UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2009~~2010

Commission File No. 1-34022

NEW GENERATION BIOFUELS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Florida	26-0067474
(State of Incorporation)	(I.R.S. Employer Identification No.)

5850 Waterloo Road, Suite 140

Columbia, Maryland 21045

(Address of Principal Executive Offices, Including Zip Code)

(410) 480-8084

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

(Title of Each Class)	(Name of Exchange on Which Registered)
Common Stock, par value $0.001 per share	~~NASDAQ Capital Market~~OTCQB

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o¨ Yes o¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o ¨ Large accelerated filer o ¨ Accelerated filer

o ¨ Non-accelerated filer x Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o ¨ Yes x No

The aggregate market value of the Registrant’s Common Stock, par value $0.001 per share, held by nonaffiliates of the Registrant as of June 30, ~~2009~~ 2010, was $2412,~~755~~304,~~104~~926.

As of March 514, ~~2010~~2011, the number of shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding was 3488,~~702~~542,~~436~~229.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Company's Proxy Statement for the 2010 Annual Meeting of Shareholders are incorporated by reference herein as portions of Part III of this Annual Report on Form 10-K. A definitive copy of the Proxy Statement will be filed with the SEC within 120 days after the end of the year covered by this Form 10-K.

TABLE OF CONTENTS

		Page
PART I		1
Item 1.	Business	1
Item 1A.	Risk Factors	1314
Item 1B.	Unresolved Staff Comments	2122
Item 2.	Properties	2122
Item 3.	Legal Proceedings	22
Item 4.	Reserved	22
PART II		23
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	3032
Item 8.	Financial Statements and Supplementary Data	3032
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	3132
Item 9A(T).	Controls and Procedures	31
Item 9A.(T)	Controls and Procedures	32
Item 9B.	Other Information	3233
PART III		33
Item 10.	Directors, Executive Officers and Corporate Governance	3334
Item 11.	Executive Compensation	3338
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3345
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3348
Item 14.	Principal Accounting Fees and Services	3350
PART IV
Item 15.	Exhibits and Financial Statement Schedules	33
	Signatures	3552
	Index to Exhibits	3653
	Certifications

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) that involve numerous assumptions, risks and uncertainties, many of which are beyond our control. Because our common stock is considered to be “penny stock” under the rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we may not rely on the safe harbor created by the PSLRA with respect to forward –looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth under the heading “Risk Factors” beginning on page 1314 and elsewhere in this report. Important factors that may cause actual results to differ from projections include without limitation:

· our lack of operating history;

our dependence on additional financing to continue as a going concern;

unexpected costs and operating deficits;

our lack of operating history;

our inability to generate revenues or profits from sales of our biofuel and to establish commercial scale production facilities;

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;

· our ability to protect our technology through intellectual property rights; and

· unexpected costs and operating deficits; and

adverse results of any material legal proceedings.

All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, financial position, estimated revenue or losses, projected costs, prospects and plans and management objectives are forward-looking statements. When used in this report, the words “~~will~~anticipate,” “~~may~~believe,” “~~believe~~estimate,” “~~anticipate~~expect,” “forecast,” “intend,” “~~estimate~~may,” “~~expect~~possible,” “plan,” “project,” “~~plan~~should,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. 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 future events, new developments 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.

As used in this report, the terms “~~company~~Company,” “we,” “us” and “our” refer to New Generation Biofuels Holdings, Inc.

ITEM 1. BUSINESS

Our Business

We are a clean energy company deploying novel technologies to produce cleaner, renewable biofuels. ~~provider~~We ~~that~~have isrights ~~marketing~~to a ~~new~~portfolio ~~class~~ of ~~“second~~patented ~~generation”~~and patent pending technology to manufacture alternative biofuels ~~for~~from ~~use~~plant inoils, ~~diesel~~animal ~~fuel~~fats ~~applications~~and related oils, ~~including~~ which we market as a new class of biofuel for power generation, commercial and industrial heating, and ~~marine~~related ~~transportation,~~ uses. We believe that our proprietary biofuel can provide a lower cost, renewable alternative energy source with significantly lower emissions than traditional fuels. We began generating revenues in 2008. Resulting primarily from scarce operating capital we generated minimal revenues in 2009 and 2010 as we worked to identify and qualify lower cost feedstock alternatives.

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 enables us to produce biofuels that cost less to produce, use less energy and generate significantly lower emissions 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 factors will enable us to customize our product to specific customer requirements and react more quickly to trends in the biofuels market.

~~During~~We ~~the~~produce ~~year~~our ~~ended~~biofuels ~~December~~using ~~31, 2009,~~proprietary mixing technologies that we ~~commenced~~believe ~~our~~are ~~principal~~simpler, ~~business~~cleaner, ~~operations~~less expensive, and ~~have exited~~less energy intensive than the ~~development~~complex ~~stage~~chemical reaction process used to produce traditional distillate fuels, biofuels such as ethnol and biodiesel and other fuels. We ~~Prior~~believe that these technological approaches, collectively “our technology,” enable us to produce biofuels that ~~from~~cost less and use less energy to manufacture and generate significantly lower emissions than our ~~inception~~competitors. Our technology also gives us the flexibility to produce our biofuels from multiple feedstocks, wewhich ~~were~~allows ~~a development~~us ~~stage~~to ~~entity~~use non-edible raw materials in ~~accordance~~our ~~with~~production process, We believe that these factors will enable us to customize our product to specific customer requirements and react more quickly to trends in the ~~Financial~~biofuels ~~Accounting~~market. We ~~Standards Board~~are ~~(“FASB”)~~also ~~Accounting~~developing ~~Standards~~products ~~Codification~~utilizing ~~(“ASC”)~~existing ~~Topic~~waste ~~915~~streams, ~~“Development~~ ~~Stage Entities~~by-products and other oils that have low alternative use values.” We believe that successfully developing biofuels from low alternative use value feedstocks will allow us to be profitable with or without government incentives and credits once we are producing fuels on a commercial scale.

WeDuring ~~have incurred annual operating losses since inception and expect to incur substantial operating losses in~~ the ~~future~~ inyear ~~connection~~ended ~~with the development of our core products. As of~~ December 31, 2009, we ~~had~~commenced anour ~~accumulated~~principal ~~deficit~~business ofoperations ~~$50.4 million. The operation~~ and ~~development~~exited ~~of our business will require substantial additional capital by~~ the ~~second~~development ~~quarter~~stage. ofPrior ~~2010~~ to ~~fund~~ that from our ~~operations~~inception, ~~payments~~we ~~due~~were ~~under~~a ~~the~~development ~~exclusive~~stage ~~license,~~entity ~~the~~in ~~acquisition~~accordance ~~or development~~with ofthe ~~manufacturing~~Financial ~~plants,~~Accounting ~~research~~Standards ~~and~~Board ~~development~~(“FASB”) ~~and~~Accounting ~~other initiatives~~Standards ~~including~~Codification ~~potentially~~(“ASC”) ~~the~~Topic ~~financing~~915, “Development ofStage ~~future acquisitions~~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 products and technology. As of December 31, 2010, we had an accumulated deficit of $62.6 million. The operation and development of our business will require substantial additional capital by the end of April 2011 to fund our operations, fund payments due under our exclusive license agreement, the acquisition or development of manufacturing plants, research and development, and other initiatives including potentially the financing of future acquisitions.

Our near-term business strategy involves the following:

· Direct Sales. We are seeking to develop a revenue stream from direct sales of our ~~biofuel~~biofuels produced at our Baltimore production facility. ~~Based~~We onplan to refine existing ~~contracts~~products ~~with~~and ~~our~~introduce ~~customers,~~new weproducts ~~are~~into ~~seeking~~our existing customer base to ~~expand~~generate ~~our~~field ~~facility~~test ~~over~~data ~~the~~related ~~next~~to ~~several~~emissions ~~months~~and market acceptance. Our longer term strategy ~~would~~includes ~~include~~ construction of an additional state-of-the-art production or plants.

· Technology Licensing. As a second potential revenue stream, our business plan contemplates ~~collecting~~leveraging our technology to collect royalties ~~through~~by 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.

· 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~~biofuels and to otherwise attempt to take advantage of the U.S. government’s encouragement of “green” technologies.

· Strategic Partners. We are seeking arrangements with strategic partners who would both provide funding and support our efforts to develop our production capacity, advance our technology, and attract customers.

· Research and Development. ToWith the ~~extent~~appropriate ~~permitted~~funding ~~by our limited resources,~~ we ~~are~~intend ~~continuing~~to continue to develop our technology and extend it to additional fuels with additional applications.

Recent Developments during the Fourth Quarter of ~~2009~~2010 and Early ~~2010~~2011

Significant recent developments include the following:

· ~~Completed~~On 41February ~~production~~1, ~~runs~~2011, atwe completed a private placement of six month secured convertible notes and warrants to four investors, which generated $1,000,000 in gross proceeds and $950,000, in net proceeds, after deducting placement agent’s fees. Net proceeds were used to satisfy past due obligations, retire a portion of our ~~Baltimore~~existing ~~production~~debt ~~facility~~and ~~through~~to ~~December~~fund ~~2009~~operations. We will need additional capital by end of April 2011.

· ~~Produced~~On ~~209~~December 9,~~000~~ ~~gallons~~2010, we notified The NASDAQ Stock Market that we were withdrawing our appeal of the delisting notice from the NASDAQ Listing Qualifications Panel. We began listing our ~~biofuel~~common instock ~~2009~~on the OTCQB effective with the opening of trading on Monday, December 13, 2010.

· ~~Blended~~On ~~our~~November ~~biofuel~~1, ~~with~~2010, #6we ~~Diesel~~completed ~~fuel~~a toprivate ~~diversify~~placement ~~our~~of ~~product~~six ~~applications~~month secured convertible notes and ~~expand~~warrants ~~our~~to ~~potential~~three ~~markets~~investors, which generated $375,000 in gross proceeds.

· On March 2010, we received the permit to construct approval from the State of Maryland to expand our Baltimore facility to 25 million gallons.

· On March 12, 2010, we executed a non-binding Memorandum of Understanding, or MOU, with Regent Trend Investment Ltd (soon to be re-named Milestone Biofuels Limited, or Milestone), a potential strategic partner from China, under which Milestone would invest $20 million in our equity securities and we would collaborate with Milestone to form a joint venture to develop and operate biofuel production plants in the continental United States with a total aggregate plant capacity of 250 million gallons per year. Milestone would fund all of the capital requirements for the joint venture and we would provide the technology and operate the plants. We would earn a minimum royalty on all sales from the joint venture and would share in a percentage of profits above the minimum royalty. The MOU remains subject to a due diligence period of up to 75 days and negotiation, execution and delivery of definitive agreements acceptable to both parties and approved by their respective boards of directors. The investment also may be subject to shareholder approval under the NASDAQ listing rules. There is no assurance that definitive agreements will be signed or that the transaction will close.

· In February 2010, we entered into an agreement with Ferdinando Petrucci, the inventor of our proprietary technology, to issue 1,100,000 shares of common stock and $120,000 in cash in lieu of the $1 million license payment payable in two equal installments in February and March 2010 to help conserve cash and strengthen our liquidity.

· InOn ~~February~~October 4, 2010, we ~~closed~~completed a ~~private~~registered ~~placement~~direct ofoffering ~~1,890,858 shares~~ of our common stock and warrants, towhich ~~purchase~~generated 1$600,~~890,858~~000 ~~shares~~in ofgross ~~common~~proceeds ~~stock~~and ~~for~~approximately ~~total~~$550,000 ~~gross~~in net proceeds, ofafter ~~approximately~~deducting ~~$1.3~~placement ~~million~~agent’s fees.

· In January 2010, Baltimore City Schools named us in their annual heating fuel request for proposal. This request for proposal by the Baltimore City Schools is in conjunction with a proposed 1 year contract with the City of Baltimore. We previously completed a successful test program with the City of Baltimore and reached an agreement to proceed with a longer contract to include the Baltimore City Schools.

· In December 2009, we closed a registered direct offering of 1,926,250 shares of common stock and warrants to purchase 577,875 shares of common stock for total gross proceeds of approximately $1.5 million.

· In November 2009, we entered into a sales contract, following the purchase order entered into in July 2009, to supply Fenix Energy with 750,000 gallons of our biofuel per month for 12 months under specified conditions. In March 2010, as provided in the sales contract, we requested a letter of credit equivalent to one month’s sales. We have not yet received the letter of credit which Fenix would need to post to satisfy one of the conditions to shipment. We also would have to complete modifications to our Baltimore production facility to be able to make shipments under this arrangement.

· In November 2009, we received a letter from NASDAQ that confirms that we are back in compliance with their shareholders’ equity requirements for continued listing. However, in December 2009, we received a letter from NASDAQ that states that we are not in compliance with the NASDAQ minimum bid price requirement for continued listing and have until June 2010 to regain compliance.

· In October 2009, we signed a letter of intent with Ace Biofuels under which Ace Biofuels intends to license product formulations, manufacturing technology and know-how from us with the intent of constructing a biofuel manufacturing facility and marketing our biofuel in Puerto Rico, subject to completion of definitive agreements.

Our Growth Strategy

~~· Continue pursuing sales to large customers through validation of biofuel performance.~~ We ~~are~~plan ~~continuing~~ to work with potential customers regarding sales of our biofuel. The sales cycle is lengthy, but we continue to emphasize the fuel characteristics and emissions data regarding our biofuel. To meet the potential demands of customers and prospective customers, we will need to develop additional production capacity.:

· ~~Pursue~~Continue ~~technology~~pursuing ~~sublicensing~~sales ~~opportunities. We plan~~ to ~~pursue~~large acustomers ~~second revenue steam by collecting royalties~~ through ~~sublicensing~~validation ~~our~~of ~~proprietary~~biofuel ~~technology~~performance. InWe ~~March~~are ~~2009,~~continuing ~~we entered into an addendum~~ to ~~our~~work ~~license agreement to provide for a cross-license~~ with ~~PTJ~~potential ~~Bioenergy~~customers ~~Holdings~~regarding ~~(“PTJ”)~~sales ~~for~~of ~~all improvements by us to~~ our ~~proprietary technology~~biofuels. The ~~royalty~~sales ~~payable~~cycle byis ~~PTJ~~lengthy, tobut uswe ~~for~~continue ~~the~~to ~~cross-licensed~~emphasize ~~technology~~the ~~will~~fuel ~~equal~~characteristics 5%and ofemissions ~~PTJ’s~~data ~~revenues~~regarding ~~outside of~~ our ~~territory,~~biofuels. ~~which~~To ~~under~~meet the ~~license~~potential ~~agreement~~demands ~~includes~~of ~~North~~customers ~~America, Central America~~ and ~~the~~prospective ~~Caribbean. Additionally~~customers, we ~~have~~anticipate ~~entered~~that ~~into~~we ~~non-binding~~will ~~letters~~need ofto ~~intent~~develop ~~(“LOIs”)~~additional ~~with~~production ~~businesses in Puerto Rico and Canada, which contemplate a payment of a fee per gallon of fuel produced and sold~~capacity.

· ~~Power~~Pursue ~~plants~~technology ~~that~~licensing ~~are~~and ~~constrained~~sublicensing byopportunities. ~~emissions~~We ~~restrictions~~plan ~~and~~to ~~eligible~~pursue ~~for~~a ~~renewable~~second ~~energy~~potential ~~credits~~revenue stream by collecting royalties through sublicensing our proprietary technology. WeIn ~~are~~March ~~marketing~~2009, we entered into an addendum to our ~~biofuel~~license asagreement to provide for a ~~low~~cross-license ~~capital~~with ~~expenditure~~PTJ ~~solution~~Bioenergy ~~that~~Holdings ~~would~~(“PTJ”) ~~enable~~for ~~customers~~all improvements by us to ~~meet~~our ~~requirements~~proprietary emulsion technology. The royalty payable by PTJ to ~~use~~us ~~renewable~~for ~~energy~~the ~~sources~~cross-licensed ~~and~~technology ~~increase~~will equal 5% of PTJ’s revenues outside of our territory, which under the ~~productivity~~license ~~and~~agreement ~~extend~~includes North America, Central America and the ~~useful~~Caribbean. ~~life~~Additionally, independent of ~~coal~~our emulsion technology, we have developed new intellectual property around solutions, a second mixing approach. Although this technology is in earlier stages of development, we believe it is available for global licensing. Our solution approach is initially aimed at utilizing waste products and ~~oil~~low ~~power~~alternative ~~plants~~use feedstocks.

