BLUE BIOFUELS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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 condensed 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 September 30, 2025, the Company has incurred accumulated losses of $58,842,893. 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 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.

NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed financial statements do not include all disclosures required of annual financial statements and, accordingly, should be read in conjunction with our financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Operating results for the nine months ended September 30, 2025, may not be indicative of full year 2025 results.

In management’s opinion, the accompanying condensed financial statements contain all adjustments necessary for a fair statement of our financial position as of September 30, 2025, and our results of operations, changes in stockholders’ deficit and cash flows for the three and nine months ended September 30, 2025 and 2024. Certain prior period amounts have been reclassified to conform to the2025 financial statement presentation. Reclassifications had no effect on net income (loss), cash flows, or stockholders’ (deficit) as previously reported.

Net Income (Loss) per Common Share:

Basic net earnings per share amounts have been calculated using the weighted-average number of common shares outstanding during each reporting period. Diluted earnings 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.

For the three and nine months ended September 30, 2025, due to net losses, all potential dilutive securities are antidilutive. Dilutive options and warrants totaling 13,708,408 and 14,221,042 for the three and nine months ended September 30, 2024, respectively, were included in diluted weighted average shares due to various options and warrants having their exercise prices lower than the average trading price of the Company’s common stock for the periods.

Grant Income

Government grants income is recognized in earnings on a systematic basis in a manner that mirrors the manner in which the Company recognizes the underlying costs for which the grant is intended to compensate. A grant receivable is recognized for expenses or losses already incurred but for which grant funding has not yet been received. Grant funding received in excess of expenses or losses incurred is recognized as deferred revenue.

The Company has adopted the disclosure requirements of Accounting Standards Codification (“ASC”) 832 Government Assistance.

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.

In December 2023, the Financial Accounting Standards Board (“ FASB”) issued Accounting Standards Update (“ ASU” ) 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We are currently evaluating the impact of this update on our financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on our financial statements and disclosures.

NOTE 4 –PROPERTY AND EQUIPMENT

Total depreciation expense was $90,392 and $89,135 for the nine months ended September 30, 2025 and 2024, respectively.

NOTE 5 –PATENTS AND TRADEMARKS

The Company has been issued three patents on its technology in the United States and has six pending patents. The Company has also applied for international patents on all of its patents. The Company has capitalized patent legal and filing fees of $310,529 and $286,115 as of September 30, 2025, and December 31, 2024, respectively. The amount are net of accumulated amortization of $37,048 as of September, 2025, and $0 as of December 2024. The Company has one trademark registered and four pending. The Company has capitalized the trademark legal and filing fees of $18,565 and $11,964 as of September 30, 2025 and December 31, 2024, respectively.

NOTE 6 –DEBT

Notes Payable – Related Party

In 2023 and 2024, the Company borrowed a total of $1,140,000 from board member Chris Kneppers.The notes are now payable on the earliest of the date on which the Company (1) uplists to the Nasdaq or NYSE; (2) receives $5 million in equity financing; or (3) begins generating revenue from its first facility. In the first half of 2025, the Company borrowed an additional $185,000 from Mr. Kneppers with the same terms. In lieu of interest, the Company will pay Mr. Kneppers 100% of the outstanding loan balance due him contingent upon the financing of the first plant. All interest and loan amounts automatically come due upon a change of control of the Company or if the Company files for bankruptcy under Chapter 11 or Chapter 7. During the three and nine months ended September 30, 2025 and 2024, the Company recognized $0 (2024: $0) and $0 (2024: $11,500), respectively, in interest expense on these notes due to Mr. Kneppers. At September 30, 2025, accrued interest payable to Mr. Kneppers is $46,651.

Convertible Notes Payable – Related Party

In July and November 2023, the Company entered two long-term convertible notes with board member Edmund Burke with principal amounts of $25,000 and $15,000, respectively, to be repaid when the Company receives an equity investment of at least $3 million. The notes may convert into common stock at $0.13/share at the option of the holder for a total of 307,692 shares. Until repayment, the note agreement requires the Company to issue to Mr. Burke 80,000 warrants having a strike price of $0.15 and an expiration of 5 years every twelve months in lieu of interest. During the three and nine months ended September 30, 2025, and September 30, 2024, 50,000 warrants were issued as they are issued each July and November for the prior year. These had a value of $6,328 and $3,429 respectively and were recognized as interest expense – related party on the statement of operations.

In April 2023, the Company entered a long-term convertible note with board member Edmund Burke, with a principal balance of $150,000, to be repaid when the Company receives an equity investment of at least $1.5 million. The notes may convert into common stock at $0.13/share at the option of the holder for a total of 1,153,846 shares. Until repayment, the note agreement requires the Company to issue to Mr. Burke 100,000 warrants having a strike price of $0.15 and an expiration of 5 years every six months in lieu of interest. During the nine months ended September 30, 2025, 200,000 warrants were issued, and in 2024, 100,000, respectively. These had a value of $18,149 (2025) and $6,518 (2024) and were recognized as interest expense – related party on the statement of operations.

Convertible Notes Payable – Non-Related Parties

In December 2023, the Company issued a convertible note to one individual for $50,000. The note was non-interest bearing and had a term of thirteen months. In January 2025, the note was converted into 625,000 shares of the Company’s common stock and 625,000 warrants with a strike price of $0.10 per share and a five-year expiration.

