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 June 30, 2026, the Company has incurred accumulated deficit of $61,544,958. 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 and six months ended June 30, 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 June 30, 2026, and our results of operations, changes in stockholders’ deficit and cash flows for the three and six months ended June 30, 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 and six months ended June 30, 2026 and 2025, all potentially dilutive securities were excluded from the computation of diluted net loss per share because the Company was in a net loss position and their effect would have been antidilutive. As of June 30, 2026, the potentially dilutive securities excluded from the computation totaled 87,671,907 common shares issuable upon the exercise of outstanding warrants and vested options and the conversion of outstanding convertible notes.

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 $28,974 and $59,272 for the three and six months ended June 30, 2026 and $30,198 and $60,053 for the three and six months ended June 30, 2025.

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 June 30, 2026 and December 31, 2025:

Amortization expenses for patents and trademarks for the three and six months ended June 30, 2026, were $1,078 and $2,157 and for 2025 were $35,970 and $35,970, respectively. Estimated amortization expense for the years subsequent to June 30, 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. 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 six-month period ended June 30,2026, the Company borrowed an additional $20,000 from Mr. Kneppers with the same terms. The total debt due as of June 30, 2026, is $1,345,000. At June 30, 2026 and December 31, 2025, accrued interest payable to Mr. Kneppers is $46,651, and $46,651, respectively.

Convertible Notes Payable – Related Party

In May and June 2026, the Company entered into three convertible notes with board members for a total of $85,000. They convert into shares of common stock in 6-months from the date of issue at $0.10 per share or a lower price if the Company has an equity financing at a lower price during the 6-month period.

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 six months ended June 30, 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 six months ended June 30, 2026 and June 30, 2025, 200,000 and 200,000 warrants with a fair value of $19,689 and $18,149 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.

Convertible Notes Payable – Other

The Company received $125,000 from an unrelated party in exchange for two notes. The first note, with principal amount of $100,000 dated April 22, 2026, is due 12 months from the date of issuance and provides for a $10,000 premium payable at maturity in addition to the principal. At the option of the holder, in lieu of repayment and premium, the holder may elect to convert into shares at $0.10 per share or a lower price if a subsequent equity raise over the term of the loan is at a lower price. The second note for $25,000 is dated May 28, 2026, and automatically converts into shares at $0.10 per share at the end of six months or a lower price if a subsequent equity raise over the 6-months is done at a lower price.

Legacy Notes Payable – Other

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. In May, 2026, the Company negotiated to payoff $100,630 for 670,868 shares at the trading price of $0.15 per share. As of June 30, 2026, and December 31, 2025, the remaining aggregate balance of these obligations is $220,000 and $320,630, respectively.

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

As of June 30, 2026, any note that is due at a specific point in time automatically converts into equity. $220,000 will be paid from future gross revenues.

At June 30, 2026, there are $400,000 in convertible notes that, if converted, would convert into 3,561,538 shares.

NOTE 7 –STOCKHOLDERS’ EQUITY

During the six months ended June 30, 2026, the Company issued an aggregate of 810,000 shares of common stock for services, consisting of 750,000 shares issued to a related party and 60,000 shares issued to unrelated parties. During the six months ended June 30, 2025, the Company issued 415,975 shares of common stock for services to unrelated parties. These shares were valued at $81,250 and $41,597, respectively, based on the trading price of the Company’s common stock on the respective dates of issuance.

During the six-months ended June 30, 2026, and 2025, in connection with the exercise of warrants, the Company issued 1,250,000 and 125,000 shares, respectively, of its common stock for $125,000 and $6,250, respectively.

During the six-months ended June 30, 2026, and 2025, the Company issued 2,916,000 and 2,600,000 shares and warrants in private placements, respectively, for proceeds of $347,000 and $260,000.

During the six-months ended June 30, 2026, and 2025, the Company issued 670,868 and 0 shares, respectively, for the settlement of legacy notes valued at $100,630 and $0, using a trading price on the date of settlement of $0.15 per share.