· ~~Commercial~~Market our biofuels to commercial and industrial process and space heating customers. These customers primarily consist of state-owned facilities and privately-owned corporate manufacturing facilities. ~~Many~~A majority of states have ~~already~~ passed mandates to utilize renewable energy, which ~~will~~mandates continue to increase annually. Privately owned corporate manufacturers are also beginning to concentrate on their responsibilities as a global corporate ~~citizen~~citizens and are proactively seeking to lower their greenhouse gas emissions. We are marketing our biofuel as a fuel alternative to both of these types of consumers, including through existing distributors.

· Expand product lines to develop new applications. Since many of the advantages of our ~~biofuel~~biofuels come from their versatility and ability to be customized for different applications, we intend to continue our research and development efforts to develop additional applications for commercial use. We also plan to customize our products to customer specifications and continue to expand our product line to serve new market segments, such as blending our biofuel with # 6 Oil and co-firing in ~~Coal~~coal burning generators.

3· Pursue favorable tax and regulatory policies for our biofuels. On the federal level, we successfully partnered with other renewable biofuels providers to support the renewal of the 50 cent per gallon “alternative fuel tax credit” which was extended through December 31, 2011. We have also been working with federal policymakers in an effort to qualify our fuel for the $1 per gallon tax credit as “renewable diesel.” In addition, on both the federal and state level, we are working to qualify our biofuels as a fuel that receives credit for state renewable energy portfolio standards that require the use of renewable energy sources and/or to qualify for federal and state biofuel mandates and incentives, such as the Renewable Fuel Standard 2 program run by EPA.

· ~~Pursue~~Market ~~favorable tax and regulatory policies for~~ our biofuels. ~~On the federal level, we have partnered with other renewable fuel providers~~ to ~~support~~power ~~the~~plants ~~renewal of the 50 cent per gallon “alternative fuel” tax credit”~~ that ~~expired~~are onconstrained ~~December~~by ~~31,~~emissions ~~2009.~~restrictions ~~An extension of this credit is included in legislation that has passed the U.S. Senate,~~ and iseligible ~~awaiting~~for ~~consideration~~renewable byenergy ~~the U~~credits.S. ~~House of Representatives.~~ We ~~have also been working with federal policymakers in an effort to qualify our fuel for the $1 per gallon tax credit for “renewable diesel.” In addition, on both the federal and state level, we~~ are ~~working~~marketing ~~to qualify~~ our ~~biofuels~~biofuel as a ~~fuel~~low ~~that~~capital ~~receives~~expenditure ~~credit~~solution ~~for~~that ~~renewable~~would ~~energy~~enable ~~portfolio~~customers ~~standards~~to ~~that~~meet ~~require~~requirements ~~the~~to use of renewable energy sources and~~/or~~ toincrease ~~qualify~~the ~~for~~productivity ~~Federal~~ and ~~state~~extend ~~biofuel~~the ~~mandates~~useful life of coal and ~~incentives~~oil power plants.

The Biofuels Industry and Market Trends

Biofuels and Feedstocks

Biofuels can be defined generally as solid, liquid or gas fuels produced from renewable, recently living biological resources, such as plant biomass. In contrast, fossil fuels are derived from non-renewable biological material formed from the decayed remains of prehistoric plants and animals. Biofuels are perceived to have a number of potential benefits including the ability to reduce greenhouse gas emissions and environmental pollution, promote energy independence through the growth of domestic energy sources, increase rural development, and establish a sustainable, renewable future energy supply.

“First generation biofuels,” such as ethanol or biodiesel, use conventional technologies to produce fuel from crops high in sugar, such as sugar cane or sugar beets, or high in starch, such as corn or maize, or from crops containing high amounts of vegetable oil, such as soybeans or palm oil, or from animal fats. For example, ethanol production involves fermenting sugars or starches to produce ethyl alcohol, while biodiesel is produced through a chemical reaction called transesterification to generate a methyl ester fuel, while yielding glycerin as a by-product. The growth of first generation biofuels has been criticized because of perceptions that their feedstocks may divert food from human use and contribute to price increases and food shortages, particularly in lesser-developed countries.3

“~~Second~~First generation biofuels,” such as corn-based ethanol or ~~“advanced” biofuels~~biodiesel, use ~~newer~~conventional technologies to produce fuel from ~~food~~ crops high in simple sugars, ~~non-food~~such ~~plants and~~as ~~waste~~sugar cane or sugar beets, or high in starch, such as corn or maize, or from crops containing high amounts of vegetable oil, ~~sources~~such as soybeans or palm oil, or from animal fats. WeFor ~~call~~example, ~~our~~ethanol ~~biofuel~~production ~~“New~~involves ~~Generation Biofuel”~~fermenting ~~because~~sugars itor ~~can~~starches beto produce ethyl alcohol, while biodiesel is produced ~~using~~through ~~our~~a ~~less~~chemical ~~complex,~~reaction ~~proprietary~~called ~~blending technology~~transesterification to ~~derive~~generate ~~fuels~~a ~~from~~methyl ~~both~~ester fuel, while yielding glycerin as a by-product. The growth of first generation biofuels has been criticized because of perceptions that their feedstocks may divert food ~~crops~~from ~~like~~human ~~soybeans~~use and ~~non-~~contribute to price increases and food ~~sources~~ ~~such~~shortages, asparticularly ~~recycled~~in ~~vegetable~~lesser-developed ~~oil~~countries.

“Second generation” or “advanced” biofuels use newer technologies to produce fuel from food crops, non-food plants and waste vegetable oil sources. Often cellulosic-derived fuels are considered second generation. We call our biofuels “New Generation Biofuels” because they can be produced using our less complex, proprietary blending technology to derive fuels from both food crops like the oil from soybeans and non-food sources such as recycled vegetable oil.

We have been developing “next generation” biofuels. As our technology and processes evolve, our objective is to incorporate non-food based oils that are of less demand and therefore carry a lower acquisition cost. Our flexible technology allows use of feedstocks that are not always amenable to other technologies and therefore have lower value alternative uses. The sources of these feedstock oils are in some instances, a by-product or waste stream from other technologies such as alternative fuel or waste reduction. Our flexible technology also allows for easier opportunities to not only improve environmental profiles but to also address physical property challenges other fuels will have difficulties meeting (e.g. low temperature flow, lubricity and flash points.

Market Size and Growth

The Energy Information Administration (“EIA”) has projected that the use of alternative fuels, such as ethanol, ~~biodiesel~~ and ~~coal-to-liquid,~~ biodiesel will increase substantially as a result of the higher prices projected for traditional fuels and the support for alternative fuels provided in recently enacted federal and state legislation. According to a recent report, direct economic output from the advanced biofuels industry, including capital investment, research and development, technology royalties, processing operations, feedstock production and biofuels distribution, is estimated to rise to $5.5 billion in 2012, $17.4 billion in 2016 and $37 billion by 2022.

Government initiatives are expected to contribute to this growth. For example, the Energy Independence and Security Act of 2007 increased the minimum production of renewable fuels target to 36 billion gallons in 2022. Currently, the US produces only 12 billion gallons of biofuels. According to a 2008 study performed in connection with the legislation, the economic impact of increasing renewable fuels production to 36 billion gallons between 2008 and 2022 would include:

adding more than $1.7 trillion to the U.S. gross domestic product;

generating an additional $436 billion of household income;

supporting the creation of as many as 1.1 million new jobs; and

generating $209 billion in new federal tax receipts.

4At the end of 2010, Congress reinstated biofuel tax incentives retroactively for 2010 and through 2011. The Obama Administration and many members of Congress support biofuel incentives. As a result, we are hopeful that such tax incentives will be continued; however, it cannot be guaranteed that they will be renewed in the same form or at all in the future.

The American Clean Energy and Security Act of 2009 (“ACESA”) passed the U.S. House of Representatives in June 2009. The bill, among other things, (i) establishes a federal renewable energy standard; (ii) permits energy efficiency measures to satisfy part of the renewable energy standard; and (iii) establishes a cap-and-trade program to reduce greenhouse gas emissions from various sectors of the economy, including electric and natural gas utilities. Similar legislation is currently stalled in the U.S. Senate but if a bipartisan compromise could be reached, it could result in the passage of enforceable federal standards, such as a cap-and-trade program, governing greenhouse gas emissions. If ACESA, or similar legislation, were enacted into law, we believe that affected companies could utilize our biofuel to meet more cost effectively the new requirements and in less time. We cannot predict whether this or similar legislation will be enacted or exactly how such legislation may impact our business.

Trends in the Biofuels Market

We believe that our biofuels can benefit from ~~the~~ favorable market trends that are converging to drive growth across the renewable fuels industry, including:

Global energy supply and demand. Despite ~~the~~past ~~recent~~ drops in oil prices due to the global economic recession, we believe that, over the long term, wethere ~~are~~will ~~still~~be in a sustained period of high demand for energy, especially for conventional sources ~~like~~such as petroleum-based fuels. We believe that this demand will continue to pressure oil supplies worldwide and has led to a heightened interest in developing domestic, alternative, renewable energy sources. Moreover, global unrest, particularly the civil unrest in the Middle East and the ongoing crisis in Japan, has put further uncertainty on petroleum prices.

Short-term energy security risks. Increased trade may carry a risk of heightened short-term energy insecurity for all consuming countries, as geographic supply diversity is reduced and reliance grows on vulnerable supply routes, such as the Middle East. We believe that in developing domestic renewable energy sources, the United States will be less vulnerable to overseas markets and the vulnerability associated with those supply routes.4

~~Environmental~~Short-term ~~and~~energy ~~sustainability concerns~~security risks. ~~Concerns~~ Increased ~~have~~trade ~~risen~~may ~~over~~carry ~~the~~a ~~growth~~risk inof ~~greenhouse gas~~heightened ~~emissions~~short-term ~~and~~energy ~~potential~~insecurity ~~negative~~for ~~impact~~all onconsuming ~~the~~countries, ~~global~~as ~~environment~~geographic supply diversity is reduced and ~~climate~~ ~~change~~reliance grows on vulnerable supply routes, such as the Middle East. ~~Unlike~~We ~~fossil~~believe ~~fuels,~~that in developing domestic renewable ~~biofuels~~energy ~~are considered~~sources, tothe ~~have~~United aStates-and ~~lower~~potentially ~~carbon~~other ~~footprint~~countries ~~because~~and ~~the~~regions ~~carbon~~as ~~dioxide~~well- ~~released by~~will ~~burning~~be ~~the~~less ~~fuel~~vulnerable isto ~~balanced~~overseas bymarkets and the ~~carbon~~vulnerability ~~dioxide~~associated ~~absorbed~~with bythose ~~new~~supply ~~plant growth~~routes.

~~Government~~Environmental ~~incentives~~ and ~~mandates~~ ~~for~~sustainability ~~renewable fuels~~concerns. Concerns Inhave ~~the~~risen ~~pursuit~~over ofthe ~~climate~~growth ~~change initiatives~~in ~~and~~greenhouse ~~energy~~gas ~~independence,~~emissions ~~federal~~ and ~~state~~their ~~governments~~potential ~~are increasingly~~negative ~~emphasizing~~impact on the ~~use~~global ofenvironment ~~renewable~~and ~~fuels~~climate change. ~~The~~Compared ~~revised renewable fuel standard calls for an increase in mandatory biofuel used as Environmental Protection Agency approved biofuels.~~to Asfossil ~~of January 2010~~fuels, 29renewable ~~states~~biofuels ~~plus~~are ~~the~~generally ~~District~~considered ofto ~~Columbia~~ have lower ~~enacted~~carbon ~~renewable~~footprints. ~~portfolio standards~~because ~~(RPS)~~the ~~that~~carbon ~~require~~dioxide ~~electric~~released ~~power~~by ~~producers~~burning tothe ~~use~~fuel ~~renewable~~is ~~sources to~~offset ~~generate~~by ~~electricity. We~~the ~~believe~~carbon ~~that~~dioxide ~~these~~absorbed ~~government~~by ~~policies will~~new ~~generate~~plant ~~market opportunities for our biofuel.~~growth

~~Food~~ Government ~~versus~~incentives ~~fuel debate. We~~and ~~believe~~mandates ~~that~~for ~~the~~renewable ~~“food v~~fuels. ~~fuel~~In ~~debate”~~the ~~which~~pursuit ~~has resulted in growing concerns over diversion~~ of ~~food~~climate ~~supplies~~change toinitiatives ~~fuel~~and ~~production is~~energy ~~pressuring~~independence, ~~first~~federal ~~generation~~and ~~biofuel~~state ~~producers~~governments toare ~~explore~~increasingly ~~alternative, non-edible~~emphasizing ~~feedstocks~~the touse ~~produce~~of ~~their~~renewable fuels . The ~~United~~revised ~~Nations~~renewable ~~noted~~fuel ~~in a~~standard ~~2007~~calls ~~report~~for onan ~~sustainable~~increase ~~bioenergy~~in ~~that~~mandatory ~~“as~~biofuel ~~second~~used ~~generation~~that ~~technologies. .~~are .approved ~~become~~by ~~commercially~~the ~~available,~~Environmental ~~this~~Protection ~~will~~Agency ~~lessen~~under the ~~possible~~Renewable ~~negative effects~~Fuel onStandards ~~land~~2 ~~and~~program. ~~resource~~In ~~competition~~addition onto ~~food availability.” We~~renewable ~~believe~~biofuels ~~that~~mandates as ~~there~~of ~~will~~January be2011, a ~~transition period~~majority ~~for~~of ~~second~~states ~~and~~plus ~~future~~the ~~generations~~District of ~~biofuels~~Columbia ~~before~~have ~~non-edible feedstocks~~enacted ~~are~~renewable ~~widely~~portfolio ~~available~~standards in(“RPS”), ~~sufficient~~which ~~commercial quantities. There~~require ~~may~~electric ~~also~~power beproducers ato ~~transition~~use ~~period~~renewable ~~before~~sources ~~these technologies~~to ~~become~~generate ~~more commercially viable~~electricity. WeMany ~~also~~RPS ~~believe~~requirements ~~that the~~are ~~ability~~graduated toand ~~use~~are ~~various~~ramping ~~different~~up ~~kinds~~in ofthe ~~feedstocks~~very ~~(both~~near ~~edible~~future. We ~~and non-edible)~~also ~~and~~believe ~~waste~~that ~~products~~these ~~will~~government ~~provide~~policies anwill ~~advantage~~generate tomarket ~~certain~~opportunities ~~biofuels during~~for ~~this~~our ~~transition period and beyond~~biofuel.

Food versus fuel debate. We believe that the “food vs. fuel debate,” which has resulted in growing concerns over diversion of food supplies to fuel production, is pressuring first generation biofuel producers to explore alternative, non-edible feedstocks to produce their fuels . The United Nations noted in a 2007 report on sustainable bioenergy that “as second generation technologies . . . become commercially available, this will lessen the possible negative effects on land and resource competition on food availability.” We believe that there will be a transition period for second and future generations of biofuels before non-edible feedstocks are widely available in sufficient commercial quantities. There may also be a transition period before these technologies become more commercially viable. We also believe that the ability to use various feedstocks (both edible and non-edible) and waste products will provide an advantage to certain biofuels during this transition period and beyond.

Our Market Opportunity

We believe a significant market opportunity exists for our biofuel in three target market segments that consume an aggregate of approximately 155 billion gallons of fuel per year: commercial, industrial and electric power markets in the U.S. Of this 5.0 billion gallon amount, the industrial and commercial sectors consume approximately 2.7 billion gallons of fuel oil annually. Much of this energy is used in boilers to generate steam and hot water. These boilers consume about 40 percent of all energy consumed in the commercial and industrial sectors. Our initial focus within these sectors has been working with customers in the Central Atlantic and Midwest regions of the US. These regions comprise a large boiler and combustion turbine markets, which use distillate fuel, heavy fuel oil or coal co-firing as an energy source.

·Commercial Power Generation. The power generation sector consumed approximately 2.2 billion gallons per year of distillate and residual fuel oils, according to the estimates available from the Energy Information Administration. This sector includes “peaking” power plants eligible for government renewable energy credits and constrained by emissions limitations.Market

·The ~~Commercial~~commercial ~~and~~market ~~Industrial.~~is ~~This~~defined ~~sector~~as ~~consumes~~service-providing ~~approximately~~facilities ~~6.4~~and ~~billion~~equipment ~~gallons~~ of ~~distillate~~non-manufacturing ~~and~~businesses. Examples ~~residual~~include ~~fuel~~government ~~oil~~facilities, ~~per year that could switch to our biofuels~~schools, ~~according to the estimates available from the Energy Information Administration. This segment includes large~~ institutional ~~customers~~living ~~like state government buildings~~quarters, ~~hospitals~~ and ~~sewage~~private ~~treatment~~and ~~facilities~~public ~~that~~service ~~are taking a leadership role in reducing greenhouse gases.~~organizations,

Common uses of energy associated with this sector include space heating, water heating, air conditioning, lighting, refrigerating, cooking and running a wide variety of other equipment.

