<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WASHINGTON D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNDER THE SECURITIES ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name of registrant as specified in its
charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 29%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center">Nevada</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 27%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center">2860</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 27%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center">20-4590982</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">(State
    or other jurisdiction of incorporation or organization)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">(Primary
    Standard Industrial Classification Code Number)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-size: 10pt">(I.R.S. Employer Identification
    No.)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>31 Musick</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Irvine, CA 92618</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(949) 588-3767</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address, including zip code, and telephone
        number,</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">including area code, or registrant&rsquo;s
        principal executive offices)</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Corporation Trust Company of Nevada</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>311 S Division St</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Carson City, NV 89703</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tel: (608) 827-5300</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name, address, including zip code, and
        telephone number,</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">including area code, of agent for service)</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lucosky Brookman LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>33 Wood Avenue South, 6th Floor</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Iselin, New Jersey 08830</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Fax: (732) 395-4401</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Approximate date of commencement of
proposed sale to the public:</B> From time to time after the effective date of this registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. <FONT STYLE="font-family: Wingdings 2">Q</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2
of the Exchange Act:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 75%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 40%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">Large accelerated filer</TD>
    <TD STYLE="width: 6%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-family: Wingdings">&uml;</TD>
    <TD STYLE="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 38%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">Non-accelerated filer</TD>
    <TD STYLE="width: 6%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-family: Wingdings">&uml;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">Accelerated filer</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-family: Wingdings">&uml;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none">Smaller reporting company</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-family: Wingdings 2">Q</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: left; width: 50%">&nbsp;</TD><TD STYLE="text-align: right; width: 50%"></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-top: 0; padding-right: 0; border-bottom: Black 1pt solid; padding-left: 0; text-indent: 0">Title of Class of Securities <BR>to be Registered</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-top: 0; padding-right: 0; border-bottom: Black 1pt solid; padding-left: 0; text-align: center; text-indent: 0">Amount <BR>To Be Registered (1)</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-top: 0; padding-right: 0; border-bottom: Black 1pt solid; padding-left: 0; text-align: center; text-indent: 0">Proposed <BR>Maximum <BR>Aggregate <BR>Price Per Share (2)</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-top: 0; padding-right: 0; border-bottom: Black 1pt solid; padding-left: 0; text-align: center; text-indent: 0">Proposed <BR>Maximum <BR>Aggregate <BR>Offering <BR>Price</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-top: 0; padding-right: 0; border-bottom: Black 1pt solid; padding-left: 0; text-align: center; text-indent: 0">Amount of <BR>Registration <BR>Fee</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 44%; font-size: 10pt; text-align: center; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Common Stock, $0.001 par value per share, issuable pursuant to the Equity Agreement</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">5,500,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">0.35</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,925,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">220.61</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">(1)&nbsp;&nbsp;&nbsp;We are registering
5,500,000 shares of our common stock (the &ldquo;Shares&rdquo;) that we will put to TCA Global Credit Master Fund, LP, a Cayman
Islands limited partnership (&ldquo;TCA&rdquo; or the &ldquo;Selling Security Holder&rdquo;), pursuant to a committed equity facility
agreement (the &ldquo;Equity Agreement&rdquo;) between the Selling Security Holder and the registrant entered into on March 28,
2012. In the event of stock splits, stock dividends, or similar transactions involving the registrant&rsquo;s common stock, the
number of shares of common stock registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional
securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the &ldquo;Securities
Act&rdquo;). In the event that adjustment provisions of the Equity Agreement require the registrant to issue more shares than are
being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant
will file a new registration statement to register those additional shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">(2)&nbsp;&nbsp;&nbsp;Estimated
solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, using the closing
price as reported on the Over-the-Counter Bulletin Board (the &ldquo;OTCBB&rdquo;) on May 2, 2012, which was $0.35 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<!-- Field: Page; Sequence: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: left; width: 50%">&nbsp;</TD><TD STYLE="text-align: right; width: 50%"></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 3 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: left; width: 50%">&nbsp;</TD><TD STYLE="text-align: right; width: 50%"></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: red"><B>The information in this
prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PRELIMINARY PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUBJECT TO COMPLETION, DATED MAY 4,
2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">5,500,000 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus relates to the resale of
up to 5,500,000 shares of our common stock, par value $0.001 per share (the &ldquo;Shares&rdquo;), by TCA, which are Shares that
we will put to TCA by delivering an advance notice pursuant to the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Equity Agreement with TCA provides
that, for a period of twenty-four (24) months commencing on the effective date of the registration statement, TCA is committed
to purchase up to $2,000,000 of our common stock. We may draw on the facility from time to time, as and when we determine appropriate
in accordance with the terms and conditions of the Equity Agreement. The 5,500,000 Shares included in this prospectus represent
a portion of the Shares issuable to the Selling Security Holder under the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA is an &ldquo;underwriter&rdquo; within
the meaning of the Securities Act in connection with the resale of our common stock under the Equity Agreement. No other underwriter
or person has been engaged to facilitate the sale of shares of our common stock in this offering. TCA will pay us ninety-five percent
(95%) of the lowest daily volume weighted average price of the Company&rsquo;s common stock for the five (5) consecutive trading
days after the Company delivers to TCA an advance notice in writing requiring TCA to advance funds (an &ldquo;Advance&rdquo;) to
the Company, subject to the terms of the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will not receive any proceeds from the
sale of these Shares offered by the Selling Security Holder. However, we will receive proceeds from the sale of our Shares under
the Equity Agreement. The proceeds will be used for working capital or general corporate purposes. We will bear all costs associated
with this registration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock is quoted on the OTCBB
under the symbol &ldquo;BFRE.OB.&rdquo; The Shares registered hereunder are being offered for sale by the Selling Security Holder
at prices established on the OTCBB during the term of this offering. On May 2, 2012, the closing price as reported on the OTCBB
was $0.35 per share. These prices will fluctuate based on the demand for our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>This investment involves a high degree
of risk. You should purchase shares only if you can afford a complete loss. See &ldquo;Risk Factors&rdquo; beginning on page 6.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Neither the U.S. Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The date of this prospectus is_________,
2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 4 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: left; width: 50%">&nbsp;</TD><TD STYLE="text-align: right; width: 50%"></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 90%; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 10%; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; font-weight: bold; text-align: center">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Prospectus Summary</TD>
    <TD STYLE="text-autospace: none; text-align: center">2</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Summary Financial Data</TD>
    <TD STYLE="text-autospace: none; text-align: center">5</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Risk Factors</TD>
    <TD STYLE="text-autospace: none; text-align: center">6</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Forward-Looking Statements</TD>
    <TD STYLE="text-autospace: none; text-align: center">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Use of Proceeds</TD>
    <TD STYLE="text-autospace: none; text-align: center">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Determination of Offering Price</TD>
    <TD STYLE="text-autospace: none; text-align: center">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Selling Security Holders</TD>
    <TD STYLE="text-autospace: none; text-align: center">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Plan of Distribution</TD>
    <TD STYLE="text-autospace: none; text-align: center">18</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Description of Securities to be Registered</TD>
    <TD STYLE="text-autospace: none; text-align: center">20</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Description of Business</TD>
    <TD STYLE="text-autospace: none; text-align: center">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Description of Property</TD>
    <TD STYLE="text-autospace: none; text-align: center">30</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Legal Proceedings</TD>
    <TD STYLE="text-autospace: none; text-align: center">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</TD>
    <TD STYLE="text-autospace: none; text-align: center">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Market Price of and Dividends on Registrant&rsquo;s Common Equity and Related Stockholder Matters</TD>
    <TD STYLE="text-autospace: none; text-align: center">37</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</TD>
    <TD STYLE="text-autospace: none; text-align: center">39</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Directors, Executive Officers, Promoters and Control Persons</TD>
    <TD STYLE="text-autospace: none; text-align: center">39</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Executive Compensation</TD>
    <TD STYLE="text-autospace: none; text-align: center">41</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD STYLE="text-autospace: none; text-align: center">44</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Transactions with Related Persons, Promoters, and Certain Control Persons</TD>
    <TD STYLE="text-autospace: none; text-align: center">47</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Indemnification for Securities Act Liabilities</TD>
    <TD STYLE="text-autospace: none; text-align: center">47</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Legal Matters</TD>
    <TD STYLE="text-autospace: none; text-align: center">47</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="text-autospace: none">Experts</TD>
    <TD STYLE="text-autospace: none; text-align: center">47</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none">Additional Information</TD>
    <TD STYLE="text-autospace: none; text-align: center">48</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>You may only rely on the information
contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common
stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any
common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor
any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no
change in our affairs since the date of this prospectus is correct as of any time after its date.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 5 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summary highlights selected
information contained in this prospectus. This summary does not contain all the information you should consider before investing
in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the &ldquo;risk
factors&rdquo; section, the financial statements and the notes to the financial statements. References to the &ldquo;Company,&rdquo;
&ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our&rdquo; and similar words refer to BlueFire Renewables, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are BlueFire Renewables, Inc., a Nevada
corporation. Our goal is to develop, own and operate high-value carbohydrate-based transportation fuel plants, or biorefineries,
to produce ethanol, a viable alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our
biorefineries will convert widely available, inexpensive, organic materials such as agricultural residues, high-content biomass
crops, wood residues and cellulose from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety
of feedstocks and locations in which to develop facilities to become a low cost producer of ethanol. We have licensed for use a
patented process from Arkenol, Inc., a Nevada corporation (&ldquo;Arkenol&rdquo;), to produce ethanol from cellulose (the &ldquo;Arkenol
Technology&rdquo;). We are the exclusive North America licensee of the Arkenol Technology. We may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to 19 ethanol project opportunities originally
developed by ARK Energy, Inc., a Nevada corporation, to accelerate our deployment of the Arkenol Technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Company History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a Nevada corporation that was initially
organized as Atlanta Technology Group, Inc., a Delaware corporation, on October 12, 1993. The Company was re-named Docplus.net
Corporation on December 31, 1998, and further re-named Sucre Agricultural Corp. (&ldquo;Sucre&rdquo;) and re-domiciled as a Nevada
corporation on March 6, 2006. Finally, on May 24, 2006, in anticipation of the reverse merger by which it would acquire BlueFire
Ethanol, Inc., a privately held Nevada corporation organized on March 28, 2006, as described below, the Company was re-named to
BlueFire Ethanol Fuels, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 27, 2006, the Company completed
a reverse merger (the &ldquo;Reverse Merger&rdquo;) with BlueFire Ethanol, Inc. (&ldquo;BlueFire Ethanol&rdquo;). At the time of
Reverse Merger, the Company was a blank-check company and had no operations, revenues or liabilities. The only asset possessed
by the Company was $690,000 in cash which continued to be owned by the Company at the time of the Reverse Merger. In connection
with the Reverse Merger, the Company issued BlueFire Ethanol 17,000,000 shares of common stock, approximately 85% of all of the
outstanding common stock of the Company, for all the issued and outstanding BlueFire Ethanol common stock. The Company stockholders
retained 4,028,264 shares of the Company&rsquo;s common stock. As a result of the Reverse Merger, BlueFire Ethanol became our wholly-owned
subsidiary. On June 21, 2006, prior to and in anticipation of the Reverse Merger, the Company sold 3,000,000 shares of common stock
to two related investors in a private offering of shares pursuant to Rule 504 for proceeds of $1,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 20, 2010, the Company changed its
name to BlueFire Renewables, Inc. to more accurately reflect our primary business plan expanding the focus from just building cellulosic
ethanol projects to include other advanced biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s shares of common stock
began trading under the symbol &ldquo;BFRE.PK&rdquo; on the Pink Sheets of the National Quotation Bureau on July 11, 2006, and
later began trading on the OTCBB under the symbol &ldquo;BFRE.OB&rdquo; on June 19, 2007. On May 2, 2012, the closing price of
our Common Stock was $0.35 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our executive offices are located at 31
Musick, Irvine, California 92618 and our telephone number at such office is (949) 588-3767.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 6 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>About This Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This offering relates to the resale of
up to 5,500,000 shares of our common stock by the Selling Security Holder, which are the Shares that we will put to TCA pursuant
to the Equity Agreement. The 5,500,000 shares included in this prospectus represent a portion of the aggregate shares issuable
to the Selling Security Holder under the Equity Agreement. Pursuant to the Equity Agreement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">TCA agreed to purchase from the Company, from time to time, in the Company&rsquo;s
discretion (subject to the conditions set forth therein), for a period of twenty-four (24) months, commencing on the effective
date of the registration statement filed by the Company for resale of the Shares issuable under the Purchase Agreement, up to $2,000,000
of the Company&rsquo;s common stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">Pursuant to a registration rights agreement between the Company and TCA entered
into in connection with the Equity Agreement, the Company agreed to file a registration statement with the U.S. Securities and
Exchange Commission (the &ldquo;SEC&rdquo;) for the resale of not less than the maximum number of shares of common stock allowable
pursuant to Rule 415 under the Securities Act, of shares of common stock issuable under the Equity Agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">The purchase price for the shares of common stock sold under the Equity Agreement
will be equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company&rsquo;s common stock
for the five (5) consecutive trading days (the &ldquo;Pricing Period&rdquo;) after the Company delivers to TCA an Advance notice
in writing (the &ldquo;Market Price&rdquo;) requiring TCA to Advance funds to the Company, subject to the terms of the Equity Agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">The maximum amount of common stock that TCA shall be obligated to purchase
with respect to any single Advance under the Equity Agreement will be the greater of: (i) an amount calculated by multiplying the
Market Price applicable to the relevant Advance notice by 200,000 shares or (ii) two hundred percent (200%) of the average daily
volume of shares of common stock traded during the immediately preceding five (5) consecutive trading days applicable to the relevant
Advance notice.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">As further consideration for TCA entering into and structuring the equity
facility, the Company shall pay to TCA a fee by issuing to TCA that number of shares of the Company&rsquo;s common stock that equal
a dollar amount of one hundred thousand dollars ($110,000) (the &ldquo;Facility Fee Shares&rdquo;). It is the intention of the
Company and TCA that the value of the Facility Fee Shares shall equal $110,000. In the event the value of the Facility Fee Shares
issued to TCA does not equal $110,000 after a ninth month evaluation date, the Equity Agreement provides for an adjustment provision
allowing for necessary action to adjust the number of shares issued.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We relied on an exemption from the registration
requirements of the Securities Act. The transaction does not involve a private offering, TCA is an &ldquo;accredited investor&rdquo;
and/or qualified institutional buyer and TCA has access to information about the Company and its investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At an assumed purchase price under the
Purchase Agreement of $0.333 (equal to 95% of the closing price of our common stock of $0.35 on May 2, 2012), we will be able to
receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered hereunder pursuant
to the Equity Agreement. At an assumed purchase price of $0.333 under the Equity Agreement, we would be required to register approximately
515,038 additional shares to obtain the balance of $2,000,000 under the Equity Agreement. The Company is currently authorized to
issue 100,000,000 shares of its common stock. TCA has agreed, subject to certain exceptions listed in the Equity Agreement, to
refrain from holding an amount of shares which would result in TCA or its affiliates from owning more than 9.99% of the then-outstanding
shares of the Company&rsquo;s common stock at any one time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will bear the expenses of this offering
which we estimate to be approximately $38,000, including legal expenses of approximately $30,000, accounting expenses of approximately
$5,000, and miscellaneous expenses, including printer costs, of approximately $3,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Equity Agreement. &nbsp;These risks include dilution of stockholders,
significant decline in our stock price and our inability to draw sufficient funds when needed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA will periodically purchase our common
stock under the Equity Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause
our stock price to decline, which will require us to issue increasing numbers of common shares to TCA to raise the same amount
of funds, as our stock price declines. &nbsp;Neither the Equity Agreement nor any rights of the parties under the Equity Agreement
may be assigned or delegated to any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary of the Shares Offered by the Selling Security Holder</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-autospace: none; font-weight: bold">Common stock Offered by the Selling Security Holder</TD>
    <TD STYLE="width: 1%; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 64%; text-autospace: none; text-align: justify">5,500,000 shares of common stock.</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Common Stock Outstanding Before the Offering</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">32,776,919 as of May 2, 2012</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Common Stock Outstanding After the Offering</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">38,276,919 shares, assuming the sale of all of the shares being registered in this Registration Statement.</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Terms of the Offering</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">The Selling Security Holder will determine when and how it will sell the common stock offered in this prospectus.</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Termination of the Offering</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Pursuant to the Equity Agreement, this offering will terminate twenty-four (24) months after the registration statement to which this prospectus is made a part is declared effective by the SEC.</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Use of Proceeds</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holder. &nbsp;However, we will receive proceeds from the sale of our common stock under the Equity Agreement. &nbsp;The proceeds from the offering will be used for working capital and general corporate purpose.&nbsp; See &ldquo;Use of Proceeds.&rdquo;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">Risk Factors</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">The common stock offered hereby involves a high degree of risk and should
not be purchased by investors who cannot afford the loss of their entire investment. See &ldquo;Risk Factors&rdquo; beginning
on page 6.</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none; font-weight: bold">OTCBB Symbol</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">BFRE.OB</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 8 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUMMARY FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following selected financial information
is derived from the Company&rsquo;s Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction
with the Company&rsquo;s Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following selected financial information
is derived from the Company&rsquo;s Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction
with the Company&rsquo;s Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Summary of Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>For the Years Ended December 31,</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-bottom: 1pt">Total Revenue</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">204,326</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">669,343</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Loss from operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2,143,750</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2,423,955</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,384,981</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(922,906</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net loss per common share (basic and diluted)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.05</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(0.03</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Weighted average common shares outstanding</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">30,101,167</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">28,379,920</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Statement of Financial Position</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>For the Years Ended December 31,</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">15,028</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">592,359</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,426,275</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,938,152</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Working Capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,520,486</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">38,708</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Long term debt</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Stockholders&rsquo; equity ( deficit )</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(1,219,346</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(221,141</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 9 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An investment in the Company&rsquo;s common
stock involves a high degree of risk. You should carefully consider the risks described below as well as other information provided
to you in this prospectus, including information in the section of this document entitled &ldquo;Forward Looking Statements.&rdquo;
If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely
affected, the value of our common stock could decline, and you may lose all or part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR BUSINESS AND INDUSTRY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>SINCE INCEPTION, WE HAVE HAD LIMITED
OPERATIONS AND HAVE INCURRED NET LOSSES OF $31,374,304 AND WE NEED ADDITIONAL CAPITAL TO EXECUTE OUR BUSINESS PLAN.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have had limited operations and have
incurred net losses of approximately $31,374,304 for the period from March 28, 2006 (&ldquo;Inception&rdquo;) through December
31, 2011, of which approximately $16,822,957 was cash used in our operating activities. We have generated revenues from consulting
of approximately $143,615 and approximately $6,172,775 in grant revenue from the DOE for total revenues of approximately $6,300,000,
and no revenues from intended operations. We have yet to begin ethanol production or construction of ethanol producing plants.
Since the Reverse Merger, we have been engaged in developmental activities, including developing a strategic operating plan, plant
engineering and development activities, entering into contracts, hiring personnel, developing processing technology, and raising
private capital. Our continued existence is dependent upon our ability to obtain additional debt and/or equity financing. We are
uncertain given the economic landscape when to anticipate the beginning construction of a plant given the availability of capital.
We estimate the engineering, procurement, and construction (&ldquo;EPC&rdquo;) cost including contingencies to be in the range
of approximately $100 million to $125 million for our Lancaster Biorefinery, and approximately $300 million for our Fulton Project.
We plan to raise additional funds through project financings, grants and/or loan guarantees, or through future sales of our common
stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations.
There is no assurance we will be successful in raising additional capital or achieving profitable operations. Wherever possible,
the Company&rsquo;s Board of Directors (the &ldquo;Board of Directors&rdquo;) will attempt to use non-cash consideration to satisfy
obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock.
These actions will result in dilution of the ownership interests of existing shareholders may further dilute common stock book
value, and that dilution may be material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>WE HAVE A LIMITED OPERATING HISTORY
WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE FUTURE.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have yet to establish any history of
profitable operations. In two of the last three years we have incurred annual operating losses. Operating losses were $2,143,750
and $2,243,955 for fiscal years ended 2011 and 2010, respectively. As a result, at December 31, 2011, we had net losses of approximately
$31,374,304 since Inception. In 2011, we had net loss of $1,384,981, which was partially a result of non-cash gains on the change
in fair value of warrant liabilities and a one-time revenue transaction. Our revenues have not been sufficient to sustain our operations.
We expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. Our profitability will
require the successful commercialization of at least one commercial scale cellulose to ethanol facility. No assurances can be given
when this will occur or that we will ever be profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>AS OF DECEMBER 31, 2011, THE COMPANY
HAS A NEGATIVE WORKING CAPITAL OF APPROXIMATELY $1,520,000.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has estimated that operating
expenses for the next twelve months will be approximately $1,700,000, excluding engineering costs related to the development of
bio-refinery projects. These matters raise substantial doubt about the Company&rsquo;s ability to continue as a going concern.
For the remainder of 2012, the Company intends to fund its operations with reimbursements under the Department of Energy contract,
from the sale of Fulton Project equity ownership, from the sale of debt or equity instruments, and our equity purchase agreement
consummated with LPC in January 2011 (as discussed herein). The Company&rsquo;s ability to get reimbursed on the DOE contract is
dependent on the availability of cash to pay for the related costs. As of May 2, 2012, the Company expects the current resources,
as well as the resources available in the short term under the LPC Purchase Agreement, will only be sufficient for a period of
approximately two months, depending upon certain funding conditions contained herein, unless significant additional financing is
received. Management has determined that general expenditures must be reduced and additional capital will be required in the form
of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further
accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms
acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the
scope of our planned development, which could harm our business, financial condition and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 10 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR CELLULOSE-TO-ETHANOL TECHNOLOGIES
ARE UNPROVEN ON A LARGE-SCALE COMMERCIAL BASIS AND PERFORMANCE COULD FAIL TO MEET PROJECTIONS, WHICH COULD HAVE A DETRIMENTAL EFFECT
ON THE LONG-TERM CAPITAL APPRECIATION OF OUR STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While production of ethanol from corn,
sugars and starches is a mature technology, newer technologies for production of ethanol from cellulose biomass have not been built
at large commercial scales. The technologies being utilized by us for ethanol production from biomass have not been demonstrated
on a commercial scale. All of the tests conducted to date by us with respect to the Arkenol Technology have been performed on limited
quantities of feedstocks, and we cannot assure you that the same or similar results could be obtained at competitive costs on a
large-scale commercial basis. We have never utilized these technologies under the conditions or in the volumes that will be required
to be profitable and cannot predict all of the difficulties that may arise. It is possible that the technologies, when used, may
require further research, development, design and testing prior to larger-scale commercialization. Accordingly, we cannot assure
you that these technologies will perform successfully on a large-scale commercial basis or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR BUSINESS EMPLOYS LICENSED ARKENOL
TECHNOLOGY WHICH MAY BE DIFFICULT TO PROTECT AND MAY INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently license our technology from
Arkenol. Arkenol owns 11 U.S. patents, 21 foreign patents, and has one foreign patent pending and may file more patent applications
in the future. Our success depends, in part, on our ability to use the Arkenol Technology, and for Arkenol to obtain patents, maintain
trade secrecy and not infringe the proprietary rights of third parties. We cannot assure you that the patents of others will not
have an adverse effect on our ability to conduct our business, that we will develop additional proprietary technology that is patentable
or that any patents issued to us or Arkenol will provide us with competitive advantages or will not be challenged by third parties.
Further, we cannot assure you that others will not independently develop similar or superior technologies, duplicate elements of
the Arkenol Technology or design around it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">It is possible that we may need to acquire
other licenses to, or to contest the validity of, issued or pending patents or claims of third parties. We cannot assure you that
any license would be made available to us on acceptable terms, if at all, or that we would prevail in any such contest. In addition,
we could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party&rsquo;s
patents in bringing patent infringement suits against other parties based on our licensed patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to licensed patent protection,
we also rely on trade secrets, proprietary know-how and technology that we seek to protect, in part, by confidentiality agreements
with our prospective joint venture partners, employees and consultants. We cannot assure you that these agreements will not be
breached, that we will have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not otherwise
become known or be independently discovered by others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR SUCCESS DEPENDS UPON ARNOLD KLANN,
OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AND JOHN CUZENS, OUR CHIEF TECHNOLOGY OFFICER AND SENIOR VICE PRESIDENT.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that our success will depend
to a significant extent upon the efforts and abilities of (i) Arnold Klann, our Chairman and Chief Executive Officer, due to his
contacts in the ethanol and cellulose industries and his overall insight into our business, and (ii) John Cuzens, our Chief Technology
Officer and Senior Vice President for his technical and engineering expertise, including his familiarity with the Arkenol Technology.
Our failure to retain Mr. Klann or Mr. Cuzens, or to attract and retain additional qualified personnel, could adversely affect
our operations. We do not currently carry key-man life insurance on any of our officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 11 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>COMPETITION FROM LARGE PRODUCERS
OF PETROLEUM-BASED GASOLINE ADDITIVES AND OTHER COMPETITIVE PRODUCTS MAY IMPACT OUR PROFITABILITY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our proposed ethanol plants will also compete
with producers of other gasoline additives made from other raw materials having similar octane and oxygenate values as ethanol.
The major oil companies have significantly greater resources than we have to develop alternative products and to influence legislation
and public perception of ethanol. These other companies also have significant resources to begin production of ethanol should they
choose to do so.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will also compete with producers of
other gasoline additives having similar octane and oxygenate values as ethanol. An example of such other additives is MTBE, a petrochemical
derived from methanol. MTBE costs less to produce than ethanol. Many major oil companies produce MTBE and because it is petroleum-based,
its use is strongly supported by major oil companies. Alternative fuels, gasoline oxygenates and alternative ethanol production
methods are also continually under development. The major oil companies have significantly greater resources than we have to market
MTBE, to develop alternative products, and to influence legislation and public perception of MTBE and ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR BUSINESS PROSPECTS WILL BE IMPACTED
BY CORN SUPPLY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our ethanol will be produced from cellulose,
however currently most ethanol is produced from corn, which is affected by weather, governmental policy, disease and other conditions.
A significant increase in the availability of corn and resulting reduction in the price of corn may decrease the price of ethanol
and harm our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>IF ETHANOL AND GASOLINE PRICES DROP
SIGNIFICANTLY, WE WILL ALSO BE FORCED TO REDUCE OUR PRICES, WHICH POTENTIALLY MAY LEAD TO FURTHER LOSSES.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prices for ethanol products can vary significantly
over time and decreases in price levels could adversely affect our profitability and viability. The price of ethanol has some relation
to the price of gasoline. The price of ethanol tends to increase as the price of gasoline increases, and the price of ethanol tends
to decrease as the price of gasoline decreases. Any lowering of gasoline prices will likely also lead to lower prices for ethanol
and adversely affect our operating results. We cannot assure you that we will be able to sell our ethanol profitably, or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>INCREASED ETHANOL PRODUCTION FROM
CELLULOSE IN THE UNITED STATES COULD INCREASE THE DEMAND AND PRICE OF FEEDSTOCKS, REDUCING OUR PROFITABILITY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">New ethanol plants that utilize cellulose
as their feedstock may be under construction or in the planning stages throughout the United States. This increased ethanol production
could increase cellulose demand and prices, resulting in higher production costs and lower profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>PRICE INCREASES OR INTERRUPTIONS
IN NEEDED ENERGY SUPPLIES COULD CAUSE LOSS OF CUSTOMERS AND IMPAIR OUR PROFITABILITY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ethanol production requires a constant
and consistent supply of energy. If there is any interruption in our supply of energy for whatever reason, such as availability,
delivery or mechanical problems, we may be required to halt production. If we halt production for any extended period of time,
it will have a material adverse effect on our business. Natural gas and electricity prices have historically fluctuated significantly.
We purchase significant amounts of these resources as part of our ethanol production. Increases in the price of natural gas or
electricity would harm our business and financial results by increasing our energy costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR BUSINESS PLAN CALLS FOR EXTENSIVE
AMOUNTS OF FUNDING TO CONSTRUCT AND OPERATE OUR BIOREFINERY PROJECTS AND WE MAY NOT BE ABLE TO OBTAIN SUCH FUNDING WHICH COULD
ADVERSELY AFFECT OUR BUSINESS, OPERATIONS AND FINANCIAL CONDITION.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business plan depends on the completion
of up to 19 biorefinery projects. Although each facility will have specific funding requirements, our proposed Lancaster Biorefinery
will require approximately $100-$125 million in EPC costs, and our proposed Fulton Project will require approximately $300 million
in EPC costs. We will be relying on additional financing, and funding from such sources as Federal and State grants and loan guarantee
programs. In 2010, BlueFire was notified by the DOE LGPO, that it had rejected our application for the Lancaster Biorefinery, and
in 2011, BlueFire was notified by the DOE LGPO that it would not move forward with its application on the Fulton Project until
it had secured the necessary equity commitment on that project. In October 2011, BlueFire was notified by its lender (&ldquo;Lender&rdquo;)
for the Company&rsquo;s USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible
to participate in the USDA Biorefinery Assistance Program. We are currently in discussions with potential sources of financing
but no definitive agreements are in place. If we cannot achieve the requisite financing or complete the projects as anticipated,
this could adversely affect our business, the results of our operations, prospects and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 12 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO GOVERNMENT REGULATION
AND SUBSIDIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>FEDERAL REGULATIONS CONCERNING TAX
INCENTIVES COULD EXPIRE OR CHANGE, WHICH COULD CAUSE AN EROSION OF THE CURRENT COMPETITIVE STRENGTH OF THE ETHANOL INDUSTRY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Congress currently provides certain federal
tax credits for ethanol producers and marketers. The current ethanol industry and our business initially depend on the continuation
of these credits. The credits have supported a market for ethanol that might disappear without the credits. These credits may not
continue beyond their scheduled expiration date or, if they continue, the incentives may not be at the same level. The revocation
or amendment of any one or more of these tax incentives could adversely affect the future use of ethanol in a material way, and
we cannot assure investors that any of these tax incentives will be continued. The elimination or reduction of federal tax incentives
to the ethanol industry could have a material adverse impact on the industry as a whole.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>WE RELY ON ACCESS TO FUNDING FROM
THE UNITED STATES DEPARTMENT OF ENERGY. IF WE CANNOT ACCESS GOVERNMENT FUNDING WE MAY BE UNABLE TO FINANCE OUR PROJECTS AND/OR
OUR OPERATIONS.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our operations have been financed to a
large degree through funding provided by the DOE. We rely on access to this funding as a source of liquidity for capital requirements
not satisfied by the cash flow from our operations. If we are unable to access government funding our ability to finance our projects
and/or operations and implement our strategy and business plan will be severely hampered. In 2008, the Company began to draw down
on the Award 1 monies that were finalized with the DOE. As our Fulton Project developed further, the Company was able to begin
drawing down on the second phase of DOE monies (&ldquo;Award 2&rdquo;). Although we finalized Award 1 with a total reimbursable
amount of $6,425,564, and Award 2 with a total reimbursable amount of $81,134,686 and through December 31, 2011, we have an unreimbursed
amount of approximately $366,000 available to us under Award 1, and approximately $77,950,563 under Award 2, we cannot guarantee
that we will continue to receive grants, loan guarantees, or other funding for our projects from the DOE.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company estimates the amounts to be
reimbursed by the DOE by applying a portion of approved indirect costs (overhead) to the direct project costs in a calculation
which derives what is known as our indirect rate. This indirect rate is used to reimburse the Company for the costs incurred that
are not directly related to the project. This rate calculation is estimated by the Company, and is subject to change periodically.
In the event that the Company over estimates this rate or under estimates this rate, it may have an impact to our financial statements
and future ability to be reimbursed under the awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2011, it was determined that the
Company had received an overpayment of approximately $354,000 from the cumulative reimbursements of the DOE grants under Award
1. The Company and DOE tentatively agreed to net overpayments with monies still available to the Company of approximately $366,000
under Award 1 in order to further its completion. While the above terms have been tentatively agreed to, the method and process
in which the matter is resolved is still in process. If demand for payment were to be made by the DOE, our cash flow intended for
operations would be negatively affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 13 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>LAX ENFORCEMENT OF ENVIRONMENTAL
AND ENERGY POLICY REGULATIONS MAY ADVERSELY AFFECT DEMAND FOR ETHANOL.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our success will depend in part on effective
enforcement of existing environmental and energy policy regulations. Many of our potential customers are unlikely to switch from
the use of conventional fuels unless compliance with applicable regulatory requirements leads, directly or indirectly, to the use
of ethanol. Both additional regulation and enforcement of such regulatory provisions are likely to be vigorously opposed by the
entities affected by such requirements. If existing emissions-reducing standards are weakened, or if governments are not active
and effective in enforcing such standards, our business and results of operations could be adversely affected. Even if the current
trend toward more stringent emission standards continues, we will depend on the ability of ethanol to satisfy these emissions standards
more efficiently than other alternative technologies. Certain standards imposed by regulatory programs may limit or preclude the
use of our products to comply with environmental or energy requirements. Any decrease in the emission standards or the failure
to enforce existing emission standards and other regulations could result in a reduced demand for ethanol. A significant decrease
in the demand for ethanol will reduce the price of ethanol, adversely affect our profitability and decrease the value of your stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>COSTS OF COMPLIANCE WITH BURDENSOME
OR CHANGING ENVIRONMENTAL AND OPERATIONAL SAFETY REGULATIONS COULD CAUSE OUR FOCUS TO BE DIVERTED AWAY FROM OUR BUSINESS AND OUR
RESULTS OF OPERATIONS TO SUFFER.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ethanol production involves the emission
of various airborne pollutants, including particulate matter, carbon monoxide, carbon dioxide, nitrous oxide, volatile organic
compounds and sulfur dioxide. The production facilities that we will build will discharge water into the environment. As a result,
we are subject to complicated environmental regulations of the U.S. Environmental Protection Agency and regulations and permitting
requirements of the states where our plants are to be located. These regulations are subject to change and such changes may require
additional capital expenditures or increased operating costs. Consequently, considerable resources may be required to comply with
future environmental regulations. In addition, our ethanol plants could be subject to environmental nuisance or related claims
by employees, property owners or residents near the ethanol plants arising from air or water discharges. Ethanol production has
been known to produce an odor to which surrounding residents could object. Environmental and public nuisance claims, or tort claims
based on emissions, or increased environmental compliance costs could significantly increase our operating costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR PROPOSED NEW ETHANOL PLANTS WILL
ALSO BE SUBJECT TO FEDERAL AND STATE LAWS REGARDING OCCUPATIONAL SAFETY.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks of substantial compliance costs and
liabilities are inherent in ethanol production. We may be subject to costs and liabilities related to worker safety and job related
injuries, some of which may be significant. Possible future developments, including stricter safety laws for workers and other
individuals, regulations and enforcement policies and claims for personal or property damages resulting from operation of the ethanol
plants could reduce the amount of cash that would otherwise be available to further enhance our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR COMMON STOCK AND
THIS OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>THERE IS NO LIQUID MARKET FOR OUR
COMMON STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our shares are traded on the OTCBB and
the trading volume has historically been very low. An active trading market for our shares may not develop or be sustained. We
cannot predict at this time how actively our shares will trade in the public market or whether the price of our shares in the public
market will reflect our actual financial performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>THE MARKET PRICE OF OUR COMMON STOCK
IS HIGHLY VOLATILE AND STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE AT WHICH SUCH SHARES WERE PURCHASED.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The market price of our common stock may
fluctuate significantly. From July 11, 2006, the day we began trading publicly as BFRE.PK, and December 31, 2011, traded as BFRE.OB,
the high and low price for our common stock has been $7.90 and $0.05 per share, respectively. Our share price has fluctuated in
response to various factors, including not yet beginning construction of our first plant, needing additional time to organize engineering
resources, issues relating to feedstock sources, trying to locate suitable plant locations, locating distributors and finding funding
sources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 14 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>THE APPLICATION OF THE &ldquo;PENNY
STOCK&rdquo; RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE
SHARES.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The U.S. Securities and Exchange Commission
(the &ldquo;SEC&rdquo;) has adopted rule 3a51-1 which establishes the definition of a &ldquo;penny stock,&rdquo; for the purposes
relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">that a broker or dealer approve a person&rsquo;s account for transactions in penny stocks; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order to approve a person&rsquo;s account
for transactions in penny stocks, the broker or dealer must:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">obtain financial information and investment experience objectives of the person; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">sets forth the basis on which the broker or dealer made the suitability determination; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">that the broker or dealer received a signed, written agreement from the investor prior to the transaction.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Generally, brokers may be less willing
to execute transactions in securities subject to the &ldquo;penny stock&rdquo; rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>AS AN ISSUER OF &ldquo;PENNY STOCK,&rdquo;
THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although federal securities laws provide
a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this
safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor
protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement
of fact or was misleading in any material respect because of the Company&rsquo;s failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>COMPLIANCE AND CONTINUED MONITORING
IN CONNECTION WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Changing laws, regulations and standards
relating to corporate governance and public disclosure may create uncertainty regarding compliance matters. New or changed laws,
regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may
evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure. Complying with
evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices,
policies and procedures, and may divert management time and attention from the achievement of revenue generating activities to
compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities
intended by regulatory or governing bodies due to uncertainties related to practice, our reputation might be harmed which would
could have a significant impact on our stock price and our business. In addition, the ongoing maintenance of these procedures to
be in compliance with these laws, regulations and standards could result in significant increase in costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 15 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>OUR PRINCIPAL STOCKHOLDER HAS SIGNIFICANT
VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTEREST OF ALL OTHER STOCKHOLDERS.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s Chairman and President
controls approximately 40% of its current outstanding shares of voting common stock. He may be able to exert significant control
over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This
concentration of ownership may expedite approvals of company decisions, or have the effect of delaying or preventing a change in
control, adversely affect the market price of our common stock, or be in the best interests of all our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>YOU COULD BE DILUTED FROM THE ISSUANCE
OF ADDITIONAL COMMON STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding and no shares of preferred stock outstanding. We are authorized to issue up to 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock. To the extent of such authorization, our Board of Directors will have the
ability, without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for
such consideration as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock
in the future may reduce your proportionate ownership and voting power.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>THE MARKET PRICE FOR OUR COMMON SHARES
IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED
OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR
COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The market for our common shares is characterized
by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities
exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of
such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number
of factors. First, as noted above, our common shares are, compared to the shares of such larger, more established companies, sporadically
and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders
may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline
precipitously in the event that a large number of our common shares are sold on the market without commensurate demand. Secondly,
we are a speculative or &ldquo;risky&rdquo; investment due to our limited operating history and lack of profits to date, and uncertainty
of future market acceptance for our potential products. &nbsp;As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more
established company that trades on a national securities exchange and has a large public float. &nbsp;Many of these factors are
beyond our control and may decrease the market price of our common shares, regardless of our operating performance. &nbsp;We cannot
make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including
as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability
of common shares for sale at any time will have on the prevailing market price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>WE ARE REGISTERING AN AGGREGATE OF
5,500,000 SHARES OF COMMON STOCK TO BE ISSUED UNDER THE EQUITY AGREEMENT. THE SALE OF SUCH SHARES COULD DEPRESS THE MARKET PRICE
OF OUR COMMON STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are registering an aggregate of 5,500,000
Shares of common stock under the registration statement of which this prospectus forms a part for issuance pursuant to the Equity
Agreement. Notwithstanding TCA&rsquo;s ownership limitation, the 5,500,000 Shares would represent approximately 14.4% of our shares
of common stock outstanding immediately after our exercise of the put right under the Equity Agreement. The sale of these Shares
into the public market by TCA could depress the market price of our common stock. At the assumed offering price of $0.333 per share,
we will be able to receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered
hereunder pursuant to the Equity Agreement. We would be required to register approximately 515,038 additional shares to obtain
the balance of $2,000,000 under the Equity Agreement at the assumed offering price of $0.333. Due to the floating offering price,
we are not able to determine the exact number of shares that we will issue under the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 16 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>THE COMPANY MAY NOT HAVE ACCESS TO
THE FULL AMOUNT AVAILABLE UNDER THE EQUITY AGREEMENT.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not drawn down funds and have not
issued shares of our common stock under the Equity Agreement with TCA. Our ability to draw down funds and sell shares under the
Equity Agreement requires that the registration statement, of which this prospectus is a part, be declared effective by the SEC,
and that this registration statement continue to be effective. &nbsp;In addition, the registration statement of which this prospectus
is a part registers 5,500,000 Shares issuable under the Equity Agreement, and our ability to access the Equity Agreement to sell
any remaining shares issuable under the Equity Agreement is subject to our ability to prepare and file one or more additional registration
statements registering the resale of these shares. &nbsp;These subsequent registration statements may be subject to review and
comment by the staff of the SEC, and will require the consent of our independent registered public accounting firm. &nbsp;Therefore,
the timing of effectiveness of these subsequent registration statements cannot be assured. &nbsp;The effectiveness of these subsequent
registration statements is a condition precedent to our ability to sell the shares of common stock subject to these subsequent
registration statements to TCA under the Equity Agreement. &nbsp;Even if we are successful in causing one or more registration
statements registering the resale of some or all of the shares issuable under the Equity Agreement to be declared effective by
the SEC in a timely manner, we will not be able to sell shares under the Equity Agreement unless certain other conditions are met.
&nbsp;Accordingly, because our ability to draw down amounts under the Equity Agreement is subject to a number of conditions, there
is no guarantee that we will be able to draw down any portion or all of the $2,000,000 available to us under the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>CERTAIN RESTRICTIONS ON THE EXTENT
OF PUTS AND THE DELIVERY OF ADVANCE NOTICES MAY HAVE LITTLE, IF ANY, EFFECT ON THE ADVERSE IMPACT OF OUR ISSUANCE OF SHARES IN
CONNECTION WITH THE EQUITY AGREEMENT, AND AS SUCH, TCA MAY SELL A LARGE NUMBER OF SHARES, RESULTING IN SUBSTANTIAL DILUTION TO
THE VALUE OF SHARES HELD BY EXISTING SHAREHOLDERS.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA has agreed, subject to certain exceptions
listed in the Equity Agreement, to refrain from holding an amount of shares which would result in TCA or its affiliates owning
more than 9.99% of the then-outstanding shares of the Company&rsquo;s common stock at any one time. &nbsp;These restrictions, however,
do not prevent TCA from selling shares of common stock received in connection with a put, and then receiving additional shares
of common stock in connection with a subsequent put. &nbsp;In this way, TCA could sell more than 9.99% of the outstanding common
stock in a relatively short time frame while never holding more than 9.99% at one time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>ASSUMING WE UTILIZE THE MAXIMUM AMOUNT
AVAILABLE UNDER THE EQUITY LINE OF CREDIT, EXISTING SHAREHOLDERS COULD EXPERIENCE SUBSTANTIAL DILUTION UPON THE ISSUANCE OF COMMON
STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Equity Agreement with TCA contemplates
the potential future issuance and sale of up to $2,000,000 of our common stock to TCA subject to certain restrictions and obligations.
&nbsp;The following table is an example of the number of shares that could be issued at various prices assuming we utilize the
maximum amount remaining available under the Equity Agreement. &nbsp;These examples assume issuances at a market price of $0.35
per share and at 10%, 25%, 50%, and 75% below $0.35 per share, taking into account TCA&rsquo;s 5% discount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 17 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table should be read in conjunction
with the footnotes immediately following the table.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Percent below <BR>Current <BR>market price</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Price&nbsp;per <BR>share&nbsp;(1)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of&nbsp; <BR>shares&nbsp;issuable&nbsp;(2)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp; <BR>outstanding&nbsp;(3)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Percent&nbsp;of&nbsp; <BR>outstanding&nbsp;shares&nbsp;(4)</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; font-size: 10pt; text-align: right">10</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 17%; font-size: 10pt; text-align: right">0.299</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; font-size: 10pt; text-align: right">6,683,375</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; font-size: 10pt; text-align: right">39,460,294</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; font-size: 10pt; text-align: right">16.94</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.249</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,020,050</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">40,796,969</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">19.66</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.166</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12,030,075</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">44,806,994</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">26.85</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">75</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.083</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">24,060,150</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">56,837,069</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">42.33</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify; padding-right: 0.5in">Represents purchase prices equal to 95% of $0.35 and potential reductions
thereof of 10%, 25%, 50% and 75%.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify; padding-right: 0.5in">Represents the number of shares issuable if the entire $2,000,000 under the
Equity Agreement were drawn down at the indicated purchase prices. &nbsp;Our Articles of Incorporation currently authorizes 100,000,000
shares of common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify; padding-right: 0.5in">Based on 32,776,919 shares of common stock outstanding at May 2, 2012. Our
Articles of Incorporation currently authorizes 100,000,000 shares of common stock. We may in the future need to amend our Articles
of Incorporation in order to increase our authorized shares of common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD STYLE="text-align: justify; padding-right: 0.5in">Percentage of the total outstanding shares of common stock after the issuance
of the shares indicated, without considering any contractual restriction on the number of shares the selling shareholder may own
at any point in time or other restrictions on the number of shares we may issue.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>TCA WILL PAY LESS THAN THE THEN-PREVAILING
MARKET PRICE FOR OUR COMMON STOCK.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The common stock to be issued to TCA pursuant
to the Equity Agreement will be purchased at a 5% discount to the average of the lowest closing price of the common stock of any
two trading days, consecutive or inconsecutive, during the five consecutive trading days immediately following the date of our
advance notice to TCA of our election to put shares pursuant to the Equity Agreement. TCA has a financial incentive to sell our
common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and
the market price. If TCA sells the shares, the price of our common stock could decrease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If our stock price decreases, TCA may have
a further incentive to sell the shares of our common stock that it holds. &nbsp;These sales may have a further impact on our stock
price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>YOUR OWNERSHIP INTEREST MAY BE DILUTED
AND THE VALUE OF OUR COMMON STOCK MAY DECLINE BY EXERCISING THE PUT RIGHT PURSUANT TO OUR EQUITY AGREEMENT.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective March 28, 2012, we entered into
a $2,000,000 Equity Agreement with TCA. Pursuant to the Equity Agreement, when we deem it necessary, we may raise capital through
the private sale of our common stock to TCA at a price equal to ninety-five percent (95%) of the lowest daily volume weighted average
price of the Company&rsquo;s common stock for the five trading days immediately following the date our advance notice is delivered.
Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised,
your ownership interest may be diluted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 18 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>WE DO NOT INTEND TO PAY DIVIDENDS.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not anticipate paying cash dividends
on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally
available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and
amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board
of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid,
there is no assurance with respect to the amount of any such dividend.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>AS A PUBLIC COMPANY, WE ARE SUBJECT
TO COMPLEX LEGAL AND ACCOUNTING REQUIREMENTS THAT WILL REQUIRE US TO INCUR SIGNIFICANT EXPENSES AND WILL EXPOSE US TO RISK OF NON-COMPLIANCE.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a public company, we are subject to
numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements
is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company.
Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will
fail to comply.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Failure to comply with these requirements
can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely
basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to
comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage
vis-&agrave;-vis our privately held and larger public competitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>WE MAY BE SUBJECT TO SHAREHOLDER
LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed in the preceding risk factors,
the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. &nbsp;In the past, plaintiffs
have often initiated securities class action litigation against a company following periods of volatility in the market price of
its securities. &nbsp;We may become the target of similar litigation. Securities litigation will result in substantial costs and
liabilities and will divert management&rsquo;s attention and resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>COMPLIANCE WITH CHANGING REGULATION
OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES AND POSE CHALLENGES FOR OUR MANAGEMENT.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Changing laws, regulations and standards
relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act,
and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for
public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. &nbsp;Our management
team will need to devote significant time and financial resources to comply with both existing and evolving standards for public
companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from
revenue generating activities to compliance activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 19 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Statements in this prospectus may be &ldquo;forward-looking
statements.&rdquo; Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.
&nbsp;These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions
made by management. &nbsp;These statements are not guarantees of future performance and involve risks, uncertainties and assumptions
that are difficult to predict. &nbsp;Therefore, actual outcomes and results may, and are likely to, differ materially from what
is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those
risks discussed from time to time in this prospectus, including the risks described under &ldquo;Risk Factors,&rdquo; and &ldquo;Management&rsquo;s
Discussion and Analysis of Financial Condition and Results of Operations&rdquo; in this prospectus and in other documents which
we file with the SEC. In addition, such statements could be affected by risks and uncertainties related to our ability to raise
any financing which we may require for our operations, competition, government regulations and requirements, pricing and development
difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general
industry and market conditions and growth rates, and general economic conditions. &nbsp;Any forward-looking statements speak only
as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this prospectus, except as may be required under applicable securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Selling Security Holder is selling
all of the shares of our common stock covered by this prospectus for its own account. Accordingly, we will not receive any proceeds
from the resale of our common stock. However, we will receive proceeds from any sale of the common stock to TCA under the Equity
Agreement. We intend to use the net proceeds received for working capital or general corporate needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DETERMINATION OF OFFERING PRICE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock currently trades on the
OTCBB under the symbol &ldquo;BFRE.OB&rdquo;. The proposed offering price of the Shares is $0.35 and has been estimated solely
for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, on
the basis of the closing bid price of common stock of the Company as reported on the OTCBB on May 2, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING SECURITY HOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We agreed to register for resale 5,500,000
Shares that we will put to TCA pursuant to the Equity Agreement. The Equity Agreement with TCA provides that TCA is committed to
purchase up to $2,000,000 of our common stock. We may draw on the facility from time to time, as and when we determine appropriate
in accordance with the terms and conditions of the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Selling Security Holder Pursuant to
the Equity Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA is the potential purchaser of our common
stock under the Equity Agreement. The 5,500,000 Shares offered in this prospectus are based on the Equity Agreement between TCA
and us. TCA may from time to time offer and sell any or all of the Shares that are registered under this prospectus. The purchase
price is ninety-five percent (95%) of the lowest daily volume weighted average price of the Company&rsquo;s common stock for the
five trading days immediately following the date on which the Company is deemed to provide an advance notice under the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are unable to determine the exact number
of Shares that will actually be sold by TCA according to this prospectus due to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">the ability of TCA to determine when and whether it will sell any of the
Shares under this prospectus; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify"></P>

<!-- Field: Page; Sequence: 20 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">the uncertainty as to the number of Shares that will be issued upon exercise
of our put options through the delivery of an Advance notice under the Equity Agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following information contains a description
of how TCA acquired (or shall acquire) the shares to be sold in this offering. TCA has not held a position or office, or had any
other material relationship with us, except as follows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA is a limited partnership organized
and existing under the laws of the Cayman Islands. &nbsp;All investment decisions of, and control of, TCA is held by its general
partner TCA Global Credit Fund GP, Ltd (&ldquo;TCA GP&rdquo;). &nbsp;Robert Press is the manager of TCA GP, and he has voting and
investment power over the shares beneficially owned by TCA. &nbsp;TCA acquired, or will acquire, all shares being registered in
this offering in the financing transaction with us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA intends to sell up to 5,500,000 Shares
of our common stock pursuant to the Equity Agreement under this prospectus. On March 28, 2012, the Company and TCA entered into
the Equity Agreement pursuant to which we have the opportunity, for a twenty-four (24) month period, beginning on the date on which
the SEC first declares effective this registration statement registering the resale of our shares by TCA, to sell shares of our
common stock for a total price of $2,000,000. For each share of our common stock purchased under the Equity Agreement, TCA will
pay ninety-five percent (95%) of the lowest daily volume weighted average price of the Company&rsquo;s common stock for the five
trading days immediately following the date on which the Company is deemed to provide an advance notice of a sale of common stock
under the Equity Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We relied on an exemption from the registration
requirements of the Securities Act. The transaction does not does involve a private offering, TCA is an &ldquo;accredited investor&rdquo;
and/or qualified institutional buyer and TCA has access to information about the Company and its investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At an assumed purchase price under the
Purchase Agreement of $0.333 (equal to 95% of the closing price of our common stock of $0.35 on May 2, 2012), we will be able to
receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered hereunder pursuant
to the Equity Agreement. At an assumed purchase price of $0.333 under the Equity Agreement, we would be required to register approximately
515,038 additional shares to obtain the balance of $2,000,000 under the Equity Agreement. &nbsp;The Company is currently authorized
to issue 100,000,000 shares of its common stock. &nbsp;TCA has agreed, subject to certain exceptions listed in the Equity Agreement,
to refrain from holding an amount of shares which would result in TCA or its affiliates from owning more than 9.99% of the then-outstanding
shares of the Company&rsquo;s common stock at any one time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Equity Agreement. &nbsp;These risks include dilution of stockholders
and significant decline in our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA will periodically purchase shares of
our common stock under the Equity Agreement and will in turn, sell such shares to investors in the market at the prevailing market
price. &nbsp;This may cause our stock price to decline, which will require us to issue increasing numbers of shares to TCA to raise
the same amount of funds, as our stock price declines.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA and any participating broker-dealers
are &ldquo;underwriters&rdquo; within the meaning of the Securities Act. All expenses incurred with respect to the registration
of the common stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission or other
expenses incurred by the Selling Security Holder in connection with the sale of such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as indicated below, neither the
Selling Security Holder nor any of its associates or affiliates has held any position, office, or other material relationship with
us in the past three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 21 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth the name
of the Selling Security Holder, the number of shares of common stock beneficially owned by the Selling Security Holder as of the
date hereof and the number of share of common stock being offered by the Selling Security Holder. The shares being offered hereby
are being registered to permit public secondary trading, and the Selling Security Holder may offer all or part of the shares for
resale from time to time. However, the Selling Security Holder is under no obligation to sell all or any portion of such shares
nor is the Selling Security Holder obligated to sell any shares immediately upon effectiveness of this prospectus. All information
with respect to share ownership has been furnished by the Selling Security Holder. The column entitled &ldquo;Amount Beneficially
Owned After the Offering&rdquo; assumes the sale of all shares offered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid"><B>Name</B></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><B>&nbsp;</B></TD>
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><B>Shares Beneficially Owned Prior to Offering</B></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><B>&nbsp;</B></TD>
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><B>Shares to Be Offered</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><B>&nbsp;</B></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Amount Beneficially Owned After Offering (1)</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><B>&nbsp;</B></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Percent Beneficially Owned After Offering</B></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; text-align: justify; padding-left: 0; text-indent: 0">TCA Global Credit Master Fund, LP (2)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">280,612 (3)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">5,500,000</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">5,780,612 (3)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">15.10%</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify; padding-right: 0.5in"><FONT STYLE="color: black">The number assumes the Selling Security Holder
sells all of its shares being offering pursuant to this prospectus.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify; padding-right: 0.5in"><FONT STYLE="color: black">TCA Global Credit Master Fund, LP is a limited
partnership organized and existing under the laws of the Cayman Islands. TCA Global Credit Fund GP, Ltd. is the general partner
of TCA and has voting and investment power over the shares beneficially owned by TCA. &nbsp;Robert Press is the manager of TCA
GP, and he has voting and investment power over the shares beneficially owned by TCA.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify; padding-right: 0.5in"><FONT STYLE="color: black">These shares represent the Facility Fee Shares
issued to TCA pursuant to the Equity Agreement.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The above table assumes that TCA purchases
the maximum amount of registrable Shares in this registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus relates to the resale of
up to 5,500,000 Shares issued pursuant to the Equity Agreement held by the Selling Security Holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Selling Security Holder may, from time
to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares
are traded or in private transactions. &nbsp;The Selling Security Holder may use any one or more of the following methods when
selling shares:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">block trades in which the broker-dealer will sell the shares as agent;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">privately negotiated transactions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">broker-dealers may agree with the Selling Stock Holder to sell a specified
number of such shares at a stipulated price per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">a combination of any such methods of sale; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">any other method permitted pursuant to applicable law.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Selling Security Holder may be deemed an underwriter. Pursuant
to the terms of the Equity Agreement, the Selling Security Holder may not engage in any short sizes of the Company&rsquo;s common
stock or other hedging activities. The Selling Security Holder may sell the shares directly to market makers acting as principals
and/or broker-dealers acting as agents for itself or its customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Security Holder and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess
of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that the Selling Security Holder will attempt to sell shares of the Company&rsquo;s common stock in block
transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Security
Holder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Security
Holder. In addition, any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus are
&ldquo;underwriters&rdquo; as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations
under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 22 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Security Holder. The Selling
Security Holder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of
the shares if liabilities are imposed on that person under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Selling Security Holder may from time
to time pledge or grant a security interest in some or all of the shares of our common stock owned by it and, if it defaults in
the performance of its secured obligations, the pledgee or secured parties may offer and sell such the shares of common stock from
time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable
provision of the Securities Act amending the list of selling security holders to include the pledgee or transferee as selling security
holders under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Selling Security Holder also may transfer
the shares of common stock in other circumstances, in which case the transferees or pledgees will be the selling beneficial owners
for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed
an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling
security holders to include the pledgee or transferee as selling security holders under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are required to pay all fees and expenses
incident to the registration of the shares of common stock. &nbsp;Otherwise, all discounts, commissions or fees incurred in connection
with the sale of our common stock offered hereby will be paid by the Selling Security Holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Selling Security Holder acquired the
securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter
or coordinating broker acting in connection with a proposed sale of shares of common stock by the Selling Security Holder. &nbsp;We
will file a supplement to this prospectus if the Selling Security Holder enters into a material arrangement with a broker-dealer
for sale of common stock being registered. &nbsp;If the Selling Security Holder uses this prospectus for any sale of the shares
of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to a requirement by the Financial
Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member or independent broker/dealer
may not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered
pursuant to SEC Rule 415 under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of our common stock and activities of the Selling Security Holder. &nbsp;The Selling
Security Holder will act independently of us in making decisions with respect to the timing, manner and size of each sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">TCA is an &ldquo;underwriter&rdquo; within
the meaning of the Securities Act in connection with the sale of our common stock under the Equity Agreement. &nbsp;As further
consideration for TCA entering into and structuring the equity facility, the Company shall pay to TCA the Facility Fee Shares.
It is the intention of the Company and TCA that the value of the Facility Fee Shares shall equal $110,000. In the event the value
of the Facility Fee Shares issued to TCA does not equal $110,000 after a nine month evaluation date, the Equity Agreement provides
for an adjustment provision allowing for necessary action to adjust the number of shares issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 23 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will pay all expenses incident to the
registration, offering and sale of the shares of our common stock to the public hereunder other than commissions, fees and discounts
of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect TCA to pay these expenses. We have
agreed to indemnify TCA and its controlling persons against certain liabilities, including liabilities under the Securities Act.