A summary of all Notes that remain above is as follows:

Of the $1,835,630 payable as of September 30, 2025, none is payable in cash at a specific point in time. $1,515,000 is due only after achieving certain milestones. $320,630 is due out of future revenue with no specific due date.

At September 30, 2025, there are $190,000 in convertible notes that, if converted, would convert into 1,461,538 shares.

NOTE 7 –STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2025 and 2024, the Company issued an aggregate of 605,896 and 114,545 shares, respectively, of its common stock for services with a fair value based on the trading price of the Company’s stock on the date of issuance of $71,734 and $10,094, respectively.

During the nine months ended September 30, 2025 and 2024, the Company issued an aggregate of 672,520 and 0 shares, respectively, of its common stock for property and equipment with a fair value of $67,253 and $0, respectively.

During the nine months ended September 30, 2025 in connection with the conversion of debt with a balance of $50,000, the Company issued 625,000 shares of its common stock and 625,000 warrants with an exercise price $0.10 and term offive years. See Note 6.

During the nine months ended September 30, 2025, the Company issued 384,408 shares of its common stock due to the cashless exercise of 650,000 options by one of its directors and one of its employees.

During the nine-months ended September 30, 2025, the Company issued 125,000 shares of its common stock due to the exercise of 125,000 warrants for $6,250.

During the nine-months ended September 30, 2025, the Company issued 4,350,000 shares of its common stock and warrants, with a strike price of 15 cents and a five-year expiration, through a private placement for proceeds of $435,000.

Warrants:

During the nine-month period ended September 30, 2025 and 2024, the Company issued 250,000 and 177,500 warrants for services with a fair value of $22,936 and $11,844, respectively for the vested warrants. An additional 500,000 unvested warrants were issued during 2025. The warrants had a fair value of $50,231 on the date of issuance and will vest upon the probability of achieving performance milestone criteria.

During the nine-month period ended September 30, 2025 and 2024, the Company issued 250,000 and 150,000 warrants for interest with a fair value of $24,477 and $9,947, respectively.

A summary of warrant activity for the year ended December 31, 2024 and nine months ended September 30, 2025 is as follows:

Warrants outstanding at September 30, 2025 have a weighted average exercise price of $0.20 and a weighted average remaining term of 3.0 years.

Stock Options:

During the three and nine-month period ended September 30, 2025, the Company recognized stock-based compensation of $258,562 and $698,049 respectively versus $134,987 and $444,001 respectively for 2024. Of this amount, $55,820 was classified as general and administrative expenses for the three month period ended in 2025 and $293,955 for the nine month period, versus $7,541 and $53,262 for 2024, respectively. The remainder was classified as research and development expenses (2025: $202,742 and $404,095 for three and nine month respectively; and for 2024: $127,446 and $390,739).

A summary of option activity for the year ended December 31, 2024 and nine months ended September 30, 2025 is as follows:

The weighted average exercise price of outstanding and vested options is $0.13 and $0.13, respectively. The weighted average remaining life of outstanding and vested options is 6.6 years and 5.9 years, respectively. At September 30, 2025, outstanding vested options had an intrinsic value of $2,707,390, and the total intrinsic value of all options is $5,448,826.

At September 30, 2025, remaining compensation to be recognized as future vesting of stock options is approximately $5.6 million of which approximately $0.7 million will vest with a weighted average remaining vesting period of approximately 1 year, and approximately $4.9 million will vest upon the probability of achieving performance milestone criteria.

Black Scholes Model Variables:

The fair value associated with warrants and options issued or modified during the nine months ended September 30, 2025 were valued on the date of issuance or modification.

The following ranges of assumptions were used in calculations of the Black-Scholes option pricing models for option and warrant-based stock compensation issued in the nine months ended September 30, 2025 and 2024:

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 condensed balance sheet. During the three-month period ended March 31, 2025, the Company renewed the leases when they expired. The new lease has a term offive years and has escalating monthly payments range from $9,100 to $10,242. At inception, the lease was classified as an operating lease and the Company recorded a ROU lease asset and liability of $452,132 and $452,132, respectively, reflecting the future lease payment discounted at a discount rate of 10% over the lease term. Rent expense for the three and nine months ending September 30, 2025, were $29,635 and $129,544 and for 2024 were $32,978 and $143,265, respectively, which is expensed as part of G&A in the statement of operations.

At September 30, 2025, minimum lease payments to be paid by the Company are as follows:

NOTE 9 –RELATED PARTY TRANSACTIONS

Related Party transactions with the Company are as follows:

NOTE 10 –GRANT INCOME

In September 2024, the Company was awarded a Small Business Innovation Research (“SBIR”) grant by the U.S. Department of Energy (DOE) in the amount of $1.15 million to be received subject to meeting certain terms and conditions. The purpose of the grant is to support the further development of the Company’s patented CTS process and to bring it to the point of being commercially ready. Accounting for this DOE grant does not fall under Accounting Standard Codification 606,Revenue from Contracts with Customers, as the DOE does not meet the definition of a customer under this standard.

During the three and nine month periods ended September 30, 2025, $420,030 and $865,000 was recognized as grant income for this grant, versus $100,000 and $100,000 respectively for the three and nine month periods ended September 30, 2024.

NOTE 11 –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 October 1, 2025 to the date of this filing, the Company issued 1,000,000 shares and warrants for $125,000 in cash to two unrelated parties. The warrants were exercisable at 18 cents and have afive-year expiration.