Statement Regarding Forward-Looking Information From time to time, we make written or oral statements that are "forward-looking," including statements contained in this report and other filings with the Securities and Exchange Commission ("SEC") and in our reports to stockholders. The Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities Exchange Act of 1934, as amended, provide a safe harbor for such forward-looking statements. All statements, other than statements of historical facts, included herein regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans, objectives and other future events and circumstances are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "would," "should" and similar expressions or negative expressions of these terms. Such statements are only predictions and, accordingly, are subject to substantial risks, uncertainties and assumptions.
Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity, performance or achievements. Refer to our Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 30, 2009, for a full description of factors we believe could cause actual results or events to differ materially from the forward-looking statements that we make. These factors include:
• the commercial viability of our technologies,

• our ability to maintain and enforce our exclusive rights to our technologies,

• our ability to raise additional capital on favorable terms to continue developing our technologies;

• the demand for and production costs of various energy products made from our biomass,

• competition from other alternative energy technologies, and

• other risks and uncertainties detailed from time to time in our filings with the SEC.

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements in this report are made on the basis of management's assumptions and analyses as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.
Company Overview
The following discussion of our company overview and plan of operation should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance. These risks and other factors include, among others, those listed under "Statement Regarding Forward-Looking Information."

We are a development stage company that has recently changed its focus from being a fully integrated cellulosic ethanol producer to being a provider of cellulosic biomass derived from municipal solid waste, also known as MSW, for any energy product. Previously, our business focused on utilizing the following technologies to produce ethanol:
• a pressurized steam classification technology, which we refer to as the "PSC" technology, invented at the University of Alabama, Huntsville that used a pressurized steam classification vessel to convert MSW into cellulosic material while simultaneously segregating and eliminating any inorganic materials in the solid waste and cleaning recyclable materials in the MSW;

• a sulfuric acid hydrolysis process, which we refer to as the "Brelsford" technology, developed by Brelsford Engineering, Inc. that employs an acid hydrolysis process to convert cellulosic material into fermentable sugars, which can then be fermented into ethanol, and;

• a nitric acid hydrolysis process, which we refer to as our "HFTA" technology, developed by scientists working at the University of California, Berkeley, that incorporates anticipated improvements in chemical reaction by which acid hydrolysis occurs.

In January 2008, we purchased a small scale unit designed to operate the HFTA technology from the University of California Berkeley and moved this unit to the Hazen Research facility in Golden Colorado. The unit was reconstructed and used to analyze the sugar content obtainable from a variety of biomass derived from different sources of garbage and waste paper. Based on these results, we determined that there are sufficient amounts of sugars obtainable from the biomass we derive from garbage to warrant further development and potential commercialization of the HFTA technology.
In September 2008, we acquired the exclusive rights to a Biomass Recovery System developed by Anthony Noll that we refer to as our Biomass Recovery Process, which is technology comprised of improvements to the patent we acquired in October 2008. Our rights to use the Biomass Recovery Process technology permit us to use the biomass we derive from MSW to produce all energy products. In October 2008, we acquired the patent for the PSC technology from World Waste Technologies ("WWT"), who previously had purchased the patent from the University of Alabama Huntsville. As a result, we became the licensor of the PSC technology to Bio-Products International, Inc. ("Bio-Products") under its Master License Agreement. Bio-Products was the sublicensor of the PSC technology to us. During the fourth quarter of 2008, Brelsford Engineering, Inc. terminated our license to the Brelsford technology for non-payment of certain fees. We have decided not to use this technology going forward in our operations and thus have written off the remaining asset as of December 31, 2008. The impairment loss of $97,500 is included in research and development expense on the statement of operations for the year ended December 31, 2008.
Since early 2008, we had been in litigation against Bio-Products regarding our use of the PSC technology as a sublicensee. In March 2009, we entered into a Settlement Agreement with Bio-Products settling all of these claims. Pursuant to the Settlement Agreement, in addition to a customary mutual release, Bio-Products entered into a covenant not to sue whereby Bio-Products and its related parties agreed to permit us to use the Biomass Recovery Process technology worldwide, for any product that we desire and with no royalty due to Bio-Products. We also mutually terminated the License Agreement with Bio-Products that had granted to us a sublicense to use the PSC technology. As a result, we have no further obligations thereunder. Due to our ownership of the patent covering the PSC technology, we continue to be the licensor of the PSC technology to Bio-Products under the Master License Agreement. As a result of the Settlement Agreement, we are now capable of using the Biomass Recovery Process technology to produce any energy product that we desire and are no longer limited to production of fuel grade ethanol in the United States. We were originally incorporated in 1996 as Long Road Entertainment, Inc., and were formed to operate as a holding company for businesses in the theater, motion picture and entertainment industries. We ceased conducting that business in 2005 and were dormant until the fall of 2006, at which time our founder and then controlling stockholder decided to pursue the sale of the company. In anticipation of that sale, we changed our name to Alternative Ethanol Technologies, Inc.
On March 27, 2007, we entered into an Agreement and Plan of Merger and Reorganization in which we agreed to acquire SRS Energy, Inc., a Delaware corporation that is the holder of the technology licenses. Pursuant to the merger agreement, SRS Acquisition Sub, our wholly-owned subsidiary, merged into SRS Energy with SRS Energy as the surviving corporation. We consummated the merger on May 31, 2007 resulting in SRS Energy becoming our wholly-owned subsidiary. Effective August 2, 2007, we changed our name to CleanTech Biofuels, Inc.