&nbsp;We estimate that the expenses of the offering to be borne by us will be approximately $38,000. We will not receive any proceeds
from the resale of any of the shares of our common stock by TCA. We may, however, receive proceeds from the sale of our common
stock under the Equity Agreement. Neither the Equity Agreement nor any rights of the parties under the Equity Agreement may be
assigned or delegated to any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES TO BE REGISTERED</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus includes 5,500,000 Shares
of our common stock offered by the Selling Security Holder. The following description of our common stock is only a summary. You
should also refer to our certificate of incorporation and bylaws, which have been incorporated by reference as exhibits to the
registration statement of which this prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue 100,000,000
shares of $0.001 par value common stock, and 1,000,000 shares of no par value preferred stock. As of May 2, 2012, the Company had
32,776,919 shares of common stock outstanding and no shares of preferred stock outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding. The shares of our common stock presently outstanding, and any shares of our common stock issues upon
exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one
vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken
by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to
share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative
voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining
shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared
by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Voting Rights</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each holder of Common Stock is entitled
to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Dividends</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to preferences that may be applicable
to any then-outstanding shares of Preferred Stock, if any, and any other restrictions, holders of Common Stock are entitled to
receive ratably those dividends, if any, as may be declared from time to time by the Company&rsquo;s board of directors out of
legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does
not presently contemplate that there will be any future payment of any dividends on Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had no shares of
preferred stock outstanding. We may issue preferred stock in one or more class or series pursuant to resolution of the Board of
Directors. The Board of Directors may determine and alter the rights, preferences, privileges, and restrictions granted to or imposed
upon any wholly unissued series of preferred stock, and fix the number of shares and the designation of any series of preferred
stock. The Board of Directors may increase or decrease (but not below the number of shares of such series then outstanding) the
number of shares of any wholly unissued class or series subsequent to the issue of shares of that class or series. We have no present
plans to issue any shares of preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 24 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had warrants to purchase
an aggregate of 7,115,265 shares of our common stock outstanding. The exercise prices for the warrants range from $0.50 per share
to $5.45 per share, with a weighted average exercise price of approximately per share of $2.65. Some of our warrants contain a
provision in which the exercise price will be adjusted for future issuances of common stock at prices lower than the current exercise
price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Options</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had options to purchase
an aggregate of 1,229,659 shares of our common stock outstanding, with exercise prices for the options ranging from $3.20 per share
to $3.52 per share, with a weighted average exercise price per share of $3.21.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Anti-Takeover Provisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws contain provisions that may make it more difficult for a third party to acquire or may discourage
acquisition bids for us. Our Board of Directors may, without action of our stockholders, issue authorized but unissued common stock
and preferred stock. The issuance of additional shares to certain persons allied with our management could have the effect of making
it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause
such removal. The existence of unissued preferred stock may enable the Board of Directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such stock with terms that could render more difficult
or discourage an attempt to obtain control of us, thereby protecting the continuity of our management. Our shares of preferred
stock could therefore be issued quickly with terms that could delay, defer, or prevent a change in control of us, or make removal
of management more difficult.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are BlueFire Renewables, Inc., a Nevada
corporation. Our goal is to develop, own and operate high-value carbohydrate-based transportation fuel plants, or biorefineries,
to produce ethanol, a viable alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our
biorefineries will convert widely available, inexpensive, organic materials such as agricultural residues, high-content biomass
crops, wood residues and cellulose from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety
of feedstocks and locations in which to develop facilities to become a low cost producer of ethanol. We have licensed for use a
patented process from Arkenol, Inc., a Nevada corporation (&ldquo;Arkenol&rdquo;), to produce ethanol from cellulose (the &ldquo;Arkenol
Technology&rdquo;). We are the exclusive North America licensee of the Arkenol Technology. We may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to 19 ethanol project opportunities originally
developed by ARK Energy, Inc., a Nevada corporation, to accelerate our deployment of the Arkenol Technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Company History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a Nevada corporation that was initially
organized as Atlanta Technology Group, Inc., a Delaware corporation, on October 12, 1993. The Company was re-named Docplus.net
Corporation on December 31, 1998, and further re-named Sucre Agricultural Corp. (&ldquo;Sucre&rdquo;) and re-domiciled as a Nevada
corporation on March 6, 2006. Finally, on May 24, 2006, in anticipation of the reverse merger by which it would acquire BlueFire
Ethanol, Inc., a privately held Nevada corporation organized on March 28, 2006, as described below, the Company was re-named to
BlueFire Ethanol Fuels, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 27, 2006, the Company completed
a reverse merger (the &ldquo;Reverse Merger&rdquo;) with BlueFire Ethanol, Inc. (&ldquo;BlueFire Ethanol&rdquo;). At the time of
Reverse Merger, the Company was a blank-check company and had no operations, revenues or liabilities. The only asset possessed
by the Company was $690,000 in cash which continued to be owned by the Company at the time of the Reverse Merger. In connection
with the Reverse Merger, the Company issued BlueFire Ethanol 17,000,000 shares of common stock, approximately 85% of all of the
outstanding common stock of the Company, for all the issued and outstanding BlueFire Ethanol common stock. The Company stockholders
retained 4,028,264 shares of Company common stock. As a result of the Reverse Merger, BlueFire Ethanol became our wholly-owned
subsidiary. On June 21, 2006, prior to and in anticipation of the Reverse Merger, Sucre sold 3,000,000 shares of common stock to
two related investors in a private offering of shares pursuant to Rule 504 for proceeds of $1,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 25 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 20, 2010, the Company changed its
name to BlueFire Renewables, Inc. to more accurately reflect our primary business plan expanding the focus from just building cellulosic
ethanol projects to include other advanced biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s shares of common stock
began trading under the symbol &ldquo;BFRE.PK&rdquo; on the Pink Sheets of the National Quotation Bureau on July 11, 2006 and later
began trading on the OTCBB under the symbol &ldquo;BFRE.OB&rdquo; on June 19, 2007. On May 2, 2012, the closing price of our Common
Stock was $0.35 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our executive offices are located at 31
Musick, Irvine, California 92618 and our telephone number at such office is (949) 588-3767.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Business of Issuer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Principal Products or Services and Their
Markets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our goal is to develop, own and operate
high-value carbohydrate-based transportation fuel plants, or biorefineries, to produce ethanol and other biofuels that are viable
alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our biorefineries will convert widely
available, inexpensive, organic materials such as agricultural residues, high-content biomass crops, wood residues and cellulose
from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety of feedstocks and locations in
which to develop facilities to become a low cost producer of ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have licensed for use the Arkenol Technology,
a patented process from Arkenol to produce ethanol from cellulose for sale into the transportation fuel market. We are the exclusive
North America licensee of the Arkenol Technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Arkenol Technology</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The production of chemicals by fermenting
various sugars is a well-accepted science. Its use ranges from producing beverage alcohol and fuel-ethanol to making citric acid
and xantham gum for food uses. However, the high price of sugar and the relatively low cost of competing petroleum based fuel has
kept the production of chemicals mainly confined to producing ethanol from corn sugar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the Arkenol Technology process, incoming
biomass feedstocks are cleaned and ground to reduce the particle size for the process equipment. The pretreated material is then
dried to a moisture content consistent with the acid concentration requirements for breaking down the biomass, then hydrolyzed
(degrading the chemical bonds of the cellulose) to produce hexose and pentose (C5 and C6) sugars at the high concentrations necessary
for commercial fermentation. The insoluble materials left are separated by filtering and pressing into a cake and further processed
into fuel for other beneficial uses. The remaining acid-sugar solution is separated into its acid and sugar components. The separated
sulfuric acid is recirculated and re-concentrated to the level required to breakdown the incoming biomass. The small quantity of
acid left in the sugar solution is neutralized with lime to make hydrated gypsum which can be used as an agricultural soil conditioner.
At this point the process has produced a clean stream of mixed sugars (both C6 and C5) for fermentation. In an ethanol production
plant, naturally-occurring yeast, which Arkenol has specifically cultured by a proprietary method to ferment the mixed sugar stream,
is mixed with nutrients and added to the sugar solution where it efficiently converts both the C6 and C5 sugars to fermentation
beer (an ethanol, yeast and water mixture) and carbon dioxide. The yeast culture is separated from the fermentation beer by a centrifuge
and returned to the fermentation tanks for reuse. Ethanol is separated from the now clear fermentation beer by conventional distillation
technology, dehydrated to 200 proof and denatured with unleaded gasoline to produce the final fuel-grade ethanol product. The still
bottoms, containing principally water and unfermented sugar, is returned to the process for economic water use and for further
conversion of the sugars.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 26 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Simply put, the process separates the biomass
into two main constituents: cellulose and hemicellulose (the main building blocks of plant life) and lignin (the &ldquo;glue&rdquo;
that holds the building blocks together), converts the cellulose and hemicellulose to sugars, ferments them and purifies the fermentation
liquids into ethanol and other end-products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ark Energy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">BlueFire may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to nineteen (19) ethanol project opportunities
originally developed by ARK Energy, Inc., a Nevada corporation to accelerate BlueFire&rsquo;s deployment of the Arkenol Technology.
The opportunities consist of ARK Energy&rsquo;s previous relationships, analysis, site development, permitting experience and market
research on various potential project locations within North America. ARK Energy has transferred these assets to us and we valued
these business assets based on management&rsquo;s best estimates as to its actual costs of development. In the event we successfully
finance the construction of a project that utilizes any of the transferred assets from ARK Energy, we are required to pay ARK Energy
for the costs ARK Energy incurred in the development of the assets pertaining to that particular project or location. We did not
incur the costs of a third party valuation but based our valuation of the assets acquired by (i) an arms-length review of the value
assigned by ARK Energy to the opportunities are based on the actual costs it incurred in developing the project opportunities,
and (ii) anticipated financial benefits to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Pilot Plants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From 1994-2000, a test pilot biorefinery
plant was built and operated by Arkenol in Orange, California to test the effectiveness of the Arkenol Technology using several
different types of raw materials containing cellulose. The types of materials tested included: rice straw, wheat straw, green waste,
wood wastes, and municipal solid wastes. Various equipment used in the process was also tested and process conditions were verified
leading to the issuance of the certain patents in support of the Arkenol Technology. In 2002, using the results obtained from the
Arkenol California test pilot plant, JGC Corporation, based in Japan, built and operated a bench scale facility followed by another
test pilot biorefinery plant in Izumi, Japan. At the Izumi plant, Arkenol retained the rights to the Arkenol Technology while the
operations of the facility were controlled by JGC Corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Bio-Refinery Projects</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently in the development stage
of building bio-refineries in North America. We plan to use the Arkenol Technology and utilize JGC&rsquo;s operations knowledge
from the Izumi test pilot plant to assist in the design and engineering of our facilities in North America. MECS and Briderson
Engineering, Inc. (&ldquo;Brinderson&rdquo;) provided the preliminary design package, while Briderson completed the detailed engineering
design for our Lancaster Biorefinery. We feel this completed design should provide the blueprint for subsequent plant constructions.
In 2010, MasTec in conjunction with Zachary Engineering completed the detailed engineering design for our planned Fulton Mississippi
plant, also known as the DOE Project, or the Fulton Project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to build a facility that will
process approximately 190 tons of green waste material per day to produce roughly 3.9 million gallons of ethanol annually. In connection
therewith, on November 9, 2007, we purchased the facility site which is located in Lancaster, California. Permit applications were
filed on June 24, 2007, to allow for construction of the Lancaster facility. The Los Angeles County Planning Commission issued
a Conditional Use Permit for the Lancaster Project in July of 2008. However, a subsequent appeal of the county decision, which
BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of
the now non-appealable permit approval to December 12, 2008. On February 12, 2009, we were issued our Authority to Construct permit
by the Antelope Valley Air Quality Management District. In December 2011, BlueFire requested an extension to pay the project&rsquo;s
permits for an additional year while we awaited potential financing. The Company is evaluating whether or not it&rsquo;s prudent
to extend the project&rsquo;s permits an additional year while we await potential financing. The Company sees this project on hold
until we receive the funding to construct the facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 27 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2009, BlueFire completed the engineering
package for the Lancaster Biorefinery, and finalized the Front-End Loading (FEL) 3 stage of engineering for the Lancaster Biorefinery.
In 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed the FEL stages 2 and 3 of
engineering for the Fulton Project readying the facility for construction. FEL is the process for conceptual development of processing
industry projects. This process is used in the petrochemical, refining, and pharmaceutical industries. Front-End Loading is also
referred to as Front-End Engineering Design (FEED). There are three stages in the FEL process:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24%; text-autospace: none; font-weight: bold">FEL-1</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 29%; text-autospace: none; font-weight: bold">FEL-2</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 45%; text-autospace: none; font-weight: bold">FEL-3</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Material Balance</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Equipment Design</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Purchase Ready Major Equipment Specifications</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Energy Balance</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Layout</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Definitive Estimate</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Project Charter</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Schedule</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Project Execution Plan</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Estimate</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary 3D Model</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Electrical Equipment List</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Line List</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Instrument Index</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We estimate the total cost including contingencies
to be in the range of approximately $100 million to $125 million for the Lancaster Biorefinery. This amount is significantly greater
than our previous estimations communicated to the public. This is due in part to a combination of significant increases in materials
costs in the world market from the last estimate until now, and the complexity of our first commercial deployment. At the end of
2008 and throughout 2009, prices for materials declined, although we expect, that prices for items like structural and specialty
steel will continue to firm up throughout 2012 along with other materials of construction. The cost approximations above do not
reflect any fluctuations in raw materials or construction costs since the original pricing estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The uncertainties of the world credit markets
from 2008 to present caused a delay in the financing we needed to enable placement of equipment orders for the construction of
our Lancaster Biorefinery, which would allow us to achieve a sustainable construction schedule after breaking ground. Hence, to
insure a timely and continuous construction of the project, BlueFire&rsquo;s Board of Directors determined it is prudent to delay
Lancaster&rsquo;s groundbreaking until all the necessary funds are in place. Project activities have advanced to a point that once
credit is available, orders can be immediately placed and construction started. We remain optimistic in being able to raise the
additional capital necessary once the capital markets normalize. This project is considered shovel ready and only requires minimal
capital to maintain until funding is obtained for its construction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently in discussions with potential
sources of financing for this facility, but no definitive agreements are in place. In 2009, the Company filed for a loan guarantee
with the U.S. Department of Energy (&ldquo;DOE&rdquo;) for this project, under DOE Program DE-FOA-0000140, which provides federal
loan guarantees for projects that employ innovative energy efficiency, renewable energy, and advanced transmission and distribution
technologies (&ldquo;DOE LGPO&rdquo;). Although the Company was hopeful of being able to secure the guarantee, in 2010, the Company
was informed that the loan guarantee was rejected by the DOE due to a lack of definitive contracts for feedstock and off-take at
the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was also pursuing
a much larger project in Fulton, Mississippi.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are also developing a facility for construction
in a joint effort with the DOE. This facility will be located in Fulton, Mississippi, and will use approximately 700 metric dry
tons of woody biomass, mill residue, and other cellulosic waste to produce approximately 19 million gallons of ethanol annually
(the &ldquo;Fulton Project&rdquo;). In 2007, we received an award from the DOE of up to $40 million for the Fulton Project. On
or around October 4, 2007, we finalized our first award for a total approved budget of just under $10,000,000 with the DOE(&ldquo;Award
1&rdquo;). Award 1 is a 60%/40% cost share, whereby 40% of approved costs may be reimbursed by the DOE pursuant to the total $40
million award announced in February 2007. December 4, 2009, the DOE announced that the award for this project has been increased
to a maximum of $88 million under the American Recovery and Reinvestment Act of 2009 (&ldquo;ARRA&rdquo;) and the Energy Policy
Act of 2005. As of December 31, 2011, BlueFire has been reimbursed approximately $9,217,869 from the DOE under this award.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, BlueFire signed definitive agreements
for the following three crucial contracts related to the Fulton Project: (a) feedstock supply with Cooper Marine and Timberlands
Corporation (&ldquo;Cooper Marine&rdquo;), (b) off-take for the ethanol of the facility with Tenaska Biofuels LLC (&ldquo;Tenaska&rdquo;),
and (c) the construction of the facility with MasTec North America Inc. (&ldquo;MasTec&rdquo;). Also in 2010, BlueFire continued
to develop the engineering package for the Fulton Project, and completed both the FEL-2 and FEL-3 stages of engineering readying
the facility for construction. As of November 2010, the Fulton Project has all necessary permits for construction, and in that
same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed
initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted
an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 28 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2011, BlueFire received notice
from the DOE LGPO staff that the Fulton Project&rsquo;s application will not move forward until such time as the project has raised
the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million
loan guarantee with the U.S. Department of Agriculture (&ldquo;USDA&rdquo;) under Section 9003 of the 2008 Farm Bill, as defined
below (&ldquo;USDA LG&rdquo;). In October 2011, BlueFire was notified by its lender (&ldquo;Lender&rdquo;) for the Company&rsquo;s
USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible to participate in the USDA
Biorefinery Assistance Program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The USDA has offered to meet with the Lender
and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity
to provide any new information and potential alternatives for the USDA&rsquo;s consideration. The Company plans to continue to
work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution
of another lender; however, no assurances can be made that the Company will be able to satisfy these requirements. As of December
31, 2011, no significant progress has been made with the USDA or the Lender in this regard. In October 2011, BlueFire signed a
Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China&rsquo;s fourth-largest
utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire is currently in negotiations
with China Huadian Corp, but no definitive agreements have yet been executed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Between the two proposed facilities (Lancaster,
CA and Fulton, MS) we expect them to create more than 1,000 construction/manufacturing jobs and, once in operation, more than 100
new operations and maintenance jobs. The Company is simultaneously researching and considering other suitable locations for other
similar bio-refineries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Status of Publically Announced Products
or Services</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In November 2011, BlueFire created SucreSource
LLC, a wholly owned subsidiary specifically tasked to partner with synergistic back end companies that need cellulosic sugars as
a feedstock for their fermentation or chemical processes. SucreSource will utilize the Arkenol process to provide the front end
technology to partner with these companies. SucreSource is cultivating relationships and will continue to develop them throughout
2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Distribution Methods of Products or
Services</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will utilize existing ethanol distribution
channels to sell the ethanol that is produced from our plants. For example, we will enter into an agreement with an existing refiner
or blender to purchase the ethanol and sell it into the Southern California and Mississippi transportation fuels market. Ethanol
is currently mandated at a blend level of 10% nationwide which represents an approximately 26+ billion gallon per year market.
We are also exploring the potential of onsite blending of E85 (85% ethanol, 15% gasoline) and direct marketing to fueling stations.
There are approximately 2,400 E85 fueling stations in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Most of the approximately 14 billion gallons
of ethanol supply in the United States is derived from corn according to the Renewable Fuels Association (&ldquo;RFA&rdquo;) website
(HTTP://WWW.ETHANOLRFA.ORG/) and as of March 2012, is produced at approximately 209 facilities, ranging in size from 300,000 to
130 million gallons per year, located predominately in the corn belt in the Midwest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Traditional corn-based production techniques
are mature and well entrenched in the marketplace, and the entire industry&rsquo;s infrastructure is geared toward corn as the
principal feedstock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">With the Arkenol Technology, the principle
difference from traditional processes apart from production technique is the acquisition and choice of feedstock. The use of a
non-commodity based non-food related biomass feedstock enables us to use feedstock typically destined for disposal, i.e. wood waste,
yard trimmings and general green waste. All ethanol producers regardless of production technique will fall subject to market fluctuation
in the end product, ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 29 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to the feedstock variety we process,
we are able to locate production facilities in and around the markets where the ethanol will be consumed, thereby giving us a competitive
advantage against much larger traditional producers who must locate plants near their feedstock, i.e. the corn belt in the Midwest
and ship the ethanol to the end market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, in the area of biomass-to-ethanol
production, there are few companies, and no commercial production infrastructure has been built. As we continue to advance our
biomass technology platform, we are likely to encounter competition for the same technologies from other companies that are also
attempting to manufacture ethanol from cellulosic biomass feedstocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ethanol production is also expanding internationally.
Ethanol produced or processed in certain countries in Central America and the Caribbean region is eligible for tariff reduction
or elimination upon importation to the United States under a program known as the Caribbean Basin Initiative. Large ethanol producers,
such as Cargill, have expressed interest in building dehydration plants in participating Caribbean Basin countries, such as El
Salvador, which would convert ethanol into fuel-grade ethanol for shipment to the United States. Ethanol imported from Caribbean
Basin countries may be a less expensive alternative to domestically produced ethanol and may affect our ability to sell our ethanol
profitably.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are approximately 21 next-generation
biofuel companies that have received grants from the DOE for development purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Industry Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 19, 2007, President Bush signed
into law the Energy Independence and Security Act of 2007 (Energy Act of 2007). The Energy Act of 2007 provides for an increase
in the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard (RFS) requiring fuel producers to use
at least 36 billion gallons of biofuel by 2022, 16 billion gallons of which must come from cellulosic derived fuel. Additionally,
the Energy Act of 2007 called for reducing U.S. demand for oil by setting a national fuel economy standard of 35 miles per gallon
by 2020 &ndash; which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2008, the Food, Conservation and
Energy Act of 2008 (the &ldquo;Farm Bill&rdquo;) was signed into law. The 2008 Farm Bill also modified existing incentives, including
ethanol tax credits and import duties and established a new integrated tax credit of $1.01/gallon for cellulosic biofuels. The
Farm Bill also authorized new biofuels loan and grant programs, which will be subject to appropriations, likely starting with the
FY2010 budget request.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 13, 2009, Congress passed the
American Recovery and Reinvestment Act of 2009 (the &ldquo;Recovery Act&rdquo;) at the urging of President Obama, who signed it
into law four days later (&ldquo;ARRA&rdquo;). A direct response to the economic crisis, the Recovery Act has three immediate goals:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Create new jobs and save existing ones;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Spur economic activity and invest in long-term growth; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Foster unprecedented levels of accountability and transparency in government spending.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Recovery Act intends to achieve those goals by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none">Providing $288 billion in tax cuts and benefits for millions of working families and businesses;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none">Increasing federal funds for education and health care as well as entitlement programs (such as extending unemployment benefits) by $224 billion;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none">Making $275 billion available for federal contracts, grants and loans; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none">Requiring recipients of Recovery funds to report quarterly on how they are using the money. All the data is posted on Recovery.gov so the public can track the Recovery funds.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 30 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to offering financial aid directly
to local school districts, expanding the Child Tax Credit, and underwriting a process to computerize health records to reduce medical
errors and save on health care costs, the Recovery Act is targeted at infrastructure development and enhancement. For instance,
the Recovery Act plans investment in the domestic renewable energy industry and the weatherizing of 75% of federal buildings as
well as more than one million private homes around the country.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historically, producers and blenders had
a choice of fuel additives to increase the oxygen content of fuels. MTBE (methyl tertiary butyl ether), a petroleum-based additive,
was the most popular additive, accounting for up to 75% of the fuel oxygenate market. However, in the United States, ethanol is
replacing MTBE as a common fuel additive. While both increase octane and reduce air pollution, MTBE is a presumed carcinogen which
contaminates ground water. It has already been banned in California, New York, Illinois and 22 other states. Major oil companies
have voluntarily abandoned MTBE and it is scheduled to be phased out under the Energy Policy Act. As MTBE is phased out, we expect
demand for ethanol as a fuel additive and fuel extender to rise. A blend of 5.5% or more of ethanol, which does not contaminate
ground water like MTBE, effectively complies with U.S. Environmental Protection Agency requirements for reformulated gasoline,
which is mandated in most urban areas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ethanol is a clean, high-octane, high-performance
automotive fuel commonly blended in gasoline to extend supplies and reduce emissions. In 2004, according to the American Coalition
for Ethanol, 3% of all United States gasoline was blended with some percentage of ethanol. The most common blend is E10, which
contains 10% ethanol and 90% gasoline. There is also growing federal government support for E85, which is a blend of 85% ethanol
and 15% gasoline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ethanol is a renewable fuel produced by
the fermentation of starches and sugars such as those found in grains and other crops. Ethanol contains 35% oxygen by weight and,
when combined with gasoline, it acts as an oxygenate, artificially introducing oxygen into gasoline and raising oxygen concentration
in the combustion mixture with air. As a result, the gasoline burns more completely and releases less unburnt hydrocarbons, carbon
monoxide and other harmful exhaust emissions into the atmosphere. The use of ethanol as an automotive fuel is commonly viewed as
a way to reduce harmful automobile exhaust emissions. Ethanol can also be blended with regular unleaded gasoline as an octane booster
to provide a mid-grade octane product which is commonly distributed as a premium unleaded gasoline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Studies published by the Renewable Fuel
Association indicate that approximately 13.5 billion gallons of ethanol was consumed in 2010 in the United States and every automobile
manufacturer approves and warrants the use of E10. Because the ethanol molecule contains oxygen, it allows an automobile engine
to more completely combust fuel, resulting in fewer emissions and improved performance. Fuel ethanol has an octane value of 113
compared to 87 for regular unleaded gasoline. Domestic ethanol consumption has tripled in the last eight years, and consumption
increases in some foreign countries, such as Brazil, are even greater in recent years. For instance, 40% of the automobiles in
Brazil operate on 100% ethanol, and others use a mixture of 22% ethanol and 78% gasoline. The European Union and Japan also encourage
and mandate the increased use of ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For every barrel of ethanol produced, the
American Coalition for Ethanol estimates that 1.2 barrels of petroleum are displaced at the refinery level, and that since 1978,
U.S. ethanol production has replaced over 14.0 billion gallons of imported gasoline or crude oil. According to a Mississippi State
University Department of Agricultural Economics Staff Report in August 2003, a 10% ethanol blend results in a 25% to 30% reduction
in carbon monoxide emissions by making combustion more complete. The same 10% blend lowers carbon dioxide emissions by 6% to 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the last 20 years, ethanol production
capacity in the United States has grown from almost nothing to an estimated 13.5 billion gallons per year in 2010. In the United
States, ethanol is primarily made from starch crops, principally from the starch fraction of corn. Consequently, the production
plants are concentrated in the grain belt of the Midwest, principally in Illinois, Iowa, Minnesota, Nebraska and South Dakota.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the United States, there are two principal
commercial applications for ethanol. The first is as an oxygenate additive to gasoline to comply with clean air regulations. The
second is as a voluntary substitute for gasoline - this is a purely economic choice by gasoline retailers who may make higher margins
on selling ethanol-blended gasoline, provided ethanol is available in the local market. The U.S. gasoline market is currently approximately
170 billion gallons annually, so the potential market for ethanol (assuming only a 10% blend) is 17 billion gallons per year. Increasingly,
motor manufacturers are producing flexible fuel vehicles (particularly sports utility vehicle models) which can run off ethanol
blends of up to 85% (known as E85) in order to obtain exemptions from fleet fuel economy quotas. There are now in excess of 5 million
flexible fuel vehicles on the road in the United States and automakers will produce several millions per year, offering further
potential for significant growth in ethanol demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 31 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Cellulose to Ethanol Production</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In a 2002 report, &ldquo;Outlook For Biomass
Ethanol Production Demand,&rdquo; the U.S. Energy Information Administration found that advancements in production technology of
ethanol from cellulose could reduce costs and result in production increases of 40% to 160% by 2010. Biomass (cellulosic feedstocks)
includes agricultural waste, woody fibrous materials, forestry residues, waste paper, municipal solid waste and most plant material.
Like waste starches and sugars, they are often available for relatively low cost, or are even free. However, cellulosic feedstocks
are more abundant, global and renewable in nature. These waste streams, which would otherwise be abandoned, land-filled or incinerated,
exist in populated metropolitan areas where ethanol prices are higher.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Sources and Availability of Raw Materials</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The U.S. DOE and USDA in its April 2005
report &ldquo;BIOMASS AS FEEDSTOCK FOR A BIOENERGY AND BIOPRODUCTS INDUSTRY: THE TECHNICAL FEASIBILITY OF A BILLION-TON ANNUAL
SUPPLY&rdquo; found that about one billion tons of cellulosic materials from agricultural and forest residues are available to
produce more than one-third of the current U.S. demand for transportation fuels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dependence on One or a Few Major Customers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have signed a definitive agreement with
Tenaska for the off-take of our Fulton Project, which allows Tenaska to exclusively market all ethanol produced at this facility.
See &ldquo;DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Patents, Trademarks, Licenses, Franchises,
Concessions, Royalty Agreements or Labor Contracts</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 1, 2006, we entered into a Technology
License Agreement with Arkenol, for use of the Arkenol Technology. Arkenol holds the following patents in relation to the Arkenol
Technology: 11 U.S. patents, 21 foreign patents, and one pending foreign patent. According to the terms of the agreement, we were
granted an exclusive, non-transferable, North American license to use and to sub-license the Arkenol technology. The Arkenol Technology,
converts cellulose and waste materials into ethanol and other high value chemicals. As consideration for the grant of the license,
we are required to make a onetime payment of $1,000,000 at first project funding and for each plant make the following payments:
(1) royalty payment of 3% of the gross sales price for sales by us or our sub-licensees of all products produced from the use of
the Arkenol Technology (2) and a onetime license fee of $40.00 per 1,000 gallons of production capacity per plant. According to
the terms of the agreement, we made a onetime exclusivity fee prepayment of $30,000 during the period ended December 31, 2006.
At March 31, 2010, we had paid Arkenol in full for the license. All sub-licenses issued by us will provide for payments to Arkenol
of any other license fees and royalties due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Governmental Approval</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are not subject to any government oversight
for our current operations other than for corporate governance and taxes. However, the production facilities that we will be constructing
will be subject to various federal, state and local environmental laws and regulations, including those relating to the discharge
of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials,
and the health and safety of our employees. In addition, some of these laws and regulations will require our facilities to operate
under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution
control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and
regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations
and/or facility shutdowns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 32 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Governmental Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, the federal government encourages
the use of ethanol as a component in oxygenated gasoline. This is a measure to both protect the environment, and, to utilize biofuels
as a viable renewable domestic fuel to reduce U.S. dependence on foreign oil.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ethanol industry is heavily dependent
on several economic incentives to produce ethanol, including federal ethanol supports. Ethanol sales have been favorably affected
by the Clean Air Act amendments of 1990, particularly the Federal Oxygen Program which became effective November 1, 1992. The Federal
Oxygen Program requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce
carbon monoxide pollution. Ethanol use has increased due to a second Clean Air Act program, the Reformulated Gasoline Program.
This program became effective January 1, 1995, and requires the sale of reformulated gasoline in nine major urban areas to reduce
pollutants, including those that contribute to ground level ozone, better known as smog. Increasingly stricter EPA regulations
are expected to increase the number of metropolitan areas deemed in non-compliance with Clean Air Standards, which could increase
the demand for ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 22, 2004, President Bush signed
H.R. 4520, which contained the Volumetric Ethanol Excise Tax Credit (&ldquo;VEETC&rdquo;) and amended the federal excise tax structure
effective as of January 1, 2005. Before this, ethanol-blended fuel was taxed at a lower rate than regular gasoline (13.2 cents
on a 10% blend). Under VEETC, the existing ethanol excise tax exemption is eliminated, thereby allowing the full federal excise
tax of 18.4 cents per gallon of gasoline to be collected on all gasoline and allocated to the highway trust fund. The bill created
a new volumetric ethanol excise tax credit of 51 cents per gallon of ethanol blended. Refiners and gasoline blenders would apply
for this credit on the same tax form as before only it would be a credit from general revenue, not the highway trust fund. Based
on volume, the VEETC is expected to allow much greater refinery flexibility in blending ethanol. VEETC is scheduled to expire in
2013. The 2008 Farm Bill amended this credit: Starting the year after 7.5 billion gallons of ethanol are produced and/or imported
in the United States, the value of the credit will be lowered to 45 cents per gallon which occurred in 2008, and lead to a reduction
in the credit starting in 2009. VEETC was scheduled to expire on December 31, 2010, but extended by congress until December 31,
2011, pending structural law changes. As of May 2, 2012, the VEETC has not been renewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Energy Policy Act of 2005 established
a renewable fuel standard (RFS) to increase in the supply of alternative sources for automotive fuels. The RFS was expanded by
the Energy Independence and Security Act of 2007. The RFS requires the blending of renewable fuels (including ethanol and biodiesel)
in transportation fuel. In 2008, fuel suppliers must blend 9.0 billion gallons of renewable fuel into gasoline; this requirement
increases annually to 36 billion gallons in 2022. The expanded RFS also specifically mandates the use of &ldquo;advanced biofuels&rdquo;&mdash;fuels
produced from non-corn feedstocks and with 50% lower lifecycle greenhouse gas emissions than petroleum fuel&mdash;starting in 2009.
Of the 36 billion gallons required in 2022, at least 21 billion gallons must be advanced biofuel. There are also specific quotas
for cellulosic biofuels and for biomass-based diesel fuel. On May 1, 2007, EPA issued a final rule on the RFS program detailing
compliance standards for fuel suppliers, as well as a system to trade renewable fuel credits between suppliers. EPA has not yet
initiated a rulemaking on the lifecycle analysis methods necessary to categorize fuels as advanced biofuels. While this program
is not a direct subsidy for the construction of biofuels plants, the market created by the renewable fuel standard is expected
to stimulate growth of the biofuels industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Farm Bill provides for, among other
things, grants for demonstration scale biorefineries, and loan guarantees for commercial scale biorefineries that produce advanced
biofuels (i.e., any fuel that is not corn-based). Section 9003 includes a Loan Guarantee Program under which the U.S.D.A. could
provide loan guarantees up to $250 million to fund development, construction, and retrofitting of commercial-scale refineries.
Section 9003 also includes a grant program to assist in paying the costs of the development and construction of demonstration-scale
biorefineries to demonstrate the commercial viability which can potentially fund up to 50% of project costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 33 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ARRA, passed into law in February 2009
makes $275 billion available for federal contracts, grants, and loans, some of which is devoted to investment into the domestic
renewable energy industry. Some other noteworthy governmental actions regarding the production of biofuels are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Small Ethanol Producer Credit</I>:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A tax credit valued at 10 cents per gallon
of ethanol produced. The credit may be claimed on the first 15 million gallons of ethanol produced by a small producer in a given
year. Qualified applicants are any ethanol producer with production capacity below 60 million gallons per year. This credit was
scheduled to terminate on December 31, 2010, but was recently renewed through 2011. As of May 2, 2012, the Small Ethanol Producer
Credit has not been renewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Credit for Production of Cellulosic
Biofuel</I>:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An integrated tax credit whereby producers
of cellulosic biofuel can claim up to $1.01 per gallon tax credit. The credit for cellulosic ethanol varies with other ethanol
credits such that the total combined value of all credits is $1.01 per gallon. As the VEETC and/or the Small Ethanol Producer Credits
(outlined above) decrease, the per-gallon credit for cellulosic ethanol production increases by the same amount (i.e. the value
of the credit is reduced by the amount of the VEETC and the Small Ethanol Producer Credit&mdash;currently, the value would be 40
cents per gallon). The credit applies to fuel produced after December 31, 2008. This credit is scheduled to terminate on December
31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Special Depreciation Allowance for Cellulosic
Biofuel Plant Property</I>:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A taxpayer may take a depreciation deduction
of 50% of the adjusted basis of a new cellulosic biofuel plant in the year it is put in service. Any portion of the cost financed
through tax-exempt bonds is exempted from the depreciation allowance. Before amendment by P.L. 110-343, the accelerated depreciation
applied only to cellulosic ethanol plants that break down cellulose through enzymatic processes&mdash;the amended provision applies
to all cellulosic biofuel plants acquired after December 20, 2006, and placed in service before January 1, 2013. This accelerated
depreciation allowance is scheduled to terminate on December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Research and Development Activities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the fiscal years ending December 31,
2011 and 2010, we spent approximately $595,302 and $1,096,653 on project development costs, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To date, project development costs include
the research and development expenses related to our future cellulose-to-ethanol production facilities including site development,
and engineering activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compliance with Environmental Laws</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will be subject to extensive air, water
and other environmental regulations and we will have to obtain a number of environmental permits to construct and operate our plants,
including, air pollution construction permits, a pollutant discharge elimination system general permit, storm water discharge permits,
a water withdrawal permit, and an alcohol fuel producer&rsquo;s permit. In addition, we may have to complete spill prevention control
and countermeasures plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The production facilities that we will
build are subject to oversight activities by the federal, state, and local regulatory agencies. There is always a risk that the
federal agencies may enforce certain rules and regulations differently than state environmental administrators. State or federal
rules are subject to change, and any such changes could result in greater regulatory burdens on plant operations. We could also
be subject to environmental or nuisance claims from adjacent property owners or residents in the area arising from possible foul
smells or other air or water discharges from the plant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have 5 full time employees as of May
2, 2012, and 1 part time employee. None of our employees are subject to a collective bargaining agreement, and we believe that
our relationship with our employees is good.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF PROPERTY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We lease approximately 6,425 square feet
of furnished office space at 31 Musick, Irvine, California 92618 from Jeong Yun Kim for $11,691 per month on a month-to-month basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 34 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 9, 2007, we issued a check
in the amount of $96,851, towards the purchase of the land for the Lancaster Biorefinery totaling a purchase price of $109,108.
The approximately 10 acre site is presently vacant and undisturbed except to occasional use by off road vehicles. The site is flat
and has no distinguishing characteristics and is adjacent to a solid waste landfill at a site that minimizes visual access from
outside the immediate area.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 14, 2010, we entered in to a lease
with Itawamba County, Mississippi. The lease is for 38 acres located in the Port of Itawamba where our Fulton Project will be located.
The lease is a 30 year term and currently is $10,292 per month and will be reduced, following a formula tied to jobs creation in
the State of Mississippi.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently not involved in any litigation
that we believe could have a material adverse effect on our financial condition or results of operations. &nbsp;There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or
affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries&rsquo; officers or directors
in their capacities as such, in which an adverse decision could have a material adverse effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Some of the statements contained in this
prospectus that are not historical facts are &ldquo;forward-looking statements&rdquo; which can be identified by the use of terminology
such as &ldquo;estimates,&rdquo; &ldquo;projects,&rdquo; &ldquo;plans,&rdquo; &ldquo;believes,&rdquo; &ldquo;expects,&rdquo; &ldquo;anticipates,&rdquo;
&ldquo;intends,&rdquo; or the negative or other variations, or by discussions of strategy that involve risks and uncertainties.
&nbsp;We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this prospectus,
reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors
affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement
of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding anticipated events. &nbsp;All written and oral forward-looking
statements made are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary
statements. &nbsp;Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such
forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Plan of Operation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our primary business encompasses development
activities culminating in the design, construction, ownership and long-term operation of cellulosic ethanol production biorefineries
utilizing the licensed Arkenol Technology in North America. Our secondary business is providing support and operational services
to Arkenol Technology based biorefineries worldwide. As such, we are currently in the development-stage of finding suitable locations
and deploying project opportunities for converting cellulose fractions of municipal solid waste and other opportunistic feedstock
into ethanol fuels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our initial planned biorefineries in North
America are projected as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">A biorefinery that will process approximately 190 tons of green waste material annually to produce roughly 3.9 million gallons of ethanol annually. On November 9, 2007, we purchased the facility site which is located in Lancaster, California for the BlueFire Ethanol Lancaster project (&ldquo;Lancaster Biorefinery&rdquo;). Permit applications were filed on June 24, 2007, to allow for construction of the Lancaster Biorefinery. On or around July 23, 2008, the Los Angeles Planning Commission approved the use permit for construction of the plant. However, a subsequent appeal of the county decision, which BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of the now non-appealable permit approval to December 12, 2008. On February 12, 2009, we were issued our &ldquo;Authority to Construct&rdquo; permit by the Antelope Valley Air Quality Management District. In 2009 the Company submitted an application for a $58 million dollar loan guarantee for the Lancaster Biorefinery with the the DOE Program DE-FOA-0000140 (&ldquo;DOE LGPO&rdquo;), which provides federal loan guarantees for projects that employ innovative energy efficiency, renewable energy, and advanced transmission and distribution technologies. In 2010, the Company was informed that the loan guarantee for the planned biorefinery in Lancaster, California, was rejected by the DOE due to a lack of definitive contracts for feedstock and off-take at the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was also pursuing a much larger project in Fulton, Mississippi. In December 2011, BlueFire requested an extension to pay the project&rsquo;s permits for an additional year while we awaited potential financing. The Company is evaluating whether or not it&rsquo;s prudent to extend the project&rsquo;s permits an additional year while we await potential financing. We have completed the detailed engineering and design on the project and are seeking funding in order to build the facility. We estimate the total cost including contingencies to be in the range of approximately $100 million to $125 million for the Lancaster Biorefinery. At the end of 2008 and throughout 2009, prices for materials declined, although we expect, that prices for items like structural and specialty steel may firm up in 2012 along with other materials of construction. The cost approximations above do not reflect any fluctuations in raw materials or construction costs since the original pricing estimates. Additionally, this project is considered shovel ready and only requires minimal capital to maintain until funding is obtained for its construction. The preparation for the construction of this plant was the primary capital uses in prior years. We are currently in discussions with potential sources of financing for this facility but no definitive agreements are in place.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 35 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">A biorefinery proposed for development and construction in conjunction with the DOE, previously located in Southern California, and now located in Fulton, Mississippi, which will process approximately 700 metric dry tons of woody biomass, mill residue, and other cellulosic waste to produce approximately 19 million gallons of ethanol annually (&ldquo;Fulton Project&rdquo;). In 2007, we received an Award from the DOE of up to $40 million for the Fulton Project. On or around October 4, 2007, we finalized Award 1 for a total approved budget of just under $10,000,000 with the DOE. This award is a 60%/40% cost share, whereby 40% of approve costs may be reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. On December 4, 2009, the DOE announced that the award for this project has been increased to a maximum of $88 million under the American Recovery and Reinvestment Act of 2009 (&ldquo;ARRA&rdquo;) and the Energy Policy Act of 2005. As of December 31, 2011, BlueFire has been reimbursed approximately $9,217,869 from the DOE under this award. In 2010, BlueFire signed definitive agreements for the following three crucial contracts related to the Fulton Project: (a) feedstock supply with Cooper Marine, (b) off-take for the ethanol of the facility with Tenaska, and (c) the construction of the facility with MasTec. Also in 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed both the FEL-2 and FEL-3 stages of engineering readying the facility for construction. As of November 2010, the Fulton Project has all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project&rsquo;s application will not move forward until such time as the project has raised the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the USDA, which would represent substantially all of the funding shortfall on the project. In October 2011, BlueFire was notified by its lender (&ldquo;Lender&rdquo;) for the Company&rsquo;s USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity to provide any new information and potential alternatives for the USDA&rsquo;s consideration. The Company plans to continue to work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution of another lender. However, no assurances can be made. In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China&rsquo;s fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire is currently in negotiations with China Huadian Corp, but no definitive agreements have yet been executed.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 36 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Several other opportunities are being evaluated
by us in North America, although no definitive agreements have been reached.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">In November 2011, BlueFire created SucreSource LLC, a wholly owned subsidiary specifically tasked to partner with synergistic back end companies that need cellulosic sugars as a feedstock for their fermentation or chemical processes. SucreSource will utilize the Arkenol process to provide the front end technology to partner with these companies. SucreSource is cultivating relationships and will continue to develop them throughout 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BlueFire&rsquo;s capital requirement strategy for its planned
biorefineries are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Obtain additional operating capital from joint venture partnerships, Federal or State grants or loan guarantees, debt financing or equity financing to fund our ongoing operations and the development of initial biorefineries in North America. Although the Company is in discussions with potential financial and strategic sources of financing for their planned biorefineries no definitive agreements are in place.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">The 2008 Farm Bill, Title IX (Energy Title) provides grants for demonstration scale Biorefineries, and loan guarantees for commercial scale Biorefineries that produce advanced Biofuels (i.e., any fuel that is not corn-based). Section 9003 includes a Loan Guarantee Program under which the USDA could provide loan guarantees up to $250 million to fund development, construction, and retrofitting of commercial-scale refineries. Section 9003 also includes a grant program to assist in paying the costs of the development and construction of demonstration-scale biorefineries to demonstrate the commercial viability which can potentially fund up to 50% of project costs. BlueFire plans to pursue all available opportunities within the Farm Bill, although initial attempts have been unsuccessful.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">Utilize proceeds from reimbursements under the DOE contract.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-autospace: none; text-align: justify">As available and as applicable to our business plans, applications for public funding will be submitted to leverage private capital raised by us.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>DEVELOPMENTS IN BLUEFIRE&rsquo;S BIOREFINERY ENGINEERING
AND DEVELOPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, BlueFire continued to develop
the engineering package for the Fulton Project, and completed the Front-End Loading (FEL) stages 2 and FEL-3 of engineering for
the Fulton Project readying the facility for construction. FEL is the process for conceptual development of processing industry
projects. This process is used in the petrochemical, refining, and pharmaceutical industries. Front-End Loading is also referred
to as Front-End Engineering Design (FEED).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are three stages in the FEL process:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 19%; border-bottom: black 1pt solid; text-autospace: none; font-weight: bold">FEL-1</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 29%; border-bottom: black 1pt solid; text-autospace: none; font-weight: bold">FEL-2</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 50%; border-bottom: black 1pt solid; text-autospace: none; font-weight: bold">FEL-3</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Material Balance</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Equipment Design</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Purchase Ready Major Equipment Specifications</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Energy Balance</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Layout</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Definitive Estimate</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">* Project Charter</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Schedule</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Project Execution Plan</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary Estimate</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Preliminary 3D Model</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Electrical Equipment List</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Line List</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">* Instrument Index</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of November 2010, the Fulton Project
has all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning
of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction.
In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project,
under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project&rsquo;s
application will not move forward until such time as the project has raised the remaining equity necessary for the completion of
funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the U.S. Department of Agriculture
(&ldquo;USDA&rdquo;) under Section 9003 of the 2008 Farm Bill, as defined below (&ldquo;USDA LG&rdquo;). In October 2011, BlueFire
was notified by its lender (&ldquo;Lender&rdquo;) for the Company&rsquo;s USDA loan guarantee application that the USDA sent the
Lender notice that they are currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered
to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and
the Company the opportunity to provide any new information and potential alternatives for the USDA&rsquo;s consideration. The Company
plans to continue to work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may
include the substitution of another lender; however, no assurances can be made that the Company will be able to satisfy these requirements.
In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp.,
which is China&rsquo;s fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing.
BlueFire is currently in negotiations with China Huadian Corp, but no definitive agreements have yet been executed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 37 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 27, 2010, the Company announced
a contract with Cooper Marine &amp; Timberlands to provide feedstock for the Company&rsquo;s planned Fulton Project for a period
of up to 15 years. Under the agreement, Cooper Marine &amp; Timberlands (&ldquo;CMT&rdquo;) will supply the project with all of
the feedstock required to produce approximately 19-million gallons of ethanol per year from locally sourced cellulosic materials
such as wood chips, forest residual chips, pre-commercial thinnings and urban wood waste such as construction waste, storm debris,
land clearing; or manufactured wood waste from furniture manufacturing. Under the Agreement, CMT will pursue a least-cost strategy
for feedstock supply made possible by the project site's proximity to feedstock sources and the flexibility of BlueFire's process
to use a wide spectrum of cellulosic waste materials in pure or mixed forms. CMT, with several chip mills in operation in Mississippi
and Alabama, is a member company of Cooper/T. Smith one of America's oldest and largest stevedoring and maritime related firms
with operations on all three U.S. coasts and foreign operations in Central and South America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 20, 2010, the Company announced
an off-take agreement with Tenaska BioFuels, LLC (&ldquo;TBF&rdquo;) for the purchase and sale of all ethanol produced at the Company&rsquo;s
planned Fulton Project. Pricing of the 15-year contract follows a market-based formula structured to capture the premium allowed
for cellulosic ethanol compared to corn-based ethanol giving the Company a credit worthy contract to support financing of the project.
Despite the long-term nature of the contract, the Company is not precluded from the upside in the coming years as fuel prices rise.
TBF, a marketing affiliate of Tenaska, provides procurement and marketing, supply chain management, physical delivery, and financial
services to customers in the agriculture and energy markets, including the ethanol and biodiesel industries. In business since
1987, Tenaska is one of the largest independent power producers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 4, 2010, the Company submitted
a loan guarantee request to the USDA for $250 million for the Fulton Project. In October 2011, BlueFire was notified by its lender
(&ldquo;Lender&rdquo;) for the Company&rsquo;s USDA loan guarantee application that the USDA sent the Lender notice that they are
currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered to meet with the Lender and
the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity
to provide any new information and potential alternatives for the USDA&rsquo;s consideration. The Company plans to continue to
work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution
of another lender.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 15, 2010, the board of directors
of BlueFire, by unanimous written consent, approved the filing of a Certificate of Amendment to the Company&rsquo;s Articles of
Incorporation with the Secretary of State of Nevada, changing the Company&rsquo;s name from BlueFire Ethanol Fuels, Inc. to BlueFire
Renewables, Inc. Our Board of Directors and management believe that changing our name to BlueFire Renewables, Inc. more accurately
reflects our primary business plan expanding the focus from just building cellulosic ethanol projects to include other advanced
biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants. On July 20, 2010, the Certificate of Amendment
was accepted by the Secretary of State of Nevada.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Year Ended December 31, 2011 Compared
to the Year Ended December 31, 2010</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue excluding unbilled grant revenue,
for the year ended December 31, 2011 and 2010, were approximately $36,000 and $641,000, respectively, and was primarily related
to a federal grant from the DOE. The grant generally provides for reimbursement in connection with related development and construction
costs involving commercialization of our technologies. The decrease in revenue was partially due to limitations of capital and
decreased activity in fiscal 2011 as the Company seeks funding for the Fulton project. The majority of the difference ($354,000)
was due to a change in accounting estimate for revenue realized in prior years. The change stems from billings in excess of estimated
earnings. These earnings were based on estimates accepted by the DOE at the time of reimbursement. Upon subsequent review by the
DOE a change in estimate was required and a cumulative catch up adjustment was necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 38 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Unbilled Grant Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unbilled grant revenues for the year ended
December 31, 2011 and 2010, were approximately $169,000 and $28,000, respectively. The increase in unbilled grant revenues is a
result of having limited cash resources in the fourth quarter of 2011 to pay for reimbursable costs under the DOE grant. These
costs are expected to be partially realized with financing obtained in March 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Project Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2011, our
project development costs were approximately $595,000, compared to project development costs of $1,097,000 for the same period
during 2010. The decrease in project development costs is mainly due to a decrease in project activities subsequent to completing
the preparation of the Fulton site in June 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>General and Administrative Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">General and Administrative Expenses were
approximately $1,753,000 for the year ended December 31, 2011, compared to $1,997,000 for the same period in 2010. The decrease
in general and administrative costs is mainly due to reduced non-critical operations at the end of fiscal 2011 to conserve working
capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historically, we have funded our operations
through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders
and outside investors. In addition, we receive funds under the grant received from the DOE. Our principal use of funds has been
for the further development of our bio-refinery projects, for capital expenditures and general corporate expenses. As our projects
are developed to the point of construction, we anticipate significant purchases of long lead time item equipment for construction
which will require a significant amount of capital. As of December 31, 2011, we had cash and cash equivalents of approximately
$15,000. As of May 2, 2012, we had cash and cash equivalents of approximately $71,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historically, we have funded our operations
though the following transactions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2009, the Company obtained
a line of credit in the amount of $570,000 from Arkenol Inc., its technology licensor, to provide additional liquidity to the Company
as needed, the credit line was ultimately paid back during 2009 and cancelled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2009, the Company received additional
funds of approximately $3,800,000 from the DOE, due to the success in amending its DOE award to include costs previously incurred
in connection with the development of the Lancaster Biorefinery which have a direct attributable benefit to the Fulton Project.
The funds were used to fund operations for the remainder of 2009 and most of 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 15, 2010, the Company entered
into a $200,000 loan agreement (&ldquo;Loan&rdquo;) with Arnold Klann, the Chief Executive Officer (&ldquo;CEO/Lender&rdquo;).
The Loan requires the Company to (i) pay to the CEO/Lender a one-time amount equal to fifteen percent (15%) of the Loan in cash
or shares of the Company&rsquo;s common stock at a value of $0.50 per share, at the CEO/Lender&rsquo;s option; and (ii) issue the
CEO/Lender warrants allowing the CEO/Lender to buy 500,000 common shares of the Company at an exercise price of $0.50 per common
share, such warrants to expire on December 15, 2013. The Company has promised to pay in full the outstanding principal balance
of any and all amounts due under the Loan Agreement within thirty (30) days of the Company&rsquo;s receipt of investment financing
or a commitment from a third party to provide $1,000,000 to the Company or one of its subsidiaries. The proceeds from this loan
are being used to fund operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 39 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 23, 2010, the Company sold
a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC (&ldquo;BlueFire Fulton&rdquo;
or the &ldquo;Fulton Project&rdquo;), to an accredited investor for a purchase price of $750,000 (&ldquo;Purchase Price&rdquo;).
The Company maintains a 99% ownership interest in BlueFire Fulton. In addition, the investor received a right to require the Company
to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future contingent events based
upon obtaining financing for the construction of the Fulton Project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 10, 2011, the Company obtained
a line of credit in the amount of $40,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional
liquidity to the Company as needed, at his sole discretion. Under the terms of the note, the Company is to repay any principal
balance and interest, at 12% per annum, within 30 days of receiving qualified investment financing of $100,000 or more. As of May
2, 2012, the outstanding balance on the line of credit is approximately $19,200.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 19, 2011, the Company signed
a $10 million purchase agreement (the &ldquo;Purchase Agreement&rdquo;) with Lincoln Park Capital Fund, LLC (&ldquo;LPC&rdquo;),
an Illinois limited liability company. The Company also entered into a registration rights agreement with LPC whereby we agreed
to file a registration statement related to the transaction with the U.S. Securities &amp; Exchange Commission (&ldquo;SEC&rdquo;)
covering the shares that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the
Purchase Agreement the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase
Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">After the SEC declared effective the registration
statement related to the transaction, we have the right, in our sole discretion, over a 30-month period to sell our shares of common
stock to LPC in amounts up to $500,000 per sale, depending on certain conditions as set forth in the Purchase Agreement, up to
the aggregate commitment of $10 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has estimated that operating
expenses for the next twelve months will be approximately $1,700,000, excluding engineering costs related to the development of
bio-refinery projects. These matters raise substantial doubt about the Company&rsquo;s ability to continue as a going concern.
For the remainder of 2012, the Company intends to fund its operations with reimbursements under the Department of Energy contract,
from the sale of Fulton Project equity ownership, from the sale of debt and equity instruments, and our equity purchase agreement
consummated with LPC in January 2011 (as discussed herein). The Company's ability to get reimbursed on the DOE contract is dependent
on the availability of cash to pay for the related costs. As of May 2, 2012, the Company expects the current resources, as well
as the resources available in the short term under the LPC Purchase Agreement, will only be sufficient for a period of approximately
two months, depending upon certain funding conditions contained herein, unless significant additional financing is received. Management
has determined that these general expenditures must be reduced and additional capital will be required in the form of equity or
debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue
liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable
to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of
our planned development, which could harm our business, financial condition and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Changes in Cash Flows</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2011,
we invested approximately $613,000 and received DOE reimbursements of approximately $490,000 for net DOE reimbursements of approximately
$123,000, in construction activities at our Fulton Project, compared with $634,000, net of DOE reimbursements in the same period
in 2010. This invested decrease was due to the decrease of the engineering and other capitalizable costs in connection with the
development of the Fulton Project as it has become shovel ready. The decrease in the DOE reimbursements was due to the decrease
of work at the Fulton site in partnership with the County of Itawamba of the State of Mississippi and their contributing costs
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We received net proceeds from LPC of approximately
$350,000 for the year ended December 31, 2011, for shares of the Company&rsquo;s common stock and warrants. There were no such
financing transactions during the year ended December 31, 2010 as cash on hand was sufficient to fund operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 40 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We prepare our consolidated financial statements
in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial
statements require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during
the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates as a result of different assumptions or conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The methods, estimates, and judgment we
use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements.
The SEC has defined &ldquo;critical accounting policies&rdquo; as those accounting policies that are most important to the portrayal
of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of
the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate
to the fair value of warrant liabilities. We also have other key accounting estimates and policies, but we believe that these other
policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less
likely that they would have a material impact on our reported results of operations for a given period. For additional information
see Note 2, &ldquo;Summary of Significant Accounting Policies&rdquo; in the notes to our audited financial statements appearing
elsewhere in this registration statement. Although we believe that our estimates and assumptions are reasonable, they are based
upon information presently available, and actual results may differ significantly from these estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not have any off-balance sheet arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(a) Market Information</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our shares of common stock began trading
under the symbol &ldquo;BFRE.PK&rdquo; on the Pink Sheets of the National Quotation Bureau on July 11, 2006 and later began trading
on the OTCBB under the symbol &ldquo;BFRE.OB&rdquo; on June 19, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth the high
and low trade information for our common stock for each quarter during the past three fiscal years. The prices reflect inter-dealer
quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold">Quarter ended</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Low Price</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">High Price</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 68%; font-size: 10pt">March 31, 2009</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0.51</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">1.00</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">June 30, 2009</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.55</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.60</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">September 30, 2009</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.80</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.20</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">December 31, 2009</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.85</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.25</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">March 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.34</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1.00</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">June 30, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.17</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.37</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">September 30, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.09</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.50</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.43</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.66</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">March 31, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.35</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.48</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">June 30, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.15</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.44</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">September 30, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.15</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.25</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">December 31, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.13</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.30</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I>&nbsp;</P>

<!-- Field: Page; Sequence: 41 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(b) Holders</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, a total of 32,776,919
shares of the Company&rsquo;s common stock are currently outstanding held by approximately 2,750 shareholders of record.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Transfer Agent and Registrar</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The transfer agent and registrar for our
common stock is First American Stock Transfer with its business address at 4747 N 7th Street, Suite 170, Phoenix, AZ 85014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(c) Dividends</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not declared or paid any dividends
on our common stock and intend to retain any future earnings to fund the development and growth of our business. Therefore, we
do not anticipate paying dividends on our common stock for the foreseeable future. There are no restrictions on our present ability
to pay dividends to stockholders of our common stock, other than those prescribed by Nevada law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(d) Securities Authorized for Issuance
under Equity Compensation Plans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>2006 Incentive and Non-Statutory Stock
Option Plan, as Amended</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to compensate our officers, directors, employees and/or
consultants, on December 14, 2006, our Board of Directors approved and stockholders ratified by consent the 2006 Incentive and
Non-Statutory Stock Option Plan (the &ldquo;Plan&rdquo;). The Plan has a total of 10,000,000 shares reserved for issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 16, 2007, the Board of Directors
reviewed the Plan. As such, it determined that the Plan was to be used as a comprehensive equity incentive program for which the
Board of Directors serves as the plan administrator and, therefore, amended the Plan (the &ldquo;Amended and Restated Plan&rdquo;)
to add the ability to grant restricted stock awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Amended and Restated Plan, an
eligible person in the Company&rsquo;s service may acquire a proprietary interest in the Company in the form of shares or an option
to purchase shares of the Company&rsquo;s common stock. The amendment includes certain previously granted restricted stock awards
as having been issued under the Amended and Restated Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011, we have issued
the following stock options and grants under the Amended and Restated Plan:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Equity Compensation Plan Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt">Plan category</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of securities to be <BR>issued upon exercise of <BR>outstanding options, <BR>warrants and rights and <BR>number of shares of <BR>restricted stock</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Weighted average <BR>exercise price <BR>of outstanding <BR>options, warrants <BR>and rights (2)</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of securities <BR>remaining available for <BR>future issuance</TD><TD NOWRAP STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 52%; font-size: 10pt; text-align: left">Equity compensation plans approved by security holders under the Amended and Restated Plan</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">2,555,518 (1)</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">3.21</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">5,454,482</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Equity compensation plans not approved by security holders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Total</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,555,518</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">Excluding 20,000 options that have been exercised, and 2,057,500 options that expired in December
2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">Excludes shares of restricted stock issued under the Plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 42 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Rule 10B-18 Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2011
and 2010, there were no repurchases of the Company&rsquo;s common stock by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ACCOUNTING AND FINANCIAL DISCLOSURE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Directors and Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table and biographical summaries
set forth information, including principal occupation and business experience, about our directors and executive officers as of
May 2, 2012. There is no familial relationship between or among the nominees, directors or executive officers of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 21%; text-autospace: none; font-weight: bold">NAME</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 11%; text-autospace: none; font-weight: bold; text-align: center">AGE</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 38%; text-autospace: none; font-weight: bold">POSITION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 27%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>OFFICER AND/OR</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTOR SINCE</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">Arnold Klann</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">60</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">President, CEO and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">June 2006</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">Necitas Sumait</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">52</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">Secretary, SVP and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">June 2006</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">John Cuzens</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">60</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">SVP, Chief Technology Officer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">June 2006</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">Chris Nichols</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">46</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">June 2006</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none">Joseph Sparano</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">64</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">March 2011</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s directors serve in
such capacity until the first annual meeting of the Company&rsquo;s shareholders and until their successors have been elected and
qualified. The Company&rsquo;s officers serve at the discretion of the Company&rsquo;s board of directors, until their death, or
until they resign or have been removed from office.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no agreements or understandings
for any director or officer to resign at the request of another person and none of the directors or officers is acting on behalf
of or will act at the direction of any other person. The activities of each director and officer are material to the operation
of the Company. No other person&rsquo;s activities are material to the operation of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Arnold R. Klann &ndash; Chairman of
the Board and Chief Executive Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Klann has been our Chairman of the
Board and Chief Executive Officer since our inception in March 2006. Mr. Klann has been President of ARK Energy, Inc. and Arkenol,
Inc. from January 1989 to present. Mr. Klann has an AA from Lakeland College in Electrical Engineering. BlueFire believes that
Mr. Klann&rsquo;s contacts in the ethanol and cellulose industries and his overall insight into our business are a valuable asset
to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Necitas Sumait &ndash; Senior Vice President
and Director</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mrs. Sumait has been our Director and Senior
Vice President since our inception in March 2006. Prior to this, Mrs. Sumait was Vice President of ARK Energy/Arkenol from December
1992 to July 2006. Mrs. Sumait has a MBA in Technological Management from Illinois Institute of Technology and a B.S. in Biology
from DePaul University. BlueFire believes that Mrs. Sumait&rsquo;s work with, and insight into, the environmental regulation and
policy of our business is a valuable asset to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>John Cuzens - Chief Technology Officer
and Senior Vice President</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Cuzens has been our Chief Technology
Officer and Senior Vice President since our inception in March 2006. Mr. Cuzens was a Director from March 2006 until his resignation
from the Board of Directors in July 2007. Prior to this, he was Director of Projects Wahlco Inc. from 2004 to June 2006. He was
employed by Applied Utility Systems Inc from 2001 to 2004 and Hydrogen Burner Technology form 1997-2001. He was with ARK Energy
and Arkenol from 1991 to 1997 and is the co-inventor on seven of Arkenol&rsquo;s eight U.S. foundation patents for the conversion
of cellulosic materials into fermentable sugar products using a modified strong acid hydrolysis process. Mr. Cuzens has a B.S.