Industrial Market

The industrial market is defined as all facilities and equipment used for producing, processing, or assembling goods. Examples include manufacturing and mining.

Overall energy use in this sector is largely for process heat, cooling and powering machinery, with lesser amounts used for facility heating, air conditioning and lighting.

Electric Power Market

The electric power market is defined as facilities that produce electricity for sale and combined heat and power (“CHP”) plants whose primary business is to sell electricity or electricity and heat, to the public.

·NGBF’s ~~Marine.~~emphasis ~~According to the estimates available from the Energy Information Administration, diesel fuel consumption~~ in ~~the~~this ~~marine~~ market is ~~approximately~~aimed ~~6.3~~at ~~billion~~CHPs, ~~gallons~~which ~~per~~are ~~year~~peak ~~and~~power ~~includes~~units ~~commercial~~that ~~and~~are ~~private~~oil ~~boats~~fired, ~~such~~and as ~~pleasure~~a ~~craft,~~form ~~fishing~~of ~~boats,~~liquid ~~tugboats,~~biomass ~~and~~that ~~ocean-going~~can ~~vessels,~~be ~~including~~co-fired ~~vessels~~with ~~operated~~coal byto ~~oil~~help ~~companies.~~meet ~~This~~EPA ~~sector~~emission isreductions ~~exploring renewable fuels due to tighter emissions standards~~ and ~~restrictions~~state onRPS ~~cruise liners idling in port~~requirements.

Our Products

~~Product Formulas~~Current Products

~~We presently~~Currently ~~offer~~we ~~two~~have ~~biofuel~~commercialized two product families ~~with~~based ~~different~~on ~~formulations,~~renewable ~~made from~~plant ~~different feedstocks~~ and ~~having~~animal ~~different~~oil ~~performance~~and ~~characteristics~~fat ~~to meet the diverse needs of our customers:~~feedstocks.

1)Both ~~Classic.~~are ~~Our~~emulsified ~~“Classic”~~renewable ~~biofuel~~fuels ~~formula~~aimed isat ~~made~~replacing ~~using~~diesel ~~plant~~or ~~oil,~~distillate ~~water~~fuels in boiler and acoal ~~proprietary~~co-firing ~~additive~~applications, ~~package~~with the capability to fulfill needs in additional applications. Trademarked ~~Classic~~as ~~represents~~ClassicTM ~~our~~(“Classic”) ~~lowest~~and ~~cost~~Ultra ~~product~~High ~~offering~~FlashTM ~~for~~(“Ultra ~~various~~HF”), ~~diesel~~both ~~fuel~~product ~~applications.~~families offer:

2)· ~~Ultra~~Renewable ~~HF.~~biofuels Our “Ultra HF” biofuel formula is made using plant oil and a premium selection of additives. Ultra HF, while being more expensive than Classic, offers most of the same favorable characteristics while having the advantage of a higher flash point.designation

We· ~~believe~~Significantly ~~that~~reduce ~~our~~emissions ~~ability to offer a selection of biofuels with different performance characteristics gives us greater ability to meet customer demand than is the case with many other biofuel manufacturers~~vs. ~~This~~ ~~customization~~petroleum ~~enables~~based ~~us to offer potential customers biofuels responsive to their specific requirements.~~fuels

Essentially eliminates sulfur oxide (“SOx”) emissions

>40% reductions in nitrus oxide (“NOx”) emissions

Improved carbon footprints

Excellent atomization and ignition properties

Low pour point for improved handling in colder conditions

Good fuel stability

Enhanced fuel lubricity

Classic has a very low pour point of -49 degrees Fahrenheit.

Ultra HF was developed based on customer and market needs for a fuel that met local storage and handling requirements. Ultra HF offers the benefits of Classic, with two major differences:

A significantly higher flash point (above 210 °F)

A higher energy content (> 100,000 Btu/gal)

Technology Development

As our technology and processes evolves our objective is to incorporate non-food based oils that are of less demand and therefore carry a lower acquisition cost. Our flexible technology allows for the use of feedstocks that are not always amenable to other technologies and therefore have lower value alternative uses. The sources of these feedstock oils are in some instances, a by-product or waste stream from other technologies such as alternative fuel or waste reduction.

Planned Product Offering

We are currently in the development stages of a pyrolysis oil based renewable biofuel. Our objective for this product is to provide equivalent performance benefits as Classic and Ultra HF, but with additional significant benefits:

A much lower raw material feedstock cost

Is defined as a cellulosic biomass based fuel, which has current incentive advantages.

Key Advantages of our Biofuels

~~Customer usage~~Our ~~and~~technology ~~test~~centers ~~burn~~on ~~results~~the ~~have shown that our biofuel is ready to~~ use ~~in industrial~~of ~~applications~~precise ~~without~~ mixing orapproaches ~~blending~~to ~~with~~blend ~~other~~renewable ~~fuels, equipment modification or substantial loss of performance. We believe that our biofuels can serve as a complete fuel replacement wherever distillate or residual fuel~~ oils ~~are~~with ~~used~~water ~~today. This feature gives us the flexibility~~ to ~~deliver~~ ~~biofuels~~create ~~directly~~renewable ~~to the end user customers or to license the technology to customers for manufacturing our~~ biofuels ~~for themselves, without relying on distributors or other intermediaries~~. ~~However,~~ These weprecise ~~also~~mixing ~~have the flexibility to blend our biofuels with other fuels~~approaches, ~~such~~emulsions asand ~~diesel~~solutions, ~~depending~~represent onour ~~the~~patent ~~needs of~~pending ~~the customer~~technologies.

~~Another key~~Our ~~characteristic~~technological ofapproach ~~our biofuels~~ is ~~its~~to ~~lower~~be ~~pour~~able ~~point. The pour point of a fluid is the temperature at which dissolved solids are no longer completely soluble and the fluid begins~~ to ~~solidify. The~~combine ~~pour~~chemicals ~~point~~that ofnormally ado ~~fluid~~not ismix ~~the lowest temperature at which it will pour or flow under prescribed conditions~~(i. ~~It is a rough indication of the lowest temperature at which the fluid is readily pumpable~~e. ~~The~~, ~~pour~~oil ~~point~~and ~~for~~water) ~~some~~coupled ofwith ~~our~~various ~~biofuels (B100 soybean based~~additives, ~~for~~such ~~example)~~as issurfactants ~~less~~in ~~than~~the 0case ~~degrees Fahrenheit while that~~ of ~~conventional~~ ~~biodiesel~~emulsions, isto 32create ~~degrees~~a ~~Fahrenheit~~stable homogeneous mixture.

~~Our biofuels~~The ~~also~~incorporation ~~have~~of ~~certain~~water ~~environmental~~in ~~advantages. They~~our ~~are~~fuel ~~renewable “carbon~~formulations ~~neutral”~~provides ~~fuels~~significant ~~with~~emission ~~minimal~~reduction ~~net~~benefits ~~carbon~~by ~~dioxide~~lowering ~~emissions. We~~the ~~have demonstrated~~temperatures ~~reductions~~at inthe ~~nitrogen~~point ~~oxide~~of ~~emissions~~combustion ofto ~~40%~~minimize orthe ~~more~~formation inof ~~utility scale~~pollutants ~~combustion~~such ~~turbine~~as ~~applications~~NOx. Water ~~and~~also ~~industrial~~assists ~~boilers~~in ~~when~~the ~~compared~~atomization ~~to diesel~~of ~~and~~our ~~biodiesel. Furthermore~~biofuels, aswhich aresults ~~crop~~in ~~based~~more ~~fuel~~complete combustion, ~~our~~improving ~~biofuels~~fuel ~~have virtually~~efficiency noand ~~sulfur~~decreasing ~~emissions~~the likelihood of pollutants being formed.

~~Our~~In ~~Production~~addition ~~Process~~to the benefits related to burning described above, our technology offers us significant manufacturing and raw material cost benefits and our mixing processes are not as complex as most other biofuel and petroleum refining technologies.

WeProcess ~~produce~~complexity our biofuels using a blending process that is much simpler than the complex chemical reaction process used to produce traditional biodiesel. Our technology combines water with commonly available additives to produce a mixture. The mixture is then combined with a plant oil or animal fat feedstock and a surfactant to produce our biofuel. By contrast, conventional biodiesel is produced utilizing a chemical reaction known as transesterification. In this process, plant oil reacts with an esterifying agent, usually anadds ~~alcohol~~costs ~~such~~in ~~as methanol or ethanol, to form two principal products: a methyl ester, which is~~ the ~~biodiesel~~following product, and glycerin, a low value by-product that requires disposal. The chemical reaction can be undertaken with or without a catalyst, but typically requires the input of additional energy to drive the reaction. Our biofuel blending production process requires a lower input of additional energy to produce the biofuel and does not result in a glycerin by-product.areas:

~~Traditional~~· ~~Biodiesel Production~~Capital ~~Process~~costs for manufacturing equipment

~~Source: National~~· ~~Biodiesel~~Operating ~~Board~~costs for process heating and cooling

~~New~~· ~~Generation~~Operating ~~Biofuel Production~~costs ~~Process~~for catalysts and/or solvents

~~Our simpler~~· ~~production~~Yield ~~process~~losses ~~enables~~from biofuels to be produced in smaller manufacturing plants than is typical for biodiesel. The smaller facility and less equipment translate into lower capital expenditures per million gallons for the production facility, a potentially significant cost advantage. This cost advantage in turn should give us more flexibility to locate production facilities closer to major customers. Our production process also requires less energy input than more complex chemical reactions, ~~making our production process more energy efficient. Our biofuel production process produces no significant by-products, wastes, emissions~~ or ~~discharges,~~molecular unlike many biodiesel fuels, which again reduces the cost of production and increases efficiency. Compared to conventional biodiesel production methods, we believe that this proprietary blending technology is cleaner and less expensive because it is substantially less complex, less capital and energy intensive and produces fewer disposable by-products.transformations

~~Research~~· ~~and Development~~Production of waste streams as a result of yield losses

WeFor ~~have established a research and development group~~example, ~~headed~~ethanol byproduction ~~our~~requires ~~Chief~~fermentation ~~Technology~~and ~~Officer,~~distillation Drprocesses. ~~Andrea Festuccia, which is based in Rome, Italy.~~ ~~Utilizing~~Biodiesel ~~input~~processes ~~from~~involve ~~test~~relatively ~~burns~~complex ~~and existing~~chemical ~~customers, Dr~~reactions. Other ~~Festuccia~~processes ~~has~~may ~~worked~~also ~~to optimize our product and improve its performance to meet certain customer specifications.~~utilize ~~The improvements~~hazardous ~~and~~chemicals ~~modifications in the last year have included successfully blending our biofuel with #2~~ and #6they ~~Diesel fuel, increasing the energy content, increasing the flash point and expanding the number of feedstocks we~~ can ~~use~~create byproducts ~~to produce our biofuel~~(e.g. Weglycerin) ~~spent~~that ~~$475,013~~must onbe ~~research~~handled and ~~development~~disposed inof ~~2009 and $1,086,723 in 2008~~properly.These ~~The~~activities ~~decrease~~can inall ~~research~~add and development expenses in 2009 is primarily the result of the beginning of commercial production of our fuel and conducting fewer test burns which were used extensively during our development stage to evaluate additional customized fuel formulations using our proprietary blending technologycosts.

Our mixing technologies are based on a combination of the correct raw materials and proper mixing techniques. It requires precision and accuracy utilizing the correct raw materials added at the correct time and in the correct quantities. Our mixing technologies do not require complex chemical reactions, catalysts, or enzymatic processes, and it does not produce any appreciable waste steams or products.

We utilize low energy pumps and motors, relatively standard storage and handling metallurgy, simple mixing capability and appropriate measuring and metering capability. As a result, our manufacturing process has a relatively low carbon footprint as compared to other more complex manufacturing technologies.

Our manufacturing technology is also environmentally friendly. Many of our materials are biodegradable. The emissions from our processes are very low. This generally means the permitting process for our technology is also less time consuming and costly as compared to more complex technologies.

Typical NGBF Biofuel Production Process Flow

~~Raw Materials~~ Research and ~~Principal Suppliers~~Development

~~Due~~We ~~to the~~have ~~flexibility~~established ofa research and development group, headed by our ~~biofuel~~Chief ~~technology~~Technology Officer, weDr. Andrea Festuccia, which is based in Rome, Italy. Our research and development objectives are ~~able~~aimed toat ~~utilize~~positioning ~~multiple feedstocks~~the ~~without~~Company ~~materially~~to ~~changing~~capitalize ~~our~~on ~~production~~the ~~process~~demand orfor ~~substantially increasing~~renewable, ~~operating~~emissions ~~costs~~reducing fuels, ~~although~~together ~~use~~with ofthe ~~different~~potential ~~feedstocks~~upsides ~~will~~associated ~~change certain~~with ~~characteristics~~regulatory ofmandates ~~the~~and ~~fuels~~potential emission based trading markets. WeUtilizing ~~expect~~input ~~that~~from ~~this~~test ~~flexibility will~~burns ~~enable~~and usexisting tocustomers, ~~opportunistically~~Dr. ~~source~~Festuccia has worked to optimize our ~~raw~~product ~~materials~~and toimprove ~~adjust~~its performance to ~~supply and~~meet ~~demand~~customer ~~imbalances~~specifications. Improvements and ~~price~~modifications ~~volatility~~ in the ~~vegetable~~last year have included successfully expanding the number of feedstocks we can use to produce our biofuels with our emulsion technology. Also, in 2010, we filed a provisional patent for pyrolysis oil as a feedstock and ~~other commodities~~a ~~markets~~provisional patent for a glycerin solution. In February 2011, we filed another provisional patent for a solution using pyrolysis oils.

We have commenced the process of procuring raw materials for production of our biofuel but have not made any significant commitments or procurements at this point. We have determined that while we can produce our biofuels from such different feedstocks as soybeans, canola, palm, sunflower, cottonseed, mustard seed, jatropha, recycled vegetable oil and animal fats, our principal raw materials in the near term will be plant oils and animal fats. We expect to source our raw materials through a variety of sources, including:Feedstocks

·Our ~~Domestic~~feedstock strategy is aimed at identifying cost effective and ~~global~~technically ~~plant~~viable ~~oils~~feedstocks ~~producers;~~that allows our formulations to be environmentally and performance advantaged, and to potentially be profitable without government incentives.

·Feedstocks ~~Animal~~drive ~~fats~~our ~~producers~~costs, performance, and ~~processors;~~ultimately profitability. There are many lessons learned from other biofuel technologies in connection with feedstocks, particularly with respect to corn based ethanol and commodity oil/fat based biodiesel, whose profitability has been negatively impacted by their limited feedstock options.

·Background ~~Commodity~~and ~~brokers;~~Our Path Forward

·We ~~Recycled~~believe ~~oil~~we ~~collectors;~~have ~~and~~key advantages in the marketplace to support our growth in respect to raw materials:

· ~~Spot~~We ~~market~~have ~~suppliers~~flexibility in the feedstocks we can utilize. Our processes provide latitude in the raw materials we can combine. As a result, we can procure raw materials from a wide range of supply sources based on local and global supply and demand opportunities which allows us to optimize economics and performance. Other biofuels typically are produced using a chemical reaction process that hinders their flexibility in the types of feedstocks that can be utilized.

~~Production Facilities~~· Our formulations use various percentages of the raw material components. This is different than other biofuel technologies that can be highly dependent on just one or two raw materials. As a result, we are able to mitigate supply challenges by not being focused on a single raw material but multiple materials to spread the burden of supply needs.

In· ~~February~~We ~~2009,~~focus weon ~~completed construction~~less oftraditional abiofuel 5feedstock ~~million~~sources. ~~gallon~~As ~~per~~a ~~year capacity production facility in Baltimore~~result, ~~Maryland and in April 2009,~~ we ~~began~~have ~~shipping~~been ~~our~~able ~~first commercial product that was made in this facility. The facility can be expanded in the future~~ to ~~produce~~develop upstrong torelationships 50with ~~million~~our ~~gallons~~feedstock ofsuppliers ~~second~~-~~generation~~ ~~biofuel~~many ~~a year. To~~with ~~complement~~global ~~this~~reach ~~production~~- ~~facility,~~and wewill ~~have~~continue ~~leased approximately~~to 6foster ~~million gallons of storage tank capacity~~ and ~~related~~grow ~~terminal facilities. Atlantic~~these ~~Terminalling~~relationships isas ~~providing~~well ~~on-site~~as ~~logistics services,~~partner ~~including~~with ~~the~~new ~~receipt~~supply ofsources ~~feedstocks,~~as ~~shipping~~they ofbecome ~~finished~~strategic ~~product and truck loading and unloading facilities. We are~~ in ~~the~~supporting ~~process of negotiating to settle various issues under~~ our ~~lease~~business ~~and~~plans ~~terminaling services agreement by reducing rent payments, relinquishing unneeded equipment~~ and ~~modifying~~ ~~other~~customer ~~commercial terms in return for making certain payments~~needs.

