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 March 31, 2026, the Company has incurred accumulated losses of $60,794,163. 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, 2025.

Operating results for the three months ended March 31, 2026, may not be indicative of full year 2026 results.

In management’s opinion, the accompanying condensed financial statements contain all adjustments necessary for a fair statement of our financial position as of March 31, 2026, and our results of operations, changes in stockholders’ deficit and cash flows for the three months ended March 31, 2026 and 2025.

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 months ended March 31, 2026 and 2025, due to net losses, all potential dilutive securities are antidilutive. There are a total of 87,321,907 common shares that would be issued if all warrants, vested options, and convertible notes were exercised.

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

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 consolidated financial statements and disclosures.

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

Total depreciation expense was $30,299 and $29,926 for the three months ended March 31, 2026 and 2025, respectively.

NOTE 5 –PATENTS AND TRADEMARKS

The Company has obtained three patents and has applied for six more patents on its technology, and has also applied for international patents. The Company has obtained one trademark and has four more pending. The following is a summary of the Company’s patents and trademarks at March 31, 2026 and December 31, 2025:

Amortization expenses for patents and trademarks for the three months ended March 31, 2026, and 2025 were $1,078 and $0, respectively. Estimated amortization expense for the years subsequent to March 31, 2026, is as follows:

NOTE 6 –DEBT

Notes Payable – Related Party

From 2023 to 2025, the Company borrowed a total of $1,325,000 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. During the three month period ended March 31,2026, the Company borrowed an additional $20,000 from Mr. Kneppers with the same terms. The total debt due as of March 31, 2026, is $1,345,000. 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. At March 31, 2026 and December 31, 2025, accrued interest payable to Mr. Kneppers is $46,651, and $46,651, respectively.

Convertible Notes Payable – Related Party

In June 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 quarter ended March 31, 2026 and 2025, 30,000 and 0 warrants with a fair value of $4,303 and $0,respectively, were issued to Mr. Burke (see Note 7). The fair value of these warrants is included in interest expense – related parties on the statement of operations.

In April 2023, the Company entered a separate long-term convertible note with board member Mr. 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 three months ended March 31, 2026 and March 31, 2025, 0 and 0 warrants with a fair value of $0 and $0, respectively, were issued to Mr. Burke (see Note 7). The fair value of these warrants is included in interest expense – related parties on the statement of operations.

Pursuant to the Company’s Chapter 11 Plan of Reorganization confirmed on September 18, 2019, the Company restructured several outstanding notes payable and convertible debentures into fixed settlement obligations. Under the terms of the confirmed Plan, the original terms, interest rates, and conversion features were terminated in exchange for a combined settlement of $320,630, payable solely out of the Company’s future gross revenues or a percentage thereof. As of March 31, 2026 and December 31, 2025, the remaining aggregate balance of these obligations is $320,630.

A summary of all Notes that remain including those indicated in the Notes above is as follows:

As of March 31, 2026, none of the $1,855,630 outstanding notes payable is due at a specific point in time. $320,630 will be paid from future gross revenues.

At March 31, 2026, there are $190,000 in convertible notes that, if converted, would convert into 1,461,538 shares.

NOTE 7 –STOCKHOLDERS’ EQUITY

During the three months ended March 31, 2026, and 2025, the Company issued an aggregate of 10,000 and 0 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 $1,250 and $0, respectively.

During the three months ended March 31, 2026, in connection with the exercise of warrants, the Company issued 1,250,000 shares of its common stock for $125,000.

During the three months ended March 31, 2026, the Company issued 1,816,000 shares and warrants in a private placement for proceeds of $227,000.

Warrants:

During the three-month period ended March 31, 2026 and 2025, the Company issued 30,000 and 0 warrants for interest with a fair value of $4,303 and $0, respectively.

A summary of warrant activity for the year ended December 31, 2025 and three months ended March 31, 2026 is as follows:

Warrants outstanding at March 31, 2026 have a weighted average exercise price of $0.20 and a weighted average remaining term of 2.7 years.

Stock Options:

During the three-month period ended March 31, 2026 and 2025, the Company recognized $75,605 and $88,165 of stock based compensation, respectively, under the employee, director plan. Of this amount, $288 (2025: $33,709) was classified as general and administrative expense and $75,317 (2025: $54,456) was classified as research and development expenses.

A summary of option activity for the year ended December 31, 2025, and three months ended March 31, 2026, is as follows:

The weighted average remaining life of outstanding and vested options is 6.2 years and 5.9 years, respectively. At March 31, 2026, outstanding vested options had an intrinsic value of $984,775, and the total intrinsic value of all options is $1,921,093.

At March 31, 2026, remaining compensation to be recognized as future vesting of stock options is approximately $5.2 million of which approximately $0.2 million will vest in 2026, $0.1 in subsequent years, 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 during the three months ended March 31, 2026, were valued on the date of issuance or modification.

The following assumptions were used in calculations of the Black-Scholes option pricing models for option and warrant-based stock compensation issued in the quarters ended March 31, 2026, and 2025:

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. The new lease has a term offive years, expires on October 31, 2029, 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, at a discount rate of 10%. Rent expense for the three months ending March 31, 2026, and 2025 were $62,146 and $57,579, respectively, which is expensed as part of G&A in the statement of operations.

At March 31, 2026, 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 year ended December 31, 2025, $865,000 was recognized as grant income for this grant.

During the three month periods ended March 31, 2025, $444,970 was recognized as grant income for this grant. None was recognized during the quarter ended March 31, 2026, as there is no additional grant money from this grant for 2026.

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:

The Company received $50,000 from a board member in exchange for a note with the same terms as previous notes. See Note 6, Notes Payable Related Party, above.

The Company received $100,000 from an unrelated party in exchange for a note. The note has a $10,000 origination fee and is payable in 12 months. At the option of the holder, instead of the origination fee, the Note may be converted into shares at 12.5 cents per share plus a warrant with a strike price of 18 cents and a 5-year expiration.

The Company issued 200,000 warrants for annual interest on a $150,000 note to a board member. See Note 6 Convertible Notes Payable, above.