Chemical Engineering degree from the University of California at Berkeley.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 43 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Chris Nichols &ndash; Director (Chairman,
Compensation Committee)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Nichols has been our Director since
our inception in March 2006. Mr. Nichols is currently the Chief Sales Officer for Field Nation, LLC. Previously, Mr Nichols was
the Chairman of the Board and Chief Executive Officer of Advanced Growing Systems, Inc. From 2003 to 2006, Mr. Nichols was the
Senior Vice President of Westcap Securities&rsquo; Private Client Group. Prior to this, Mr. Nichols was a Registered Representative
at Fisher Investments from December 2002 to October 2003. He was a Registered Representative with Interfirst Capital Corporation
from 1997 to 2002. Mr. Nichols is a graduate of California State University in Fullerton with a B.A. degree in Marketing. The Company
believes that Mr. Nichols&rsquo; experience in public company financing will assist us with the formation of new capital into the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Joseph Sparano &ndash; Director</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Sparano currently serves as an executive
advisor to the Western States Petroleum Association&rsquo;s (&ldquo;WSPA&rdquo;) board of directors. WSPA is an non-profit trade
association that represents companies that account for the bulk of petroleum exploration, production, refining, transportation
and marketing in the six western states of Arizona, California, Hawaii, Nevada, Oregon and Washington. In his role as executive
advisor, Mr. Sparano advises the WSPA&rsquo;s President and Chairman on matters related to the trade organization&rsquo;s operations
and advocacy in six Western states (CA, AZ, NV, WA, OR, HI). Mr. Sparano has served in such role since January 2010, at which time
he resigned as the President of the WSPA, a role in which he served since March 2003. Prior to joining the WSPA, from March 2000
to March 2003, Mr. Sparano served as the President of Tesoro Petroleum Corporation&rsquo;s (&ldquo;Tesoro&rdquo;) West Coast Regional
Business Unit and as Vice President of the company&rsquo;s Heavy Fuels Marketing segment. Tesoro is an independent marketer and
refiner of petroleum products. Prior to joining Teroso, from September 1990 to August 1995, Mr. Sparano served as the Chairman
and Chief Executive Officer of Pacific Refining Company, a California based petroleum refining operation. Mr. Sparano graduated
cum laude from the Stevens Institute of Technology, receiving a B.S. in chemical engineering. The Company believes that Mr. Sparano&rsquo;s
experience in both mergers and acquisitions and in representing the oil and gas industry will assist us with the formation of new
strategic partnerships.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Family Relationships</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no family relationships among
our directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Executive Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as set forth below, no director
or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy
petition filed against it during the past five years. No director or executive officer has been convicted of a criminal offense
or is the subject of a pending criminal proceeding during the past five years. No director or executive officer has been the subject
of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities during the past five years. No director or officer has been
found by a court to have violated a federal or state securities or commodities law during the past five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Nichols was a director of Advanced
Nurseries, Inc. (&ldquo;Advanced Nurseries&rdquo;), until September 2009. In March 2009, Advanced Nurseries filed for Chapter 11
bankruptcy. In September 2009, the bankruptcy was voluntarily converted into a Chapter 7 bankruptcy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Nichols was a director of Organic Growing
Systems, Inc. (&ldquo;Organic&rdquo;), until June 2010. In February 2010, Organic filed for Chapter 11 bankruptcy. In June 2010,
the bankruptcy was voluntarily converted into a Chapter 7 bankruptcy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None of our directors or executive officers
or their respective immediate family members or affiliates are indebted to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 44 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Committees of the Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each of our Audit Committee, Compensation
Committee and Nomination Committee are composed of a majority of independent board members and are also chaired by an independent
board member.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Audit Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Christopher Nichols</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compensation Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Christopher Nichols, Chairman</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Nomination Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are currently no members in the Nomination
Committee</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compliance with Section 16(a) of the
Exchange Act</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Section 16(a) of the Exchange Act requires
the Company&rsquo;s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered
under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC.
Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish
the Company with copies of all reports filed by them in compliance with Section 16(a). To the best of the Company&rsquo;s knowledge,
any reports required to be filed were timely filed as of May 2, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Code of Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has adopted a Code of Ethics
that applies to the Registrant&rsquo;s directors, officers and key employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Board Nomination Procedure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There has been no material change to the
procedures by which security holders may recommend nominees to the Company&rsquo;s board of directors since the Company provided
disclosure on such process on its proxy statement on Schedule 14A, as amended, filed on May 19, 2010, with the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth information
with respect to compensation paid by us to our executive officers during the three most recent fiscal years. This information includes
the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 45 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Summary
Compensation Table</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-autospace: none; font-size: 10pt; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name
    and <BR> Principal Position</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary
    <BR> ($)(5)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Bonus
    <BR> ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock
    <BR> Awards <BR> ($) (2)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option
    <BR> Awards <BR> ($) (2)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-Equity
    <BR> Incentive Plan <BR> Compensation <BR> ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-Qualified<BR>
    Deferred<BR> Compensation<BR> Earnings ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">All
    Other <BR> Compensation <BR> ($) (3)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total
    <BR> ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Arnold Klann</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2011</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">226,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">226,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Chief Executive Officer,</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2010</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">226,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,440 (1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">45,525</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">272,965</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">President</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="width: 19%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 6%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Necitas Sumait</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2011</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Secretary,</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2010</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,400 (1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">20,925</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">202,325</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Vice President</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">John Cuzens</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2011</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Treasurer,</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2010</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">180,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">8,654</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">188,654</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Vice President</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Christopher Scott</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2011</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">90,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">90,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Former Chief</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">2010</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">120,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">120,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Financial Officer (4)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(1)</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">Reflects the value of shares of restricted common stock issued as compensation
for serving on the Company&rsquo;s board of directors. See notes to the consolidated financial statements for valuation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(2)</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">Valued based on the Black-Scholes valuation model at the date of grant, see
note to the consolidated financial statements.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(3)</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">Reflects the cash payments made to the executives for paid time off.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(4)</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">Mr. Scott resigned from his position as Chief Financial Officer of the Company
on September 23, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(5)</FONT></TD><TD STYLE="text-align: justify; padding-right: 0.5in">In 2011, due to a lack of capital, the Company accrued, but had not paid
back salary in the amounts of $75,333 to Mr. Klann, $60,000 to Ms. Sumait, $60,000 to Mr. Cuzens, and $10,000 to Mr. Scott.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>2011
Outstanding Equity Awards at Fiscal Year</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="21" STYLE="text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">OPTION
    AWARDS</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="14" STYLE="text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">STOCK
    AWARDS</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-autospace: none; font-size: 10pt; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number
    of <BR> Securities <BR> Underlying <BR> Unexercised <BR> Options (#) <BR> Exercisable</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number
    of <BR> Securities <BR> Underlying <BR> Unexercised <BR> Options (#) <BR> Unexercisable</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Equity
    <BR> Incentive Plan <BR> Awards: <BR> Number of <BR> Securities <BR> Underlying <BR> Unexercised <BR> Unearned <BR> Options
    (#)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option
    <BR> Exercise <BR> Price ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option
    <BR> Expiration <BR> Date</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Number
    <BR> of Shares <BR> or Units <BR> of Stock <BR> That <BR> Have Not <BR> Vested <BR> (#)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Market
    <BR> Value of <BR> Shares or <BR> Units of <BR> Stock <BR> That <BR> Have Not <BR> Vested <BR> ($)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Equity
    <BR> Incentive Plan <BR> Awards: <BR> Number of <BR> Unearned <BR> Shares, Units <BR> or Other <BR> Rights That <BR> Have
    Not <BR> Vested (#)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-autospace: none; font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Equity
    <BR> Incentive Plan <BR> Awards: <BR> Market or <BR> Payout Value <BR> of Unearned <BR> Shares, Units or <BR> Other Rights
    <BR> That Have Not <BR> Vested (#)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 8pt">Arnold Klann</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">28,409</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3.52</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">12/20/12</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3.20</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">12/20/12</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 8pt">Necitas Sumait</FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">118,750</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">87,500</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3.20</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">12/20/12</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 8pt">John Cuzens</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">118,750</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">87,500</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3.20</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">12/20/12</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Christopher Scott</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">118,750</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">87,500</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">(1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3.20</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">12/20/12</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Chris Nichols</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Roger Peterson (2)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(1)</FONT></TD><TD STYLE="text-align: justify">50% vested immediately upon grant in 2007, 25% vests on closing remainder of Lancaster Project
Funding, 25% vests at the start of construction of Lancaster Project.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="text-transform: uppercase">(2)</FONT></TD><TD STYLE="text-align: justify">Mr. Peterson resigned from his position as a member of the Company&rsquo;s board of directors on
January 25, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B>&nbsp;</FONT></P>

<!-- Field: Page; Sequence: 46 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>2011
Director Compensation Table</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-autospace: none; font-size: 10pt; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Fees
        Earned</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">or
        Paid in</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Cash
        ($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Stock</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Awards</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Option</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Awards</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Non-Equity</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Incentive
        Plan</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Compensation</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Change
        in</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Pension
        Value</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">and
        Non-<BR>
        Qualified<BR>
        Deferred</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Compensation</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Earnings
        ($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">All
        Other</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Compensation</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">($)</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">Total</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">($)</FONT></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Arnold Klann</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Necitas Sumait</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Chris Nichols (1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">5,000</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Roger Peterson</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="text-autospace: none; font-size: 10pt"><FONT STYLE="font-size: 8pt">Joseph Sparano (1)</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 8pt">5,000</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) These fees were accrued, yet unpaid, as of December 31,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employment Contracts</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 27, 2006, the Company entered into
employment agreements with three of its executive officers. The employment agreements are for a period of three years, which expired
in 2009, with prescribed percentage increases beginning in 2007 and can be cancelled upon a written notice by either employee or
employer (if certain employee acts of misconduct are committed). The total aggregate annual amount due under the employment agreements
is approximately $520,000. These contracts have not been renewed. Each of the executive officers are currently working for the
Company on a month to month basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, on June 27, 2006, the Company
entered into a Directors agreement with four individuals to join the Company&rsquo;s board of directors. Under the terms of the
agreement the non-employee Director (Chris Nichols) will receive annual compensation in the amount of $5,000 and all Directors
receive a onetime grant of 5,000 shares of the Company&rsquo;s common stock. The common shares vested immediately. The value of
the common stock granted was determined to be approximately $67,000 based on the estimated fair market value of the Company&rsquo;s
common stock over a reasonable period of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 31, 2008, the Board of Directors
approved the re-election of Victor Doolan, Joseph Emas, Christopher Nichols, Arnold Klann and Necitas Sumait. The Company also
resolved to grant each Board Chair, and the Secretary each an additional 5,000 shares of stock. The value of the common stock granted
at the time of the grant was determined to be approximately $123,000 based on the estimated fair market value of the Company&rsquo;s
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 23, 2009, the Board of Directors
approved the re-election of Victor Doolan, Joseph Emas, Christopher Nichols, Arnold Klann and Necitas Sumait. The Company also
resolved to grant each Board Chair, and the Secretary each an additional 5,000 shares of stock. The value of the common stock granted
at the time of the grant was determined to be approximately $5,250 based on the estimated fair market value of the Company&rsquo;s
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 22, 2009, the Company Board
of Directors accepted the resignation of Joseph I. Emas, which had been submitted on December 21, 2009. Mr. Emas served on the
Audit Committee, Compensation Committee and as Chairman of the Nominating Committee. Mr. Emas resignation was not a result of any
disagreements relating to the Company&rsquo;s operations, policies or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 15, 2010, the Company entered into
a Directors agreement with Roger Petersen to join the Company&rsquo;s board of directors. Under the terms of the agreement Mr.
Petersen will receive annual compensation in the amount of $5,000 and also Directors receive an annual grant of 6,000 shares of
the Company&rsquo;s common stock. The common shares vest immediately. The value of the common stock granted was determined to be
approximately $1,440 based on the estimated fair market value of the Company&rsquo;s common stock over a reasonable period of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 14, 2010, Victor Doolan resigned
from his position on the board of directors of the Company. His resignation was not the result of any disagreements with the Company
on any matters relating to the Company&rsquo;s operations, policies or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 1, 2011, the Company entered into
a director agreement with Joseph Sparano to join the Company&rsquo;s board of directors. Under the terms of the agreement, Mr.
Sparano will receive annual compensation in the amount of $5,000 and also directors receive an annual grant of 6,000 shares of
the Company&rsquo;s common stock. The common shares vest immediately. The value of the common stock will be determined when issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 23, 2011, Christopher Scott
resigned from his position as the Chief Financial Officer of the Company. His resignation was not the result of any disagreements
with the Company on any matters relating to the Company&rsquo;s operations, policies or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 47 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 25, 2012, Roger Peterson resigned
from his position on the board of directors of the Company. His resignation was not the result of any disagreements with the Company
on any matters relating to the Company&rsquo;s operations, policies or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, our authorized capitalization
was 101,000,000 shares of capital stock, consisting of 100,000,000 shares of common stock, $0.001 par value per share and 1,000,000
shares of preferred stock, no par value per share. As of May 2, 2012, there were 32,776,919 shares of our common stock outstanding,
all of which were fully paid, non-assessable and entitled to vote. Each share of our common stock entitles its holder to one vote
on each matter submitted to the stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth, as of May
2, 2012, the number of shares of our common stock owned by (i) each person who is known by us to own of record or beneficially
five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive officers and (iv)
all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting
and investment power with respect to the shares of our common stock beneficially owned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Executive Officers, Directors, and More than 5% Beneficial
Owners</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The address of each owner who is an officer or director is c/o
the Company at 31 Musick, Irvine California 92618.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold">Name of Beneficial Owner (1)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Shares</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent of Class (2)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left">Arnold Klann</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">13,579,909</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">(3)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">40.62</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Chief Executive Officer, President, Chairman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Necitas Sumait</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,336,750</TD><TD STYLE="font-size: 10pt; text-align: left">(4)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Senior Vice President, Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">John Cuzens</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,302,250</TD><TD STYLE="font-size: 10pt; text-align: left">(5)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Chief Technology Officer, Senior Vice President</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Chris Nicols</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">16,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Joseph Sparano</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">*</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">All officers and directors as a group (5 persons)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">48.22</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">James G. Speirs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,703,489</TD><TD STYLE="font-size: 10pt; text-align: left">(6)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15.40</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">All officers, directors and 5% holders as a group (6 persons)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">57.84</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* denotes less than 1%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(1)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">Beneficial ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(2)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">Figures may not add up due to rounding of percentages.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(3)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">Includes options and warrants to purchase 653,409 shares of common stock vested at May 2, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(4)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">Includes options to purchase 118,750 shares of common stock vested at May 2, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(5)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">Includes options to purchase 118,750 shares of common stock vested at May 2, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; text-autospace: none; font-size: 10pt">(6)</TD>
    <TD STYLE="text-autospace: none; font-size: 10pt; text-align: justify">As per Form 13G filed on February 6, 2012, and includes options and warrants to purchase 4,260,741 shares of common stock vested at May 2, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 48 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Share Issuances/Consulting Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 31, 2008, the Company renewed all
of its existing Directors appointments, issued 6,000 shares to each and paid $5,000 to the three outside members. Pursuant to the
Board of Director agreements, the Company&rsquo;s &ldquo;in-house&rdquo; board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $123,000 based on the fair
market value of the Company&rsquo;s common stock of $4.10 on the date of the grant. During the years ended December 31, 2008, the
Company expensed approximately $138,000, related to the agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 23, 2009, the Company renewed all
of its existing Directors&rsquo; appointment, issued 6,000 shares to each and paid $5,000 to the three outside member. Pursuant
to the Board of Director agreements, the Company's &quot;in-house&quot; board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $26,400 based on the fair
market value of the Company&rsquo;s common stock of $0.88 on the date of the grant. During the year 2009 the Company expensed approximately
$41,400 related to these agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 15, 2010, the Company renewed all
of its existing Directors&rsquo; appointment, issued 6,000 shares to each and paid $5,000 to the three outside member. Pursuant
to the Board of Director agreements, the Company's &quot;in-house&quot; board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $7,200 based on the fair
market value of the Company&rsquo;s common stock of $0.24 on the date of the grant. During the year ended December 31, 2010, the
Company expensed approximately $17,000 related to these agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock Option Issuances Under Amended 2006 Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No stock options have been granted by the
Company&rsquo;s Board of Directors in 2009, 2010 or 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Description of Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue 100,000,000
shares of $0.001 par value common stock, and 1,000,000 shares of no par value preferred stock. As of May 2, 2012, the Company had
32,776,919 shares of common stock outstanding, and no shares of preferred stock outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding. The shares of our common stock presently outstanding, and any shares of our common stock issues upon
exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one
vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken
by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to
share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative
voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining
shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared
by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Voting Rights</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each holder of common stock is entitled
to one vote for each share of common stock held on all matters submitted to a vote of stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Dividends</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to preferences that may be applicable
to any then-outstanding shares of preferred stock, if any, and any other restrictions, holders of common stock are entitled to
receive ratably those dividends, if any, as may be declared from time to time by the Company&rsquo;s board of directors out of
legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does
not presently contemplate that there will be any future payment of any dividends on common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 49 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Preferred Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had no shares of
preferred stock outstanding. We may issue preferred stock in one or more class or series pursuant to resolution of the Board of
Directors. The Board of Directors may determine and alter the rights, preferences, privileges, and restrictions granted to or imposed
upon any wholly unissued series of preferred stock, and fix the number of shares and the designation of any series of preferred
stock. The Board of Directors may increase or decrease (but not below the number of shares of such series then outstanding) the
number of shares of any wholly unissued class or series subsequent to the issue of shares of that class or series. We have no present
plans to issue any shares of preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had warrants to purchase
an aggregate of 7,115,265 shares of our common stock outstanding. The exercise prices for the warrants range from $0.50 per share
to $5.45 per share, with a weighted average exercise price of approximately per share of $2.65. Some of our warrants contain a
provision in which the exercise price will be adjusted for future issuances of common stock at prices lower than the current exercise
price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Options</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 2, 2012, we had options to purchase
an aggregate of 1,229,659 shares of our common stock outstanding, with exercise prices for the options ranging from $3.20 per share
to $3.52 per share, with a weighted average exercise price per share of $3.21.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Anti-Takeover Provisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws contain provisions that may make it more difficult for a third party to acquire or may discourage
acquisition bids for us. Our Board of Directors may, without action of our stockholders, issue authorized but unissued common stock
and preferred stock. The issuance of additional shares to certain persons allied with our management could have the effect of making
it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause
such removal. The existence of unissued preferred stock may enable the Board of Directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such stock with terms that could render more difficult
or discourage an attempt to obtain control of us, thereby protecting the continuity of our management. Our shares of preferred
stock could therefore be issued quickly with terms that could delay, defer, or prevent a change in control of us, or make removal
of management more difficult.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Disclosure of Commission Position on
Indemnification for Securities Act Liabilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s Amended and Restated
Bylaws provide for indemnification of directors and officers against certain liabilities. Officers and directors of the Company
are indemnified generally for any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, against expenses, including attorneys&rsquo; fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s Amended and Restated Articles of Incorporation
further provides the following indemnifications:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(a) a director of the Corporation shall
not be personally liable to the Corporation or to its shareholders for damages for breach of fiduciary duty as a director of the
Corporation or to its shareholders for damages otherwise existing for (i) any breach of the director&rsquo;s duty of loyalty to
the Corporation or to its shareholders; (ii) acts or omission not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) acts revolving around any unlawful distribution or contribution; or (iv) any transaction from which
the director directly or indirectly derived any improper personal benefit. If Nevada Law is hereafter amended to eliminate or limit
further liability of a director, then, in addition to the elimination and limitation of liability provided by the foregoing, the
liability of each director shall be eliminated or limited to the fullest extent permitted under the provisions of Nevada Law as
so amended. Any repeal or modification of the indemnification provided in these Articles shall not adversely affect any right or
protection of a director of the Corporation under these Articles, as in effect immediately prior to such repeal or modification,
with respect to any liability that would have accrued, but for this limitation of liability, prior to such repeal or modification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 50 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(b) the Corporation shall indemnify, to
the fullest extent permitted by applicable law in effect from time to time, any person, and the estate and personal representative
of any such person, against all liability and expense (including, but not limited to attorney&rsquo;s fees) incurred by reason
of the fact that he is or was a director or officer of the Corporation, he is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary, or agent of, or in any similar managerial or fiduciary position
of, another domestic or foreign corporation or other individual or entity of an employee benefit plan. The Corporation shall also
indemnify any person who is serving or has served the Corporation as a director, officer, employee, fiduciary, or agent and that
person&rsquo;s estate and personal representative to the extent and in the manner provided in any bylaw, resolution of the shareholders
or directors, contract, or otherwise, so long as such provision is legally permissible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by our directors, officers or controlling persons
in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection
with any securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether such indemnification by us is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TRANSACTIONS WITH RELATED PERSONS, PROMOTERS,
AND CERTAIN CONTROL PERSONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2011, there were no transactions
with related persons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Articles of Incorporation provide that
it will indemnify its officers and directors to the full extent permitted by Nevada state law. Our By-laws provide that we will
indemnify and hold harmless our officers and directors for any liability including reasonable costs of defense arising out of any
act or omission taken on our behalf, to the full extent allowed by Nevada law, if the officer or director acted in good faith and
in a manner the officer or director reasonably believed to be in, or not opposed to, the best interests of the corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the &ldquo;Act&rdquo; or &ldquo;Securities Act&rdquo;) may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The validity of the shares of our common
stock offered by the Selling Stock Holders has been passed upon by the law firm of Lucosky Brookman LLP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements of
BlueFire Renewables, Inc. and subsidiaries as of December 31, 2011 and 2010, and for the years then ended and for the period from
March 28, 2006 (Inception) through December 31, 2011, appearing in the prospectus and registration statement have been audited
by dbbmckennon, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report on the authority of such firm as experts in accounting and auditing..</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 51 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ADDITIONAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have filed a registration statement
on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus,
and reference is made to such registration statement. This prospectus constitutes the prospectus of BlueFire Renewables, Inc. filed
as part of the registration statement, and it does not contain all information in the registration statement, as certain portions
have been omitted in accordance with the rules and regulations of the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to the informational requirements
of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street,
N.E., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street,
N.E., Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this
information by visiting the SEC&rsquo;s Internet website at http://www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 52 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">5,500,000 Shares of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PROSPECTUS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Dealer Prospectus Delivery Obligation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until ________, 2012, all dealers that
effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
&nbsp;This is in addition to the dealers&rsquo; obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You should rely only on the information
contained in this prospectus. &nbsp;We have not authorized anyone to provide you with information different from that which is
set forth in this prospectus. &nbsp;We are offering to sell shares of our common stock and seeking offers to buy shares of our
common stock only in jurisdictions where offers and sales are permitted. &nbsp;The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities.
&nbsp;Our business, financial condition, results of operation and prospects may have changed after the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 53 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->49<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Index to Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Report of Independent Registered Public Accounting Firm</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>Consolidated Financial Statements:</TD>
    <TD>&nbsp;</TD>
    <TD></TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Consolidated Balance Sheets</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>Consolidated Statements of Operations</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Consolidated Statements of Stockholders&rsquo; Deficit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>Consolidated Statements of Cash Flows</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-11</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Notes to the Consolidated Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-13</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 54; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the Board of Directors and Stockholders
of BlueFire Renewables, Inc. and subsidiaries</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying
consolidated balance sheets of BlueFire Renewables, Inc. and subsidiaries, a development-stage company (collectively the
&ldquo;Company&rdquo;) as of December 31, 2011 and 2010, and the related consolidated statements of
operations, stockholders&rsquo; deficit, and cash flows for the years then ended and the period from March 28, 2006
(&ldquo;Inception&rdquo;) through December 31, 2011. These consolidated financial statements are the responsibility of the
Company&rsquo;s management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.&nbsp;&nbsp;Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of BlueFire Renewables, Inc. and
subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended
and the period from Inception through December 31, 2011, in conformity with accounting principles generally accepted in the United
States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 of the financial statements,
the Company has limited working capital and significant operating costs expected to be incurred in the next 12 months. These factors
raise substantial doubt about the Company&rsquo;s ability to continue as a going concern.&nbsp;&nbsp;Management&rsquo;s plans with
respect to these matters are also discussed in Note 2.&nbsp;&nbsp;The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ dbb<I>mckennon</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Newport Beach, California</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">April 16, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 55; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1.5pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2010</B></P></TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">ASSETS</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Current assets:</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Cash and cash equivalents</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">15,028</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">592,359</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Department of Energy unbilled grant receivables</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">207,570</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">51,769</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Prepaid expenses</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">15,911</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">39,258</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Total current assets</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">238,509</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">683,386</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Debt issuance costs</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">195,698</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Property and equipment, net of accumulated depreciation of $88,205 and $69,299, respectively</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,187,766</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,059,068</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total assets</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,426,275</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,938,152</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Current liabilities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Accounts payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">718,018</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">387,913</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Accrued liabilities</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">466,916</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">130,650</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Line of credit, related party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,230</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Note payable to a related party, net of discount of $0 and $73,885, respectively</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">200,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">126,115</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Department of Energy billings in excess of estimated earnings</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">354,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Outstanding warrant liability </TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">831</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Total current liabilities</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,758,995</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">644,678</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Outstanding warrant liability</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">34,095</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">764,615</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Total liabilities</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,793,090</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,409,293</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Redeemable noncontrolling interest</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">852,531</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">750,000</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Stockholders&rsquo; deficit:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Preferred stock, no par value, 1,000,000 shares authorized; none issued and outstanding</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in; text-indent: -0.12in">Common stock, $0.001 par value; 100,000,000 shares authorized; 32,099,840 and 28,555,400 shares issued and 32,067,668 and 28,523,228 outstanding, respectively</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">32,099</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">28,555</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Additional paid-in capital</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,543,019</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,169,756</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Treasury stock at cost, 32,172 shares</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(101,581</TD>
    <TD NOWRAP>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(101,581</TD>
    <TD NOWRAP COLSPAN="2">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Deficit accumulated during the development stage</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,692,883</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,317,871</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Total stockholders&rsquo; deficit </TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,219,346</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(221,141</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Total liabilities and stockholders&rsquo; deficit</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,426,275</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,938,152</TD>
    <TD NOWRAP COLSPAN="2" STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 56; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the year</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ended</B></P></TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the year</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ended</B></P></TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>From</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 28,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2006</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(inception)</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Through</B></P></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2010</B></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Revenues:</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%">Consulting fees</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">3,849</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">71,196</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">143,615</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Department of Energy grant revenues</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">31,704</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">569,879</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,975,734</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Department of Energy unbilled grant revenues</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">168,773</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">28,268</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">197,041</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Total revenues</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">204,326</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">669,343</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6,316,390</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Operating expenses:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Project development, including stock based compensation of $0, $0, and $4,468,490, respectively</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">595,302</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,096,653</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">18,931,157</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in; text-indent: -0.12in">General and administrative, including stock based compensation of $161,851, $52,487,<BR>
 and $6,311,670, respectively</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,752,774</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,996,645</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">16,784,049</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Related party license fee</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,000,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Total operating expenses</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,348,076</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,093,298</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">36,715,206</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Operating loss</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,143,750</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,423,955</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(30,398,816</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Other income and (expense):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Other income</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,122</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">256,295</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Financing related charge</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(211,660</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Amortization of debt discount</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(9,851</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(686,833</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Interest expense</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(56,097</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Related party interest expense</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(104,402</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(169,368</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Loss on extinguishment of debt</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,818,370</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Gain on settlement of accrued rent</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7,920</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7,920</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Gain from change in fair value of warrant liability</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">855,251</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,509,778</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,932,490</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Loss on the retirement of warrants</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(146,718</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Total other income and (expense)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">758,769</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,501,049</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(892,341</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Loss before provision for income taxes</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,384,981</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(922,906</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(31,291,157</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Provision for income taxes</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">83,147</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Net loss</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,384,981</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(922,906</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(31,374,304</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Net loss attributable to noncontrolling interest</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">(9,969</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">(9,969</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Net loss attributable to controlling interest&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(1,375,012</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 2.5pt">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(31,364,335</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Basic and diluted loss per common share attributable to controlling interest</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(0.05</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(0.03</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Weighted average common shares outstanding, basic and diluted</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">30,101,167</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,379,920</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 57; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Common Stock</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-in</B></P></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Deficit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Accumulated</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>During</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Development</B></P></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stockholders&rsquo;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stage</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Balance at March 28, 2006 (inception)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Issuance of founder&rsquo;s share at $.001 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,000,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares retained by Sucre Agricultural Corp., Shareholders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,028,264</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,028</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">685,972</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">690,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Costs associated with the acquisition of Sucre Agricultural Corp.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(3,550</TD>
    <TD NOWRAP>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(3,550</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for services in November 2006 at $2.99 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">111,962</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">112,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in November 2006 at $3.35 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">66,981</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">67,001</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for services in December 2006 at $3.65 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">72,980</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">73,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in December 2006 at $3.65 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">72,980</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">73,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Estimated value of common shares at $3.99 per share and warrants at $2.90 issuable for services upon vesting in February 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">160,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">160,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Share-based compensation related to options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">114,811</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">114,811</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Share-based compensation related to warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100,254</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100,254</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Net Loss</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,555,497</TD>
    <TD NOWRAP>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,555,497</TD>
    <TD NOWRAP>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Balances at December 31, 2006</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,125,764</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,126</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,382,390</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,555,497</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(151,981</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 58; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Common Stock</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-in</B></P></TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Deficit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Accumulated</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>During</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Development</B></P></TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stockholders&rsquo;</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stage</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 39%">Balances at December 31, 2006</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">21,125,764</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 7%; text-align: right">21,126</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">1,382,390</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">(1,555,497</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 11%; text-align: right">(151,981</TD>
    <TD NOWRAP STYLE="width: 1%">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for cash in January 2007, at $2.00 per share to unrelated individuals, including costs associated with private placement of 6,250 shares and $12,500 cash paid</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">284,750</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">285</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">755,875</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">756,160</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Amortization of share based compensation related to employment agreement in January 2007 $3.99 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">39,890</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">39,900</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in February 2007 at $5.92 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">138,837</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">138,875</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Adjustment to record remaining value of warrants at $4.70 per share issued for services in February 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">158,118</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">158,118</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in March 2007 at $7.18 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">269,213</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">269,250</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Fair value of warrants at $6.11 for services vested in March 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">305,307</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">305,307</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Fair value of warrants at $5.40 for services vested in June 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">269,839</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">269,839</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for services in June 2007 at $6.25 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">234,338</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">234,375</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Share based compensation related to employment agreement in February 2007 $5.50 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">50,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">50</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">274,951</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">275,001</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common Shares issued for services in August 2007 at $5.07 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">65,901</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">65,914</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Share based compensation related to options</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,692,863</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,692,863</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Value of warrants issued in August, 2007 for debt replacement services valued at $4.18 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">107,459</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">107,459</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Relative fair value of warrants associated with July 2007 convertible note agreement</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">332,255</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">332,255</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Exercise of stock options in July 2007 at $2.00 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">39,980</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">40,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Relative fair value of warrants and beneficial conversion feature in connection with the $2,000,000 convertible note payable in August 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,000,000</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,000,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Stock issued in lieu of interest payments on the senior secured convertible note at $4.48 and $2.96 per share in October and December 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15,143</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">55,569</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">55,584</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Conversion of $2,000,000 note payable in August 2007 at $2.90 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">689,655</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">689</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,999,311</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,000,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for cash at $2.70 per share, December 2007, net of legal costs of $90,000 and placement agent cost of $1,050,000</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,740,741</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,741</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,354,259</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,360,000</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Loss on Extinguishment of debt in December 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">955,637</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">955,637</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Net loss</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,276,418</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,276,418</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balances at December 31, 2007</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,061,553</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,061</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,431,992</TD>
    <TD NOWRAP>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(15,831,915</TD>
    <TD NOWRAP STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">12,628,138</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 59; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-in</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Deficit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Accumulated</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>During</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Development</B></P></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stockholders&rsquo;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stage</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stock</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 27%">Balances at December 31, 2007</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">28,061,553</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 8%; text-align: right">28,061</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 9%; text-align: right">28,431,992</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">(15,831,915</TD>
    <TD STYLE="width: 1%; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 8%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 11%; text-align: right">12,628,138</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Share based compensation relating to options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,769,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,769,276</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for services in July 2008 at $4.10 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">122,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">123,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in July, September, and December 2008 at $3.75, $2.75, and $0.57 per share, respectively</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">41,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">63,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">63,855</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Purchase of treasury shares between April to September 2008 at an average of $3.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(32,172</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(101,581</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(101,581</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Net loss</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,370,594</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,370,594</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Balances at December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,100,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">32,388,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(30,202,509</TD>
    <TD STYLE="text-align: left; vertical-align: top">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(101,581</TD>
    <TD STYLE="text-align: left; vertical-align: top">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">2,112,094</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 60; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-in</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Deficit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Accumulated</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>During</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Development</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Treasury</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stockholders&rsquo;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stage</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Stock</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 26%">Balances at December 31, 2008</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">28,100,881</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">28,132</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">32,388,052</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">(30,202,509</TD>
    <TD STYLE="width: 1%; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">(101,581</TD>
    <TD STYLE="width: 1%; text-align: left; vertical-align: top">)</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 11%; text-align: right">2,112,094</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Cumulative effect of warrants reclassified</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(18,586,588</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">18,586,588</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Reclassification of long term warrant liability</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,915,136</TD>
    <TD STYLE="text-align: left; vertical-align: bottom">)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,915,136</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in June 2009 at $1.50 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">11,412</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">11</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,107</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,118</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares issued for services in July 2009 at $0.88 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">26,370</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">26,400</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in August 2009 at $0.80 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">79,900</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">80,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Option to purchase Common shares for services in August 2009 at an option price of $3.00 for 100,000 shares</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,273</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,273</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common shares issued for services in September and October 2009 at $0.89 and $0.95 per share, respectively</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">22,500</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">23</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,678</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,701</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common shares to be issued for services in August 2009 at $0.80 per share</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">80,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Net income</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,136,092</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,136,092</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Balances at December 31, 2009</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">28,264,793</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">28,296</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">14,033,792</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">(13,394,965</TD>
    <TD STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">(101,581</TD>
    <TD STYLE="text-align: left; vertical-align: top">)</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">565,542</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 61; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-in</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1.5pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Deficit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Accumulated</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>During</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Development</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stockholders&rsquo;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Stage</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Stock</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Deficit</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 27%">Balances at December 31, 2009</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">28,264,793</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">28,296</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">14,033,792</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">(13,394,965</TD>
    <TD STYLE="width: 1%">)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 8%; text-align: right">(101,581</TD>
    <TD STYLE="width: 1%">)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 11%; text-align: right">565,542</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Common shares issued for services in March 2010 at $0.36 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,500</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Common shares issued for services in May 2010 at $0.30 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">43,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">12,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Common shares released in May 2010 issued at $0.80 per share, additional paid-in capital included in 2009 balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(100</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Common shares issued for services in May 2010 at $0.18 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6,750</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Common shares issued for services in July 2010 at $0.24 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7,200</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Common shares cancelled in October 2010 at $0.30 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(43,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(43</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(12,957</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(13,000</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Common shares issued for services in October 2010 at $0.46 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">16,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,020</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Common shares issued for services in November 2010 at $0.50 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,217</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Common shares issued for services in December 2010 at $.048 per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,800</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Discount on related party note payable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">83,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">83,736</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">Net loss</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(922,906</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(922,906</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Balances at December 31, 2010</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,523,228</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">28,555</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">14,169,756</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(14,317,871</TD>
    <TD STYLE="padding-bottom: 2.5pt">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(101,581</TD>
    <TD STYLE="padding-bottom: 2.5pt">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(221,141</TD>
    <TD STYLE="padding-bottom: 2.5pt">)</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 62; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>(A DEVELOPMENT-STAGE
COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIT&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Deficit</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Accumulated</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Additional</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">During</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Common
    Stock</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Paid-in</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Development</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Treasury</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">Stockholders&rsquo;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Shares</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Amount</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Capital</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Stage</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Stock</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Deficit</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-size: 10pt; padding-left: 0"><FONT STYLE="font-size: 10pt">Balances at December 31, 2010</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">28,523,228</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">28,555</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">14,169,756</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(14,317,871</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(101,581</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="width: 7%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(221,141</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for cash
    at $0.35 per share in January 2011, net of discount from warrant liability of $125,562</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">428,571</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">429</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">24,009</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">24,438</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Committed shares issued to LPC</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">600,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">600</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(600</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for reduction
    of accounts payable in March 2011 ranging from $0.47 to $0.50 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">60,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">60</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">29,040</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">29,100</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in March 2011 at $0.42 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">30,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">30</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">12,570</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">12,600</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in April 2011 at $0.43 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">26,042</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">26</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,224</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,250</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for cash
    in May 2011, ranging from $0.22 to $0.29 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">284,045</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">284</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">69,716</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">70,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in July 2011, ranging from $0.17 to $0.20 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">155,034</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">155</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">28,977</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">29,132</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in August 2011, at $0.16 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">75,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">75</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,925</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">12,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for cash
    in August 2011, ranging from $0.16 to $0.18 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">175,438</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">175</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">29,825</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">30,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in September 2011, at $0.18 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">10,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">10</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">1,790</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">1,800</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in October 2011, at $0.15 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">173,077</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">173</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">25,979</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">26,152</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in November 2011, ranging from $0.21 to $0.23 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">253,638</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">253</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">57,006</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">57,259</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for cash
    in November 2011, ranging from $0.15 to $0.16 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">659,894</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">660</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">99,340</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">100,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for services
    in December 2011, at $0.14 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">85,721</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">86</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,572</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">11,658</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Common shares issued for settlement
    of accrued rent in December, 2011 at $0.14 per share</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">527,980</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">528</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">73,390</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">73,918</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><FONT STYLE="font-size: 10pt">Accretion of redeemable noncontrolling
    interest</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(112,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(112,500</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0"><FONT STYLE="font-size: 10pt">Net loss
    attributable to controlling interest</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(1,375,012</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(1,375,012</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 0"><FONT STYLE="font-size: 10pt">Balances at December 31,
    2011</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">32,067,668</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">32,099</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">14,543,019</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(15,692,883</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(101,581</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">(1,219,346</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 63; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>year ended</B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>year ended </B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>From</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 28,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2006</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Inception) to</B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2010</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Cash flows from operating activities:</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 63%">Net loss</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">(1,384,981</TD>
    <TD STYLE="width: 1%">)</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 9%; text-align: right">(922,906</TD>
    <TD STYLE="width: 1%">)</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">(31,374,304</TD>
    <TD STYLE="width: 1%">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Adjustments to reconcile net loss to net cash used in operating activities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Gain from change in fair value of warrant liability</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(855,251</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,509,778</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,932,490</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Founders shares</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Costs associated with purchase of Sucre Agricultural Corp</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(3,550</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Interest expense on beneficial conversion feature of convertible notes</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">676,983</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Loss on extinguishment of convertible debt</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,718,370</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Loss on retirement of warrants</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">146,718</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Common stock issued for interest on convertible notes</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">55,585</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Discount on sale of stock associated with private placement</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">211,660</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Accretion of discount on note payable to related party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">73,885</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">9,851</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">83,736</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Loss from change in accounting estimate on Department of Energy billings</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">354,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">354,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Debt issuance costs for rejected loan guarantees</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">309,834</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">273,800</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">583,634</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Gain on settlement of accrued rent</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(7,920</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(7,920</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Share-based compensation</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">161,851</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">52,487</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">11,552,467</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Depreciation</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">18,951</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">25,522</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">88,607</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Changes in operating assets and liabilities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Department of Energy unbilled grant receivable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(117,004</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(28,267</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(145,271</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Department of Energy grant receivable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">207,380</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.12in">Prepaid expenses and other current assets</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">23,348</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">11,532</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(15,912</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.12in">Accounts payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">377,751</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,146</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">721,442</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 0.12in">Accrued liabilities</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">336,266</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(135,374</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">446,288</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Net cash used in operating activities</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(709,270</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,007,607</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(16,822,957</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Cash flows from investing activities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Acquisition of property and equipment</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(5,508</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(217,636</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Construction in progress</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(123,155</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(889,739</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,012,894</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Net cash used in investing activities</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(123,155</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(895,247</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,230,530</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 64; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(continued)</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>year ended</B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>year ended</B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>From</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 28,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2006</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Inception) to</B></P></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2010</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Cash flows from financing activities:</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 65%">Cash paid for treasury stock</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">(101,581</TD>
    <TD STYLE="width: 1%">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cash received in acquisition of Sucre Agricultural Corp.</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">690,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Proceeds from sale of stock through private placement</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">544,500</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Proceeds from exercise of stock options</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">40,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Proceeds from issuance of common stock</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">350,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,710,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Proceeds from convertible notes payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,500,000</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Repayment of notes payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(500,000</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Proceeds from related party line of credit/notes payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,230</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">335,230</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Repayment from related party line of credit/notes payable</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(116,000</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Debt issuance costs</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(114,136</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(299,498</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(563,634</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Retirement of warrants</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(220,000</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Proceeds from sale of LLC Unit</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">750,000</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">750,000</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Net cash provided by financing activities</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">255,094</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">650,502</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,068,515</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Net increase (decrease) in cash and cash equivalents</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(577,331</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(2,252,352</TD>
    <TD>)</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15,028</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cash and cash equivalents beginning of period</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">592,359</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,844,711</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Cash and cash equivalents end of period</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,028</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">592,359</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">15,028</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Supplemental disclosures of cash flow information</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Cash paid during the period for:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Interest</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">209</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">57,102</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Income taxes</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">825</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">54,153</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,921</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Supplemental schedule of non-cash investing and financing activities:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Conversion of senior secured convertible notes payable</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,000,000</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Interest converted to common stock</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">55,569</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Fair value of warrants issued to placement agents</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">725,591</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Discount on related party note payable</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">83,736</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">83,736</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">Accounts payable, net of reimbursement, included in construction-in-progress</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; border-bottom: Black 2.5pt double">24,494</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; border-bottom: Black 2.5pt double">21,348</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; border-bottom: Black 2.5pt double">45,842</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">Accretion of redeemable non-controlling interest</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom; text-align: right">112,500</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom; text-align: right">-</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: bottom; text-align: right">112,500</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 65; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(A DEVELOPMENT-STAGE COMPANY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 1 - ORGANIZATION AND BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BlueFire Ethanol, Inc. (&ldquo;BlueFire&rdquo;) was incorporated
in the state of Nevada on March 28, 2006 (&ldquo;Inception&rdquo;). BlueFire was established to deploy the commercially ready and
patented process for the conversion of cellulosic waste materials to ethanol (&ldquo;Arkenol Technology&rdquo;) under a technology
license agreement with Arkenol, Inc. (&ldquo;Arkenol&rdquo;). BlueFire&rsquo;s use of the Arkenol Technology positions it as a
cellulose-to-ethanol company with demonstrated production of ethanol from urban trash (post-sorted &ldquo;MSW&rdquo;), rice and
wheat straws, wood waste and other agricultural residues. The Company&rsquo;s goal is to develop and operate high-value carbohydrate-based
transportation fuel production facilities in North America, and to provide professional services to such facilities worldwide.
These &ldquo;biorefineries&rdquo; will convert widely available, inexpensive, organic materials such as agricultural residues,
high-content biomass crops, wood residues, and cellulose from MSW into ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 15, 2010, the board of directors of BlueFire, by unanimous
written consent, approved the filing of a Certificate of Amendment to the Company&rsquo;s Articles of Incorporation with the Secretary
of State of Nevada, changing the Company&rsquo;s name from BlueFire Ethanol Fuels, Inc. to BlueFire Renewables, Inc. On July 20,
2010, the Certificate of Amendment was accepted by the Secretary of State of Nevada.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Management&rsquo;s Plans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is a development-stage company which has incurred
losses since inception. Management has funded operations primarily through proceeds received in connection with the reverse merger,
loans from its majority shareholder, the private placement of the Company's common stock in December 2007 for net proceeds of approximately
$14,500,000, the issuance of convertible notes with warrants in July and in August 2007, and Department of Energy reimbursements
throughout 2009, 2010, and 2011. The Company may encounter difficulties in establishing operations due to the time frame of developing,
constructing and ultimately operating the planned bio-refinery projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, the Company has negative working capital
of approximately $1,520,000. Management has estimated that operating expenses for the next 12 months will be approximately $1,700,000,
excluding engineering costs related to the development of bio-refinery projects. These matters raise substantial doubt about the
Company&rsquo;s ability to continue as a going concern. Throughout the remainder of 2012, the Company intends to fund its operations
with reimbursements under the Department of Energy contract, draw downs on the equity commitment the Company received from Lincoln
Park Capital in January 2011, as well as seek additional funding in the form of equity or debt. On March 28, 2012, the Company
finalized a committed equity facility agreement and a $300,000 convertible promissory note with TCA Global Credit Master Fund,
LP (See Note 12). As of April 16, 2012, the Company expects the current resources available to them will only be sufficient for
a period of approximately two months unless significant additional financing is received. Management has determined that the general
expenditures must be reduced and additional capital will be required in the form of equity or debt securities. In addition, if
we cannot raise additional short term capital we may consume all of our cash reserved for operations. There are no assurances that
management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional
capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition
and operating results. The financial statements do not include any adjustments that might result from these uncertainties.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Additionally, the Company&rsquo;s Lancaster plant is currently
shovel ready and only requires minimal capital to maintain until funding is obtained for the construction. The preparation for
the construction of this plant was the primary capital use in 2009. In October 2010, BlueFire filed the necessary paperwork to
extend this project&rsquo;s permits for an additional year while we await potential financing. In 2012, as in 2011, the Company
sees this project on hold until we receive the funding to construct the facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 66; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2010, the Company completed the detailed
engineering on our proposed Fulton Project, procured all necessary permits for construction of the plant, and began site clearing
and preparation work, signaling the beginning of construction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We estimate the total construction cost of the bio-refineries
to be in the range of approximately $300 million for the Fulton Project and approximately $100 million to $125 million for the
Lancaster Biorefinery. These cost approximations do not reflect any decrease in raw materials or any savings in construction cost
that might be realized by the weak world economic environment. The Company is currently in discussions with potential sources of
financing for these facilities but no definitive agreements are in place.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Principles of Consolidation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The consolidated financial statements include the accounts of
BlueFire Renewables, Inc., and its wholly-owned subsidiary, BlueFire Ethanol, Inc., BlueFire Ethanol Lancaster, LLC, BlueFire Fulton
Renewable Energy LLC (excluding 1% interest sold), and SucreSource LLC are wholly-owned subsidiaries of BlueFire Ethanol, Inc.
All intercompany balances and transactions have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Use of Estimates</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ
from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Debt Issuance Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Debt issuance costs are capitalized and amortized over the term
of the debt using the effective interest method, or expensed upon conversion or extinguishment when applicable. Costs are capitalized
for amounts incurred in connection with proposed financings. In the event the financing related to the capitalized cost is not
successful, the costs are immediately expensed (see Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Cash and Cash Equivalents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For purpose of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Accounts Receivable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable are reported net of allowance for expected
losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and
the amount management expects to collect are charged to operations in the year in which those differences are determined, with
an offsetting entry to a valuation allowance. As of December 31, 2011 and 2010, there have been no such charges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Intangible Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">License fees acquired are either expensed or recognized as intangible
assets. The Company recognizes intangible assets when the following criteria are met: 1) the asset is identifiable, 2) the Company
has control over the asset, 3) the cost of the asset can be measured reliably, and 4) it is probable that economic benefits will
flow to the Company. During the year ended December 31, 2009, the Company paid a license fee (see Note 10) to Arkenol, Inc., a
related party. The license fee was expensed because the Company is still in the research and development stage and cannot readily
determine the probability of future economic benefits for said license.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 67; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Property and Equipment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment are stated at cost. The Company&rsquo;s
fixed assets are depreciated using the straight-line method over a period ranging from three to five years, except land which is
not depreciated. Maintenance and repairs are charged to operations as incurred. Significant renewals and betterments are capitalized.
At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations. During the year ended December 31, 2010, the Company began
to capitalize costs in connection with the construction of its Fulton plant, and continued to do so in 2011. A portion of these
costs were reimbursed under the Department of Energy grant discussed in Note 3. The
reimbursable portion is treated as a reduction of those costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Revenue Recognition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is currently a development-stage company. The
Company will recognize revenues from 1) consulting services rendered to potential sub licensees for development and construction
of cellulose to ethanol projects, 2) sales of ethanol from its production facilities when (a) persuasive evidence that an agreement
exists; (b) the products have been delivered; (c) the prices are fixed and determinable and not subject to refund or adjustment;
and (d) collection of the amounts due is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">As discussed in Note 3, the Company
received a federal grant from the United States Department of Energy, (&ldquo;DOE&rdquo;). The grant generally provides for payment
in connection with related development and construction costs involving commercialization of our technologies. Grant award reimbursements
are recorded as either as contra assets or as revenues depending upon whether the reimbursement is for capitalized costs or expenses
paid by the Company. Contra capitalized cost and revenues from the grant are recognized in the period during which the conditions
under the grant have been met and the Company has made payment for the asset or expense. </FONT>&nbsp;The Company recognizes <FONT STYLE="font-size: 10pt">DOE
</FONT>unbilled <FONT STYLE="font-size: 10pt">grant </FONT>receivables for those costs that have been incurred during a period
but not yet paid at period end, are otherwise reimbursable under the terms of the grant, and are expected to be paid in the normal
course of business. Realiza<FONT STYLE="font-size: 10pt">tion of unbilled receivables is</FONT> dependent on the Company&rsquo;s
ability to meet their obligation <FONT STYLE="font-size: 10pt">for</FONT> reimbursable costs.<FONT STYLE="font-size: 10pt"> </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Project Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Project development costs are either expensed or capitalized.
The costs of materials and equipment that will be acquired or constructed for project development activities, and that have alternative
future uses, both in project development, marketing or sales, will be classified as property and equipment and depreciated over
their estimated useful lives. To date, project development costs include the research and development expenses related to the Company's
future cellulose-to-ethanol production facilities. During the years ended December 31, 2011 and 2010 and for the period from March
28, 2006 (Inception) to December 31, 2011, research and development costs included in Project Development were $595,302,
$1,096,653, and $14,462,667, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Convertible Debt</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Convertible debt is accounted for under the guidelines established
by Accounting Standards Codification (&ldquo;ASC&rdquo;) 470 &ldquo;Debt with Conversion and Other Options&rdquo; and ASC 740 &ldquo;Beneficial
Conversion Features&rdquo;. The Company records a beneficial conversion feature (&ldquo;BCF&rdquo;) related to the issuance of
convertible debt that have conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair
value of warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating
a portion of the proceeds to warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic
value of the conversion features, both of which are credited to paid-in-capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company calculates the fair value of warrants issued with
the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing employee options
for purposes of ASC 718 &ldquo;Compensation &ndash; Stock Compensation&rdquo;, except that the contractual life of the warrant
is used. Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between
the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair
value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense.
For a conversion price change of a convertible debt issue, the additional intrinsic value of the debt conversion feature, calculated
as the number of additional shares issuable due to a conversion price change multiplied by the previous conversion price, is recorded
as additional debt discount and amortized over the remaining life of the debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 68; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for modifications of its BCF&rsquo;s in
accordance with ASC 470 &ldquo;Modifications and Exchanges&rdquo;. ASC 470 requires the modification of a convertible debt instrument
that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated
debt instrument when the modification does not result in a debt extinguishment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Equity Instruments Issued with Registration Rights Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for these penalties as contingent liabilities,
applying the accounting guidance of ASC 450 &ldquo;Contingencies&rdquo;. This accounting is consistent with views established in
ASC 825 &ldquo;Financial Instruments&rdquo;. Accordingly, the Company recognizes damages when it becomes probable that they will
be incurred and amounts are reasonably estimable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the issuance of common stock for gross proceeds
of $15,500,000 in December 2007 and the $2,000,000 convertible note financing in August 2007, the Company was required to file
a registration statement on Form SB-2 or Form S-3 with the Securities and Exchange Commission in order to register the resale of
the common stock under the Securities Act. The Company filed that registration statement on December 18, 2007 and as required under
the registration rights agreement had the registration statement declared effective by the Securities and Exchange Commission (&ldquo;SEC&rdquo;)
on March 27, 2009 and in so doing incurred no liquidated damages. As of December 31, 2011 and 2010, the Company does not believe
that any liquidated damages are probable and thus no amounts have been accrued in the accompanying financial statements.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for income taxes in accordance with ASC
740 &rdquo;Income Taxes&rdquo; requires the Company to provide a net deferred tax asset/liability equal to the expected future
tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss
or tax credit carry forwards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This Interpretation sets forth a recognition threshold and valuation
method to recognize and measure an income tax position taken, or expected to be taken, in a tax return. The evaluation is based
on a two-step approach. The first step requires an entity to evaluate whether the tax position would &ldquo;more likely than not,&rdquo;
based upon its technical merits, be sustained upon examination by the appropriate taxing authority. The second step requires the
tax position to be measured at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon
ultimate settlement. In addition, previously recognized benefits from tax positions that no longer meet the new criteria would
no longer be recognized. This Interpretation was effective for the Company on January 1, 2007 and did not have a material impact
on our financial position,results of operations or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Fair Value of Financial Instruments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 1, 2009, the Company adopted ASC
820 &ldquo;Fair Value Measurements and Disclosures&rdquo;. The Company did not record an adjustment to its accumulated
deficit as a result of the adoption of the guidance for fair value measurements, and the adoption did not have a
material effect on the Company&rsquo;s results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair value is defined as the exit price, or the amount that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of
the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use
of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market
data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company&rsquo;s assumptions
about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs
that may be used to measure fair value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 1. Observable inputs such as quoted prices in active markets;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 69; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 2. Inputs, other than the quoted prices in active markets,
that are observable either directly or indirectly; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 3. Unobservable inputs in which there is little or no
market data, which require the reporting entity to develop its own assumptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company did not have any level 1finanical instruments at
December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, the warrant liability is considered
a level 2 item, see Note 6.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, the Company&rsquo;s redeemable
noncontrolling interest is considered a level 3 item and changed during 2010 and 2011 due to the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-indent: -10pt; padding-left: 10pt">Balance as of January&nbsp;1, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 87%; font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Redeemable noncontrolling interest</TD><TD STYLE="width: 1%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">750,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-indent: -10pt; padding-left: 10pt">Balance as of December&nbsp;31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">750,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -10pt; padding-left: 20pt">Accretion of noncontrolling interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">112,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Net loss attributable to noncontrolling interest</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(9,969</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-indent: -10pt; padding-left: 10pt">Balance at December&nbsp;31, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">852,531</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Note 8 for details of valuation and changes during the years
2010 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Risks and Uncertainties</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company's operations are subject to new innovations in product
design and function. Significant technical changes can have an adverse effect on product lives. Design and development of new products
are important elements to achieve and maintain profitability in the Company's industry segment. The Company may be subject to federal,
state and local environmental laws and regulations. The Company does not anticipate expenditures to comply with such laws and does
not believe that regulations will have a material impact on the Company's financial position, results of operations, or liquidity.
