NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 4 - OTHER SIGNIFICANT CURRENT PERIOD EVENTS
On March 29, 2009, the Company announced that it had signed a non-binding
Letter of Intent with World Venture Management, Inc., a Nevada based
company (hereinafter: "WVM") and Mac Bioventures, Inc. The transaction
includes (i) the transfer to NexGen of WVM's assets relating to its real
estate acquisitions and asset management enterprises, such as
hotel/casinos, wineries and vineyards, refineries, office buildings and
apartment complexes, shopping malls and other commercial buildings, in
addition to the management of certain assets such as gemstones, gold and
diamonds and in-ground assets such as coal and oil, gas and natural gas, in
the United states in consideration for a controlling stake in NexGen and
(ii) the purchase of NexGen's holdings in its subsidiaries by Mac
Bioventures in consideration for a part of the debt it is assuming in
NexGen. This agreement was further extended until August 31, 2009.
The Letter of Intent further contemplates that the number of shares up to
65 million to be issued in consideration for WVM's assets shall be based on
the valuation of the assets to be provided by a recognized valuation firm.
Closing of the transaction is subject to the negotiation and execution of
definitive agreements, the completion of due diligence, the receipt of the
necessary corporate, regulatory and third party approvals, including
NexGen's shareholders and the approval of an Israeli District Court. No
assurance can be given that a definitive agreement will be signed or that
the transaction will close.
ITEM 1:- INVESTEMENTS IN LAND PURCHASE OPTIONS
Due to the depressed state of the ethanol/biodiesel industry, coupled with
lack of Greenfield project financing for ethanol/biodiesel projects, the
Company will not extend any of the land options upon expiration.
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.
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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 seeking to raise capital to develop,
construct, and/or acquire, own, and operate ethanol and biodiesel 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 the majority interest 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.
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.
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RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS AND SIX MONTHS PERIODS ENDED JUNE 30, 2009 AND
2008 (IN THOUSANDS)
NexGen is a development stage company which has not yet generated any revenues
from operations, but which has operational costs 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 costs amounted to $17 for the three months ended June
30, 2009 compared to $138 for the three months ended June 30, 2008. The legal
and professional costs amounted to $28 for the six months ended June 30, 2009
compared to $361 for the six months ended June 30, 2008.
The salaries for the three months ended June 30, 2009 amounted to $0 compared to
$115 for the three months ended June 30, 2008. The salaries for the six months
ended June 30, 2009 amounted to $83 compared to $271 for the six months ended
June 30, 2008.
The travel expenses for the three months ended June 30, 2009 amounted to
$0compared to $24 for the three months ended June 30, 2008. The travel expenses
for the six months ended June 30, 2009 amounted to $3 compared to $95 for the
six months ended June 30, 2008. Travel costs are for travel in the U.S. and out
of the U.S. in connection with the land purchase options, the Purchase Agreement
during 2007 and, our efforts to raise funds during 2009.
During the three months ended June 30, 2009, we had $ 0 in compensation expenses
related to the issuance of shares and option shares to employees and a director,
compared to $59 compensation expenses for the comparable period of 2008. During
the six months ended June 30, 2009, we had $0 in compensation expenses related
to the issuance of shares and option shares to employees and a director,
compared to $534 compensation expenses for the comparable period of 2008.
Net loss for the three months ended June 30, 2009 amounted to $19 and $394 for
the three months ended June 30, 2008. Net loss for the six months ended June 30,
2009 amounted to $179 and $1,392 for the six months ended June 30, 2008.
LIQUIDITY AND CAPITAL RESOURCES (IN THOUSANDS)
The Company's working capital was a negative of $ 156 at June 30, 2009, compared
to a negative of $287 at June 30, 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 $(96) for the six months
period ended June 30, 2009 compared to $(1,047) net cash used in operating
activities for the six months ended June 30, 2008.
Cash provided by investing activities amounted to $0 for the six months period
ended June 30, 2009 compared to $167 used in investing activities in the six
months ended June 30, 2008.
Cash provided from financing activities amounted to $94 for the six months
period ended June 30, 2009 compared to $881for the six months ended June 30,
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.
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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 June 30, 2009, the Company was not subject to any off balance agreements,
other then 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 and the principal Financial 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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