such that its debt will be reduced to $
A summary of all debts indicated in the Notes above is as follows:
| Notes Payable | March 31, 2024 | December 31, 2023 | ||||||
| Short Term Convertible Note – Related Party | $ | $ | ||||||
| Short Term Convertible Notes — Other | ||||||||
| Long Term Convertible Notes – Related Party | ||||||||
| Long Term Convertible Notes -- Other | ||||||||
| Long Term Convertible Notes Payable after equity investment – Related Party | ||||||||
| Long Term Notes Payable from future revenue — Related Party | ||||||||
| Long Term Notes Payable from future revenue — Other | ||||||||
| Long-Term Notes Payable expiring on September 18, 2024 — Related Party | ||||||||
| Long Term Notes Payable expiring on September 18, 2024 — Other | ||||||||
| TOTAL NOTES | $ | $ | ||||||
Only
$
| 12 |
NOTE 7 – STOCKHOLDERS’ EQUITY
The
total number of shares of capital stock, which the Company has authority to issue, is
For the three months ended March 31, 2024, the Company issued an aggregate of
shares of its common stock for services valued at $
For
the three months ended March 31, 2024, warrants were issued for services. Using a Black-Scholes asset pricing model, these had
a value of $
For the three months ended March 31, 2024, shares of common stock were issued for cash.
For
the three months ended March 31, 2024,
For
the three months ended March 31, 2024,
stock options vested. Using a Black-Scholes asset pricing model, these had a value of $. During the three months ended March 31, 2024, the Company recognized
additional stock based compensation of $
At March 31, 2024, there was $
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business. The Company is not in any litigation at this time.
Leases
The Company currently leases office and laboratory space in Palm Beach Gardens, FL, that is classified as operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet.
Rent
expense for the three months ending March 31, 2024, and 2023, were $
| 13 |
NOTE 9 – RELATED PARTY TRANSACTIONS
Related Party Transactions
Related Party transactions with the Company are as follows:
| 1) | Short-term notes payable, convertible notes, and legacy liabilities issued to related parties are described in NOTE 6. | |
| 2) | A board resolution was passed on February 13, 2020, that pledged the patents and pending patents to secure the back pay claims of Ben Slager, CEO, Anthony Santelli, CFO, and Charles Sills, Director. This was done to ensure the continued involvement of management to build the Company while they receive less than full salaries. | |
| 3) | During the three month period ended March 31, 2024, the board approved
an increase in salaries to two officers of the Company retroactive to August 1, 2023, in light of the fact that they are again accruing
unpaid salaries. CEO Ben Slager is to receive $ |
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the financial statements were issued. Based on this evaluation, the Company has identified the following subsequent events:
From
April 1, 2024, to the date of this filing, the Company issued
From
April 1, 2024, to the date of this filing, the Company issued convertible notes to related parties for $
| 14 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
This quarterly report contains forward-looking statements and information relating to the Company that are based on the beliefs of its management as well as assumptions made by, and information currently available to, its management. When used in this report, the words “believe,” “anticipate,” “expect,” “estimate,” “intend”, “plan” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that the Company desires to effect; Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks”; and other risks and uncertainties. Some of those risks and uncertainties include the risk factors set forth in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. 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 financial statement 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., 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, Canada 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.
| 15 |
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.
Plan of Operation
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. The joint venture agreement requires that each party contribute $50,000 which has not yet been contributed by either party. In any event, commencing commercial production will require project financing.
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. |
| 16 |
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 $3.27 per gallon of ethanol. For comparison, the D6 RIN for corn ethanol is $0.44. 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.
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.
| 17 |
Capital Formation
From January 1, 2024, through the date of filing, the Company issued an aggregate of 52,500 shares of its common stock for services valued at $4,200.
From January 1, 2024, through the date of filing, the Company issued an aggregate of 87,500 warrants for services valued at $5,494.
From January 1, 2024, through the date of filing, 1,875,000 previously issued options vested. Using a Black-Scholes asset-pricing model, these agreements were valued at $251,290. During the three months ended March 31, 2024, the Company recognized additional stock based compensation of $27,958 in connection with modification of the exercise price of 6,175,000 vested options.
From January 1, 2024, through the date of filing, 483,333 warrants expired or were cancelled.
Going Concern
The Company has incurred losses since inception, has a working capital deficiency, and may be unable to raise further capital. As of March 31, 2024, the Company had a working capital deficit of $2,011,029 and had incurred accumulated losses of $56,783,652 since its inception. The Company expects to incur significant additional losses in connection with its continued start-up activities. As a result, there is substantial doubt about 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.