The Company believes that its operations comply, in all material respects, with applicable federal, state, and local environmental
laws and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Concentrations of Credit Risk</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company maintains its cash accounts in a commercial bank
and in an institutional money-market fund account. The total cash balances held in a commercial bank are secured by the Federal
Deposit Insurance Corporation (&ldquo;FDIC&rdquo;) up to $250,000, although on January 1, 2014 this amount is scheduled to return
to $100,000 per depositor, per insured bank. At times, the Company has cash deposits in excess of federally insured limits. In
addition, the Institutional Funds Account is insured through the Securities Investor Protection Corporation (&ldquo;SIPC&rdquo;)
up to $500,000 per customer, including up to $100,000 for cash. At times, the Company has cash deposits in excess of federally
and institutional insured limits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, the Department of Energy made
up 100% of billed and unbilled Grant Revenues and Department of Energy grant receivables. Management believes the loss of these
organizations would have a material impact on the Company&rsquo;s financial position, results of operations, and cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010 three and one venders
made up 63% and 39% of accounts payable, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Loss per Common Share </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company presents basic loss per
share (&ldquo;EPS&rdquo;) and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is
computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares issuable through stock options, warrants, and other
convertible securities. For the year ended December 31, 2011, the Company had 1,229,659 options and 7,115,275 warrants
outstanding, for which all of the exercise prices were in excess of the average closing price of the Company&rsquo;s common
stock during the corresponding year and thus no shares are considered as dilutive under the treasury-stock method of
accounting and their effects would have been antidilutive due to the loss. For the year ended December 31, 2010, the Company had 3,287,159 options and 6,886,694 warrants, to purchase shares of common stock that were excluded from the
calculation of diluted loss per share as their effects would have been anti-dilutive due to the loss, and because all of the
exercise prices were in excess of the average closing price of the Company&rsquo;s common stock during the corresponding
year.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Share-Based Payments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for stock options issued to employees and
consultants under ASC 718 &ldquo;Share-Based Payment&rdquo;. Under ASC 718, share-based compensation cost to employees is measured
at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite vesting
period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 70; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company measures compensation expense for its non-employee
stock-based compensation under ASC 505 &ldquo;Equity&rdquo;. The fair value of the option issued or committed to be issued is used
to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at
the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or
the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation
expense and credited to additional paid-in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Redeemable - Noncontrolling Interest</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Redeemable interest held by third parties in subsidiaries owned
or controlled by the Company. As these redeemable noncontrolling interests provide for redemption features not solely within the
control of the issuer, we classify such interests outside of permanent equity in accordance with ASC 480-10, &ldquo;Distinguishing
Liabilities from Equity&rdquo;. All redeemable noncontrolling interest reported in the consolidated statements of operations reflects
the respective interests in the income or loss after income taxes of the subsidiaries attributable to the other parties, the effect
of which is removed from the net loss available to the Company. The Company accretes the redemption value of the redeemable
noncontrolling interest over the redemption period using the straight-line method.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Impairment of Long-Lived Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company regularly evaluates whether events and circumstances
have occurred that indicate the carrying amount of property and equipment may not be recoverable. When factors indicate that these
long-lived assets should be evaluated for possible impairment, the Company assesses the potential impairment by determining whether
the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of
the asset and its eventual disposition. If the carrying amount of the asset is determined not to be recoverable, a write-down to
fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals,
as applicable. The Company regularly evaluates whether events and circumstances have occurred that indicate the useful lives of
property and equipment may warrant revision. In our opinion, the carrying values of our long-lived assets, including property and
equipment, were not impaired at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>New Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white">In May 2011, the
Financial Accounting Standards Board (&ldquo;FASB&rdquo;) issued amended standards to achieve common fair value measurements and
disclosures between GAAP and International Financial Reporting Standards. The standards include amendments that clarify the intent
behind the application of existing fair value measurements and disclosures and other amendments which change principles or requirements
for fair value measurements or disclosures. The amended standards are to be applied prospectively for interim and annual periods
beginning after December 15, 2011. Management does not believe the adoption of these changes will not have an impact on the consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white">In June 2011,
the FASB issued amended standards that eliminated the option to report other comprehensive income in the statement of stockholders&rsquo;
equity and require companies to present the components of net income and other comprehensive income as either one continuous statement
of comprehensive income or two separate but consecutive statements. The amended standards do not affect the reported amounts of
comprehensive income. In December 2011, the FASB deferred the requirement to present components of reclassifications of other comprehensive
income on the face of the income statement that had previously been included in the June 2011 amended standard. These amended standards
are to be applied retrospectively for interim and annual periods beginning after December 15, 2011. Management does not believe
the adoption of these changes will not have an impact on the consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; background-color: white">In
September 2011, the FASB issued Accounting Standards Update (&ldquo;ASU&rdquo;) No. 2011-08, Intangibles &mdash;
&ldquo;Goodwill and Other&rdquo; (Topic 350). This Accounting Standards Update amends FASB ASC Topic 350. This amendment specifies
the change in method for determining the potential impairment of goodwill. It includes examples of circumstances
and events that the entity should consider in evaluating whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011.  Management does not believe
the adoption of these changes will not have an impact on the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<!-- Field: Page; Sequence: 71; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">In December 2011,
the FASB issued changes to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both
gross information and net information about both instruments and transactions eligible for offset in the statement of financial
position and instruments and transactions subject to an agreement similar to a master netting arrangement. The enhanced disclosures
will enable users of an entity&rsquo;s financial statements to understand and evaluate the effect or potential effect of master
netting arrangements on an entity&rsquo;s financial position, including the effect or potential effect of rights of setoff associated
with certain financial instruments and derivative instruments. These changes become effective for the Company on January 1, 2013.
Management does not believe the adoption of these changes will not have an impact on the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; DEVELOPMENT CONTRACT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Department of Energy Awards 1 and 2</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2007, the Company was awarded a grant for up to
$40 million from the U.S. Department of Energy&rsquo;s (&ldquo;DOE&rdquo;) cellulosic ethanol grant program to develop a solid
waste biorefinery project at a landfill in Southern California. During October 2007, the Company finalized Award 1 for a total
approved budget of just under $10,000,000 with the DOE. This award is a 60%/40% cost share, whereby 40% of approved costs may be
reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. In October 2009, the Company received
from the DOE a one-time reimbursement of approximately $3,841,000. This was primarily related to the Company amending its award
to include costs previously incurred in connection with the development of the Lancaster site which have a direct attributable
benefit to the Fulton Project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2009, as a result of the American Recovery and Reinvestment
Act, the DOE increased the Award 2 to a total of $81 million for Phase II of its Fulton Project. This is in addition to a renegotiated Phase I funding for development
of the biorefinery of approximately $7 million out of the previously announced $10 million total. This brings the DOE&rsquo;s total
award to the Fulton project to approximately $88 million. The Company is currently drawing
down on funds for Phase II of its Fulton Project.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of April 16, 2012, the Company has received reimbursements
of approximately $9,243,984 under these awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2011 and 2010, our operations had been financed to a large
degree through funding provided by the DOE. We rely on access to this funding as a source of liquidity for capital requirements
not satisfied by the cash flow from our operations. If we are unable to access government funding our ability to finance our projects
and/or operations and implement our strategy and business plan will be severely hampered. Awards 1 and 2 consist of a total reimbursable
amount of approximately $87,560,000, and through April 16, 2012, we have an unreimbursed amount of approximately $78,316,000 available
to us under the awards. We cannot guarantee that we will continue to receive grants, loan guarantees, or other funding for our
projects from the DOE.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2011, it was determined that the Company had received
an overpayment of approximately $354,000 from the cumulative reimbursements of the DOE grants under Award 1 for the period from
inception of the award through December 31, 2010. The overpayment is a result of estimates made on the indirect rate during the
reimbursement process over the course of the award. The DOE and the Company reached a tentative agreement during that time, that
in combination, as a result of the unused grant award money left in Award 1 of approximately $366,000, the Company would not be
required to refund any overpayment to the DOE and the Company could proceed towards completion of Award 1. While completion of
the award under the above terms was tentatively agreed to, the method and process was uncertain. During the fourth quarter of 2011,
the close of the award was reassessed and discussed with the DOE. Management determined that it was not in the best interest of
the Company to close the award during fiscal 2011 due to amounts still available for reimbursement under the Award and possible
modifications that could be made to shift certain costs between Award 1 and Award 2. The Company also determined that there is
no right of offset between Award 1 and Award 2.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 72; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accordingly, although Management does not believe the DOE
intends to demand payment for the overbill, and the Contracting Officer has not indicated such will be done, the DOE does
have the legal right to do so. Due to that right and the Company&rsquo;s decision not to close the award as of December 31,
2011 as initially planned, the Company has determined that a liability should be included in the accompanying balance sheet
as of December 31, 2011 due to billing is excess of estimated earnings. Because this liability stems from normal recurring
estimates made in government contracting, the change is accounted for as a change in accounting estimate with the cumulative
effect shown in the current year. The $354,000 reduced Department of Energy grant revenue and increased net loss in the
accompanying statement of operations during the year ended December 31, 2011. The per share effect on net loss is approximately
$0.01 per share of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management will continue to evaluate the Award status, and may
choose to close out the Award if it is advantageous to future operations and allowable under federal regulations. Management believes
a quick close out of Award 1 under Federal Acquisition Regulations could result in the elimination of this excess billing; however,
no assurances can be made.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4 &ndash; PROPERTY AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and Equipment consist of the following:</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December <BR>
31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2011</B></P></TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December <BR>
31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2010</B></P></TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="width: 78%; vertical-align: bottom">Construction in progress</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="width: 8%; vertical-align: top; text-align: right">1,058,735</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="width: 8%; vertical-align: top; text-align: right">911,087</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom">Land</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">109,108</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">109,108</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: bottom">Office equipment</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">63,367</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">63,367</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Furniture and fixtures</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">44,806</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">44,805</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1,276,016</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1,128,367</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Accumulated depreciation</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">(88,250</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">)</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">(69,299</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">1,187,766</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">1,059,068</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation expense for the years ended December 31, 2011 and
2010 and for the period from inception to December 31, 2011 was $18,951, $25,522, and $88,607, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2011, the Company invested
approximately $123,000 in construction activities at our Fulton Project, compared with $890,000 in 2010 net of DOE reimbursements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Purchase of Lancaster Land</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 9, 2007, the Company purchased approximately 10
acres of land in Lancaster, California for approximately $109,000, including certain site surveying and other acquisition costs.
The Company originally intended to use the land for the construction of their first cellulosic ethanol refinery plant. The Company
is now considering using this land for a facility to produce products other than cellulosic ethanol, such as higher value chemicals
that would yield fuel additives that that could improve the project economics for a smaller facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 5 &ndash; NOTES PAYABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Convertible Notes Payable</I> - 2007</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 13, 2007, the Company issued several convertible notes
aggregating a total of $500,000 with eight accredited investors including $25,000 from the Company&rsquo;s Chief Financial Officer.
Under the terms of the notes, the Company was to repay any principal balance and interest, at 10% per annum within 120 days of
the note. The holders also received warrants to purchase common stock at $5.00 per share. The warrants vested immediately and expire
in five years. The total warrants issued pursuant to this transaction were 200,000 on a pro-rata basis to investors. The convertible
promissory notes were only convertible into shares of the Company&rsquo;s common stock in the event of a default. The conversion
price was determined based on one third of the average of the last-trade prices of the Company&rsquo;s common stock for the ten
trading days preceding the default date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 73; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fair value of the warrants was $990,367 as determined by
the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 113%, risk-free interest
rate of 4.94%, dividend yield of 0%, and a term of five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The proceeds were allocated between the convertible notes payable
and the warrants issued to the convertible note holders based on their relative fair values which resulted in $167,744 allocated
to the convertible notes and $332,256 allocated to the warrants. The amount allocated to the warrants resulted in a discount to
the convertible notes. The Company amortized the discount over the term of the convertible notes. During the year ended December
31, 2007, the Company amortized $332,256 of the discount to interest expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company calculated the value of the beneficial conversion
feature to be approximately $332,000 of which $167,744 was allocated to the convertible notes. However, since the notes were convertible
upon a contingent event, the value was recorded when such event was triggered during the year ended December 31, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 7, 2007, the Company re-paid the 10% convertible
promissory notes totaling approximately $516,000 including interest of approximately $16,000. This included approximately $800
of accrued interest to the Company&rsquo;s Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Convertible Notes - 2012 (subsequent)</I></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to year end, the Company entered into a convertible
note payable. See note 12.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Senior Secured Convertible Notes Payable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 21, 2007, the Company issued senior secured convertible
notes aggregating a total of $2,000,000 with two institutional accredited investors. Under the terms of the notes, the Company
was to repay any principal balance and interest, at 8% per annum, due August 21, 2010. On a quarterly basis, the Company has the
option to pay interest due in cash or in stock. The senior secured convertible notes were secured by substantially all of the Company&rsquo;s
assets. The total warrants issued pursuant to this transaction were 1,000,000 on a pro-rata basis to investors. These include class
A warrants to purchase 500,000 common stock at $5.48 per share and class B warrants to purchase an additional 500,000 shares of
common stock at $6.32 per share. The warrants vested immediately and expire in three years. The senior secured convertible note
holders had the option to convert the note into shares of the Company&rsquo;s common stock at $4.21 per share at any time prior
to maturity. If, before maturity, the Company consummated a Financing of at least $10,000,000 then the principal and accrued unpaid
interest of the senior secured convertible notes would be automatically converted into shares of the Company&rsquo;s common stock
at $4.21 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fair value of the warrants was approximately $3,500,000
as determined by the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 118%, risk-free
interest rate of 4.05%, dividend yield of 0% and a term of three years. The proceeds were allocated between the senior secured
convertible notes and the warrants issued to the convertible note holders based on their relative fair values and resulted in $728,571
being allocated to the senior secured convertible promissory notes and $1,279,429 allocated to the warrants. The resulting discount
was to be amortized over the life of the notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company calculated the value of the beneficial conversion
feature to be approximately $1,679,000 of which approximately $728,000 was allocated to the beneficial conversion feature resulting
in 100% discount to the convertible promissory notes. During the year ended December 31, 2007, the Company amortized approximately
$312,000 of the discount related to the warrants and beneficial conversion feature to interest expense and $1,688,000 to loss on
extinguishment, see below for discussion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Company entered into a registration rights
agreement with the holders of the senior secured convertible notes agreement whereby the Company was required to file an initial
registration statement with the Securities and Exchange Commission in order to register the resale of the maximum amount of common
stock underlying the secured convertible notes within 120 days of the Exchange Agreement (December 19, 2007). The registration
statement was filed with the SEC on December 19, 2007. The registration statement was then declared effective on March 27, 2009.
The Company incurred no liquidated damages.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 74; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Modification of Conversion Price and Warrant Exercise Price
on Senior Secured Convertible Note Payable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 3, 2007, the Company modified the conversion price
into common stock on its outstanding senior secured convertible notes from $4.21 to $2.90 per share. The Company also modified
the exercise price of the Class A and B warrants issued with convertible notes from $5.48 and $6.32, respectively, to $2.90 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with ASC 470, the Company recorded an extinguishment
loss of approximately $2,818,000 for the modification of the conversion price as the fair value of the conversion price immediately
before and after the modification was greater than 10% of the carrying amount of the original debt instrument immediately prior
to the modification. The loss on extinguishment was determined based on the difference between the fair value of the new instruments
issued and the previous carrying value of the convertible debt at the date of extinguishment. Upon modification, the carrying amount
of the senior secured convertible notes payable of $2,000,000 and accrued interest of approximately $33,000 was converted into
a total of 700,922 shares of common stock at $2.90 and $2.96 per share, respectively. Prior to the modification, during the quarter
ended September 30, 3007, the Company satisfied its interest obligation of approximately $20,000 by issuing 3,876 shares of the
Company&rsquo;s common stock at $4.48 per share in lieu of cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The extinguishment loss and non-cash interest expense for the
warrants was determined using the Black-Scholes option pricing model using the following assumptions: volatility of 122.9%, expected
life of 4.72 years, risk free interest rate of 3.28%, market price per share of $3.26, and no dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Debt Issuance Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2007 debt issuance fees and expenses of approximately
$207,000 were incurred in connection with the senior secured convertible note. These fees consisted of a cash payment of $100,000
and the issuance of warrants to purchase 23,731 shares of common stock. The warrants have an exercise price of $5.45, vested immediately
and expire in five years. The warrants were valued at approximately $107,000 as determined by the Black-Scholes option pricing
model using the following weighted-average assumptions: volatility of 118%, risk-free interest rate of 4.05%, dividend yield of
0% and a term of five years. These costs were amortized over the term of the note using the effective interest method and expensed
upon conversion of senior secured convertible note. During the year ended December 31, 2007, the Company amortized approximately
$32,000 of the debt issuance costs to interest expense and approximately $175,000 to loss on extinguishment, see above for further
discussion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2010 debt issuance costs of $123,800 were incurred, net
of DOE reimbursement in connection with the Company submitting an application for a $250 million dollar DOE loan guarantee for
the Company's planned cellulosic ethanol biorefinery in Fulton, Mississippi. This compares to 2009 debt issuance costs of $150,000
incurred in connection with an application for a $58 million dollar DOE loan guarantee for the Company's planned cellulosic ethanol
biorefinery in Lancaster, California. These applications were filed under the Department of Energy (&ldquo;DOE&rdquo;) Program
DE-FOA-0000140 (&ldquo;DOE LGPO&rdquo;), which provides federal loan guarantees for projects that employ innovative energy efficiency,
renewable energy, and advanced transmission and distribution technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2010, the Company was informed that the loan guarantee for
the planned biorefinery in Lancaster, California, was rejected by the DOE due to a lack of definitive contracts for feedstock and
off-take at the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was
also pursuing a much larger project in Fulton, Mississippi. As a result of this DOE loan guarantee rejection for the Lancaster,
California project, the Company wrote off $150,000 of capitalized debt issuance cost to expense in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2011, the Company received notice from the DOE LGPO
staff that the Fulton Project&rsquo;s application will not move forward until such time as the project has raised the remaining
equity necessary for the completion of funding. As a result of this DOE loan guarantee rejection for the Fulton Project, the Company
wrote off $123,800 of capitalized debt issuance cost to expense in 2010 as there were indicating factors the loan would not be
approved prior to year end.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 75; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2010, BlueFire submitted an application for a $250
million loan guarantee for the Fulton Project with the U.S. Department of Agriculture under Section 9003 of the 2008 Farm Bill
(&ldquo;USDA LG&rdquo;). During 2011 debt issuance costs for the USDA loan guarantee totaled approximately $114,000, compared to
$298,000 in fiscal 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In October 2011, the Company was informed that the USDA would
not move forward with the USDA LG; however, appeal processes were provided to afford the Company a chance to change certain aspects
of the application. Such appeals have been informal to date. Because of the initial rejection, the Company expensed all related
debt costs totaling approximately $309,000 to general and administrative in the accompanying statement of operations during the
year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From the period of Inception through December 31, 2011, the
Company has expensed $583,634 of previously capitalized debt issue costs due to unsuccessful debt financings.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 6 - OUTSTANDING WARRANT LIABILITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective January 1, 2009 we adopted the provisions of ASC 815
&ldquo;Derivatives and Hedging&rdquo; (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features
that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an
entity&rsquo;s own common stock. As a result of adopting ASC 815, 6,962,963 of our issued and outstanding common stock purchase
warrants previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment.
These warrants have an exercise price of $2.90; 5,962,563 warrants expire in December 2012 and 1,000,000 expired August 2010. As
such, effective January 1, 2009 we reclassified the fair value of these common stock purchase warrants, which have exercise price
reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of
issue in August 2007 and December 2007. On January 1, 2009, we reclassified from additional paid-in capital, as a cumulative effect
adjustment, $15.7 million to beginning retained earnings and $2.9 million to a long-term warrant liability to recognize the fair
value of such warrants on such date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company assesses the fair value of the warrants quarterly
based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the 5,962,963 warrants to expire in December
2012, the Company recognized gains of approximately $764,000, $1,510,000, and $2,515,000 from the change in fair value of these
warrants during the years ended December 31, 2011 and 2010 and the period from Inception to December 31, 2011.</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 19, 2009, the Company cancelled 673,200 warrants
for $220,000 in cash. These warrants were part of the 1,000,000 warrants issued in August 2007, and were set to expire August 2010.
Prior to October 19, 2009, the warrants were previously accounted for as a derivative liability and marked to their fair value
at each reporting period in 2009. The Company valued these warrants the day immediately preceding the cancellation date which indicated
a gain on the changed in fair value of $208,562 and a remaining fair value of $73,282. Upon cancellation the remaining value was
extinguished for payment of $220,000 in cash, resulting in a loss on extinguishment of $146,718. In connection with the remaining
326,800 warrants that expired in August 2010, the Company recognized a gain of $117,468 for the change in fair value of these
warrants during the year ended December 31, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These common stock purchase warrants were initially issued in
connection with two private offerings, our August 2007 issuance of 689,655 shares of common stock and our December 2007 issuance
of 5,740,741 shares of common stock. The common stock purchase warrants were not issued with the intent of effectively hedging
any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify
for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings
until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities
market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model using the following
assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 76; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: center">December <BR>
31,</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: center">December <BR>
31,</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center">2011</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center">2010</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; vertical-align: bottom">Annual dividend yield</TD>
    <TD STYLE="width: 1%; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Expected life (years) of December 2007 issuance</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1.0</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.0</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Risk-free interest rate</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">0.12</TD>
    <TD STYLE="vertical-align: top">%</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">0.61</TD>
    <TD STYLE="vertical-align: top">%</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Expected volatility of December 2007 issuance</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">95</TD>
    <TD STYLE="vertical-align: top">%</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">125</TD>
    <TD STYLE="vertical-align: top">%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company issued 428,571 warrants to purchase common
stock in connection with the Stock Purchase Agreement entered into on January 19, 2011 with Lincoln Park Capital, LLC (see note
9). These warrants are accounted for as a liability under ASC 815. The Company assesses the fair value of the warrants quarterly
based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">December 31,</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center">January 19,</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Annual dividend yield</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left">Expected life (years) </TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">4.05</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">5.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Risk-free interest rate</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.83</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.95</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Expected volatility</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">109</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">105</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with these warrants, the Company recognized a
gain on the change in fair value of warrant liability of $91,467, $0, and $91,437 during the years ended December 31, 2011 and
2010, and for the period from Inception to December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Expected volatility is based primarily on historical volatility.
Historical volatility was computed using weekly pricing observations for recent periods that correspond to the expected life of
the warrants. The Company believes this method produces an estimate that is representative of our expectations of future volatility
over the expected term of these warrants. The Company currently has no reason to believe future volatility over the expected remaining
life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term
of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 - COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Employment Agreements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 27, 2006, the Company entered into employment
agreements with three key employees. The employment agreements were for a period of three years, which expired in 2010, with
prescribed percentage increases beginning in 2007 and could have been cancelled upon a written notice by either employee or
employer (if certain employee acts of misconduct are committed). The total aggregate annual amount due under the employment
agreements was approximately $586,000 per year. These contracts have not been renewed. Each of the executive officers are
currently working for the Company on a month to month basis under the same terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2008, the Board of Directors of the Company replaced
our Chief Financial Officer&rsquo;s previously existing at-will Employment Agreement with a new employment agreement, effective
February 1, 2008, and terminating on May 31, 2009, unless extended for additional periods by mutual agreement of both parties.
The new agreement contained the following material terms: (i) initial annual salary of $120,000, paid monthly; and (ii) standard
employee benefits; (iii) limited termination provisions; (iv) rights to Invention provisions; and (v) confidentiality and non-compete
provisions upon termination of employment. This employment agreement expired on May 31, 2009. Our now former Chief Financial Officer
served until September 2011, at which time he entered into a month-to-month part-time consulting contract with the Company, for
$7,500 per month, payable in cash or stock at the consultant&rsquo;s option, at predetermined conversion rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Board of Director Arrangements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 23, 2009, the Company renewed all of its existing Directors&rsquo;
appointment, issued 6,000 shares to each and paid $5,000 to the three outside members. Pursuant to the Board of Director agreements,
the Company's &quot;in-house&quot; board members (CEO and Vice-President) waived their annual cash compensation of $5,000. The
value of the common stock granted was determined to be approximately $26,400 based on the fair market value of the Company&rsquo;s
common stock of $0.88 on the date of the grant. During the year 2009 the Company expensed approximately $41,400 related to these
agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 15, 2010, the Company renewed all of its existing Directors&rsquo;
appointment, issued 6,000 shares to each and paid $5,000 to two of the three outside members. Pursuant to the Board of Director
agreements, the Company's &quot;in-house&quot; board members (CEO and Vice-President) waived their annual cash compensation of
$5,000. The value of the common stock granted was determined to be approximately $7,200 based on the fair market value of the Company&rsquo;s
common stock of $0.24 on the date of the grant. During the year ended December 31, 2010, the Company expensed approximately $17,000
related to these agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 77; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2011, the Company accrued
$10,000 related to the agreements for the two remaining board members.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Investor Relations Agreements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 9, 2006, the Company entered into an agreement with
a consultant. Under the terms of the agreement, the Company is to receive investor relations and support services in exchange for
a monthly fee of $7,500, 150,000 shares of common stock, warrants to purchase 200,000 shares of common stock at $5.00 per share,
expiring in five years, and the reimbursement of certain travel expenses. The common stock and warrants vested in equal amounts
on November 9, 2006, February 1, 2007, April 1, 2007 and June 1, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2006, the consultant was vested in 37,500 shares
of common stock. The shares were valued at $112,000 based upon the closing market price of the Company&rsquo;s common stock on
the vesting date. The warrants were valued on the vesting date at $100,254 based on the Black-Scholes option pricing model using
the following assumptions: volatility of 88%, expected life of five years, risk free interest rate of 4.75% and no dividends. The
value of the common stock and warrants was recorded in general and administrative expense on the accompanying consolidated statement
of operations during the year ended December 31, 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company revalued the shares on February 1, 2007, vesting
date, and recorded an additional adjustment of $138,875. On February 1, 2007 the warrants were revalued at $4.70 per share based
on the Black-Scholes option pricing method using the following assumptions: volatility of 102%, expected life of five years, risk
free interest rate of 4.96% and no dividends. The Company recorded an additional expense of $158,118 related to these vested warrants
during the year ended December 31, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2007, the fair value of the vested common stock
issuable under the contract based on the closing market price of the Company&rsquo;s common stock was $7.18 per share and thus
expensed $269,250. As of March 31, 2007, the Company estimated the fair value of the vested warrants issuable under the contract
to be $6.11 per share. The warrants were valued on March 31, 2007 based on the Black-Scholes option pricing model using the following
assumptions: volatility of 114%, expected life of five years, risk free interest rate of 4.58% and no dividends. The Company recorded
an additional estimated expense of approximately $305,000 related to the remaining unvested warrants during the year ended December
31, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company revalued the shares on June 1, 2007, vesting date,
and recorded an additional adjustment of $234,375. On June 1, 2007 the warrants were revalued at $5.40 per share based on the Black-Scholes
option pricing method using the following assumptions: volatility of 129%, expected life of four and a half years, risk free interest
rate of 4.97% and no dividends. The Company recorded an additional expense of $269,839 related to these vested warrants during
the year ended December 31, 2007.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 21, 2011, these warrants expired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Fulton Project Lease</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 20, 2010, the Company entered into a 30 year lease
agreement with Itawamba County, Mississippi for the purpose of the development, construction, and operation of the Fulton Project.
At the end of the primary 30 year lease term, the Company shall have the right for two additional 30 year terms. The current
lease rate is computed based on a per acre rate per month that is approximately $10,300 per month. The lease stipulates the lease
rate is to be reduced at the time of the construction start by a Property Cost Reduction Formula which can substantially reduce
the monthly lease costs. The lease rate shall be adjusted every five years to the Consumer Price Index. The below payout schedule
does not contemplate reductions available upon the commencement of construction and commercial operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 78; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Future annual minimum lease payments under the above lease agreements,
at December 31, 2011 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 50%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">Years ending</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">December 31,</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 35%; text-align: center">2012</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">123,504</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">2013</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">123,504</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">2014</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">123,504</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">2015</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">125,976</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">2016</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">125,976</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Thereafter</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,025,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Total</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">3,647,464</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rent expense under non-cancellable leases was approximately
$123,000, $62,000, and $185,000 during the years ended December 31, 2011, 2010 and the period from Inception to December 31, 2011,
respectively. As of December 31, 2011 and 2010, $82,336 and $0 of the monthly lease payments were included in accounts payable
on the accompanying balance sheets. As of December 31, 2011, the Company was in technical default of the lease due to non-payment.
However, as of April 16, 2012, we have not received a notice of default.</P>





<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Legal Proceedings</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From time to time we may become involved
in legal proceedings which could adversely affect us. We are currently not involved in litigation that we believe will have a materially
adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the
executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our company&rsquo;s or our company&rsquo;s subsidiaries&rsquo; officers or directors in their capacities
as such, in which an adverse decision is expected to have a material adverse effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Consulting Agreements - Other</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 21, 2011, the Company entered into
a consulting service agreement with the National Center for Sustainable Development (&ldquo;NCSD&rdquo;), a non-profit organization.
The NCSD assists companies in the sustainable development industry in order to promote a sustainable low carbon economy through
demonstration projects, by identifying qualified Chinese investors. The term of the agreement is for twelve months or upon termination
by either party. The NCSD is entitled to 5% on the first $250 million, and 3% in excess of $250 million for equity capital, and/or
2% of aggregate gross proceeds received from debt capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 8 - REDEEMABLE NONCONTROLLING INTEREST</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On December 23, 2010, the Company
sold a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC (&ldquo;BlueFire
Fulton&rdquo; or the &ldquo;Fulton Project&rdquo;), to an accredited investor for a purchase price of $750,000 (&ldquo;Purchase
Price&rdquo;). The Company maintains a 99% ownership interest in the Fulton Project. In addition, the investor received a right
to require the Company to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future
contingent events based upon obtaining financing for the construction of the Fulton Project. The third party equity interests is reflected as redeemable noncontrolling interests in the Company&rsquo;s consolidated financial
statements outside of equity. The Company accreted the redeemable noncontrolling interest for the total redemption price of $862,500
through the forecasted financial close, estimated to be the end of the third quarter of 2011. On October 5, 2011, the Company received
a rejection letter for the USDA loan guarantee, which was the financing the Company was basing estimates on. During the years ended
December 31, 2011 and 2010 and the period from Inception to December 31, 2011, the </FONT>Company recognized the accretion of the
redeemable noncontrolling interest of $<FONT STYLE="font-size: 10pt">112,500</FONT>, $0, <FONT STYLE="font-size: 10pt">and </FONT>$112,500<FONT STYLE="font-size: 10pt">,</FONT>
respectively which was charged to additional paid-in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net loss attributable to the redeemable noncontrolling interest
during the year ended December 31, 2011 was $9,969 which netted against the value of the redeemable non-controlling interest in
temporary equity. The allocation of net loss was presented on the statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 9 - STOCKHOLDERS' DEFICIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Purchase Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 19, 2011, the Company signed a $10 million purchase
agreement (the &ldquo;Purchase Agreement&rdquo;) with Lincoln Park Capital Fund, LLC (&ldquo;LPC&rdquo;), an Illinois limited liability
company.&nbsp;&nbsp;The Company also entered into a registration rights agreement with LPC whereby we agreed to file a registration
statement related to the transaction with the U.S. Securities &amp; Exchange Commission (&ldquo;SEC&rdquo;) covering the shares
that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the Purchase Agreement
the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase Agreement. The registration
statement was declared effective on May 10, 2011, without any penalty. </P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">After the SEC has declared effective the registration
statement related to the transaction, the Company has&nbsp;the right, in&nbsp;their sole discretion, over a 30-month period to
sell&nbsp;the shares of common stock to LPC in amounts from $35,000 and up to $500,000 per sale, depending on the
Company&rsquo;s stock price as set forth in the Purchase Agreement, up to the aggregate commitment of $10 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are no upper limits to the price LPC may pay to purchase
our common stock and the purchase price of the shares related to the $10 million funding will be based on the prevailing market
prices of the Company&rsquo;s shares immediately preceding the time of sales without any fixed discount, and the Company controls
the timing and amount of any future sales, if any, of shares to LPC.&nbsp;&nbsp;LPC shall not have the right or the obligation
to purchase any shares of our common stock on any business day that the price of our common stock is below $0.15. The Purchase
Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions
by, among and for the benefit of the parties. LPC has covenanted not to cause or engage in any manner whatsoever, any direct or
indirect short selling or hedging of the Company&rsquo;s shares of common stock.&nbsp;&nbsp;The Purchase Agreement may be terminated
by us at any time at our discretion without any cost to us.&nbsp;&nbsp;Except for a limitation on variable priced financings, there
are no financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties
or liquidated damages in the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 79; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Upon signing the Purchase Agreement, BlueFire received $150,000
from LPC as an initial purchase under the $10 million commitment in exchange for 428,571 shares of our common stock and warrants
to purchase 428,571 shares of our common stock at an exercise price of $0.55 per share.&nbsp;&nbsp;The warrants contain a ratchet
provision in which the exercise price will be adjusted&nbsp;based on&nbsp;future issuances of common stock, excluding certain issuances;
if issuances are at prices lower than the current exercise price (see Note 6). The warrants have an expiration date of January
2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Concurrently, in consideration for entering into the $10
million agreement, we issued to LPC 600,000 shares of our common stock as a commitment fee and shall issue up to 600,000 more
shares pro rata as LPC purchases up to the remaining $9.85 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2011, the Company drew $200,000
under the Purchase Agreement and issued 1,119,377 shares of common stock, including 12,183 commitment shares that were eared on
a pro-rata basis as described above. The Company still has $9,650,000 available on the Purchase Agreement as of December 31, 2011;
however, no additional monies are expected to be drawn down until sometime during the second quarter of 2012. There have been $35,000
in draw downs subsequent to December 31, 2011 year end resulting in 235,465 additional shares being issued under the Purchase Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounted for the 428,571 common stock warrants
with ratchet provisions in accordance with ASC 815 whereby the warrants require liability classification. As the warrants are considered
a cost of permanent equity, the value of the warrants netted against the equity recognized in additional paid-in capital. See note
6 for valuation of warrants. The 600,000 shares of common stock issued in connect with the agreement were also considered a cost
of permanent equity. However, because the value of the shares both add to additional paid-in capital for the value of shares issued
and net against it as a cost of capital, they were recorded at par value with a corresponding reduction to additional-paid-in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The remaining 600,000 shares that are to be issue pro-rata as
the Company draws on the Purchase Agreement are also a cost of capital and are recorded as earned by LPC. The value of the shares
both add to additional paid-in capital for the value of shares issued and net against it as a cost of capital; accordingly, they
are recorded at par value with a corresponding reduction to additional-paid-in capital when earned.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Amended and Restated 2006 Incentive and Nonstatutory Stock
Option Plan</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 14, 2006, the Company established the 2006 incentive
and nonstatutory stock option plan (the &ldquo;Plan&rdquo;). The Plan is intended to further the growth and financial success of
the Company by providing additional incentives to selected employees, directors, and consultants. Stock options granted under the
Plan may be either &quot;Incentive Stock Options&quot; or &quot;Nonstatutory Options&quot; at the discretion of the Board of Directors.
The total number of shares of Stock which may be purchased through exercise of Options granted under this Plan shall not exceed
ten million (10,000,000) shares, they become exercisable over a period of no longer than five (5) years and no less than 20% of
the shares covered thereby shall become exercisable annually.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 16, 2007, the Board reviewed the Plan. As such, it
determined that the Plan was to be used as a comprehensive equity incentive program for which the Board serves as the Plan administrator;
and therefore added the ability to grant restricted stock awards under the Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the amended and restated Plan, an eligible person in the
Company&rsquo;s service may acquire a proprietary interest in the Company in the form of shares or an option to purchase shares
of the Company&rsquo;s common stock. The amendment includes certain previously granted restricted stock awards as having been issued
under the amended and restated Plan. As of December 31, 2011, 3,307,159 options and 1,238,359 shares have been issued under the
plan. As of December 31, 2011, 5,454,482 shares are still issuable under the Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Options</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 14, 2006, the Company granted options to purchase
1,990,000 shares of common stock to various employees and consultants having a $2.00 exercise price. The value of the options granted
was determined to be approximately $4,900,000 based on the Black-Scholes option pricing model using the following assumptions:
volatility of 99%, expected life of five (5) years, risk free interest rate of 4.73%, market price per share of $3.05, and no dividends.
The Company expensed the value of the options over the vesting period of two years for the employees. For non-employees the Company
revalued the fair market value of the options at each reporting period under the provisions of ASC 505. On December 14, 2011 all
1,970,000 of these options expired while 20,000 were exercised in a prior year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 80; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 20, 2007, the Company granted options to purchase
1,038,750 shares of the Company&rsquo;s common stock to various employees and consultants having an exercise price of $3.20 per
share. In addition, on the same date, the Company granted its President and Chief Executive Officer 250,000 and 28,409 options
to purchase shares of the Company&rsquo;s common stock having an exercise price of $3.20 and $3.52, respectively. The value of
the options granted was determined to be approximately $3,482,000 based on the Black-Scholes option pricing model using the following
assumptions: volatility of 122.9%, expected life of five (5) years, risk free interest rate of 3.09%, market price per share of
$3.20, and no dividends. Of the total 1,317,159 options granted on December 20, 2007, 739,659 vested immediately and 27,500 issued
to consultants vested monthly over a one year period, and 550,000 of the options vested upon two contingent future events. Management&rsquo;s
belief at the time of the grant was that the events were probable to occur and were within their control, and thus accounted for
the remaining vesting under ASC 718 by straight-lining the vesting through the expected date on which the future events were to
occur. At the time, management believed that future date was June 30, 2008. This determination was based on the fact that the Company
appeared to be on track to receive the permits and the related funding was available. In June 2008, the Company determined that
the June 30, 2008 estimate would not be met due to delays in receiving the necessary permits and thus modified the date to September
30, 2008. In September 2008, the Company determined that the September 30, 2009 deadline would not be met due to the difficulty
in obtaining financing due to the pending collapse of the capital markets. At that point the remaining unamortized portion was
immaterial and thus, the Company expensed the remaining amounts. Although the options were expensed according to ASC 718, the recipients
are still not fully vested as the triggering events have not yet occurred. The original grant date fair value of the 550,000 unvested
options was $2.70.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for the stock options to consultants under
the provisions of ASC 505. In accordance with ASC 505, the options awarded to consultants under the 2006 and 2007 Stock Option
Grant were re-valued periodically using the Black-Scholes option pricing model over the vesting period. As of December 31, 2011
and 2010 stock options to consultants were fully vested and expensed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the Company&rsquo;s 2007 and 2006 stock option
awards, during the years ended December 31, 2011, and 2010 and for the period from March 28, 2006 (Inception) to December 31, 2011,
the Company recognized stock based compensation, including consultants, of approximately $0, $0, and $4,487,000 to general
and administrative expenses and $0, $0, and $4,368,000 to project development expenses, respectively. There is no additional
future compensation expense to record at December 31, 2011 based on previous awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of the status of the stock option grants under the
Plan as of the years ended December 31, 2007, 2008, 2009, 2010 and 2011 and changes during this period are presented as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">Options</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Weighted</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Exercise</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Price</P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Weighted</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Remaining</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Contractual</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Term</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Years)</P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Outstanding January 1, 2007</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1,990,000</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">$</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.00</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Granted during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1,317,159</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">3.21</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Exercised during the year</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">(20,000</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">)</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">2.00</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="width: 66%; vertical-align: bottom">Outstanding December 31, 2007</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 8%; vertical-align: top; text-align: right">3,287,159</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">$</TD>
    <TD STYLE="width: 8%; vertical-align: top; text-align: right">2.48</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; text-align: right">4.40</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Granted during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Exercised during the year</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Outstanding December 31, 2008</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">3,287,159</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">$</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.48</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">3.40</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Granted during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Exercised during the year</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Outstanding December 31, 2009</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">3,287,159</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">$</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.48</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.40</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Granted during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Exercised during the year</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Outstanding December 31, 2010</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">3,287,159</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">$</TD>
    <TD STYLE="vertical-align: top; text-align: right">2.48</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">1.40</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom">Granted during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom">Exercised during the year</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">-</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">Expired during the year</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">(2,057,500</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">)</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right; border-bottom: Black 1pt solid">2.00</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.5pt">Options exercisable at December 31, 2011</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">1,229,659</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">3.21</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; vertical-align: top; text-align: right">1.00</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 81; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no amounts received for the exercise of stock options
in 2011 or 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes information concerning outstanding
and exercisable options at December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OPTIONS</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OUTSTANDING</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid; text-align: center">OPTIONS<BR>
EXERCISABLE</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">Range of Exercise Prices</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Outstanding</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">as of</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">12/31/2011</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Weighted-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Remaining</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Contractual Life</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(years)</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Weighted-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Exercise</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Price</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Exercisable</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">as of</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">12/31/2011</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Weighted-</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Exercise</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Price</P></TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">$3.20 - $3.52</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">1,229,659</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">1.00&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">3.21</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; vertical-align: top">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">767,159</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 1pt solid; vertical-align: top; text-align: right">3.21</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, the average intrinsic value of the
options outstanding is zero as the exercise prices were in excess of the closing price of the Company&rsquo;s common stock as of
December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Private Offerings</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 5, 2007, the Company completed a private offering
of its stock, and entered into subscription agreements with four accredited investors. In this offering, the Company sold an aggregate
of 278,500 shares of the Company&rsquo;s common stock at a price of $2.00 per share for total proceeds of $557,000. The shares
of common stock were offered and sold to the investors in private placement transactions made in reliance upon exemptions from
registration pursuant to Section 4(2) under the Securities Act of 1933. In addition, the Company paid $12,500 in cash and issued
6,250 shares of their common stock as a finder&rsquo;s fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 3, 2007 and December 14, 2007, the Company issued
an aggregate of 5,740,741 shares of common stock at $2.70 per share and issued warrants to purchase 5,740,741 shares of common
stock for gross proceeds of $15,500,000. The warrants have an exercise price of $2.90 per share and expire five years from the
date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The value of the warrants was determined to be approximately
$15,968,455 based on the Black-Scholes option pricing model using the following assumptions: volatility of 122.9%, expected life
of five (5) years, risk free interest rate of 3.28%, market price per share of $3.26, and no dividends. The relative fair value
of the warrants did not have an impact on the financial statements as they were issued in connection with a capital raise and recorded
as additional paid-in capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The warrants are subject to &ldquo;full-ratchet&rdquo; anti-dilution
protection in the event the Company (other than excluded issuances, as defined) issues any additional shares of stock, stock options,
warrants or any securities exchangeable into common stock at a price of less than $2.90 per share. If the Company issues securities
for less $2.90 per share then the exercise price for the warrants shall be adjusted to equal to the lower price. See Note 6, for
additional information regarding these warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the capital raise, the Company paid $1,050,000
to placement agents, $90,000 in legal fees and issued warrants for the purchase of 222,222 shares of common stock. The warrants
were valued at $618,133 based on the Black-Scholes assumptions above as recorded as a cost of the capital raised by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Issuance of Common Stock related to Employment Agreements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2007, the Company issued 10,000 shares of common
stock to an employee in connection with an employment agreement. The shares were valued on the initial date of employment at $40,000
based on the closing market of the Company&rsquo;s common stock on that date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 82; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 12, 2007, the Company entered into an employment
agreement with a key employee, and simultaneously entered into a consulting agreement with an entity controlled by such employee;
both agreements were effective March 16, 2007. Under the terms of the consulting agreement, the consulting entity received 50,000
restricted shares of the Company&rsquo;s common stock. The common stock was valued at approximately $275,000 based on the closing
market price of the Company&rsquo;s common stock on the date of the agreement. The shares vested in equal quarterly installments
on February 12, 2007, June 1, December 1, and December 1, 2007. The Company amortized the entire fair value of the common stock
of $275,000 over the vesting period during the year ended December 31, 2007. No additional issuances were made in 2008, 2009 and
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Shares Issued for Services</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 27, 2009, the Company entered into a 6-month Consulting
Agreement with Mirador Consulting, Inc. Pursuant to the Agreement, the Company will receive services in connection with mergers
and acquisitions, corporate finance, corporate finance relations, introductions to other financial relations companies and other
financial services. As consideration for these services, the Company made monthly cash payments of $3,000 and issued 200,000 shares
of the Company&rsquo;s common stock in exchange for $200. The Company valued the shares at $0.80 based upon the closing price of
the Company&rsquo;s common stock on the date of the agreement. Under the terms of the agreement, the shares did not have any future
performance requirement nor were they cancellable. The Company expensed the entire value on the date of the agreement and recorded
to general and administrative expense. Under the terms of the agreement the Company was to issue 100,000 shares on execution of
the agreement on November 15, 2009. On May 24, 2010, the Company issued the remaining 100,000 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Throughout the year ended December 31, 2011, the Company issued
718,963 shares of common stock for legal services provided, which compares to 75,000 shares for the same services in 2010. In connection
with this issuance the Company recorded $162,000 in legal expense which is included in general and administrative expense, which
compares to $20,250 in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Throughout the year ended December 31, 2011, the Company issued
139,549 shares of common stock for compliance services provided, which compares to zero shares for the same services in 2010. In
connection with this issuance the Company recorded $22,962 in compliance expenses which is included in general and administrative
expense, which compares to $0 in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 16, 2011, the Company issued 10,000 shares of common
stock for consulting services provided, which compares to zero shares for the same services in 2010. In connection with this issuance
the Company recorded $1,800 in consulting expenses which is included in general and administrative expense, which compares to $0
in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Shares Issued for Settlement of Accrued Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 28, 2011, the Company issued 527,980 shares of common
stock in lieu of cash for back rent owed of $81,837. In connection with this issuance the Company recorded a gain on the settlement
of accrued rent expenses of $7,920 which is included in the accompanying statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Private Placement Agreements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2007, the Company entered
into various placement agent agreements, whereby payments are only ultimately due if capital is raised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Warrants Issued</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Notes 5, 6, 9 and 10 for warrants issued with debt
and equity financings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 27, 2009, the Company entered into a six month consulting
agreement. Pursuant to the agreement, the Company grated the consultant a warrant to purchase 100,000 shares of common stock at
an exercise price of $3.00 per share. The value of the warrant issued was determined to be approximately $8,300 based on the Black-Scholes
option pricing model using the following assumptions: volatility of 108%, expected life of one (1) year, risk free interest rate
of 2.48%, market price per share of $0.80, and no dividends. The value of the warrants was expensed during the year ended December
31, 2009. These warrants expired on August 27, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 15, 2010, the Company issued to Arnold Klann, a
Director and Executive at the Company, a warrant to purchase 500,000 shares of common stock at an exercise price of $0.50 per share
pursuant to a loan agreement. See Note 10.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 19, 2011, the Company issued to Lincoln Park Capital,
a warrant to purchase 428,571 shares of common stock at an exercise price of $0.55 per share pursuant to a stock purchase agreement.
See Note 9.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 83; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Warrants Cancelled</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 19, 2009, the Company cancelled 673,200 warrants
for $220,000 in cash. (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Warrants Outstanding</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of the status of the warrants for the years ended
December 31, 2007, 2008, 2009 and 2010 changes during the periods is presented as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted <BR>Average <BR>Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted <BR>Average <BR>Remaining <BR>Contractual <BR>Term <BR>(Years)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">Outstanding January 1, 2007 (with 50,000 warrants exercisable)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Issued during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,186,694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2.96</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Outstanding and exercisable at December 31, 2007</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,386,694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3.02</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.60</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Issued during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Outstanding and exercisable at December 31, 2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,386,694</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.02</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Issued during the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cancelled during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(673,200</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2.90</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Outstanding and exercisable at December 31, 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,813,494</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.03</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.76</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Issued during the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cancelled during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(426,800</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2.92</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Outstanding and exercisable at December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,886,694</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.85</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.98</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Issued during the year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">428,581</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.55</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Expired during the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(200,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5.00</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Outstanding and exercisable at December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,115,275</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.65</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 10 - RELATED PARTY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Technology Agreement with Arkenol, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 1, 2006, the Company entered into a Technology License
agreement with Arkenol, Inc. (&ldquo;Arkenol&rdquo;), which the Company&rsquo;s majority shareholder and other family members hold
an interest in. Arkenol has its own management and board separate and apart from the Company. According to the terms of the agreement,
the Company was granted an exclusive, non-transferable, North American license to use and to sub-license the Arkenol technology.
The Arkenol Technology, converts cellulose and waste materials into Ethanol and other high value chemicals. As consideration for
the grant of the license, the Company shall make a one time payment of $1,000,000 at first project construction funding and for
each plant make the following payments: (1) royalty payment of 4% of the gross sales price for sales by the Company or its sub
licensees of all products produced from the use of the Arkenol Technology (2) and a one time license fee of $40.00 per 1,000 gallons
of production capacity per plant. According to the terms of the agreement, the Company made a one-time exclusivity fee prepayment
of $30,000 during the period ended December 31, 2006. The agreement term is for 30 years from the effective date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2008, due to the receipt of proceeds from the Department
of Energy, the Board of Directors determined that the Company had triggered its obligation to incur the full $1,000,000 Arkenol
License fee. The Board of Directors determined that the receipt of these proceeds constituted &ldquo;First Project Construction
Funding&rdquo; as established under the Arkenol technology agreement. As such, the consolidated statement of operations for the
year ended December 31, 2008 reflected the one-time license fee of $1,000,000. The Company paid the net amount due of $970,000
to the related party on March 9, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 84; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Asset Transfer Agreement with Ark Entergy, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 1, 2006, the Company entered into an Asset Transfer
and Acquisition Agreement with ARK Energy, Inc. (&ldquo;ARK Energy&rdquo;), which is owned (50%) by the Company&rsquo;s CEO. ARK
Energy has its own management and board separate and apart from the Company. Based upon the terms of the agreement, ARK Energy
transferred certain rights, assets, work-product, intellectual property and other know-how on project opportunities that may be
used to deploy the Arkenol technology (as described in the above paragraph). In consideration, the Company has agreed to pay a
performance bonus of up to $16,000,000 when certain milestones are met. These milestones include transferee&rsquo;s project implementation
which would be demonstrated by start of the construction of a facility or completion of financial closing whichever is earlier.
The payment is based on ARK Energy&rsquo;s cost to acquire and develop 19 sites which are currently at different stages of development.
As of December 31, 2011 and 2010, the Company had not incurred any liabilities related to the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Related Party Lines of Credit</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2007, the Company obtained a line of credit in the
amount of $1,500,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional liquidity to the
Company as needed. Under the terms of the note, the Company is to repay any principal balance and interest, at 10% per annum, within
30 days of receiving qualified investment financing of $5,000,000 or more. As of December 31, 2007, the Company repaid its outstanding
balance on line of credit of approximately $631,000 which included interest of $37,800. This line of credit was terminated with
the closing of the private placement in December 2007 and the subsequent line of credit balance repayment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2009, the Company obtained a line of credit in the
amount of $570,000 from Arkenol Inc, its technology licensor, to provide additional liquidity to the Company as needed. In October
2009 $175,000 was utilized from the line of credit and in November 2009 the balance was paid in full along with approximately $500
interest. As of December 31, 2010, there were no amounts outstanding and the line of credit was deemed cancelled as the Company
did not anticipate utilizing funds from the line of credit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November&nbsp;10, 2011, the Company obtained a line of credit
in the amount of $40,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional liquidity to
the Company as needed, at his sole discretion. Under the terms of the note, the Company is to repay any principal balance and interest,
at 12% per annum, within 30 days of receiving qualified investment financing of $100,000 or more. As of November 11, 2011, the
outstanding balance on the&nbsp;line of credit&nbsp;is approximately $19,000 with $21,000 remaining under the line.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Purchase of Property and Equipment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the year ended December 31, 2007, the Company purchased
various office furniture and equipment from ARK Energy costing approximately $39,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Notes Payable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As mentioned in Note 3, on July 13, 2007, the Company issued
several convertible notes aggregating a total of $500,000 with eight accredited investors including $25,000 invested by the Company&rsquo;s
former Chief Financial Officer. In 2011 and 2010 no additional notes were issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 85; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Loan Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 15, 2010, the Company entered into a loan agreement
(the &ldquo;Loan Agreement&rdquo;) by and between Arnold Klann, the Chief Executive Officer, Chairman of the board of directors
and majority shareholder of the Company, as lender (the &ldquo;Lender&rdquo;), and the Company, as borrower. Pursuant to the Loan
Agreement, the Lender agreed to advance to the Company a principal amount of Two Hundred Thousand United States Dollars ($200,000)
(the &ldquo;Loan&rdquo;). The Loan Agreement requires the Company to (i) pay to the Lender a one-time amount equal to fifteen percent
(15%) of the Loan (the &ldquo;Fee Amount&rdquo;) in cash or shares of the Company&rsquo;s common stock at a value of $0.50 per
share, at the Lender&rsquo;s option; and (ii) issue the Lender warrants allowing the Lender to buy 500,000 common shares of the
Company at an exercise price of $0.50 per common share, such warrants to expire on December 15, 2013. The Company has promised
to pay in full the outstanding principal balance of any and all amounts due under the Loan Agreement within thirty (30) days of
the Company&rsquo;s receipt of investment financing or a commitment from a third party to provide One Million United States Dollars
($1,000,000) to the Company or one of its subsidiaries (the &ldquo;Due Date&rdquo;), to be paid in cash or shares of the Company&rsquo;s
common stock, at the Lender&rsquo;s option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fair value of the warrants was $83,736 as determined by
the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 112.6%, risk-free interest
rate of 1.1%, dividend yield of 0%, and a term of three (3) years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The proceeds were allocated to the warrants issued to the note
holder based on their relative fair values which resulted in $83,736 allocated to the warrants. The amount allocated to the warrants
resulted in a discount to the note. The Company  amortized the discount over the estimated term of the Loan using the straight
line method due to the short term nature of the Loan. The Company estimated the Loan would be paid back during the quarter ended
September 30, 2011. During the year ended December 31, 2011 and 2010, the Company amortized $73,885 and $9,851, respectively, of
the discount to interest expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 11 &ndash; INCOME TAXES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax reporting primarily relates to the business of the
parent company Blue Fire Ethanol Fuels, Inc. which experienced a change in ownership on June 27, 2006. A change in ownership requires
management to compute the annual limitation under Section 382 of the Internal Revenue Code. The amount of benefits the Company
may receive from the operating loss carry forwards for income tax purposes is further dependent, in part, upon the tax laws in
effect, the future earnings of the Company, and other future events, the effects of which cannot be determined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company had no estimated state tax liability at December
31, 2011. There is no current provision or liability for federal reporting purposes, and no deferred income tax expense is recorded
since the deferred tax assets have been recorded as discussed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company's deferred tax assets consist solely of net operating
loss carry forwards of approximately $9,651,000 and $9,386,000 at December 31, 2011 and 2010, respectively. For federal tax purposes
these carry forwards expire in twenty years beginning in 2026 and for the State of California purposes they expire in five years
beginning in 2011. A full valuation allowance has been placed on 100% of the Company's deferred tax assets as it cannot be determined
if the assets will be ultimately used to offset future income, if any. During the years ended December 31, 2011 and 2010, and for
the period from March 28, 2006 (Inception) to December 31, 2011, the valuation increased by approximately $266,000, increased by
approximately $822,000, increased by approximately $9,651,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The difference between the California statutory rate of approximately
8.83% and the actual provision rate is due to permanent difference required to get to taxable income. These permanent differences
relate primarily to the gain on warrant liability,  the accretion of related party note discount and other non-cash expenses.
The Company has not provided a reconciliation to the provision for income taxes for the years ended December 31, 2011 and 2010
as the difference between the statutory rates and the actual provision rate relate to changes in the NOLs and the corresponding
valuation allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Company is not current in their federal and
state income tax filings due to previous delinquencies by Sucre prior to the reverse acquisition and due to fiscal 2010 returns
not being filed. The Company has assessed and determined that the effect of non filing is not expected to be significant, as Sucre
has not had active operations for a significant period of time and because the Company incurred significant losses in fiscal 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has filed all other United States Federal and State
tax returns. The Company has identified the United States Federal tax returns as its &ldquo;major&rdquo; tax jurisdiction. The
United States Federal return years 2007 through 2011 are still subject to tax examination by the United States Internal Revenue
Service, however, we do not currently have any ongoing tax examinations. The Company is subject to examination by the California
Franchise Tax Board for the years ended 2006 through 2011 and currently does not have any ongoing tax examinations.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 86; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 12 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 28, 2012, BlueFire finalized a committed equity facility
(the &ldquo;Equity Facility&rdquo;) with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (&ldquo;TCA&rdquo;),
whereby the parties entered into (i) a committed equity facility agreement (the &ldquo;Equity Agreement&rdquo;) and (ii) a registration
rights agreement (the &ldquo;Registration Rights Agreement&rdquo;). Pursuant to the terms of the Equity Agreement, for a period
of twenty-four (24) months commencing on the date of effectiveness of the Registration Statement (as defined below), TCA shall
commit to purchase up to $2,000,000 of BlueFire&rsquo;s common stock, par value $0.001 per share (the &ldquo;Shares&rdquo;), pursuant
to Advances (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under
the Equity Agreement is equal to ninety-five percent (95%) of the lowest daily volume weighted average price of BlueFire&rsquo;s
common stock during the five (5) consecutive trading days after BlueFire delivers to TCA an Advance notice in writing requiring
TCA to advance funds (an &ldquo;Advance&rdquo;) to BlueFire, subject to the terms of the Equity Agreement. The &ldquo;Registrable
Securities&rdquo; include (i) the Shares; and (ii) any securities issued or issuable with respect to the Shares by way of exchange,
stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization
or otherwise. As further consideration for TCA entering into and structuring the Equity Facility, BlueFire shall pay to TCA a fee
by issuing to TCA that number of shares of BlueFire&rsquo;s common stock that equal a dollar amount of $110,000 (the &ldquo;Facility
Fee Shares&rdquo;). It is the intention of BlueFire and TCA that the value of the Facility Fee Shares shall equal $110,000. In
the event the value of the Facility Fee Shares issued to TCA does not equal $110,000 after a nine month evaluation date, the Equity
Agreement provides for an adjustment provision allowing for necessary action (either the issuance of additional shares to TCA or
the return of shares previously issued to TCA to BlueFire&rsquo;s treasury) to adjust the number of Facility Fee Shares issued.
BlueFire also entered into the Registration Rights Agreement with TCA. Pursuant to the terms of the Registration Rights Agreement,
BlueFire is obligated to file a registration statement (the &ldquo;Registration Statement&rdquo;) with the U.S. Securities and
Exchange Commission (the &ldquo;SEC&rsquo;) to cover the Registrable Securities within 45 days of closing. BlueFire must use its
commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC by a date that is no later
than 90 days following closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 28, 2012, BlueFire entered into a security
agreement (the &ldquo;Security Agreement&rdquo;) TCA, related to a $300,000 convertible promissory note issued by BlueFire in
favor of TCA (the &ldquo;Convertible Note&rdquo;). The Security Agreement grants to TCA a continuing, first priority security
interest in all of BlueFire&rsquo;s assets, wheresoever located and whether now existing or hereafter arising or acquired. On
March 28, 2012, BlueFire issued the Convertible Note in favor of TCA. The maturity date of the Convertible Note is March 28,
2013, and the Convertible Note bears interest at a rate of twelve percent (12%) per annum. The Convertible Note is
convertible into shares of BlueFire&rsquo;s common stock at a price equal to ninety-five percent (95%) of the lowest daily
volume weighted average price of BlueFire&rsquo;s common stock during the five (5) trading days immediately prior to the date
of conversion. The Convertible Note may be prepaid in whole or in part at BlueFire&rsquo;s option without penalty. The
proceeds received by the Company under the purchase agreement are expected to be used for general working capital purposes
which include costs expected to be reimbursed under the DOE cost share program. The Company is currently determining the accounting
impact of the transaction.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to year end, in January 2012, under the LPC Purchase
Agreement the Company sold a total of 235,465 shares to LPC for $0.15 share for $35,000.</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 87 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE>&nbsp;</DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B> &ndash;<B> INFORMATION NOT
REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Other Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth an itemization
of all estimated expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 50%; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 81%; font-size: 10pt; text-align: left">SEC registration fee</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right">221</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Accounting fees and expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,000</TD><TD STYLE="font-size: 10pt; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Legal fees and expenses*</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">30,000</TD><TD STYLE="font-size: 10pt; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Miscellaneous</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">38,221</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">* Estimated</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Indemnification of Directors and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our certificate of incorporation and bylaws
provide that we will indemnify an officer, director, or former officer or director, to the full extent permitted by law. We have
been advised that in the opinion of the U.S. Securities and Exchange Commission indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection
with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction.
