Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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

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, 2025. 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, our chief executive officer ("CEO") Ben Slager invented a new technology system referred to as Cellulose-to-Sugar or CTS, and, to date, the Company filed, and received, three patents for this technology. The CTS process is a continuous mechanical/chemical process for converting cellulose material into sugar and lignin. Three additional patent applications have been filed and are pending.

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

In January 2024, the Company formed a 50-50 joint venture partnership with Vertimass called VertiBlue Fuels, LLC, that has the mission to build an ethanol-to-SAF facility in Florida with the initial goal to produce around 10-25 million gallons of Sustainable Aviation Fuel (SAF), and then expand SAF production to approximately 70 million gallon per year. This facility will use the Vertimass Process that converts ethanol into sustainable aviation fuel and other renewable biofuels including bio-gasoline.

In 2025, the Company finalized the upscaling, testing, and optimizing of its CTS pilot plant and received third-party confirmation of its conversion results into sugars and ethanol.

To obtain project financing, in September 2024 and September 2025, the Company applied for two USDA loan guarantees through its Section 9003 Loan Guarantee Program: one for a $149 million loan guarantee to build a commercial-scale facility for its CTS process; and one for a $148 million loan guarantee through its joint venture VertiBlue Fuels, LLC, to build a commercial-scale facility for the Vertimass Process. According to the USDA's specification in its Section 9003 Loan Guarantee Program, to obtain these loan guarantees for first-of-a-kind commercial-scale renewable technology projects, companies need to complete an integrated demonstration unit (IDU) for each technology and run them for 120 days using the same feedstock as anticipated in a commercial facility, and having the products meet the technical requirements outlined.

In 2026, the Company has designed integrated demonstration units for both its CTS technology to make cellulosic ethanol from king grass, and the Vertiblue Fuels ethanol-to-SAF facility.

The Company has also obtained an LOI with Ben Hill Griffin to grow sufficient king grass for the Company's first cellulose-to-ethanol facility.

Plan of Operation

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

The Company is in the process of seeking funding to build its IDUs and run them for 120 days with an independent engineering firm analyzing the data and reporting it back to the USDA. Upon the success of these IDUs, the Company will engineer and design its full-scale commercial volume systems (cellulose-to-ethanol and ethanol-to-SAF) and obtain permits and the financing, along with the USDA loan guarantees, to build the facilities.

The plan is to build the Company's first CTS technology factory at the same time and location in Frostproof, FL as the VertiBlue ethanol-to-SAF factory and feed cellulosic ethanol to make SAF. Making SAF from cellulose should generate the large D7 RIN and other government credits. Commencing commercial production will require project financing.

After its first plant is profitable, the Company intends to grow with an additional ten plants in Florida, and then explore growth in the rest of the United States, and 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.

Capital Formation

From January 1, 2026, through the date of filing, the Company issued an aggregate of 1,660,000 shares of its common stock for services valued at $166,250.

From January 1, 2026, through the date of filing, the Company issued an aggregate of 280,000 warrants for interest on notes to a related party.

From January 1, 2026, through the date of filing, the Company issued an aggregate of 2,916,000 shares and warrants for $347,000 in a private placement.

From January 1, 2026, through the date of filing, the Company issued an aggregate of 1,300,000 shares for the exercise of warrants and received proceeds of $127,500.

From January 1, 2026, through the date of filing, the Company issued 670,868 shares of common stock for the settlement of legacy debt.

From January 1, 2026, through the date of filing, 10,607,916 options vested. During the nine months ended September 30, 2026, the Company recognized stock-based compensation of $1,004,838 in connection with the expensing of unvested options.

From January 1, 2026, through the date of filing, 10,000 vested options expired.

From January 1, 2026, through the date of filing, 3,350,000 warrants expired.

Going Concern

The Company has incurred losses since inception, has a working capital deficiency, and may be unable to raise further capital. As of September 30, 2026, the Company had a working capital deficit of $3,659,437 and had incurred accumulated losses of $62,930,226 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 and nine month period ended September 30, 2026 to September 30, 2025

For the three and nine months ended September 30, 2026, the Company recognized $0 in revenue as opposed to $0 in 2025.

For the three months ended September 30, 2026, the Company's general and administrative expenses increased by $204,615 to $555,192 from $350,577 in 2025. This increase is primarily due to an increase in equity-based compensation from $55,820 in 2025 to $265,272 in 2026.

For the nine months ended September 30, 2026, the Company's general and administrative expenses increased by $107,376 to 1,227,185 from $1,119,809 in 2025. This increase is primarily due to an increase in equity-based compensation from $293,955 in 2025 to $430,806 in 2026.

Interest expense decreased in the quarter ended September 30, 2026, by $2,700 to $3,623 from $6,323 in 2025.

Interest expense increase in the nine months ended September 30, 2026, by $3,145 to $27,615 from $24,470 in 2025.

Research and development (R&D) costs for the quarter ended September 30, 2026, were $826,453, an increase of $340,776 from $485,677 in 2025. The increase is primarily due to an increase in equity-based compensation from $202,742 to $540,562 in 2026.

Research and development (R&D) costs for the nine months ended September 30, 2026, were $1,642,564, an increase of $334,711 from $1,307,853 in 2025. The increase is primarily due to an increase in equity-based compensation from $404,095 to $759,163 in 2026.

Liquidity and Capital Resources

Liquidity

As of September 30, 2026, the Company had $6,473 in cash and cash equivalents, and total stockholders' deficit on September 30, 2026, was $4,546,983. As of December 31, 2025, the Company had $65,200 in cash and cash equivalents, and total stockholders' deficit at December 31, 2025, was $3,706,083. Total debt, including convertible notes and other notes payable at September 30, 2026, together with legacy liabilities, was $2,384,000 an increase of $548,370 from December 31, 2025, where it stood at $1,835,630. This increase is primarily attributable to an increase in notes payable and convertible notes payable to related parties of $375,000.

During the nine months ended September 30, 2026, the Company's net cash used in operating activities was $1,029,218 compared to $452,692 in the nine months ending September 30, 2025. This is primarily attributed to a higher net loss in 2026 due to grant income in 2025.

During the nine months ended September 30, 2026, the Company generated an aggregate of $1,123,500 versus $626,250 through its financing activities in the nine months ended September 30, 2025, which is an increase of $497,250. This increase from the prior year can primarily be attributed to net proceeds of $649,000 in notes and $127,500 from the exercise of warrants versus $185,000 and $6,250, respectively, for 2025.

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 2026 the Company has raised $474,500 through the issuance of shares and $877,000 from the issuance of notes. The Company previously raised $17,974,375 in shares and $2,245,916 through converted notes and $1,515,000 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 September 30, 2026, shareholders' deficit was $4,546,983.

There were 324,418,980 shares of common stock issued and outstanding as of September 30, 2026.

There were no preferred shares outstanding.

The Company has paid no dividends.