SRS Energy was originally formed as a wholly-owned subsidiary of Supercritical Recovery Systems, Inc., a Delaware corporation, in July 2004. At that time, Supercritical Recovery Systems was a licensee of various technologies for the processing of waste materials into usable products. While investigating different technologies, Supercritical Recovery Systems was introduced to the PSC and Brelsford technologies and secured licenses to the technologies in SRS Energy. Prior to our acquisition of SRS Energy, Supercritical Recovery Systems distributed approximately 80% of its ownership of SRS Energy to the stockholders of Supercritical Recovery Systems. Since our acquisition of SRS Energy, Supercritical Recovery Systems has ceased its business activities with respect to licensing other technologies.
We have no operating history as a producer of biomass feedstocks or any energy products and have not constructed any commercial operating plants to date. We have no operating revenues to date and expect that our current capital and other existing resources will be sufficient only to complete a portion of the testing of our technologies and to provide a limited amount of working capital. The Company will require substantial additional capital to implement its business plan and it may be unable to obtain the capital required to do so. If we are not able to timely and successfully raise additional capital and/or achieve profitability or positive cash flow, we will be required to delay our development and may not be able to implement our business plan. Recent Developments
Beginning in April 2009, the Company commenced a second offering of units comprised of a convertible promissory note and a warrant. As of May 11, 2009, the Company has received $235,000 in investment proceeds. Each convertible promissory note carries a one-year term and a 6% interest rate. In addition, each note can be converted into shares of the Company's common stock, par value $0.001per share (the "Common Stock"), at $0.08 per share, at the Note holder's option. Each note was issued with a warrant to purchase additional shares of Common Stock equal to the principal amount of the Note at a price of $0.30 per share. Under the first offering of units comprised of a convertible promissory note and warrants, which is now closed, the Company received $642,000 in investment proceeds.
During the first quarter of 2009, we constructed a small-scale test vessel. This vessel was operated in Kentucky during April 2009 processing approximately 10 tons of MSW. The biomass will be tested as a feedstock in energy conversion technologies that are ready for commercialization. We may eventually move this test vessel to Pasco, Washington as detailed further in our Plan of Operation. In March 2009, we also entered into an equipment lease for $25,000 whereby our customer has the use of our HFTA equipment for our customer's testing purposes. This lease is for two and one half months and currently ends on May 31, 2009, but can be renewed by our customer.
Plan of Operation
The following discussion of our plan of operation should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance. These risks and other factors include, among others, those listed under "Statement Regarding Forward-Looking Information." Our company was initially conceived as a fully-integrated producer of cellulosic ethanol using a technology for cleaning and separating municipal solid waste, also known as MSW, into its component parts, which we refer to as the PSC technology and a dilute acid hydrolysis technology developed by Brelsford Engineering, Inc. To further enhance our ability to produce ethanol, in 2008 we licensed a technology that uses nitric acid to hydrolize biomass into ethanol. The technology developed at the University of California Berkeley is controlled by HFTA, Inc. pursuant to a Master License Agreement with the University of California Berkeley and sublicensed to us for the production of ethanol from MSW.