We will then be governed by the court&rsquo;s decision.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Sales of Unregistered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 27, 2009, the Company issued
200,000 shares of the Company&rsquo;s common stock to a consultant for services rendered at a fair value of $160,000 ($0.80/share),
based upon the quoted closing price of the Company&rsquo;s common stock on August 27, 2009. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 10, 2010, the Company issued
37,000 shares of the Company&rsquo;s common stock to a consultant for services rendered at a fair value of $17,020 ($0.46/share),
based upon the quoted closing price of the Company&rsquo;s common stock on October 11, 2010. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 15, 2010, the Company issued
the Chief Executive Officer, Chairman of the board of directors and majority shareholder of the Company, 500,000 warrants to purchase
shares of the Company&rsquo;s common stock at $0.50/share at anytime until December 15, 2013 as part of a $200,000 loan to the
Company. The issuance of such securities was exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation
D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 16, 2011, the Company issued
10,000 shares of the Company&rsquo;s common stock to a consultant for services rendered at a fair value of $1,800 ($0.18/share),
based upon the quoted closing price of the Company&rsquo;s common stock on September 16, 2011. The issuance of such securities
was exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 28, 2012, the Company issued 280,612 shares of the
Company&rsquo;s common stock to TCA as Facility Fee Shares pursuant to the Equity Agreement. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 88; Options: NewSection; Value: 50 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>EXHIBITS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 13%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold; text-align: center">Exhibit No.</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 85%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">Description</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">2.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Stock Purchase Agreement and Plan of Reorganization, dated May 31, 2006 (Incorporated by reference to the Company&rsquo;s Form 10-SB, as filed with the SEC on December 13, 2006)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">3.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Amended and Restated Articles of Incorporation, dated July 2, 2006 (Incorporated by reference to the Company&rsquo;s Form 10-SB, as filed with the SEC on December 13, 2006)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">3.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Amended and Restated Bylaws, dated May 27, 2006 (Incorporated by reference to the Company&rsquo;s Form 10-SB, as filed with the SEC on December 13, 2006)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">3.3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Second Amended and Restated Bylaws, dated April 24, 2008 (Incorporated by reference to the Company&rsquo;s Form 8-K, as filed with the SEC on April 29, 2008)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">3.4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Amended and Restated Articles of Incorporation, dated July 20, 2010 (Incorporated by reference to the Company&rsquo;s Form 8-K, as filed with the SEC on July 26, 2010)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">5.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Legal Opinion of Lucosky Brookman LLP *</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Arkenol Technology License Agreement, dated March 1, 2006 (Incorporated by reference to the Company&rsquo;s Form 10-SB, as filed with the SEC on December 13, 2006)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">ARK Energy Asset Transfer and Acquisition Agreement, dated March 1, 2006 (Incorporated by reference to the Company&rsquo;s Form 10-SB, as filed with the SEC on December 13, 2006)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Amended and Restated 2006 Incentive and Non-Statutory Stock Option Plan, dated December 13, 2006 (Incorporated by reference to the Company&rsquo;s Form S-8, as filed with the SEC on December 17, 2007)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Purchase Agreement, dated as of January 19, 2011, by and between the Company and Lincoln Park Capital Fund, LLC (Incorporated by reference to the Company&rsquo;s Form 8-K, as filed with the SEC on January 24, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.5</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Registration Rights Agreement, dated as of January 19, 2011, by and between the Company and Lincoln Park Capital Fund, LLC (Incorporated by reference to the Company&rsquo;s Form 8-K, as filed with the SEC on January 24, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.6</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Committed Equity Facility Agreement, dated March 28, 2012, by and between BlueFire Renewables, Inc. and TCA Global Credit Master Fund, LP *</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">10.7</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Registration Rights Agreement, dated March 28, 2012, by and between BlueFire Renewables, Inc. and TCA Global Credit Master Fund, LP *</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">14.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Code of Ethics (Incorporated by reference to the Company&rsquo;s Form 8-K, as filed with the SEC on March 6, 2009)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">23.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Consent of dbbmckennon *</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: center">23.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Consent of Lucosky Brookman LLP (filed as Exhibit 5.1 herewith)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* filed herewith</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 89 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->51<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Undertakings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">(1) To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">i. To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">ii. To reflect in
the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth
in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">iii. To include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">(2) That, for the
purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">(3) To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">(4) Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">(5) Each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt"></P>

<!-- Field: Page; Sequence: 90 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 46.2pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the requirements of
the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements
of filing on Form S-1 and authorizes this registration statement to be signed on its behalf by the undersigned, in the City of
Irvine, California, on May 4, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold; text-align: justify">BLUEFIRE RENEWABLES, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 35%; padding-right: -3.3pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 15%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -3.3pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: -3.3pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic; text-align: justify">&nbsp;/s/ Arnold Klann</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -3.3pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">Name: Arnold Klann</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: -6.6pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Title: Chief Executive Officer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(Principal Executive
        Officer)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(Principal Financial
        Officer)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(Principal Accounting
        Officer)</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the requirements of
the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the
capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">Signature</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 59%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">Title</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 17%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-weight: bold">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">/s/ Arnold Klann</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD ROWSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Arnold Klann</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">/s/ Necitas Sumait</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Director, Secretary and Senior Vice President</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Necitas Sumait</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">/s/ John Cuzens</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Chief Technology Officer and Senior Vice President</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">John Cuzens</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">/s/ Chris Nichols</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Director</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">Chris Nichols</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt; font-style: italic">/s/ Joseph Sparano</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Director</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">Joseph Sparano</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-autospace: none; font-size: 10pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 91; Options: Last -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "v311738_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1026103}]
{"company-data": {"conformed-name": "Bluefire Renewables, Inc.", "cik": "0001370489", "assigned-sic": "2860", "irs-number": "204590982", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-181169", "film-number": "12814805"}, "business-address": {"street1": "31 MUSICK", "city": "IRVINE", "state": "CA", "zip": "92618", "phone": "949-588-3767"}, "mail-address": {"street1": "31 MUSICK", "city": "IRVINE", "state": "CA", "zip": "92618"}, "former-company": {"former-conformed-name": "BLUEFIRE ETHANOL FUELS INC", "date-changed": "20060726"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BLUEFIRE RENEWABLES, INC.
(Name of registrant as specified in its
charter)
Nevada
2860
20-4590982
(State
    or other jurisdiction of incorporation or organization)
(Primary
    Standard Industrial Classification Code Number)
(I.R.S. Employer Identification
    No.)
31 Musick
Irvine, CA 92618
(949) 588-3767
(Address, including zip code, and telephone
        number,
including area code, or registrant's
        principal executive offices)
The Corporation Trust Company of Nevada
311 S Division St
Carson City, NV 89703
Tel: (608) 827-5300
(Name, address, including zip code, and
        telephone number,
including area code, of agent for service)
Copies to:
Lucosky Brookman LLP
33 Wood Avenue South, 6th Floor
Iselin, New Jersey 08830
Fax: (732) 395-4401
Approximate date of commencement of
proposed sale to the public:
From time to time after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
Q
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act:
Large accelerated filer
¨
Non-accelerated filer
¨
Accelerated filer
¨
Smaller reporting company
Q
CALCULATION OF REGISTRATION FEE
Title of Class of Securities
to be Registered
Amount
To Be Registered (1)
Proposed
Maximum
Aggregate
Price Per Share (2)
Proposed
Maximum
Aggregate
Offering
Price
Amount of
Registration
Fee
Common Stock, $0.001 par value per share, issuable pursuant to the Equity Agreement
5,500,000
$
0.35
$
1,925,000
$
220.61
(1)   We are registering
5,500,000 shares of our common stock (the "Shares") that we will put to TCA Global Credit Master Fund, LP, a Cayman
Islands limited partnership ("TCA" or the "Selling Security Holder"), pursuant to a committed equity facility
agreement (the "Equity Agreement") between the Selling Security Holder and the registrant entered into on March 28,
2012. In the event of stock splits, stock dividends, or similar transactions involving the registrant's common stock, the
number of shares of common stock registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional
securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). In the event that adjustment provisions of the Equity Agreement require the registrant to issue more shares than are
being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant
will file a new registration statement to register those additional shares.
(2)   Estimated
solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, using the closing
price as reported on the Over-the-Counter Bulletin Board (the "OTCBB") on May 2, 2012, which was $0.35 per
share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
The information in this
prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 4,
2012
BLUEFIRE RENEWABLES, INC.
5,500,000 Shares of Common Stock
This prospectus relates to the resale of
up to 5,500,000 shares of our common stock, par value $0.001 per share (the "Shares"), by TCA, which are Shares that
we will put to TCA by delivering an advance notice pursuant to the Equity Agreement.
The Equity Agreement with TCA provides
that, for a period of twenty-four (24) months commencing on the effective date of the registration statement, TCA is committed
to purchase up to $2,000,000 of our common stock. We may draw on the facility from time to time, as and when we determine appropriate
in accordance with the terms and conditions of the Equity Agreement. The 5,500,000 Shares included in this prospectus represent
a portion of the Shares issuable to the Selling Security Holder under the Equity Agreement.
TCA is an "underwriter" within
the meaning of the Securities Act in connection with the resale of our common stock under the Equity Agreement. No other underwriter
or person has been engaged to facilitate the sale of shares of our common stock in this offering. TCA will pay us ninety-five percent
(95%) of the lowest daily volume weighted average price of the Company's common stock for the five (5) consecutive trading
days after the Company delivers to TCA an advance notice in writing requiring TCA to advance funds (an "Advance") to
the Company, subject to the terms of the Equity Agreement.
We will not receive any proceeds from the
sale of these Shares offered by the Selling Security Holder. However, we will receive proceeds from the sale of our Shares under
the Equity Agreement. The proceeds will be used for working capital or general corporate purposes. We will bear all costs associated
with this registration.
Our common stock is quoted on the OTCBB
under the symbol "BFRE.OB." The Shares registered hereunder are being offered for sale by the Selling Security Holder
at prices established on the OTCBB during the term of this offering. On May 2, 2012, the closing price as reported on the OTCBB
was $0.35 per share. These prices will fluctuate based on the demand for our common stock.
This investment involves a high degree
of risk. You should purchase shares only if you can afford a complete loss. See "Risk Factors" beginning on page 6.
Neither the U.S. Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is_________,
2012
TABLE OF CONTENTS
Page
Prospectus Summary
2
Summary Financial Data
5
Risk Factors
6
Forward-Looking Statements
16
Use of Proceeds
16
Determination of Offering Price
16
Selling Security Holders
16
Plan of Distribution
18
Description of Securities to be Registered
20
Description of Business
21
Description of Property
30
Legal Proceedings
31
Management's Discussion and Analysis of Financial Condition and Results of Operations
31
Market Price of and Dividends on Registrant's Common Equity and Related Stockholder Matters
37
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
39
Directors, Executive Officers, Promoters and Control Persons
39
Executive Compensation
41
Security Ownership of Certain Beneficial Owners and Management
44
Transactions with Related Persons, Promoters, and Certain Control Persons
47
Indemnification for Securities Act Liabilities
47
Legal Matters
47
Experts
47
Additional Information
48
You may only rely on the information
contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common
stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any
common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor
any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no
change in our affairs since the date of this prospectus is correct as of any time after its date.
1
PROSPECTUS SUMMARY
The following summary highlights selected
information contained in this prospectus. This summary does not contain all the information you should consider before investing
in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the "risk
factors" section, the financial statements and the notes to the financial statements. References to the "Company,"
"we," "us," "our" and similar words refer to BlueFire Renewables, Inc.
BLUEFIRE RENEWABLES, INC.
Our Company
We are BlueFire Renewables, Inc., a Nevada
corporation. Our goal is to develop, own and operate high-value carbohydrate-based transportation fuel plants, or biorefineries,
to produce ethanol, a viable alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our
biorefineries will convert widely available, inexpensive, organic materials such as agricultural residues, high-content biomass
crops, wood residues and cellulose from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety
of feedstocks and locations in which to develop facilities to become a low cost producer of ethanol. We have licensed for use a
patented process from Arkenol, Inc., a Nevada corporation ("Arkenol"), to produce ethanol from cellulose (the "Arkenol
Technology"). We are the exclusive North America licensee of the Arkenol Technology. We may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to 19 ethanol project opportunities originally
developed by ARK Energy, Inc., a Nevada corporation, to accelerate our deployment of the Arkenol Technology.
Company History
We are a Nevada corporation that was initially
organized as Atlanta Technology Group, Inc., a Delaware corporation, on October 12, 1993. The Company was re-named Docplus.net
Corporation on December 31, 1998, and further re-named Sucre Agricultural Corp. ("Sucre") and re-domiciled as a Nevada
corporation on March 6, 2006. Finally, on May 24, 2006, in anticipation of the reverse merger by which it would acquire BlueFire
Ethanol, Inc., a privately held Nevada corporation organized on March 28, 2006, as described below, the Company was re-named to
BlueFire Ethanol Fuels, Inc.
On June 27, 2006, the Company completed
a reverse merger (the "Reverse Merger") with BlueFire Ethanol, Inc. ("BlueFire Ethanol"). At the time of
Reverse Merger, the Company was a blank-check company and had no operations, revenues or liabilities. The only asset possessed
by the Company was $690,000 in cash which continued to be owned by the Company at the time of the Reverse Merger. In connection
with the Reverse Merger, the Company issued BlueFire Ethanol 17,000,000 shares of common stock, approximately 85% of all of the
outstanding common stock of the Company, for all the issued and outstanding BlueFire Ethanol common stock. The Company stockholders
retained 4,028,264 shares of the Company's common stock. As a result of the Reverse Merger, BlueFire Ethanol became our wholly-owned
subsidiary. On June 21, 2006, prior to and in anticipation of the Reverse Merger, the Company sold 3,000,000 shares of common stock
to two related investors in a private offering of shares pursuant to Rule 504 for proceeds of $1,000,000.
On July 20, 2010, the Company changed its
name to BlueFire Renewables, Inc. to more accurately reflect our primary business plan expanding the focus from just building cellulosic
ethanol projects to include other advanced biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants.
The Company's shares of common stock
began trading under the symbol "BFRE.PK" on the Pink Sheets of the National Quotation Bureau on July 11, 2006, and
later began trading on the OTCBB under the symbol "BFRE.OB" on June 19, 2007. On May 2, 2012, the closing price of
our Common Stock was $0.35 per share.
Our executive offices are located at 31
Musick, Irvine, California 92618 and our telephone number at such office is (949) 588-3767.
2
About This Offering
This offering relates to the resale of
up to 5,500,000 shares of our common stock by the Selling Security Holder, which are the Shares that we will put to TCA pursuant
to the Equity Agreement. The 5,500,000 shares included in this prospectus represent a portion of the aggregate shares issuable
to the Selling Security Holder under the Equity Agreement. Pursuant to the Equity Agreement:
·
TCA agreed to purchase from the Company, from time to time, in the Company's
discretion (subject to the conditions set forth therein), for a period of twenty-four (24) months, commencing on the effective
date of the registration statement filed by the Company for resale of the Shares issuable under the Purchase Agreement, up to $2,000,000
of the Company's common stock;
·
Pursuant to a registration rights agreement between the Company and TCA entered
into in connection with the Equity Agreement, the Company agreed to file a registration statement with the U.S. Securities and
Exchange Commission (the "SEC") for the resale of not less than the maximum number of shares of common stock allowable
pursuant to Rule 415 under the Securities Act, of shares of common stock issuable under the Equity Agreement;
·
The purchase price for the shares of common stock sold under the Equity Agreement
will be equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company's common stock
for the five (5) consecutive trading days (the "Pricing Period") after the Company delivers to TCA an Advance notice
in writing (the "Market Price") requiring TCA to Advance funds to the Company, subject to the terms of the Equity Agreement.
·
The maximum amount of common stock that TCA shall be obligated to purchase
with respect to any single Advance under the Equity Agreement will be the greater of: (i) an amount calculated by multiplying the
Market Price applicable to the relevant Advance notice by 200,000 shares or (ii) two hundred percent (200%) of the average daily
volume of shares of common stock traded during the immediately preceding five (5) consecutive trading days applicable to the relevant
Advance notice.
·
As further consideration for TCA entering into and structuring the equity
facility, the Company shall pay to TCA a fee by issuing to TCA that number of shares of the Company's common stock that equal
a dollar amount of one hundred thousand dollars ($110,000) (the "Facility Fee Shares"). It is the intention of the
Company and TCA that the value of the Facility Fee Shares shall equal $110,000. In the event the value of the Facility Fee Shares
issued to TCA does not equal $110,000 after a ninth month evaluation date, the Equity Agreement provides for an adjustment provision
allowing for necessary action to adjust the number of shares issued.
We relied on an exemption from the registration
requirements of the Securities Act. The transaction does not involve a private offering, TCA is an "accredited investor"
and/or qualified institutional buyer and TCA has access to information about the Company and its investment.
At an assumed purchase price under the
Purchase Agreement of $0.333 (equal to 95% of the closing price of our common stock of $0.35 on May 2, 2012), we will be able to
receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered hereunder pursuant
to the Equity Agreement. At an assumed purchase price of $0.333 under the Equity Agreement, we would be required to register approximately
515,038 additional shares to obtain the balance of $2,000,000 under the Equity Agreement. The Company is currently authorized to
issue 100,000,000 shares of its common stock. TCA has agreed, subject to certain exceptions listed in the Equity Agreement, to
refrain from holding an amount of shares which would result in TCA or its affiliates from owning more than 9.99% of the then-outstanding
shares of the Company's common stock at any one time.
We will bear the expenses of this offering
which we estimate to be approximately $38,000, including legal expenses of approximately $30,000, accounting expenses of approximately
$5,000, and miscellaneous expenses, including printer costs, of approximately $3,000.
There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Equity Agreement.  These risks include dilution of stockholders,
significant decline in our stock price and our inability to draw sufficient funds when needed.
3
TCA will periodically purchase our common
stock under the Equity Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause
our stock price to decline, which will require us to issue increasing numbers of common shares to TCA to raise the same amount
of funds, as our stock price declines.  Neither the Equity Agreement nor any rights of the parties under the Equity Agreement
may be assigned or delegated to any other person.
Summary of the Shares Offered by the Selling Security Holder
Common stock Offered by the Selling Security Holder
5,500,000 shares of common stock.
Common Stock Outstanding Before the Offering
32,776,919 as of May 2, 2012
Common Stock Outstanding After the Offering
38,276,919 shares, assuming the sale of all of the shares being registered in this Registration Statement.
Terms of the Offering
The Selling Security Holder will determine when and how it will sell the common stock offered in this prospectus.
Termination of the Offering
Pursuant to the Equity Agreement, this offering will terminate twenty-four (24) months after the registration statement to which this prospectus is made a part is declared effective by the SEC.
Use of Proceeds
We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holder.  However, we will receive proceeds from the sale of our common stock under the Equity Agreement.  The proceeds from the offering will be used for working capital and general corporate purpose.  See "Use of Proceeds."
Risk Factors
The common stock offered hereby involves a high degree of risk and should
not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors" beginning
on page 6.
OTCBB Symbol
BFRE.OB
4
SUMMARY FINANCIAL DATA
The following selected financial information
is derived from the Company's Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction
with the Company's Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
The following selected financial information
is derived from the Company's Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction
with the Company's Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
Summary of Operations
For the Years Ended December 31,
2011
2010
Total Revenue
$
204,326
$
669,343
Loss from operations
$
(2,143,750
)
$
(2,423,955
)
Net loss
$
(1,384,981
)
$
(922,906
)
Net loss per common share (basic and diluted)
$
(0.05
)
$
(0.03
)
Weighted average common shares outstanding
30,101,167
28,379,920
Statement of Financial Position
For the Years Ended December 31,
2011
2010
Cash and cash equivalents
$
15,028
$
592,359
Total assets
$
1,426,275
$
1,938,152
Working Capital
$
(1,520,486
)
$
38,708
Long term debt
$
-
$
-
Stockholders' equity ( deficit )
$
(1,219,346
)
$
(221,141
)
5
RISK FACTORS
An investment in the Company's common
stock involves a high degree of risk. You should carefully consider the risks described below as well as other information provided
to you in this prospectus, including information in the section of this document entitled "Forward Looking Statements."
If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely
affected, the value of our common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
SINCE INCEPTION, WE HAVE HAD LIMITED
OPERATIONS AND HAVE INCURRED NET LOSSES OF $31,374,304 AND WE NEED ADDITIONAL CAPITAL TO EXECUTE OUR BUSINESS PLAN.
We have had limited operations and have
incurred net losses of approximately $31,374,304 for the period from March 28, 2006 ("Inception") through December
31, 2011, of which approximately $16,822,957 was cash used in our operating activities. We have generated revenues from consulting
of approximately $143,615 and approximately $6,172,775 in grant revenue from the DOE for total revenues of approximately $6,300,000,
and no revenues from intended operations. We have yet to begin ethanol production or construction of ethanol producing plants.
Since the Reverse Merger, we have been engaged in developmental activities, including developing a strategic operating plan, plant
engineering and development activities, entering into contracts, hiring personnel, developing processing technology, and raising
private capital. Our continued existence is dependent upon our ability to obtain additional debt and/or equity financing. We are
uncertain given the economic landscape when to anticipate the beginning construction of a plant given the availability of capital.
We estimate the engineering, procurement, and construction ("EPC") cost including contingencies to be in the range
of approximately $100 million to $125 million for our Lancaster Biorefinery, and approximately $300 million for our Fulton Project.
We plan to raise additional funds through project financings, grants and/or loan guarantees, or through future sales of our common
stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations.
There is no assurance we will be successful in raising additional capital or achieving profitable operations. Wherever possible,
the Company's Board of Directors (the "Board of Directors") will attempt to use non-cash consideration to satisfy
obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock.
These actions will result in dilution of the ownership interests of existing shareholders may further dilute common stock book
value, and that dilution may be material.
WE HAVE A LIMITED OPERATING HISTORY
WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE FUTURE.
We have yet to establish any history of
profitable operations. In two of the last three years we have incurred annual operating losses. Operating losses were $2,143,750
and $2,243,955 for fiscal years ended 2011 and 2010, respectively. As a result, at December 31, 2011, we had net losses of approximately
$31,374,304 since Inception. In 2011, we had net loss of $1,384,981, which was partially a result of non-cash gains on the change
in fair value of warrant liabilities and a one-time revenue transaction. Our revenues have not been sufficient to sustain our operations.
We expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. Our profitability will
require the successful commercialization of at least one commercial scale cellulose to ethanol facility. No assurances can be given
when this will occur or that we will ever be profitable.
AS OF DECEMBER 31, 2011, THE COMPANY
HAS A NEGATIVE WORKING CAPITAL OF APPROXIMATELY $1,520,000.
Management has estimated that operating
expenses for the next twelve months will be approximately $1,700,000, excluding engineering costs related to the development of
bio-refinery projects. These matters raise substantial doubt about the Company's ability to continue as a going concern.
For the remainder of 2012, the Company intends to fund its operations with reimbursements under the Department of Energy contract,
from the sale of Fulton Project equity ownership, from the sale of debt or equity instruments, and our equity purchase agreement
consummated with LPC in January 2011 (as discussed herein). The Company's ability to get reimbursed on the DOE contract is
dependent on the availability of cash to pay for the related costs. As of May 2, 2012, the Company expects the current resources,
as well as the resources available in the short term under the LPC Purchase Agreement, will only be sufficient for a period of
approximately two months, depending upon certain funding conditions contained herein, unless significant additional financing is
received. Management has determined that general expenditures must be reduced and additional capital will be required in the form
of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further
accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms
acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the
scope of our planned development, which could harm our business, financial condition and operating results.
6
OUR CELLULOSE-TO-ETHANOL TECHNOLOGIES
ARE UNPROVEN ON A LARGE-SCALE COMMERCIAL BASIS AND PERFORMANCE COULD FAIL TO MEET PROJECTIONS, WHICH COULD HAVE A DETRIMENTAL EFFECT
ON THE LONG-TERM CAPITAL APPRECIATION OF OUR STOCK.
While production of ethanol from corn,
sugars and starches is a mature technology, newer technologies for production of ethanol from cellulose biomass have not been built
at large commercial scales. The technologies being utilized by us for ethanol production from biomass have not been demonstrated
on a commercial scale. All of the tests conducted to date by us with respect to the Arkenol Technology have been performed on limited
quantities of feedstocks, and we cannot assure you that the same or similar results could be obtained at competitive costs on a
large-scale commercial basis. We have never utilized these technologies under the conditions or in the volumes that will be required
to be profitable and cannot predict all of the difficulties that may arise. It is possible that the technologies, when used, may
require further research, development, design and testing prior to larger-scale commercialization. Accordingly, we cannot assure
you that these technologies will perform successfully on a large-scale commercial basis or at all.
OUR BUSINESS EMPLOYS LICENSED ARKENOL
TECHNOLOGY WHICH MAY BE DIFFICULT TO PROTECT AND MAY INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
We currently license our technology from
Arkenol. Arkenol owns 11 U.S. patents, 21 foreign patents, and has one foreign patent pending and may file more patent applications
in the future. Our success depends, in part, on our ability to use the Arkenol Technology, and for Arkenol to obtain patents, maintain
trade secrecy and not infringe the proprietary rights of third parties. We cannot assure you that the patents of others will not
have an adverse effect on our ability to conduct our business, that we will develop additional proprietary technology that is patentable
or that any patents issued to us or Arkenol will provide us with competitive advantages or will not be challenged by third parties.
Further, we cannot assure you that others will not independently develop similar or superior technologies, duplicate elements of
the Arkenol Technology or design around it.
It is possible that we may need to acquire
other licenses to, or to contest the validity of, issued or pending patents or claims of third parties. We cannot assure you that
any license would be made available to us on acceptable terms, if at all, or that we would prevail in any such contest. In addition,
we could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party's
patents in bringing patent infringement suits against other parties based on our licensed patents.
In addition to licensed patent protection,
we also rely on trade secrets, proprietary know-how and technology that we seek to protect, in part, by confidentiality agreements
with our prospective joint venture partners, employees and consultants. We cannot assure you that these agreements will not be
breached, that we will have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not otherwise
become known or be independently discovered by others.
OUR SUCCESS DEPENDS UPON ARNOLD KLANN,
OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AND JOHN CUZENS, OUR CHIEF TECHNOLOGY OFFICER AND SENIOR VICE PRESIDENT.
We believe that our success will depend
to a significant extent upon the efforts and abilities of (i) Arnold Klann, our Chairman and Chief Executive Officer, due to his
contacts in the ethanol and cellulose industries and his overall insight into our business, and (ii) John Cuzens, our Chief Technology
Officer and Senior Vice President for his technical and engineering expertise, including his familiarity with the Arkenol Technology.
Our failure to retain Mr. Klann or Mr. Cuzens, or to attract and retain additional qualified personnel, could adversely affect
our operations. We do not currently carry key-man life insurance on any of our officers.
7
COMPETITION FROM LARGE PRODUCERS
OF PETROLEUM-BASED GASOLINE ADDITIVES AND OTHER COMPETITIVE PRODUCTS MAY IMPACT OUR PROFITABILITY.
Our proposed ethanol plants will also compete
with producers of other gasoline additives made from other raw materials having similar octane and oxygenate values as ethanol.
The major oil companies have significantly greater resources than we have to develop alternative products and to influence legislation
and public perception of ethanol. These other companies also have significant resources to begin production of ethanol should they
choose to do so.
We will also compete with producers of
other gasoline additives having similar octane and oxygenate values as ethanol. An example of such other additives is MTBE, a petrochemical
derived from methanol. MTBE costs less to produce than ethanol. Many major oil companies produce MTBE and because it is petroleum-based,
its use is strongly supported by major oil companies. Alternative fuels, gasoline oxygenates and alternative ethanol production
methods are also continually under development. The major oil companies have significantly greater resources than we have to market
MTBE, to develop alternative products, and to influence legislation and public perception of MTBE and ethanol.
OUR BUSINESS PROSPECTS WILL BE IMPACTED
BY CORN SUPPLY.
Our ethanol will be produced from cellulose,
however currently most ethanol is produced from corn, which is affected by weather, governmental policy, disease and other conditions.
A significant increase in the availability of corn and resulting reduction in the price of corn may decrease the price of ethanol
and harm our business.
IF ETHANOL AND GASOLINE PRICES DROP
SIGNIFICANTLY, WE WILL ALSO BE FORCED TO REDUCE OUR PRICES, WHICH POTENTIALLY MAY LEAD TO FURTHER LOSSES.
Prices for ethanol products can vary significantly
over time and decreases in price levels could adversely affect our profitability and viability. The price of ethanol has some relation
to the price of gasoline. The price of ethanol tends to increase as the price of gasoline increases, and the price of ethanol tends
to decrease as the price of gasoline decreases. Any lowering of gasoline prices will likely also lead to lower prices for ethanol
and adversely affect our operating results. We cannot assure you that we will be able to sell our ethanol profitably, or at all.
INCREASED ETHANOL PRODUCTION FROM
CELLULOSE IN THE UNITED STATES COULD INCREASE THE DEMAND AND PRICE OF FEEDSTOCKS, REDUCING OUR PROFITABILITY.
New ethanol plants that utilize cellulose
as their feedstock may be under construction or in the planning stages throughout the United States. This increased ethanol production
could increase cellulose demand and prices, resulting in higher production costs and lower profits.
PRICE INCREASES OR INTERRUPTIONS
IN NEEDED ENERGY SUPPLIES COULD CAUSE LOSS OF CUSTOMERS AND IMPAIR OUR PROFITABILITY.
Ethanol production requires a constant
and consistent supply of energy. If there is any interruption in our supply of energy for whatever reason, such as availability,
delivery or mechanical problems, we may be required to halt production. If we halt production for any extended period of time,
it will have a material adverse effect on our business. Natural gas and electricity prices have historically fluctuated significantly.
We purchase significant amounts of these resources as part of our ethanol production. Increases in the price of natural gas or
electricity would harm our business and financial results by increasing our energy costs.
OUR BUSINESS PLAN CALLS FOR EXTENSIVE
AMOUNTS OF FUNDING TO CONSTRUCT AND OPERATE OUR BIOREFINERY PROJECTS AND WE MAY NOT BE ABLE TO OBTAIN SUCH FUNDING WHICH COULD
ADVERSELY AFFECT OUR BUSINESS, OPERATIONS AND FINANCIAL CONDITION.
Our business plan depends on the completion
of up to 19 biorefinery projects. Although each facility will have specific funding requirements, our proposed Lancaster Biorefinery
will require approximately $100-$125 million in EPC costs, and our proposed Fulton Project will require approximately $300 million
in EPC costs. We will be relying on additional financing, and funding from such sources as Federal and State grants and loan guarantee
programs. In 2010, BlueFire was notified by the DOE LGPO, that it had rejected our application for the Lancaster Biorefinery, and
in 2011, BlueFire was notified by the DOE LGPO that it would not move forward with its application on the Fulton Project until
it had secured the necessary equity commitment on that project. In October 2011, BlueFire was notified by its lender ("Lender")
for the Company's USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible
to participate in the USDA Biorefinery Assistance Program. We are currently in discussions with potential sources of financing
but no definitive agreements are in place. If we cannot achieve the requisite financing or complete the projects as anticipated,
this could adversely affect our business, the results of our operations, prospects and financial condition.
8
RISKS RELATED TO GOVERNMENT REGULATION
AND SUBSIDIZATION
FEDERAL REGULATIONS CONCERNING TAX
INCENTIVES COULD EXPIRE OR CHANGE, WHICH COULD CAUSE AN EROSION OF THE CURRENT COMPETITIVE STRENGTH OF THE ETHANOL INDUSTRY.
Congress currently provides certain federal
tax credits for ethanol producers and marketers. The current ethanol industry and our business initially depend on the continuation
of these credits. The credits have supported a market for ethanol that might disappear without the credits. These credits may not
continue beyond their scheduled expiration date or, if they continue, the incentives may not be at the same level. The revocation
or amendment of any one or more of these tax incentives could adversely affect the future use of ethanol in a material way, and
we cannot assure investors that any of these tax incentives will be continued. The elimination or reduction of federal tax incentives
to the ethanol industry could have a material adverse impact on the industry as a whole.
WE RELY ON ACCESS TO FUNDING FROM
THE UNITED STATES DEPARTMENT OF ENERGY. IF WE CANNOT ACCESS GOVERNMENT FUNDING WE MAY BE UNABLE TO FINANCE OUR PROJECTS AND/OR
OUR OPERATIONS.
Our operations have been financed to a
large degree through funding provided by the DOE. We rely on access to this funding as a source of liquidity for capital requirements
not satisfied by the cash flow from our operations. If we are unable to access government funding our ability to finance our projects
and/or operations and implement our strategy and business plan will be severely hampered. In 2008, the Company began to draw down
on the Award 1 monies that were finalized with the DOE. As our Fulton Project developed further, the Company was able to begin
drawing down on the second phase of DOE monies ("Award 2"). Although we finalized Award 1 with a total reimbursable
amount of $6,425,564, and Award 2 with a total reimbursable amount of $81,134,686 and through December 31, 2011, we have an unreimbursed
amount of approximately $366,000 available to us under Award 1, and approximately $77,950,563 under Award 2, we cannot guarantee
that we will continue to receive grants, loan guarantees, or other funding for our projects from the DOE.
The Company estimates the amounts to be
reimbursed by the DOE by applying a portion of approved indirect costs (overhead) to the direct project costs in a calculation
which derives what is known as our indirect rate. This indirect rate is used to reimburse the Company for the costs incurred that
are not directly related to the project. This rate calculation is estimated by the Company, and is subject to change periodically.
In the event that the Company over estimates this rate or under estimates this rate, it may have an impact to our financial statements
and future ability to be reimbursed under the awards.
In June 2011, it was determined that the
Company had received an overpayment of approximately $354,000 from the cumulative reimbursements of the DOE grants under Award
1. The Company and DOE tentatively agreed to net overpayments with monies still available to the Company of approximately $366,000
under Award 1 in order to further its completion. While the above terms have been tentatively agreed to, the method and process
in which the matter is resolved is still in process. If demand for payment were to be made by the DOE, our cash flow intended for
operations would be negatively affected.
9
LAX ENFORCEMENT OF ENVIRONMENTAL
AND ENERGY POLICY REGULATIONS MAY ADVERSELY AFFECT DEMAND FOR ETHANOL.
Our success will depend in part on effective
enforcement of existing environmental and energy policy regulations. Many of our potential customers are unlikely to switch from
the use of conventional fuels unless compliance with applicable regulatory requirements leads, directly or indirectly, to the use
of ethanol. Both additional regulation and enforcement of such regulatory provisions are likely to be vigorously opposed by the
entities affected by such requirements. If existing emissions-reducing standards are weakened, or if governments are not active
and effective in enforcing such standards, our business and results of operations could be adversely affected. Even if the current
trend toward more stringent emission standards continues, we will depend on the ability of ethanol to satisfy these emissions standards
more efficiently than other alternative technologies. Certain standards imposed by regulatory programs may limit or preclude the
use of our products to comply with environmental or energy requirements. Any decrease in the emission standards or the failure
to enforce existing emission standards and other regulations could result in a reduced demand for ethanol. A significant decrease
in the demand for ethanol will reduce the price of ethanol, adversely affect our profitability and decrease the value of your stock.
COSTS OF COMPLIANCE WITH BURDENSOME
OR CHANGING ENVIRONMENTAL AND OPERATIONAL SAFETY REGULATIONS COULD CAUSE OUR FOCUS TO BE DIVERTED AWAY FROM OUR BUSINESS AND OUR
RESULTS OF OPERATIONS TO SUFFER.
Ethanol production involves the emission
of various airborne pollutants, including particulate matter, carbon monoxide, carbon dioxide, nitrous oxide, volatile organic
compounds and sulfur dioxide. The production facilities that we will build will discharge water into the environment. As a result,
we are subject to complicated environmental regulations of the U.S. Environmental Protection Agency and regulations and permitting
requirements of the states where our plants are to be located. These regulations are subject to change and such changes may require
additional capital expenditures or increased operating costs. Consequently, considerable resources may be required to comply with
future environmental regulations. In addition, our ethanol plants could be subject to environmental nuisance or related claims
by employees, property owners or residents near the ethanol plants arising from air or water discharges. Ethanol production has
been known to produce an odor to which surrounding residents could object. Environmental and public nuisance claims, or tort claims
based on emissions, or increased environmental compliance costs could significantly increase our operating costs.
OUR PROPOSED NEW ETHANOL PLANTS WILL
ALSO BE SUBJECT TO FEDERAL AND STATE LAWS REGARDING OCCUPATIONAL SAFETY.
Risks of substantial compliance costs and
liabilities are inherent in ethanol production. We may be subject to costs and liabilities related to worker safety and job related
injuries, some of which may be significant. Possible future developments, including stricter safety laws for workers and other
individuals, regulations and enforcement policies and claims for personal or property damages resulting from operation of the ethanol
plants could reduce the amount of cash that would otherwise be available to further enhance our business.
RISKS RELATED TO OUR COMMON STOCK AND
THIS OFFERING
THERE IS NO LIQUID MARKET FOR OUR
COMMON STOCK.
Our shares are traded on the OTCBB and
the trading volume has historically been very low. An active trading market for our shares may not develop or be sustained. We
cannot predict at this time how actively our shares will trade in the public market or whether the price of our shares in the public
market will reflect our actual financial performance.
THE MARKET PRICE OF OUR COMMON STOCK
IS HIGHLY VOLATILE AND STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE AT WHICH SUCH SHARES WERE PURCHASED.
The market price of our common stock may
fluctuate significantly. From July 11, 2006, the day we began trading publicly as BFRE.PK, and December 31, 2011, traded as BFRE.OB,
the high and low price for our common stock has been $7.90 and $0.05 per share, respectively. Our share price has fluctuated in
response to various factors, including not yet beginning construction of our first plant, needing additional time to organize engineering
resources, issues relating to feedstock sources, trying to locate suitable plant locations, locating distributors and finding funding
sources.
10
THE APPLICATION OF THE "PENNY
STOCK" RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE
SHARES.
The U.S. Securities and Exchange Commission
(the "SEC") has adopted rule 3a51-1 which establishes the definition of a "penny stock," for the purposes
relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account
for transactions in penny stocks, the broker or dealer must:
·
obtain financial information and investment experience objectives of the person; and
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form:
·
sets forth the basis on which the broker or dealer made the suitability determination; and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing
to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.
AS AN ISSUER OF "PENNY STOCK,"
THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.
Although federal securities laws provide
a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this
safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor
protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement
of fact or was misleading in any material respect because of the Company's failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial condition.
COMPLIANCE AND CONTINUED MONITORING
IN CONNECTION WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES.
Changing laws, regulations and standards
relating to corporate governance and public disclosure may create uncertainty regarding compliance matters. New or changed laws,
regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may
evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure. Complying with
evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices,
policies and procedures, and may divert management time and attention from the achievement of revenue generating activities to
compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities
intended by regulatory or governing bodies due to uncertainties related to practice, our reputation might be harmed which would
could have a significant impact on our stock price and our business. In addition, the ongoing maintenance of these procedures to
be in compliance with these laws, regulations and standards could result in significant increase in costs.
11
OUR PRINCIPAL STOCKHOLDER HAS SIGNIFICANT
VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTEREST OF ALL OTHER STOCKHOLDERS.
The Company's Chairman and President
controls approximately 40% of its current outstanding shares of voting common stock. He may be able to exert significant control
over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This
concentration of ownership may expedite approvals of company decisions, or have the effect of delaying or preventing a change in
control, adversely affect the market price of our common stock, or be in the best interests of all our stockholders.
YOU COULD BE DILUTED FROM THE ISSUANCE
OF ADDITIONAL COMMON STOCK.
As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding and no shares of preferred stock outstanding. We are authorized to issue up to 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock. To the extent of such authorization, our Board of Directors will have the
ability, without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for
such consideration as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock
in the future may reduce your proportionate ownership and voting power.
THE MARKET PRICE FOR OUR COMMON SHARES
IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED
OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR
COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.
The market for our common shares is characterized
by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities
exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of
such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number
of factors. First, as noted above, our common shares are, compared to the shares of such larger, more established companies, sporadically
and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders
may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline
precipitously in the event that a large number of our common shares are sold on the market without commensurate demand. Secondly,
we are a speculative or "risky" investment due to our limited operating history and lack of profits to date, and uncertainty
of future market acceptance for our potential products.  As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more
established company that trades on a national securities exchange and has a large public float.  Many of these factors are
beyond our control and may decrease the market price of our common shares, regardless of our operating performance.  We cannot
make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including
as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability
of common shares for sale at any time will have on the prevailing market price.
WE ARE REGISTERING AN AGGREGATE OF
5,500,000 SHARES OF COMMON STOCK TO BE ISSUED UNDER THE EQUITY AGREEMENT. THE SALE OF SUCH SHARES COULD DEPRESS THE MARKET PRICE
OF OUR COMMON STOCK.
We are registering an aggregate of 5,500,000
Shares of common stock under the registration statement of which this prospectus forms a part for issuance pursuant to the Equity
Agreement. Notwithstanding TCA's ownership limitation, the 5,500,000 Shares would represent approximately 14.4% of our shares
of common stock outstanding immediately after our exercise of the put right under the Equity Agreement. The sale of these Shares
into the public market by TCA could depress the market price of our common stock. At the assumed offering price of $0.333 per share,
we will be able to receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered
hereunder pursuant to the Equity Agreement. We would be required to register approximately 515,038 additional shares to obtain
the balance of $2,000,000 under the Equity Agreement at the assumed offering price of $0.333. Due to the floating offering price,
we are not able to determine the exact number of shares that we will issue under the Equity Agreement.
12
THE COMPANY MAY NOT HAVE ACCESS TO
THE FULL AMOUNT AVAILABLE UNDER THE EQUITY AGREEMENT.
We have not drawn down funds and have not
issued shares of our common stock under the Equity Agreement with TCA. Our ability to draw down funds and sell shares under the
Equity Agreement requires that the registration statement, of which this prospectus is a part, be declared effective by the SEC,
and that this registration statement continue to be effective.  In addition, the registration statement of which this prospectus
is a part registers 5,500,000 Shares issuable under the Equity Agreement, and our ability to access the Equity Agreement to sell
any remaining shares issuable under the Equity Agreement is subject to our ability to prepare and file one or more additional registration
statements registering the resale of these shares.  These subsequent registration statements may be subject to review and
comment by the staff of the SEC, and will require the consent of our independent registered public accounting firm.  Therefore,
the timing of effectiveness of these subsequent registration statements cannot be assured.  The effectiveness of these subsequent
registration statements is a condition precedent to our ability to sell the shares of common stock subject to these subsequent
registration statements to TCA under the Equity Agreement.  Even if we are successful in causing one or more registration
statements registering the resale of some or all of the shares issuable under the Equity Agreement to be declared effective by
the SEC in a timely manner, we will not be able to sell shares under the Equity Agreement unless certain other conditions are met.
 Accordingly, because our ability to draw down amounts under the Equity Agreement is subject to a number of conditions, there
is no guarantee that we will be able to draw down any portion or all of the $2,000,000 available to us under the Equity Agreement.
CERTAIN RESTRICTIONS ON THE EXTENT
OF PUTS AND THE DELIVERY OF ADVANCE NOTICES MAY HAVE LITTLE, IF ANY, EFFECT ON THE ADVERSE IMPACT OF OUR ISSUANCE OF SHARES IN
CONNECTION WITH THE EQUITY AGREEMENT, AND AS SUCH, TCA MAY SELL A LARGE NUMBER OF SHARES, RESULTING IN SUBSTANTIAL DILUTION TO
THE VALUE OF SHARES HELD BY EXISTING SHAREHOLDERS.
TCA has agreed, subject to certain exceptions
listed in the Equity Agreement, to refrain from holding an amount of shares which would result in TCA or its affiliates owning
more than 9.99% of the then-outstanding shares of the Company's common stock at any one time.  These restrictions, however,
do not prevent TCA from selling shares of common stock received in connection with a put, and then receiving additional shares
of common stock in connection with a subsequent put.  In this way, TCA could sell more than 9.99% of the outstanding common
stock in a relatively short time frame while never holding more than 9.99% at one time.
ASSUMING WE UTILIZE THE MAXIMUM AMOUNT
AVAILABLE UNDER THE EQUITY LINE OF CREDIT, EXISTING SHAREHOLDERS COULD EXPERIENCE SUBSTANTIAL DILUTION UPON THE ISSUANCE OF COMMON
STOCK.
Our Equity Agreement with TCA contemplates
the potential future issuance and sale of up to $2,000,000 of our common stock to TCA subject to certain restrictions and obligations.
 The following table is an example of the number of shares that could be issued at various prices assuming we utilize the
maximum amount remaining available under the Equity Agreement.  These examples assume issuances at a market price of $0.35
per share and at 10%, 25%, 50%, and 75% below $0.35 per share, taking into account TCA's 5% discount.
13
The following table should be read in conjunction
with the footnotes immediately following the table.
Percent below
Current
market price
Price per
share (1)
Number of
shares issuable (2)
Shares
outstanding (3)
Percent of
outstanding shares (4)
10
%
$
0.299
6,683,375
39,460,294
16.94
%
25
%
$
0.249
8,020,050
40,796,969
19.66
%
50
%
$
0.166
12,030,075
44,806,994
26.85
%
75
%
$
0.083
24,060,150
56,837,069
42.33
%
(1)
Represents purchase prices equal to 95% of $0.35 and potential reductions
thereof of 10%, 25%, 50% and 75%.
(2)
Represents the number of shares issuable if the entire $2,000,000 under the
Equity Agreement were drawn down at the indicated purchase prices.  Our Articles of Incorporation currently authorizes 100,000,000
shares of common stock.
(3)
Based on 32,776,919 shares of common stock outstanding at May 2, 2012. Our
Articles of Incorporation currently authorizes 100,000,000 shares of common stock. We may in the future need to amend our Articles
of Incorporation in order to increase our authorized shares of common stock.
(4)
Percentage of the total outstanding shares of common stock after the issuance
of the shares indicated, without considering any contractual restriction on the number of shares the selling shareholder may own
at any point in time or other restrictions on the number of shares we may issue.
TCA WILL PAY LESS THAN THE THEN-PREVAILING
MARKET PRICE FOR OUR COMMON STOCK.
The common stock to be issued to TCA pursuant
to the Equity Agreement will be purchased at a 5% discount to the average of the lowest closing price of the common stock of any
two trading days, consecutive or inconsecutive, during the five consecutive trading days immediately following the date of our
advance notice to TCA of our election to put shares pursuant to the Equity Agreement. TCA has a financial incentive to sell our
common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and
the market price. If TCA sells the shares, the price of our common stock could decrease.
If our stock price decreases, TCA may have
a further incentive to sell the shares of our common stock that it holds.  These sales may have a further impact on our stock
price.
YOUR OWNERSHIP INTEREST MAY BE DILUTED
AND THE VALUE OF OUR COMMON STOCK MAY DECLINE BY EXERCISING THE PUT RIGHT PURSUANT TO OUR EQUITY AGREEMENT.
Effective March 28, 2012, we entered into
a $2,000,000 Equity Agreement with TCA. Pursuant to the Equity Agreement, when we deem it necessary, we may raise capital through
the private sale of our common stock to TCA at a price equal to ninety-five percent (95%) of the lowest daily volume weighted average
price of the Company's common stock for the five trading days immediately following the date our advance notice is delivered.
Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised,
your ownership interest may be diluted.
14
WE DO NOT INTEND TO PAY DIVIDENDS.
We do not anticipate paying cash dividends
on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally
available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and
amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board
of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid,
there is no assurance with respect to the amount of any such dividend.
AS A PUBLIC COMPANY, WE ARE SUBJECT
TO COMPLEX LEGAL AND ACCOUNTING REQUIREMENTS THAT WILL REQUIRE US TO INCUR SIGNIFICANT EXPENSES AND WILL EXPOSE US TO RISK OF NON-COMPLIANCE.
As a public company, we are subject to
numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements
is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company.
Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will
fail to comply.
Failure to comply with these requirements
can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely
basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to
comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage
vis-à-vis our privately held and larger public competitors.
WE MAY BE SUBJECT TO SHAREHOLDER
LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factors,
the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.  In the past, plaintiffs
have often initiated securities class action litigation against a company following periods of volatility in the market price of
its securities.  We may become the target of similar litigation. Securities litigation will result in substantial costs and
liabilities and will divert management's attention and resources.
COMPLIANCE WITH CHANGING REGULATION
OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES AND POSE CHALLENGES FOR OUR MANAGEMENT.
Changing laws, regulations and standards
relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act,
and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for
public companies and significantly increased the costs and risks associated with accessing the U.S. public markets.  Our management
team will need to devote significant time and financial resources to comply with both existing and evolving standards for public
companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from
revenue generating activities to compliance activities.
15
FORWARD-LOOKING STATEMENTS
Statements in this prospectus may be "forward-looking
statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.
 These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions
made by management.  These statements are not guarantees of future performance and involve risks, uncertainties and assumptions
that are difficult to predict.  Therefore, actual outcomes and results may, and are likely to, differ materially from what
is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those
risks discussed from time to time in this prospectus, including the risks described under "Risk Factors," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus and in other documents which
we file with the SEC. In addition, such statements could be affected by risks and uncertainties related to our ability to raise
any financing which we may require for our operations, competition, government regulations and requirements, pricing and development
difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general
industry and market conditions and growth rates, and general economic conditions.  Any forward-looking statements speak only
as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this prospectus, except as may be required under applicable securities laws.
USE OF PROCEEDS
The Selling Security Holder is selling
all of the shares of our common stock covered by this prospectus for its own account. Accordingly, we will not receive any proceeds
from the resale of our common stock. However, we will receive proceeds from any sale of the common stock to TCA under the Equity
Agreement. We intend to use the net proceeds received for working capital or general corporate needs.
DETERMINATION OF OFFERING PRICE
Our common stock currently trades on the
OTCBB under the symbol "BFRE.OB". The proposed offering price of the Shares is $0.35 and has been estimated solely
for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, on
the basis of the closing bid price of common stock of the Company as reported on the OTCBB on May 2, 2012.
SELLING SECURITY HOLDERS
We agreed to register for resale 5,500,000
Shares that we will put to TCA pursuant to the Equity Agreement. The Equity Agreement with TCA provides that TCA is committed to
purchase up to $2,000,000 of our common stock. We may draw on the facility from time to time, as and when we determine appropriate
in accordance with the terms and conditions of the Equity Agreement.
Selling Security Holder Pursuant to
the Equity Agreement
TCA is the potential purchaser of our common
stock under the Equity Agreement. The 5,500,000 Shares offered in this prospectus are based on the Equity Agreement between TCA
and us. TCA may from time to time offer and sell any or all of the Shares that are registered under this prospectus. The purchase
price is ninety-five percent (95%) of the lowest daily volume weighted average price of the Company's common stock for the
five trading days immediately following the date on which the Company is deemed to provide an advance notice under the Equity Agreement.
We are unable to determine the exact number
of Shares that will actually be sold by TCA according to this prospectus due to:
·
the ability of TCA to determine when and whether it will sell any of the
Shares under this prospectus; and
16
·
the uncertainty as to the number of Shares that will be issued upon exercise
of our put options through the delivery of an Advance notice under the Equity Agreement.
The following information contains a description
of how TCA acquired (or shall acquire) the shares to be sold in this offering. TCA has not held a position or office, or had any
other material relationship with us, except as follows.
TCA is a limited partnership organized
and existing under the laws of the Cayman Islands.  All investment decisions of, and control of, TCA is held by its general
partner TCA Global Credit Fund GP, Ltd ("TCA GP").  Robert Press is the manager of TCA GP, and he has voting and
investment power over the shares beneficially owned by TCA.  TCA acquired, or will acquire, all shares being registered in
this offering in the financing transaction with us.
TCA intends to sell up to 5,500,000 Shares
of our common stock pursuant to the Equity Agreement under this prospectus. On March 28, 2012, the Company and TCA entered into
the Equity Agreement pursuant to which we have the opportunity, for a twenty-four (24) month period, beginning on the date on which
the SEC first declares effective this registration statement registering the resale of our shares by TCA, to sell shares of our
common stock for a total price of $2,000,000. For each share of our common stock purchased under the Equity Agreement, TCA will
pay ninety-five percent (95%) of the lowest daily volume weighted average price of the Company's common stock for the five
trading days immediately following the date on which the Company is deemed to provide an advance notice of a sale of common stock
under the Equity Agreement.
We relied on an exemption from the registration
requirements of the Securities Act. The transaction does not does involve a private offering, TCA is an "accredited investor"
and/or qualified institutional buyer and TCA has access to information about the Company and its investment.
At an assumed purchase price under the
Purchase Agreement of $0.333 (equal to 95% of the closing price of our common stock of $0.35 on May 2, 2012), we will be able to
receive up to $1,828,750 in gross proceeds, assuming the sale of the entire 5,500,000 Shares being registered hereunder pursuant
to the Equity Agreement. At an assumed purchase price of $0.333 under the Equity Agreement, we would be required to register approximately
515,038 additional shares to obtain the balance of $2,000,000 under the Equity Agreement.  The Company is currently authorized
to issue 100,000,000 shares of its common stock.  TCA has agreed, subject to certain exceptions listed in the Equity Agreement,
to refrain from holding an amount of shares which would result in TCA or its affiliates from owning more than 9.99% of the then-outstanding
shares of the Company's common stock at any one time.
There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Equity Agreement.  These risks include dilution of stockholders
and significant decline in our stock price.
TCA will periodically purchase shares of
our common stock under the Equity Agreement and will in turn, sell such shares to investors in the market at the prevailing market
price.  This may cause our stock price to decline, which will require us to issue increasing numbers of shares to TCA to raise
the same amount of funds, as our stock price declines.
TCA and any participating broker-dealers
are "underwriters" within the meaning of the Securities Act. All expenses incurred with respect to the registration
of the common stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission or other
expenses incurred by the Selling Security Holder in connection with the sale of such shares.
Except as indicated below, neither the
Selling Security Holder nor any of its associates or affiliates has held any position, office, or other material relationship with
us in the past three years.
17
The following table sets forth the name
of the Selling Security Holder, the number of shares of common stock beneficially owned by the Selling Security Holder as of the
date hereof and the number of share of common stock being offered by the Selling Security Holder. The shares being offered hereby
are being registered to permit public secondary trading, and the Selling Security Holder may offer all or part of the shares for
resale from time to time. However, the Selling Security Holder is under no obligation to sell all or any portion of such shares
nor is the Selling Security Holder obligated to sell any shares immediately upon effectiveness of this prospectus. All information
with respect to share ownership has been furnished by the Selling Security Holder. The column entitled "Amount Beneficially
Owned After the Offering" assumes the sale of all shares offered.
Name
Shares Beneficially Owned Prior to Offering
Shares to Be Offered
Amount Beneficially Owned After Offering (1)
Percent Beneficially Owned After Offering
TCA Global Credit Master Fund, LP (2)
280,612 (3)
5,500,000
5,780,612 (3)
15.10%
(1)
The number assumes the Selling Security Holder
sells all of its shares being offering pursuant to this prospectus.
(2)
TCA Global Credit Master Fund, LP is a limited
partnership organized and existing under the laws of the Cayman Islands. TCA Global Credit Fund GP, Ltd. is the general partner
of TCA and has voting and investment power over the shares beneficially owned by TCA.  Robert Press is the manager of TCA
GP, and he has voting and investment power over the shares beneficially owned by TCA.
(3)
These shares represent the Facility Fee Shares
issued to TCA pursuant to the Equity Agreement.
The above table assumes that TCA purchases
the maximum amount of registrable Shares in this registration statement.
PLAN OF DISTRIBUTION
This prospectus relates to the resale of
up to 5,500,000 Shares issued pursuant to the Equity Agreement held by the Selling Security Holder.
The Selling Security Holder may, from time
to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares
are traded or in private transactions.  The Selling Security Holder may use any one or more of the following methods when
selling shares:
·
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
·
block trades in which the broker-dealer will sell the shares as agent;
·
purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
·
privately negotiated transactions;
·
broker-dealers may agree with the Selling Stock Holder to sell a specified
number of such shares at a stipulated price per share;
·
through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
·
a combination of any such methods of sale; or
·
any other method permitted pursuant to applicable law.
The Selling Security Holder may be deemed an underwriter. Pursuant
to the terms of the Equity Agreement, the Selling Security Holder may not engage in any short sizes of the Company's common
stock or other hedging activities. The Selling Security Holder may sell the shares directly to market makers acting as principals
and/or broker-dealers acting as agents for itself or its customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Security Holder and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess
of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that the Selling Security Holder will attempt to sell shares of the Company's common stock in block
transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Security
Holder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Security
Holder. In addition, any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus are
"underwriters" as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations
under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
18
Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Security Holder. The Selling
Security Holder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of
the shares if liabilities are imposed on that person under the Securities Act.
The Selling Security Holder may from time
to time pledge or grant a security interest in some or all of the shares of our common stock owned by it and, if it defaults in
the performance of its secured obligations, the pledgee or secured parties may offer and sell such the shares of common stock from
time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable
provision of the Securities Act amending the list of selling security holders to include the pledgee or transferee as selling security
holders under this prospectus.
The Selling Security Holder also may transfer
the shares of common stock in other circumstances, in which case the transferees or pledgees will be the selling beneficial owners
for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed
an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling
security holders to include the pledgee or transferee as selling security holders under this prospectus.
We are required to pay all fees and expenses
incident to the registration of the shares of common stock.  Otherwise, all discounts, commissions or fees incurred in connection
with the sale of our common stock offered hereby will be paid by the Selling Security Holder.
The Selling Security Holder acquired the
securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter
or coordinating broker acting in connection with a proposed sale of shares of common stock by the Selling Security Holder.  We
will file a supplement to this prospectus if the Selling Security Holder enters into a material arrangement with a broker-dealer
for sale of common stock being registered.  If the Selling Security Holder uses this prospectus for any sale of the shares
of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.
Pursuant to a requirement by the Financial
Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member or independent broker/dealer
may not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered
pursuant to SEC Rule 415 under the Securities Act.
The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of our common stock and activities of the Selling Security Holder.  The Selling
Security Holder will act independently of us in making decisions with respect to the timing, manner and size of each sale.
TCA is an "underwriter" within
the meaning of the Securities Act in connection with the sale of our common stock under the Equity Agreement.  As further
consideration for TCA entering into and structuring the equity facility, the Company shall pay to TCA the Facility Fee Shares.
