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Prospectus
Supplement
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Filed
Pursuant to Rule 424(b)(5)
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(to Prospectus dated January
27, 2009)
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Registration
No. 333-156449
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5,000,000
Shares of Common Stock
Warrants
to Purchase 1,250,000 Shares of Common Stock
We are offering 5,000,000 shares of our
common stock, $0.001 par value per share, and warrants to purchase 1,250,000
shares of our common stock (and the underlying shares of common stock issuable
from time to time upon exercise of the warrants). The common stock and warrants
will be sold such that for each share of our common stock purchased, an investor
will receive a warrant to purchase 0.25 shares of our common stock at an
exercise price of $0.30 per share. The warrants are exercisable at any time
after the six-month anniversary of their date of issuance and will expire on the
fifth anniversary of their date of issuance. Each share will be sold at a price
of $0.20. The shares of common stock and warrants are immediately separable and
will be issued separately.
Our common stock is listed on The
NASDAQ Capital Market under the symbol “NGBF”. The last reported sale price of
our common stock on The NASDAQ Capital Market on August 13, 2010 was $0.25 per
share. We do not intend that the warrants will trade on any exchange or be
listed for quotation on any market.
Investing in our securities involves
risks. See the “Risk Factors” beginning on page S-5 of this
prospectus supplement and incorporated by reference from our Annual Report on
Form 10-K for the year ended December 31, 2009, and in subsequent filings with
the Securities and Exchange Commission, or SEC.
As of July 31, 2010, the aggregate
market value of our outstanding common stock held by non-affiliates was
approximately $21,275,299, based on 38,682,361 shares of outstanding common
stock, of which 8,924,650 shares are held by affiliates, and a price of $0.55
per share, which was the last reported sale price of our common stock as quoted
on The NASDAQ Capital Market on June 17, 2010. As of the date hereof, including
the securities being offered hereunder, we have offered securities with an
aggregate market value of approximately $4,067,165, consisting of the 8,037,362
shares of our common stock and warrants to purchase 2,383,431 shares of our
common stock issued in December 2009 and June 2010, pursuant to General
Instruction I.B.6. of Form S-3 during the prior 12 calendar month period that
ends on, and includes, the date of this prospectus supplement.
Palladium Capital Advisors, LLC is
acting as our placement agent in connection with this offering. The placement
agent is not purchasing or selling any of these securities nor is it required to
sell any minimum specific number or dollar amount of securities but has agreed
to use its best efforts to sell the securities offered by this prospectus
supplement. In consideration for its services, we have agreed to pay the
placement agent the aggregate fees set forth in the table below.
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Per
Share
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Maximum
Offering
Amount
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Public
offering price of shares
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$
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0.20
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$
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1,000,000
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Placement agent
fees
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$
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0.01
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$
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70,000
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Proceeds, before expenses, to
New Generation Biofuels Holdings, Inc.
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$
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0.19
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$
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930,000
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Because there is no minimum offering
amount required as a condition to the closing of this offering, the actual
public offering amount, placement agent fees and proceeds to us are not
presently determinable and may be substantially less than the maximum amounts
set forth above. We expect that delivery of the shares being offered pursuant to
this prospectus supplement will be made to purchasers on or about August 17,
2010.
Neither the SEC nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
Palladium
Capital Advisors, LLC
Placement
Agent
The date of this prospectus
supplement is August 16, 2010
TABLE OF CONTENTS
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Page
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Prospectus
Supplement
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About
this Prospectus Supplement
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S-i
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Summary
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S-1
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Risk
Factors
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S-5
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Special
Note Regarding Forward-Looking Statements
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S-8
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Use
of Proceeds
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S-9
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Dilution
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S-9
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Description
of Securities
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S-11
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Plan
of Distribution
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S-13
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Legal
Matters
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S-14
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Experts
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S-14
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Incorporation
of Certain Information by Reference
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S-15
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Where
You Can Find More Information
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S-15
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Accompanying
Prospectus
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About
this Prospectus
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1
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Our
Company
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1
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Cautionary
Note Regarding Forward-Looking Statements
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2
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Risk
Factors
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2
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Use
of Proceeds
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3
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Description
of Securities
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4
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Plan
of Distribution
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7
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Legal
Matters
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8
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Experts
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8
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Where
You Can Find More Information
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10
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Incorporation
of Certain Information by Reference
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10
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ABOUT THIS PROSPECTUS
SUPPLEMENT
This prospectus supplement and the
accompanying prospectus are part of a “shelf” registration statement on
Form S-3 (No. 333-156449) that we filed with the SEC. This prospectus
supplement describes the specific terms of this offering. The accompanying
prospectus, including the documents incorporated by reference, provides general
information about us, some of which, such as the section therein entitled “Plan
of Distribution,” may not apply to this offering. Generally, when we refer to
this prospectus, we are referring to both parts of this document, this
prospectus supplement and the accompanying prospectus, combined.
We urge you to carefully read this
prospectus supplement, the accompanying prospectus and the documents
incorporated herein and therein, before buying any of the securities being
offered under this prospectus supplement. These documents contain information
you should consider when making your investment decision.