We· ~~are~~Our ~~continuing~~process todoes ~~explore~~not ~~additional ways~~generate ofyield ~~acquiring~~losses ~~manufacturing~~based ~~facilities~~on ~~without~~chemical ~~having to fund the entire cost ourselves~~processing, ~~including~~so ~~other~~all ~~joint~~of ~~ventures~~the ~~with~~feedstock ~~third parties such as utilities, independent power producers, sublicensees or other strategic partners or through project-based financing. To acquire manufacturing plants~~ we ~~would need~~purchase tobecomes ~~identify~~incorporated ~~suitable~~into ~~facilities that can be cost-effectively modified for~~ our ~~needs,~~fuel ~~negotiate acceptable purchase or lease agreements and finance any such acquisitions and capital improvements~~products. Unless we acquire existing plants, we may need to obtain government permits and other regulatory approvals (including environmental, zoning and construction permits), which could cause delays and/or add significant cost.

~~Sublicensing~~Our strategic feedstock objectives are focused toward driving costs down in the total formulation of our biofuels. Key drivers include:

~~Business Strategy. Our~~· ~~exclusive~~Developing ~~license allows us to sublicense our proprietary technology in North America, Central America~~ and ~~the~~maintain ~~Caribbean,~~feedstock and our business plan contemplates, as a second potential revenue stream, the collection of royalties through sublicensing our proprietary technology. We expect to pursue sublicenses where it is more efficient for manufacturers to produce our biofuel at their own plants, rather than requiring production at our proposed facilities. In 2009, we took steps to execute this strategy by signing non-binding letters of intent (“LOIs”) with businesses in Puerto Rico and Canada that are evaluating sublicensing our technology to construct biofuel manufacturing facilities and marketing and selling our biofuel under the “New Generation” brand name. These LOIs contemplated payment to us of a fee per gallon of fuel produced and sold. We are continuing to explore sublicensing opportunities both domestically and internationally.flexibility:

Be capable of using a wide range of feedstocks; and

Develop non-traditional feedstock options to take advantage of lower alternative values of the raw material.

Minimize our supply chain expenses:

Including a range of activities from evaluating feedstocks on a delivered cost basis to consideration of where to locate manufacturing facilities.

Identify opportunistic purchase situations:

Take advantage of short term supply and demand and pricing imbalances in the feedstock markets

~~Global Energy~~Current ~~Sublicense.~~Feedstock In April 2006 we entered into a sublicense agreement with Global Energy Holdings, Inc. (formerly Xethanol Corporation), formerly our largest shareholder and a renewable fuels company engaged in the production and sale of ethanol and its by-products. Neither side purchased or sold any product and Global Energy did not utilize the license to make biofuel, and accordingly we have not received any royalties from Global Energy. In November 2009, Global Energy filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Court for the District of Delaware to protect its assets and restructure its business. About six months prior to its bankruptcy filing, in March 2009, Global Energy sold its remaining 5,301,300 shares of our common stock to 2020 Energy, currently our largest shareholder. In connection with that sale of our shares, Global Energy agreed to assign its rights under the sublicense agreement to 2020 Energy. We do not believe that assignment has yet been completed.Initiatives:

Continued funding and resourcing our R&D efforts in seeking, screening, evaluating, formulating, and application testing lower cost feedstocks:

Place primary focus on pyrolysis oil;

Economics, efficacy, energy content, and environmental performance are key screening and evaluation parameters; and

Develop and support feedstock flexibility to mitigate shifting raw material costs.

Identify additional transactional and strategic partnerships for feedstocks:

Supply sources including non-traditional organizations;

Research institutions; and

Financing supply agreements.

Utilization and optimization of current supply sources to establish testing programs to generate profitable sales.

Extend current relationships and include new technology partners to seek low cost feedstock alternatives.

Continue partnering with key additive suppliers to advance and accelerate feedstock evaluations and appropriate additive packages for stability and performance criteria.

Progress registration processes, and the associated supporting engineering and laboratory work, for governmental approvals in key areas such as the EPA Renewable Fuel Standard 2 program.

Production Facilities

NGBF currently operates a Phase 1 pilot plant located in Baltimore, MD. This facility was completed in February 2009, and is permitted to produce 3.6 million gallons of fuel per year. The plant has been used to produce Classic and Ultra HF biofuels for initial customer test burns and acceptance programs. While this facility can be and may be expanded in the future, we recognize that additional modifications are required to allow for more consistent fuel production to meet the demand of our current customers. In particular, additional raw material storage, plant winterization and certain plant upgrades are needed to handle the storage and processing requirements of pyrolysis oil. We also recognize that locating a plant in another geographic region may be more efficient for feedstock acquisition and end user sales.

Our Future Manufacturing Asset Requirements

We believe our capital costs are competitive and a potential differentiator for our business going foward. In general, we are able to design, engineer, and construct a plant supporting our manufacturing processes for $0.25-$0.50 per gallon of annual production capacity. The range incorporates anticipated structural, infrastructure, and civil needs a potential site may face. In general, the more appropriate infrastructure that already exists, the lower the costs of constructing a plant would be. We believe that one advantage of our manufacturing process is that it is easily scalable. With no major reactors or process heating/cooling requirements, scale up consists primarily of storage tanks, pumps, meters and mixing kettles. We anticipate that our designs will us to use relatively small site footprints. For example, we believe that we can set up a 25 million gallon facility, excluding logistics, in 30,000 square feet depending upon configurations of the site. Although each individual site requires its own engineering to assure the processes are optimized and meet permitting and license to operate parameters, which are sometimes unpredictable and could cause significant delays, we believe that our fundamental plant design and low capital cost significantly differentiate our technologies from other alternative fuel production processes.

Competition

The markets for our biofuels are highly competitive. We compete with petroleum-based fuels, with other biofuels ~~like~~such as biodiesel or ethanol, and with other forms of alternative energy ~~like~~such as wind and solar.

Currently, the cost of producing most alternative fuels forces many manufacturers to operate at a significant competitive disadvantage compared to petroleum-based fuels. Producers of alternative fuels generally depend upon government support, including tax credits ~~and~~mandates ~~various~~to ~~incentives~~use specified minimum amounts of renewable fuels, upon the willingness of customers to pay a premium for renewable non-petroleum fuels, and upon ~~government~~access ~~mandates~~ to ~~use~~low ~~specified~~cost ~~minimum~~feedstock ~~amounts of renewable fuels, which amounts increase each year~~alternatives. Our ability to compete with petroleum-based fuels depends significantly on our ability to qualify for the various tax credits and other government incentives such as the Renewable Fuel Standard 2 (“RFS2”) program.

Also relevant to our ability to compete with petroleum-based fuels is the cost of adapting equipment to use alternative fuels. Since the vast majority of fuels currently consumed are petroleum-based, most consumers have equipment designed for consumption of those fuels, and alternative fuel suppliers often experience a second cost disadvantage – the expense of adapting the equipment to accommodate alternative fuels. We believe the ability of our biofuels to serve as a direct fuel replacement for distillate or residual fuel oils that requires no significant plant modifications improves our ability to compete.9

Also relevant to our ability to compete with petroleum-based fuels is the cost of adapting equipment to use alternative fuels. Since the vast majority of fuels currently consumed are petroleum-based, most consumers have equipment designed for consumption of such petroleum-based fuels, and alternative fuel suppliers often experience a second cost disadvantage – the expense of adapting the equipment to accommodate alternative fuels. We believe the ability of our biofuels to serve as a direct fuel replacement for distillate or residual fuel oils that requires no significant plant modifications improves our ability to compete with both petroleum-based fuels and other biofuels.

Within the alternative fuels market, the manufacture, marketing and sale of biofuels and other alternative fuels is highly competitive and highly fragmented. Such competition could be intense and could drive up the costs of feedstocks, plant construction, attracting and retaining qualified engineers, chemists and other key employees, as well as other operating expenses. Additionally, new companies are constantly entering the market.

We believe our ability to compete successfully in the biofuel production industry will depend on several factors, including the following:

advantages of our production process, including cost and efficiency factors;

fuel performance characteristics, including the ability of our biofuels to be used as a complete fuel replacement for distillate or residual fuel oils and our ability to customize our products to meet a customer’s requirements;

feedstock flexibility, particularly the ability to avoid using edible feedstocks in our production process;

overall demand for biofuels as a result of governmental incentives and legislation; and

continued technological innovation.

Tax Credits and Other Government Support

Since our fuel and other alternative and renewable fuels generally cost more to produce per unit of energy than petroleum-based fuels or coal, we and other producers of alternative fuels ~~will~~are be dependent upon government support to make our fuels cost competitive in comparison to fossil fuels. This support generally takes the form of tax credits, payments or other incentives or mandates.

50Fifty cent per gallon “alternative fuel” tax credit. The 50 cent per gallon credit applicable to our fuel, when mixed with diesel, kerosene or other taxable fuel and sold at the retail level, expired on December 31, 2009, along with biodiesel and other alternative fuel tax credits. ~~Congress~~In isDecember ~~expected~~2010, toCongress ~~pass~~extended in the ~~coming months~~alternative afuel ~~tax~~credit, ~~extenders bill which will extend (effective~~ retroactive to January 1, 2010), through ~~the~~December ~~end of 2010 or beyond many expired tax provisions~~31, ~~but we cannot assure you if or when the tax credit applicable to our fuel will be extended~~2011.

9One dollar per gallon tax credit for biodiesel and “renewable diesel.” We are not currently eligible for the $1 per gallon federal tax credit currently afforded to biodiesel and “renewable diesel.” We have been engaged in an effort to convince the United States Congress to amend the tax code definitions to make our biofuels eligible for the same tax credit provided to biodiesel.In addition, the biodiesel tax credit (and renewable diesel) expired on December 31, 2009. In December 2010 Congress extended the $1 per gallon tax credit, retroactive to January 1, 2010, through December 31, 2011.

$1 per gallon tax credit for biodiesel and “renewable diesel.” We are not currently eligible for the $1 per gallon federal tax credit currently afforded biodiesel and “renewable diesel.” We have been engaged in an effort to convince Congress to amend the tax code definitions to make our biofuel eligible for the same tax credit provided to biodiesel. In late 2008, the biodiesel tax credit definitions were amended such that we may qualify for the $1 per gallon tax credit with appropriate guidance from the U.S. Department of the Treasury. Until such guidance is issued, however, we will not be eligible for the $1 per gallon credit available to biodiesel. In addition, the biodiesel tax credit (and renewable diesel) expired on December 31, 2009.

Intellectual Property

We acquired the rights to our proprietary emulsion technology (the “Technology”) through an exclusive license agreement with the inventor of the technology, Ferdinando Petrucci, in March 2006. Under the license agreement, we have been granted a perpetual, exclusive license to make, use and exploit certain chemical additives for use in making biofuel and related know-how. Our exclusive license extends to North America, Central America and the Caribbean, and we have a right of first offer for any other territories worldwide (other than Italy and Paraguay, which are reserved to the inventor). As of March 1525, ~~2010~~2011, our license agreement has remaining payments of $1.0 million per year during each of the next four years, ~~with~~ the next payment of $1.0 million was originally due inon ~~February~~March 20, 2011. The parties agreed to extend the payment due date until May 21, 2011.

In April 2006, we filed a U.S. provisional patent application on behalf of the inventor and directed to the technology covered by our license. In April 2007, we filed a patent application under the Patent Cooperation Treaty which claimed the benefit of the U.S. provisional application and in September 2008 we filed national applications in the United States and certain foreign countries. Until patent protection is granted, we must rely on trade secret protection, which requires reasonable steps to preserve secrecy. Therefore, we require that our personnel, contractors and sublicensees not disclose the trade secrets and confidential information pertaining to the technology. In addition, trade secret protection does not provide any barrier to a third party “reverse engineering” fuel made with the technology, to the extent that the technology is readily ascertainable by proper means. Neither the patent, if it issues, nor trade secret protection will preclude third parties from asserting that the technology, or the products we or our sub-licensees commercialize using the technology, infringes upon their proprietary rights.

Government Regulations

Environmental Regulations . Our business is subject to environmental risks and hazards and we are subject to environmental regulation implemented and/or imposed by a variety of international conventions as well as federal, state, provincial, and municipal laws and regulations. Environmental laws restrict and prohibit spills, discharges and emissions of various substances produced in association with biofuel manufacturing operations. Environmental laws also require that manufacturing plants are operated, maintained and decommissioned in such a way that satisfies applicable regulatory authorities. Environmental permitting of biofuel manufacturing facilities varies with the characteristics of individual plants and by state. Our biofuel is manufactured using a process that is believed to yield little, if any wastes, emissions or discharges.

Compliance with environmental laws can require significant expenditures and a violation may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner we expect may result in stricter standards and enforcement, larger fines and liability, as well as potentially increased capital expenditures and operating costs. Compliance with environmental laws may cause us to limit our production, significantly increase the costs of our operations and activities, or otherwise adversely affect our financial condition, results of operations, and/or prospects.

Clean Air Act. We intend to market our biofuel as a new class of biofuel for power generation, commercial and industrial heating and marine use. In order to be legally marketable as a fuel for on-road motor applications, our biofuel must be registered with the Environmental Protection Agency (EPA) and comply with the EPA’s rigorous emissions, durability, and health effects regulations promulgated to implement Section 211 of the Clean Air Act. Under these regulations, a company registering a fuel must conduct extensive testing on a variety of in-use motor vehicle engines.

Section 211 of the Clean Air Act generally does not apply to using our biofuel in a stationary source, such as utility power generation applications or institutional/commercial heating fuel, or in certain marine applications. There may, however, be federal or state requirements applicable to emissions from individual furnaces, boilers, and similar equipment. As a practical matter, market acceptance of our biofuel may be limited until we can demonstrate that (i) our biofuel is comparable to conventional fuels from an energy content and emissions perspective as well as handling and storage perspectives, and (ii) that our biofuel is compatible with existing heating systems or power generation systems and other combustion systems. To date, we have only demonstrated the foregoing in commercially available systems on a very limited basis. In addition, certain initial testing indicated that our biofuel may require further development so that its viscosity is more stable under certain temperature conditions.

WeIn ~~also are~~addition ~~evaluating~~to the ~~regulatory~~rights ~~requirements~~acquired ~~for~~under ~~using~~ our ~~fuel~~exclusive inlicense ~~motor~~agreement, ~~vehicle applications~~we inhave also acquired non-exclusive rights to our ~~territory~~Technology ~~outside~~pursuant to an assignment of rights to the ~~United~~Technology ~~States~~by Andrea Festuccia, a co-owner of the Technology and an officer of the Company. Pursuant to the assignment from Mr. Festuccia of the Technology, we have non-exclusive rights to exploit the Technology on a worldwide basis. The license agreement provides us with exclusive rights to exploit the technology solely in North America, Central America, and the Carribean.

In April 2006, we filed a provisional U.S. patent application on behalf of the inventor for the emulsion technology covered by our license. In April 2007, we filed a patent application under the Patent Cooperation Treaty which claimed the benefit of the provisional U.S. application and in September 2008, we filed national applications in the U.S. and certain foreign countries. Between 2006 and 2009, our R&D efforts significantly improved the initial emulsion formulation which resulted in the filing of amendments to the original provisional patent for two new renewable biofuels. In addition to being renewable, these biofuels significantly lower NOx, SOx and carbon emissions in relation to traditional petroleum diesel and can be produced from a wide variety of non-food feedstocks. We have continued to develop new feedstocks for the emulsion technology including a 2010 filing of a provisional patent for pyrolysis oil as a feedstock. Also in 2010 we filed a provisional patent for a glycerin solution. In February 2011 we filed another provisional patent for a solution using pyrolysis oils. We believe the patents we have filed for the glycerin and pyrolysis oil based biofuels, that are solutions instead of emulsions, are available to us for global production, sales and licensing and are not covered by our emulsion technology license agreement..