Results of Operations
Comparison of the three month period ended March 31, 2024 to March 31, 2023
For the three and months ended March 31, 2024, the Company recognized $0 in revenue as opposed to $0 in 2023.
For the three months ended March 31, 2024, the Company’s general and administrative expenses decreased by $73,863 to $295,982 from $369,845 in 2023. This decrease is primarily the result of a $84,698 stock based compensation expense in 2023 versus $16,940 in 2024.
Interest expense increased in the quarter ended March 31, 2024 by $33,941 to $43,255 from $9,314 in 2023.
For the three months ended March 31, 2024, the Company recorded non-cash impairments of assets of $0 as compared to $369 in the first three months of 2023. This was the result of disposing and/or selling of laboratory assets no longer in use in 2023.
| 18 |
Research and development (R&D) costs for the quarter ended March 31, 2024, were $607,635, a decrease of $76,927 from $684,562 in 2023. The decrease in R&D expenses is primarily the result of equity-based compensation of $262,308 in 2024 versus $306,599 in 2023.
Liquidity and Capital Resources
Liquidity
As of March 31, 2024, the Company had $24,319 in cash, and total stockholders’ equity on March 31, 2024, was negative $4,219,012. As of December 31, 2023, the Company had $41,008 in cash, and total stockholders’ equity at December 31, 2023, was negative $3,561,082. Total debt, including convertible notes, accounts payable and other notes payable at March 31, 2024, together with interest payable thereon and legacy liabilities, was $5,196,231 an increase of $604,930 from December 31, 2023, where it stood at $4,591,301. This increase is primarily attributable to new convertible notes due and deferred wages to related parties. $2,738,132 of the remaining debt has been renegotiated to be payable out of future revenue or out of future profits and otherwise does not come due.
During the three months ended March 31, 2024, the Company’s net cash used in operating activities decreased by $353,255 to $255,864 from $609,119 in the three months ending March 31, 2023. This is primarily attributed to the increase in accounts payable and accrued liabilities of $328,184 in 2024 versus $19,559 in 2023, and the decrease in stock based compensation of 126,356 from 415,297 in the three months ending March 31, 2023, to 288,942 in 2024.
During the three months ended March 31, 2024, the Company’s investing activities used $20,825 in cash, as compared to $294,659 in the first three months of 2023. This can be primarily attributed to capitalizing $282,038 used to purchase machinery and equipment for a pilot plant in 2023, as compared to $0 in 2024.
During the three months ended March 31, 2024, the Company generated an aggregate of $260,000 through its financing activities versus $855,000 in the three months ended March 31, 2023, which is a decrease of $595,000. This decrease from the prior year can primarily be attributed to net proceeds of $582,750 for the issuance of common stock in 2023.
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 additional funds for G&A expenses and will seek project financing for a commercial ethanol to SAF facility in addition to funds needed to complete the commercialization of its CTS system. There is no guarantee that the Company will achieve all of the additional funding that is needed.
As of the date of this filing, in 2024 the Company has raised $390,000 through the issuance of convertible notes and $0 through the issuance of shares and the exercise of warrants. The Company previously raised $16,963,625 in shares and $1,970,916 through converted notes and $1,180,000 in debt or convertible notes since inception. However, there is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.
The inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement its business plan of operations and jeopardize the viability of the Company. In that case, the Company may need to reevaluate and revise its operations.
Equity
As of March 31, 2024, shareholders’ equity was negative $4,219,012.
There were 302,803,463 shares of common stock issued and outstanding as of March 31, 2024.
There were no preferred shares outstanding.
The Company has paid no dividends.
| 19 |
Critical Accounting Policies
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Seasonality
The Company’s operating results are not affected by seasonality.
Inflation
The Company’s business and operating results are not affected in any material way by inflation.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2023. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2023, that occurred during our first fiscal quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 20 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business. As of the date of filing, there are no material claims or suits whose outcomes could have a material effect on the Company’s financial statements.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
Below is a list of securities sold by the Company from January 1, 2024, 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 | ||||||||
| 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.
| 21 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference in this report.
| 22 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Blue Biofuels, Inc. | ||
| (Registrant) | ||
| By | /s/ Benjamin Slager | |
| Benjamin Slager | ||
| Chief Executive Officer, (Principal Executive Officer) | ||
| Date | May 20, 2024 | |
| By | /s/ Anthony Santelli | |
| Anthony Santelli | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date | May 20, 2024 | |
| 23 |