You should rely only on the information
contained or incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and the placement agent has not,
authorized anyone to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. This
prospectus supplement may add, update or change information contained in the
accompanying prospectus. To the extent any information in this prospectus
supplement is inconsistent with the accompanying prospectus, you should rely on
the information in this prospectus supplement. The information in this
prospectus supplement will be deemed to modify or supersede those made in the
accompanying prospectus and the documents incorporated by reference therein,
except for those documents incorporated by reference therein which we file
with the SEC after the date hereof.
You should not assume that the
information contained or incorporated by reference in this prospectus supplement
and the accompanying prospectus is accurate on any date subsequent to the date
set forth on the front cover of this prospectus supplement and the accompanying
prospectus or on any date subsequent to the date of the document incorporated by
reference, as applicable. Our business, financial condition, results of
operations and prospects may have changed since those dates.
We
are offering to sell, and seeking offers to buy, the securities described in
this prospectus supplement only in jurisdictions where offers and sales are
permitted. The distribution of this prospectus supplement and the offering of
the securities in certain jurisdictions may be restricted by law. Persons
outside the United States who come into possession of this prospectus supplement
must inform themselves about, and observe any restrictions relating to, the
offering of the securities and the distribution of this prospectus supplement
outside the United States. This prospectus supplement does not constitute, and
may not be used in connection with, an offer to sell, or a solicitation of an
offer to buy, any securities offered by this prospectus supplement by any person
in any jurisdiction in which it is unlawful for such person to make such an
offer or solicitation.
We are not making any representation to
you regarding the legality of an investment in the common stock, warrants and
underlying common stock by you under applicable law. You should consult with
your own legal advisors as to the legal, tax, business, financial and related
aspects of a purchase of these securities.
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SUMMARY
This summary is not complete
and does not contain all of the information that you should consider
before investing in the securities offered by this prospectus. You should
read this summary together with the entire prospectus supplement and
accompanying prospectus, including our financial statements, notes to
those financial statements and the other documents that are incorporated
by reference in this prospectus supplement, before making an investment
decision. See the “Risk Factors” section of this prospectus supplement on
page S-5 and those in our Annual Report on Form 10-K for the year ended
December 31, 2009, and in subsequent filings with the SEC, which are
incorporated by reference herein for a discussion of the risks involved in
investing in our securities.
New Generation Biofuels
Holdings, Inc.
We
are a renewable biofuels provider that is marketing a new class of “second
generation” biofuels for use in diesel fuel applications, including power
generation, commercial and industrial heating and marine transportation,
that began generating revenues in 2008.
We
produce our biofuels using a proprietary blending technology that we
believe is simpler, cleaner, less expensive, and less energy intensive
than the complex chemical reaction process used to produce traditional
biodiesel. We believe that this technology gives us a competitive
advantage by enabling us to produce biofuels that are cleaner and less
expensive than our competitors. Our technology also gives us the
flexibility to produce our biofuel from multiple feedstocks, which allows
us to use non-edible raw materials in our production process, when
desirable. We believe that these fuel characteristics will enable us to
customize our product to specific customer requirements and react more
quickly to trends in the biofuels market.
During
the year ended December 31, 2009, we commenced our principal business
operations and
have exited the development stage. Prior to
that, from our inception, we were a development stage entity in accordance
with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 915,
“Development
Stage Entities.”
We
have incurred annual operating losses since inception and expect to incur
substantial operating losses in the future in connection with the
development of our core products. As of March 31, 2010, we had an
accumulated deficit of $53.5 million. The operation and
development of our business will require substantial additional
capital to fund our operations, payments due under our exclusive
license, the acquisition or development of manufacturing plants, research
and development and working capital and general corporate
purposes.
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Our near-term business strategy involves the
following:
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Direct
Sales.
We are seeking to develop a revenue stream from
direct sales of our biofuel produced at our Baltimore production facility.
Based on existing contracts with our customers, we are seeking to expand
our facility over the next several months, if sufficient resources are
available. Our longer term strategy would include construction
of additional plants.
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Technology
Licensing
. As a second potential revenue stream, our
business plan contemplates collecting royalties through sublicensing our
proprietary technology where it is more efficient for manufacturers to
produce our biofuel at their own plants rather than requiring production
at our facilities. We are in the process of exploring various technology
licensing relationships.
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Government Tax
Credits
. We are also pursuing our eligibility and
qualification for tax credits and other government incentives to
strengthen the competitive position of our biofuel and to otherwise
attempt to take advantage of the U.S. government’s encouragement of
“green” technologies.
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Strategic
Partners
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partners who would both provide funding and support our efforts to develop
our production capacity and attract customers.
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Research and
Development
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resources, we are continuing to develop our technology and extend it to
fuels with additional applications.
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Our
principal executive office is located at 5850 Waterloo Road, Suite 140,
Columbia, Maryland 21045. Our telephone number is (410)
480-8084. Our website is
www.newgenerationbiofuels.com
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The information on our website or any other website is not incorporated by
reference into this prospectus supplement or any accompanying
prospectus.
Recent
Developments
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Significant
recent developments regarding our company include the
following:
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On
July 21, 2010 the Company announced that it has filed for a patent
application for their new pyrolysis oil based biofuels.
