Edgar Filing: BLUEFIRE ETHANOL FUELS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 000-52361

BLUEFIRE ETHANOL FUELS, INC.

(Exact Name of Registrant in its Charter)

Nevada		20-4590982
(State or Other Jurisdiction of		(IRS Employer
Incorporation)		Identification No.)

31 MUSICK, IRVINE, CALIFORNIA 92618

(Address of Principal Executive Offices)(Zip Code)

(949) 588-3767

Registrant’s Telephone Number

Copies to:

Joseph M. Lucosky, Esq.

195 Rt. 9 South, 2nd Floor

Manalapan, NJ, 07726

Tel No.: (732)409-1212

Fax No.: (732) 577-1188

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 14, 2010, there were 28,414,965 shares outstanding of the registrant’s common stock.

INDEX

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	CONSOLIDATED BALANCE SHEETS	3

	CONSOLIDATED STATEMENTS OF OPERATIONS	4

	CONSOLIDATED STATEMENTS OF CASH FLOWS	5

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	16

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	17

Item 1A.	Risk Factors	17

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3.	Defaults Upon Senior Securities	18

Item 4.	(Removed & Reserved)	18

Item 5.	Other Information	18

Item 6.	Exhibits	18

Item 1. Financial Statements.

BLUEFIRE ETHANOL FUELS, INC. AND SUBSIDIARIES

(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

	March 31, 2010			December 31, 2009
	(unaudited)			(audited)
ASSETS

Current assets:
Cash and cash equivalents	$	2,010,237		$	2,844,711
Accounts receivable		13,071			-
Department of Energy grant receivable		274,991			207,380
Prepaid expenses		54,744			50,790
Total current assets		2,353,043			3,102,881

Debt issuance costs		175,000			150,000
Property, plant and equipment, net of accumulated depreciation of $50,359 and $44,130 respectively		162,550			167,995
Total assets	$	2,690,593		$	3,420,876

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	270,208		$	335,547
Accrued liabilities		174,887			245,394
Total current liabilities		445,095			580,941

Long term stock warrant liability		386,702			2,274,393
Total liabilities		831,797			2,855,334

Stockholders’ equity:
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; 28,334,465 and 28,296,965 shares issued; and 28,302,293 and 28,264,793 outstanding, as of March 31, 2010 and December 31, 2009, respectively		28,334			28,296
Additional paid-in capital		14,047,254			14,033,792
Treasury stock at cost, 32,172 shares at March 31, 2010		(101,581	)		(101,581	)
Deficit accumulated during the development stage		(12,115,211	)		(13,394,965	)
Total stockholders’ equity		1,858,796			565,542

Total liabilities and stockholders’ equity	$	2,690,593		$	3,420,876

See accompanying notes to consolidated financial statements

BLUEFIRE ETHANOL FUELS, INC. AND SUBSIDIARIES

(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended March 31,			For the Three Months Ended March 31,			From March 28, 2006 (inception) Through March 31,
	2010			2009			2010
Revenues:
Consulting fees	$	13,071		$	14,570		$	81,641
Department of Energy grant		274,991			43,595			5,649,142
Total revenues		288,062			58,165			5,730,783

Operating expenses:
Project development including stock based compensation of $-0-, $-0-, and $4,468,490, respectively		482,739			309,905			17,721,941
General and administrative including stock based compensation of $13,500, $-0- and $6,097,332		413,714			576,984			13,448,344
Related party license fee		-			-			1,000,000
Total operating expenses		896,453			886,889			32,170,285

Operating loss		(608,391	)		(828,724	)		(26,439,502	)

Other income and (expense):
Gain from change in fair value of warrant liability		1,887,691			196,983			2,455,152
Other income		454			5,702			255,627
Financing related charge		-			-			(211,660	)
Amortization of debt discount		-			-			(676,982	)
Interest expense		-			-			(56,097	)
Related party interest expense		-			-			(64,966	)
Loss on extinguishment of debt		-			-			(2,818,370	)
Loss on the retirement of warrants		-			-			(146,718	)
Total Other income or (expense)		1,888,145			202,685			(1,264,014	)

Income (loss) before income taxes		1,279,754			(626,039	)		(27,703,516	)
Provision for income taxes		-			-			83,147
Net Income (loss)	$	1,279,754		$	(626,039	)	$	(27,786,663	)

