ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Report") of NexGen Biofuels Ltd., an
Israeli corporation (formerly known as Healthcare Technologies Ltd.) (the
"Company," "NexGen," "we," "us" and "our"), contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. This Report
includes statements regarding our plans, goals, strategies, intent, beliefs or
current expectations. These statements are expressed in good faith and based
upon a reasonable basis when made, but there can be no assurance that these
expectations will be achieved or accomplished. These forward looking statements
can be identified by the use of terms and phrases such as "believe," "plan,"
"intend," "anticipate," "target," "estimate," "expect," and the like, and/or
future-tense or conditional constructions ("will," "may," "could," "should,"
etc.). Items contemplating or making assumptions about, actual or potential
future sales, market size, collaborations, and trends or operating results also
constitute such forward-looking statements.
Although forward-looking statements in this report reflect the good faith
judgment of management, forward-looking statements are inherently subject to
known and unknown risks, business, economic and other risks and uncertainties
that may cause actual results to be materially different from those discussed in
these forward-looking statements. Readers are urged not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
report. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the Securities and Exchange Commission ("SEC") which
attempt to advise interested parties of the risks and factors that may affect
our business, financial condition, results of operation and cash flows,
including the in the field of ethanol and bio-diesel fuel production under "Risk
Factors" in Item 1A of our Annual Report on Form 10K for the fiscal year ended
December 31, 2007. If one or more of these risks or uncertainties materialize,
or if the underlying assumptions prove incorrect, our actual results may vary
materially from those expected or projected.
OVERVIEW
NexGen is currently in the process of raising capital to develop, construct,
and/or acquire, own, and operate blending terminal facilities in the United
States.
NexGen is pursuing a vertically integrated strategy involving the blending of
ethanol and biodiesel through developing/acquiring of blending terminal and
production facilities. The Company plans to build the blending terminal
following the receipt of phase-I financing.
In order to be responsive to changing market conditions in the ethanol and
bio-diesel industries, and in the capital markets, we intend to postpone our
plans to construct or and/or acquire ethanol and bio-diesel plants in favor of
developing a blending terminal first. Two non binding letters of intent
("LOI's") for purchase of majority interests in two separate ethanol production
facilities expired during May 2008 and have not been renewed. The Company
intends to renegotiate those LOI's and/or consider other opportunities to
acquire or construct operating plants as soon as market conditions improve to
the point that conditions become favorable for such developments.
In NexGen's view, controlling assets at both ends of the ethanol and biodiesel
value chains offer a highly effective means for buffering the operating and
financial impacts caused by ethanol and biodiesel price volatility resulting
from feedstock and production output supply/demand imbalances.
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GENERAL
In accordance with the Purchase Agreement, on December 31, 2007, the Company
completed the Plan pursuant to which the Company transferred substantially all
of its existing business and assets in the field of biotechnology and medical
devices to Gamida For Life B.V. and acquired NexGen Bio's principal assets in
the field of ethanol and bio-diesel fuel production.
The Plan was treated as a reverse merger of the Company for financial accounting
purposes. Accordingly, the historical financial statements of the Company before
the Plan will be replaced with the historical financial statements of NexGen Bio
before the Plan in all future filings that the Company makes with the SEC,
including this Report.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTH PERIODS ENDED MARCH 31, 2009 AND 2008(IN
THOUSANDS)
NexGen is a development stage company which has operational cost related to our
efforts to plan, develop, construct and/or acquire biofuels business. These
costs include legal and professional costs, salaries, travel and other.
The Legal and professional cost amounted to $ 11 for the three month period
ended March 31, 2009 compared to $ 223 for the three months ended March 31,
2008.
The salaries for the three month period ended March 31, 2009 amounted to $ 83
compared to $ 223 for the three months ended March 31, 2008.
The travel expenses for the three month period ended March 31, 2009 amounted to
$ 3compared to $ 71 for the three months ended March 31, 2008. Travel costs are
for travel in the U.S. and out of the U.S. in connection with our efforts to
raise funds during 2008.
During the three month period ended March 31, 2009, we had $ 0 in compensation
expenses related to the issuance of shares and option shares to employees and a
director, as compared to $ 475 compensation expenses for the comparable period
of 2008.
Net loss for three month period ended March 31, 2009 amounted to $ 160 and $
1,001 for the three months ended March 31, 2008.
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LIQUIDITY AND CAPITAL RESOURCES (IN THOUSANDS)
The Company's working capital was a negative of $ 158 at March 31, 2008,
compared to a negative of $ 398 at March 31, 2008. Historically, our cash needs
have been satisfied primarily through proceeds from private placements of our
equity securities and related party advances. We expect to continue to be
required to raise capital in the future, but cannot guarantee that such
financing activities will be sufficient to fund our current and future projects
and our ability to meet our cash and working capital needs.
Net cash used in operating activities amounted to $ 93 for the three month
period ended March 31, 2009 compared to $ 664 net cash used in operating
activities for the three months ended March 31, 2008.
Cash provided by investing activities amounted to $ 0 for the three month period
ended March 31, 2009 compared to $ 156 used in investing activities in the three
months ended March 31, 2008.