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On
July 14, 2010, the Company announced that they and Burmeister and Wain
Energy A/S ("BWE") an engineering organization located in Lyngby, Denmark
have entered into a Memorandum of Understanding (MOU) to cooperatively
expand the use of NGBF’s renewable biofuels technology with BWE's
engineering expertise in power generation and green renewable
applications. The two companies believe there are substantial mutual
benefits that can arise from the collaborations of BWE's expertise in
combustion systems and NGBF's biofuel production know-how and proprietary
technology. The companies intend to explore business opportunities to
provide renewable energy solutions to BWE's existing
customers.
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On
June 24, 2010, the Company announced that the Baltimore City Board of
School Commissioners has approved a long term boiler test and evaluation
of the Company's proprietary biofuel in two of Baltimore City's public
schools over a one year period. The maximum volume for the program is
capped at 1,000,000 gallons, but can be increased up to 2,000,000 gallons
if both parties agree.
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On
June 23, 2010, we received a letter from The Nasdaq Stock Market notifying
us that a Staff determination has been made to delist our securities from
The Nasdaq Capital Market due to our non-compliance with the Nasdaq
Listing Rule 5550(a)(2) which requires our common stock to maintain a
minimum bid price of $1.00 per share and our inability to regain
compliance with the rule within the 180 calendar days given to us in
accordance with Listing Rule 5810(c)(3)(A). In addition, our inability to
comply with the minimum stockholders’ equity requirement of $2.5 million
or to meet the alternative minimum market value of listed securities or
minimum net income from continuing operations as of the period ending
March 31, 2010 serves as an additional basis for delisting our
securities.
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Pursuant
to the procedures set forth in the Nasdaq Listing Rules, we have appealed
the Staff determination to a Nasdaq Listing Qualifications Panel (the
“Panel”) by requesting a hearing, and our common stock would remain listed
on the Nasdaq Capital Market pending a final determination by the Panel
Our hearing was held on August 5, 2010. We are currently awaiting a
response from the panel. If successful, the Panel could grant up to an
additional 180 calendar days, or until December 20, 2010, for us to regain
compliance with the Nasdaq Listing Rules. There is no assurance that we
will be successful in our appeal and will remain listed on
Nasdaq.
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On
June 10, 2010, the Company completed a private placement of our common
stock and warrants, raising $500,000 in gross proceeds and approximately
$437,000 in net proceeds, after deducting finders’ fees
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On
June 3, 2010, we and Regent Trend Investment Ltd. (soon to be Milestone
Biofuels Limited) (“Milestone”) announced an amendment to our non-binding
MOU, dated March 12, 2010 to extend the due diligence period an additional
90 days to August 25, 2010 to more fully explore the opportunities
available for both parties. As previously disclosed, the MOU contemplates
a strategic relationship between Milestone and us, including a $20 million
direct equity investment in us and collaboration with Milestone to fund a
joint venture to develop and operate biofuel production plants in the
continental United States with a production capacity of 250 million
gallons per year. In addition to satisfactory completion of due diligence,
any transaction also remains subject to negotiation and execution of
definitive agreements and board approval by both parties. The
transaction obtained shareholder approval as required under NASDAQ listing
rules, at our annual shareholders’ meeting on July 8,
2010. There can be no assurance that the transaction will be
completed, either on the proposed terms and within the timeframe currently
anticipated, or at all
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On
May 27, 2010 the Company announced they have filed a patent application on
their new glycerin-based biofuel.
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On
May 12, 2010, we issued a termination notice to Fenix Energy (Fenix) to
terminate our biofuel contract with Fenix as a result of
Fenix’s failure to post the mandatory letter of credit equal to
one month’s projected sales that we requested in March 2010. The
termination is effective immediately, although Fenix had a 30 day
cure period, which they did not meet. The contract is now fully
terminated. This contract was our largest single biofuel sales
contract, under which Fenix had agreed to purchase a minimum of
750,000 gallons of our biofuel per month for 12 months.
We
are continuing to work to advance several potential customers in our
pipeline from negotiation to executed contracts. We believe that we will
be able to offset the volume lost from the Fenix termination with some
delay relative to when product might have been shipped under the Fenix
contract, although there can be no assurance that we will be able to do
so.
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On
May 7, 2010, the Company’s board of directors completed several management
and organizational changes, including appointing John E. Mack, our current
audit committee chairman, as non-executive Chairman of the Board and David
H. Goebel, our Chief Operating Officer, as a director, and accepting the
resignation of Lee S. Rosen as Chairman and as director and approving a
separation agreement with Mr. Rosen.
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On
April 30, 2010, we completed a private placement of 90-day secured
convertible notes and warrants to two investors, raising $700,000 in gross
proceeds and $630,000 in net proceeds, after deducting finders’ fees. In
August the investors agreed to extendthe maturity dates of the notes to
August 31, 2010 ($500,000 note) and August 19, 2010 ($200,000 note)
respectively. We have a 10 business day cure period if we fail to payoff
the notes or the investor does not convert upon the maturity
date.
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The
Offering
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Common
stock offered by us:
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5,000,000
shares.
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Common
stock to be outstanding after this offering:
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43,682,361shares
of common stock or 44,932,361 shares of common stock if the warrants
offered hereby are exercised in full.
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Warrants
offered by us:
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Warrants
to purchase up to 1,250,000 shares of common stock. The warrants have an
exercise price of $0.30 per share, and will be exercisable at any time
after the six-month anniversary of their date of issuance and will expire
on the fifth anniversary of their date of issuance. This prospectus
supplement also relates to the offering of the shares of common stock
issuable upon exercise of the warrants.