It is the intention of the Company and TCA that the value of the Facility Fee Shares shall equal $110,000. In the event the value
of the Facility Fee Shares issued to TCA does not equal $110,000 after a nine month evaluation date, the Equity Agreement provides
for an adjustment provision allowing for necessary action to adjust the number of shares issued.
19
We will pay all expenses incident to the
registration, offering and sale of the shares of our common stock to the public hereunder other than commissions, fees and discounts
of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect TCA to pay these expenses. We have
agreed to indemnify TCA and its controlling persons against certain liabilities, including liabilities under the Securities Act.
 We estimate that the expenses of the offering to be borne by us will be approximately $38,000. We will not receive any proceeds
from the resale of any of the shares of our common stock by TCA. We may, however, receive proceeds from the sale of our common
stock under the Equity Agreement. Neither the Equity Agreement nor any rights of the parties under the Equity Agreement may be
assigned or delegated to any other person.
DESCRIPTION OF SECURITIES TO BE REGISTERED
This prospectus includes 5,500,000 Shares
of our common stock offered by the Selling Security Holder. The following description of our common stock is only a summary. You
should also refer to our certificate of incorporation and bylaws, which have been incorporated by reference as exhibits to the
registration statement of which this prospectus forms a part.
The Company is authorized to issue 100,000,000
shares of $0.001 par value common stock, and 1,000,000 shares of no par value preferred stock. As of May 2, 2012, the Company had
32,776,919 shares of common stock outstanding and no shares of preferred stock outstanding.
Common Stock
As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding. The shares of our common stock presently outstanding, and any shares of our common stock issues upon
exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one
vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken
by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to
share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative
voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining
shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared
by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.
Voting Rights
Each holder of Common Stock is entitled
to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.
Dividends
Subject to preferences that may be applicable
to any then-outstanding shares of Preferred Stock, if any, and any other restrictions, holders of Common Stock are entitled to
receive ratably those dividends, if any, as may be declared from time to time by the Company's board of directors out of
legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does
not presently contemplate that there will be any future payment of any dividends on Common Stock.
Preferred Stock
As of May 2, 2012, we had no shares of
preferred stock outstanding. We may issue preferred stock in one or more class or series pursuant to resolution of the Board of
Directors. The Board of Directors may determine and alter the rights, preferences, privileges, and restrictions granted to or imposed
upon any wholly unissued series of preferred stock, and fix the number of shares and the designation of any series of preferred
stock. The Board of Directors may increase or decrease (but not below the number of shares of such series then outstanding) the
number of shares of any wholly unissued class or series subsequent to the issue of shares of that class or series. We have no present
plans to issue any shares of preferred stock.
20
Warrants
As of May 2, 2012, we had warrants to purchase
an aggregate of 7,115,265 shares of our common stock outstanding. The exercise prices for the warrants range from $0.50 per share
to $5.45 per share, with a weighted average exercise price of approximately per share of $2.65. Some of our warrants contain a
provision in which the exercise price will be adjusted for future issuances of common stock at prices lower than the current exercise
price.
Options
As of May 2, 2012, we had options to purchase
an aggregate of 1,229,659 shares of our common stock outstanding, with exercise prices for the options ranging from $3.20 per share
to $3.52 per share, with a weighted average exercise price per share of $3.21.
Anti-Takeover Provisions
Our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws contain provisions that may make it more difficult for a third party to acquire or may discourage
acquisition bids for us. Our Board of Directors may, without action of our stockholders, issue authorized but unissued common stock
and preferred stock. The issuance of additional shares to certain persons allied with our management could have the effect of making
it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause
such removal. The existence of unissued preferred stock may enable the Board of Directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such stock with terms that could render more difficult
or discourage an attempt to obtain control of us, thereby protecting the continuity of our management. Our shares of preferred
stock could therefore be issued quickly with terms that could delay, defer, or prevent a change in control of us, or make removal
of management more difficult.
DESCRIPTION OF BUSINESS
Our Company
We are BlueFire Renewables, Inc., a Nevada
corporation. Our goal is to develop, own and operate high-value carbohydrate-based transportation fuel plants, or biorefineries,
to produce ethanol, a viable alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our
biorefineries will convert widely available, inexpensive, organic materials such as agricultural residues, high-content biomass
crops, wood residues and cellulose from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety
of feedstocks and locations in which to develop facilities to become a low cost producer of ethanol. We have licensed for use a
patented process from Arkenol, Inc., a Nevada corporation ("Arkenol"), to produce ethanol from cellulose (the "Arkenol
Technology"). We are the exclusive North America licensee of the Arkenol Technology. We may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to 19 ethanol project opportunities originally
developed by ARK Energy, Inc., a Nevada corporation, to accelerate our deployment of the Arkenol Technology.
Company History
We are a Nevada corporation that was initially
organized as Atlanta Technology Group, Inc., a Delaware corporation, on October 12, 1993. The Company was re-named Docplus.net
Corporation on December 31, 1998, and further re-named Sucre Agricultural Corp. ("Sucre") and re-domiciled as a Nevada
corporation on March 6, 2006. Finally, on May 24, 2006, in anticipation of the reverse merger by which it would acquire BlueFire
Ethanol, Inc., a privately held Nevada corporation organized on March 28, 2006, as described below, the Company was re-named to
BlueFire Ethanol Fuels, Inc.
On June 27, 2006, the Company completed
a reverse merger (the "Reverse Merger") with BlueFire Ethanol, Inc. ("BlueFire Ethanol"). At the time of
Reverse Merger, the Company was a blank-check company and had no operations, revenues or liabilities. The only asset possessed
by the Company was $690,000 in cash which continued to be owned by the Company at the time of the Reverse Merger. In connection
with the Reverse Merger, the Company issued BlueFire Ethanol 17,000,000 shares of common stock, approximately 85% of all of the
outstanding common stock of the Company, for all the issued and outstanding BlueFire Ethanol common stock. The Company stockholders
retained 4,028,264 shares of Company common stock. As a result of the Reverse Merger, BlueFire Ethanol became our wholly-owned
subsidiary. On June 21, 2006, prior to and in anticipation of the Reverse Merger, Sucre sold 3,000,000 shares of common stock to
two related investors in a private offering of shares pursuant to Rule 504 for proceeds of $1,000,000.
21
On July 20, 2010, the Company changed its
name to BlueFire Renewables, Inc. to more accurately reflect our primary business plan expanding the focus from just building cellulosic
ethanol projects to include other advanced biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants.
The Company's shares of common stock
began trading under the symbol "BFRE.PK" on the Pink Sheets of the National Quotation Bureau on July 11, 2006 and later
began trading on the OTCBB under the symbol "BFRE.OB" on June 19, 2007. On May 2, 2012, the closing price of our Common
Stock was $0.35 per share.
Our executive offices are located at 31
Musick, Irvine, California 92618 and our telephone number at such office is (949) 588-3767.
Business of Issuer
Principal Products or Services and Their
Markets
Our goal is to develop, own and operate
high-value carbohydrate-based transportation fuel plants, or biorefineries, to produce ethanol and other biofuels that are viable
alternative to fossil fuels, and to provide professional services to biorefineries worldwide. Our biorefineries will convert widely
available, inexpensive, organic materials such as agricultural residues, high-content biomass crops, wood residues and cellulose
from municipal solid wastes into ethanol. This versatility enables us to consider a wide variety of feedstocks and locations in
which to develop facilities to become a low cost producer of ethanol.
We have licensed for use the Arkenol Technology,
a patented process from Arkenol to produce ethanol from cellulose for sale into the transportation fuel market. We are the exclusive
North America licensee of the Arkenol Technology.
Arkenol Technology
The production of chemicals by fermenting
various sugars is a well-accepted science. Its use ranges from producing beverage alcohol and fuel-ethanol to making citric acid
and xantham gum for food uses. However, the high price of sugar and the relatively low cost of competing petroleum based fuel has
kept the production of chemicals mainly confined to producing ethanol from corn sugar.
In the Arkenol Technology process, incoming
biomass feedstocks are cleaned and ground to reduce the particle size for the process equipment. The pretreated material is then
dried to a moisture content consistent with the acid concentration requirements for breaking down the biomass, then hydrolyzed
(degrading the chemical bonds of the cellulose) to produce hexose and pentose (C5 and C6) sugars at the high concentrations necessary
for commercial fermentation. The insoluble materials left are separated by filtering and pressing into a cake and further processed
into fuel for other beneficial uses. The remaining acid-sugar solution is separated into its acid and sugar components. The separated
sulfuric acid is recirculated and re-concentrated to the level required to breakdown the incoming biomass. The small quantity of
acid left in the sugar solution is neutralized with lime to make hydrated gypsum which can be used as an agricultural soil conditioner.
At this point the process has produced a clean stream of mixed sugars (both C6 and C5) for fermentation. In an ethanol production
plant, naturally-occurring yeast, which Arkenol has specifically cultured by a proprietary method to ferment the mixed sugar stream,
is mixed with nutrients and added to the sugar solution where it efficiently converts both the C6 and C5 sugars to fermentation
beer (an ethanol, yeast and water mixture) and carbon dioxide. The yeast culture is separated from the fermentation beer by a centrifuge
and returned to the fermentation tanks for reuse. Ethanol is separated from the now clear fermentation beer by conventional distillation
technology, dehydrated to 200 proof and denatured with unleaded gasoline to produce the final fuel-grade ethanol product. The still
bottoms, containing principally water and unfermented sugar, is returned to the process for economic water use and for further
conversion of the sugars.
22
Simply put, the process separates the biomass
into two main constituents: cellulose and hemicellulose (the main building blocks of plant life) and lignin (the "glue"
that holds the building blocks together), converts the cellulose and hemicellulose to sugars, ferments them and purifies the fermentation
liquids into ethanol and other end-products.
Ark Energy
BlueFire may also utilize certain biorefinery
related rights, assets, work-product, intellectual property and other know-how related to nineteen (19) ethanol project opportunities
originally developed by ARK Energy, Inc., a Nevada corporation to accelerate BlueFire's deployment of the Arkenol Technology.
The opportunities consist of ARK Energy's previous relationships, analysis, site development, permitting experience and market
research on various potential project locations within North America. ARK Energy has transferred these assets to us and we valued
these business assets based on management's best estimates as to its actual costs of development. In the event we successfully
finance the construction of a project that utilizes any of the transferred assets from ARK Energy, we are required to pay ARK Energy
for the costs ARK Energy incurred in the development of the assets pertaining to that particular project or location. We did not
incur the costs of a third party valuation but based our valuation of the assets acquired by (i) an arms-length review of the value
assigned by ARK Energy to the opportunities are based on the actual costs it incurred in developing the project opportunities,
and (ii) anticipated financial benefits to us.
Pilot Plants
From 1994-2000, a test pilot biorefinery
plant was built and operated by Arkenol in Orange, California to test the effectiveness of the Arkenol Technology using several
different types of raw materials containing cellulose. The types of materials tested included: rice straw, wheat straw, green waste,
wood wastes, and municipal solid wastes. Various equipment used in the process was also tested and process conditions were verified
leading to the issuance of the certain patents in support of the Arkenol Technology. In 2002, using the results obtained from the
Arkenol California test pilot plant, JGC Corporation, based in Japan, built and operated a bench scale facility followed by another
test pilot biorefinery plant in Izumi, Japan. At the Izumi plant, Arkenol retained the rights to the Arkenol Technology while the
operations of the facility were controlled by JGC Corporation.
Bio-Refinery Projects
We are currently in the development stage
of building bio-refineries in North America. We plan to use the Arkenol Technology and utilize JGC's operations knowledge
from the Izumi test pilot plant to assist in the design and engineering of our facilities in North America. MECS and Briderson
Engineering, Inc. ("Brinderson") provided the preliminary design package, while Briderson completed the detailed engineering
design for our Lancaster Biorefinery. We feel this completed design should provide the blueprint for subsequent plant constructions.
In 2010, MasTec in conjunction with Zachary Engineering completed the detailed engineering design for our planned Fulton Mississippi
plant, also known as the DOE Project, or the Fulton Project.
We intend to build a facility that will
process approximately 190 tons of green waste material per day to produce roughly 3.9 million gallons of ethanol annually. In connection
therewith, on November 9, 2007, we purchased the facility site which is located in Lancaster, California. Permit applications were
filed on June 24, 2007, to allow for construction of the Lancaster facility. The Los Angeles County Planning Commission issued
a Conditional Use Permit for the Lancaster Project in July of 2008. However, a subsequent appeal of the county decision, which
BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of
the now non-appealable permit approval to December 12, 2008. On February 12, 2009, we were issued our Authority to Construct permit
by the Antelope Valley Air Quality Management District. In December 2011, BlueFire requested an extension to pay the project's
permits for an additional year while we awaited potential financing. The Company is evaluating whether or not it's prudent
to extend the project's permits an additional year while we await potential financing. The Company sees this project on hold
until we receive the funding to construct the facility.
23
In 2009, BlueFire completed the engineering
package for the Lancaster Biorefinery, and finalized the Front-End Loading (FEL) 3 stage of engineering for the Lancaster Biorefinery.
In 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed the FEL stages 2 and 3 of
engineering for the Fulton Project readying the facility for construction. FEL is the process for conceptual development of processing
industry projects. This process is used in the petrochemical, refining, and pharmaceutical industries. Front-End Loading is also
referred to as Front-End Engineering Design (FEED). There are three stages in the FEL process:
FEL-1
FEL-2
FEL-3
* Material Balance
* Preliminary Equipment Design
* Purchase Ready Major Equipment Specifications
* Energy Balance
* Preliminary Layout
* Definitive Estimate
* Project Charter
* Preliminary Schedule
* Project Execution Plan
* Preliminary Estimate
* Preliminary 3D Model
* Electrical Equipment List
* Line List
* Instrument Index
We estimate the total cost including contingencies
to be in the range of approximately $100 million to $125 million for the Lancaster Biorefinery. This amount is significantly greater
than our previous estimations communicated to the public. This is due in part to a combination of significant increases in materials
costs in the world market from the last estimate until now, and the complexity of our first commercial deployment. At the end of
2008 and throughout 2009, prices for materials declined, although we expect, that prices for items like structural and specialty
steel will continue to firm up throughout 2012 along with other materials of construction. The cost approximations above do not
reflect any fluctuations in raw materials or construction costs since the original pricing estimates.
The uncertainties of the world credit markets
from 2008 to present caused a delay in the financing we needed to enable placement of equipment orders for the construction of
our Lancaster Biorefinery, which would allow us to achieve a sustainable construction schedule after breaking ground. Hence, to
insure a timely and continuous construction of the project, BlueFire's Board of Directors determined it is prudent to delay
Lancaster's groundbreaking until all the necessary funds are in place. Project activities have advanced to a point that once
credit is available, orders can be immediately placed and construction started. We remain optimistic in being able to raise the
additional capital necessary once the capital markets normalize. This project is considered shovel ready and only requires minimal
capital to maintain until funding is obtained for its construction.
We are currently in discussions with potential
sources of financing for this facility, but no definitive agreements are in place. In 2009, the Company filed for a loan guarantee
with the U.S. Department of Energy ("DOE") for this project, under DOE Program DE-FOA-0000140, which provides federal
loan guarantees for projects that employ innovative energy efficiency, renewable energy, and advanced transmission and distribution
technologies ("DOE LGPO"). Although the Company was hopeful of being able to secure the guarantee, in 2010, the Company
was informed that the loan guarantee was rejected by the DOE due to a lack of definitive contracts for feedstock and off-take at
the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was also pursuing
a much larger project in Fulton, Mississippi.
We are also developing a facility for construction
in a joint effort with the DOE. This facility will be located in Fulton, Mississippi, and will use approximately 700 metric dry
tons of woody biomass, mill residue, and other cellulosic waste to produce approximately 19 million gallons of ethanol annually
(the "Fulton Project"). In 2007, we received an award from the DOE of up to $40 million for the Fulton Project. On
or around October 4, 2007, we finalized our first award for a total approved budget of just under $10,000,000 with the DOE("Award
1"). Award 1 is a 60%/40% cost share, whereby 40% of approved costs may be reimbursed by the DOE pursuant to the total $40
million award announced in February 2007. December 4, 2009, the DOE announced that the award for this project has been increased
to a maximum of $88 million under the American Recovery and Reinvestment Act of 2009 ("ARRA") and the Energy Policy
Act of 2005. As of December 31, 2011, BlueFire has been reimbursed approximately $9,217,869 from the DOE under this award.
In 2010, BlueFire signed definitive agreements
for the following three crucial contracts related to the Fulton Project: (a) feedstock supply with Cooper Marine and Timberlands
Corporation ("Cooper Marine"), (b) off-take for the ethanol of the facility with Tenaska Biofuels LLC ("Tenaska"),
and (c) the construction of the facility with MasTec North America Inc. ("MasTec"). Also in 2010, BlueFire continued
to develop the engineering package for the Fulton Project, and completed both the FEL-2 and FEL-3 stages of engineering readying
the facility for construction. As of November 2010, the Fulton Project has all necessary permits for construction, and in that
same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed
initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted
an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above.
24
In February 2011, BlueFire received notice
from the DOE LGPO staff that the Fulton Project's application will not move forward until such time as the project has raised
the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million
loan guarantee with the U.S. Department of Agriculture ("USDA") under Section 9003 of the 2008 Farm Bill, as defined
below ("USDA LG"). In October 2011, BlueFire was notified by its lender ("Lender") for the Company's
USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible to participate in the USDA
Biorefinery Assistance Program.
The USDA has offered to meet with the Lender
and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity
to provide any new information and potential alternatives for the USDA's consideration. The Company plans to continue to
work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution
of another lender; however, no assurances can be made that the Company will be able to satisfy these requirements. As of December
31, 2011, no significant progress has been made with the USDA or the Lender in this regard. In October 2011, BlueFire signed a
Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China's fourth-largest
utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire is currently in negotiations
with China Huadian Corp, but no definitive agreements have yet been executed.
Between the two proposed facilities (Lancaster,
CA and Fulton, MS) we expect them to create more than 1,000 construction/manufacturing jobs and, once in operation, more than 100
new operations and maintenance jobs. The Company is simultaneously researching and considering other suitable locations for other
similar bio-refineries.
Status of Publically Announced Products
or Services
In November 2011, BlueFire created SucreSource
LLC, a wholly owned subsidiary specifically tasked to partner with synergistic back end companies that need cellulosic sugars as
a feedstock for their fermentation or chemical processes. SucreSource will utilize the Arkenol process to provide the front end
technology to partner with these companies. SucreSource is cultivating relationships and will continue to develop them throughout
2012.
Distribution Methods of Products or
Services
We will utilize existing ethanol distribution
channels to sell the ethanol that is produced from our plants. For example, we will enter into an agreement with an existing refiner
or blender to purchase the ethanol and sell it into the Southern California and Mississippi transportation fuels market. Ethanol
is currently mandated at a blend level of 10% nationwide which represents an approximately 26+ billion gallon per year market.
We are also exploring the potential of onsite blending of E85 (85% ethanol, 15% gasoline) and direct marketing to fueling stations.
There are approximately 2,400 E85 fueling stations in the United States.
Competition
Most of the approximately 14 billion gallons
of ethanol supply in the United States is derived from corn according to the Renewable Fuels Association ("RFA") website
(HTTP://WWW.ETHANOLRFA.ORG/) and as of March 2012, is produced at approximately 209 facilities, ranging in size from 300,000 to
130 million gallons per year, located predominately in the corn belt in the Midwest.
Traditional corn-based production techniques
are mature and well entrenched in the marketplace, and the entire industry's infrastructure is geared toward corn as the
principal feedstock.
With the Arkenol Technology, the principle
difference from traditional processes apart from production technique is the acquisition and choice of feedstock. The use of a
non-commodity based non-food related biomass feedstock enables us to use feedstock typically destined for disposal, i.e. wood waste,
yard trimmings and general green waste. All ethanol producers regardless of production technique will fall subject to market fluctuation
in the end product, ethanol.
25
Due to the feedstock variety we process,
we are able to locate production facilities in and around the markets where the ethanol will be consumed, thereby giving us a competitive
advantage against much larger traditional producers who must locate plants near their feedstock, i.e. the corn belt in the Midwest
and ship the ethanol to the end market.
However, in the area of biomass-to-ethanol
production, there are few companies, and no commercial production infrastructure has been built. As we continue to advance our
biomass technology platform, we are likely to encounter competition for the same technologies from other companies that are also
attempting to manufacture ethanol from cellulosic biomass feedstocks.
Ethanol production is also expanding internationally.
Ethanol produced or processed in certain countries in Central America and the Caribbean region is eligible for tariff reduction
or elimination upon importation to the United States under a program known as the Caribbean Basin Initiative. Large ethanol producers,
such as Cargill, have expressed interest in building dehydration plants in participating Caribbean Basin countries, such as El
Salvador, which would convert ethanol into fuel-grade ethanol for shipment to the United States. Ethanol imported from Caribbean
Basin countries may be a less expensive alternative to domestically produced ethanol and may affect our ability to sell our ethanol
profitably.
There are approximately 21 next-generation
biofuel companies that have received grants from the DOE for development purposes.
Industry Overview
On December 19, 2007, President Bush signed
into law the Energy Independence and Security Act of 2007 (Energy Act of 2007). The Energy Act of 2007 provides for an increase
in the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard (RFS) requiring fuel producers to use
at least 36 billion gallons of biofuel by 2022, 16 billion gallons of which must come from cellulosic derived fuel. Additionally,
the Energy Act of 2007 called for reducing U.S. demand for oil by setting a national fuel economy standard of 35 miles per gallon
by 2020 – which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.
In June 2008, the Food, Conservation and
Energy Act of 2008 (the "Farm Bill") was signed into law. The 2008 Farm Bill also modified existing incentives, including
ethanol tax credits and import duties and established a new integrated tax credit of $1.01/gallon for cellulosic biofuels. The
Farm Bill also authorized new biofuels loan and grant programs, which will be subject to appropriations, likely starting with the
FY2010 budget request.
On February 13, 2009, Congress passed the
American Recovery and Reinvestment Act of 2009 (the "Recovery Act") at the urging of President Obama, who signed it
into law four days later ("ARRA"). A direct response to the economic crisis, the Recovery Act has three immediate goals:
·
Create new jobs and save existing ones;
·
Spur economic activity and invest in long-term growth; and
·
Foster unprecedented levels of accountability and transparency in government spending.
The Recovery Act intends to achieve those goals by:
·
Providing $288 billion in tax cuts and benefits for millions of working families and businesses;
·
Increasing federal funds for education and health care as well as entitlement programs (such as extending unemployment benefits) by $224 billion;
·
Making $275 billion available for federal contracts, grants and loans; and
·
Requiring recipients of Recovery funds to report quarterly on how they are using the money. All the data is posted on Recovery.gov so the public can track the Recovery funds.
26
In addition to offering financial aid directly
to local school districts, expanding the Child Tax Credit, and underwriting a process to computerize health records to reduce medical
errors and save on health care costs, the Recovery Act is targeted at infrastructure development and enhancement. For instance,
the Recovery Act plans investment in the domestic renewable energy industry and the weatherizing of 75% of federal buildings as
well as more than one million private homes around the country.
Historically, producers and blenders had
a choice of fuel additives to increase the oxygen content of fuels. MTBE (methyl tertiary butyl ether), a petroleum-based additive,
was the most popular additive, accounting for up to 75% of the fuel oxygenate market. However, in the United States, ethanol is
replacing MTBE as a common fuel additive. While both increase octane and reduce air pollution, MTBE is a presumed carcinogen which
contaminates ground water. It has already been banned in California, New York, Illinois and 22 other states. Major oil companies
have voluntarily abandoned MTBE and it is scheduled to be phased out under the Energy Policy Act. As MTBE is phased out, we expect
demand for ethanol as a fuel additive and fuel extender to rise. A blend of 5.5% or more of ethanol, which does not contaminate
ground water like MTBE, effectively complies with U.S. Environmental Protection Agency requirements for reformulated gasoline,
which is mandated in most urban areas.
Ethanol is a clean, high-octane, high-performance
automotive fuel commonly blended in gasoline to extend supplies and reduce emissions. In 2004, according to the American Coalition
for Ethanol, 3% of all United States gasoline was blended with some percentage of ethanol. The most common blend is E10, which
contains 10% ethanol and 90% gasoline. There is also growing federal government support for E85, which is a blend of 85% ethanol
and 15% gasoline.
Ethanol is a renewable fuel produced by
the fermentation of starches and sugars such as those found in grains and other crops. Ethanol contains 35% oxygen by weight and,
when combined with gasoline, it acts as an oxygenate, artificially introducing oxygen into gasoline and raising oxygen concentration
in the combustion mixture with air. As a result, the gasoline burns more completely and releases less unburnt hydrocarbons, carbon
monoxide and other harmful exhaust emissions into the atmosphere. The use of ethanol as an automotive fuel is commonly viewed as
a way to reduce harmful automobile exhaust emissions. Ethanol can also be blended with regular unleaded gasoline as an octane booster
to provide a mid-grade octane product which is commonly distributed as a premium unleaded gasoline.
Studies published by the Renewable Fuel
Association indicate that approximately 13.5 billion gallons of ethanol was consumed in 2010 in the United States and every automobile
manufacturer approves and warrants the use of E10. Because the ethanol molecule contains oxygen, it allows an automobile engine
to more completely combust fuel, resulting in fewer emissions and improved performance. Fuel ethanol has an octane value of 113
compared to 87 for regular unleaded gasoline. Domestic ethanol consumption has tripled in the last eight years, and consumption
increases in some foreign countries, such as Brazil, are even greater in recent years. For instance, 40% of the automobiles in
Brazil operate on 100% ethanol, and others use a mixture of 22% ethanol and 78% gasoline. The European Union and Japan also encourage
and mandate the increased use of ethanol.
For every barrel of ethanol produced, the
American Coalition for Ethanol estimates that 1.2 barrels of petroleum are displaced at the refinery level, and that since 1978,
U.S. ethanol production has replaced over 14.0 billion gallons of imported gasoline or crude oil. According to a Mississippi State
University Department of Agricultural Economics Staff Report in August 2003, a 10% ethanol blend results in a 25% to 30% reduction
in carbon monoxide emissions by making combustion more complete. The same 10% blend lowers carbon dioxide emissions by 6% to 10%.
During the last 20 years, ethanol production
capacity in the United States has grown from almost nothing to an estimated 13.5 billion gallons per year in 2010. In the United
States, ethanol is primarily made from starch crops, principally from the starch fraction of corn. Consequently, the production
plants are concentrated in the grain belt of the Midwest, principally in Illinois, Iowa, Minnesota, Nebraska and South Dakota.
In the United States, there are two principal
commercial applications for ethanol. The first is as an oxygenate additive to gasoline to comply with clean air regulations. The
second is as a voluntary substitute for gasoline - this is a purely economic choice by gasoline retailers who may make higher margins
on selling ethanol-blended gasoline, provided ethanol is available in the local market. The U.S. gasoline market is currently approximately
170 billion gallons annually, so the potential market for ethanol (assuming only a 10% blend) is 17 billion gallons per year. Increasingly,
motor manufacturers are producing flexible fuel vehicles (particularly sports utility vehicle models) which can run off ethanol
blends of up to 85% (known as E85) in order to obtain exemptions from fleet fuel economy quotas. There are now in excess of 5 million
flexible fuel vehicles on the road in the United States and automakers will produce several millions per year, offering further
potential for significant growth in ethanol demand.
27
Cellulose to Ethanol Production
In a 2002 report, "Outlook For Biomass
Ethanol Production Demand," the U.S. Energy Information Administration found that advancements in production technology of
ethanol from cellulose could reduce costs and result in production increases of 40% to 160% by 2010. Biomass (cellulosic feedstocks)
includes agricultural waste, woody fibrous materials, forestry residues, waste paper, municipal solid waste and most plant material.
Like waste starches and sugars, they are often available for relatively low cost, or are even free. However, cellulosic feedstocks
are more abundant, global and renewable in nature. These waste streams, which would otherwise be abandoned, land-filled or incinerated,
exist in populated metropolitan areas where ethanol prices are higher.
Sources and Availability of Raw Materials
The U.S. DOE and USDA in its April 2005
report "BIOMASS AS FEEDSTOCK FOR A BIOENERGY AND BIOPRODUCTS INDUSTRY: THE TECHNICAL FEASIBILITY OF A BILLION-TON ANNUAL
SUPPLY" found that about one billion tons of cellulosic materials from agricultural and forest residues are available to
produce more than one-third of the current U.S. demand for transportation fuels.
Dependence on One or a Few Major Customers
We have signed a definitive agreement with
Tenaska for the off-take of our Fulton Project, which allows Tenaska to exclusively market all ethanol produced at this facility.
See "DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES."
Patents, Trademarks, Licenses, Franchises,
Concessions, Royalty Agreements or Labor Contracts
On March 1, 2006, we entered into a Technology
License Agreement with Arkenol, for use of the Arkenol Technology. Arkenol holds the following patents in relation to the Arkenol
Technology: 11 U.S. patents, 21 foreign patents, and one pending foreign patent. According to the terms of the agreement, we were
granted an exclusive, non-transferable, North American license to use and to sub-license the Arkenol technology. The Arkenol Technology,
converts cellulose and waste materials into ethanol and other high value chemicals. As consideration for the grant of the license,
we are required to make a onetime payment of $1,000,000 at first project funding and for each plant make the following payments:
(1) royalty payment of 3% of the gross sales price for sales by us or our sub-licensees of all products produced from the use of
the Arkenol Technology (2) and a onetime license fee of $40.00 per 1,000 gallons of production capacity per plant. According to
the terms of the agreement, we made a onetime exclusivity fee prepayment of $30,000 during the period ended December 31, 2006.
At March 31, 2010, we had paid Arkenol in full for the license. All sub-licenses issued by us will provide for payments to Arkenol
of any other license fees and royalties due.
Governmental Approval
We are not subject to any government oversight
for our current operations other than for corporate governance and taxes. However, the production facilities that we will be constructing
will be subject to various federal, state and local environmental laws and regulations, including those relating to the discharge
of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials,
and the health and safety of our employees. In addition, some of these laws and regulations will require our facilities to operate
under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution
control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and
regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations
and/or facility shutdowns.
28
Governmental Regulation
Currently, the federal government encourages
the use of ethanol as a component in oxygenated gasoline. This is a measure to both protect the environment, and, to utilize biofuels
as a viable renewable domestic fuel to reduce U.S. dependence on foreign oil.
The ethanol industry is heavily dependent
on several economic incentives to produce ethanol, including federal ethanol supports. Ethanol sales have been favorably affected
by the Clean Air Act amendments of 1990, particularly the Federal Oxygen Program which became effective November 1, 1992. The Federal
Oxygen Program requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce
carbon monoxide pollution. Ethanol use has increased due to a second Clean Air Act program, the Reformulated Gasoline Program.
This program became effective January 1, 1995, and requires the sale of reformulated gasoline in nine major urban areas to reduce
pollutants, including those that contribute to ground level ozone, better known as smog. Increasingly stricter EPA regulations
are expected to increase the number of metropolitan areas deemed in non-compliance with Clean Air Standards, which could increase
the demand for ethanol.
On October 22, 2004, President Bush signed
H.R. 4520, which contained the Volumetric Ethanol Excise Tax Credit ("VEETC") and amended the federal excise tax structure
effective as of January 1, 2005. Before this, ethanol-blended fuel was taxed at a lower rate than regular gasoline (13.2 cents
on a 10% blend). Under VEETC, the existing ethanol excise tax exemption is eliminated, thereby allowing the full federal excise
tax of 18.4 cents per gallon of gasoline to be collected on all gasoline and allocated to the highway trust fund. The bill created
a new volumetric ethanol excise tax credit of 51 cents per gallon of ethanol blended. Refiners and gasoline blenders would apply
for this credit on the same tax form as before only it would be a credit from general revenue, not the highway trust fund. Based
on volume, the VEETC is expected to allow much greater refinery flexibility in blending ethanol. VEETC is scheduled to expire in
2013. The 2008 Farm Bill amended this credit: Starting the year after 7.5 billion gallons of ethanol are produced and/or imported
in the United States, the value of the credit will be lowered to 45 cents per gallon which occurred in 2008, and lead to a reduction
in the credit starting in 2009. VEETC was scheduled to expire on December 31, 2010, but extended by congress until December 31,
2011, pending structural law changes. As of May 2, 2012, the VEETC has not been renewed.
The Energy Policy Act of 2005 established
a renewable fuel standard (RFS) to increase in the supply of alternative sources for automotive fuels. The RFS was expanded by
the Energy Independence and Security Act of 2007. The RFS requires the blending of renewable fuels (including ethanol and biodiesel)
in transportation fuel. In 2008, fuel suppliers must blend 9.0 billion gallons of renewable fuel into gasoline; this requirement
increases annually to 36 billion gallons in 2022. The expanded RFS also specifically mandates the use of "advanced biofuels"—fuels
produced from non-corn feedstocks and with 50% lower lifecycle greenhouse gas emissions than petroleum fuel—starting in 2009.
Of the 36 billion gallons required in 2022, at least 21 billion gallons must be advanced biofuel. There are also specific quotas
for cellulosic biofuels and for biomass-based diesel fuel. On May 1, 2007, EPA issued a final rule on the RFS program detailing
compliance standards for fuel suppliers, as well as a system to trade renewable fuel credits between suppliers. EPA has not yet
initiated a rulemaking on the lifecycle analysis methods necessary to categorize fuels as advanced biofuels. While this program
is not a direct subsidy for the construction of biofuels plants, the market created by the renewable fuel standard is expected
to stimulate growth of the biofuels industry.
The Farm Bill provides for, among other
things, grants for demonstration scale biorefineries, and loan guarantees for commercial scale biorefineries that produce advanced
biofuels (i.e., any fuel that is not corn-based). Section 9003 includes a Loan Guarantee Program under which the U.S.D.A. could
provide loan guarantees up to $250 million to fund development, construction, and retrofitting of commercial-scale refineries.
Section 9003 also includes a grant program to assist in paying the costs of the development and construction of demonstration-scale
biorefineries to demonstrate the commercial viability which can potentially fund up to 50% of project costs.
29
The ARRA, passed into law in February 2009
makes $275 billion available for federal contracts, grants, and loans, some of which is devoted to investment into the domestic
renewable energy industry. Some other noteworthy governmental actions regarding the production of biofuels are as follows:
Small Ethanol Producer Credit
:
A tax credit valued at 10 cents per gallon
of ethanol produced. The credit may be claimed on the first 15 million gallons of ethanol produced by a small producer in a given
year. Qualified applicants are any ethanol producer with production capacity below 60 million gallons per year. This credit was
scheduled to terminate on December 31, 2010, but was recently renewed through 2011. As of May 2, 2012, the Small Ethanol Producer
Credit has not been renewed.
Credit for Production of Cellulosic
Biofuel
:
An integrated tax credit whereby producers
of cellulosic biofuel can claim up to $1.01 per gallon tax credit. The credit for cellulosic ethanol varies with other ethanol
credits such that the total combined value of all credits is $1.01 per gallon. As the VEETC and/or the Small Ethanol Producer Credits
(outlined above) decrease, the per-gallon credit for cellulosic ethanol production increases by the same amount (i.e. the value
of the credit is reduced by the amount of the VEETC and the Small Ethanol Producer Credit—currently, the value would be 40
cents per gallon). The credit applies to fuel produced after December 31, 2008. This credit is scheduled to terminate on December
31, 2012.
Special Depreciation Allowance for Cellulosic
Biofuel Plant Property
:
A taxpayer may take a depreciation deduction
of 50% of the adjusted basis of a new cellulosic biofuel plant in the year it is put in service. Any portion of the cost financed
through tax-exempt bonds is exempted from the depreciation allowance. Before amendment by P.L. 110-343, the accelerated depreciation
applied only to cellulosic ethanol plants that break down cellulose through enzymatic processes—the amended provision applies
to all cellulosic biofuel plants acquired after December 20, 2006, and placed in service before January 1, 2013. This accelerated
depreciation allowance is scheduled to terminate on December 31, 2012.
Research and Development Activities
For the fiscal years ending December 31,
2011 and 2010, we spent approximately $595,302 and $1,096,653 on project development costs, respectively.
To date, project development costs include
the research and development expenses related to our future cellulose-to-ethanol production facilities including site development,
and engineering activities.
Compliance with Environmental Laws
We will be subject to extensive air, water
and other environmental regulations and we will have to obtain a number of environmental permits to construct and operate our plants,
including, air pollution construction permits, a pollutant discharge elimination system general permit, storm water discharge permits,
a water withdrawal permit, and an alcohol fuel producer's permit. In addition, we may have to complete spill prevention control
and countermeasures plans.
The production facilities that we will
build are subject to oversight activities by the federal, state, and local regulatory agencies. There is always a risk that the
federal agencies may enforce certain rules and regulations differently than state environmental administrators. State or federal
rules are subject to change, and any such changes could result in greater regulatory burdens on plant operations. We could also
be subject to environmental or nuisance claims from adjacent property owners or residents in the area arising from possible foul
smells or other air or water discharges from the plant.
Employees
We have 5 full time employees as of May
2, 2012, and 1 part time employee. None of our employees are subject to a collective bargaining agreement, and we believe that
our relationship with our employees is good.
DESCRIPTION OF PROPERTY
We lease approximately 6,425 square feet
of furnished office space at 31 Musick, Irvine, California 92618 from Jeong Yun Kim for $11,691 per month on a month-to-month basis.
30
On November 9, 2007, we issued a check
in the amount of $96,851, towards the purchase of the land for the Lancaster Biorefinery totaling a purchase price of $109,108.
The approximately 10 acre site is presently vacant and undisturbed except to occasional use by off road vehicles. The site is flat
and has no distinguishing characteristics and is adjacent to a solid waste landfill at a site that minimizes visual access from
outside the immediate area.
On June 14, 2010, we entered in to a lease
with Itawamba County, Mississippi. The lease is for 38 acres located in the Port of Itawamba where our Fulton Project will be located.
The lease is a 30 year term and currently is $10,292 per month and will be reduced, following a formula tied to jobs creation in
the State of Mississippi.
LEGAL PROCEEDINGS
We are currently not involved in any litigation
that we believe could have a material adverse effect on our financial condition or results of operations.  There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or
affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries' officers or directors
in their capacities as such, in which an adverse decision could have a material adverse effect.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Some of the statements contained in this
prospectus that are not historical facts are "forward-looking statements" which can be identified by the use of terminology
such as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties.
 We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this prospectus,
reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors
affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement
of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding anticipated events.  All written and oral forward-looking
statements made are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary
statements.  Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such
forward-looking statements.
Plan of Operation
Our primary business encompasses development
activities culminating in the design, construction, ownership and long-term operation of cellulosic ethanol production biorefineries
utilizing the licensed Arkenol Technology in North America. Our secondary business is providing support and operational services
to Arkenol Technology based biorefineries worldwide. As such, we are currently in the development-stage of finding suitable locations
and deploying project opportunities for converting cellulose fractions of municipal solid waste and other opportunistic feedstock
into ethanol fuels.
Our initial planned biorefineries in North
America are projected as follows:
·
A biorefinery that will process approximately 190 tons of green waste material annually to produce roughly 3.9 million gallons of ethanol annually. On November 9, 2007, we purchased the facility site which is located in Lancaster, California for the BlueFire Ethanol Lancaster project ("Lancaster Biorefinery"). Permit applications were filed on June 24, 2007, to allow for construction of the Lancaster Biorefinery. On or around July 23, 2008, the Los Angeles Planning Commission approved the use permit for construction of the plant. However, a subsequent appeal of the county decision, which BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of the now non-appealable permit approval to December 12, 2008. On February 12, 2009, we were issued our "Authority to Construct" permit by the Antelope Valley Air Quality Management District. In 2009 the Company submitted an application for a $58 million dollar loan guarantee for the Lancaster Biorefinery with the the DOE Program DE-FOA-0000140 ("DOE LGPO"), which provides federal loan guarantees for projects that employ innovative energy efficiency, renewable energy, and advanced transmission and distribution technologies. In 2010, the Company was informed that the loan guarantee for the planned biorefinery in Lancaster, California, was rejected by the DOE due to a lack of definitive contracts for feedstock and off-take at the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was also pursuing a much larger project in Fulton, Mississippi. In December 2011, BlueFire requested an extension to pay the project's permits for an additional year while we awaited potential financing. The Company is evaluating whether or not it's prudent to extend the project's permits an additional year while we await potential financing. We have completed the detailed engineering and design on the project and are seeking funding in order to build the facility. We estimate the total cost including contingencies to be in the range of approximately $100 million to $125 million for the Lancaster Biorefinery. At the end of 2008 and throughout 2009, prices for materials declined, although we expect, that prices for items like structural and specialty steel may firm up in 2012 along with other materials of construction. The cost approximations above do not reflect any fluctuations in raw materials or construction costs since the original pricing estimates. Additionally, this project is considered shovel ready and only requires minimal capital to maintain until funding is obtained for its construction. The preparation for the construction of this plant was the primary capital uses in prior years. We are currently in discussions with potential sources of financing for this facility but no definitive agreements are in place.
31
·
A biorefinery proposed for development and construction in conjunction with the DOE, previously located in Southern California, and now located in Fulton, Mississippi, which will process approximately 700 metric dry tons of woody biomass, mill residue, and other cellulosic waste to produce approximately 19 million gallons of ethanol annually ("Fulton Project"). In 2007, we received an Award from the DOE of up to $40 million for the Fulton Project. On or around October 4, 2007, we finalized Award 1 for a total approved budget of just under $10,000,000 with the DOE. This award is a 60%/40% cost share, whereby 40% of approve costs may be reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. On December 4, 2009, the DOE announced that the award for this project has been increased to a maximum of $88 million under the American Recovery and Reinvestment Act of 2009 ("ARRA") and the Energy Policy Act of 2005. As of December 31, 2011, BlueFire has been reimbursed approximately $9,217,869 from the DOE under this award. In 2010, BlueFire signed definitive agreements for the following three crucial contracts related to the Fulton Project: (a) feedstock supply with Cooper Marine, (b) off-take for the ethanol of the facility with Tenaska, and (c) the construction of the facility with MasTec. Also in 2010, BlueFire continued to develop the engineering package for the Fulton Project, and completed both the FEL-2 and FEL-3 stages of engineering readying the facility for construction. As of November 2010, the Fulton Project has all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction. In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project, under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project's application will not move forward until such time as the project has raised the remaining equity necessary for the completion of funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the USDA, which would represent substantially all of the funding shortfall on the project. In October 2011, BlueFire was notified by its lender ("Lender") for the Company's USDA loan guarantee application that the USDA sent the Lender notice that they are currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity to provide any new information and potential alternatives for the USDA's consideration. The Company plans to continue to work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution of another lender. However, no assurances can be made. In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp., which is China's fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing. BlueFire is currently in negotiations with China Huadian Corp, but no definitive agreements have yet been executed.
32
Several other opportunities are being evaluated
by us in North America, although no definitive agreements have been reached.
·
In November 2011, BlueFire created SucreSource LLC, a wholly owned subsidiary specifically tasked to partner with synergistic back end companies that need cellulosic sugars as a feedstock for their fermentation or chemical processes. SucreSource will utilize the Arkenol process to provide the front end technology to partner with these companies. SucreSource is cultivating relationships and will continue to develop them throughout 2012.
BlueFire's capital requirement strategy for its planned
biorefineries are as follows:
·
Obtain additional operating capital from joint venture partnerships, Federal or State grants or loan guarantees, debt financing or equity financing to fund our ongoing operations and the development of initial biorefineries in North America. Although the Company is in discussions with potential financial and strategic sources of financing for their planned biorefineries no definitive agreements are in place.
·
The 2008 Farm Bill, Title IX (Energy Title) provides grants for demonstration scale Biorefineries, and loan guarantees for commercial scale Biorefineries that produce advanced Biofuels (i.e., any fuel that is not corn-based). Section 9003 includes a Loan Guarantee Program under which the USDA could provide loan guarantees up to $250 million to fund development, construction, and retrofitting of commercial-scale refineries. Section 9003 also includes a grant program to assist in paying the costs of the development and construction of demonstration-scale biorefineries to demonstrate the commercial viability which can potentially fund up to 50% of project costs. BlueFire plans to pursue all available opportunities within the Farm Bill, although initial attempts have been unsuccessful.
·
Utilize proceeds from reimbursements under the DOE contract.
·
As available and as applicable to our business plans, applications for public funding will be submitted to leverage private capital raised by us.
DEVELOPMENTS IN BLUEFIRE'S BIOREFINERY ENGINEERING
AND DEVELOPMENT
In 2010, BlueFire continued to develop
the engineering package for the Fulton Project, and completed the Front-End Loading (FEL) stages 2 and FEL-3 of engineering for
the Fulton Project readying the facility for construction. FEL is the process for conceptual development of processing industry
projects. This process is used in the petrochemical, refining, and pharmaceutical industries. Front-End Loading is also referred
to as Front-End Engineering Design (FEED).
There are three stages in the FEL process:
FEL-1
FEL-2
FEL-3
* Material Balance
* Preliminary Equipment Design
* Purchase Ready Major Equipment Specifications
* Energy Balance
* Preliminary Layout
* Definitive Estimate
* Project Charter
* Preliminary Schedule
* Project Execution Plan
* Preliminary Estimate
* Preliminary 3D Model
* Electrical Equipment List
* Line List
* Instrument Index
As of November 2010, the Fulton Project
has all necessary permits for construction, and in that same month we began site clearing and preparation work, signaling the beginning
of construction. In June 2011, BlueFire completed initial site preparation and the site is now ready for facility construction.
In February 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for the Fulton Project,
under the DOE LGPO, mentioned above. In February 2011, BlueFire received notice from the DOE LGPO staff that the Fulton Project's
application will not move forward until such time as the project has raised the remaining equity necessary for the completion of
funding. In August 2010, BlueFire submitted an application for a $250 million loan guarantee with the U.S. Department of Agriculture
("USDA") under Section 9003 of the 2008 Farm Bill, as defined below ("USDA LG"). In October 2011, BlueFire
was notified by its lender ("Lender") for the Company's USDA loan guarantee application that the USDA sent the
Lender notice that they are currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered
to meet with the Lender and the Company in order to provide further explanation as to its decision and to allow the Lender and
the Company the opportunity to provide any new information and potential alternatives for the USDA's consideration. The Company
plans to continue to work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may
include the substitution of another lender; however, no assurances can be made that the Company will be able to satisfy these requirements.
In October 2011, BlueFire signed a Memorandum of Understanding with China Huadian Engineering Co., a unit of China Huadian Corp.,
which is China's fourth-largest utility, to buy a stake in the Fulton Project and may later also provide debt financing.
BlueFire is currently in negotiations with China Huadian Corp, but no definitive agreements have yet been executed.
33
On September 27, 2010, the Company announced
a contract with Cooper Marine & Timberlands to provide feedstock for the Company's planned Fulton Project for a period
of up to 15 years. Under the agreement, Cooper Marine & Timberlands ("CMT") will supply the project with all of
the feedstock required to produce approximately 19-million gallons of ethanol per year from locally sourced cellulosic materials
such as wood chips, forest residual chips, pre-commercial thinnings and urban wood waste such as construction waste, storm debris,
land clearing; or manufactured wood waste from furniture manufacturing. Under the Agreement, CMT will pursue a least-cost strategy
for feedstock supply made possible by the project site's proximity to feedstock sources and the flexibility of BlueFire's process
to use a wide spectrum of cellulosic waste materials in pure or mixed forms. CMT, with several chip mills in operation in Mississippi
and Alabama, is a member company of Cooper/T. Smith one of America's oldest and largest stevedoring and maritime related firms
with operations on all three U.S. coasts and foreign operations in Central and South America.
On September 20, 2010, the Company announced
an off-take agreement with Tenaska BioFuels, LLC ("TBF") for the purchase and sale of all ethanol produced at the Company's
planned Fulton Project. Pricing of the 15-year contract follows a market-based formula structured to capture the premium allowed
for cellulosic ethanol compared to corn-based ethanol giving the Company a credit worthy contract to support financing of the project.
Despite the long-term nature of the contract, the Company is not precluded from the upside in the coming years as fuel prices rise.
TBF, a marketing affiliate of Tenaska, provides procurement and marketing, supply chain management, physical delivery, and financial
services to customers in the agriculture and energy markets, including the ethanol and biodiesel industries. In business since
1987, Tenaska is one of the largest independent power producers.
On August 4, 2010, the Company submitted
a loan guarantee request to the USDA for $250 million for the Fulton Project. In October 2011, BlueFire was notified by its lender
("Lender") for the Company's USDA loan guarantee application that the USDA sent the Lender notice that they are
currently ineligible to participate in the USDA Biorefinery Assistance Program. The USDA has offered to meet with the Lender and
the Company in order to provide further explanation as to its decision and to allow the Lender and the Company the opportunity
to provide any new information and potential alternatives for the USDA's consideration. The Company plans to continue to
work with the USDA and the Lender in order to satisfy the loan guarantee application requirements which may include the substitution
of another lender.
On July 15, 2010, the board of directors
of BlueFire, by unanimous written consent, approved the filing of a Certificate of Amendment to the Company's Articles of
Incorporation with the Secretary of State of Nevada, changing the Company's name from BlueFire Ethanol Fuels, Inc. to BlueFire
Renewables, Inc. Our Board of Directors and management believe that changing our name to BlueFire Renewables, Inc. more accurately
reflects our primary business plan expanding the focus from just building cellulosic ethanol projects to include other advanced
biofuels, biodiesel, and other drop-in biofuels as well as synthetic lubricants. On July 20, 2010, the Certificate of Amendment
was accepted by the Secretary of State of Nevada.
Results of Operations
Year Ended December 31, 2011 Compared
to the Year Ended December 31, 2010
Revenue
Revenue excluding unbilled grant revenue,
for the year ended December 31, 2011 and 2010, were approximately $36,000 and $641,000, respectively, and was primarily related
to a federal grant from the DOE. The grant generally provides for reimbursement in connection with related development and construction
costs involving commercialization of our technologies. The decrease in revenue was partially due to limitations of capital and
decreased activity in fiscal 2011 as the Company seeks funding for the Fulton project. The majority of the difference ($354,000)
was due to a change in accounting estimate for revenue realized in prior years. The change stems from billings in excess of estimated
earnings. These earnings were based on estimates accepted by the DOE at the time of reimbursement. Upon subsequent review by the
DOE a change in estimate was required and a cumulative catch up adjustment was necessary.
34
Unbilled Grant Revenues
Unbilled grant revenues for the year ended
December 31, 2011 and 2010, were approximately $169,000 and $28,000, respectively. The increase in unbilled grant revenues is a
result of having limited cash resources in the fourth quarter of 2011 to pay for reimbursable costs under the DOE grant. These
costs are expected to be partially realized with financing obtained in March 2012.
Project Development
For the year ended December 31, 2011, our
project development costs were approximately $595,000, compared to project development costs of $1,097,000 for the same period
during 2010. The decrease in project development costs is mainly due to a decrease in project activities subsequent to completing
the preparation of the Fulton site in June 2011.
General and Administrative Expenses
General and Administrative Expenses were
approximately $1,753,000 for the year ended December 31, 2011, compared to $1,997,000 for the same period in 2010. The decrease
in general and administrative costs is mainly due to reduced non-critical operations at the end of fiscal 2011 to conserve working
capital.
Liquidity and Capital Resources
Historically, we have funded our operations
through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders
and outside investors. In addition, we receive funds under the grant received from the DOE. Our principal use of funds has been
for the further development of our bio-refinery projects, for capital expenditures and general corporate expenses. As our projects
are developed to the point of construction, we anticipate significant purchases of long lead time item equipment for construction
which will require a significant amount of capital. As of December 31, 2011, we had cash and cash equivalents of approximately
$15,000. As of May 2, 2012, we had cash and cash equivalents of approximately $71,000.
Historically, we have funded our operations
though the following transactions:
In February 2009, the Company obtained
a line of credit in the amount of $570,000 from Arkenol Inc., its technology licensor, to provide additional liquidity to the Company
as needed, the credit line was ultimately paid back during 2009 and cancelled.
In October 2009, the Company received additional
funds of approximately $3,800,000 from the DOE, due to the success in amending its DOE award to include costs previously incurred
in connection with the development of the Lancaster Biorefinery which have a direct attributable benefit to the Fulton Project.
The funds were used to fund operations for the remainder of 2009 and most of 2010.
On December 15, 2010, the Company entered
into a $200,000 loan agreement ("Loan") with Arnold Klann, the Chief Executive Officer ("CEO/Lender").
The Loan requires the Company to (i) pay to the CEO/Lender a one-time amount equal to fifteen percent (15%) of the Loan in cash
or shares of the Company's common stock at a value of $0.50 per share, at the CEO/Lender's option; and (ii) issue the
CEO/Lender warrants allowing the CEO/Lender to buy 500,000 common shares of the Company at an exercise price of $0.50 per common
share, such warrants to expire on December 15, 2013. The Company has promised to pay in full the outstanding principal balance
of any and all amounts due under the Loan Agreement within thirty (30) days of the Company's receipt of investment financing
or a commitment from a third party to provide $1,000,000 to the Company or one of its subsidiaries. The proceeds from this loan
are being used to fund operations.
35
On December 23, 2010, the Company sold
a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC ("BlueFire Fulton"
or the "Fulton Project"), to an accredited investor for a purchase price of $750,000 ("Purchase Price").
The Company maintains a 99% ownership interest in BlueFire Fulton. In addition, the investor received a right to require the Company
to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future contingent events based
upon obtaining financing for the construction of the Fulton Project.
On November 10, 2011, the Company obtained
a line of credit in the amount of $40,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional
liquidity to the Company as needed, at his sole discretion. Under the terms of the note, the Company is to repay any principal
balance and interest, at 12% per annum, within 30 days of receiving qualified investment financing of $100,000 or more. As of May
2, 2012, the outstanding balance on the line of credit is approximately $19,200.
On January 19, 2011, the Company signed
a $10 million purchase agreement (the "Purchase Agreement") with Lincoln Park Capital Fund, LLC ("LPC"),
an Illinois limited liability company. The Company also entered into a registration rights agreement with LPC whereby we agreed
to file a registration statement related to the transaction with the U.S. Securities & Exchange Commission ("SEC")
covering the shares that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the
Purchase Agreement the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase
Agreement.
After the SEC declared effective the registration
statement related to the transaction, we have the right, in our sole discretion, over a 30-month period to sell our shares of common
stock to LPC in amounts up to $500,000 per sale, depending on certain conditions as set forth in the Purchase Agreement, up to
the aggregate commitment of $10 million.
Management has estimated that operating
expenses for the next twelve months will be approximately $1,700,000, excluding engineering costs related to the development of
bio-refinery projects. These matters raise substantial doubt about the Company's ability to continue as a going concern.
For the remainder of 2012, the Company intends to fund its operations with reimbursements under the Department of Energy contract,
from the sale of Fulton Project equity ownership, from the sale of debt and equity instruments, and our equity purchase agreement
consummated with LPC in January 2011 (as discussed herein). The Company's ability to get reimbursed on the DOE contract is dependent
on the availability of cash to pay for the related costs. As of May 2, 2012, the Company expects the current resources, as well
as the resources available in the short term under the LPC Purchase Agreement, will only be sufficient for a period of approximately
two months, depending upon certain funding conditions contained herein, unless significant additional financing is received. Management
has determined that these general expenditures must be reduced and additional capital will be required in the form of equity or
debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue
liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable
to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of
our planned development, which could harm our business, financial condition and operating results.
Changes in Cash Flows
During the year ended December 31, 2011,
we invested approximately $613,000 and received DOE reimbursements of approximately $490,000 for net DOE reimbursements of approximately
$123,000, in construction activities at our Fulton Project, compared with $634,000, net of DOE reimbursements in the same period
in 2010. This invested decrease was due to the decrease of the engineering and other capitalizable costs in connection with the
development of the Fulton Project as it has become shovel ready. The decrease in the DOE reimbursements was due to the decrease
of work at the Fulton site in partnership with the County of Itawamba of the State of Mississippi and their contributing costs
share.
We received net proceeds from LPC of approximately
$350,000 for the year ended December 31, 2011, for shares of the Company's common stock and warrants. There were no such
financing transactions during the year ended December 31, 2010 as cash on hand was sufficient to fund operations.
36
Critical Accounting Policies
We prepare our consolidated financial statements
in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial
statements require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during
the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates as a result of different assumptions or conditions.
The methods, estimates, and judgment we
use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements.
The SEC has defined "critical accounting policies" as those accounting policies that are most important to the portrayal
of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of
the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate
to the fair value of warrant liabilities. We also have other key accounting estimates and policies, but we believe that these other
policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less
likely that they would have a material impact on our reported results of operations for a given period. For additional information
see Note 2, "Summary of Significant Accounting Policies" in the notes to our audited financial statements appearing
elsewhere in this registration statement. Although we believe that our estimates and assumptions are reasonable, they are based
upon information presently available, and actual results may differ significantly from these estimates.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
Our shares of common stock began trading
under the symbol "BFRE.PK" on the Pink Sheets of the National Quotation Bureau on July 11, 2006 and later began trading
on the OTCBB under the symbol "BFRE.OB" on June 19, 2007.
The following table sets forth the high
and low trade information for our common stock for each quarter during the past three fiscal years. The prices reflect inter-dealer
quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
Quarter ended
Low Price
High Price
March 31, 2009
$
0.51
$
1.00
June 30, 2009
$
0.55
$
1.60
September 30, 2009
$
0.80
$
1.20
December 31, 2009
$
0.85
$
1.25
March 31, 2010
$
0.34
$
1.00
June 30, 2010
$
0.17
$
0.37
September 30, 2010
$
0.09
$
0.50
December 31, 2010
$
0.43
$
0.66
March 31, 2011
$
0.35
$
0.48
June 30, 2011
$
0.15
$
0.44
September 30, 2011
$
0.15
$
0.25
December 31, 2011
$
0.13
$
0.30
37
(b) Holders
As of May 2, 2012, a total of 32,776,919
shares of the Company's common stock are currently outstanding held by approximately 2,750 shareholders of record.
Transfer Agent and Registrar
The transfer agent and registrar for our
common stock is First American Stock Transfer with its business address at 4747 N 7th Street, Suite 170, Phoenix, AZ 85014.
(c) Dividends
We have not declared or paid any dividends
on our common stock and intend to retain any future earnings to fund the development and growth of our business. Therefore, we
do not anticipate paying dividends on our common stock for the foreseeable future. There are no restrictions on our present ability
to pay dividends to stockholders of our common stock, other than those prescribed by Nevada law.
(d) Securities Authorized for Issuance
under Equity Compensation Plans
2006 Incentive and Non-Statutory Stock
Option Plan, as Amended
In order to compensate our officers, directors, employees and/or
consultants, on December 14, 2006, our Board of Directors approved and stockholders ratified by consent the 2006 Incentive and
Non-Statutory Stock Option Plan (the "Plan"). The Plan has a total of 10,000,000 shares reserved for issuance.
On October 16, 2007, the Board of Directors
reviewed the Plan. As such, it determined that the Plan was to be used as a comprehensive equity incentive program for which the
Board of Directors serves as the plan administrator and, therefore, amended the Plan (the "Amended and Restated Plan")
to add the ability to grant restricted stock awards.