Based on our investigation and acquisition of new technologies and research and development of our existing technologies in 2008, we have re-focused our business on the commercialization of our technology for cleaning and separating MSW into its component parts through the acquisition of further technology to clean and separate MSW, which we refer to as the Biomass Recovery Process and is currently in use in a commercial setting in Australia. As a result, we believe this technology is ready for commercial implementation in the United States and elsewhere. In furtherance of our new focus, we have begun evaluating potential commercial projects using our technology. Biomass Feedstock Production
We are seeking sites to develop a facility in Chicago, Illinois including negotiating a lease for a facility to construct an operating commercial plant in Chicago, Illinois. The site we intend to lease currently has a commercial waste transfer station in operation by a third party. In anticipation of completing the lease, the owner of the property has commenced the permitting process to obtain the permits necessary for us to convert the commercial waste transfer station into a residential MSW transfer station and install our vessels for processing the waste delivered to the transfer station into cellulosic biomass. We will be required to pay the expenses incurred to date for permitting at the site upon completing our lease. Any new site we seek to develop may require us to seek permits or licenses to operate such sites. The biomass we expect to produce will be sold to utilities or other energy producers operating near the plant for combustion in existing co-fired boilers. We have provided our biomass to different utility owners for testing the BTU value and emissions profile and universally have been advised by the utilities that our biomass can be used as a feedstock for combustion together with coal.
We have completed construction of a small test vessel and operated this vessel beginning in April 2009 in Kentucky that processed approximately 10 tons of MSW into approximately 4-5 tons of biomass. We will provide the biomass produced during this testing phase to utilities and other mass consumers of energy operating in the Chicago area and to Green Power, Inc. in sufficient quantities to permit them to test the ability to utilize our biomass in their existing material handling operations. Upon completing this stage of our testing, we intend to seek long-term off-take contracts for the purchase of our biomass and begin construction of a larger scale plant to process sufficient biomass to the requirements of our agreements and any other market opportunities to sell the biomass in the Chicago area.
Upon operating a plant in Chicago and after refining our know-how with respect to implementation of the technology, we intend to seek to partner with waste haulers, landfill owners and municipalities to implement the technology across the United States and internationally.
The further implementation of the commercial plant described above will require significant additional capital, which we currently do not have. We cannot provide any assurance that we will be able to raise this additional capital. We anticipate that financing for this project will be provided in large part via tax exempt bond financing. In addition we intend to seek funding and loan guarantees from local, state and federal authorities. On January 23, 2009, our partner in the Chicago project submitted an application to the City of Chicago for a $100,000 grant to develop an organic waste processing station in the city. We believe that further opportunities to utilize governmental assistance will become available for this project.
Diesel Fuel Production
We are working to complete an agreement with Green Power, Inc. ("Green Power") to build a 200 ton per day MSW processing station to provide biomass for an existing 100 ton per day diesel fuel production plant. We have not completed an agreement to date and there can be no assurance that we will complete any agreement and proceed with this development. Green Power has constructed a facility in Pasco, Washington capable of processing up to 100 tons of organic biomass material per day into diesel. The diesel produced is not biodiesel, but rather a high grade fuel diesel. Green Power has tested the system with wood waste and other organic matter and the results have proven superior, however it is difficult and costly to obtain long term supplies of organic matter to operate the plant on a continuous basis. We believe that the organic matter we derive from MSW (biomass and plastics) will provide an excellent feedstock for the Green Power process.
We may move our test vessel, currently located in Kentucky, to Pasco, Washington in order to operate this small vessel for a sufficient time to enable an independent verification of the inputs and outputs to the system as well as completing a full feasibility study for the technology.

If the results from this stage of operations are successful, we plan to construct a system to process 200 tons of MSW (creating approximately 100 tons of usable biomass) daily at the Pasco plant. We anticipate the total costs to construct and operate the full system will be approximately $4 million to $5 million. We have applied to the USDA for a grant pursuant to its Repowering America Program to offset part of this cost. Additionally, the Company and Green Power have had preliminary discussions about a possible equity investment in our Company in an amount that will enable us to complete this construction, regardless of whether governmental assistance becomes available. New Technologies; Commercializing Existing Technologies Because of our unique ability to produce a clean, homogenous biomass feedstock, we are frequently presented with the opportunity to partner with or acquire new technologies. In addition to developing our current technologies, we will continue to add technologies to our suite of solutions that complement our core operations. We believe that our current technologies and aspects of those in development will enable us to eventually expand our business to use organic material from other waste streams such as municipal bio-solids from waste water facilities and animal waste for fuel production. To commercialize this technology, we intend to:
• construct and operate a commercial plant that processes MSW into cellulosic biomass for combustion in existing co-fired boilers for electricity production in Chicago, Illinois;

• identify and partner with landfill owners, waste haulers and municipalities to identify locations suitable for our technology; and

• pursue additional opportunities to implement our technology in commercial settings at transfer stations and landfills in the United States and elsewhere in the world.

Our ethanol conversion technology, like all other cellulosic ethanol conversion technologies in development, has not been proven on a commercial level. To develop our technology for converting our biomass into ethanol and other biofuels, we intend to:
• complete the research and development of our licensed technologies, which we believe when combined can convert MSW into ethanol; and

• explore, develop and/or license additional technologies for processing waste into energy products as opportunities to do so present themselves.

Our ability to implement this strategy will depend on our ability to raise significant amounts of additional capital and to hire appropriate managers and staff. Our success will also depend on a variety of market forces and other developments beyond our control.