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Use
of proceeds:
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We
intend to use the net proceeds received from the sale of the securities to
fund operations and for working capital and general corporate purposes. We
may also repay all or a portion of our secured convertible notes due in
August 2010. See “Use of Proceeds” on page S-9.
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NASDAQ
Capital Market Symbol:
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NGBF
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Risk
Factors:
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See
“Risk Factors” beginning on page S-5 for a discussion of factors that you
should read and consider carefully before investing in our
securities.
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The
fully diluted number of shares of our common stock outstanding after this
offering is based on 38,682,361 shares outstanding as of July 31,
2010, which excludes:
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10,548,711
shares subject to outstanding options as of July 31, 2010, having a
weighted average exercise price of $2.76 per share;
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13,452,253
shares of our common stock issuable upon exercise of outstanding warrants
as of
July
31, 2010, having an weighted average exercise price of $1.69 per
share;
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3,141,616
shares of common stock available for future issuance under our Omnibus
Incentive Plan;
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1,826,561
shares of common stock issuable upon the conversion of outstanding Series
B convertible preferred stock, at a conversion price of $3.00 per share
(which convert automatically in March 2011); and
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1,250,000
shares issuable upon the exercise of warrants to be issued in this
offering, at an exercise price of $0.30 per share.
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The
number of shares of our common stock outstanding after this offering on a
fully diluted basis (giving effect to the conversion of outstanding
preferred stock and exercise of vested options and warrants which are in
the money) as of August 16, 2010 equaled 45,508,922.
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RISK
FACTORS
An
investment in our securities involves a high degree of risk. Before making an
investment decision, you should carefully consider the risks described below and
those in our Annual Report on Form 10-K for the year ended December 31, 2009,
and in our subsequent filings with the SEC, which are incorporated by reference
herein, and the other information set forth or incorporated by reference in this
prospectus supplement and the accompanying prospectus. You also should refer to
our financial statements and the notes to those statements, which are
incorporated by reference in this prospectus supplement. See also the
information contained under the heading “Special Note Regarding Forward-Looking
Statements” immediately below.
Assuming
receipt of $1,000,000 in gross proceeds, this offering will only provide
financing through October 2010, and we will need to raise additional capital to
continue our business, which may not be available on acceptable terms or at
all.
Based on our current estimates, we
anticipate that our existing financial resources, including the expected net
proceeds to us from this offering, will be adequate to permit us to continue to
conduct our business through at least October 2010. As of July 31, 2010, we had
approximately $0.03 million of available cash and approximately $3.9 million of
short-term debt, accounts payable and accrued expenses. On July 29, 2010,
$700,000 of our 90-day secured convertible notes issued in April 2010 were
scheduled to mature. The maturity dates of the notes were extended and with
$200,000 and $500,000 maturing on August 19 and 31, respectively. We also may
owe certain lease payments under our site lease and terminaling services
agreement for our Baltimore production facility and are negotiating to settle
various issues by reducing rent payments and modifying certain terms of the
agreements in return for making certain payments. In addition, under the license
agreement with the inventor of our proprietary technology, we are required to
pay $1.0 million per year over the next four years, with the next $1 million due
in March 2011. If we are unable to raise additional capital, we will not be able
to continue our business. We cannot ensure that additional funding will be
available or, if available, that it can be obtained on terms and conditions we
will deem acceptable. Additional funding derived from the sale of equity
securities is likely to result in dilution to our existing shareholders,
including investors in this offering.
If
we do not meet Nasdaq requirements for continued listing, our common stock may
be delisted which could negatively impact our stock’s liquidity.
Under Nasdaq listing rules, our common
stock could be delisted from Nasdaq if we do not meet certain standards
regarding our financial condition and operating results (including, among other
factors, maintaining adequate shareholders’ equity, minimum $1.00 bid price and
market capitalization), the distribution of our publicly held securities and
compliance with Nasdaq listing agreements and SEC rules and regulations. For
example, Nasdaq requires a minimum shareholders’ equity of $2.5 million or,
alternatively, a market value of listed securities of at least $35 million. On
March 26, 2010, we filed our annual report on Form 10-K for the year ended
December 31, 2009, in which we reported shareholders’ equity of $1,002,204. In
early April 2010, we received notice from Nasdaq that our shareholders’ equity
did not meet the minimum continued listing requirement of $2.5 million, based on
our balance sheet as of December 31, 2009.
As of
June 30, 2010, we also did not meet the alternative listing requirements of at
least $35 million in market value of listed securities or at least $500,000 in
net income from continuing operations. Further, listed companies
whose securities fall below the minimum $1.00 bid requirement for continued
listing for 30 consecutive business days can be subject to delisting. In
December 2009, we received a notice from NASDAQ
that we
were not in compliance with the minimum bid requirement for 30 consecutive
business days and had until June 2010 to regain compliance. Our
common stock has not traded above $1.00 on NASDAQ since December 2009. On June
23, 2010, we received a letter from The NASDAQ Stock Market notifying us that a
Staff determination has been made to delist our securities from The NASDAQ
Capital Market due to our non-compliance with the Nasdaq Listing Rule 5550(a)(2)
which requires our common stock to maintain a minimum bid price of $1.00 per
share and our inability to regain compliance with the rule within the 180
calendar days given to us in accordance with Listing Rule 5810(c)(3)(A). In
addition, our inability to comply with the minimum stockholders’ equity
requirement of $2.5 million or to meet the alternative minimum market value of
listed securities or minimum net income from continuing operations as of the
period ending March 31, 2010 serves as an additional basis for delisting our
securities.