During the six-months ended June 30, 2026, and 2025, the Company issued 0 and 150,687 shares, respectively, for the exercise of stock options on a cashless basis.

Warrants:

During the six-month period ended June 30, 2026 and 2025, the Company issued 230,000 and 200,000 warrants for interest with a fair value of $23,992 and $18,149 respectively.

A summary of warrant activity for the year ended December 31, 2025 and six months ended June 30, 2026 is as follows:

Warrants outstanding at June 30, 2026 have a weighted average exercise price of $0.20 and a weighted average remaining term of 2.7 years.

Stock Options:

During the six-month period ended June 30, 2026 and 2025, the Company recognized $199,004 and $439,487 of stock based compensation, respectively. Of this amount, $39,856 (2025: $238,134) was classified as general and administrative expense and $159,148 (2025: $201,353) was classified as research and development expenses.

A summary of option activity for the year ended December 31, 2025, and six months ended June 30, 2026, is as follows:

The weighted average remaining life of outstanding and vested options is 6.7 years and 5.6 years, respectively. At June 30, 2026, outstanding vested options had an intrinsic value of $345,076, and the total intrinsic value of all options is $812,665.

At June 30, 2026, remaining compensation to be recognized as future vesting of stock options is approximately $6 million of which approximately $1.6 million will vest in 2026, $4.4 in subsequent years.

*Modification of performance-based options.*On June 24, 2026, the Board of Directors modified all outstanding unvested stock options held by the Company’s officers and managers that vested based on performance conditions so that they instead vest solely based on continued service, generally in equal quarterly installments over two years. Vesting of these performance-based awards had not previously been considered probable, and no compensation cost had been recognized for them prior to the modification. Because the awards were not expected to vest immediately before the modification but are expected to vest following it, the Company measured the modified awards at their fair value on the modification date and recognizes that cost over the remaining service period. The modification affected options covering 40,628,913 shares with an aggregate modification-date fair value of $3,315,576.

*Anti-dilution option commitment.*Under the same June 24, 2026 Board action, the Company is committed to grant additional options to its officers and managers (Ben Slager, Anthony Santelli, Kevin Hissem, and Eric Libra) upon each future issuance of equity, or conversion of convertible instruments, in order to maintain their fully-diluted ownership percentages of 10%,7%,4%, and 2.5%, respectively, through the next $50 million of equity raised. Any such options will have an exercise price equal to the fair market value of the common stock on the closing date of the related financing and will vest in equal quarterly installments overtwo years. Because the number of options to be issued is not determinable until each financing closes, no compensation cost has been recognized for these future grants, which will be measured and recognized as the awards are granted.

Black Scholes Model Variables:

The fair value associated with warrants and options issued during the six months ended June 30, 2026, and 2025, 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 six months ended June 30, 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 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 and six months ending June 30, 2026, $28,998 and $91,144, and for 2025 were $42,330 and $99,909, respectively, which is expensed as part of general and administrative expenses in the statement of operations.

At June 30, 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:

*Deferred salaries and directors’ fees.*The Company’s officers and directors have historically received less than their full salaries and fees, with the unpaid amounts accrued as deferred compensation. During 2024, the Board of Directors approved annual salaries, retroactive to August 1, 2023, of $525,000 for CEO Ben Slager and $325,000 for CFO Anthony Santelli, much of which continues to be accrued rather than paid on a consistent basis. As of June 30, 2026 and December 31, 2025, the aggregate liability for deferred wages and directors’ fees due to related parties was $2,859,070 and $2,525,135, respectively, and is reported as Deferred Wages and Directors’ Fees – Related Party in the accompanying condensed balance sheets. A board resolution passed on February 13, 2020 pledged the Company’s patents and pending patents to secure the back-pay claims of Mr. Slager, Mr. Santelli, and Director Charles Sills in order to support their continued involvement while they receive less than full salaries.

