What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-31 · 82 added, 67 removed, 140 unchanged (52% of the section changed)

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Biofuels, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels,

and bioplastics technologies sectors.

and lignin technologies sectors.

early 2018, our chief executive officer (“CEO”) Ben Slager invented a new technology system referred to as Cellulose-to-Sugar

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and other biofuels like jet fuel, and potentially into bio chemicals.

primary co-product of the CTS system is sulfur-free lignin.

Our lignin potentially can be used in ion exchange resins or specialty chemicals.

Lignin can also be burned as a renewable fuel.

2022, the Company partnered with K.R.

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that builds briquetting machines and compaction/granulation systems with throughput capacities up to 50 tons per hour.

The Company has

begun successful testing on a Komarek-made machine at a throughput processing rate of 2.5 tons per day.

The Company has designed a pilot

plant around that machine and is in the process of completing the buildout of the plant.

We anticipate having the pilot plant completed

in Q1, 2023 and anticipate to continue testing it and optimizing parameters and sugar production in the first half of 2023.

plant is designed to show successful volume production and scalability.

Company expects to engage an engineering firm to design a semi-commercial scale pilot plant that integrates a larger CTS system into

the pre-processing and post-processing elements of the plant.

It is anticipated that the semi-commercial plant will have the capacity

to produce sugar at a rate sufficient to make around 500,000 – 1,000,000 gallons of ethanol per year.

The goal of the semi-commercial

plant is to provide operating cost estimates of a full commercial volume system.

Due to its mechanical nature and modularity, we anticipate

that one plant would have multiple modular CTS systems, and that the semi-commercial plant would contain one such module.

expects to have the semi-commercial system ready in 2024.

Company’s strategy is to diversify its product portfolio to include a number of product lines.

These potentially include (1) biofuels

– such as ethanol, or converting ethanol into higher biofuels like jet-fuel and the like;

(2) selling sulfur-free lignin to ion

exchange resin producers;

or, (3) using the sugars and lignin to make biochemicals.

We believe that one or more of these co-products

could potentially be profitable for the Company.

goal is to develop our CTS technology to a commercial scale and then seek to either enter into a joint venture with or acquire existing

corn ethanol plants to install the CTS technology.

The Company is also looking into converting ethanol to jet fuel.

To minimize dilution

to shareholders, we will seek project-based financing to build (or acquire and retrofit) or joint venture with existing ethanol producers

to produce cellulosic ethanol and lignin and other specialty chemicals from our CTS system.

We believe retrofitting existing plants with

the CTS technology may achieve more rapid commercialization than building new plants.

If 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 technology or forming joint

ventures with foreign domestic partners to build plants ourselves.

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 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.

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.

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

from feedstock to fermentable cellulosic sugars (CTS)

the cellulosic sugars into cellulosic ethanol.

the ethanol into SAF and related products.

This third step happens with the Vertimass technology which the Company has licensed.

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 related products, and then expand SAF and related product 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.

commercial production will require project financing.

Energy Policy Act of 2005, which included the Renewable Fuel Standard Program enforced by the US Environmental Protection Agency (“EPA”),

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To profit from these incentives, the Company plans to apply for these D3 RIN credits as it brings its first plant into commercial

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

The CFPC currently does not apply to transportation fuel sold after December 31, 2027.

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.

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.

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.

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.

Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization.

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January 1, 2023 through the date of filing, 5,950,148 warrants were exercised for proceeds of $97,251.

January 1, 2022 through the date of filing, 350,000 options were exercised for proceeds of $15,900.

January 1, 2023 through the date of filing, no options were exercised.

January 1, 2023, through the date of filing, the Company issued 6,684,998 shares at prices ranging from $0.15 to $0.15 per share for

proceeds of $1,002,772.

January 1, 2023, through the date of filing, the Company issued 312,500 shares for the conversion of debt for proceeds of $25,000.

January 1, 2023 through the date of filing, the Company issued an aggregate of 226,694 shares of its common stock for services valued

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of the year ended December 31, 2023, to December 31, 2022

the year ended December 31, 2022, the Company recognized $0 in revenue and also $0 in 2021.

the year ended December 31, 2022, the Company’s general and administrative expenses increased by $507,011 to $1,541,959 from $1,034,948

This increase is primarily due to the vesting and expensing of options in 2022 valued at $526,636, as compared to $31,104 non-cash

the year ended December 31, 2023, the Company recognized $0 in revenue and $0 in 2022.

the year ended December 31, 2023, the Company’s general and administrative expenses decreased by $202,170 to $1,339,789 from $1,541,959

This decrease is primarily due to the vesting and expensing of options in 2022 valued at $526,636, as compared to $169,382 non-cash

stock compensation in 2023.

expense decreased in the year ended December 31, 2022 by $4,366 to $29,406 from $33,772 in 2021.

the year ended December 31, 2022, the Company received a loan forgiveness of $0 versus $66,330 in 2021.

expense increased in the year ended December 31, 2023 by $68,371 to $97,778 from $29,407 in 2022.

the year ended December 31, 2023, the Company received grants valued at $233,5000 versus $13,000 in 2022.