Pursuant
to the procedures set forth in the NASDAQ Listing Rules, we have appealed the
Staff determination to a NASDAQ Listing Qualifications Panel (the “Panel”) by
requesting a hearing, and our common stock would remain listed on the NASDAQ
Capital Market pending a final determination by the Panel Our hearing was held
on August 5, 2010. We are currently awaiting a response from the panel. If
successful, the Panel could grant up to an additional 180 calendar days, or
until December 20, 2010, for us to regain compliance with the NASDAQ Listing
Rules. There is no assurance that we will be successful in our appeal and will
remain listed on NASDAQ.
In the
future, however, due to factors such as loses from operations and the volatility
of our stock price, we may not be able to meet the NASDAQ continued listing
requirements. If we are unable to satisfy the NASDAQ criteria for maintaining
listing, our common stock may be subject to delisting. Trading, if any, of our
securities would thereafter be conducted in the over-the-counter market, in the
so-called “pink sheets” or on the OTC Bulletin Board. As a consequence of any
such delisting, our shareholders would likely find it more difficult to dispose
of, or to obtain accurate quotations as to the prices of our common
stock.
We
may not close the proposed strategic transaction and investment with Milestone
Biofuels as contemplated by our MOU, on acceptable terms or at all.
Although
the non-binding MOU with
Milestone Biofuels was amended to extend the due diligence period an additional
90 days, the MOU remains subject to due diligence and negotiation, execution and
delivery of definitive agreements acceptable to both parties and approval by
their respective boards of directors. The investment also may be subject to
shareholder approval under the NASDAQ listing rules. There can be no assurance
that the transaction will be completed, either on the proposed terms and within
the timeframe currently anticipated, or at all.
If
we are unable to replace our largest single biofuel sales contract that we
recently terminated for failure to perform, revenue growth and our results of
operations may be negatively impacted.
In May 2010, we terminated our largest
single biofuel sales contract, under which Fenix Energy had agreed to purchase a
minimum of 750,000 gallons of our biofuel per month for 12 months, for certain
failures to perform. It may take us a significant period of time to replace the
sales volume represented by that one contract, and we cannot assure you whether
or when we will be able to do so.
There is no
public market for the warrants to purchase common stock in this
offering.
There is
no established public trading market for the warrants being sold in this
offering, and we do not expect a market to develop. In addition, we do not
intend to apply to list the warrants on any securities exchange. Without an
active market, the liquidity of the warrants will be limited.
The warrants
being issued as part of this offering are not exercisable immediately after
issuance.
The
warrants being sold in this offering are exercisable six months after issuance
and will expire five years from date of issuance. In the event our common stock
price does not exceed the per share exercise price of the warrants during the
period when the warrants are exercisable, the warrants will not have any
value.
As a new
investor, you will incur substantial dilution as a result of this offering and
future equity issuances, and as a result, our stock price could
decline.
The
offering price is substantially higher than the net tangible book value per
share of our outstanding common stock. As a result, based on our capitalization
as of August 16, 2010, investors purchasing common stock in this offering will
incur immediate dilution of $0.33 per share of common stock purchased, based on
the offering price of $0.20 per share, without giving effect to the potential
exercise of the warrants offered by this prospectus supplement. In addition to
this offering, subject to market conditions and other factors, it is likely that
we will pursue additional financings in the future, as we continue to build our
business. In future years, we will likely need to raise significant additional
capital to finance our operations and the development, manufacture and marketing
of other products under development and new product opportunities. Accordingly,
we may conduct substantial future offerings of equity or debt securities. The
exercise of outstanding options and warrants and future equity issuances,
including future public offerings or future private placements of equity
securities and any additional shares issued in connection with acquisitions,
will result in dilution to investors. In addition, the market price of our
common stock could fall as a result of resales of any of these shares of common
stock due to an increased number of shares available for sale in the
market.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Any
statements in this prospectus supplement, the accompanying prospectus and the
information incorporated herein and therein by reference relating to future
financial or business performance, conditions or strategies and other financial
and business matters, including expectations regarding future revenues and
operating expenses, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as “anticipates,” “believes,” “continues,”
“estimates,” “expects,” “intends,” “may,” “opportunity,” “plans,” “potential,”
“predicts,” “projects” or “will,” the negative of these words or words of
similar import. Similarly, statements that describe our future plans,
strategies, intentions, expectations, objectives, goals or prospects are also
forward-looking statements. We caution that these forward-looking statements are
subject to numerous assumptions, risks and uncertainties, that can change over
time. Factors that may cause actual results to differ materially from the
results discussed in the forward-looking statements include:
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our
lack of operating history;
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our
dependence on additional financing to continue as a going
concern;
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·
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our
inability to generate revenues or profits from sales of our biofuel and to
establish commercial scale production
facilities;
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·
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our
inability to close a strategic transaction and investment with Milestone
Biofuels as contemplated by our MOU, on acceptable terms or at
all;
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·
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the
disproportionally higher cost of production relative to units
sold;
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·
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our
ability to fully realize the value of our technology license agreement,
which is our principal asset;
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·
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our
inability to enter into acceptable sublicensing agreements with respect to
our technology or the inability of any sublicensee to successfully
manufacture, market or sell biofuel utilizing our licensed
technology;
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·
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market
acceptance of our biofuel;
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·
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our
inability to compete effectively in the renewable fuels
market;
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governmental
regulation and oversight, including our ability to qualify our biofuel for
certain tax credits and renewable portfolio
standards;
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our
ability to protect our technology through intellectual property
rights;
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unexpected
costs and operating deficits;
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adverse
results of any material legal proceedings;
and
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other
specific risks set forth under the heading “Risk Factors” of this
prospectus supplement.