*Interest on deferred amounts and related contingent bonuses.*Effective April 1, 2024, the Board approved ceasing the accrual of interest on officer back pay and directors’ fees. In lieu of interest, the Company will pay an additional $25,000 to each director contingent upon the financing of the first commercial plant or a successful uplisting to the NYSE or Nasdaq. In addition, a performance bonus equal to 100% of the outstanding back-pay balance due to Mr. Slager and Mr. Santelli is payable contingent upon the financing of the first plant. These amounts become due automatically upon a change of control or a filing by the Company for protection under Chapter 11 or Chapter 7 of the U.S. Bankruptcy Code. Because payment of these amounts was not probable as of June 30, 2026, no liability has been recorded for them.

*Notes and other financing.*Short-term notes payable, convertible notes, and legacy liabilities issued to related parties are described in Note 6.

*Anti-dilution compensation — restricted stock units.*In June 2024, the Board approved partial anti-dilution compensation for CEO Ben Slager, CFO Anthony Santelli, and Director Chris Kneppers, payable in restricted stock units (and, for Mr. Kneppers, options) equal to 4%,3%, and 3%, respectively, of the equity and warrants issued to investors on the next $50 million of equity raised, as consideration for deferring salary or lending funds to the Company. These units are issuable as the Company raises capital through the sale of its common stock. As of June 30, 2026, the amounts issuable were 419,440 RSUs to Mr. Slager,314,580 RSUs to Mr. Santelli, and 314,580 RSUs and 314,580 options (five-year term) to Mr. Kneppers; none of these RSUs or options had been issued. Their fair value is $185,131, (of which $59,453 is expensed as research and development and $125,678 as general and administrative expenses), and was recognized during the six-month period ended June 30, 2026. In June 2026, the Board replaced the option portion of this arrangement with the anti-dilution option package described below, and no additional options will be issued under the prior arrangement; no compensation cost had been recognized for the replaced options.

*Anti-dilution compensation — option package.*On June 24, 2026, the Board approved an anti-dilution option package for officers Ben Slager and Anthony Santelli and managers Kevin Hissem and Eric Libra, intended to maintain their fully-diluted option positions at 10%,7%,4%, and 2.5%, respectively, and to retain these key members of management while they receive below-market salaries. To meet those percentages,13,535,000,6,205,000,5,030,000, and 1,040,000 unvested options, respectively, were issued as of June 30, 2026, each with an exercise price of $0.115 and a ten-year term, vesting in equal quarterly installments over two years. Under the same action, the Company is committed to issue additional options upon each future equity raise or conversion to maintain these percentages through the next $50 million of equity raised, priced at the fair market value of the common stock on the applicable closing date. The Company also modified certain previously granted performance-based options to vest based on continued service. See Note 7 for the accounting for these option grants, the modification, and the future grant commitment.

*Director introduction compensation.*Effective August 28, 2024, each director who is not an officer is entitled to receive 3.5% in cash and 3.5% in warrants of the amount invested by any investor first introduced to the Company by that director. The warrants will be priced at the same price as any warrants offered in the related raise or, if there are none, at the closing market price on the date the funds are received, and will have a five-year term. No such cash or warrants had been earned as of June 30, 2026.

*CTS production milestone bonus.*On December 15, 2025, the Board approved a $500,000 bonus to Mr. Slager for achieving the milestone of producing over 500 pounds of sugar in an eight-hour day — an incentive originally offered on March 12, 2021 to upscale and commercialize the Company’s patented CTS system. This amount is accrued in Deferred Wages and Directors’ Fees – Related Party as of June 30, 2026 and December 31, 2025.

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 six month periods ended June 30, 2025, $444,970 was recognized as grant income for this grant. None was recognized during the six month period ended June 30, 2026, as there isno 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 $30,000 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 $2,500 from the exercise of warrants and issued 50,000 shares of common stock.

The Company received $60,000 for a note.

The Company issued 600,000 shares of common stock in exchange for services.