Until patent protection is granted, we must rely on trade secret protection, which requires reasonable steps to preserve secrecy. Therefore, we require that our personnel, contractors and sublicensees not disclose the trade secrets and confidential information pertaining to the technology. In addition, trade secret protection does not provide any barrier to a third party “reverse engineering” fuel made with the technology, to the extent that the technology is readily ascertainable by proper means. Neither the patent, if it issues, nor trade secret protection will preclude third parties from asserting that the technology, or the products we or our sub-licensees commercialize using the technology, infringes upon their proprietary rights.

Government Regulations

Environmental Regulations. Our business is subject to significant environmental risks and hazards and we are subject to environmental regulation implemented or imposed by a variety of international conventions as well as federal, state, provincial, and municipal laws and regulations. Environmental laws restrict and prohibit spills, discharges and emissions of various substances produced in association with biofuel manufacturing operations. Environmental laws also require that manufacturing plants are operated, maintained and decommissioned in such a way that satisfies applicable regulatory authorities. Environmental permitting of biofuel manufacturing facilities varies with the characteristics of individual plants and by each governmental authority. Our biofuels are manufactured using a process that is believed to yield little, if any wastes, emissions or discharges.

Compliance with environmental laws can require significant expenditures and a violation may result in the imposition of fines and penalties, some of which may be material to our business. Environmental legislation both domestically and internationally is evolving in a manner we expect may result in stricter standards and enforcement, larger fines and liability, as well as potentially increased capital expenditures and operating costs. Compliance with environmental laws may cause us to limit our production, significantly increase the costs of our operations and activities, or otherwise adversely affect our financial condition, results of operations, and/or prospects.

Clean Air Act. We intend to market our biofuels as a new class of biofuel for power generation, commercial and industrial heating, and marine use. In order to be legally marketable as a fuel for on-road motor applications, our biofuel must be registered with the EPA and comply with the EPA’s rigorous emissions, durability, and health effects regulations promulgated to implement Section 211 of the Clean Air Act. Under these regulations, a company registering a fuel must conduct extensive testing on a variety of in-use motor vehicle engines.

Section 211 of the Clean Air Act generally does not apply to using our biofuel in a stationary source, such as utility power generation applications or institutional/commercial heating fuel, or in certain marine applications. There may, however, be federal or state requirements applicable to emissions from individual furnaces, boilers, and similar equipment. As a practical matter, market acceptance of our biofuel may be limited until we can demonstrate that (i) our biofuels are comparable to conventional fuels from an energy content and emissions perspective as well as handling and storage perspectives, and (ii) that our biofuels are compatible with existing heating systems or power generation systems and other combustion systems. To date, we have only demonstrated the foregoing in commercially available systems on a very limited basis

Company History

We are a Florida corporation that was initially organized as Wireless Holdings, Inc. in June 2003. Our Delaware subsidiary, New Generation Biofuels, Inc, formerly H2Diesel, Inc. (“H2Diesel”), was formed in February 2006, to acquire the exclusive license to commercialize the proprietary technology used to produce our ~~biofuel~~ biofuels. ~~Through~~H2Diesel became a subsidiary of public company Wireless Holdings, Inc. through a reverse merger transaction in October 2006. In November 2006, ~~H2Diesel~~ ~~became~~we arenamed ~~subsidiary~~Wireless ofHoldings, ~~public~~Inc. ~~company~~to ~~Wireless~~H2Diesel Holdings, Inc., ~~which~~and in March 2008, we ~~eventually~~ renamed H2Diesel Holdings, Inc. to New Generation Biofuels Holdings, Inc. ~~in March 2008.~~ Since ~~September~~December ~~2008~~2010, our common stock has been listed on the ~~NASDAQ~~OTC ~~Capital~~Markets ~~Market~~Group ~~(“NASDAQ”)~~Inc., inter-dealer electronic quotation and trading system which operates the OTCQB, under the ticker symbol “NGBF.”

Employees

We have ~~twelve~~ ~~employees,~~eight ~~all~~full oftime ~~whom~~employees ~~are~~and ~~full~~one part time ~~employees~~employee. We expect to increase the number of employees as we implement our business objectives and expand our management team. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We believe that our relations with our employees are good.

1112

Executive Officers

Name	Age	Position
Lee S. Rosen	56	Chairman of the Board
David H. Goebel, Jr.	51	Interim Principal Executive and Chief Operating Officer
Cary J. Claiborne	49	President, Chief Executive Officer, Chief Financial Officer and Director
Dane R. Saglio	53	Chief Financial Officer
David H. Goebel	50	Chief Operating Officer
Andrea Festuccia	39	Chief Technology Officer
Andrea Festuccia	38	Chief Technology Officer
Phillip J. Wallis	46	Chief Marketing Officer
Connie Lausten, P.E.	42	Vice President, Regulatory and Legislative Affairs
Philip R. Cherry, Jr.	47	Vice President, Engineering and Operations

The following is a description of the business experience of each of our executive officers:

~~Lee~~David SH. ~~Rosen~~Goebel, ~~Chairman~~Jr., ~~of the~~Interim ~~Board~~Principal Executive Officer and Chief Operating Officer

Mr. ~~Rosen~~Goebel ishas ~~the~~served ~~founder~~ as our Chief Operating Officer since July 2009 and became our Interim Principal Executive Officer as of ~~H2Diesel~~ March 14, ~~Inc~~2011., Mr. Goebel previously served as our ~~wholly~~Vice ~~owned~~President ~~subsidiary~~of ~~(now~~Global ~~known~~Sourcing asand ~~New~~Supply ~~Generation Biofuels~~Chain since September 2007 and previously worked at MeadWestvaco, ~~Inc.)~~a packaging solutions and ~~has~~products ~~served~~company, as the ~~Chairman~~acting Vice President of ~~our~~Supply ~~Board~~Chain/Director ~~since~~of ~~October~~Customer ~~2006~~Service. ~~Mr.~~ ~~Rosen~~He ~~has~~was ~~been~~responsible ~~involved~~for inredesigning the ~~financial~~corporate order-to-cash processes, strategizing organizational and ~~securities~~process ~~brokerage~~changes ~~industry since~~in ~~1980~~capacity planning, demand forecasting, inventory management/ operations, logistics/distribution, and ~~has~~ customer service. Additionally, for nearly 20 years, Mr. Goebel worked asat ExxonMobil and its predecessor, Mobil Corporation, in many different leadership capacities including manufacturing, engineering, supply chain, operations, marketing, and sales. Mr. Goebel holds a ~~broker~~bachelor ~~dealer~~of science degree in microbiology from University of Minnesota along with agraduate ~~number~~studies at both the University of ~~firms~~ Texas at Dallas and Northeastern University.

~~Cary~~Dane JR. ~~Claiborne~~Saglio, ~~President,~~ Chief ~~Executive Officer, Chief~~ Financial Officer ~~and a Director~~

Mr. ~~Claiborne~~Saglio ~~became~~has served as our ~~President,~~ Chief ~~Executive~~Financial Officer ~~and~~since aMarch ~~Director~~2010. Mr. inSaglio ~~March~~possesses ~~2009~~experience ~~and~~ranging ~~continues~~from toearly-stage ~~serve~~entrepreneurial ~~as our~~enterprises ~~Chief~~through ~~Financial~~mature ~~Officer~~public companies across multiple technology based industries. Prior to joining ~~New~~Mr. ~~Generation~~Saglio ~~Biofuels~~ was a consultant in ~~December~~the ~~2007,~~biotechnology sector focusing on emerging private companies. From 2003 -2008 Mr. ~~Claiborne~~Saglio served as ~~the~~ Chief Financial Officer ofat ~~Osiris Therapeutics~~EntreMed, Inc., a publicly traded ~~Biotech~~clinical-stage ~~company~~biopharmaceutical ~~from~~firm. Previously ~~2004 to 2007~~Mr. ~~From~~Saglio ~~2001~~held ~~to 2004,~~financial ~~Mr.~~management ~~Claiborne~~positions ~~was~~with ~~the~~Public ~~Vice~~Communications ~~President~~Associates, ~~Financial~~a ~~Planning~~private ~~and~~telecommunications ~~Analysis~~company, ~~at Constellation~~Bresler ~~Energy.~~& ~~Mr.~~Reiner, ~~Claiborne~~Inc ~~earned~~and anSterling ~~MBA~~Software, intwo ~~Finance~~publicly ~~from~~traded ~~Villanova University~~companies ~~and~~focused aon BAreal inestate ~~business~~development ~~administration~~and ~~from~~management ~~Rutgers University~~and information management, respectively.

David H. Goebel, Jr., Chief Operating Officer

Mr. Goebel has served as our Chief Operating Officer since July 2009. Mr. Goebel previously served as our Vice President of Global Sourcing and Supply Chain since September 2007 and previously worked at MeadWestvaco, a packaging solutions and products company, as the acting Vice President of Supply Chain/Director of Customer Service. He was responsible for redesigning the corporate order-to-cash processes, strategizing organizational and process changes in capacity planning, demand forecasting, inventory management/ operations, logistics/distribution, and customer service. Additionally, for nearly 20 years, Mr. Goebel worked at ExxonMobil and its predecessor, Mobil Corporation, in many different leadership capacities including manufacturing, engineering, supply chain, operations, marketing, and sales. Mr. Goebel holds a bachelor of science degree in microbiology from University of Minnesota along with graduate studies at both the University of Texas at Dallas and Northeastern University.

Andrea Festuccia, PhD, Chief Technology Officer

Dr. Festuccia has served as Chief Technology Officer since April 2006. Currently, Dr. Festuccia is Partner, Technical Director and member of the Board of Directors of IGEAM S.r.l. (since February 2009), a private Italian company with about 100 employees engaged in consulting environmental and safety problems where he has worked since June 1999. Prior to his current position with IGEAM S.r.l., Dr. Festuccia was the Director of the B.U. “Environment and Territory” at IGEAM S.r.l. Dr. Festuccia was Adjunct Professor of General and Inorganic Chemistry with the University of “La Tuscia” of Viterbo from 1999 to 2000. Dr. Festuccia was a former Technical Director and member of the Board of Directors of 3TI Progetti Italia (from July 2004 to January 2009). Dr. Festuccia is currently an external consultant with the University “La Sapienza” of Rome, a position that he has held since 2001. He also worked as an external expert for the Minister of Foreign Affairs of Italy-Farnesina from 2002-2004 and as Technical Director of Ecosystems S.r.l. from 2002 to present. He is the Chairman of the Board of Directors of OPT SENSOR, a private Italian company dealing with R&D for electronic equipments to measure chemical/physical parameters, a spin-off company of University “La Sapienza” of Rome. He is also the CEO of BART-Biotechnology and Recovery Technologies, a small private Italian company engaged in biotechnology. In October 1996, he received a degree in chemical engineering and subsequently, in 2007, his doctor of philosophy degree in chemical engineering from the University of Rome - “La Sapienza”.

~~Phillip J. Wallis, Chief Marketing Officer~~13

Mr. Wallis joined us in January 2008. Mr. Wallis served as Manager, Regional Sales and Solutions for Asia Pacific and Africa at the Chevron Corporation from September 2001 to December 2006 and as Process Documentation Team Lead, Chevron Supply Trading from December 2006 to January 2008.

Connie Lausten, P.E., Vice President, Regulatory and Legislative Affairs

Ms. Lausten joined the management team as Vice President of Legislative and Regulatory Affairs in May 2007. From 2003 to 2007, Ms. Lausten served as Manager of Federal Affairs for National Grid USA, one of the world’s largest utilities. Ms. Lausten also has served at the Federal Energy Regulatory Commission and in the United States House of Representatives on the Government Reform Committee, Subcommittee for Energy Policy, Natural Resources and Regulatory Affairs. Ms. Lausten is a Licensed Professional Engineer and received a Master of Science and a Bachelor of Science degree in Mechanical Engineering from the University of Minnesota.

Philip R. Cherry, Jr. Vice President, Engineering and Operations

Mr. Cherry has served as Vice President of Engineering and Operations since June 2008. Mr. Cherry was previously employed by the ethanol producer VeraSun from 2007 through May 2008 as Director of Operations where he was responsible for the commissioning, initial operation and annual maintenance shutdowns of a fleet of ethanol facilities. Prior to joining VeraSun, Mr. Cherry worked for U.S. BioEnergy providing contract management to ethanol facility owners. Mr. Cherry was also with The O-H Group from 2003 through 2006, providing project management and technical consulting services to renewable fuel producers. Additionally, for nine years Mr. Cherry worked for Mobil Oil Corporation in a variety of process and scientific roles. Mr. Cherry holds a Bachelor of Science degree in Chemistry from Chapman University. He is a member of the American Chemical Society, ASTM International, and the California Biomass Collaborative.

Other Information

News and information about New Generation Biofuels is available on and/or may be accessed through our website, www.newgenerationbiofuels.com. In addition to news and other information about our company, we have provided access through this site to our filings with the Securities and Exchange Commission as soon as reasonably practicable after we file or furnish them electronically. We are not including the information on our website as a part of, or incorporating it by reference into, our Form 10-K.

We have also provided access on our website to our Code of Business Conduct and Ethics, the charters of our Audit, Compensation and Nominating Committees and ~~other corporate~~our ~~governance~~Whistleblower ~~documents~~Policy. Copies of these documents are available to any shareholder upon written request made to our corporate secretary at our corporate headquarters at 5850 Waterloo Road, Suite 140, Columbia, Maryland 21045, Attn: Corporate Secretary. In addition, we intend to disclose on our website any changes to or waivers for executive officers from our Code of Business Conduct and Ethics.

ITEM 1A. RISK FACTORS

Our business faces many risks. If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline. Some of the risks described below may apply to more than just the subsection in which we grouped them for the purpose of this presentation. You should consider all of the following risks, together with all of the other information in this Annual Report on Form 10-K, before deciding to invest in our securities.

Risks Related to Our Business

Our existing financial resources will only provide financing through ~~mid-May~~the ~~2010~~end of April 2011, and we will need to raise additional capital to continue our business, which could be particularly challenging in the near term under current financial market conditions.

The report of our independent registered public accounting firm for the year ended December 31, ~~2009~~2010 contains an explanatory ~~paragraph~~footnote which states that we have incurred negative cash flows from operations since inception and are dependent upon future financing and, based on our operating plan and existing working capital deficit, this raises substantial doubt about our ability to continue as a going concern. Based on our current estimates, we anticipate that our existing financial resources will be adequate to permit us to continue to conduct our business through mid ~~May~~April ~~2010~~2011, and we will need to control costs and raise additional capital to continue our business beyond ~~May~~April ~~2010~~2011. Accordingly, we will need to complete a financing by ~~in the~~end ~~second~~of ~~quarter~~ April of ~~2010~~2011. As of December 31, ~~2009~~2010, we have incurred a net loss of $1411.46 million and negative cash flows from operating activities of $74.1 6 million. As of December 31, ~~2009~~2010, we had approximately $0.62 million of available cash and approximately $1.56 million of accounts payable and accrued expenses. In February ~~2010~~2011, we closed a private placement of ~~common~~senior ~~stock~~secured convertible notes for total gross proceeds of ~~approximately~~ $1.30 million. 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 originally due in ~~February~~March ~~2011.~~2011has Wenow ~~are~~been inextended ~~the process of negotiating~~ to ~~settle various~~May ~~issues under our site lease and terminaling services agreement for our Baltimore production facility by reducing rent payments~~21, ~~relinquishing unneeded equipment and modifying other commercial terms of the agreements in return for making certain payments~~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. Any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing shareholders and may require shareholder approval, which cannot be assured. If we are unable to raise additional capital, we will not be able to continue our business.

We are an early stage company with a limited operating history, which makes us a speculative investment.

We are an early stage company that is commercializing our exclusive ~~licensing~~ rights to proprietary technology to manufacture biofuel ~~that we acquired in early 2006~~. Since then, we have been engaged in organizational activities, including developing our business plan, hiring key management, optimizing product performance, developing our production facility, raising capital, conducting test burns with potential customers, entering into initial sales contracts, delivering initial fuel orders to customers and exploring sublicensing opportunities. We recorded our first sales in the fourth quarter of 2008. We currently have ~~twelve~~eight employees. 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. Accordingly, we have limited relevant operating history upon which you can evaluate our performance and prospects. You should consider our prospects in light of the inherent risks, expenses and difficulties encountered by companies in the early stage of development, particularly companies in new and evolving markets such as the renewable fuels industry. Such risks include technology risks, capital requirements, lack of market acceptance of our products, failure to establish business relationships, competitive disadvantages against larger and more established companies and regulatory matters.

We have a history of losses, deficits and negative operating cash flows and will likely continue to incur losses for the foreseeable future which may impede our ability to achieve our business objectives.