Under the Amended and Restated Plan, an
eligible person in the Company's service may acquire a proprietary interest in the Company in the form of shares or an option
to purchase shares of the Company's common stock. The amendment includes certain previously granted restricted stock awards
as having been issued under the Amended and Restated Plan.
As of December 31, 2011, we have issued
the following stock options and grants under the Amended and Restated Plan:
Equity Compensation Plan Information
Plan category
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights and
number of shares of
restricted stock
Weighted average
exercise price
of outstanding
options, warrants
and rights (2)
Number of securities
remaining available for
future issuance
Equity compensation plans approved by security holders under the Amended and Restated Plan
2,555,518 (1)
$
3.21
5,454,482
Equity compensation plans not approved by security holders
-
Total
2,555,518
(1)
Excluding 20,000 options that have been exercised, and 2,057,500 options that expired in December
2011.
(2)
Excludes shares of restricted stock issued under the Plan.
38
Rule 10B-18 Transactions
During the years ended December 31, 2011
and 2010, there were no repurchases of the Company's common stock by the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Directors and Executive Officers
The following table and biographical summaries
set forth information, including principal occupation and business experience, about our directors and executive officers as of
May 2, 2012. There is no familial relationship between or among the nominees, directors or executive officers of the Company.
NAME
AGE
POSITION
OFFICER AND/OR
DIRECTOR SINCE
Arnold Klann
60
President, CEO and Director
June 2006
Necitas Sumait
52
Secretary, SVP and Director
June 2006
John Cuzens
60
SVP, Chief Technology Officer
June 2006
Chris Nichols
46
Director
June 2006
Joseph Sparano
64
Director
March 2011
The Company's directors serve in
such capacity until the first annual meeting of the Company's shareholders and until their successors have been elected and
qualified. The Company's officers serve at the discretion of the Company's board of directors, until their death, or
until they resign or have been removed from office.
There are no agreements or understandings
for any director or officer to resign at the request of another person and none of the directors or officers is acting on behalf
of or will act at the direction of any other person. The activities of each director and officer are material to the operation
of the Company. No other person's activities are material to the operation of the Company.
Arnold R. Klann – Chairman of
the Board and Chief Executive Officer
Mr. Klann has been our Chairman of the
Board and Chief Executive Officer since our inception in March 2006. Mr. Klann has been President of ARK Energy, Inc. and Arkenol,
Inc. from January 1989 to present. Mr. Klann has an AA from Lakeland College in Electrical Engineering. BlueFire believes that
Mr. Klann's contacts in the ethanol and cellulose industries and his overall insight into our business are a valuable asset
to the Company.
Necitas Sumait – Senior Vice President
and Director
Mrs. Sumait has been our Director and Senior
Vice President since our inception in March 2006. Prior to this, Mrs. Sumait was Vice President of ARK Energy/Arkenol from December
1992 to July 2006. Mrs. Sumait has a MBA in Technological Management from Illinois Institute of Technology and a B.S. in Biology
from DePaul University. BlueFire believes that Mrs. Sumait's work with, and insight into, the environmental regulation and
policy of our business is a valuable asset to the Company.
John Cuzens - Chief Technology Officer
and Senior Vice President
Mr. Cuzens has been our Chief Technology
Officer and Senior Vice President since our inception in March 2006. Mr. Cuzens was a Director from March 2006 until his resignation
from the Board of Directors in July 2007. Prior to this, he was Director of Projects Wahlco Inc. from 2004 to June 2006. He was
employed by Applied Utility Systems Inc from 2001 to 2004 and Hydrogen Burner Technology form 1997-2001. He was with ARK Energy
and Arkenol from 1991 to 1997 and is the co-inventor on seven of Arkenol's eight U.S. foundation patents for the conversion
of cellulosic materials into fermentable sugar products using a modified strong acid hydrolysis process. Mr. Cuzens has a B.S.
Chemical Engineering degree from the University of California at Berkeley.
39
Chris Nichols – Director (Chairman,
Compensation Committee)
Mr. Nichols has been our Director since
our inception in March 2006. Mr. Nichols is currently the Chief Sales Officer for Field Nation, LLC. Previously, Mr Nichols was
the Chairman of the Board and Chief Executive Officer of Advanced Growing Systems, Inc. From 2003 to 2006, Mr. Nichols was the
Senior Vice President of Westcap Securities' Private Client Group. Prior to this, Mr. Nichols was a Registered Representative
at Fisher Investments from December 2002 to October 2003. He was a Registered Representative with Interfirst Capital Corporation
from 1997 to 2002. Mr. Nichols is a graduate of California State University in Fullerton with a B.A. degree in Marketing. The Company
believes that Mr. Nichols' experience in public company financing will assist us with the formation of new capital into the
Company.
Joseph Sparano – Director
Mr. Sparano currently serves as an executive
advisor to the Western States Petroleum Association's ("WSPA") board of directors. WSPA is an non-profit trade
association that represents companies that account for the bulk of petroleum exploration, production, refining, transportation
and marketing in the six western states of Arizona, California, Hawaii, Nevada, Oregon and Washington. In his role as executive
advisor, Mr. Sparano advises the WSPA's President and Chairman on matters related to the trade organization's operations
and advocacy in six Western states (CA, AZ, NV, WA, OR, HI). Mr. Sparano has served in such role since January 2010, at which time
he resigned as the President of the WSPA, a role in which he served since March 2003. Prior to joining the WSPA, from March 2000
to March 2003, Mr. Sparano served as the President of Tesoro Petroleum Corporation's ("Tesoro") West Coast Regional
Business Unit and as Vice President of the company's Heavy Fuels Marketing segment. Tesoro is an independent marketer and
refiner of petroleum products. Prior to joining Teroso, from September 1990 to August 1995, Mr. Sparano served as the Chairman
and Chief Executive Officer of Pacific Refining Company, a California based petroleum refining operation. Mr. Sparano graduated
cum laude from the Stevens Institute of Technology, receiving a B.S. in chemical engineering. The Company believes that Mr. Sparano's
experience in both mergers and acquisitions and in representing the oil and gas industry will assist us with the formation of new
strategic partnerships.
Family Relationships
There are no family relationships among
our directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.
Executive Legal Proceedings
Except as set forth below, no director
or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy
petition filed against it during the past five years. No director or executive officer has been convicted of a criminal offense
or is the subject of a pending criminal proceeding during the past five years. No director or executive officer has been the subject
of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities during the past five years. No director or officer has been
found by a court to have violated a federal or state securities or commodities law during the past five years.
Mr. Nichols was a director of Advanced
Nurseries, Inc. ("Advanced Nurseries"), until September 2009. In March 2009, Advanced Nurseries filed for Chapter 11
bankruptcy. In September 2009, the bankruptcy was voluntarily converted into a Chapter 7 bankruptcy.
Mr. Nichols was a director of Organic Growing
Systems, Inc. ("Organic"), until June 2010. In February 2010, Organic filed for Chapter 11 bankruptcy. In June 2010,
the bankruptcy was voluntarily converted into a Chapter 7 bankruptcy.
None of our directors or executive officers
or their respective immediate family members or affiliates are indebted to us.
40
Committees of the Board of Directors
Each of our Audit Committee, Compensation
Committee and Nomination Committee are composed of a majority of independent board members and are also chaired by an independent
board member.
Audit Committee
Christopher Nichols
Compensation Committee
Christopher Nichols, Chairman
Nomination Committee
There are currently no members in the Nomination
Committee
Compliance with Section 16(a) of the
Exchange Act
Section 16(a) of the Exchange Act requires
the Company's directors, executive officers and persons who beneficially own 10% or more of a class of securities registered
under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC.
Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish
the Company with copies of all reports filed by them in compliance with Section 16(a). To the best of the Company's knowledge,
any reports required to be filed were timely filed as of May 2, 2012.
Code of Ethics
The Company has adopted a Code of Ethics
that applies to the Registrant's directors, officers and key employees.
Board Nomination Procedure
There has been no material change to the
procedures by which security holders may recommend nominees to the Company's board of directors since the Company provided
disclosure on such process on its proxy statement on Schedule 14A, as amended, filed on May 19, 2010, with the SEC.
EXECUTIVE COMPENSATION
The following table sets forth information
with respect to compensation paid by us to our executive officers during the three most recent fiscal years. This information includes
the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.
41
Summary
Compensation Table
Name
    and
Principal Position
Year
Salary
($)(5)
Bonus
($)
Stock
Awards
($) (2)
Option
Awards
($) (2)
Non-Equity
Incentive Plan
Compensation
($)
Non-Qualified
Deferred
Compensation
Earnings ($)
All
    Other
Compensation
($) (3)
Total
($)
Arnold Klann
2011
226,000
0
0
226,000
Chief Executive Officer,
2010
226,000
1,440 (1)
45,525
272,965
President
Necitas Sumait
2011
180,000
0
0
180,000
Secretary,
2010
180,000
1,400 (1)
20,925
202,325
Vice President
John Cuzens
2011
180,000
0
180,000
Treasurer,
2010
180,000
8,654
188,654
Vice President
Christopher Scott
2011
90,000
0
90,000
Former Chief
2010
120,000
120,000
Financial Officer (4)
(1)
Reflects the value of shares of restricted common stock issued as compensation
for serving on the Company's board of directors. See notes to the consolidated financial statements for valuation.
(2)
Valued based on the Black-Scholes valuation model at the date of grant, see
note to the consolidated financial statements.
(3)
Reflects the cash payments made to the executives for paid time off.
(4)
Mr. Scott resigned from his position as Chief Financial Officer of the Company
on September 23, 2011.
(5)
In 2011, due to a lack of capital, the Company accrued, but had not paid
back salary in the amounts of $75,333 to Mr. Klann, $60,000 to Ms. Sumait, $60,000 to Mr. Cuzens, and $10,000 to Mr. Scott.
2011
Outstanding Equity Awards at Fiscal Year
OPTION
    AWARDS
STOCK
    AWARDS
Name
Number
    of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number
    of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
    (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
    Not
Vested (#)
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)
Arnold Klann
28,409
-
3.52
12/20/12
125,000
(1)
125,000
(1)
3.20
12/20/12
Necitas Sumait
118,750
(1)
87,500
(1)
3.20
12/20/12
John Cuzens
118,750
(1)
87,500
(1)
3.20
12/20/12
Christopher Scott
118,750
(1)
87,500
(1)
3.20
12/20/12
Chris Nichols
Roger Peterson (2)
(1)
50% vested immediately upon grant in 2007, 25% vests on closing remainder of Lancaster Project
Funding, 25% vests at the start of construction of Lancaster Project.
(2)
Mr. Peterson resigned from his position as a member of the Company's board of directors on
January 25, 2012.
42
2011
Director Compensation Table
Name
Fees
        Earned
or
        Paid in
Cash
        ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive
        Plan
Compensation
($)
Change
        in
Pension
        Value
and
        Non-
Qualified
Deferred
Compensation
Earnings
        ($)
All
        Other
Compensation
($)
Total
($)
Arnold Klann
Necitas Sumait
Chris Nichols (1)
5,000
5,000
Roger Peterson
Joseph Sparano (1)
5,000
5,000
(1) These fees were accrued, yet unpaid, as of December 31,
2011.
Employment Contracts
On June 27, 2006, the Company entered into
employment agreements with three of its executive officers. The employment agreements are for a period of three years, which expired
in 2009, with prescribed percentage increases beginning in 2007 and can be cancelled upon a written notice by either employee or
employer (if certain employee acts of misconduct are committed). The total aggregate annual amount due under the employment agreements
is approximately $520,000. These contracts have not been renewed. Each of the executive officers are currently working for the
Company on a month to month basis.
In addition, on June 27, 2006, the Company
entered into a Directors agreement with four individuals to join the Company's board of directors. Under the terms of the
agreement the non-employee Director (Chris Nichols) will receive annual compensation in the amount of $5,000 and all Directors
receive a onetime grant of 5,000 shares of the Company's common stock. The common shares vested immediately. The value of
the common stock granted was determined to be approximately $67,000 based on the estimated fair market value of the Company's
common stock over a reasonable period of time.
On July 31, 2008, the Board of Directors
approved the re-election of Victor Doolan, Joseph Emas, Christopher Nichols, Arnold Klann and Necitas Sumait. The Company also
resolved to grant each Board Chair, and the Secretary each an additional 5,000 shares of stock. The value of the common stock granted
at the time of the grant was determined to be approximately $123,000 based on the estimated fair market value of the Company's
common stock.
On July 23, 2009, the Board of Directors
approved the re-election of Victor Doolan, Joseph Emas, Christopher Nichols, Arnold Klann and Necitas Sumait. The Company also
resolved to grant each Board Chair, and the Secretary each an additional 5,000 shares of stock. The value of the common stock granted
at the time of the grant was determined to be approximately $5,250 based on the estimated fair market value of the Company's
common stock.
On December 22, 2009, the Company Board
of Directors accepted the resignation of Joseph I. Emas, which had been submitted on December 21, 2009. Mr. Emas served on the
Audit Committee, Compensation Committee and as Chairman of the Nominating Committee. Mr. Emas resignation was not a result of any
disagreements relating to the Company's operations, policies or practices.
On July 15, 2010, the Company entered into
a Directors agreement with Roger Petersen to join the Company's board of directors. Under the terms of the agreement Mr.
Petersen will receive annual compensation in the amount of $5,000 and also Directors receive an annual grant of 6,000 shares of
the Company's common stock. The common shares vest immediately. The value of the common stock granted was determined to be
approximately $1,440 based on the estimated fair market value of the Company's common stock over a reasonable period of time.
On December 14, 2010, Victor Doolan resigned
from his position on the board of directors of the Company. His resignation was not the result of any disagreements with the Company
on any matters relating to the Company's operations, policies or practices.
On March 1, 2011, the Company entered into
a director agreement with Joseph Sparano to join the Company's board of directors. Under the terms of the agreement, Mr.
Sparano will receive annual compensation in the amount of $5,000 and also directors receive an annual grant of 6,000 shares of
the Company's common stock. The common shares vest immediately. The value of the common stock will be determined when issued.
On September 23, 2011, Christopher Scott
resigned from his position as the Chief Financial Officer of the Company. His resignation was not the result of any disagreements
with the Company on any matters relating to the Company's operations, policies or practices.
43
On January 25, 2012, Roger Peterson resigned
from his position on the board of directors of the Company. His resignation was not the result of any disagreements with the Company
on any matters relating to the Company's operations, policies or practices.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of May 2, 2012, our authorized capitalization
was 101,000,000 shares of capital stock, consisting of 100,000,000 shares of common stock, $0.001 par value per share and 1,000,000
shares of preferred stock, no par value per share. As of May 2, 2012, there were 32,776,919 shares of our common stock outstanding,
all of which were fully paid, non-assessable and entitled to vote. Each share of our common stock entitles its holder to one vote
on each matter submitted to the stockholders.
The following table sets forth, as of May
2, 2012, the number of shares of our common stock owned by (i) each person who is known by us to own of record or beneficially
five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive officers and (iv)
all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting
and investment power with respect to the shares of our common stock beneficially owned.
Executive Officers, Directors, and More than 5% Beneficial
Owners
The address of each owner who is an officer or director is c/o
the Company at 31 Musick, Irvine California 92618.
Name of Beneficial Owner (1)
Number of Shares
Percent of Class (2)
Arnold Klann
13,579,909
(3)
40.62
%
Chief Executive Officer, President, Chairman
Necitas Sumait
1,336,750
(4)
*
%
Senior Vice President, Director
John Cuzens
1,302,250
(5)
*
%
Chief Technology Officer, Senior Vice President
Chris Nicols
16,000
*
%
Director
Joseph Sparano
0
*
%
Director
All officers and directors as a group (5 persons)
48.22
%
James G. Speirs
5,703,489
(6)
15.40
%
All officers, directors and 5% holders as a group (6 persons)
57.84
%
* denotes less than 1%
(1)
Beneficial ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities.
(2)
Figures may not add up due to rounding of percentages.
(3)
Includes options and warrants to purchase 653,409 shares of common stock vested at May 2, 2012.
(4)
Includes options to purchase 118,750 shares of common stock vested at May 2, 2012.
(5)
Includes options to purchase 118,750 shares of common stock vested at May 2, 2012.
(6)
As per Form 13G filed on February 6, 2012, and includes options and warrants to purchase 4,260,741 shares of common stock vested at May 2, 2012.
44
Share Issuances/Consulting Agreements
On July 31, 2008, the Company renewed all
of its existing Directors appointments, issued 6,000 shares to each and paid $5,000 to the three outside members. Pursuant to the
Board of Director agreements, the Company's "in-house" board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $123,000 based on the fair
market value of the Company's common stock of $4.10 on the date of the grant. During the years ended December 31, 2008, the
Company expensed approximately $138,000, related to the agreements.
On July 23, 2009, the Company renewed all
of its existing Directors' appointment, issued 6,000 shares to each and paid $5,000 to the three outside member. Pursuant
to the Board of Director agreements, the Company's "in-house" board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $26,400 based on the fair
market value of the Company's common stock of $0.88 on the date of the grant. During the year 2009 the Company expensed approximately
$41,400 related to these agreements.
On July 15, 2010, the Company renewed all
of its existing Directors' appointment, issued 6,000 shares to each and paid $5,000 to the three outside member. Pursuant
to the Board of Director agreements, the Company's "in-house" board members (CEO and Vice-President) waived their annual
cash compensation of $5,000. The value of the common stock granted was determined to be approximately $7,200 based on the fair
market value of the Company's common stock of $0.24 on the date of the grant. During the year ended December 31, 2010, the
Company expensed approximately $17,000 related to these agreements.
Stock Option Issuances Under Amended 2006 Plan
No stock options have been granted by the
Company's Board of Directors in 2009, 2010 or 2011.
Description of Securities
The Company is authorized to issue 100,000,000
shares of $0.001 par value common stock, and 1,000,000 shares of no par value preferred stock. As of May 2, 2012, the Company had
32,776,919 shares of common stock outstanding, and no shares of preferred stock outstanding.
Common Stock
As of May 2, 2012, we had 32,776,919 shares
of common stock outstanding. The shares of our common stock presently outstanding, and any shares of our common stock issues upon
exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one
vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken
by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to
share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative
voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining
shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared
by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.
Voting Rights
Each holder of common stock is entitled
to one vote for each share of common stock held on all matters submitted to a vote of stockholders.
Dividends
Subject to preferences that may be applicable
to any then-outstanding shares of preferred stock, if any, and any other restrictions, holders of common stock are entitled to
receive ratably those dividends, if any, as may be declared from time to time by the Company's board of directors out of
legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does
not presently contemplate that there will be any future payment of any dividends on common stock.
45
Preferred Stock
As of May 2, 2012, we had no shares of
preferred stock outstanding. We may issue preferred stock in one or more class or series pursuant to resolution of the Board of
Directors. The Board of Directors may determine and alter the rights, preferences, privileges, and restrictions granted to or imposed
upon any wholly unissued series of preferred stock, and fix the number of shares and the designation of any series of preferred
stock. The Board of Directors may increase or decrease (but not below the number of shares of such series then outstanding) the
number of shares of any wholly unissued class or series subsequent to the issue of shares of that class or series. We have no present
plans to issue any shares of preferred stock.
Warrants
As of May 2, 2012, we had warrants to purchase
an aggregate of 7,115,265 shares of our common stock outstanding. The exercise prices for the warrants range from $0.50 per share
to $5.45 per share, with a weighted average exercise price of approximately per share of $2.65. Some of our warrants contain a
provision in which the exercise price will be adjusted for future issuances of common stock at prices lower than the current exercise
price.
Options
As of May 2, 2012, we had options to purchase
an aggregate of 1,229,659 shares of our common stock outstanding, with exercise prices for the options ranging from $3.20 per share
to $3.52 per share, with a weighted average exercise price per share of $3.21.
Anti-Takeover Provisions
Our Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws contain provisions that may make it more difficult for a third party to acquire or may discourage
acquisition bids for us. Our Board of Directors may, without action of our stockholders, issue authorized but unissued common stock
and preferred stock. The issuance of additional shares to certain persons allied with our management could have the effect of making
it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause
such removal. The existence of unissued preferred stock may enable the Board of Directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such stock with terms that could render more difficult
or discourage an attempt to obtain control of us, thereby protecting the continuity of our management. Our shares of preferred
stock could therefore be issued quickly with terms that could delay, defer, or prevent a change in control of us, or make removal
of management more difficult.
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities
The Company's Amended and Restated
Bylaws provide for indemnification of directors and officers against certain liabilities. Officers and directors of the Company
are indemnified generally for any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful.
The Company's Amended and Restated Articles of Incorporation
further provides the following indemnifications:
(a) a director of the Corporation shall
not be personally liable to the Corporation or to its shareholders for damages for breach of fiduciary duty as a director of the
Corporation or to its shareholders for damages otherwise existing for (i) any breach of the director's duty of loyalty to
the Corporation or to its shareholders; (ii) acts or omission not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) acts revolving around any unlawful distribution or contribution; or (iv) any transaction from which
the director directly or indirectly derived any improper personal benefit. If Nevada Law is hereafter amended to eliminate or limit
further liability of a director, then, in addition to the elimination and limitation of liability provided by the foregoing, the
liability of each director shall be eliminated or limited to the fullest extent permitted under the provisions of Nevada Law as
so amended. Any repeal or modification of the indemnification provided in these Articles shall not adversely affect any right or
protection of a director of the Corporation under these Articles, as in effect immediately prior to such repeal or modification,
with respect to any liability that would have accrued, but for this limitation of liability, prior to such repeal or modification.
46
(b) the Corporation shall indemnify, to
the fullest extent permitted by applicable law in effect from time to time, any person, and the estate and personal representative
of any such person, against all liability and expense (including, but not limited to attorney's fees) incurred by reason
of the fact that he is or was a director or officer of the Corporation, he is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary, or agent of, or in any similar managerial or fiduciary position
of, another domestic or foreign corporation or other individual or entity of an employee benefit plan. The Corporation shall also
indemnify any person who is serving or has served the Corporation as a director, officer, employee, fiduciary, or agent and that
person's estate and personal representative to the extent and in the manner provided in any bylaw, resolution of the shareholders
or directors, contract, or otherwise, so long as such provision is legally permissible.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by our directors, officers or controlling persons
in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection
with any securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether such indemnification by us is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issues.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS,
AND CERTAIN CONTROL PERSONS
During the year ended December 31, 2011, there were no transactions
with related persons.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that
it will indemnify its officers and directors to the full extent permitted by Nevada state law. Our By-laws provide that we will
indemnify and hold harmless our officers and directors for any liability including reasonable costs of defense arising out of any
act or omission taken on our behalf, to the full extent allowed by Nevada law, if the officer or director acted in good faith and
in a manner the officer or director reasonably believed to be in, or not opposed to, the best interests of the corporation.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares of our common
stock offered by the Selling Stock Holders has been passed upon by the law firm of Lucosky Brookman LLP.
EXPERTS
The consolidated financial statements of
BlueFire Renewables, Inc. and subsidiaries as of December 31, 2011 and 2010, and for the years then ended and for the period from
March 28, 2006 (Inception) through December 31, 2011, appearing in the prospectus and registration statement have been audited
by dbbmckennon, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report on the authority of such firm as experts in accounting and auditing..
47
ADDITIONAL INFORMATION
We have filed a registration statement
on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus,
and reference is made to such registration statement. This prospectus constitutes the prospectus of BlueFire Renewables, Inc. filed
as part of the registration statement, and it does not contain all information in the registration statement, as certain portions
have been omitted in accordance with the rules and regulations of the SEC.
We are subject to the informational requirements
of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street,
N.E., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street,
N.E., Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this
information by visiting the SEC's Internet website at http://www.sec.gov.
48
5,500,000 Shares of
Common Stock
PROSPECTUS
Dealer Prospectus Delivery Obligation
Until ________, 2012, all dealers that
effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
 This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
You should rely only on the information
contained in this prospectus.  We have not authorized anyone to provide you with information different from that which is
set forth in this prospectus.  We are offering to sell shares of our common stock and seeking offers to buy shares of our
common stock only in jurisdictions where offers and sales are permitted.  The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities.
 Our business, financial condition, results of operation and prospects may have changed after the date of this prospectus.
, 2012
49
FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Financial Statements:
Consolidated Balance Sheets
F-3
Consolidated Statements of Operations
F-4
Consolidated Statements of Stockholders' Deficit
F-5
Consolidated Statements of Cash Flows
F-11
Notes to the Consolidated Financial Statements
F-13
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of BlueFire Renewables, Inc. and subsidiaries
We have audited the accompanying
consolidated balance sheets of BlueFire Renewables, Inc. and subsidiaries, a development-stage company (collectively the
"Company") as of December 31, 2011 and 2010, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for the years then ended and the period from March 28, 2006
("Inception") through December 31, 2011. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of BlueFire Renewables, Inc. and
subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended
and the period from Inception through December 31, 2011, in conformity with accounting principles generally accepted in the United
States of America.
The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 of the financial statements,
the Company has limited working capital and significant operating costs expected to be incurred in the next 12 months. These factors
raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans with
respect to these matters are also discussed in Note 2.  The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ dbb
mckennon
Newport Beach, California
April 16, 2012
F-
2
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31,
2011
December 31,
2010
ASSETS
Current assets:
Cash and cash equivalents
$
15,028
$
592,359
Department of Energy unbilled grant receivables
207,570
51,769
Prepaid expenses
15,911
39,258
Total current assets
238,509
683,386
Debt issuance costs
-
195,698
Property and equipment, net of accumulated depreciation of $88,205 and $69,299, respectively
1,187,766
1,059,068
Total assets
$
1,426,275
$
1,938,152
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
718,018
$
387,913
Accrued liabilities
466,916
130,650
Line of credit, related party
19,230
-
Note payable to a related party, net of discount of $0 and $73,885, respectively
200,000
126,115
Department of Energy billings in excess of estimated earnings
354,000
-
Outstanding warrant liability
831
-
Total current liabilities
1,758,995
644,678
Outstanding warrant liability
34,095
764,615
Total liabilities
1,793,090
1,409,293
Redeemable noncontrolling interest
852,531
750,000
Stockholders' deficit:
Preferred stock, no par value, 1,000,000 shares authorized; none issued and outstanding
-
-
Common stock, $0.001 par value; 100,000,000 shares authorized; 32,099,840 and 28,555,400 shares issued and 32,067,668 and 28,523,228 outstanding, respectively
32,099
28,555
Additional paid-in capital
14,543,019
14,169,756
Treasury stock at cost, 32,172 shares
(101,581
)
(101,581
)
Deficit accumulated during the development stage
(15,692,883
)
(14,317,871
)
Total stockholders' deficit
(1,219,346
)
(221,141
)
Total liabilities and stockholders' deficit
$
1,426,275
$
1,938,152
See accompanying notes to consolidated financial
statements
F-
3
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year
ended
For the year
ended
From
March 28,
2006
(inception)
Through
December 31,
2011
December 31,
2010
December 31,
2011
Revenues:
Consulting fees
$
3,849
$
71,196
$
143,615
Department of Energy grant revenues
31,704
569,879
5,975,734
Department of Energy unbilled grant revenues
168,773
28,268
197,041
Total revenues
204,326
669,343
6,316,390
Operating expenses:
Project development, including stock based compensation of $0, $0, and $4,468,490, respectively
595,302
1,096,653
18,931,157
General and administrative, including stock based compensation of $161,851, $52,487,
and $6,311,670, respectively
1,752,774
1,996,645
16,784,049
Related party license fee
-
-
1,000,000
Total operating expenses
2,348,076
3,093,298
36,715,206
Operating loss
(2,143,750
)
(2,423,955
)
(30,398,816
)
Other income and (expense):
Other income
-
1,122
256,295
Financing related charge
-
-
(211,660
)
Amortization of debt discount
-
(9,851
)
(686,833
)
Interest expense
-
-
(56,097
)
Related party interest expense
(104,402
)
-
(169,368
)
Loss on extinguishment of debt
-
-
(2,818,370
)
Gain on settlement of accrued rent
7,920
-
7,920
Gain from change in fair value of warrant liability
855,251
1,509,778
2,932,490
Loss on the retirement of warrants
-
-
(146,718
)
Total other income and (expense)
758,769
1,501,049
(892,341
)
Loss before provision for income taxes
(1,384,981
)
(922,906
)
(31,291,157
)
Provision for income taxes
-
-
83,147
Net loss
$
(1,384,981
)
$
(922,906
)
$
(31,374,304
)
Net loss attributable to noncontrolling interest
(9,969
)
-
(9,969
)
Net loss attributable to controlling interest
$
(1,375,012
)
$
-
$
(31,364,335
)
Basic and diluted loss per common share attributable to controlling interest
$
(0.05
)
$
(0.03
)
Weighted average common shares outstanding, basic and diluted
30,101,167
28,379,920
See accompanying notes to consolidated financial
statements
F-
4
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Common Stock
Additional
Paid-in
Deficit
Accumulated
During
Development
Stockholders'
Shares
Amount
Capital
Stage
Deficit
Balance at March 28, 2006 (inception)
-
$
-
$
-
$
-
$
-
Issuance of founder's share at $.001 per share
17,000,000
17,000
17,000
Common shares retained by Sucre Agricultural Corp., Shareholders
4,028,264
4,028
685,972
-
690,000
Costs associated with the acquisition of Sucre Agricultural Corp.
(3,550
)
(3,550
)
Common shares issued for services in November 2006 at $2.99 per share
37,500
38
111,962
-
112,000
Common shares issued for services in November 2006 at $3.35 per share
20,000
20
66,981
-
67,001
Common shares issued for services in December 2006 at $3.65 per share
20,000
20
72,980
-
73,000
Common shares issued for services in December 2006 at $3.65 per share
20,000
20
72,980
-
73,000
Estimated value of common shares at $3.99 per share and warrants at $2.90 issuable for services upon vesting in February 2007
-
-
160,000
-
160,000
Share-based compensation related to options
-
-
114,811
-
114,811
Share-based compensation related to warrants
-
-
100,254
-
100,254
Net Loss
-
-
-
(1,555,497
)
(1,555,497
)
Balances at December 31, 2006
21,125,764
$
21,126
$
1,382,390
$
(1,555,497
)
$
(151,981
)
See accompanying notes to consolidated financial
statements
F-
5
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Common Stock
Additional
Paid-in
Deficit
Accumulated
During
Development
Stockholders'
Shares
Amount
Capital
Stage
Deficit
Balances at December 31, 2006
21,125,764
$
21,126
$
1,382,390
$
(1,555,497
)
$
(151,981
)
Common shares issued for cash in January 2007, at $2.00 per share to unrelated individuals, including costs associated with private placement of 6,250 shares and $12,500 cash paid
284,750
285
755,875
-
756,160
Amortization of share based compensation related to employment agreement in January 2007 $3.99 per share
10,000
10
39,890
-
39,900
Common shares issued for services in February 2007 at $5.92 per share
37,500
38
138,837
-
138,875
Adjustment to record remaining value of warrants at $4.70 per share issued for services in February 2007
-
-
158,118
-
158,118
Common shares issued for services in March 2007 at $7.18 per share
37,500
37
269,213
-
269,250
Fair value of warrants at $6.11 for services vested in March 2007
-
-
305,307
-
305,307
Fair value of warrants at $5.40 for services vested in June 2007
-
-
269,839
-
269,839
Common shares issued for services in June 2007 at $6.25 per share
37,500
37
234,338
-
234,375
Share based compensation related to employment agreement in February 2007 $5.50 per share
50,000
50
274,951
-
275,001
Common Shares issued for services in August 2007 at $5.07 per share
13,000
13
65,901
-
65,914
Share based compensation related to options
-
-
4,692,863
-
4,692,863
Value of warrants issued in August, 2007 for debt replacement services valued at $4.18 per share
-
-
107,459
-
107,459
Relative fair value of warrants associated with July 2007 convertible note agreement
-
-
332,255
-
332,255
Exercise of stock options in July 2007 at $2.00 per share
20,000
20
39,980
-
40,000
Relative fair value of warrants and beneficial conversion feature in connection with the $2,000,000 convertible note payable in August 2007
-
-
2,000,000
-
2,000,000
Stock issued in lieu of interest payments on the senior secured convertible note at $4.48 and $2.96 per share in October and December 2007
15,143
15
55,569
-
55,584
Conversion of $2,000,000 note payable in August 2007 at $2.90 per share
689,655
689
1,999,311
-
2,000,000
Common shares issued for cash at $2.70 per share, December 2007, net of legal costs of $90,000 and placement agent cost of $1,050,000
5,740,741
5,741
14,354,259
-
14,360,000
Loss on Extinguishment of debt in December 2007
-
-
955,637
-
955,637
Net loss
-
-
-
(14,276,418
)
(14,276,418
)
Balances at December 31, 2007
28,061,553
$
28,061
$
28,431,992
$
(15,831,915
)
$
12,628,138
See accompanying notes to consolidated financial
statements
F-
6
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Common Stock
Additional
Paid-in
Deficit
Accumulated
During
Development
Treasury
Stockholders'
Shares
Amount
Capital
Stage
Stock
Deficit
Balances at December 31, 2007
28,061,553
$
28,061
$
28,431,992
$
(15,831,915
)
$
-
$
12,628,138
Share based compensation relating to options
-
-
3,769,276
-
-
3,769,276
Common shares issued for services in July 2008 at $4.10 per share
30,000
30
122,970
-
-
123,000
Common shares issued for services in July, September, and December 2008 at $3.75, $2.75, and $0.57 per share, respectively
41,500
41
63,814
-
-
63,855
Purchase of treasury shares between April to September 2008 at an average of $3.12
(32,172
)
-
-
-
(101,581
)
(101,581
)
Net loss
-
-
-
(14,370,594
)
-
(14,370,594
)
Balances at December 31, 2008
28,100,881
$
28,132
$
32,388,052
$
(30,202,509
)
$
(101,581
)
$
2,112,094
See accompanying notes to consolidated financial
statements
F-
7
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Common Stock
Additional
Paid-in
Deficit
Accumulated
During
Development
Treasury
Stockholders'
Shares
Amount
Capital
Stage
Stock
Deficit
Balances at December 31, 2008
28,100,881
$
28,132
$
32,388,052
$
(30,202,509
)
$
(101,581
)
$
2,112,094
Cumulative effect of warrants reclassified
-
-
(18,586,588
)
18,586,588
-
-
Reclassification of long term warrant liability
-
-
-
(2,915,136
)
-
(2,915,136
)
Common shares issued for services in June 2009 at $1.50 per share
11,412
11
17,107
-
-
17,118
Common shares issued for services in July 2009 at $0.88 per share
30,000
30
26,370
-
-
26,400
Common shares issued for services in August 2009 at $0.80 per share
100,000
100
79,900
-
-
80,000
Option to purchase Common shares for services in August 2009 at an option price of $3.00 for 100,000 shares
-
-
8,273
-
-
8,273
Common shares issued for services in September and October 2009 at $0.89 and $0.95 per share, respectively
22,500
23
20,678
-
-
20,701
Common shares to be issued for services in August 2009 at $0.80 per share
-
-
80,000
-
-
80,000
Net income
-
-
-
1,136,092
-
1,136,092
Balances at December 31, 2009
28,264,793
$
28,296
$
14,033,792
$
(13,394,965
)
$
(101,581
)
$
565,542
See accompanying notes to consolidated financial
statements
F-
8
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Common Stock
Additional
Paid-in
Deficit
Accumulated
During
Development
Treasury
Stockholders'
Shares
Amount
Capital
Stage
Stock
Deficit
Balances at December 31, 2009
28,264,793
$
28,296
$
14,033,792
$
(13,394,965
)
$
(101,581
)
$
565,542
Common shares issued for services in March 2010 at $0.36 per share
37,500
38
13,462
-
-
13,500
Common shares issued for services in May 2010 at $0.30 per share
43,000
43
12,957
-
-
13,000
Common shares released in May 2010 issued at $0.80 per share, additional paid-in capital included in 2009 balance
100,000
100
(100
)
-
-
-
Common shares issued for services in May 2010 at $0.18 per share
37,500
38
6,712
-
-
6,750
Common shares issued for services in July 2010 at $0.24 per share
30,000
30
7,170
-
-
7,200
Common shares cancelled in October 2010 at $0.30 per share
(43,000
)
(43
)
(12,957
)
-
-
(13,000
)
Common shares issued for services in October 2010 at $0.46 per share
37,000
37
16,983
-
-
17,020
Common shares issued for services in November 2010 at $0.50 per share
6,435
6
3,211
-
-
3,217
Common shares issued for services in December 2010 at $.048 per share
10,000
10
4,790
-
-
4,800
Discount on related party note payable
-
-
83,736
-
-
83,736
Net loss
-
-
-
(922,906
)
-
(922,906
)
Balances at December 31, 2010
$
28,523,228
$
28,555
$
14,169,756
$
(14,317,871
)
$
(101,581
)
$
(221,141
)
See accompanying notes to consolidated financial
statements
F-
9
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE
COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Deficit
Accumulated
Additional
During
Common
    Stock
Paid-in
Development
Treasury
Stockholders'
Shares
Amount
Capital
Stage
Stock
Deficit
Balances at December 31, 2010
28,523,228
$
28,555
$
14,169,756
$
(14,317,871
)
$
(101,581
)
$
(221,141
)
Common shares issued for cash
    at $0.35 per share in January 2011, net of discount from warrant liability of $125,562
428,571
429
24,009
-
-
24,438
Committed shares issued to LPC
600,000
600
(600
)
-
-
-
Common shares issued for reduction
    of accounts payable in March 2011 ranging from $0.47 to $0.50 per share
60,000
60
29,040
-
-
29,100
Common shares issued for services
    in March 2011 at $0.42 per share
30,000
30
12,570
-
-
12,600
Common shares issued for services
    in April 2011 at $0.43 per share
26,042
26
11,224
11,250
Common shares issued for cash
    in May 2011, ranging from $0.22 to $0.29 per share
284,045
284
69,716
70,000
Common shares issued for services
    in July 2011, ranging from $0.17 to $0.20 per share
155,034
155
28,977
-
-
29,132
Common shares issued for services
    in August 2011, at $0.16 per share
75,000
75
11,925
-
-
12,000
Common shares issued for cash
    in August 2011, ranging from $0.16 to $0.18 per share
175,438
175
29,825
-
-
30,000
Common shares issued for services
    in September 2011, at $0.18 per share
10,000
10
1,790
-
-
1,800
Common shares issued for services
    in October 2011, at $0.15 per share
173,077
173
25,979
-
-
26,152
Common shares issued for services
    in November 2011, ranging from $0.21 to $0.23 per share
253,638
253
57,006
-
-
57,259
Common shares issued for cash
    in November 2011, ranging from $0.15 to $0.16 per share
659,894
660
99,340
-
-
100,000
Common shares issued for services
    in December 2011, at $0.14 per share
85,721
86
11,572
11,658
Common shares issued for settlement
    of accrued rent in December, 2011 at $0.14 per share
527,980
528
73,390
-
-
73,918
Accretion of redeemable noncontrolling
    interest
-
-
(112,500
)
(112,500
)
Net loss
    attributable to controlling interest
-
-
-
(1,375,012
)
-
(1,375,012
)
Balances at December 31,
    2011
32,067,668
$
32,099
$
14,543,019
$
(15,692,883
)
$
(101,581
)
$
(1,219,346
)
See accompanying notes to consolidated financial
statements
F-
10
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
year ended
For the
year ended
From
March 28,
2006
(Inception) to
December 31,
2011
December 31,
2010
December 31,
2011
Cash flows from operating activities:
Net loss
$
(1,384,981
)
$
(922,906
)
$
(31,374,304
)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain from change in fair value of warrant liability
(855,251
)
(1,509,778
)
(2,932,490
)
Founders shares
-
-
17,000
Costs associated with purchase of Sucre Agricultural Corp
-
-
(3,550
)
Interest expense on beneficial conversion feature of convertible notes
-
-
676,983
Loss on extinguishment of convertible debt
-
-
2,718,370
Loss on retirement of warrants
-
-
146,718
Common stock issued for interest on convertible notes
-
-
55,585
Discount on sale of stock associated with private placement
-
-
211,660
Accretion of discount on note payable to related party
73,885
9,851
83,736
Loss from change in accounting estimate on Department of Energy billings
354,000
-
354,000
Debt issuance costs for rejected loan guarantees
309,834
273,800
583,634
Gain on settlement of accrued rent
(7,920
)
-
(7,920
)
Share-based compensation
161,851
52,487
11,552,467
Depreciation
18,951
25,522
88,607
Changes in operating assets and liabilities:
Department of Energy unbilled grant receivable
(117,004
)
(28,267
)
(145,271
)
Department of Energy grant receivable
-
207,380
-
Prepaid expenses and other current assets
23,348
11,532
(15,912
)
Accounts payable
377,751
8,146
721,442
Accrued liabilities
336,266
(135,374
)
446,288
Net cash used in operating activities
(709,270
)
(2,007,607
)
(16,822,957
)
Cash flows from investing activities:
Acquisition of property and equipment
-
(5,508
)
(217,636
)
Construction in progress
(123,155
)
(889,739
)
(1,012,894
)
Net cash used in investing activities
(123,155
)
(895,247
)
(1,230,530
)
See accompanying notes to consolidated financial
statements
F-
11
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
For the
year ended
For the
year ended
From
March 28,
2006
(Inception) to
December 31,
2011
December 31,
2010
December 31,
2011
Cash flows from financing activities:
Cash paid for treasury stock
-
-
(101,581
)
Cash received in acquisition of Sucre Agricultural Corp.
-
-
690,000
Proceeds from sale of stock through private placement
-
-
544,500
Proceeds from exercise of stock options
-
-
40,000
Proceeds from issuance of common stock
350,000
-
14,710,000
Proceeds from convertible notes payable
-
-
2,500,000
Repayment of notes payable
-
-
(500,000
)
Proceeds from related party line of credit/notes payable
19,230
200,000
335,230
Repayment from related party line of credit/notes payable
-
-
(116,000
)
Debt issuance costs
(114,136
)
(299,498
)
(563,634
)
Retirement of warrants
-
-
(220,000
)
Proceeds from sale of LLC Unit
-
750,000
750,000
Net cash provided by financing activities
255,094
650,502
18,068,515
Net increase (decrease) in cash and cash equivalents
(577,331
)
(2,252,352
)
15,028
Cash and cash equivalents beginning of period
592,359
2,844,711
-
Cash and cash equivalents end of period
$
15,028
$
592,359
$
15,028
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
$
-
$
209
$
57,102
Income taxes
$
825
$
54,153
$
18,921
Supplemental schedule of non-cash investing and financing activities:
Conversion of senior secured convertible notes payable
$
-
$
-
$
2,000,000
Interest converted to common stock
$
-
$
-
$
55,569
Fair value of warrants issued to placement agents
$
-
$
-
$
725,591
Discount on related party note payable
$
-
$
83,736
$
83,736
Accounts payable, net of reimbursement, included in construction-in-progress
$
24,494
$
21,348
$
45,842
Accretion of redeemable non-controlling interest
$
112,500
$
-
$
112,500
See accompanying notes to consolidated financial
statements
F-
12
BLUEFIRE RENEWABLES, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
BlueFire Ethanol, Inc. ("BlueFire") was incorporated
in the state of Nevada on March 28, 2006 ("Inception"). BlueFire was established to deploy the commercially ready and
patented process for the conversion of cellulosic waste materials to ethanol ("Arkenol Technology") under a technology
license agreement with Arkenol, Inc. ("Arkenol"). BlueFire's use of the Arkenol Technology positions it as a
cellulose-to-ethanol company with demonstrated production of ethanol from urban trash (post-sorted "MSW"), rice and
wheat straws, wood waste and other agricultural residues. The Company's goal is to develop and operate high-value carbohydrate-based
transportation fuel production facilities in North America, and to provide professional services to such facilities worldwide.
These "biorefineries" will convert widely available, inexpensive, organic materials such as agricultural residues,
high-content biomass crops, wood residues, and cellulose from MSW into ethanol.
On July 15, 2010, the board of directors of BlueFire, by unanimous
written consent, approved the filing of a Certificate of Amendment to the Company's Articles of Incorporation with the Secretary
of State of Nevada, changing the Company's name from BlueFire Ethanol Fuels, Inc. to BlueFire Renewables, Inc. On July 20,
2010, the Certificate of Amendment was accepted by the Secretary of State of Nevada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Plans
The Company is a development-stage company which has incurred
losses since inception. Management has funded operations primarily through proceeds received in connection with the reverse merger,
loans from its majority shareholder, the private placement of the Company's common stock in December 2007 for net proceeds of approximately
$14,500,000, the issuance of convertible notes with warrants in July and in August 2007, and Department of Energy reimbursements
throughout 2009, 2010, and 2011. The Company may encounter difficulties in establishing operations due to the time frame of developing,
constructing and ultimately operating the planned bio-refinery projects.
As of December 31, 2011, the Company has negative working capital
of approximately $1,520,000. Management has estimated that operating expenses for the next 12 months will be approximately $1,700,000,
excluding engineering costs related to the development of bio-refinery projects. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Throughout the remainder of 2012, the Company intends to fund its operations
with reimbursements under the Department of Energy contract, draw downs on the equity commitment the Company received from Lincoln
Park Capital in January 2011, as well as seek additional funding in the form of equity or debt. On March 28, 2012, the Company
finalized a committed equity facility agreement and a $300,000 convertible promissory note with TCA Global Credit Master Fund,
LP (See Note 12). As of April 16, 2012, the Company expects the current resources available to them will only be sufficient for
a period of approximately two months unless significant additional financing is received. Management has determined that the general
expenditures must be reduced and additional capital will be required in the form of equity or debt securities. In addition, if
we cannot raise additional short term capital we may consume all of our cash reserved for operations. There are no assurances that
management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional
capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition
and operating results. The financial statements do not include any adjustments that might result from these uncertainties.
Additionally, the Company's Lancaster plant is currently
shovel ready and only requires minimal capital to maintain until funding is obtained for the construction. The preparation for
the construction of this plant was the primary capital use in 2009. In October 2010, BlueFire filed the necessary paperwork to
extend this project's permits for an additional year while we await potential financing. In 2012, as in 2011, the Company
sees this project on hold until we receive the funding to construct the facility.
F-
13
As of December 31, 2010, the Company completed the detailed
engineering on our proposed Fulton Project, procured all necessary permits for construction of the plant, and began site clearing
and preparation work, signaling the beginning of construction.
We estimate the total construction cost of the bio-refineries
to be in the range of approximately $300 million for the Fulton Project and approximately $100 million to $125 million for the
Lancaster Biorefinery. These cost approximations do not reflect any decrease in raw materials or any savings in construction cost
that might be realized by the weak world economic environment. The Company is currently in discussions with potential sources of
financing for these facilities but no definitive agreements are in place.
Principles of Consolidation
The consolidated financial statements include the accounts of
BlueFire Renewables, Inc., and its wholly-owned subsidiary, BlueFire Ethanol, Inc., BlueFire Ethanol Lancaster, LLC, BlueFire Fulton
Renewable Energy LLC (excluding 1% interest sold), and SucreSource LLC are wholly-owned subsidiaries of BlueFire Ethanol, Inc.
All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ
from those estimates.
Debt Issuance Costs
Debt issuance costs are capitalized and amortized over the term
of the debt using the effective interest method, or expensed upon conversion or extinguishment when applicable. Costs are capitalized
for amounts incurred in connection with proposed financings. In the event the financing related to the capitalized cost is not
successful, the costs are immediately expensed (see Note 5).
Cash and Cash Equivalents
For purpose of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are reported net of allowance for expected
losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and
the amount management expects to collect are charged to operations in the year in which those differences are determined, with
an offsetting entry to a valuation allowance. As of December 31, 2011 and 2010, there have been no such charges.
Intangible Assets
License fees acquired are either expensed or recognized as intangible
assets. The Company recognizes intangible assets when the following criteria are met: 1) the asset is identifiable, 2) the Company
has control over the asset, 3) the cost of the asset can be measured reliably, and 4) it is probable that economic benefits will
flow to the Company. During the year ended December 31, 2009, the Company paid a license fee (see Note 10) to Arkenol, Inc., a
related party. The license fee was expensed because the Company is still in the research and development stage and cannot readily
determine the probability of future economic benefits for said license.
F-
14
Property and Equipment
Property and equipment are stated at cost. The Company's
fixed assets are depreciated using the straight-line method over a period ranging from three to five years, except land which is
not depreciated. Maintenance and repairs are charged to operations as incurred. Significant renewals and betterments are capitalized.
At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations. During the year ended December 31, 2010, the Company began
to capitalize costs in connection with the construction of its Fulton plant, and continued to do so in 2011. A portion of these
costs were reimbursed under the Department of Energy grant discussed in Note 3. The
reimbursable portion is treated as a reduction of those costs.
Revenue Recognition
The Company is currently a development-stage company. The
Company will recognize revenues from 1) consulting services rendered to potential sub licensees for development and construction
of cellulose to ethanol projects, 2) sales of ethanol from its production facilities when (a) persuasive evidence that an agreement
exists; (b) the products have been delivered; (c) the prices are fixed and determinable and not subject to refund or adjustment;
and (d) collection of the amounts due is reasonably assured.
As discussed in Note 3, the Company
received a federal grant from the United States Department of Energy, ("DOE"). The grant generally provides for payment
in connection with related development and construction costs involving commercialization of our technologies. Grant award reimbursements
are recorded as either as contra assets or as revenues depending upon whether the reimbursement is for capitalized costs or expenses
paid by the Company. Contra capitalized cost and revenues from the grant are recognized in the period during which the conditions
under the grant have been met and the Company has made payment for the asset or expense.
The Company recognizes
DOE
unbilled
grant
receivables for those costs that have been incurred during a period
but not yet paid at period end, are otherwise reimbursable under the terms of the grant, and are expected to be paid in the normal
course of business. Realiza
tion of unbilled receivables is
dependent on the Company's
ability to meet their obligation
for
reimbursable costs.
Project Development
Project development costs are either expensed or capitalized.
The costs of materials and equipment that will be acquired or constructed for project development activities, and that have alternative
future uses, both in project development, marketing or sales, will be classified as property and equipment and depreciated over
their estimated useful lives. To date, project development costs include the research and development expenses related to the Company's
future cellulose-to-ethanol production facilities. During the years ended December 31, 2011 and 2010 and for the period from March
28, 2006 (Inception) to December 31, 2011, research and development costs included in Project Development were $595,302,
$1,096,653, and $14,462,667, respectively.
Convertible Debt
Convertible debt is accounted for under the guidelines established
by Accounting Standards Codification ("ASC") 470 "Debt with Conversion and Other Options" and ASC 740 "Beneficial
Conversion Features". The Company records a beneficial conversion feature ("BCF") related to the issuance of
convertible debt that have conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair
value of warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating
a portion of the proceeds to warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic
value of the conversion features, both of which are credited to paid-in-capital.
The Company calculates the fair value of warrants issued with
the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing employee options
for purposes of ASC 718 "Compensation – Stock Compensation", except that the contractual life of the warrant
is used. Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between
the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair
value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense.
For a conversion price change of a convertible debt issue, the additional intrinsic value of the debt conversion feature, calculated
as the number of additional shares issuable due to a conversion price change multiplied by the previous conversion price, is recorded
as additional debt discount and amortized over the remaining life of the debt.
F-
15
The Company accounts for modifications of its BCF's in
accordance with ASC 470 "Modifications and Exchanges". ASC 470 requires the modification of a convertible debt instrument
that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated
debt instrument when the modification does not result in a debt extinguishment.
Equity Instruments Issued with Registration Rights Agreement
The Company accounts for these penalties as contingent liabilities,
applying the accounting guidance of ASC 450 "Contingencies". This accounting is consistent with views established in
ASC 825 "Financial Instruments". Accordingly, the Company recognizes damages when it becomes probable that they will
be incurred and amounts are reasonably estimable.
In connection with the issuance of common stock for gross proceeds
of $15,500,000 in December 2007 and the $2,000,000 convertible note financing in August 2007, the Company was required to file
a registration statement on Form SB-2 or Form S-3 with the Securities and Exchange Commission in order to register the resale of
the common stock under the Securities Act. The Company filed that registration statement on December 18, 2007 and as required under
the registration rights agreement had the registration statement declared effective by the Securities and Exchange Commission ("SEC")
on March 27, 2009 and in so doing incurred no liquidated damages. As of December 31, 2011 and 2010, the Company does not believe
that any liquidated damages are probable and thus no amounts have been accrued in the accompanying financial statements.
Income Taxes
The Company accounts for income taxes in accordance with ASC
740 "Income Taxes" requires the Company to provide a net deferred tax asset/liability equal to the expected future
tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss
or tax credit carry forwards.
This Interpretation sets forth a recognition threshold and valuation
method to recognize and measure an income tax position taken, or expected to be taken, in a tax return. The evaluation is based
on a two-step approach. The first step requires an entity to evaluate whether the tax position would "more likely than not,"
based upon its technical merits, be sustained upon examination by the appropriate taxing authority. The second step requires the
tax position to be measured at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon
ultimate settlement. In addition, previously recognized benefits from tax positions that no longer meet the new criteria would
no longer be recognized. This Interpretation was effective for the Company on January 1, 2007 and did not have a material impact
on our financial position,results of operations or cash flows.
Fair Value of Financial Instruments
On January 1, 2009, the Company adopted ASC
820 "Fair Value Measurements and Disclosures". The Company did not record an adjustment to its accumulated
deficit as a result of the adoption of the guidance for fair value measurements, and the adoption did not have a
material effect on the Company's results of operations.
Fair value is defined as the exit price, or the amount that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of
the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use
of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market
data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions
about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs
that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices in active markets;
F-
16
Level 2. Inputs, other than the quoted prices in active markets,
that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no
market data, which require the reporting entity to develop its own assumptions.
The Company did not have any level 1finanical instruments at
December 31, 2011 and 2010.
As of December 31, 2011 and 2010, the warrant liability is considered
a level 2 item, see Note 6.
As of December 31, 2011 and 2010, the Company's redeemable
noncontrolling interest is considered a level 3 item and changed during 2010 and 2011 due to the following:
Balance as of January 1, 2010
$
-
Redeemable noncontrolling interest
750,000
Balance as of December 31, 2010
750,000
Accretion of noncontrolling interest
112,500
Net loss attributable to noncontrolling interest
(9,969
)
Balance at December 31, 2011
$
852,531
See Note 8 for details of valuation and changes during the years
2010 and 2011.
Risks and Uncertainties
The Company's operations are subject to new innovations in product
design and function. Significant technical changes can have an adverse effect on product lives. Design and development of new products
are important elements to achieve and maintain profitability in the Company's industry segment. The Company may be subject to federal,
state and local environmental laws and regulations. The Company does not anticipate expenditures to comply with such laws and does
not believe that regulations will have a material impact on the Company's financial position, results of operations, or liquidity.
The Company believes that its operations comply, in all material respects, with applicable federal, state, and local environmental
laws and regulations.
Concentrations of Credit Risk
The Company maintains its cash accounts in a commercial bank
and in an institutional money-market fund account. The total cash balances held in a commercial bank are secured by the Federal
Deposit Insurance Corporation ("FDIC") up to $250,000, although on January 1, 2014 this amount is scheduled to return
to $100,000 per depositor, per insured bank. At times, the Company has cash deposits in excess of federally insured limits. In
addition, the Institutional Funds Account is insured through the Securities Investor Protection Corporation ("SIPC")
up to $500,000 per customer, including up to $100,000 for cash. At times, the Company has cash deposits in excess of federally
and institutional insured limits.
As of December 31, 2011 and 2010, the Department of Energy made
up 100% of billed and unbilled Grant Revenues and Department of Energy grant receivables. Management believes the loss of these
organizations would have a material impact on the Company's financial position, results of operations, and cash flows.
As of December 31, 2011 and 2010 three and one venders
made up 63% and 39% of accounts payable, respectively.
Loss per Common Share
The Company presents basic loss per
share ("EPS") and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is
computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares issuable through stock options, warrants, and other
convertible securities. For the year ended December 31, 2011, the Company had 1,229,659 options and 7,115,275 warrants
outstanding, for which all of the exercise prices were in excess of the average closing price of the Company's common
stock during the corresponding year and thus no shares are considered as dilutive under the treasury-stock method of
accounting and their effects would have been antidilutive due to the loss. For the year ended December 31, 2010, the Company had 3,287,159 options and 6,886,694 warrants, to purchase shares of common stock that were excluded from the
calculation of diluted loss per share as their effects would have been anti-dilutive due to the loss, and because all of the
exercise prices were in excess of the average closing price of the Company's common stock during the corresponding
year.
Share-Based Payments
The Company accounts for stock options issued to employees and
consultants under ASC 718 "Share-Based Payment". Under ASC 718, share-based compensation cost to employees is measured
at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite vesting
period.
F-
17
The Company measures compensation expense for its non-employee
stock-based compensation under ASC 505 "Equity". The fair value of the option issued or committed to be issued is used
to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at
the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or
the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation
expense and credited to additional paid-in capital.
Redeemable - Noncontrolling Interest
Redeemable interest held by third parties in subsidiaries owned
or controlled by the Company. As these redeemable noncontrolling interests provide for redemption features not solely within the
control of the issuer, we classify such interests outside of permanent equity in accordance with ASC 480-10, "Distinguishing
Liabilities from Equity". All redeemable noncontrolling interest reported in the consolidated statements of operations reflects
the respective interests in the income or loss after income taxes of the subsidiaries attributable to the other parties, the effect
of which is removed from the net loss available to the Company. The Company accretes the redemption value of the redeemable
noncontrolling interest over the redemption period using the straight-line method.
Impairment of Long-Lived Assets
The Company regularly evaluates whether events and circumstances
have occurred that indicate the carrying amount of property and equipment may not be recoverable. When factors indicate that these
long-lived assets should be evaluated for possible impairment, the Company assesses the potential impairment by determining whether
the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of
the asset and its eventual disposition. If the carrying amount of the asset is determined not to be recoverable, a write-down to
fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals,
as applicable. The Company regularly evaluates whether events and circumstances have occurred that indicate the useful lives of
property and equipment may warrant revision. In our opinion, the carrying values of our long-lived assets, including property and
equipment, were not impaired at December 31, 2011.
New Accounting Pronouncements
In May 2011, the
Financial Accounting Standards Board ("FASB") issued amended standards to achieve common fair value measurements and
disclosures between GAAP and International Financial Reporting Standards. The standards include amendments that clarify the intent
behind the application of existing fair value measurements and disclosures and other amendments which change principles or requirements
for fair value measurements or disclosures. The amended standards are to be applied prospectively for interim and annual periods
beginning after December 15, 2011. Management does not believe the adoption of these changes will not have an impact on the consolidated
financial statements.
In June 2011,
the FASB issued amended standards that eliminated the option to report other comprehensive income in the statement of stockholders'
equity and require companies to present the components of net income and other comprehensive income as either one continuous statement
of comprehensive income or two separate but consecutive statements. The amended standards do not affect the reported amounts of
comprehensive income. In December 2011, the FASB deferred the requirement to present components of reclassifications of other comprehensive
income on the face of the income statement that had previously been included in the June 2011 amended standard. These amended standards
are to be applied retrospectively for interim and annual periods beginning after December 15, 2011. Management does not believe
the adoption of these changes will not have an impact on the consolidated financial statements
In
September 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-08, Intangibles —
"Goodwill and Other" (Topic 350). This Accounting Standards Update amends FASB ASC Topic 350. This amendment specifies
the change in method for determining the potential impairment of goodwill. It includes examples of circumstances
and events that the entity should consider in evaluating whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011.  Management does not believe
the adoption of these changes will not have an impact on the consolidated financial statements.