Cash provided from financing activities amounted to $ 91 for the three month
period ended March 31, 2009 compared to $ 514 for the three months ended March
31, 2008. Financing activities for both periods represent net cash received from
the Company's controlling shareholder for the development of NexGen's business.
Additionally, during the first quarter of fiscal 2008 we raised approximately
$225 through cash generated by the sale of stock via a private offering.
We have an unsecured line of credit in the amount of $500 available through its
controlling shareholder. We believe these funds will be sufficient to fund our
current operations until we obtain the third-party financing to fund the first
phase of our business plan. However, additional funding may not be available
when required or it may not be available on favorable terms. Without adequate
funds, we may need to significantly reduce or refocus our plan of operations or
obtain funds through arrangements that may require us to relinquish rights to
certain or potential markets, either of which could have a material adverse
effect on our business, financial condition and results of operations. Failure
to secure additional financing in a timely manner and on favorable terms when
needed will have a material adverse effect on the Company's ability to continue
as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business.
As of September 30, 2008, the Company was not subject to any off balance
agreements, other than the office lease agreement disclosed under Item 2
"Description of Property" in our Form 10K.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
The Company performed an evaluation of the effectiveness of its
disclosure controls and procedures (as defined in RULES 13A-15(E) AND
15D-15(E) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) AS OF
THE END OF THE PERIOD COVERED BY THIS REPORT. BASED ON THE COMPANY'S
EVALUATION, THE COMPANY'S MANAGEMENT, INCLUDING THE CHIEF EXECUTive
officer, has concluded that the Company's disclosure controls and
procedures as of the end of the period covered by this Report were
effective.
(b) Change in Internal Control over Financial Reporting. No change in the
Company's internal control over financial reporting occurred during
the Company's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect the Company's internal
control over financial reporting.
(c) Management believes that a controls system, no matter how well
designed and operated, cannot provide absolute assurance 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.
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PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
N/A
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 9, 2008, the Company sold 150,000 ordinary shares for an
aggregate purchase price of $225,000 to an accredited investor in a private
placement transaction under Section 4(2) of the Securities Act.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5 OTHER INFORMATION
On January 28, 2008, the Company changed its name from Healthcare Technologies
Ltd. to NexGen Biofuels Ltd.
As of March 2008, our ordinary shares are quoted in the OTC Bulletin Board
("OTC-BB") under the symbol "NXGNF". Prior to February 28, 2008, our ordinary
shares were quoted on the NASDAQ Capital Market under the symbol HCTL (through
February 21, 2008) and thereafter under the symbol NXGN.
In accordance with an agreement dated as of June 17, 2008, effective as of June
1, 2008, the employment of our Chief Financial Officer who was based in Israel
was terminated by mutual agreement of the Company and the executive. The Company
has begun a search in the United States for a replacement CFO.
ITEM 6 EXHIBITS
Exhibit Number, Name and/or Identification of Exhibit
17
INDEX TO EXHIBITS
EXHIBIT NCORP BY
NUMBERR IEF. TO EXH. DESCRIPTION
- ----------- -------------------- -----------
(D) EXHIBITS
EXHIBIT NO. INCORP. BY REFERENCE DESCRIPTION
----------- -------------------- -----------
3.1 1.1(1) Memorandum of Association of the Registrant, as amended
3.2 1.2(2) Articles of Association, restated to include all amendments in
effect as of December 31, 2006
3.3 1.3(3) Amendment to Articles of Association
10.1 4.34(2) Purchase Agreement between Healthcare Technologies Ltd., Gamida For
Life B.V., MAC Bioventures Inc. and NexGen Biofuels Inc.
10.2 4.35(3) Amendment No. 1 to Purchase Agreement.
14 11(2) Code of Ethics
21 (4) List of Subsidiaries
31.1 * Certification of Chief Executive Officer required by Rule
13a-14(a) under the Exchange Act
32.1 * Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley
Act of 2002
99.1 4.33(5) Audit Committee Charter
99.2 4.36(6) AAA Valuation dated May 4, 2007 and letter dated July 13, 2007.
99.3 4.37(6) Valuation from David Boas Business Consultant Ltd., dated January
20, 2007.
- --------------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Annual
Report on Form 20-F for the Fiscal year ended December
31, 1997.
(2) Incorporated by reference to the Registrant's Annual
Report on Form 20-F for the Fiscal year ended December
31, 2006.
(3) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated December 31, 2007.
(4) Incorporated by reference to the Consolidated Financial
Statements that are filed as a part of this Form 10-K.
(5) Incorporated by reference to the Registrant's Annual
Report on Form 20-F for the Fiscal year ended December
31, 2004.
(6) Incorporated by reference to the Registrant's Proxy
Statement filed as an exhibit to the Registrant's Form
6-K dated August 2007, filed on August 16, 2007.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized:
NEXGEN BIOFUELS LTD.
Dated: May 20, 2009
By: /s/ J. Ram Ajjarapu
-----------------------
J. Ram Ajjarapu
Chief Executive Officer
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