Basic and diluted loss per common share		0.05			(0.02	)
Weighted average common shares outstanding, basic and diluted		28,264,793			28,100,881

See accompanying notes to consolidated financial statements

BLUEFIRE ETHANOL FUELS, INC. AND SUBSIDIARIES

(A DEVELOPMENT-STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASHFLOWS

(Unaudited)

	For the Three Months Ended March 31,			For the Three Months Ended March 31,			From March 28, 2006 (inception) Through March 31,
	2010			2009			2010

Cash flows from operating activities:
Net income (loss)	$	1,279,754		$	(626,039	)	$	(27,786,663	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
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
Gain from change in the fair value of warrant liability		(1,887,691	)		(196,983	)		(2,455,152	)
Common stock issued for interest on Convertible notes		-			-			55,585
Discount on sale of stock associated with private placement		-			-			211,660
Share-based compensation		13,500			-			11,351,629
Depreciation		6,229			5,789			50,363
Changes in operating assets and liabilities:								-
Accounts receivable		(13,071	)		(14,570	)		(13,071	)
Department of Energy grant receivable		(67,611	)		648,419			(274,991	)
Prepaid fees to related party		-			-			-
Prepaid expenses and other current assets		(3,954	)		18,562			(54,746	)
Accounts payable		(65,339	)		(1,257,608	)		270,206
Accrued liabilities		(70,507	)		(925	)		174,889
Net cash used in operating activities		(808,690	)		(1,423,355	)		(14,914,770	)

Cash flows from investing activities:
Acquisition of property and equipment		(784	)		-			(212,912	)

Cash flows from financing activities:

Repurchases of common stock held in treasury		-			-			(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		-			-			14,360,000
Proceeds from Convertible notes payable		-			-			2,500,000
Repayment of notes payable		-			-			(500,000	)
Proceeds from related party notes payable		-			-			116,000
Repayment of related party notes payable		-			-			(116,000	)
Debt issuance costs		(25,000	)		-			(175,000	)
Retirement of Aurarian warrants		-			-			(220,000	)
Net cash provided by financing activities		(25,000	)		-			17,137,919

Net decrease in cash and cash equivalents		(834,474	)		(1,423,355	)		2,010,237

Cash and cash equivalents beginning of period		2,844,711			2,999,599			-

Cash and cash equivalents end of period	$	2,010,237		$	1,576,244		$	2,010,237

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	518		$	13,700		$	57,411
Income taxes	$	-		$	-		$	18,096

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

See accompanying notes to consolidated financial statements

BLUEFIRE ETHANOL FUELS, 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.

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 commencing in 2008 through the current date. 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 March 31, 2010, the Company has working capital of approximately $1,900,000. Management has estimated that operating expenses for the next 12 months will be approximately $2,000,000, excluding engineering costs related to the development of bio-refinery projects. Throughout 2010, the Company intends to fund its operations with its current working capital, and proceeds from reimbursements under the Department of Energy contract. The Company expects the current resources available to them will be sufficient for a period in excess of 12 months. If necessary, management has determined that general expenditures will be reduced and additional capital will be required in the form of equity or debt securities. There are no assurances that management will be able to raise capital on terms acceptable to the Company.

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 a primary capital use in prior years.

We estimate the total cost of the bio-refinery, including contingencies to be in the range of approximately $100 million to $120 million for this first plant. 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 material costs on the world market from the last estimate until now, and the complexity of our first commercial deployment. At the end of 2008 and early 2009, prices for materials have declined, and we expect, that items like structural and specialty steel may continue to decline in price during 2010 with other materials of construction following suit. The cost approximations above do not reflect any decrease in raw materials or any savings in construction cost. The Company is currently in discussions with potential sources of financing for this facility but no definitive agreements are in place.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities Exchange Commission. Certain information and disclosures normally included in the annual financial statements prepared in accordance with the accounting principles generally accepted in the Unites States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2009. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the full year.

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.

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 three months ended March 31, 2010 and 2009 and for the period from March 28, 2006 (Inception) to March 31, 2010, research and development costs included in Project Development were approximately $483,000, $310,000, and $13,253,000, respectively.