We expect to incur operating losses and continued negative cash flows for the foreseeable future as we invest in sales and marketing, research and development and production facilities to achieve our business objectives. We may not achieve or sustain profitability on a quarterly or annual basis in the future. To be profitable, we will have to significantly increase our revenues and reduce our costs. Future revenues and profits, if any, will depend upon various factors such as those discussed here, many of which are beyond our control. If we are unable to increase our revenues, reduce costs or achieve profitability, we may have to reduce or terminate our operations.

Sufficient customer acceptance for our biofuel may never develop or may take longer to develop than we anticipate, and as a result, our revenues and profits, if any, may be insufficient to fund our operations.

Sufficient markets may never develop for our biofuel, may develop more slowly than we anticipate or may develop with economics that are not favorable for us. The development of sufficient markets for our biofuel at favorable pricing may be affected by cost competitiveness of our biofuel, customer reluctance to try a new product and emergence of more competitive products. Because we only recently began manufacturing our biofuel, potential customers may be skeptical about product stability, supply availability, quality control and our financial viability, which may prevent them from purchasing our biofuel or entering into long-term supply agreements with us. We cannot estimate or predict whether a market for our biofuel will develop, whether sufficient demand for our biofuel will materialize at favorable prices, or whether satisfactory profit margins will be achieved. If such pricing levels are not achieved or sustained, or if our technologies and business approach to our markets do not achieve or sustain broad acceptance, our business, operating results and financial condition will be materially and adversely impacted.

Our ability to produce and distribute our biofuel on a commercially sustainable basis is unproven, and until we can prove our technology, we likely will not be able to generate or sustain sufficient revenues to continue operating our business.

While producing biofuel from vegetable oils or animal fats is not a new technology, the technologies we are pursuing for our biofuel production have never been utilized on a commercially sustainable basis. Our biofuel, while intended as a new class of biofuel for power generation, commercial and industrial heating and marine use, may never achieve technical or commercial viability. All of the tests and sales that we have conducted to date with respect to our technology have been performed in a limited scale environment, and the same or similar results may not be obtainable at competitive costs on a large-scale commercial basis.

We have conducted multiple test burns of our biofuel products with potential customers. However, others may need to replicate these tests before our biofuel becomes commercially acceptable. We have never utilized our technology under the conditions or in the volumes that will be required for us to be profitable and cannot predict all of the difficulties that may arise. Our technology may require further research, development, regulatory approvals, environmental permits, design and testing prior to commercialization. Accordingly, our technology and our biofuel may not perform successfully on a commercial basis and may never generate any profits.

We likely will not be able to generate significant revenues until we can successfully validate our product performance with customers and operate our manufacturing facility on a commercial scale.

To date, we have generated a small amount of revenues on sales of limited quantities of our biofuel. Revenue generation could be impacted by any of the following:

delays in demonstrating the technological advantages or commercial viability of our proposed products;

problems with our commercial scale production plant, including delays in upgrading the plant, technical staffing, permitting or other operational issues;

inability to interest early adopter customers in our products; and

inability to obtain cost effective supplies of vegetable oil and feedstocks.

Any planned manufacturing plants may not achieve projected capacity or efficiency, and we may not be able to sell our biofuel generated at these plants at prices that will cover our costs. Potential customers may require lengthy or complex trials or long sampling periods before committing to significant orders for our products.

We granted a security interest in all of our assets in connection with our recent financing in February 2011, and certain terms of such financing may cause dilution to our current shareholders.

Pursuant to the terms of a Subscription Agreement dated February 1, 2011, we entered into a Security Agreement dated February 1, 2011, to secure obligations of the Company under Secured Convertible Promissory Notes dated February 1, 2011 (“February 2011 Notes”). If we default under the February 2011 Notes, the holders will be entitled to foreclose on our assets pursuant to the Security Agreement. We do have the option of issuing shares of common stock of the Company instead of making cash payments; however, any additional issuances of common stock of the Company will dilute the current shareholders’ holdings. After such time as we have repaid 51% of the original outstanding principal of February 2011 Notes, whether in cash payments or conversion into common stock, we will no longer be subject to the Security Agreement.

The current credit and financial market conditions may exacerbate certain risks affecting our business.

Due to the continued disruption in the financial markets arising from the global recession in 2008 and the slow pace of economic recovery, many of our potential customers are unable to access capital necessary to accommodate the use of our biofuel. Many are operating under austerity budgets that limit their ability to invest in infrastructure necessary to use alternative fuels and that make it significantly more difficult to take risks with new fuel sources. As a result, we may experience increased difficulties in convincing customers to adopt our biofuel as a viable alternative at this time.

We may not be able to generate revenues from sublicensing our technology.

Our exclusive perpetual license allows us to sublicense our proprietary technology in North America, Central America and the Caribbean, and our business plan includes, as a second potential revenue stream, the collection of royalties through sublicensing our proprietary technology. To date, we do not have any revenues from sublicenses and have only entered into one sublicense, with Global Energy Holdings Group, Inc. (formerly Xethanol Corporation, “Global Energy”). It is extremely unlikely that Global Energy will be able to perform its obligations under the sublicense. Since Global Energy sold its remaining 5,301,300 shares of our common stock that it owned in March 2009 and filed for bankruptcy in November 2009, we are re-evaluating our agreements with Global Energy and may engage in discussions to modify or terminate them. We likely will need to continue proving the viability of our technology before we can obtain any additional sublicense agreements, and we cannot assure you that we will be able to do so. Companies to which we grant sublicenses may not be able to produce, market and sell enough biofuel to pay us royalty fees or they may default on the payment of royalties. We may not be able to achieve profitable operations from collecting royalties from the sublicensing of our proprietary technology.

The strategic relationships upon which we may rely are subject to change.

Our ability to successfully test our technology, to develop and operate manufacturing plants and to identify and enter into commercial arrangements with customers or sublicensees will depend on developing and maintaining close working relationships with industry participants. These relationships will need to change and evolve over time, as we enter different phases of development. Our strategic relationships most often are not yet reflected in definitive agreements, or the agreements we have do not cover all aspects of the relationship. Our success in this area also will depend on our ability to select and evaluate new strategic relationships and to consummate transactions. Our inability to identify suitable companies or enter into and maintain strategic relationships may impair our ability to grow. The terms of relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to incur or undertake in order to maintain these relationships. Moreover, reliance upon strategic partners to manufacture and sell our biofuel subjects us to additional risks, including a limited ability to control the quality of such fuel and the failure of such partners to perform in accordance with the terms of agreements that they may enter into with us. Arrangements we enter into with such partners may compete with any biofuel that we may manufacture at our own plants and therefore may limit our organic growth.

Our biofuel and other alternative sources are at significant disadvantage to petroleum fuels.

Our biofuel and other alternative fuels like biodiesel compete with petroleum-based fuels. Currently, the cost of producing most alternative fuels forces manufacturers to operate at a significant competitive disadvantage compared to petroleum-based fuels. Producers of alternative fuels generally depend upon government support, including tax credits and various incentives and mandates to purchase alternative fuels, and upon the willingness of customers to pay a premium for cleaner burning, renewable non-petroleum fuels.

We may be unable to compete successfully in the highly competitive alternative fuels market.

Within the alternative fuels market, the manufacture, marketing and sale of biofuels (such as biodiesel) and other alternative fuels is highly competitive. Such competition could be intense and could drive up the costs of feedstock, plant construction, attracting and retaining qualified engineers, chemists and other key employees, as well as other operating expenses. Additionally, new companies are constantly entering the market. This growth and fragmentation could negatively impact us or our sublicensees’ ability to obtain additional capital from investors. Larger companies which have been engaged in this business for substantially longer periods of time may have access to greater financial and other resources. These companies may have greater success in recruiting and retaining qualified employees and in fuel manufacturing and marketing, which may give them a competitive advantage.

We may never develop the scale economies necessary to optimize our cost structure and enable us to produce and sell our biofuels for a profit.

Our current business model depends, in part, on developing sufficiently large sales volumes and production capacity to be able to realize economies of scale and minimize raw materials, sourcing, logistics and transportation costs. If we are unable to generate sufficient economies of scale in our operations, we may be unable to obtain volume discounts on raw materials and transportation or cut marginal production costs to the level necessary to profitably price our biofuel.

The tax credits for which we ~~were~~are eligible ~~expired~~will atexpire ~~the~~on ~~end~~December of31, ~~2009~~2011. Failure to extend or renew these or similar tax credits could make our ~~biofuel~~biofuels less competitive.

The 50 cent per gallon credit applicable to our fuel, when mixed with diesel, kerosene or other taxable fuel and sold at the retail level, ~~expired~~will expire on December 31, ~~2009~~2011, along with biodiesel and other alternative fuel tax credits. We depend in part on the availability of tax credits to incentivize customers to purchase our fuels. ~~Congress~~ Our isability ~~expected~~ to ~~pass~~produce inrevenues ~~the~~from ~~coming~~our ~~months~~biofuels amay ~~tax~~be ~~extenders~~impacted ~~bill~~significantly ~~which will~~if ~~extend~~such ~~(effective~~credits ~~retroactive~~are tonot ~~January~~extended ~~1, 2010) through the end of 2010~~ or ~~beyond~~renewed ~~many~~past ~~expired~~December ~~tax provisions~~31, ~~but we cannot assure you if or when the tax credit applicable to our fuel will be extended~~2011.

If our biofuels do not qualify for government mandated or incentivized renewable energy credits or renewable portfolio standards or biofuel mandates, our potential customers may be less likely to pay a premium for our biofuels, which could negatively impact our ability to generate revenues.

More than thirty states have enacted renewable energy credits (“RECs”) or renewable portfolio standards (“RPS”), and several other states have created biofuel mandates, tax credits and other incentives for the use of renewable fuels. Our business model depends in part, on our biofuels qualifying for RECs, RPS requirements or biofuel mandates and that our customers will pay a premium for our biofuels in order to receive tax credits or comply with the government mandates. If we do not receive this premium because our biofuel does not qualify our customers for the credits or incentives, we may be unable to generate sufficient revenues or profits which could have a negative effect on our business, results of operations and financial condition.

We may never fully realize the value of our technology license agreement, which presently is ~~our~~the principal asset reflected on our balance sheet.

We may not be successful in realizing the expected benefits from our master license agreement, which represented over 70 65% of our total assets as of December 31, ~~2009~~2010. We recorded our initial fuel sale in October 2008 and accordingly began to amortize the license agreement. Further, we initially intended to use the licensed technology to generate our expected revenues without any significant modification, but we have conducted significant additional research and development to modify the basic fuel technology to meet market demands for particular fuel attributes. To date, we have incurred approximately $2.47 million in research and development separate from our license payments, and we are continuing to incur additional research and development costs to optimize our fuels to test different feedstocks and to tailor the fuel energy output, emissions and other specifications to the specific needs of potential customers.

Our business depends on proprietary technology that we may not be able to protect and may infringe on the intellectual property rights of others.

Our success will depend, in large part, on our technology’s commercial viability and on the strength of our intellectual property rights. Much of the technology presently consists only of trade secret rights, which are difficult to protect. If others gain access to the trade secrets relating to our technology, including through analysis or “reverse engineering,” they may able to develop substantially equivalent technology. Although we filed patent applications to protect our technology, there can be no assurance that we ultimately will receive patent protection or that any protection that is obtained will be broad enough to be effective in protecting our technology against claims or actions by competitors. Further, any patents that are obtained may not withstand challenges as to validity and enforceability. Third parties may assert that the technology, or the products we or our sub-licensees commercialize using the technology, infringes upon their proprietary rights. We have yet to complete an infringement analysis and, even if such an analysis were available at the current time, we could not be certain that no infringement exists, particularly as our products have not yet been fully developed. We may need to acquire additional licenses from third parties in order to avoid infringement claims, and any required licenses may not be available to us on acceptable terms, or at all. To the extent infringement claims are made, we could incur substantial costs in the resulting litigation, and the existence of this type of litigation could impede the development of our business.

Our technology may become ineffective or obsolete.

To be competitive in the biofuel industry, we may be required to continually enhance and update our technology. The costs of doing so may be substantial, and if we are unable to maintain the efficacy of our technology, our ability to compete may be impaired. The impact of technical shortcomings could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we cannot make the required payments under our license agreement for our proprietary technology, the inventor may be able to terminate the agreement, which could preclude us from selling our biofuel.

We still have substantial obligations under the license agreement with the inventor of our proprietary technology. Specifically, we are required to pay Mr. Petrucci an additional $1.0 million in cash per year for the next four years, for a total of $4.0 million in remaining payments. To the extent we default on any of these payments or breach any other material provisions of our license, the inventor could terminate the agreement, which is our principal asset. The license agreement also provides that the inventor may terminate the agreement if an insolvency or bankruptcy petition is filed against us and is not dismissed within 90 days.

We depend on key personnel to execute our business plan. If we cannot attract and retain key personnel, we may not be able to successfully implement our business plan.

As of December 31, ~~2009~~2010, we had 1211 full-time employees and one part time employee. In ~~2009~~2010 and early ~~2010~~2011, ~~three~~ five of our executives resigned from the Company, including ~~David~~Lee ~~Gillespie~~S. Rosen, our former Chairman of the Board, Cary J. Claiborne, our former President, Chief Executive Officer and a Director. In addition in March 2011, Miles F, Mahoney was terminated from his position of President, Chief Executive Officer and a Director. Our success depends to a significant degree upon the continuing contributions of our key management. We have a relatively small team, and the loss of a key individual or inability to attract suitably qualified replacements or additional staff could adversely affect our business. No assurance can be given that our key personnel will continue their association or employment with us or that replacement personnel with comparable skills will be found. If we are unable to attract and retain key personnel and additional employees, our business may be adversely affected.

2020 Energy, LLC owns approximately 218.03% or our outstanding common stock, and Ferdinardo Petrucci, the inventor of our ~~proprietary~~emulsion technology owns approximately 112.62% of our common stock. The managing and sole member of 2020 Energy has partnered with Mr. Petrucci to form PTJ Bioenergy Holdings, Ltd, an entity that is the licensor (by assignment from Mr. Petrucci) of our technology. 2020 Energy and Mr. Petrucci may delay, defer or prevent us from taking actions that would be beneficial to our other shareholders.

As of March 514, ~~2010~~2011, 2020 Energy, LLC and Mr. Petrucci combined owned approximately 32 10.65% of our outstanding common stock. ~~This amount includes an additional 1,100,000 shares that were issued to Mr. Petrucci in February 2010 in lieu of a license payment.~~ Accordingly, they may be able to exercise significant influence over the outcome of substantially all matters required to be submitted to our shareholders for approval, including the election of our board of directors and any proposed merger or consolidation of our company. Their ownership interest in our company may discourage potential investors from investing in our securities due to concerns with the overhang on our common stock and third parties from seeking to acquire control of our company, which may adversely affect the market price of our common stock.

Risks Related to Our Industry

The current economic and political environment may provide increased uncertainty and unpredictability that may have an adverse effect on our industry.

Our industry relies heavily on governmental incentives, usually tax-based, and government mandates to encourage broad market acceptance and use of alternative fuels. The slow pace of changes in renewable energy polices by the Obama Administration and Congress has minimized a positive impact on the market’s willingness to embrace alternative fuels. The timing and the effectiveness of these policies are unknown and may not provide the requisite support to ensure success of the alternative fuels industry. In addition, the global economic recession, the tight capital markets and the slow economic recovery have depressed fuel prices and energy demand, limited the ability of customers to spend funds on new, experimental fuels and limited the funds available to invest in early-stage companies.

Changes in government regulations, including mandates, tax credits, subsidies and other incentives, could have a material adverse effect upon our business and results of operations.

The market for renewable fuels is heavily influenced by foreign, federal, state and local government regulations and policies. Changes to existing, or adoption of new foreign, federal, state and local legislative and regulatory initiatives that impact the production, distribution or sale of renewable fuels may harm our business. For example, the currently applicable federal renewable fuels standard requires 14 billion gallons of liquid transportation fuels sold in 2011 to be produced from renewable sources. By 2022, approximately 36 billion gallons will be required to be produced from renewable sources, half of which must be cellulosic biofuel. In the United States and in a number of other countries, regulations and policies like the renewable fuels standard have been modified previously and may be modified again in the future. In the United States, the Administrator of the EPA, in consultation with the Secretary of Energy and the Secretary of Agriculture, may waive certain renewable fuels standards, on his or her own motion or in response to a petition requesting such waiver, to avert economic harm or in response to inadequate supply of renewable fuels. The Administrator of the EPA is also required to reduce the mandate for cellulosic biofuel use if projected supply for a given year falls below a minimum threshold for such year, which could impact overall demand of all biofuels.