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Further
information on the factors and risks that could affect our business, financial
condition and results of operations, are set forth in this prospectus supplement
under “Risk Factors” and in our filings with the SEC, which are available at
www.sec.gov
.
All forward-looking statements are based on information available at the time
the statement was made. We undertake no obligation to update any forward-looking
statements or other information contained in this report as a result of new
information, future events or otherwise. You should not place undue reliance on
these forward-looking statements. Although we believe that our plans, intentions
and expectations reflected in or suggested by the forward-looking statements are
reasonable, these plans, intentions or expectations may not be
achieved.
USE
OF PROCEEDS
We
estimate that the net proceeds of this offering, after deducting placement agent
fees and our estimated offering expenses, and excluding the proceeds, if any,
from the exercise of the warrants issued in this offering, will be approximately
$915,000.
We intend to use the net proceeds
received from the sale of the securities to fund operations and for working
capital and general corporate purposes. We may also repay all or a
portion of our secured convertible notes due August 19 and August 31, 2010. We
cannot estimate precisely the allocation of the net proceeds from this offering.
Accordingly, our management will have broad discretion in the application of the
net proceeds of this offering.
DILUTION
Our net tangible book value as of June
30, 2010, was approximately $(6,583,556), or approximately $(0.17) per share of
common stock. Net tangible book value per share is determined by dividing our
net tangible book value, which consists of our total tangible assets less total
liabilities, by the number of shares of our common stock outstanding on July 31,
2010.
Dilution in net tangible book value per
share represents the difference between the amount per share of common stock
paid by purchasers in this offering and the net tangible book value per share of
our common stock immediately after this offering. Without taking into account
any other changes in the net tangible book value after June 30, 2010, other than
to give effect to our receipt of the estimated proceeds from the sale of
5,000,000 shares of common stock, at an offering price of $0.20 per share, less
the placement agent’s fees and our estimated offering expenses, our net tangible
book value as of June 30, 2010, after giving effect to the items above, would
have been approximately $(5,653,556), or approximately $(0.13) per share of
common stock. This represents an immediate increase of $0.04 in net tangible
book value per share to our existing shareholders and an immediate dilution of
$0.33 per share to purchasers in this offering. The following table illustrates
this calculation on a per share basis:
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Public
offering price per share
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$
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0.20
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Net
tangible book value as of June 30, 2010 per share as of July 31,
2010
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$
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(0.17
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)
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Increase
per share attributable to the offering
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$
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0.04
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Adjusted
net tangible book value as of June 30, 2010 per share as of August 16,
2010 after giving effect to this offering
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$
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(0.13
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)
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Dilution
per share to new investors
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$
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(0.33
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)
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The
foregoing table is based on 38,682,361 shares of common stock outstanding as of
July 31, 2010, which does not take into effect further dilution to new investors
that could occur upon the exercise of outstanding options having a per share
exercise price less than the offering price.
In
addition, the calculations in the foregoing table do not take into account any
of the following:
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·
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10,548,711
shares subject to outstanding options as of July 31, 2010, having a
weighted average exercise price of $2.76 per
share;
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·
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13,452,253
shares of our common stock issuable upon exercise of outstanding warrants
as of
July
31, 2010, having an exercise price of $1.69 per
share;
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3,141,616
shares of common stock available for future issuance under our Omnibus
Incentive Plan;
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1,826,561
shares of common stock issuable upon the conversion of outstanding Series
B convertible preferred stock, at a conversion price of $3.00 per share
(which convert automatically in March 2011);
and
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·
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1,250,000
shares issuable upon the exercise of warrants to be issued in this
offering, at an exercise price of $0.30 per
share.
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To the extent that any options or
warrants are exercised, restricted stock units are settled, new options or other
equity awards are issued under our Omnibus Incentive Plan, or we otherwise issue
additional shares of common stock in the future, there will be further dilution
to new investors.
DESCRIPTION
OF SECURITIES
The
material terms and provisions of the warrants being offered pursuant to this
prospectus supplement are summarized below. The form of warrant will be provided
to each purchaser in this offering and will be filed as an exhibit to a Current
Report on Form 8-K with the SEC in connection with this offering.
Common
Stock
The material terms and provisions of
our common stock are described under the caption “Description of Securities –
Common Stock” starting on page 5 of the accompanying prospectus.
Warrants
Each
purchaser of a share of Common Stock will receive one warrant representing the
right to purchase 0.25 shares of our common stock at an exercise price of $0.30
per share. The warrants will be exercisable at the option of the holder at any
time
after the six-month
anniversary of their date of issuance
.
Warrants may be exercised in whole or
in part, and any portion of a warrant not exercised prior to the termination
date shall be and become void and of no value. Holders of the warrants may
exercise their warrants to purchase shares of our common stock on or before the
termination date by delivering a notice of exercise, appropriately completed and
duly signed, and payment of the exercise price for the number of shares for
which the warrant is being exercised. Upon the holder’s exercise of a warrant,
we will issue the shares of common stock issuable upon exercise of the warrant
within three trading days of our receipt of notice of exercise and payment of
the aggregate exercise price, subject to surrender of the warrant.
In the event that the registration
statement relating to the warrant shares is not effective and another exemption
from registration is not available, a holder of warrants will have the right, in
its sole discretion, to exercise its warrants for a net number of warrant shares
pursuant to the cashless exercise procedures specified in the warrants. The
absence of an effective registration statement or applicable exemption from
registration does not alleviate our obligation to deliver common stock issuable
upon exercise of a warrant.
The exercise price is subject to
appropriate adjustment in the event of stock dividends, stock splits,
reorganizations or similar events affecting our common stock and the exercise
price and number of warrants held by a purchaser (or such purchaser’s direct or
indirect transferee) are subject to appropriate adjustment in the event of cash
dividends or other distributions to holders of shares of our common
stock.
If, at any time the warrant is
outstanding, we consummate any fundamental transaction, as described in the
warrants and generally including any consolidation or merger into another
corporation, the consummation of a transaction whereby another entity acquires
more than 50% of our outstanding common stock, or the sale of all or
substantially all of our assets, or other transaction in which our common
stock is converted into or exchanged for other securities or other
consideration, the holder of any warrants will thereafter receive upon exercise
of the warrants, the securities or other consideration to which a holder of the
number of shares of common stock then deliverable upon the exercise or
conversion of such warrants would have been entitled upon such consolidation or
merger or other transaction.
The shares of common stock issuable on
exercise of the warrants will be, when issued in accordance with the warrants,
duly authorized, validly issued, fully paid and non-assessable. We will
authorize and reserve at least that number of shares of common stock equal to
the number of shares of common stock issuable upon exercise of all outstanding
warrants.
There is no established public trading
market for the warrants, and we do not expect a market to develop. We do not
intend to apply to list the warrants on any securities exchange. Without an
active market, the liquidity of the warrants will be limited. In addition, in
the event our common stock price does not exceed the per share exercise price of
the warrants during the period when the warrants are exercisable, the warrants
will not have any value.
Amendments and waivers of the terms of
the warrants require the written consent of the holders of warrants and the
Company.
THE HOLDER OF A WARRANT WILL NOT
POSSESS ANY RIGHTS AS A SHAREHOLDER UNDER THAT WARRANT UNTIL THE HOLDER
EXERCISES THE WARRANT. THE WARRANTS MAY BE TRANSFERRED INDEPENDENT OF THE COMMON
STOCK WITH WHICH THEY WERE ISSUED, SUBJECT TO APPLICABLE LAWS.
PLAN
OF DISTRIBUTION
We have entered into a placement agent
agreement, dated August 16, 2010, with Palladium Capital Advisors, LLC
(“Palladium”), the placement agent for this offering. The placement agent
agreement is included as an exhibit to our Current Report on Form 8-K that we
have filed with the Securities and Exchange Commission in connection with this
offering.
Subject
to the terms and conditions set forth in the placement agent agreement,
Palladium has agreed to act as our placement agent in connection with this
offering. The placement agent is not purchasing or selling any securities being
offered by this prospectus supplement or the accompanying prospectus, nor is it
required to arrange for the purchase or sale of any specific number or dollar
amount of the shares, but has agreed to use its reasonable best efforts to
arrange for the sale of all of the shares in this offering.
There is
no requirement that any minimum number of shares or dollar amount be sold in
this offering and there can be no assurance that we will sell all or any of the
shares being offered.
Our agreement with the placement agent
provides that the obligations of the placement agent and the investors are
subject to certain conditions precedent. The placement agent agreement also
contains customary representations and warranties which are incorporated into
the securities purchase agreement investors are required to sign to subscribe
for shares in this offering. Copies of the form of securities purchase agreement
(and form of warrant attached thereto) and the placement agent agreement are
being or have been circulated with this Prospectus Supplement, and are
incorporated herein by reference. Final forms of the form of securities purchase
agreement, form of warrant and placement agent agreement will be included as
exhibits to our Current Report on Form 8-K that will be filed with the SEC in
connection with the consummation of this offering.
We currently anticipate that the
closing of this offering will take place on or about August 17, 2010. On the
scheduled closing date, the following will occur:
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we
will receive funds in the amount of the aggregate purchase
price;
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the
placement agent will receive the placement agent fees in accordance with
the terms of the engagement letter agreement;
and
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we
will deliver the shares and warrants to the
investors.
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We have agreed to pay the placement
agent an aggregate fee equal to seven percent (7%) of the aggregate gross
proceeds raised in this offering. In compliance with the guidelines of FINRA,
under no circumstances will the fee, commission or discount received by the
placement agent or any other FINRA member or independent broker-dealer exceed
8.0% of the gross proceeds to us in this offering.
We have
agreed to indemnify the placement agent against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and liabilities
arising from breaches of representations and warranties contained in the
placement agent agreement. We have also agreed to contribute to payments the
placement agent may be required to make in respect of such
liabilities.
The compensation warrants will be
substantially on the same terms as the warrants offered hereby and will also
comply with FINRA Rule 5110(g)(1) in that for a period of six months after their
date of issuance (which shall not be earlier than the closing date of this
offering), neither the compensation warrants nor any shares issued upon exercise
of the compensation warrants shall be sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale, derivative, put, or
call transaction that would result in the effective economic disposition of the
securities by any person, except the transfer of any security:
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by
operation of law or by reason of reorganization of
us;
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·
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to
any FINRA member firm participating in this offering and the officers or
partners thereof, if all securities so transferred remain subject to the
lock-up restriction described above for the remainder of the time
period;
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·
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if
the aggregate amount of our securities held by Palladium or related
persons do not exceed 1% of the securities being
offered;
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that
is beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or
otherwise directs investments by the fund, and participating members in
the aggregate do not own more than 10% of the equity in the fund;
or
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·
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the
exercise or conversion of any security, if all securities received remain
subject to the lock-up restriction set forth above for the remainder of
the time period.
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The
transfer agent for our common stock to be issued in this offering is Olde
Monmouth Stock Transfer Co., Inc., 200 Memorial Parkway, Atlantic Highlands, New
Jersey 07716.
LEGAL MATTERS
The
validity of the securities offered hereby has been passed upon for us by
Fredrikson & Byron P.A.
EXPERTS
The consolidated financial statements
as of December 31, 2009 and 2008, and the related consolidated statements of
operations, shareholders’ equity, and cash flows for the years ended December
31, 2009 and 2008 incorporated in this prospectus by reference from our Annual
Report on Form 10-K for the years ended December 31, 2009 and 2008, which have
been audited by Reznick Group, P.C. and Imowitz Koenig & Co., LLP,
respectively, independent registered public accounting firms, as stated in their
reports, which are incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firms given their authority as
experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
The SEC
allows us to “incorporate by reference” information into this prospectus. This
means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this prospectus, except
for any information that is superseded by other information that is included in
or incorporated by reference into this document. We incorporate by
reference each of the documents listed below:
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our
Annual Report on Form 10-K for the year ended December 31, 2009
(SEC File No. 001-34022), as
amended;
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·
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our
Quarterly Report on Form 10-Q for the quarters ended March 31, 2010 (SEC
File No. 001-34022), as amended if
applicable;
|
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·
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our
Current Reports on Form 8-K filed with the SEC on April 2, 2010, May
6, 2010, May 13, 2010 and June 14, 2010, June 29, 2010 and July 13, 2010
(SEC File No. 001-34022), except for portions of such reports which were
deemed to be furnished and not filed;
and
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·
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the
description of our capital stock contained in our Registration Statement
on Form 8-A filed with the SEC on April 14, 2008 and as amended September
22, 2008 (SEC File No. 001-34022).
|
We
incorporate by reference any additional documents that we may file with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 from the date of the registration statement of which this prospectus
supplement and accompanying prospectus is part until the termination of the
offering of the securities. These documents may include annual, quarterly
and current reports, as well as proxy statements. Any material that
we later file with the SEC will automatically update and replace the information
previously filed with the SEC.
For purposes of this prospectus
supplement, any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference
modifies or supersedes such statement in such document. We are not
incorporating by reference any documents, or portions of documents that are not
deemed “filed” with the SEC.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly and special reports, proxy statements and other documents with
the SEC. You may read and copy any document we file at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. You should call
1-800-SEC-0330 for more information on the public reference room. The SEC
maintains an Internet website at
www.sec.gov
that
contains reports, proxy and information statements, and other information
regarding issuers of securities, like us, that file electronically with the SEC.
Our SEC filings are available to you on the SEC’s Internet website. We also
maintain a website at
www.newgenerati
onbiofuels.com
, which
provides additional information about our company. The contents of our
website or any other website, however, are not a part of this prospectus and is
not incorporated by reference into this prospectus or any accompanying
prospectus supplement.
This
prospectus supplement and accompanying prospectus is part of a registration
statement that we filed with the SEC. The registration statement, including
certain exhibits and schedules and the information incorporated by reference,
contains more information than this prospectus supplement or accompanying
prospectus regarding us and our securities. You can obtain a copy of the
registration statement from the SEC at the address listed above or from the
SEC’s Internet site.
You can
also obtain these documents from us, without charge (other than exhibits, unless
the exhibits are specifically incorporated by reference), by requesting them in
writing or by telephone at the following address:
New
Generation Biofuels Holdings, Inc.
Attn:
Cary J. Claiborne
5850
Waterloo Road, Suite 140
Columbia,
Maryland 21045
(410)
480-8084
Website:
www.newgenerationbiofuels.com
NEW
GENERATION BIOFUELS HOLDINGS, INC.
$10,000,000
Preferred
Stock
Common
Stock
Warrants
Prospectus
January
27, 2009
NEW
GENERATION BIOFUELS HOLDINGS, INC.
5,000,000
Shares of Common Stock
Warrants
to Purchase 1,250,000 Shares of Common Stock
Prospectus
Supplement
August
16, 2010
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