Fair Value of Financial Instruments

On January 1, 2009, the Company adopted ASC 820 (“ASC 820”) Fair Value Measurements and Disclosures. The Company did not record an adjustment to retained earnings 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;

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.

As of March 31, 2010, the Company’s warrant liability is considered a level 2 item, see Note 4.

Income (loss) per Common Share

The Company presents basic income (loss) per share (“EPS”) and diluted EPS on the face of the consolidated statement of operations. Basic income (loss) per share is computed as net income (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. As of March 31, 2010, the Company had 3,287,159 options and 6,813,494 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 quarter and thus no shares are considered as dilutive under the treasury-stock method of accounting. As of March 31, 2009, the Company had 3,287,159 options and 7,386,694 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.

Share-Based Payments

The Company accounts for stock options issued to employees and consultants under ASC 718 formerly SFAS No. 123(R), “Share-Based Payment”. Under SFAS 123(R), 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.

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505 formerly EITF No. 96-18 “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). 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.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) amended authoritative guidance for improving disclosures about fair-value measurements. The updated guidance requires new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The guidance also clarified existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. The guidance became effective for interim and annual reporting periods beginning on or after December 15, 2009, with an exception for the disclosures of purchases, sales, issuances and settlements on the roll-forward of activity in Level 3 fair-value measurements. Those disclosures will be effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on the consolidated financial statements.

In June 2009, the FASB issued ASC 105 “Generally Accepted Accounting Principles” (formerly SFAS No. 168 The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162). ASC 105 establishes the FASB Accounting Standards Codification as the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. ASC 105, which changes the referencing of financial standards, is effective for interim or annual financial periods ending after September 15, 2009. The Company adopted ASC 105 during the three months ended September 30, 2009 with no impact to its financial statements, except for the changes related to the referencing of financial standards.

NOTE 3 – DEVELOPMENT CONTRACTS

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 , which is now located in Fulton Mississippi. 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 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 DOE Biorefinery project. This is in addition to a renegotiated Phase I funding for development of the DOE Biorefinery of approximately $7 million out of the previously announced $10 million total. This brings the total eligible funds for DOE Biorefinery to approximately $88 million. The Company is currently in negotiations with the DOE for Phase II of its DOE Biorefinery project.

To date the Company has received reimbursements of approximately $5,650,000 under these awards.

In 2009, our operations have been financed to a large degree through funding provided by the U.S Department of Energy. 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. Although we finalized Award 1 with a total reimbursable amount of $6,425,564, and through March 31, 2010, we have an unreimbursed amount of approximately $776,422 available to us under the award, we cannot guarantee that we will continue to receive grants, loan guarantees, or other funding for our projects from the U.S. Department of Energy.

NOTE 4 - OUTSTANDING WARRANT LIABILITY

Effective January 1, 2009 we adopted the provisions of Derivatives and Hedging (“ASC 815”) formerly EITF 07-5, "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF 07-5”). 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 expire 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.

In connection with the 5,962,963 warrants to expire in December 2012, the Company recognized a gain of approximately $1,868,000 and $169,000 from the change in fair value of these warrants during the quarters ended March 31, 2010 and 2009.

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 change 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 set to expire in August 2010, the Company recognized a gain of approximately $19,000 and $9,200 for the change in fair value of these warrants during the quarters ended March 31, 2010 and 2009, respectively.

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 quarterly using the Black-Scholes option pricing model using the following assumptions:

	March 31,			December 31,
	2010			2009
Annual dividend yield		-			-
Expected life (years) of August 2007 issuance		0.39			0.64
Expected life (years) of December 2007 issuance		2.75			3.0
Risk-free interest rate		1.82	%		2.69	%
Expected volatility of August 2007 issuance		117	%		101	%
Expected volatility of December 2007 issuance		98	%		95	%

Expected volatility is based primarily on historical volatility. Historical volatility for the August 2007 and December 2007 issuances were 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 5 - COMMITMENTS AND CONTINGENCIES

Professional Service Agreements

As of March 31, 2010, the Company has contracts with several engineering firms. During the three months ended March 31, 2010, the Company paid approximately $157,000 to various engineering firms.

Related-Party Line of Credit

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 March 31, 2010, there were no amount outstanding and the line of credit was deemed cancelled as the Company did not anticipate utilizing funds from the line of credit.