In addition, the U.S. Congress has passed legislation that extends tax credits for, among other things, the production of certain renewable fuel products. However, we cannot assure you that this or any other favorable legislation will remain in place. Any reduction in or phasing out or elimination of existing tax credits, subsidies or other incentives in the United States and foreign markets for renewable fuels, or any inability of us or our prospective customers to access such credits, subsidies or other incentives, may adversely affect demand for, and increase the overall cost of our biofuels, which would adversely affect our business. In addition, market uncertainty regarding future policies may also affect our ability to develop new biofuels. Any inability to address these requirements and any regulatory or policy changes could have a material adverse effect on our business, financial condition and results of operations.

Prices and markets for biofuel are unpredictable and tend to fluctuate significantly.

The price of biofuels, as well as the price of conventional petroleum-based fuels and other alternative fuels, is based on global demand, supply and other factors, all of which are beyond our control. Global prices for biodiesel fuel have fluctuated widely in recent years, and we expect that prices will continue to fluctuate. Price fluctuations will have a significant impact upon our revenue, results of operations and on our general financial condition. Price fluctuations for biodiesel and other conventional and alternative fuels may also impact the capital markets, and our ability to raise capital. In particular, as prices of petroleum-based fuels decline, the interest in investing in alternative sources of energy, like our biofuel, may decline as well. Future decreases in the price of biodiesel and competing fuels may have a material adverse effect on our financial condition and future results of operations.

Our financial results are substantially dependent on commodity prices and supplies, which are subject to significant volatility and uncertainty.

Our results of operations, financial position and business outlook are substantially dependent on commodity prices, especially prices for vegetable oil, animal fat feedstock and materials used in producing our biofuel. The prices for these items are quite volatile and could cause our results to fluctuate substantially. We may experience periods of declining prices for our products and increasing costs for our raw materials, which would result in operating losses. Many biofuel companies attempt to hedge a portion of the effects of fluctuations in prices by entering into forward contracts to supply vegetable oil or purchase feedstock or other items or by engaging in transactions involving exchange-traded futures contracts. These activities involve substantial costs and substantial risks and may be ineffective in mitigating changing commodity prices. We have not entered into any hedging, forward contracts, or similar arrangements and could be at a competitive disadvantage with companies that have entered into successful hedging arrangements.

1819

The biofuel industry is subject to significant environmental regulation and may be adversely affected by regulatory and environmental risks.

Biofuels businesses are subject to environmental risks and hazards and environmental regulation imposed by a variety of international conventions as well as federal, state, provincial, and local laws and regulations. Environmental laws restrict and prohibit spills, discharges and emissions of various substances produced in association with biofuel manufacturing operations. Environmental laws also require that manufacturing plants are operated, maintained and closed in such a way that satisfies applicable regulatory authorities. Compliance with environmental laws can require significant expenditures and a violation may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner we expect may result in stricter standards and enforcement, larger fines and liability, as well as potentially increased capital expenditures and operating costs. Compliance with environmental laws may limit production, significantly increase the costs of operations, or otherwise adversely affect results of operations and prospects.

To market our fuel for on-road motor vehicle applications in the United States, our biofuel must be registered with the U.S. Environmental Protection Agency, or EPA, and comply with the EPA’s rigorous emissions, engine durability and health effects regulations. We have not yet applied for such registration. ~~We are evaluating the regulatory requirements for using our fuel in motor vehicle applications in our territory outside the United States.~~

Section 211 of the Clean Air Act generally does not apply to using our biofuel in a stationary source, such as utility power generation applications or institutional or commercial heating fuel, or in certain marine applications. There may, however, be federal or state requirements applicable to emissions from individual furnaces, boilers, and similar equipment. As a practical matter, market acceptance of our biofuel may be limited until we can demonstrate that (i) our biofuel is comparable to conventional fuels from an energy content and emissions perspective, as well as handling and storage perspectives, and (ii) that our biofuel is compatible with existing heating systems or power generation systems and other combustion systems. To date, we have not demonstrated any of the foregoing in such commercially available systems. ~~In addition, certain initial testing indicated that our biofuel may require further development so that its viscosity is more stable under certain conditions.~~

Our business is subject to local legal, political, and economic factors.

To the extent we operate our business outside of North America, particularly in Central America and the Caribbean where we have an existing license, we will need to adapt our business to the local legal, political and economic conditions. Certain of these areas are less hospitable to US businesses, and US businesses operating in certain of these areas have been subject at various times to risks from terrorism, military repression, interference with private contract rights, currency fluctuations, inflation, exchange controls, laws or policies affecting environmental issues (including land use and water use), workplace safety, foreign investment, foreign trade, investment or taxation, restrictions imposed on the alternative fuel industry (such as restrictions on production) and price controls and export controls. Any changes in alternative fuel, financial incentives, investment regulations, policies or a shift in political attitudes within our operating area are beyond our control and may adversely affect our business and future financial results.

Risks Related to Our Securities

Our declining stock price and need to raise additional capital likely could lead to significant dilution in future financing transactions.

In light of our need to raise significant amounts of additional capital, coupled with the recent decline in our stock price, we may need to issue large amounts of additional shares of common stock or securities convertible into common stock, resulting in significant dilution to our shareholders and causing a reduction in their proportionate ownership and voting power. Under NASDAQ rules, our board of directors has the ability, without seeking shareholder approval, to issue additional shares of common stock or convertible preferred stock, aggregating up to 20% of our outstanding common stock, for such consideration as the board of directors may consider sufficient, which may be at a discount to the market price. In addition, we may be required to issue securities that may contain antidilution provisions or other onerous terms that may also result in additional dilution to our shareholders.

19Some of our recent financing transactions included antidilution provisions that, if triggered, could dilute the ownership interests of our existing common shareholders

Some of our ~~recent~~outstanding ~~financing~~securities ~~transactions included~~include antidilution provisions that, if when triggered, ~~could~~result ~~dilute~~in the ~~ownership~~issuance of additional shares that would dilute the interests of ~~our~~ existing common ~~shareholders~~ stockholders. Our February 2010 private placement included certain antidilution provisions that apply if we issue additional equity securities in a financing transaction with a purchase price less than $0.69 per share or issue convertible securities with a purchase price less than $0.69 at any time within 6 months after the registration statement is declared effective, subject to certain caps set forth under the NASDAQ listing rules.

Some of our outstanding securities include antidilution provisions that, when triggered, result in the issuance of additional shares that would dilute the interests of existing common stockholders. Our March 2009 private placement included certain antidilution provisions that apply if we issue additional shares of common stock or convertible securities in a financing transaction within 15 months of the closing date with a purchase price or conversion price less than $0.80 per share or if we issue additional warrants in a financing transaction within the next 15 months with an exercise price less than $0.90 per share, subject to certain caps required by NASDAQ listing rules. On June 29, 2009 and September 23, 2009, we obtained waivers from the holders of the warrants issued in the March 2009 offering, which permitted us to enter into future financing transactions without the potential triggering of the antidilution provisions in their warrants. Our February 2010 private placement also included certain antidilution provisions that apply if we issue additional equity securities in a financing transaction with a purchase price less than $0.69 per share or issue convertible securities with a purchase price less than $0.69 at any time within 6 months after the registration statement is declared effective, subject to certain caps required by NASDAQ listing rules.20

Our November 2010 private placement of convertible notes also included certain antidilution provisions that apply if we issue additional equity securities in a financing transaction with a purchase price less than $0.14 per share at any time prior to the conversion date.

Our February 2011 private placement of senior secured convertible notes also included certain antidilution provisions that apply if we issue additional equity securities in a financing transaction with a purchase price less than the conversion price that would be in effect prior to the conversion date. Currently the conversion price is $0.10 per share.

These antidilution provisions could be disproportionately dilutive and adversely affect the prevailing market prices of our common stock. The existence of conversion features also may result in short selling of our common stock that may further depress the market price.

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. 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. NASDAQ also requires a minimum shareholders’ equity of $2.5 million or, alternatively, a market value of listed securities of at least $35 million. In August 2009, we received a communication from NASDAQ when we reported in our Quarterly Report on Form 10-Q that our shareholders’ equity equaled $648,756 at June 30, 2009. At September 30, 2009, our shareholders’ equity barely exceeded the minimum requirement of $2.5 million, and we received confirmation from NASDAQ that we were back in compliance with such requirement.

In the future, however, due to factors such as losses from operations and the volatility of our stock price, we may not be able to meet the listing maintenance requirements of the NASDAQ Capital Market. 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 on the OTC Bulletin Board or in the so-called “pink sheets”. 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.

Our common stock is thinly traded and subject to volatility.

Although our common stock is currently traded on the ~~NASDAQ~~ OTCQB and previously was traded on the ~~Amex~~NASDAQ, it has traded in relatively small volumes. If our common stock continues to be thinly traded, it may enhance volatility in the share price and make it difficult for investors to buy or sell shares in the public market without materially affecting the quoted share price. Further, investors seeking to buy or sell a certain quantity of our shares in the public market may be unable to do so within one or more trading days. If limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices, which may limit the liquidity of our common stock.

The market price of our common stock is likely to be volatile based upon developments in our business or the industry.

The market price of our common stock is likely to be volatile as a result of many factors including, but not limited to:

our announcement of developments, whether positive or negative, with respect to our business, including the viability of our biofuel, new or changes in strategic relationships, and our ability or failure to meet business milestones;

developments concerning intellectual property rights and regulatory approvals;

the announcement of new products or product enhancements by our competitors;

changes in the market for alternative fuels and in commodities used to produce them;

fluctuations in the availability of capital to companies in the early stages;

changes in the social, political and economic climate in the regions in which we operate; and

the impact of sales and trading activity with respect to our common stock in the market.

These and other factors are largely beyond our control, and the impact of these risks, individually or in the aggregate, may result in material changes to the market price of our common stock.

A significant number of our shares are eligible for sale, and their sale could depress the market price of our common stock.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock. Approximately 4 million shares of our common stock issued in our March 2009 private placements became eligible for sale in the open market under Rule 144 in September and November 2009, respectively. In general, a person who has held restricted shares for the requisite holding period, upon compliance with Rule 144 procedures, may sell shares into the market. In addition, we are currently in the process of registering for resale by non-affiliate selling shareholders 3,781,716 shares of our common stock issued in our February 2010 private placement, including shares issuable upon exercise of options to purchase that are not currently outstanding. We cannot predict the effect, if any, that the availability of these shares for sale, or the sale of these shares, will have on the market price for our common stock. If the number of shares offered for sale is greater than the number of shares sought to be purchased, then the price of our common stock would decline. The market price of our securities could be adversely affected by future sales of these securities.

Our common stock may be considered “a penny stock” and may be difficult to sell.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. While penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they also may trade on securities exchanges. To the extent the market price of our publicly traded common stock is less than $5.00 per share, it may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares. Additionally, because our common stock is currently classified by the SEC as a “penny stock,” we are unable to rely on the PSLRA safe-harbor for “forward looking” statements in our various filings with the SEC, which may expose us to additional securities liability.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

We own no real property and currently lease our office and production spaces. As of August 28, 2009, we terminated the lease on our office space in Lake Mary, Florida and relocated our corporate headquarters from Lake Mary, Florida to Columbia, Maryland, closer to the Company’s biofuel production plant. The ~~new~~ corporate headquarters is located at 5850 Waterloo Road, Suite 140, Columbia, Maryland 21045. The Company has remained a Florida corporation and currently maintains ~~two~~an ~~smaller~~accounting and administrative ~~offices~~office in Florida.

On September 12, 2008, we entered into a site lease agreement to locate our first commercial scale biofuel manufacturing plant at a port location in Baltimore, Maryland and a terminaling services agreement to provide certain terminaling services at the site. The lease agreement ~~covers~~covered the physical premises where the production facility is located as well as approximately six million gallons of storage tank capacity and related terminaling facilities. The initial term of the lease agreement iswas five years with an option to renew for three additional five year periods. ~~The~~As ~~total~~of ~~base~~August ~~rental~~1, ~~commitment~~2010, ~~for~~ the ~~initial~~base ~~five~~rent ~~year rental~~was ~~period,~~reduced isto ~~approximately~~ $425,~~605,~~000. ~~Under~~per ~~the~~month ~~terminaling~~for ~~services agreement, we are provided terminaling services that include~~ the ~~receipt,~~remainder ~~the unloading and the transfer~~ of ~~raw materials and~~ the ~~subsequent~~initial ~~transfer~~term. ~~and~~Effective ~~load out~~August of27, ~~finished product from and to railcars~~2010, ~~barges and trucks. The term of~~ the terminaling services agreement ~~runs concurrently~~ with ~~the~~Atlantic ~~lease~~Terminaling ~~agreement.~~was ~~The total~~terminated ~~minimum~~and ~~throughput charges, for~~ the ~~initial~~Company ~~five~~was ~~year~~released ~~service~~from ~~agreement period,~~paying ~~are~~all ~~approximately~~amounts ~~$953,000~~due. WeAs ~~are in the process~~ of ~~negotiating~~ toDecember ~~settle~~31, ~~various issues under our lease and terminaling services agreement by reducing rent payments~~2010, ~~relinquishing~~the ~~unneeded~~Company’s ~~equipment~~minimum ~~and modifying~~rental ~~other~~commitment ~~commercial~~under ~~terms~~non-cancelable inoperating ~~return~~lease ~~for~~is ~~making certain payments.~~$825,000

ITEM 3. LEGAL PROCEEDINGS

We doare not ~~believe~~ ~~that~~involved in any ~~currently pending or threatened proceeding, if determined adversely to us, would have a~~ material ~~adverse~~legal ~~effect~~proceedings onas ~~our~~of ~~business,~~the ~~financial condition~~date orof ~~results~~this ofannual ~~operations~~report.

ITEM 4. RESERVED

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock began trading on the ~~NASDAQ~~OTCQB on December13, 2010, under the symbol “NGBF.” Between September 23, 2008 and December 10, 2010 our common stock traded on the NASDAQ under the symbol “NGBF.” Between April 15, 2008 and September 22, 2008 our common stock traded on the Amex under the symbol “GNB” and prior to trading on Amex, our common stock was traded on the OTC Bulletin Board under the symbol “HTWO.OB.” The following table below sets forth the high and low sales prices per share for the periods our common stock was traded on NASDAQ and Amex and the high and low bid prices per share for the periods our common stock was quoted on the OTC Bulletin Board.

	High		Low
2011
First Quarter	$	0.07	$	0.02
2010
First Quarter (through March 15, 2010)	$	0.92	$	0.62
First Quarter	$	0.92	$	0.62
Second Quarter		0.80		0.35
Third Quarter		0.49		0.13
Fourth Quarter		0.17		0.06
2009
First Quarter	$	1.12	$	0.43
Second Quarter		1.80		0.81
Third Quarter		1.60		0.84
Fourth Quarter		1.25		0.61
2008
First Quarter	$	6.00	$	3.00
Second Quarter		7.08		4.25
Third Quarter		5.15		3.45
Fourth Quarter		4.50		0.71

Shareholders

The approximate number of holders of record of our common stock as of December 31, ~~2009~~ 2010 was ~~142~~209, including those brokerage firms and/or clearing houses holding shares of common stock for their clientele (with each such brokerage house and/or clearing house being considered as one holder). As of December 31, ~~2009~~2010, we had 3182,~~711~~083,~~578~~896 shares of common stock outstanding. ~~In February 2010, we completed a private placement of 1,890,858 shares of common stock and warrants to purchase an additional 1,890,858 shares.~~ As of March 1514, ~~2010~~2011, we had 34 88,~~702~~542,~~436~~229 shares of common stock outstanding.

Dividends

We have never declared or paid dividends on our common stock. We do not intend to declare dividends in the foreseeable future because we anticipate that we will reinvest any future earnings into the development and growth of our business. Any decision as to the future payment of dividends will depend on our results of operations and financial position and such other factors as our Board of Directors in its discretion deems relevant.

Registration Rights

Under the terms of some private placements, we have entered into registration rights agreements with the purchasers of our convertible preferred stock, common stock and warrants. Under the registration rights agreements, we were required to file “resale” registration statements with the SEC covering the shares of our common stock issued directly, upon conversion of the preferred stock issued or upon exercise of the warrants issued in the private placements. Pursuant to our February 2010 private placement, we filed a registration statement on Form S-3 on February 11, 2010 to register 3,781,716 shares of common stock for resale by the selling shareholders. This registration statement has not yet been declared effective by the SEC. In November 2008, we registered 4,770,990 shares of our common stock for resale by the selling stockholders on two registration statements on Form S-3 (Registration No. 333-151318 and No. 333-151320). We are obligated to maintain the effectiveness of these “resale” registration statements from the effective date until all securities registered under the registration statements have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without regard to volume limitations, provided we comply with our reporting obligations. We may also include on future registration statements additional shares issuable upon exercise of our outstanding warrants and options. We agreed to use our best efforts to have the “resale” registration statement declared effective by the SEC as soon as possible after the initial filing, but by no later than 180 days after the closing of the private placements.

