NOTE 4 – LIABILITIES PURCHASE AGREEMENT

On September 27, 2017, BlueFire Renewables, Inc., a Nevada Corporation (the “Company”) entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Tarpon Bay Partners, LLC, a Florida limited liability company (“TBP”), pursuant to which the Company agreed to issue common stock to TBP in exchange for the settlement of $999,630.45 (the “Settlement Amount”) of past-due obligations and accounts payable of the Company. TBP purchased the obligations and accounts payable from certain vendors of the Company as described below.

On October 11, 2017, the Circuit Court of Leon County, Florida (the “Court”), entered an order (the “TBP Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement, pursuant to the Settlement Agreement between the Company and TBP, in the matter entitled Tarpon Bay Partners, LLC v. BlueFire Renewables, Inc. (the “TBP Action”). TBP commenced the TBP Action against the Company to recover an aggregate of $999,630.45 of past-due obligations and accounts payable of the Company (the “TBP Claim”), which TBP had purchased from certain vendors of the Company pursuant to the terms of separate receivable purchase agreements between TBP and each of such vendors (the “TBP Assigned Accounts”). The TBP Assigned Accounts relate to certain contractual obligations and legal services provided to the Company. The TBP Order provides for the full and final settlement of the TBP Claim and the TBP Action. The Settlement Agreement became effective and binding upon the Company and TBP upon execution of the TBP Order by the Court on October 11, 2017.

Pursuant to the terms of the Settlement Agreement approved by the TBP Order, on October 11, 2017, the Company agreed to issue to TBP shares (the “TBP Settlement Shares”) of the Company’s common stock, $0.001 par value (the “Common Stock”). The Settlement Agreement provides that the TBP Settlement Shares will be issued in one or more tranches, as necessary, sufficient to satisfy the TBP Settlement Amount through the issuance of common stock. Pursuant to the Settlement Agreement, TBP may deliver a request to the Company for shares of Common Stock to be issued to TBP (the “TBP Share Request”). Pursuant to the fairness hearing, the Order, and the Company’s agreement with Tarpon, on October 11, 2017, the Company booked the Tarpon Success Fee Note in the principal amount of $50,000 in favor of Tarpon as a commitment fee although no signed note agreement exists. The Tarpon Success Fee Note is considered due on April 11, 2018. The Tarpon Success Fee Note is convertible into shares of the Company’s common stock.

In connection with the settlement, during the three months ended March 31, 2018, the Company has issued 350,046,000 shares of Common Stock to Tarpon in which gross proceeds of $59,565 were generated from the sale of the Common Stock. In connection with the transaction, Tarpon received fees of $17,870 and providing payments of $41,695 to settle outstanding vendor payables. The Company valued these shares at $122,279 and recorded the difference of $62,714 as a cost of the transaction. The Company cannot reasonably estimate the amount of proceeds Tarpon expects to receive from the sale of these shares which will be used to satisfy the liabilities. Any shares not used by Tarpon are subject to return to the Company. Accordingly, the Company accounts for these shares as issued but not outstanding until the shares have been sold by Tarpon and the proceeds are known. Net proceeds received by Tarpon are included as a reduction to accounts payable or other liability as applicable, as such funds are legally required to be provided to the party Tarpon purchased the debt from.

The parties reasonably estimate that the fair market value of the TBP Settlement Shares to be received by TBP is equal to approximately $1,666,000.

Because the conversion price is variable and does not contain a floor, the conversion feature represented a derivative liability upon issuance. Accordingly, the Company calculated the derivative liability using the Black-Sholes pricing model for the notes upon inception, resulting in a day one loss of $823,968. The derivative liability was marked to market at March 31, 2018 being valued at $738,221, which resulted in a gain of $16,549. The derivative is revalued each payment date and at quarter end. The Company used the following range of assumptions for the quarter ended March 31, 2018:

Approximately $43,800 was reclassed to APIC in connection with this derivative.

Subsequent to March 31, 2018, the Company issued 76,745,000 shares of common stock to settle additional liabilities purchased by Tarpon Bay.