NOTE 6 - STOCKHOLDERS’ EQUITY

Stock-Based Compensation under the Company’s Employee Stock Option Plan

During the three months ended March 31, 2010 and 2009, and for the period from March 28, 2006 (Inception) to March 31, 2010, the Company amortized 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 during the year ending December 31, 2010 based on the previous awards.

Shares Issued for Services

On August 27, 2009, the Company entered into a six-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 will make monthly cash payments of $3,000 and has issued, or will issue, 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 and November 15, 2009. As of March 31, 2010, the Company has yet to issue the remaining 100,000 shares due to the pending negotiation of a new agreement.

During the three months ended March 31, 2010, the Company issued 37,500 shares of common stock for legal services provided. In connection with this issuance the Company recorded $13,500 in legal expense which is included in general and administrative expense. The Company valued the shares using the closing market price on the date of issuance. The Company expensed the shares on the date of issuance as the services had been provided and there was no future performance criteria.

Summarized Equity Rollforward

	Additional Paid- in Capital		Deficit Accumulated During the Development Stage

Balances at December 31, 2009	$	14,033,792	$	(13,394,965	)

Stock issued for services		13,462		-

Net Loss		-		1,279,754

Balances at March 31, 2010	$	14,047,254	$	(12,115,211	)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the United States Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are (collectively, the “Filings”) based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

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. 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 this first plant. 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 on the world market from the last estimate till now, and the complexity of our first commercial deployment. At the end of 2008 and early 2009, prices for materials have declined, and we expect, that items like structural and specialty steel may continue to decline in price in 2010 with other materials of construction following suit. The cost approximations above do not reflect any decrease in raw materials or any savings in construction cost. We are currently in discussions with potential sources of financing for this facility but no definitive agreements are in place.

A biorefinery proposed for development and construction in conjunction with the U.S. 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 annually to produce approximately 19 million gallons of ethanol annually ("DOE Biorefinery"). We have received an Award from the DOE of up to $40 million for the Facility. 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 March 31, 2010, BlueFire has been reimbursed approximately $5,600,000from the DOE under this award. On or around February 23, 2010, we announced that we submitted an application for a $250 million dollar loan guarantee for this planned biorefinery. The application, filed under the 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, was submitted on February 15th, 2010 and serves as a phase one application in a two phase approval process. If approved, the loan guarantee will secure a substantial portion of the total costs to construct the facility, although there is no assurance that the loan guarantee will be approved. We are in the detailed engineering phase for this project and expect to have all necessary permits for this facility by this summer, putting the Company on a path to commence construction by the end of 2010. At this time the remainder of financing for this project is yet to be determined.

Ÿ	Several other opportunities are being evaluated by us in North America, although no definitive agreements have been reached.

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 Energy Policy Act of 2005 provides for grants and loan guarantee programs to incentivize the growth of the cellulosic ethanol market. These programs include a Cellulosic Biomass Ethanol and Municipal Solid Waste Guarantee Program under which the U.S. Department of Energy (“DOE”) could provide loan guarantees up to $250 million per qualified project. BlueFire plans to pursue all available opportunities within EPAct 2005.

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 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. BlueFire plans to pursue all available opportunities within the Farm Bill.

Ÿ	Utilize proceeds from reimbursements under the DOE contract.

Ÿ	As available and as applicable to our business plans, applications for public funding will be submitted to leverage private capital raised by us.

RECENT DEVELOPMENTS IN BLUEFIRE’S BIOREFINERY ENGINEERING AND DEVELOPMENT

On February 12, 2009, we were issued our Authority to Construct permit by the Antelope Valley Air Quality Management District.

In February 2009, the Company obtained a line of credit in the amount of $570,000 from Arkenol, its technology licensor, to provide additional liquidity to the Company as needed. As of November 16, 2009, there were no amounts outstanding and the line of credit was cancelled as the Company did not anticipate utilizing future funds from the line of credit.

In March 2009, BlueFire signed a Technology Development Services Agreement with Dr. William Farone and his company Applied Power Concepts, Inc. Under the agreement, Dr. Farone will work with BlueFire to continue the advancement of BlueFire’s patented Arkenol Technology for the production of cellulosic biofuel. Dr. Farone, along with John Cuzens, is the original author of the patents used in the BlueFire concentrated acid hydrolysis process.

On May 27, 2009, we announced that Solazyme, Inc., a renewable oil production company and leading algal synthetic biology company, is testing sugars, produced through the Company’s patented process, for compatibility with its renewable oil process to produce the oil cost effectively and at scale.

On October 15, 2009, BlueFire announced the strategic relocation of its second planned biorefinery (DOE Facility) to Fulton, Mississippi.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

Revenue

Revenue for the three months ended March 31, 2010 and 2009, was approximately $380,000 and $58,000, respectively, and was primarily related to a federal grant from the United States Department of Energy, (“U.S. DOE” or “DOE”). The grant generally provides for reimbursement in connection with related development and construction costs involving commercialization of our technologies.

Project Development

For the first quarter in 2010, our project development costs were approximately $483,000, compared to project development costs of $310,000 for the same period during 2009. The increase in project development costs is due to the increased activity in the design and engineering development of the Fulton Plant.

General and Administrative Expenses

General and Administrative Expenses were approximately $414,000 for the first quarter of 2010, compared to $577,000 for the same period in 2009. The decrease in general and administrative costs is mainly due to the increased activity at the project level, mostly related to the Fulton facility.

Interest Income

Interest income for the three months ended March 31, 2010, was approximately $500, compared to $5,700 for the same period in 2009, in each case, related to funds invested. The decrease in interest income from the same period in 2009 is mainly due to the fact that our investment account balance was depleted as we used the funds in operations, and that our rate of return on the account decreased dramatically as it was tied to short-term interest rates.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity consist of cash and cash equivalents. 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. Our principal use of funds has been for the further development of our Biorefinery projects, for capital expenditures and general corporate expenses. As of March 31, 2010, we had cash and cash equivalents of approximately $2,000,000. However, as of May 10, 2010, the Company has approximately $2,225,000 in cash as a result of proceeds of approximately $366,000 from reimbursements under the Department of Energy contract. Management believes that our Company’s cash will be sufficient to meet our working capital requirements for the next twelve month period. If necessary, management has determined that general and administrative expenditures will be reduced with measures such as a reduction of headcount, reducing employee benefits and/or salary deferral, as needed.

We expect to rely upon funds raised from private placements, as well as future equity and debt offerings, current and future grant opportunities, as well as the $3,800,000 received from the DOE in October 2009, to implement our growth plan and meet our liquidity needs going forward. Management believes that our Company’s cash will be sufficient to meet our working capital requirements for the next twelve month period, but will not be sufficient to move forward beyond the development stage of either of our first two Projects, at which point further funding will be necessary. However, we cannot assure you that such financing will be available to us on favorable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital needs are identified and we are not successful in obtaining the financing, we may be forced to curtail our existing or planned future operations.

In addition, as our biorefinery projects develop to the point of construction, we anticipate significant purchases of long lead time item equipment for construction.

The Company is currently in discussions with potential financial and strategic sources of financing for both the Lancaster and DOE Biorefineries but no definitive agreements are in place.

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 reviewed financial statements appearing elsewhere in this quarterly report and our annual audited financial statements appearing on Form 10-K. 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal control over financial reporting as of March 31, 2010. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on this evaluation, Our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2010, our internal control over financial reporting was effective.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. 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.

Item 1A. Risk Factors.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 30, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of Equity Securities and Use of Proceeds during the period ended March 31, 2010.

Item 3. Defaults Upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4. (Removed & Reserved).

Item 5. Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits.

Exhibit Number		Description of Document
31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Arnold Klann, Principal Executive Officer of the Company.
31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Christopher Scott, Principal Financial Officer of the Company.
32.1		Certification Pursuant to 18 U.S.C. Section 1350 of Arnold Klann, Principal Executive Officer of the Company.
32.2		Certification Pursuant to 18 U.S.C. Section 1350 of Christopher Scott, Principal Financial Officer of the Company.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 14, 2010	BLUEFIRE ETHANOL FUELS, INC.

	/s/ Arnold Klann
	Arnold Klann
	Chief Executive Officer Principal Executive Officer

	/s/ Christopher Scott
	Christopher Scott
	Chief Financial Officer and
	Principal Accounting Officer