Results of Operations
The following table sets forth the amounts of expenses and changes represented
by certain items reflected in our consolidated statements of operations for the
three months ended March 31, 2009 and 2008:

                                                            Three months ended
                                                   March 31, 2009        March 31, 2008         Change
General and administrative                        $        243,823      $        146,223      $   97,600
Professional fees                                          109,413               111,946          (2,533 )
Research and development                                       101               183,104        (183,003 )

Operating loss                                             353,337               441,273         (87,936 )

Other expense (income):
Interest expense                                           226,127                19,751         206,376
Amortization of technology license                               -                 3,750          (3,750 )
Other income                                                (4,667 )                   -          (4,667 )
Interest income                                             (2,241 )              (5,727 )         3,486


Net loss applicable to common stockholders        $        572,556      $        459,047      $  113,509

Three months ended March 31, 2009 compared to the three months ended March 31, 2008
General and administrative - The increase in expense in 2009 is due primarily to accruing salaries for all employees in 2009 compared to salary earned only by the CEO in 2008 and $15,000 in increased marketing expenses.
Research and Development - The decrease in 2009 is due primarily to a shift in focus in our plan of operation from a fully-integrated producer of cellulosic ethanol to the commercialization of our technology for cleaning and separating MSW into its component parts as described earlier in this report.
Interest expense - The increase in 2009 is due primarily to the amortization of approximately $225,000 of discounts related to various notes and interest on those notes. These notes were issued from September through March 2009 and thus no interest was incurred during the three months ended March 31, 2008. This increase in interest was offset partially by reduced interest expense in 2009 on our Series A Convertible Notes as all but $140,000 of the notes were converted by the end of March 2008.
Amortization - The asset related to this amortization was written off as of December 31, 2008 as we no longer plan to use the technology in our plan of operations going forward. As we have not yet commenced our operations, we have no amortization in 2009 of our current technology assets.
Other income - The income in 2009 is for the leasing of our HFTA equipment. This lease currently expires on May 31, 2009 but can be renewed.
Interest income - The income in 2008 is primarily interest on $450,000 of promissory notes issued to us as part of the consideration for the issuance of the Series A Convertible Debentures. We received the $450,000 plus accrued interest on March 14, 2008 and thus no longer earn interest at 6% per annum on those notes. The interest in 2009 is for interest earned on the notes receivable from our directors and executive officers related to the issuance of restricted stock.
Liquidity and Capital Resources
We have no operating revenues to date and will be required to raise additional capital in order to execute our business plan and commercialize our products.

Beginning in September 2008 and as of May 11, 2009, we raised $642,000 and $235,000, respectively, in separate note issuances from investors in exchange for units comprised of a convertible note and warrants. We are continuing to explore opportunities to raise cash through the issuance of these units and other financing opportunities. As of May 11, 2009, our current cash will be sufficient to fund approximately the next one to two months. Thereafter, we anticipate requiring additional capital to continue our plan of operation. These costs will be substantially greater than our current available funds. We currently expect attempting to obtain additional financing through the sale of additional equity, various government funding opportunities and/or possibly through strategic alliances with larger energy or waste management companies. However, we may not be successful in securing additional capital. If we are not able to obtain additional financing in the near-term future, we will be required to delay our development until such financing becomes available. Further, even assuming that we secure additional funds, we may never achieve profitability or positive cash flow. If we are not able to timely and successfully raise additional capital and/or achieve profitability or positive cash flow, we will not have sufficient capital resources to implement our business plan. Debt
Convertible Notes Payable
During September 2008, the Company commenced an offering of units comprised of a convertible promissory note and warrants. As of March 31, 2009, the Company raised a total of $642,000 of investment proceeds. Each convertible promissory note carries a one-year term and a 6% interest rate. In addition, each note can be converted, at the note holder's option, at any time during the one-year term into shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), at $0.25 per share, or prior to the closing of any Qualifying Equity Financing (minimum capital received of $5 million). Each note was issued with a warrant to purchase additional shares of Common Stock equal to the principal amount of the promissory note at a price of $0.45 per share. These promissory notes have been recorded as short-term debt (notes payable) in the financial statements, net of discounts for the conversion and warrant features. The discounts are being amortized on a straight-line basis over the term of each note. For the three months ended March 31, 2009, amortization of approximately $150,000 for these discounts has been recorded in interest expense. WWT Note Payable
On October 22, 2008, the Company completed the purchase of Patent No. 6,306,248 (the "Patent") pursuant to a Patent Purchase Agreement ("Agreement") with World Waste Technologies, Inc. ("WWT"). The Patent is the basis for the pressurized steam classification technology that cleans and separates municipal solid waste into its component parts, which the Company had licensed from Bio-Products . . .