F-
18
In December 2011,
the FASB issued changes to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both
gross information and net information about both instruments and transactions eligible for offset in the statement of financial
position and instruments and transactions subject to an agreement similar to a master netting arrangement. The enhanced disclosures
will enable users of an entity's financial statements to understand and evaluate the effect or potential effect of master
netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated
with certain financial instruments and derivative instruments. These changes become effective for the Company on January 1, 2013.
Management does not believe the adoption of these changes will not have an impact on the consolidated financial statements.
Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
NOTE 3 – DEVELOPMENT CONTRACT
Department of Energy Awards 1 and 2
In February 2007, the Company was awarded a grant for up to
$40 million from the U.S. Department of Energy's ("DOE") cellulosic ethanol grant program to develop a solid
waste biorefinery project at a landfill in Southern California. During October 2007, the Company finalized Award 1 for a total
approved budget of just under $10,000,000 with the DOE. This award is a 60%/40% cost share, whereby 40% of approved costs may be
reimbursed by the DOE pursuant to the total $40 million award announced in February 2007. In October 2009, the Company received
from the DOE a one-time reimbursement of approximately $3,841,000. This was primarily related to the Company amending its award
to include costs previously incurred in connection with the development of the Lancaster site which have a direct attributable
benefit to the Fulton Project.
In December 2009, as a result of the American Recovery and Reinvestment
Act, the DOE increased the Award 2 to a total of $81 million for Phase II of its Fulton Project. This is in addition to a renegotiated Phase I funding for development
of the biorefinery of approximately $7 million out of the previously announced $10 million total. This brings the DOE's total
award to the Fulton project to approximately $88 million. The Company is currently drawing
down on funds for Phase II of its Fulton Project.
As of April 16, 2012, the Company has received reimbursements
of approximately $9,243,984 under these awards.
In 2011 and 2010, our operations had been financed to a large
degree through funding provided by the DOE. We rely on access to this funding as a source of liquidity for capital requirements
not satisfied by the cash flow from our operations. If we are unable to access government funding our ability to finance our projects
and/or operations and implement our strategy and business plan will be severely hampered. Awards 1 and 2 consist of a total reimbursable
amount of approximately $87,560,000, and through April 16, 2012, we have an unreimbursed amount of approximately $78,316,000 available
to us under the awards. We cannot guarantee that we will continue to receive grants, loan guarantees, or other funding for our
projects from the DOE.
In June 2011, it was determined that the Company had received
an overpayment of approximately $354,000 from the cumulative reimbursements of the DOE grants under Award 1 for the period from
inception of the award through December 31, 2010. The overpayment is a result of estimates made on the indirect rate during the
reimbursement process over the course of the award. The DOE and the Company reached a tentative agreement during that time, that
in combination, as a result of the unused grant award money left in Award 1 of approximately $366,000, the Company would not be
required to refund any overpayment to the DOE and the Company could proceed towards completion of Award 1. While completion of
the award under the above terms was tentatively agreed to, the method and process was uncertain. During the fourth quarter of 2011,
the close of the award was reassessed and discussed with the DOE. Management determined that it was not in the best interest of
the Company to close the award during fiscal 2011 due to amounts still available for reimbursement under the Award and possible
modifications that could be made to shift certain costs between Award 1 and Award 2. The Company also determined that there is
no right of offset between Award 1 and Award 2.
F-
19
Accordingly, although Management does not believe the DOE
intends to demand payment for the overbill, and the Contracting Officer has not indicated such will be done, the DOE does
have the legal right to do so. Due to that right and the Company's decision not to close the award as of December 31,
2011 as initially planned, the Company has determined that a liability should be included in the accompanying balance sheet
as of December 31, 2011 due to billing is excess of estimated earnings. Because this liability stems from normal recurring
estimates made in government contracting, the change is accounted for as a change in accounting estimate with the cumulative
effect shown in the current year. The $354,000 reduced Department of Energy grant revenue and increased net loss in the
accompanying statement of operations during the year ended December 31, 2011. The per share effect on net loss is approximately
$0.01 per share of common stock.
Management will continue to evaluate the Award status, and may
choose to close out the Award if it is advantageous to future operations and allowable under federal regulations. Management believes
a quick close out of Award 1 under Federal Acquisition Regulations could result in the elimination of this excess billing; however,
no assurances can be made.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and Equipment consist of the following:
December
31,
2011
December
31,
2010
Construction in progress
$
1,058,735
$
911,087
Land
109,108
109,108
Office equipment
63,367
63,367
Furniture and fixtures
44,806
44,805
1,276,016
1,128,367
Accumulated depreciation
(88,250
)
(69,299
)
$
1,187,766
$
1,059,068
Depreciation expense for the years ended December 31, 2011 and
2010 and for the period from inception to December 31, 2011 was $18,951, $25,522, and $88,607, respectively.
During the year ended December 31, 2011, the Company invested
approximately $123,000 in construction activities at our Fulton Project, compared with $890,000 in 2010 net of DOE reimbursements.
Purchase of Lancaster Land
On November 9, 2007, the Company purchased approximately 10
acres of land in Lancaster, California for approximately $109,000, including certain site surveying and other acquisition costs.
The Company originally intended to use the land for the construction of their first cellulosic ethanol refinery plant. The Company
is now considering using this land for a facility to produce products other than cellulosic ethanol, such as higher value chemicals
that would yield fuel additives that that could improve the project economics for a smaller facility.
NOTE 5 – NOTES PAYABLE
Convertible Notes Payable
- 2007
On July 13, 2007, the Company issued several convertible notes
aggregating a total of $500,000 with eight accredited investors including $25,000 from the Company's Chief Financial Officer.
Under the terms of the notes, the Company was to repay any principal balance and interest, at 10% per annum within 120 days of
the note. The holders also received warrants to purchase common stock at $5.00 per share. The warrants vested immediately and expire
in five years. The total warrants issued pursuant to this transaction were 200,000 on a pro-rata basis to investors. The convertible
promissory notes were only convertible into shares of the Company's common stock in the event of a default. The conversion
price was determined based on one third of the average of the last-trade prices of the Company's common stock for the ten
trading days preceding the default date.
F-
20
The fair value of the warrants was $990,367 as determined by
the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 113%, risk-free interest
rate of 4.94%, dividend yield of 0%, and a term of five years.
The proceeds were allocated between the convertible notes payable
and the warrants issued to the convertible note holders based on their relative fair values which resulted in $167,744 allocated
to the convertible notes and $332,256 allocated to the warrants. The amount allocated to the warrants resulted in a discount to
the convertible notes. The Company amortized the discount over the term of the convertible notes. During the year ended December
31, 2007, the Company amortized $332,256 of the discount to interest expense.
The Company calculated the value of the beneficial conversion
feature to be approximately $332,000 of which $167,744 was allocated to the convertible notes. However, since the notes were convertible
upon a contingent event, the value was recorded when such event was triggered during the year ended December 31, 2007.
On November 7, 2007, the Company re-paid the 10% convertible
promissory notes totaling approximately $516,000 including interest of approximately $16,000. This included approximately $800
of accrued interest to the Company's Chief Financial Officer.
Convertible Notes - 2012 (subsequent)
Subsequent to year end, the Company entered into a convertible
note payable. See note 12.
Senior Secured Convertible Notes Payable
On August 21, 2007, the Company issued senior secured convertible
notes aggregating a total of $2,000,000 with two institutional accredited investors. Under the terms of the notes, the Company
was to repay any principal balance and interest, at 8% per annum, due August 21, 2010. On a quarterly basis, the Company has the
option to pay interest due in cash or in stock. The senior secured convertible notes were secured by substantially all of the Company's
assets. The total warrants issued pursuant to this transaction were 1,000,000 on a pro-rata basis to investors. These include class
A warrants to purchase 500,000 common stock at $5.48 per share and class B warrants to purchase an additional 500,000 shares of
common stock at $6.32 per share. The warrants vested immediately and expire in three years. The senior secured convertible note
holders had the option to convert the note into shares of the Company's common stock at $4.21 per share at any time prior
to maturity. If, before maturity, the Company consummated a Financing of at least $10,000,000 then the principal and accrued unpaid
interest of the senior secured convertible notes would be automatically converted into shares of the Company's common stock
at $4.21 per share.
The fair value of the warrants was approximately $3,500,000
as determined by the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 118%, risk-free
interest rate of 4.05%, dividend yield of 0% and a term of three years. The proceeds were allocated between the senior secured
convertible notes and the warrants issued to the convertible note holders based on their relative fair values and resulted in $728,571
being allocated to the senior secured convertible promissory notes and $1,279,429 allocated to the warrants. The resulting discount
was to be amortized over the life of the notes.
The Company calculated the value of the beneficial conversion
feature to be approximately $1,679,000 of which approximately $728,000 was allocated to the beneficial conversion feature resulting
in 100% discount to the convertible promissory notes. During the year ended December 31, 2007, the Company amortized approximately
$312,000 of the discount related to the warrants and beneficial conversion feature to interest expense and $1,688,000 to loss on
extinguishment, see below for discussion.
In addition, the Company entered into a registration rights
agreement with the holders of the senior secured convertible notes agreement whereby the Company was required to file an initial
registration statement with the Securities and Exchange Commission in order to register the resale of the maximum amount of common
stock underlying the secured convertible notes within 120 days of the Exchange Agreement (December 19, 2007). The registration
statement was filed with the SEC on December 19, 2007. The registration statement was then declared effective on March 27, 2009.
The Company incurred no liquidated damages.
F-
21
Modification of Conversion Price and Warrant Exercise Price
on Senior Secured Convertible Note Payable
On December 3, 2007, the Company modified the conversion price
into common stock on its outstanding senior secured convertible notes from $4.21 to $2.90 per share. The Company also modified
the exercise price of the Class A and B warrants issued with convertible notes from $5.48 and $6.32, respectively, to $2.90 per
share.
In accordance with ASC 470, the Company recorded an extinguishment
loss of approximately $2,818,000 for the modification of the conversion price as the fair value of the conversion price immediately
before and after the modification was greater than 10% of the carrying amount of the original debt instrument immediately prior
to the modification. The loss on extinguishment was determined based on the difference between the fair value of the new instruments
issued and the previous carrying value of the convertible debt at the date of extinguishment. Upon modification, the carrying amount
of the senior secured convertible notes payable of $2,000,000 and accrued interest of approximately $33,000 was converted into
a total of 700,922 shares of common stock at $2.90 and $2.96 per share, respectively. Prior to the modification, during the quarter
ended September 30, 3007, the Company satisfied its interest obligation of approximately $20,000 by issuing 3,876 shares of the
Company's common stock at $4.48 per share in lieu of cash.
The extinguishment loss and non-cash interest expense for the
warrants was determined using the Black-Scholes option pricing model using the following assumptions: volatility of 122.9%, expected
life of 4.72 years, risk free interest rate of 3.28%, market price per share of $3.26, and no dividends.
Debt Issuance Costs
During 2007 debt issuance fees and expenses of approximately
$207,000 were incurred in connection with the senior secured convertible note. These fees consisted of a cash payment of $100,000
and the issuance of warrants to purchase 23,731 shares of common stock. The warrants have an exercise price of $5.45, vested immediately
and expire in five years. The warrants were valued at approximately $107,000 as determined by the Black-Scholes option pricing
model using the following weighted-average assumptions: volatility of 118%, risk-free interest rate of 4.05%, dividend yield of
0% and a term of five years. These costs were amortized over the term of the note using the effective interest method and expensed
upon conversion of senior secured convertible note. During the year ended December 31, 2007, the Company amortized approximately
$32,000 of the debt issuance costs to interest expense and approximately $175,000 to loss on extinguishment, see above for further
discussion.
During 2010 debt issuance costs of $123,800 were incurred, net
of DOE reimbursement in connection with the Company submitting an application for a $250 million dollar DOE loan guarantee for
the Company's planned cellulosic ethanol biorefinery in Fulton, Mississippi. This compares to 2009 debt issuance costs of $150,000
incurred in connection with an application for a $58 million dollar DOE loan guarantee for the Company's planned cellulosic ethanol
biorefinery in Lancaster, California. These applications were filed under the Department of Energy ("DOE") Program
DE-FOA-0000140 ("DOE LGPO"), which provides federal loan guarantees for projects that employ innovative energy efficiency,
renewable energy, and advanced transmission and distribution technologies.
In 2010, the Company was informed that the loan guarantee for
the planned biorefinery in Lancaster, California, was rejected by the DOE due to a lack of definitive contracts for feedstock and
off-take at the time of submittal of the loan guarantee for the Lancaster Biorefinery, as well as the fact that the Company was
also pursuing a much larger project in Fulton, Mississippi. As a result of this DOE loan guarantee rejection for the Lancaster,
California project, the Company wrote off $150,000 of capitalized debt issuance cost to expense in 2010.
In February 2011, the Company received notice from the DOE LGPO
staff that the Fulton Project's application will not move forward until such time as the project has raised the remaining
equity necessary for the completion of funding. As a result of this DOE loan guarantee rejection for the Fulton Project, the Company
wrote off $123,800 of capitalized debt issuance cost to expense in 2010 as there were indicating factors the loan would not be
approved prior to year end.
F-
22
In August 2010, BlueFire submitted an application for a $250
million loan guarantee for the Fulton Project with the U.S. Department of Agriculture under Section 9003 of the 2008 Farm Bill
("USDA LG"). During 2011 debt issuance costs for the USDA loan guarantee totaled approximately $114,000, compared to
$298,000 in fiscal 2010.
In October 2011, the Company was informed that the USDA would
not move forward with the USDA LG; however, appeal processes were provided to afford the Company a chance to change certain aspects
of the application. Such appeals have been informal to date. Because of the initial rejection, the Company expensed all related
debt costs totaling approximately $309,000 to general and administrative in the accompanying statement of operations during the
year ended December 31, 2011.
From the period of Inception through December 31, 2011, the
Company has expensed $583,634 of previously capitalized debt issue costs due to unsuccessful debt financings.
NOTE 6 - OUTSTANDING WARRANT LIABILITY
Effective January 1, 2009 we adopted the provisions of ASC 815
"Derivatives and Hedging" (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features
that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an
entity's own common stock. As a result of adopting ASC 815, 6,962,963 of our issued and outstanding common stock purchase
warrants previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment.
These warrants have an exercise price of $2.90; 5,962,563 warrants expire in December 2012 and 1,000,000 expired August 2010. As
such, effective January 1, 2009 we reclassified the fair value of these common stock purchase warrants, which have exercise price
reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of
issue in August 2007 and December 2007. On January 1, 2009, we reclassified from additional paid-in capital, as a cumulative effect
adjustment, $15.7 million to beginning retained earnings and $2.9 million to a long-term warrant liability to recognize the fair
value of such warrants on such date.
The Company assesses the fair value of the warrants quarterly
based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.
In connection with the 5,962,963 warrants to expire in December
2012, the Company recognized gains of approximately $764,000, $1,510,000, and $2,515,000 from the change in fair value of these
warrants during the years ended December 31, 2011 and 2010 and the period from Inception to December 31, 2011.
On October 19, 2009, the Company cancelled 673,200 warrants
for $220,000 in cash. These warrants were part of the 1,000,000 warrants issued in August 2007, and were set to expire August 2010.
Prior to October 19, 2009, the warrants were previously accounted for as a derivative liability and marked to their fair value
at each reporting period in 2009. The Company valued these warrants the day immediately preceding the cancellation date which indicated
a gain on the changed in fair value of $208,562 and a remaining fair value of $73,282. Upon cancellation the remaining value was
extinguished for payment of $220,000 in cash, resulting in a loss on extinguishment of $146,718. In connection with the remaining
326,800 warrants that expired in August 2010, the Company recognized a gain of $117,468 for the change in fair value of these
warrants during the year ended December 31, 2009.
These common stock purchase warrants were initially issued in
connection with two private offerings, our August 2007 issuance of 689,655 shares of common stock and our December 2007 issuance
of 5,740,741 shares of common stock. The common stock purchase warrants were not issued with the intent of effectively hedging
any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify
for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings
until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities
market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model using the following
assumptions:
F-
23
December
31,
December
31,
2011
2010
Annual dividend yield
-
-
Expected life (years) of December 2007 issuance
1.0
2.0
Risk-free interest rate
0.12
%
0.61
%
Expected volatility of December 2007 issuance
95
%
125
%
The Company issued 428,571 warrants to purchase common
stock in connection with the Stock Purchase Agreement entered into on January 19, 2011 with Lincoln Park Capital, LLC (see note
9). These warrants are accounted for as a liability under ASC 815. The Company assesses the fair value of the warrants quarterly
based on the Black-Scholes pricing model. See below for variables used in assessing the fair value.
December 31,
January 19,
2011
2011
Annual dividend yield
-
-
Expected life (years)
4.05
5.0
Risk-free interest rate
0.83
%
1.95
%
Expected volatility
109
%
105
%
In connection with these warrants, the Company recognized a
gain on the change in fair value of warrant liability of $91,467, $0, and $91,437 during the years ended December 31, 2011 and
2010, and for the period from Inception to December 31, 2011.
Expected volatility is based primarily on historical volatility.
Historical volatility was computed using weekly pricing observations for recent periods that correspond to the expected life of
the warrants. The Company believes this method produces an estimate that is representative of our expectations of future volatility
over the expected term of these warrants. The Company currently has no reason to believe future volatility over the expected remaining
life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term
of the warrants. The risk-free interest rate is based on U.S. Treasury securities rates.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
On June 27, 2006, the Company entered into employment
agreements with three key employees. The employment agreements were for a period of three years, which expired in 2010, with
prescribed percentage increases beginning in 2007 and could have been cancelled upon a written notice by either employee or
employer (if certain employee acts of misconduct are committed). The total aggregate annual amount due under the employment
agreements was approximately $586,000 per year. These contracts have not been renewed. Each of the executive officers are
currently working for the Company on a month to month basis under the same terms.
On March 31, 2008, the Board of Directors of the Company replaced
our Chief Financial Officer's previously existing at-will Employment Agreement with a new employment agreement, effective
February 1, 2008, and terminating on May 31, 2009, unless extended for additional periods by mutual agreement of both parties.
The new agreement contained the following material terms: (i) initial annual salary of $120,000, paid monthly; and (ii) standard
employee benefits; (iii) limited termination provisions; (iv) rights to Invention provisions; and (v) confidentiality and non-compete
provisions upon termination of employment. This employment agreement expired on May 31, 2009. Our now former Chief Financial Officer
served until September 2011, at which time he entered into a month-to-month part-time consulting contract with the Company, for
$7,500 per month, payable in cash or stock at the consultant's option, at predetermined conversion rates.
Board of Director Arrangements
On July 23, 2009, the Company renewed all of its existing Directors'
appointment, issued 6,000 shares to each and paid $5,000 to the three outside members. Pursuant to the Board of Director agreements,
the Company's "in-house" board members (CEO and Vice-President) waived their annual cash compensation of $5,000. The
value of the common stock granted was determined to be approximately $26,400 based on the fair market value of the Company's
common stock of $0.88 on the date of the grant. During the year 2009 the Company expensed approximately $41,400 related to these
agreements.
On July 15, 2010, the Company renewed all of its existing Directors'
appointment, issued 6,000 shares to each and paid $5,000 to two of the three outside members. Pursuant to the Board of Director
agreements, the Company's "in-house" board members (CEO and Vice-President) waived their annual cash compensation of
$5,000. The value of the common stock granted was determined to be approximately $7,200 based on the fair market value of the Company's
common stock of $0.24 on the date of the grant. During the year ended December 31, 2010, the Company expensed approximately $17,000
related to these agreements.
F-
24
During the year ended December 31, 2011, the Company accrued
$10,000 related to the agreements for the two remaining board members.
Investor Relations Agreements
On November 9, 2006, the Company entered into an agreement with
a consultant. Under the terms of the agreement, the Company is to receive investor relations and support services in exchange for
a monthly fee of $7,500, 150,000 shares of common stock, warrants to purchase 200,000 shares of common stock at $5.00 per share,
expiring in five years, and the reimbursement of certain travel expenses. The common stock and warrants vested in equal amounts
on November 9, 2006, February 1, 2007, April 1, 2007 and June 1, 2007.
At December 31, 2006, the consultant was vested in 37,500 shares
of common stock. The shares were valued at $112,000 based upon the closing market price of the Company's common stock on
the vesting date. The warrants were valued on the vesting date at $100,254 based on the Black-Scholes option pricing model using
the following assumptions: volatility of 88%, expected life of five years, risk free interest rate of 4.75% and no dividends. The
value of the common stock and warrants was recorded in general and administrative expense on the accompanying consolidated statement
of operations during the year ended December 31, 2006.
The Company revalued the shares on February 1, 2007, vesting
date, and recorded an additional adjustment of $138,875. On February 1, 2007 the warrants were revalued at $4.70 per share based
on the Black-Scholes option pricing method using the following assumptions: volatility of 102%, expected life of five years, risk
free interest rate of 4.96% and no dividends. The Company recorded an additional expense of $158,118 related to these vested warrants
during the year ended December 31, 2007.
On March 31, 2007, the fair value of the vested common stock
issuable under the contract based on the closing market price of the Company's common stock was $7.18 per share and thus
expensed $269,250. As of March 31, 2007, the Company estimated the fair value of the vested warrants issuable under the contract
to be $6.11 per share. The warrants were valued on March 31, 2007 based on the Black-Scholes option pricing model using the following
assumptions: volatility of 114%, expected life of five years, risk free interest rate of 4.58% and no dividends. The Company recorded
an additional estimated expense of approximately $305,000 related to the remaining unvested warrants during the year ended December
31, 2007.
The Company revalued the shares on June 1, 2007, vesting date,
and recorded an additional adjustment of $234,375. On June 1, 2007 the warrants were revalued at $5.40 per share based on the Black-Scholes
option pricing method using the following assumptions: volatility of 129%, expected life of four and a half years, risk free interest
rate of 4.97% and no dividends. The Company recorded an additional expense of $269,839 related to these vested warrants during
the year ended December 31, 2007.
On November 21, 2011, these warrants expired.
Fulton Project Lease
On July 20, 2010, the Company entered into a 30 year lease
agreement with Itawamba County, Mississippi for the purpose of the development, construction, and operation of the Fulton Project.
At the end of the primary 30 year lease term, the Company shall have the right for two additional 30 year terms. The current
lease rate is computed based on a per acre rate per month that is approximately $10,300 per month. The lease stipulates the lease
rate is to be reduced at the time of the construction start by a Property Cost Reduction Formula which can substantially reduce
the monthly lease costs. The lease rate shall be adjusted every five years to the Consumer Price Index. The below payout schedule
does not contemplate reductions available upon the commencement of construction and commercial operations.
F-
25
Future annual minimum lease payments under the above lease agreements,
at December 31, 2011 are as follows:
Years ending
December 31,
2012
$
123,504
2013
123,504
2014
123,504
2015
125,976
2016
125,976
Thereafter
3,025,000
Total
$
3,647,464
Rent expense under non-cancellable leases was approximately
$123,000, $62,000, and $185,000 during the years ended December 31, 2011, 2010 and the period from Inception to December 31, 2011,
respectively. As of December 31, 2011 and 2010, $82,336 and $0 of the monthly lease payments were included in accounts payable
on the accompanying balance sheets. As of December 31, 2011, the Company was in technical default of the lease due to non-payment.
However, as of April 16, 2012, we have not received a notice of default.
Legal Proceedings
From time to time we may become involved
in legal proceedings which could adversely affect us. We are currently not involved in litigation that we believe will have a materially
adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the
executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our company's or our company's subsidiaries' officers or directors in their capacities
as such, in which an adverse decision is expected to have a material adverse effect.
Consulting Agreements - Other
On July 21, 2011, the Company entered into
a consulting service agreement with the National Center for Sustainable Development ("NCSD"), a non-profit organization.
The NCSD assists companies in the sustainable development industry in order to promote a sustainable low carbon economy through
demonstration projects, by identifying qualified Chinese investors. The term of the agreement is for twelve months or upon termination
by either party. The NCSD is entitled to 5% on the first $250 million, and 3% in excess of $250 million for equity capital, and/or
2% of aggregate gross proceeds received from debt capital.
NOTE 8 - REDEEMABLE NONCONTROLLING INTEREST
On December 23, 2010, the Company
sold a one percent (1%) membership interest in its operating subsidiary, BlueFire Fulton Renewable Energy, LLC ("BlueFire
Fulton" or the "Fulton Project"), to an accredited investor for a purchase price of $750,000 ("Purchase
Price"). The Company maintains a 99% ownership interest in the Fulton Project. In addition, the investor received a right
to require the Company to redeem the 1% interest for $862,500, or any pro-rata amount thereon. The redemption is based upon future
contingent events based upon obtaining financing for the construction of the Fulton Project. The third party equity interests is reflected as redeemable noncontrolling interests in the Company's consolidated financial
statements outside of equity. The Company accreted the redeemable noncontrolling interest for the total redemption price of $862,500
through the forecasted financial close, estimated to be the end of the third quarter of 2011. On October 5, 2011, the Company received
a rejection letter for the USDA loan guarantee, which was the financing the Company was basing estimates on. During the years ended
December 31, 2011 and 2010 and the period from Inception to December 31, 2011, the
Company recognized the accretion of the
redeemable noncontrolling interest of $
112,500
, $0,
and
$112,500
,
respectively which was charged to additional paid-in capital.
Net loss attributable to the redeemable noncontrolling interest
during the year ended December 31, 2011 was $9,969 which netted against the value of the redeemable non-controlling interest in
temporary equity. The allocation of net loss was presented on the statement of operations.
NOTE 9 - STOCKHOLDERS' DEFICIT
Stock Purchase Agreement
On January 19, 2011, the Company signed a $10 million purchase
agreement (the "Purchase Agreement") with Lincoln Park Capital Fund, LLC ("LPC"), an Illinois limited liability
company.  The Company also entered into a registration rights agreement with LPC whereby we agreed to file a registration
statement related to the transaction with the U.S. Securities & Exchange Commission ("SEC") covering the shares
that may be issued to LPC under the Purchase Agreement within ten days of the agreement. Although under the Purchase Agreement
the registration statement was to be declared effective by March 31, 2011, LPC did not terminate the Purchase Agreement. The registration
statement was declared effective on May 10, 2011, without any penalty.
After the SEC has declared effective the registration
statement related to the transaction, the Company has the right, in their sole discretion, over a 30-month period to
sell the shares of common stock to LPC in amounts from $35,000 and up to $500,000 per sale, depending on the
Company's stock price as set forth in the Purchase Agreement, up to the aggregate commitment of $10 million.
There are no upper limits to the price LPC may pay to purchase
our common stock and the purchase price of the shares related to the $10 million funding will be based on the prevailing market
prices of the Company's shares immediately preceding the time of sales without any fixed discount, and the Company controls
the timing and amount of any future sales, if any, of shares to LPC.  LPC shall not have the right or the obligation
to purchase any shares of our common stock on any business day that the price of our common stock is below $0.15. The Purchase
Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions
by, among and for the benefit of the parties. LPC has covenanted not to cause or engage in any manner whatsoever, any direct or
indirect short selling or hedging of the Company's shares of common stock.  The Purchase Agreement may be terminated
by us at any time at our discretion without any cost to us.  Except for a limitation on variable priced financings, there
are no financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties
or liquidated damages in the agreement.
F-
26
Upon signing the Purchase Agreement, BlueFire received $150,000
from LPC as an initial purchase under the $10 million commitment in exchange for 428,571 shares of our common stock and warrants
to purchase 428,571 shares of our common stock at an exercise price of $0.55 per share.  The warrants contain a ratchet
provision in which the exercise price will be adjusted based on future issuances of common stock, excluding certain issuances;
if issuances are at prices lower than the current exercise price (see Note 6). The warrants have an expiration date of January
2016.
Concurrently, in consideration for entering into the $10
million agreement, we issued to LPC 600,000 shares of our common stock as a commitment fee and shall issue up to 600,000 more
shares pro rata as LPC purchases up to the remaining $9.85 million.
During the year ended December 31, 2011, the Company drew $200,000
under the Purchase Agreement and issued 1,119,377 shares of common stock, including 12,183 commitment shares that were eared on
a pro-rata basis as described above. The Company still has $9,650,000 available on the Purchase Agreement as of December 31, 2011;
however, no additional monies are expected to be drawn down until sometime during the second quarter of 2012. There have been $35,000
in draw downs subsequent to December 31, 2011 year end resulting in 235,465 additional shares being issued under the Purchase Agreement.
The Company accounted for the 428,571 common stock warrants
with ratchet provisions in accordance with ASC 815 whereby the warrants require liability classification. As the warrants are considered
a cost of permanent equity, the value of the warrants netted against the equity recognized in additional paid-in capital. See note
6 for valuation of warrants. The 600,000 shares of common stock issued in connect with the agreement were also considered a cost
of permanent equity. However, because the value of the shares both add to additional paid-in capital for the value of shares issued
and net against it as a cost of capital, they were recorded at par value with a corresponding reduction to additional-paid-in capital.
The remaining 600,000 shares that are to be issue pro-rata as
the Company draws on the Purchase Agreement are also a cost of capital and are recorded as earned by LPC. The value of the shares
both add to additional paid-in capital for the value of shares issued and net against it as a cost of capital; accordingly, they
are recorded at par value with a corresponding reduction to additional-paid-in capital when earned.
Amended and Restated 2006 Incentive and Nonstatutory Stock
Option Plan
On December 14, 2006, the Company established the 2006 incentive
and nonstatutory stock option plan (the "Plan"). The Plan is intended to further the growth and financial success of
the Company by providing additional incentives to selected employees, directors, and consultants. Stock options granted under the
Plan may be either "Incentive Stock Options" or "Nonstatutory Options" at the discretion of the Board of Directors.
The total number of shares of Stock which may be purchased through exercise of Options granted under this Plan shall not exceed
ten million (10,000,000) shares, they become exercisable over a period of no longer than five (5) years and no less than 20% of
the shares covered thereby shall become exercisable annually.
On October 16, 2007, the Board reviewed the Plan. As such, it
determined that the Plan was to be used as a comprehensive equity incentive program for which the Board serves as the Plan administrator;
and therefore added the ability to grant restricted stock awards under the Plan.
Under the amended and restated Plan, an eligible person in the
Company's service may acquire a proprietary interest in the Company in the form of shares or an option to purchase shares
of the Company's common stock. The amendment includes certain previously granted restricted stock awards as having been issued
under the amended and restated Plan. As of December 31, 2011, 3,307,159 options and 1,238,359 shares have been issued under the
plan. As of December 31, 2011, 5,454,482 shares are still issuable under the Plan.
Stock Options
On December 14, 2006, the Company granted options to purchase
1,990,000 shares of common stock to various employees and consultants having a $2.00 exercise price. The value of the options granted
was determined to be approximately $4,900,000 based on the Black-Scholes option pricing model using the following assumptions:
volatility of 99%, expected life of five (5) years, risk free interest rate of 4.73%, market price per share of $3.05, and no dividends.
The Company expensed the value of the options over the vesting period of two years for the employees. For non-employees the Company
revalued the fair market value of the options at each reporting period under the provisions of ASC 505. On December 14, 2011 all
1,970,000 of these options expired while 20,000 were exercised in a prior year.
F-
27
On December 20, 2007, the Company granted options to purchase
1,038,750 shares of the Company's common stock to various employees and consultants having an exercise price of $3.20 per
share. In addition, on the same date, the Company granted its President and Chief Executive Officer 250,000 and 28,409 options
to purchase shares of the Company's common stock having an exercise price of $3.20 and $3.52, respectively. The value of
the options granted was determined to be approximately $3,482,000 based on the Black-Scholes option pricing model using the following
assumptions: volatility of 122.9%, expected life of five (5) years, risk free interest rate of 3.09%, market price per share of
$3.20, and no dividends. Of the total 1,317,159 options granted on December 20, 2007, 739,659 vested immediately and 27,500 issued
to consultants vested monthly over a one year period, and 550,000 of the options vested upon two contingent future events. Management's
belief at the time of the grant was that the events were probable to occur and were within their control, and thus accounted for
the remaining vesting under ASC 718 by straight-lining the vesting through the expected date on which the future events were to
occur. At the time, management believed that future date was June 30, 2008. This determination was based on the fact that the Company
appeared to be on track to receive the permits and the related funding was available. In June 2008, the Company determined that
the June 30, 2008 estimate would not be met due to delays in receiving the necessary permits and thus modified the date to September
30, 2008. In September 2008, the Company determined that the September 30, 2009 deadline would not be met due to the difficulty
in obtaining financing due to the pending collapse of the capital markets. At that point the remaining unamortized portion was
immaterial and thus, the Company expensed the remaining amounts. Although the options were expensed according to ASC 718, the recipients
are still not fully vested as the triggering events have not yet occurred. The original grant date fair value of the 550,000 unvested
options was $2.70.
The Company accounts for the stock options to consultants under
the provisions of ASC 505. In accordance with ASC 505, the options awarded to consultants under the 2006 and 2007 Stock Option
Grant were re-valued periodically using the Black-Scholes option pricing model over the vesting period. As of December 31, 2011
and 2010 stock options to consultants were fully vested and expensed.
In connection with the Company's 2007 and 2006 stock option
awards, during the years ended December 31, 2011, and 2010 and for the period from March 28, 2006 (Inception) to December 31, 2011,
the Company recognized stock based compensation, including consultants, of approximately $0, $0, and $4,487,000 to general
and administrative expenses and $0, $0, and $4,368,000 to project development expenses, respectively. There is no additional
future compensation expense to record at December 31, 2011 based on previous awards.
A summary of the status of the stock option grants under the
Plan as of the years ended December 31, 2007, 2008, 2009, 2010 and 2011 and changes during this period are presented as follows:
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Outstanding January 1, 2007
1,990,000
$
2.00
Granted during the year
1,317,159
3.21
Exercised during the year
(20,000
)
2.00
Outstanding December 31, 2007
3,287,159
$
2.48
4.40
Granted during the year
-
-
Exercised during the year
-
-
Outstanding December 31, 2008
3,287,159
$
2.48
3.40
Granted during the year
-
-
Exercised during the year
-
-
Outstanding December 31, 2009
3,287,159
$
2.48
2.40
Granted during the year
-
-
Exercised during the year
-
-
Outstanding December 31, 2010
3,287,159
$
2.48
1.40
Granted during the year
-
Exercised during the year
-
Expired during the year
(2,057,500
)
2.00
Options exercisable at December 31, 2011
1,229,659
$
3.21
1.00
F-
28
There were no amounts received for the exercise of stock options
in 2011 or 2010.
The following table summarizes information concerning outstanding
and exercisable options at December 31, 2011:
OPTIONS
OUTSTANDING
OPTIONS
EXERCISABLE
Range of Exercise Prices
Outstanding
as of
12/31/2011
Weighted-
Average
Remaining
Contractual Life
(years)
Weighted-
Average
Exercise
Price
Exercisable
as of
12/31/2011
Weighted-
Average
Exercise
Price
$3.20 - $3.52
1,229,659
1.00
$
3.21
767,159
$
3.21
As of December 31, 2011, the average intrinsic value of the
options outstanding is zero as the exercise prices were in excess of the closing price of the Company's common stock as of
December 31, 2011.
Private Offerings
On January 5, 2007, the Company completed a private offering
of its stock, and entered into subscription agreements with four accredited investors. In this offering, the Company sold an aggregate
of 278,500 shares of the Company's common stock at a price of $2.00 per share for total proceeds of $557,000. The shares
of common stock were offered and sold to the investors in private placement transactions made in reliance upon exemptions from
registration pursuant to Section 4(2) under the Securities Act of 1933. In addition, the Company paid $12,500 in cash and issued
6,250 shares of their common stock as a finder's fee.
On December 3, 2007 and December 14, 2007, the Company issued
an aggregate of 5,740,741 shares of common stock at $2.70 per share and issued warrants to purchase 5,740,741 shares of common
stock for gross proceeds of $15,500,000. The warrants have an exercise price of $2.90 per share and expire five years from the
date of issuance.
The value of the warrants was determined to be approximately
$15,968,455 based on the Black-Scholes option pricing model using the following assumptions: volatility of 122.9%, expected life
of five (5) years, risk free interest rate of 3.28%, market price per share of $3.26, and no dividends. The relative fair value
of the warrants did not have an impact on the financial statements as they were issued in connection with a capital raise and recorded
as additional paid-in capital.
The warrants are subject to "full-ratchet" anti-dilution
protection in the event the Company (other than excluded issuances, as defined) issues any additional shares of stock, stock options,
warrants or any securities exchangeable into common stock at a price of less than $2.90 per share. If the Company issues securities
for less $2.90 per share then the exercise price for the warrants shall be adjusted to equal to the lower price. See Note 6, for
additional information regarding these warrants.
In connection with the capital raise, the Company paid $1,050,000
to placement agents, $90,000 in legal fees and issued warrants for the purchase of 222,222 shares of common stock. The warrants
were valued at $618,133 based on the Black-Scholes assumptions above as recorded as a cost of the capital raised by the Company.
Issuance of Common Stock related to Employment Agreements
In January 2007, the Company issued 10,000 shares of common
stock to an employee in connection with an employment agreement. The shares were valued on the initial date of employment at $40,000
based on the closing market of the Company's common stock on that date.
F-
29
On February 12, 2007, the Company entered into an employment
agreement with a key employee, and simultaneously entered into a consulting agreement with an entity controlled by such employee;
both agreements were effective March 16, 2007. Under the terms of the consulting agreement, the consulting entity received 50,000
restricted shares of the Company's common stock. The common stock was valued at approximately $275,000 based on the closing
market price of the Company's common stock on the date of the agreement. The shares vested in equal quarterly installments
on February 12, 2007, June 1, December 1, and December 1, 2007. The Company amortized the entire fair value of the common stock
of $275,000 over the vesting period during the year ended December 31, 2007. No additional issuances were made in 2008, 2009 and
2010.
Shares Issued for Services
On August 27, 2009, the Company entered into a 6-month Consulting
Agreement with Mirador Consulting, Inc. Pursuant to the Agreement, the Company will receive services in connection with mergers
and acquisitions, corporate finance, corporate finance relations, introductions to other financial relations companies and other
financial services. As consideration for these services, the Company made monthly cash payments of $3,000 and issued 200,000 shares
of the Company's common stock in exchange for $200. The Company valued the shares at $0.80 based upon the closing price of
the Company's common stock on the date of the agreement. Under the terms of the agreement, the shares did not have any future
performance requirement nor were they cancellable. The Company expensed the entire value on the date of the agreement and recorded
to general and administrative expense. Under the terms of the agreement the Company was to issue 100,000 shares on execution of
the agreement on November 15, 2009. On May 24, 2010, the Company issued the remaining 100,000 shares.
Throughout the year ended December 31, 2011, the Company issued
718,963 shares of common stock for legal services provided, which compares to 75,000 shares for the same services in 2010. In connection
with this issuance the Company recorded $162,000 in legal expense which is included in general and administrative expense, which
compares to $20,250 in 2010.
Throughout the year ended December 31, 2011, the Company issued
139,549 shares of common stock for compliance services provided, which compares to zero shares for the same services in 2010. In
connection with this issuance the Company recorded $22,962 in compliance expenses which is included in general and administrative
expense, which compares to $0 in 2010.
On September 16, 2011, the Company issued 10,000 shares of common
stock for consulting services provided, which compares to zero shares for the same services in 2010. In connection with this issuance
the Company recorded $1,800 in consulting expenses which is included in general and administrative expense, which compares to $0
in 2010.
Shares Issued for Settlement of Accrued Expenses
On December 28, 2011, the Company issued 527,980 shares of common
stock in lieu of cash for back rent owed of $81,837. In connection with this issuance the Company recorded a gain on the settlement
of accrued rent expenses of $7,920 which is included in the accompanying statement of operations.
Private Placement Agreements
During the year ended December 31, 2007, the Company entered
into various placement agent agreements, whereby payments are only ultimately due if capital is raised.
Warrants Issued
See Notes 5, 6, 9 and 10 for warrants issued with debt
and equity financings.
On August 27, 2009, the Company entered into a six month consulting
agreement. Pursuant to the agreement, the Company grated the consultant a warrant to purchase 100,000 shares of common stock at
an exercise price of $3.00 per share. The value of the warrant issued was determined to be approximately $8,300 based on the Black-Scholes
option pricing model using the following assumptions: volatility of 108%, expected life of one (1) year, risk free interest rate
of 2.48%, market price per share of $0.80, and no dividends. The value of the warrants was expensed during the year ended December
31, 2009. These warrants expired on August 27, 2010.
On December 15, 2010, the Company issued to Arnold Klann, a
Director and Executive at the Company, a warrant to purchase 500,000 shares of common stock at an exercise price of $0.50 per share
pursuant to a loan agreement. See Note 10.
On January 19, 2011, the Company issued to Lincoln Park Capital,
a warrant to purchase 428,571 shares of common stock at an exercise price of $0.55 per share pursuant to a stock purchase agreement.
See Note 9.
F-
30
Warrants Cancelled
On October 19, 2009, the Company cancelled 673,200 warrants
for $220,000 in cash. (see Note 6).
Warrants Outstanding
A summary of the status of the warrants for the years ended
December 31, 2007, 2008, 2009 and 2010 changes during the periods is presented as follows:
Warrants
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Outstanding January 1, 2007 (with 50,000 warrants exercisable)
200,000
$
5.00
Issued during the year
7,186,694
2.96
Outstanding and exercisable at December 31, 2007
7,386,694
$
3.02
4.60
Issued during the year
-
-
Outstanding and exercisable at December 31, 2008
7,386,694
$
3.02
3.60
Issued during the year
100,000
3.00
Cancelled during the year
(673,200
)
(2.90
)
Outstanding and exercisable at December 31, 2009
6,813,494
$
3.03
2.76
Issued during the year
500,000
0.50
Cancelled during the year
(426,800
)
(2.92
)
Outstanding and exercisable at December 31, 2010
6,886,694
$
2.85
1.98
Issued during the year
428,581
0.55
Expired during the year
(200,000
)
5.00
Outstanding and exercisable at December 31, 2011
7,115,275
$
2.65
1.20
NOTE 10 - RELATED PARTY TRANSACTIONS
Technology Agreement with Arkenol, Inc.
On March 1, 2006, the Company entered into a Technology License
agreement with Arkenol, Inc. ("Arkenol"), which the Company's majority shareholder and other family members hold
an interest in. Arkenol has its own management and board separate and apart from the Company. According to the terms of the agreement,
the Company was granted an exclusive, non-transferable, North American license to use and to sub-license the Arkenol technology.
The Arkenol Technology, converts cellulose and waste materials into Ethanol and other high value chemicals. As consideration for
the grant of the license, the Company shall make a one time payment of $1,000,000 at first project construction funding and for
each plant make the following payments: (1) royalty payment of 4% of the gross sales price for sales by the Company or its sub
licensees of all products produced from the use of the Arkenol Technology (2) and a one time license fee of $40.00 per 1,000 gallons
of production capacity per plant. According to the terms of the agreement, the Company made a one-time exclusivity fee prepayment
of $30,000 during the period ended December 31, 2006. The agreement term is for 30 years from the effective date.
During 2008, due to the receipt of proceeds from the Department
of Energy, the Board of Directors determined that the Company had triggered its obligation to incur the full $1,000,000 Arkenol
License fee. The Board of Directors determined that the receipt of these proceeds constituted "First Project Construction
Funding" as established under the Arkenol technology agreement. As such, the consolidated statement of operations for the
year ended December 31, 2008 reflected the one-time license fee of $1,000,000. The Company paid the net amount due of $970,000
to the related party on March 9, 2009.
F-
31
Asset Transfer Agreement with Ark Entergy, Inc.
On March 1, 2006, the Company entered into an Asset Transfer
and Acquisition Agreement with ARK Energy, Inc. ("ARK Energy"), which is owned (50%) by the Company's CEO. ARK
Energy has its own management and board separate and apart from the Company. Based upon the terms of the agreement, ARK Energy
transferred certain rights, assets, work-product, intellectual property and other know-how on project opportunities that may be
used to deploy the Arkenol technology (as described in the above paragraph). In consideration, the Company has agreed to pay a
performance bonus of up to $16,000,000 when certain milestones are met. These milestones include transferee's project implementation
which would be demonstrated by start of the construction of a facility or completion of financial closing whichever is earlier.
The payment is based on ARK Energy's cost to acquire and develop 19 sites which are currently at different stages of development.
As of December 31, 2011 and 2010, the Company had not incurred any liabilities related to the agreement.
Related Party Lines of Credit
In March 2007, the Company obtained a line of credit in the
amount of $1,500,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional liquidity to the
Company as needed. Under the terms of the note, the Company is to repay any principal balance and interest, at 10% per annum, within
30 days of receiving qualified investment financing of $5,000,000 or more. As of December 31, 2007, the Company repaid its outstanding
balance on line of credit of approximately $631,000 which included interest of $37,800. This line of credit was terminated with
the closing of the private placement in December 2007 and the subsequent line of credit balance repayment.
In February 2009, the Company obtained a line of credit in the
amount of $570,000 from Arkenol Inc, its technology licensor, to provide additional liquidity to the Company as needed. In October
2009 $175,000 was utilized from the line of credit and in November 2009 the balance was paid in full along with approximately $500
interest. As of December 31, 2010, there were no amounts outstanding and the line of credit was deemed cancelled as the Company
did not anticipate utilizing funds from the line of credit.
On November 10, 2011, the Company obtained a line of credit
in the amount of $40,000 from its Chairman/Chief Executive Officer and majority shareholder to provide additional liquidity to
the Company as needed, at his sole discretion. Under the terms of the note, the Company is to repay any principal balance and interest,
at 12% per annum, within 30 days of receiving qualified investment financing of $100,000 or more. As of November 11, 2011, the
outstanding balance on the line of credit is approximately $19,000 with $21,000 remaining under the line.
Purchase of Property and Equipment
During the year ended December 31, 2007, the Company purchased
various office furniture and equipment from ARK Energy costing approximately $39,000.
Notes Payable
As mentioned in Note 3, on July 13, 2007, the Company issued
several convertible notes aggregating a total of $500,000 with eight accredited investors including $25,000 invested by the Company's
former Chief Financial Officer. In 2011 and 2010 no additional notes were issued.
F-
32
Loan Agreement
On December 15, 2010, the Company entered into a loan agreement
(the "Loan Agreement") by and between Arnold Klann, the Chief Executive Officer, Chairman of the board of directors
and majority shareholder of the Company, as lender (the "Lender"), and the Company, as borrower. Pursuant to the Loan
Agreement, the Lender agreed to advance to the Company a principal amount of Two Hundred Thousand United States Dollars ($200,000)
(the "Loan"). The Loan Agreement requires the Company to (i) pay to the Lender a one-time amount equal to fifteen percent
(15%) of the Loan (the "Fee Amount") in cash or shares of the Company's common stock at a value of $0.50 per
share, at the Lender's option; and (ii) issue the Lender warrants allowing the Lender to buy 500,000 common shares of the
Company at an exercise price of $0.50 per common share, such warrants to expire on December 15, 2013. The Company has promised
to pay in full the outstanding principal balance of any and all amounts due under the Loan Agreement within thirty (30) days of
the Company's receipt of investment financing or a commitment from a third party to provide One Million United States Dollars
($1,000,000) to the Company or one of its subsidiaries (the "Due Date"), to be paid in cash or shares of the Company's
common stock, at the Lender's option.
The fair value of the warrants was $83,736 as determined by
the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 112.6%, risk-free interest
rate of 1.1%, dividend yield of 0%, and a term of three (3) years.
The proceeds were allocated to the warrants issued to the note
holder based on their relative fair values which resulted in $83,736 allocated to the warrants. The amount allocated to the warrants
resulted in a discount to the note. The Company  amortized the discount over the estimated term of the Loan using the straight
line method due to the short term nature of the Loan. The Company estimated the Loan would be paid back during the quarter ended
September 30, 2011. During the year ended December 31, 2011 and 2010, the Company amortized $73,885 and $9,851, respectively, of
the discount to interest expense.
NOTE 11 – INCOME TAXES
Income tax reporting primarily relates to the business of the
parent company Blue Fire Ethanol Fuels, Inc. which experienced a change in ownership on June 27, 2006. A change in ownership requires
management to compute the annual limitation under Section 382 of the Internal Revenue Code. The amount of benefits the Company
may receive from the operating loss carry forwards for income tax purposes is further dependent, in part, upon the tax laws in
effect, the future earnings of the Company, and other future events, the effects of which cannot be determined.
The Company had no estimated state tax liability at December
31, 2011. There is no current provision or liability for federal reporting purposes, and no deferred income tax expense is recorded
since the deferred tax assets have been recorded as discussed below.
The Company's deferred tax assets consist solely of net operating
loss carry forwards of approximately $9,651,000 and $9,386,000 at December 31, 2011 and 2010, respectively. For federal tax purposes
these carry forwards expire in twenty years beginning in 2026 and for the State of California purposes they expire in five years
beginning in 2011. A full valuation allowance has been placed on 100% of the Company's deferred tax assets as it cannot be determined
if the assets will be ultimately used to offset future income, if any. During the years ended December 31, 2011 and 2010, and for
the period from March 28, 2006 (Inception) to December 31, 2011, the valuation increased by approximately $266,000, increased by
approximately $822,000, increased by approximately $9,651,000, respectively.
The difference between the California statutory rate of approximately
8.83% and the actual provision rate is due to permanent difference required to get to taxable income. These permanent differences
relate primarily to the gain on warrant liability,  the accretion of related party note discount and other non-cash expenses.
The Company has not provided a reconciliation to the provision for income taxes for the years ended December 31, 2011 and 2010
as the difference between the statutory rates and the actual provision rate relate to changes in the NOLs and the corresponding
valuation allowance.
In addition, the Company is not current in their federal and
state income tax filings due to previous delinquencies by Sucre prior to the reverse acquisition and due to fiscal 2010 returns
not being filed. The Company has assessed and determined that the effect of non filing is not expected to be significant, as Sucre
has not had active operations for a significant period of time and because the Company incurred significant losses in fiscal 2010.
The Company has filed all other United States Federal and State
tax returns. The Company has identified the United States Federal tax returns as its "major" tax jurisdiction. The
United States Federal return years 2007 through 2011 are still subject to tax examination by the United States Internal Revenue
Service, however, we do not currently have any ongoing tax examinations. The Company is subject to examination by the California
Franchise Tax Board for the years ended 2006 through 2011 and currently does not have any ongoing tax examinations.
F-
33
NOTE 12 – SUBSEQUENT EVENTS
On March 28, 2012, BlueFire finalized a committed equity facility
(the "Equity Facility") with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership ("TCA"),
whereby the parties entered into (i) a committed equity facility agreement (the "Equity Agreement") and (ii) a registration
rights agreement (the "Registration Rights Agreement"). Pursuant to the terms of the Equity Agreement, for a period
of twenty-four (24) months commencing on the date of effectiveness of the Registration Statement (as defined below), TCA shall
commit to purchase up to $2,000,000 of BlueFire's common stock, par value $0.001 per share (the "Shares"), pursuant
to Advances (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under
the Equity Agreement is equal to ninety-five percent (95%) of the lowest daily volume weighted average price of BlueFire's
common stock during the five (5) consecutive trading days after BlueFire delivers to TCA an Advance notice in writing requiring
TCA to advance funds (an "Advance") to BlueFire, subject to the terms of the Equity Agreement. The "Registrable
Securities" include (i) the Shares; and (ii) any securities issued or issuable with respect to the Shares by way of exchange,
stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization
or otherwise. As further consideration for TCA entering into and structuring the Equity Facility, BlueFire shall pay to TCA a fee
by issuing to TCA that number of shares of BlueFire's common stock that equal a dollar amount of $110,000 (the "Facility
Fee Shares"). It is the intention of BlueFire and TCA that the value of the Facility Fee Shares shall equal $110,000. In
the event the value of the Facility Fee Shares issued to TCA does not equal $110,000 after a nine month evaluation date, the Equity
Agreement provides for an adjustment provision allowing for necessary action (either the issuance of additional shares to TCA or
the return of shares previously issued to TCA to BlueFire's treasury) to adjust the number of Facility Fee Shares issued.
BlueFire also entered into the Registration Rights Agreement with TCA. Pursuant to the terms of the Registration Rights Agreement,
BlueFire is obligated to file a registration statement (the "Registration Statement") with the U.S. Securities and
Exchange Commission (the "SEC') to cover the Registrable Securities within 45 days of closing. BlueFire must use its
commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC by a date that is no later
than 90 days following closing.
On March 28, 2012, BlueFire entered into a security
agreement (the "Security Agreement") TCA, related to a $300,000 convertible promissory note issued by BlueFire in
favor of TCA (the "Convertible Note"). The Security Agreement grants to TCA a continuing, first priority security
interest in all of BlueFire's assets, wheresoever located and whether now existing or hereafter arising or acquired. On
March 28, 2012, BlueFire issued the Convertible Note in favor of TCA. The maturity date of the Convertible Note is March 28,
2013, and the Convertible Note bears interest at a rate of twelve percent (12%) per annum. The Convertible Note is
convertible into shares of BlueFire's common stock at a price equal to ninety-five percent (95%) of the lowest daily
volume weighted average price of BlueFire's common stock during the five (5) trading days immediately prior to the date
of conversion. The Convertible Note may be prepaid in whole or in part at BlueFire's option without penalty. The
proceeds received by the Company under the purchase agreement are expected to be used for general working capital purposes
which include costs expected to be reimbursed under the DOE cost share program. The Company is currently determining the accounting
impact of the transaction.
Subsequent to year end, in January 2012, under the LPC Purchase
Agreement the Company sold a total of 235,465 shares to LPC for $0.15 share for $35,000.
F-
34
PART II
–
INFORMATION NOT
REQUIRED IN PROSPECTUS
Other Expenses
The following table sets forth an itemization
of all estimated expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered:
SEC registration fee
$
221
Accounting fees and expenses
5,000
*
Legal fees and expenses*
30,000
*
Miscellaneous
3,000
*
Total
$
38,221
*
* Estimated
Indemnification of Directors and Officers
Our certificate of incorporation and bylaws
provide that we will indemnify an officer, director, or former officer or director, to the full extent permitted by law. We have
been advised that in the opinion of the U.S. Securities and Exchange Commission indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection
with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction.
We will then be governed by the court's decision.
Recent Sales of Unregistered Securities
On August 27, 2009, the Company issued
200,000 shares of the Company's common stock to a consultant for services rendered at a fair value of $160,000 ($0.80/share),
based upon the quoted closing price of the Company's common stock on August 27, 2009. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
On November 10, 2010, the Company issued
37,000 shares of the Company's common stock to a consultant for services rendered at a fair value of $17,020 ($0.46/share),
based upon the quoted closing price of the Company's common stock on October 11, 2010. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
On December 15, 2010, the Company issued
the Chief Executive Officer, Chairman of the board of directors and majority shareholder of the Company, 500,000 warrants to purchase
shares of the Company's common stock at $0.50/share at anytime until December 15, 2013 as part of a $200,000 loan to the
Company. The issuance of such securities was exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation
D promulgated thereunder.
On September 16, 2011, the Company issued
10,000 shares of the Company's common stock to a consultant for services rendered at a fair value of $1,800 ($0.18/share),
based upon the quoted closing price of the Company's common stock on September 16, 2011. The issuance of such securities
was exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
On March 28, 2012, the Company issued 280,612 shares of the
Company's common stock to TCA as Facility Fee Shares pursuant to the Equity Agreement. The issuance of such securities was
exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
50
EXHIBITS
Exhibit No.
Description
2.1
Stock Purchase Agreement and Plan of Reorganization, dated May 31, 2006 (Incorporated by reference to the Company's Form 10-SB, as filed with the SEC on December 13, 2006)
3.1
Amended and Restated Articles of Incorporation, dated July 2, 2006 (Incorporated by reference to the Company's Form 10-SB, as filed with the SEC on December 13, 2006)
3.2
Amended and Restated Bylaws, dated May 27, 2006 (Incorporated by reference to the Company's Form 10-SB, as filed with the SEC on December 13, 2006)
3.3
Second Amended and Restated Bylaws, dated April 24, 2008 (Incorporated by reference to the Company's Form 8-K, as filed with the SEC on April 29, 2008)
3.4
Amended and Restated Articles of Incorporation, dated July 20, 2010 (Incorporated by reference to the Company's Form 8-K, as filed with the SEC on July 26, 2010)
5.1
Legal Opinion of Lucosky Brookman LLP *
10.1
Arkenol Technology License Agreement, dated March 1, 2006 (Incorporated by reference to the Company's Form 10-SB, as filed with the SEC on December 13, 2006)
10.2
ARK Energy Asset Transfer and Acquisition Agreement, dated March 1, 2006 (Incorporated by reference to the Company's Form 10-SB, as filed with the SEC on December 13, 2006)
10.3
Amended and Restated 2006 Incentive and Non-Statutory Stock Option Plan, dated December 13, 2006 (Incorporated by reference to the Company's Form S-8, as filed with the SEC on December 17, 2007)
10.4
Purchase Agreement, dated as of January 19, 2011, by and between the Company and Lincoln Park Capital Fund, LLC (Incorporated by reference to the Company's Form 8-K, as filed with the SEC on January 24, 2011)
10.5
Registration Rights Agreement, dated as of January 19, 2011, by and between the Company and Lincoln Park Capital Fund, LLC (Incorporated by reference to the Company's Form 8-K, as filed with the SEC on January 24, 2011)
10.6
Committed Equity Facility Agreement, dated March 28, 2012, by and between BlueFire Renewables, Inc. and TCA Global Credit Master Fund, LP *
10.7
Registration Rights Agreement, dated March 28, 2012, by and between BlueFire Renewables, Inc. and TCA Global Credit Master Fund, LP *
14.1
Code of Ethics (Incorporated by reference to the Company's Form 8-K, as filed with the SEC on March 6, 2009)
23.1
Consent of dbbmckennon *
23.2
Consent of Lucosky Brookman LLP (filed as Exhibit 5.1 herewith)
* filed herewith
51
Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
i. To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii. To reflect in
the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration statement.
iii. To include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement;
(2) That, for the
purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4) Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(5) Each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
52
SIGNATURES
In accordance with the requirements of
the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements
of filing on Form S-1 and authorizes this registration statement to be signed on its behalf by the undersigned, in the City of
Irvine, California, on May 4, 2012.
BLUEFIRE RENEWABLES, INC.
By:
/s/ Arnold Klann
Name: Arnold Klann
Title: Chief Executive Officer
(Principal Executive
        Officer)
(Principal Financial
        Officer)
(Principal Accounting
        Officer)
In accordance with the requirements of
the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Arnold Klann
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer)
May 4, 2012
Arnold Klann
/s/ Necitas Sumait
Director, Secretary and Senior Vice President
May 4, 2012
Necitas Sumait
/s/ John Cuzens
Chief Technology Officer and Senior Vice President
May 4, 2012
John Cuzens
/s/ Chris Nichols
Director
May 4, 2012
Chris Nichols
/s/ Joseph Sparano
Director
May 4, 2012
Joseph Sparano
53