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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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3,557,69
2
Shares of Common
Stock
Warrants
to Purchase 2,668,269 Shares of Common Stock
We are offering 3,557,692 shares of our
common stock, $0.001 par value per share, and warrants to purchase 2,668,269
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 0.75 shares of our common stock at an
exercise price of $0.15 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 $0.13. 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 September 21, 2010 was $0.13
per share. We do not intend that the warrants will
trade on any exchange or be listed for
quot
ation on any
market
.
Investing in our securities involves
risks. See the “Risk Factors” beginning on page S-7 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 September 21, 2010, the aggregate
market value of our outstanding common stock held by non-affiliates was
approximately $17,555,961, based on 49,752,466 shares of outstanding common
stock, of which 8,924,650 shares are held by affiliates, and a price of $0.43
per share, which was the last reported sale price of our common stock as quoted
on The NASDAQ Capital Market on July 27, 2010. As of the date hereof, including
the securities being offered hereunder, we have offered securities with an
aggregate market value of approximately $5,675,732, consisting of the 11,595,055
shares of our common stock and warrants to purchase 5,051,701 shares of our
common stock issued in December 2009, June 2010 and August 2010, pursuant to
General Instruction I.B.6. of Form S-3 during the prior 12 calendar month period
that ends on, and includes, the date of this prospectus supplement.
Palladium Capital Advisors, LLC is
acting as our placement agent in connection with this offering. The placement
agent is not purchasing or selling any of these securities nor is it required to
sell any minimum specific number or dollar amount of securities but has agreed
to use its best efforts to sell the securities offered by this prospectus
supplement. In consideration for its services, we have agreed to pay the
placement agent the aggregate fees set forth in the table below.
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Per
Share
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Maximum
Offering Amount
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Public
offering price of shares
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$
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0.13
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$
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462,500
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Placement agent
fees
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$
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0.00
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$
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0
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Proceeds, before expenses, to
New Generation Biofuels Holdings, Inc.
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$
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0.13
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$
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462,500
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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 September 23,
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 September 23, 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-7
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Special
Note Regarding Forward-Looking
Statements
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S-10
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Use
of
Proceeds
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S-11
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Dilution
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S-11
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Description
of
Securities
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S-13
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Plan
of
Distribution
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S-15
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Legal
Matters
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S-16
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Experts
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S-16
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Incorporation
of Certain Information by
Reference
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S-17
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Where
You Can Find More
Information
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S-17
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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 o
ffering. 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
r
efer 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
incorpo
rated 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 o
r 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
inf
o
rmation, 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, yo
u
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 th
o
se 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,
r
esults 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 distribu
tion 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 solicitat
i
on 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-7 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 June 30, 2010, we had an
accumulated deficit of $56.6 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.
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
. We are seeking arrangements with strategic
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
. To the extent permitted by our limited
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.newgenerationb
iofuels.com
. The information on our website
or any other website is not incorporated by reference into this prospectus
supplement or any accompanying prospectus.
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Recent
Developments
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Significant
recent developments regarding our company include the
following:
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August
27, 2010 the Company announced that it has entered into an agreement to
amend the lease on its Baltimore production facility. Pursuant
to the agreement the Company made a cash payment of $290,000 and also
issued 300,000 shares of restricted common stock, to the
landlord. In consideration of the payment, the landlord agreed
to forfeit past due amounts under the lease agreement, terminate and
forfeit minimum payments due for terminaling services under a separate
agreement, and reduce the monthly lease rate to $25,000 for the remaining
lease term of three years. Included in the $290,000 payment is
$100,000 representing the August reduced lease payment and prepayment of
the monthly $25,000 rent for the months of September – through November
2010. As a result of the lease amendment the Company recorded a gain of
approximately $800,000 and reduced our future obligations by approximately
$2.9 million. The Company has also taken additional steps to
reduce its costs and therefore reduce its quarterly cash
burn.
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On
August 17, 2010, the Company completed a registered direct offering of our
common stock and warrants, raising $1,000,000 in gross proceeds and
approximately $930,000 in net proceeds, after deducting finders’
fees.
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On July 21, 2010 th
e Co
mpany 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 substantia
l
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 solution
s
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 registered direct 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.
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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 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 extend the 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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3,557,69
2
shares.
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Common stock to be outstanding
after this offering:
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53,310,158 of common stock or
55,978,427
shares of
common stock if the warran
ts offered hereby are exercised in
full.
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Warrants offered by
us:
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Warr
ants to purchase up to
2,668,269
of common
stock. The warrants have an exercise price of $0.15 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 pay amounts due pursuant to select debt settlement agreements we
reached with creditors. See “Use of Proceeds” on page
S-11.
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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-7 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 49,752,466 shares outstanding as of July 21,
2010, which excludes:
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9,167,418
shares subject to outstanding options as of September 21, 2010, having a
weighted average exercise price of $2.22 per share;
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14,702,253
shares of our common stock issuable upon exercise of outstanding warrants
as of
September
21, 2010, having an weighted average exercise price of $1.57 per
share;
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3,145,900 shares of common stock
available for futu
re
issuance under our Omnibus Incentive Plan;
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1,850,808
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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3,781,716
shares of common stock issuable upon the exercise of optionable shares and
warrants from prior financing;
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816,853
shares of common stock issuable upon the conversion of Convertible Notes;
and
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2,668,269
shares issuable upon the exercise of warrants to be issued in this
offering, at an exercise price of $0.15 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 September 21, 2010 equaled 55,160,966.
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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 $462,500 in gross proceeds, this offering will only provide financing
through not later than November 2010 and maybe earlier depending on how we
utilize the proceeds, 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 mid- November 2010. As of August 31, 2010, we had
approximately $0.4 million of available cash and approximately $4.6 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 February 28, 2011 and September 30, 2010
respectively. 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 final 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 September 21, 2010, investors purchasing common stock in this offering
will incur immediate dilution of $0.24 per share of common stock purchased,
based on the offering price of $0.13 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;
|
|
|
·
|
our
dependence on additional financing to continue as a going
concern;
|
|
|
·
|
our
inability to generate revenues or profits from sales of our biofuel and to
establish commercial scale production
facilities;
|
|
|
·
|
our
inability to close a strategic transaction and investment with Milestone
Biofuels as contemplated by our MOU, on acceptable terms or at
all;
|
|
|
·
|
the
disproportionally higher cost of production relative to units
sold;
|
|
|
·
|
our
ability to fully realize the value of our technology license agreement,
which is our principal asset;
|
|
|
·
|
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;
|
|
|
·
|
market
acceptance of our biofuel;
|
|
|
·
|
our
inability to compete effectively in the renewable fuels
market;
|
|
|
·
|
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.
|
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
$442,500.
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 pay amounts due pursuant to
select debt settlement agreements we reached with creditors. 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 a
pproximately
$
(6,583,556)
, or
approximately $
(0.13)
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 sha
res of our common stock outstanding on
September 21, 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
o
f 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
3,557,692
shares of co
mmon stock, at an offering price of
$0.13 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 h
ave been approximately
$(6,141,0
56), o
r approximately $(0.11) per share of
common stock. This represents an immediate increase of $0.02 in net tangible
book value per share to our existing shareholders and an immediate dilution of
$0.24 per share to purchasers in this offering.
The following table
illustrates this calculation on a per share basis:
|
Public
offering price per share
|
|
|
|
|
$
|
0.13
|
|
|
Net
tangible book value as of June 30, 2010 per share as of September 21,
2010
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
Increase per share attributable
to the offering
|
|
$
|
0.02
|
|
|
|
|
|
|
Adjusted
net tangible book value as of
June
3
0
, 2010
per share as of
September 21, 2010 after giving effect to this offering
|
|
|
|
|
|
$
|
(0.11
|
)
|
|
Dilution
per share to new investors
|
|
|
|
|
|
$
|
(0.24
|
)
|
The
foregoing table is based on 49,752,466 shares of common stock outstanding as of
September 21, 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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|
·
|
9,167,418
shares subject to outstanding options as of September 21, 2010, having a
weighted average exercise price of $2.22 per
share;
|
|
|
·
|
14,702,253
shares of our common stock issuable upon exercise of outstanding warrants
as of September 21, 2010, having an exercise price of $1.57 per
share;
|
|
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·
|
3,145,900 shares of common stock
available for future issuance under our Omnibus Incentive
Plan;
|
|
|
·
|
1,850,808
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
|
|
|
·
|
3,781,716
shares of common stock issuable upon the exercise of optionable shares and
warrants from prior financing;
|
|
|
·
|
816,853
shares of common stock issuable upon the conversion of Convertible Notes;
and
|
|
|
·
|
2,668,269
shares issuable upon the exercise of warrants to be issued in this
offering, at an exercise price of $0.15 per
share.
|
To the e
xtent 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 furt
h
er 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.
7
5 shares of our common stock at an
exercise price of $0.
15
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 be
come 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
exercis
e
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 exercis
e
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 fr
o
m 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 affecti
ng 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 o
u
r 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 an
other 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 hold
e
r 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 enti
t
led 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
auth
orize 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 estab
lished public trading market for the
warrants, and we do not expect a mark
et 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 pric
e
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
W
e
reserve the right to enter
into a placement agent agreement with
Palladium Capital Advisors, LLC (“
Palladium”
).
The form of 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 form placement agent agreement, Palladium has agreed to act as our
placement agent in connection with this offering, subject to final execution of
t
he placement agent
agreement. The placement agent will not purchase or sell any securities being
offered by this prospectus supplement or the accompanying prospectus, nor would
it be required to arrange for the purchase or sale of any specific number or
d
o
llar amount of the shares, but may agree
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
b
e no assurance that we
will sell all or any of the shares being
offered.
Our agreement with the placement agent,
upon execution, 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
form of 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 offeri
ng will take
place on or about September 24
,
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;
|
|
|
·
|
the placement agent will receive
the placement agent fees in accordance with
the terms of the engagement letter
agreement; and
|
|
|
·
|
we will deliver the shares and
warrants to the investors.
|
The form of placement agent agreement
requires us to pay the placement agent an aggregate fee in shares of our common
stock, equal to seven perce
nt (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.
If we
execute the placement agent agreement, we will 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
will also agree to contribute to payments the placement agent may be required to
make in respect of such liabilities.
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:
|
|
·
|
our Annual R
eport on Form 10-K for the
year ended December 31, 2009 (SEC File No. 001-34022), as
amended;
|
|
|
·
|
our Quarterly Report on Form 10-Q
for the quarters ended March 31, 2010 and June 30, 2010 (SEC File No.
001-34022), as amended if
applicable;
|
|
|
·
|
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, July 13,
2010
(SEC File No.
001-34022),
August
17, 2010, August 18, 2010, August 23, 2010 and September 2, 2010,
except for portions
of such report
s which
were deemed to be furnished and not filed;
and
|
|
|
·
|
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 refere
nce 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 othe
r 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.newgenerationbiofuels.com
, which provides additional
inform
ation 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
acc
ompanying 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
supplem
e
nt 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.
3,557,69
2
Shares of Common
Stock
Warrants
to Purchase 2,668,269 Shares of Common Stock
Prospectus
Supplement
September 23
, 2010