The grant money comes from

the Department of Energy SBIR Phase I grant.

and Development

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to research and development expenses were $1,849,967 and $2,350,218, respectively.

The increase is largely due to the vesting of options

The decrease is largely due to the vesting of options

in 2022 valued at $1,038,953, versus $467,646 in 2023.

and Capital Resources

of December 31, 2022, the Company had $211,901 in cash and total stockholders’ equity December 31, 2022, was negative $2,356,917.

of December 31, 2023, the Company had $41,007 in cash and total stockholders’ equity as of December 31, 2023, was negative $3,561,082.

As of December 31, 2022 the Company had $211,901 in cash and total stockholders’ equity at December 31, 2022 was negative $2,356,917.

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This increase

is primarily attributable to a renewal of the lease which increased liabilities by $108,809.

$2,738,132 of the remaining debt was renegotiated

to be payable out of future revenue or future profits and otherwise does not come due.

the fiscal year ended December 31, 2022, the Company’s operating expenses increased $1,760,408 to $3,932,276 from $2,171,868 in

This increase can primarily be attributed to equity based compensation of $1,565,589 in 2022 due to the vesting of options.

is primarily attributable to deferred wages of management and board, and notes to related parties of $350,000.

$2,738,132 of the remaining

debt has been renegotiated to be payable out of future revenue or future profits and otherwise does not come due.

$2,417,502 of the $2,738,132

will be discharged if not paid by September 18, 2024.

the fiscal year ended December 31, 2023, the Company’s operating expenses decreased $974,861 to $2,957,415 from $3,932,276 in 2022.

This decrease can primarily be attributed to equity-based compensation of $1,565,589 in 2022 due to the vesting of options.

the fiscal year ended December 31, 2023, the Company’s investing activities used $320,504 in cash.

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used to purchase machinery and equipment and $32,675 in patent costs.

These are to be compared with $233,132 in cash used in fiscal

year ended December 31, 2021, which consisted of $216,390 used to purchase machinery and equipment, and $16,742 in patent expenses.

These are to be compared to $205,520 cash used in 2022 with $138,170

used to purchase machinery and equipment, and $67,350 in patent costs.

the fiscal year ended December 31, 2023, the Company generated an aggregate of $1,750,023 through its financing activities, which is

a decrease of $2,287,567 from $3,576,467 raised during fiscal year ended December 31, 2021.

This decrease from the prior year can be

attributed to $1,168,000 raised in private placements as compared to $2,260,750 in 2021, and $120,900 received from the exercise of warrants

as compared to $1,315,717 in 2021.

an increase of $461,123 from $1,288,900 raised during fiscal year ended December 31, 2022.

This increase from the prior year can be attributed

to $700,000 net proceeds from issuance of convertible notes as compared to zero in 2022, and $1,002,772 raised in private placements

as compared to $1,168,000 in 2022, and $97,251 received from the exercise of warrants as compared to $120,900 in 2022, and a $50,000

debt repayment in 2023 versus $0 in 2022.

this time, the Company has limited liquidity and capital resources.

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revenue or obtain additional financing for current and future operations.

The Company anticipates needing around $15 million to optimize

and scale up its CTS system to be commercially ready.

The Company anticipates reaching this stage in around 12-18 months.

guarantee that we will achieve all of the additional funding that is needed.

of the date of filing, the Company has raised $655,001 through a private placement and the exercise of warrants in 2023, $1,288,900 in

2022, through the issuance of common stock and the exercise of warrants and options, in addition to $14,826,952 raised through the end

of 2021 through its private placement offerings, and in addition to capital raised through debt or convertible notes.

However, there

is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.

The Company anticipates needing around $25 million to pay for

its share of the Vertiblue Fuels joint venture and start commercial production of Sustainable Aviation Fuel.

The Company anticipates

generating revenue from this joint venture 18-24 months from financing.

There is no guarantee that we will achieve all of the additional

funding that is needed.

of the date of filing, the Company has raised $100,000 through the issuance of convertible notes in 2024, $1,800,023 through a private

placement, the exercise of warrants and the issuance of convertible notes in 2023, $1,288,900 in 2022, through the issuance of common

stock and the exercise of warrants and options, in addition to $14,826,952 raised through the end of 2021 through its private placement

offerings, and in addition to capital raised through debt or convertible notes.

However, there is no guarantee that the company will

be able to raise any additional capital on terms acceptable to the Company.

inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis