UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the nine months period ended September 30, 2009
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-17788
NEXGEN BIOFUELS LTD.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN ITS CHARTERS)
ISRAEL N/A
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8909 REGENTS PARK DRIVE, SUITE 210
TAMPA, FLORIDA 33547
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(813) 293-3534
(REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE)
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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer' and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [_] No [X]
Indicate the number of shares outstanding of each class of Ordinary Shares, as
of the latest practicable date
CLASS OUTSTANDING AS OF NOVEMBER 11, 2009
- ----------------------------------- -----------------------------------
Ordinary Shares, NIS 0.04 Par Value 42,730,198 Shares
NEXGEN BIOFUELS LTD.
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
Consolidated Financial Statements
Consolidated Balance Sheets - June 30, 2009 and December 31, 2008 3-4
Consolidated Statements of Operations - Six months and Three-month
periods ended June 30, 2009 and 2008, and from August 10, 2006
(inception) to June 30, 2009 (unaudited) 5
Consolidated Statements of Cash Flows - For the Six months ended
June 30, 2009 and 2008 and from August 10, 2006 (inception)
to June 30, 2009 6
Notes to Consolidated Financial Statements 7-13
Item 1. Investment in Land Purchase Options 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Controls and Procedures 16
2
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
SEPTEMBER 30, DECEMBER 31,
2 0 0 9 2 0 0 8
-------- --------
UNAUDITED AUDITED
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 2 4
-------- --------
LONG-TERM INVESTMENTS
Investments in land purchase options - 84
-------- --------
PROPERTY AND EQUIPMENT, NET 5 5
-------- --------
Total Assets 7 93
======== ========
The accompanying notes to these financial statements are an integral part
thereof.
3
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
2 0 0 9 2 0 0 8
-------- --------
UNAUDITED AUDITED
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Credits from related parties 903 807
Trade payables 157 217
Other accounts payables 12 13
-------- --------
Total current liabilities 1,072 1,037
-------- --------
SHAREHOLDERS' DEFICIT
Share capital
Ordinary shares NIS 0.04 par value -Authorized 1,900,000,000 shares as
of June 30, 2009 and December 31, 2008;
Issued and outstanding: 42,730,998 shares as of June 30, 2009 and
December 31, 2008 445 445
Additional paid-in capital 2,665 2,665
Accumulated deficit (4,175) (4,054)
-------- --------
Total shareholders' deficit (1,065) (944)
-------- --------
Total liabilities and shareholders' deficit 7 93
======== ========
September 11, 2009
-------------------------------------------- ----------------------
Date of Approval of the Financial Statements Director
The accompanying notes to these financial statements are an integral part
thereof.
4
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
AUGUST 10, 2006
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, THROUGH SEPTEMBER 30,
2009 2008 2009 2008 2 0 0 9
----------- ----------- ----------- ----------- -----------
UNAUDITED UNAUDITED UNAUDITED
----------------------------------- ---------------------------- -----------
EXPENSES:
Legal and professional fees 12 (60) (16) (421) (1,236)
Salaries - (112) (83) (383) (1,189)
Travel 2 (20) (1) (115) (392)
Loss from expiration of land purchase
option and futures trading (21) (42) (84) (62) (315)
Compensation on shares issuance and
options - (43) - (577) (621)
Other expenses 1 (14) (1) (125) (406)
Write-off of balances 64 - 64 - 64
----------- ----------- ----------- ----------- -----------
Net income (loss) from operations 58 (291) (121) (1,683) (4,095)
Interest income (expense) - (1) - (8) (84)
Capital loss - - - - 4
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) 58 (292) (121) (1,691) (4,175)
----------- ----------- ----------- ----------- -----------
Basic and diluted income (loss)
per share 0.001 (0.01) (0.003) (0.04) (0.16)
=========== =========== =========== =========== ===========
Weighted average number of shares used in
computing basic and diluted loss per
share attributed to Ordinary shareholders 42,730,998 42,730,998 42,730,998 42,725,442 25,941,117
=========== =========== =========== =========== ===========
The accompanying notes to these financial statements are an integral part
thereof.
5
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
AUGUST 10, 2006
NINE MONTHS ENDED (DATE OF INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009
-------- -------- --------
UNAUDITED UNAUDITED
------------------------ --------
OPERATING ACTIVITIES
Net loss (121) (1,691) (4,175)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation expenses -.- -.- 1
Compensation related to share and option
issuance to employees -.- 577 577
Expiration of land purchase option and
futures trading 84 62 240
Issuance of shares -.- -.- 187
Increase (decrease) in other receivables -.- (19) 5
Increase (decrease) in trade payables (60) (133) 268
Increase (decrease) in other accounts payables (1) (36) 458
-------- -------- --------
Net cash used in operating activities (98) (1,240) (2,439)
-------- -------- --------
INVESTING ACTIVITIES
Purchase of computer equipment -.- -.- (4)
Cash used in connection with acquisition -.- -.- (280)
Repayment of Gamida For Life B.V. debt -.- 397 397
Repayment of loan to Gamidor Diagnostics -.- (230) (230)
Investments in land purchase options and
futures trading -.- (19) (193)
-------- -------- --------
Net cash provided by (used in) investing
activities -.- 148 (310)
-------- -------- --------
FINANCING ACTIVITIES
Credit from related party 96 700 2,417
Repayment of short term bank credit -.- (39) (39)
Purchase of treasury shares -.- -.- (68)
Proceeds from issuance of shares -.- 439 441
-------- -------- --------
Net cash provided by financing activities 96 1,100 2,749
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (2) 8 2
CASH AT BEGINNING OF PERIOD 4 1 -.-
-------- -------- --------
CASH AT END OF PERIOD 2 9 2
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
6
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 1: - ORGANIZATION AND BASIS OF PRESENTATION
a. General
NexGen Biofuels Ltd. (formally: Healthcare Technologies Ltd.) and its
subsidiaries (the "Company" or "NexGen"), is a development stage
company that is currently seeking to green develop and/or acquire
blending terminal facilities and, ethanol and bio-diesel plants in the
United States.
NexGen Biofuels Ltd. was established as an Israeli corporation. Prior
to closing of the Purchase Agreement on December 31, 2007, the
Company's business was in the field of diagnostic and biotech. In
accordance with the Purchase Agreement, dated January 16, 2007, as
amended (the "Purchase Agreement"), and consummated on December 31,
2007, by and among, the Company, NexGen Biofuels, Inc., ("NexGen
Bio"), MAC Bioventures Inc., ("MAC"), the parent company of NexGen
Bio, and Gamida for Life B.V., ("Gamida"), the parent company of
NexGen, the Company completed a Plan of Arrangement (the "Plan") as
following:
1. The Company transferred substantially all of its existing assets
and liabilities to Gamida, in consideration for 4,700,000 shares
of the Company held by Gamida.
2. NexGen Bio transferred its principal assets (the "NexGen Assets")
in the ethanol and biodiesel fuel industry consisting of options
to purchase five Greenfield sites in the United States and
permitting for 100 million gallons of annual ethanol or
bio-diesel production capacity per site to NexGen 2007, Inc
("NewCo"), a wholly-owned subsidiary of the Company;
3. The Company issued to MAC and MAC's designees an aggregate of
38,280,000 ordinary shares, representing the $58 million
appraised value of the NexGen Assets divided by $1.50 (the agreed
upon value of NexGen share) less 1%; In addition, the Company
issued 386,666 ordinary shares to one of its directors. see also
note 2a.
The Plan was approved by the shareholders on December 4, 2007.
Prior to the Plan, the Company had no substantial operations as it had
transferred all of its existing assets to Gamida. Therefore, the
financial statements and accompanying notes represent the historical
results of NexGen Bio, unless otherwise stated.
On January 28, 2008, the Company changed its name from Healthcare
Technologies Ltd. to NexGen Biofuels Ltd.
7
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 1: - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)
b. Development Stage Enterprise
The Company has been in the development stage since its formation on
August 10, 2006. It has primarily been engaged in the development of
blending terminals and ethanol/biodiesel plants while raising capital
to carry out its business plan. The Company expects to continue to
incur significant operating losses and to generate negative cash flow
from operating activities while it develops projects, its customer
base and establishes itself in the marketplace. The Company's ability
to eliminate operating losses and to generate positive cash flow from
operations in the future will depend upon a variety of factors, many
of which the Company may be unable to control. If the Company is
unable to implement its business plan successfully, it may not be able
to eliminate operating losses, generate positive cash flow, or achieve
or sustain profitability, which would materially adversely affect its
business, operations, and financial results, as well as its ability to
make payments on its debt obligations.
c. Going Concern
The Company incurred a net loss of $4.175 million for the period
August 10, 2006 (inception) through September 30, 2009. As of
September 30, 2009 the Company had $1.070 million of negative working
capital, a deficit of $1.07 million and $2 thousand of cash. The
Company depends upon capital to be derived from future financial
activities, such as future offerings of its Ordinary Shares, or debt
financing in order to operate and increase or expand the business.
There can be no assurance that the Company will be successful in
raising such capital. The key factors that are not within the
Company's control and that have a direct bearing on operating results
include, but are not limited to, acceptance of the Company's business
plan, the ability to raise capital in the future, the ability to
expand its customer base, and the ability to hire key employees to
increase or expand the business. There may be other risks and
circumstances that management may be unable to predict. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments relating to recoverability
of assets and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
8
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 1: - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)
d. Basis of Presentation-Interim Financial Statements
The accompanying unaudited interim consolidated financial statements
and related notes have been prepared in accordance with accounting
principles generally accepted in the United States of America for
interim financial information and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. Results for
interim periods should not be considered indicative of results for a
full year. These interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2008. Except as disclosed in Note 1e
below, the accounting policies used in preparing these consolidated
financial statements are the same as those described in the
consolidated financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2008 filed on April 15,
2009.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair statement of
the results for interim periods have been included. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
9
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 1: - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)
E. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FAS 157-4 - DETERMINING FAIR VALUE WHEN THE VOLUME AND LEVEL OF
ACTIVITY FOR THE ASSET OR LIABILITY HAVE SIGNIFICANTLY DECREASED AND
IDENTIFYING TRANSACTIONS THAT ARE NOT ORDERLY:
In April 2009, the FASB Issued FAS No. 157-4, "Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly"
This FASB Staff Position (FSP) provides additional guidance for
estimating fair value in accordance with FASB Statement No. 157, FAIR
VALUE MEASUREMENTS, when the volume and level of activity for the
asset or liability have significantly decreased. This FSP also
includes guidance on identifying circumstances that indicate a
transaction is not orderly. FAS No. 157-4 is in effect for interim
reporting periods ending after June 15, 2009. The company believes
that it will not have an impact on its financial statements.
FAS 107-1 AND APB 28-1 - INTERIM DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS:
On April, 2009 the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Values of Financial Instruments, which amends
SFAS 107, Disclosures about Fair Values of Financial Instruments, and
requires that companies also disclose the fair value of financial
instruments during interim reporting similar to those that are
currently provided annually. FSP No. FAS 107-1 and APB 28-1 is
effective for interim reporting periods ending after June 15, 2009 and
had no impact on the Company's financial statements.
FAS 115-2 AND FAS 124-2 - RECOGNITION AND PRESENTATION OF
OTHER-THAN-TEMPORARY IMPAIRMENTS:
In April 2009, the FASB Issued FAS No. 115-2 and FAS No. 124-2,
"Recognition and Presentation of Other-Than-Temporary Impairments".
This FSP amends the other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments in the
financial statements. The most significant change the FSP brings is a
revision to the amount of other-than-temporary loss of a debt security
recorded in earnings. FSP FAS 157-4 and FSP FAS 115-2/FAS 124-2 must
be adopted at the same time.
FSP FAS 115-2 and FAS 124-2 is effective for interim and annual
reporting periods ending after June 15, 2009, and has no material
impact on the Company's financial statements.
10
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 1: - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)
SFAS NO. 165 - SUBSEQUENT EVENTS
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS
165") to establish general standards of accounting for and disclosures
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. SFAS 165 also
requires entities to disclose the date through which subsequent events
were evaluated as well as the rationale for why that date was
selected. SFAS 165 is effective for interim and annual periods ending
after June 15, 2009. The adoption of SFAS 165 did not have a material
impact on the Company's financial position, results of operations,
cash flows and disclosures.
FASB ISSUED SFAS NO. 168 - CODIFICATION
In June 2009, the FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a replacement of
FAS No. 162, as codified in FASB ASC topic 105, Generally Accepted
Accounting Principles ("ASC 105"). ASC 105 establishes that the FASB
Accounting Standards Codification ("Codification") will become the
authoritative source of U.S. GAAP and that rules and interpretive
releases of the SEC will also be sources of authoritative GAAP for SEC
registrants. Following ASC 105, the FASB will not issue new standards
in the form of Statements, FASB Staff Positions or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards
Updates.
NOTE 2: - COMMITMENTS AND CONTINGENT LIABILITIES
Options
a. On January 9, 2008, the Company granted one of its executives 650,000
options to purchase Ordinary shares of the Company under the ISO Plan.
The Options have the following terms, among others: (i) a term of 5
years, subject to earlier expiration; (ii) an exercise price of $1.50
per share, and (iii) vesting and exercise rights in five annually
equal installments of 130,000 shares each. The Company has accounted
for these options in accordance with FAS123(R). The fair value of each
option is estimated on the date of grant using a Black-Scholes option
pricing model. As of June 1 2008, the employment agreement with the
executive was terminated by mutual agreement. The total grant fair
value recorded was $ 28 thousand.
According to the Purchase Agreement, the Company granted to Israel
Amir 386,666 Ordinary Shares for his willingness to commit to serve as
a director of the Company for a period of no less than two years after
the Closing. The Company has accounted for this grant in accordance
with FAS123(R). The total grant date fair value was $ 352 thousand,
reflecting the quoted market price of the Company's Ordinary shares as
of the date of grant over the purchase price of $ 0 as compensation
expense, ratably over the release two years period of the restricted
shares. The agreement was terminated. The total grant fair value
recorded was $176 thousand.
b. All directors of the Company, except one, have resigned. This
situation does not meet the requirements of the Israeli Corporate law
as to minimal number of directors required by a public company.
11
NEXGEN BIOFUELS AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
NOTE 3: - RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2009, the Company recorded
related party salary in the amount of $83 thousand.
12
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.
After the LOI expired on August 31, 2009, World Venture Management has not
renewed its non-binding Letter of Intent. No further negotiations are
expected.
13
ITEM 1: - INVESTEMENTS IN LAND PURCHASE OPTIONS
On August 17, 2009 Council Bluffs Biofuels the final land option expired.
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.
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.
14
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 MONTHS AND NINE MONTHS PERIODS ENDED SEPTEMBER 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 $(12) for the three months ended
September 30, 2009 compared to $60 for the three months ended June 30, 2008. The
legal and professional costs amounted to $16 for the nine months ended September
30, 2009 compared to $421 for the nine months ended September 30, 2008.
The salaries for the three months ended September 30, 2009 amounted to $0
compared to $112 for the three months ended September 30, 2008. The salaries for
the nine months ended September 30, 2009 amounted to $83 compared to $383 for
the nine months ended September 30, 2008.
The travel expenses for the three months ended September 30, 2009 amounted to
$(2) compared to $20 for the three months ended September 30, 2008. The travel
expenses for the nine months ended September 30, 2009 amounted to $1 compared to
$115 for the nine months ended September 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 September 30, 2009, we had $0 in compensation
expenses related to the issuance of shares and option shares to employees and a
director, compared to $43 compensation expenses for the comparable period of
2008. During the nine months ended September 30, 2009, we had $0 in compensation
expenses related to the issuance of shares and option shares to employees and a
director, compared to $577 compensation expenses for the comparable period of
2008.
Net income/loss for the three months ended September 30, 2009 amounted to $(58)
and $291 for the three months ended September 30, 2008. Net loss for the nine
months ended September 30, 2009 amounted to $121 and $1,691 for the nine months
ended September 30, 2008.
LIQUIDITY AND CAPITAL RESOURCES (IN THOUSANDS)
The Company's working capital was a negative of $156 at September 30, 2009,
compared to a negative of $287 at September 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 $98 for the nine months period
ended September 30, 2009 compared to $1240 net cash used in operating activities
for the nine months ended September 30, 2008.
15
Cash provided by investing activities amounted to $0 for the nine months period
ended September 30, 2009 compared to $148 used in investing activities in the
nine months ended September 30, 2008.
Cash provided from financing activities amounted to $96 for the nine months
period ended September 30, 2009 compared to $1,100 for the nine months ended
September 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.
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, 2009, 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 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.
16
INDEX TO EXHIBITS
(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.
17
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: November 12, 2009
By: /s/ J. Ram Ajjarapu
-----------------------
J. Ram Ajjarapu
Chief Executive Officer
(and) Acting Chief Financial Officer
18