Equity Compensation Plans

Please refer to Item 12 of this Annual Report for information regarding securities authorized under our equity compensation plans.

ITEM 6.

SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a clean energy company deploying novel technologies to produce cleaner, renewable biofuels. ~~provider that~~We ishave ~~marketing~~rights to a ~~new~~portfolio ~~class~~ of ~~“second~~patented ~~generation”~~and patent pending technology to manufacture alternative biofuels ~~for~~from ~~use~~plant inoils, ~~diesel fuel~~animal ~~applications~~fats and related oils, ~~including~~which we market as a new class of biofuel for power generation, commercial and industrial heating , and ~~marine~~related ~~transportation~~uses. ~~that~~We began generating revenues in 2008.

We produce our biofuels using a proprietary ~~blending~~mixing ~~technology~~technologies that we believe is are simpler, cleaner, less expensive, and less energy intensive than the complex chemical reaction process used to produce traditional distillate fuels and other forms of biodiesel. We believe that ~~this~~ these technological approaches, collectively “our technology,” ~~enables~~enable us to produce biofuels that cost less toand ~~produce,~~ use less energy to manufacture and generate significantly lower emissions than our competitors. Our technology also gives us the flexibility to produce our ~~biofuel~~biofuels from multiple feedstocks, which allows us to use non-edible raw materials in our production process, when desirable. We believe that these factors will enable us to customize our product to specific customer requirements and react more quickly to trends in the biofuels market. We are also developing products utilizing existing waste streams, by-products and other oils that have low alternative use values. We believe that successfully developing biofuels from low alternative use value feedstocks will allow us to be profitable with or without government incentives and credits once we are producing fuels on a commercial scale.

The operation and development of our business will require substantial additional capital to fund our operations, payments due under our exclusive technology license, the development or expansion of our production plants, research and development, and other initiatives.

Going Concern Matters

Our ability to continue as a going concern is dependent upon, among other things, future offerings of capital or alternative financing arrangements and the expansion of our operations. Uncertainty as to the outcome of these factors raises substantial doubt about our ability to continue as a going concern. We are currently evaluating various courses of action to address the issues we are facing. There can be no assurance that any of these efforts will be successful.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates, including those related to revenue recognition, long-lived assets, accrued liabilities, income taxes, common stock warrant liabilities and antidultion obligations, and share-based compensation. These estimates are based on historical experience, information received from third parties, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We follow the provisions as set forth by authoritative accounting guidance.

We generally recognize revenue when we have satisfied all contractual obligations and we are reasonably assured of collecting the resulting receivable.

We recognize revenue related to the sale of our inventory as we ship or deliver products, provided all other revenue recognition criteria have been met. We recognize revenue from products sold through distributors or other third-party arrangements upon shipment of the products, if the distributor has a right of return, provided that (a) the price is substantially fixed and determinable at the time of sale; (b) the distributor’s obligation to pay us is not contingent upon resale of the products; (c) title and risk of loss passes to the distributor at time of shipment; (d) the distributor has economic substance apart from that provided by us; (e) we have no significant obligation to the distributor to bring about resale of the products; and (f) future returns can be reasonably estimated. For any sales that do not meet all of the above criteria, revenue is deferred until all such criteria have been met.

Share-based Compensation

We calculate the fair value of all share-based payments to employees and non-employee directors, including grants of stock options, non-restricted and restricted shares, and amortize these fair values to share-based compensation in the income statement over the respective vesting periods of the underlying awards.

Share-based compensation related to stock options includes the amortization of the fair value of options at the date of grant determined using Black-Scholes option pricing model. We amortize the fair value of options to expense over the vesting periods of the underlying options.

We estimate the fair value of stock option awards on the date of grant using assumptions about volatility, expected life of the awards, risk-free interest rate, and dividend yield rate. The expected volatility in this model is based on the historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time awards are granted, based on maturities which approximate the expected life of the options. The expected life of the options granted is estimated using the “simplified” method for “plain vanilla” options. The expected dividend rate takes into account the absence of any historical payments and management’s intention to retain all earnings for future operations and expansion.

We estimate the fair value of non-restricted and restricted stock awards based upon the closing market price of our common stock at the date of grant. We charge the fair value of non-restricted awards to share-based compensation upon grant. We amortize the fair value of restricted awards to share-based compensation expense over the vesting period of the underlying awards.

Derivative Accounting

We adopted new guidance as issued on January 1, 2009 which significantly impacted the accounting for certain of our freestanding derivative instruments by requiring us to account for these instruments as liabilities because they were no longer afforded equity treatment due to their exercise price reset features. We account for these arrangement in accordance with ASC Topic 815-10-50, “Accounting for Derivative Instruments and Hedging Activities,” “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” as well as related interpretations of these standards. In accordance with GAAP, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the statement of financial position and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and recognized at fair value with changes in fair value recognized as either a gain or loss in earnings if they can be reliably measured. When the fair value of embedded derivative features cannot be reliably measured, we measure and report the entire hybrid instrument at fair value with changes in fair value recognized as either a gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument and precluding the use of " “blockage"” discounts or premiums in determining the fair value of a large block of financial instruments. Fair value under these conditions does not necessarily represent fair value determined using valuation standards that give consideration to blockage discounts and other factors that may be considered by market participants in establishing fair value.

Convertible Debt

We recorded a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that have conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair value of warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to paid-in-capital or liabilities as appropriate. We calculated the fair value of warrants issued with the convertible instruments using the Black-Scholes option pricing model, using the same assumptions used for valuing employee options, except that the contractual life of the warrant is used. Upon each issuance, we evaluate the variable conversion features and determine the appropriate accounting treatment as either equity or liability, in accordance with GAAP. We first allocated the value of the proceeds received to the convertible instrument and any other detachable instruments (such as detachable warrants) on a relative fair value basis and then determined the amount of any BCF based on effective conversion price to measure the intrinsic value, if any, of the embedded conversion option. Using the effective yield method, the allocated fair value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense. For a conversion price change of a convertible debt issue, the additional intrinsic value of the debt conversion feature, calculated as the number of additional shares issuable due to a conversion price change multiplied by the previous conversion price, is recorded as additional debt discount and amortized over the remaining life of the debt.

Derivative Financial Instruments

We do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, we have issued financial instruments including warrants that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. In certain instances, these instruments are required to be carried as derivative liabilities, at fair value, in our consolidated financial statements.

We estimated the fair values of our derivative financial instrument using the option pricing model because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our consolidated operating results reflect the volatility in these estimate and assumption changes in each reporting period.

Long-Lived Assets

We review long-lived assets, including leasehold improvements, property and equipment, and acquired intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. This requires us to estimate future cash flows related to these assets. Actual results could differ from those estimates, which may affect the carrying amount of assets and the related amortization expense.

Income Taxes

We account for income taxes pursuant to authoritative accounting guidance, which prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax return. We do not recognize an uncertain tax position as a deferred tax asset if it has less than a 50% likelihood of being sustained.

We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As a result of our analysis, we have recorded no additional tax liability.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amounts, an adjustment to the deferred tax assets would increase our income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Our deferred tax assets at December 31, 2009 were fully offset by a valuation allowance.26

Results of Operations

Comparison of the Year ended December 31, 2010 and the Year ended December 31, 2009

Net Loss

We incurred a net loss of $11.6 million for the year ended December 31, 2010, as compared to $14.4 million for the year ended December 31, 2009.

The decrease in net loss of $2.8 million resulted primarily from:

a $0.7 million decrease in cost of product revenue.

a $0.2 million decrease in research and development expenses.

a $1.6 million decrease in loss on net change in fair value adjustment.

a $1.0 million decrease in general and administrative expenses.

a $1.3 million increase in gain on debt extinguishment.

partially offset by:

a $1.2 million increase in induced conversion loss.

a $0.5 million increase in loss on conversion of debt.

a $0.3 million increase in interest expense.

Revenue

Total revenues for the year ended December 31, 2010 were $15,446, a decrease of $0.16 million compared to total revenues of $178,938 for the year ended December 31, 2009. Resulting primarily from scarce operating capital we generated minimal revenues in 2009 and 2010 as we worked to identify and qualify lower cost feedstock alternatives.

Cost of Product Revenue

Cost of product revenue was $1.6 million for the year ended December 31, 2010, a decrease of $0.7 million, compared to $2.3 million for the year ended December 31, 2009. Cost of product revenue is comprised of raw material feedstocks, facility lease, patent and license amortization and depreciation, used in production of $0.3 million in 2010 compared to $0.9 million in 2009, direct facility costs of $0.7 in 2010 compared to $0.8 in 2009, and amortization of the license agreement of $0.6 million in 2010 compared to $0.6 million in 2009.

Research and Development Expenses

Research and development expenses were approximately $0.3 million for the year ended December 31, 2010 compared to $0.5 million for the year ended December 31, 2009. The decrease in research and development expenses in 2010 reflects significantly lower fuel production coupled with the elimination of external collaborations as out research and development efforts were focused internally on the identification and qualification of lower cost feedstocks.

General and Administrative Expenses

General and administrative expenses were $ 8.8 million for the year ended December 31, 2010, compared to $9.8 million in the prior year. The decrease of $1.0 million in 2010 over the prior year was primarily attributable to the following:

Increases in expenses related to:

$0.3 million in severance pay to 2 executives that left during the year.

$0.1 million for consultants of which the majority relates to a one-time expense for Turnmile associated with the possible Milestone Joint Venture.

$0.1 million for recruiting fees associated with the hiring of our new CFO.

$0.6 million for legal fees which can be attributed to the 7 financing deals closed during 2010 compared to 3 during 2009. Additionally, the deals were more complicated as time went on.

$1.5 million for non cash compensation expense related to restricted stock awards.

Decreases in expenses related to:

$0.3 million for lease termination expenses associated with the Lake Mary office lease termination in 2009.

$0.2 million bonus payments.

$0.3 million for Terminal lease expense as these expenses were part of cost of product revenue for all of 2010.

$0.2 million for business travel expenses.

$0.1 million for general insurance.

$0.1 million for investor relations expenses.

$0.1 million for professional expenses.

$0.1 million for legal fees – regulatory affairs as a result of the termination of the services provided by Kelley Drye & Warren.

$0.5 million for non-cash compensation expenses – warrants.

$1.7 million for non-cash compensation expenses.

Interest Expense

Interest expense was $0.8 million for the year ended December 31, 2010 compared to $0.5 million in the prior year. The expenses increased in conjunction with the debt financings we completed in April and November 2010 as the costs associated with those financings are amortized to interest expense over the term of the debt.

(Loss) Gain on Fair Value Adjustment

The gain on net change in fair value of derivative liabilities of $0.1 million for the year ended December 31, 2010, was the result of the change in fair value of the detachable warrants issued to investors in connection with several financings during the year ended December 31, 2009. The warrants issued in conjunction with several financings during the year ended December 31, 2009 are considered derivative liabilities and must be valued at the end of each period. The carrying value of the common stock warrant liability is calculated using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the remaining contractual term of the award. The risk-free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the award. Expected dividend yield is projected at 0%, as the Company has not paid any dividends on its common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. Expected volatility is based on the Company’s historical volatility and the historical volatilities of the common stock of comparable publicly traded companies.

Comparison of the Year ended December 31, 2009 and the Year ended December 31, 2008

Net Loss

We incurred a net loss of $14.4 million for the year ended December 31, 2009, as compared to $13.5 million for the year ended December 31, 2008.

The increase in net loss of $0.9 million resulted primarily from:

a $2.0 million increase in cost of revenues.

a $0.1 million increase in general and administrative expenses.

a $1.7 million increase in non-cash loss on fair market value adjustment.

partially offset by:

a $0.2 million increase in revenues.

a $0.6 million decrease in research and development expenses.

a $0.4 million decrease in legal settlements.

a $1.6 million decrease in license impairments.

a $0.2 million increase in gain on debt extinguishment.

Revenue

Total revenues for the year ended December 31, 2009 were $178,938, an increase of $0.15 million compared to total revenues of $22,943 for the year ended December 31, 2008. The increase in net revenues was due to the initiation of biofuel production and sales from our production plant in Baltimore, Maryland.

Our product revenue was driven by a number of factors including: in the commercial and industrial market we offered our product at a substantial discount to the price of petroleum diesel fuel in order to attract “early adopter” customers and gain product validation and performance data through their use of our product. These discounts were partially offset by eliminating the need to perform test burns to sign up commercial and industrial customers, thereby lowering our research and development costs. We also gained the ability to utilize these early customers as a marketing tool, by bringing potential customers to existing sites for real-time demonstrations of our biofuel performance in their boiler applications. We have since signed several customers as a result and no longer offer “early adopter” discounts. We have continued to have success in signing up customers since discontinuing the “early adopter” discount, but may from time to time offer volume-related or other promotional pricing discounts as warranted.

Cost of Product Revenue

Cost of product revenue was $2.3 million for the year ended December 31, 2009, an increase of $2.0 million, compared to $0.3 million for the year ended December 31, 2008. Cost of product revenue is comprised of raw material feedstocks used in production of $0.9 million in 2009 compared to $0.1 million in 2008, direct facility costs of $0.8 in 2009 compared to no costs in 2008, and amortization of the license agreement of $0.6 million in 2009 compared to $0.2 million in 2008.

During 2009 cost of product revenue was driven by a disproportionally higher cost of production relative to units sold. We were just beginning to ramp-up production in our Baltimore facility and were running in small batch processing which does not allow us to purchase our feedstocks in large enough quantities to leverage volume discounts and transportation costs. We also amortize our license agreement on a straight line basis and pay fixed monthly lease costs on the facility. These non-volume driven items were approximately $1.5 million of the $2.3 million total cost of product revenue. As we are ramping up our production, the amortization and direct facility costs will have a disproportionate impact on our cost of product revenue in relation to units sold. As we begin fulfilling our recently awarded contracts and our production volume increases, we believe that our per unit cost of production will decrease as we process much larger production runs, though there can be no assurance that these cost reductions will materialize.

Research and Development Expenses

Research and development expenses were approximately $0.5 million for the year ended December 31, 2009 compared to $1.1 million for the year ended December 31, 2008. The decrease in research and development expenses in 2009 is primarily the result of the beginning of production of our fuel and conducting less test burns which were used to evaluate additional customized fuel formulations using our proprietary blending technology.

General and Administrative Expenses

General and administrative expenses were $9.8 million for the year ended December 31, 2009, compared to $9.7 million in the prior year. The increase of $0.1 million in 2009 over the prior year was primarily attributable to the following:

Increases in expenses related to:

$0.3 million in salary and severance pay based on hiring 2 additional employees and payment of severance to an executive.

$0.3 million for lease termination expenses associated with the Lake Mary office lease termination.

$0.2 million related to the Baltimore plant lease and terminaling services lease.

$0.3 million for board fees. Compensation program was implemented in August 2008.

$0.3 million for non cash compensation expense related to the fair market value of warrants issued for services.

$0.7 million for non cash compensation expense related to restricted stock awards.

$0.1 million for general liability and D&O insurance.

$0.2 million for investor relations and consulting services.

Decreases in expenses related to:

$1.0 million related to non cash compensation expense related to stock options.

$0.9 decrease in legal expenses.

$0.2 million for penalty shares expense incurred in prior year for late filing of registration statement.

$0.1 million for recruiting fees as 2 executives positions in prior year.

$0.1 million for bonuses.

Interest Expense

Interest expense was $0.5 million for the year ended December 31, 2009 compared to $0.5 million in the prior year. The expenses are unchanged as interest expense consists entirely of interest incurred related to the License Agreement payable.

(Loss) Gain on Fair Value Adjustment

The loss on net change in fair value of derivative liabilities of $1.7 million for the year ended December 31, 2009, was the result of the change in fair value of the detachable warrants issued to investors in connection with several financings during the year ended December 31, 2009. The warrants issued in conjunction with several financings during the year ended December 31, 2009 are considered derivative liabilities and must be valued at the end of each period. The carrying value of the common stock warrant liability is calculated using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the remaining contractual term of the award. The risk-free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the award. Expected dividend yield is projected at 0%, as the Company has not paid any dividends on its common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. Expected volatility is based on the Company’s historical volatility and the historical volatilities of the common stock of comparable publicly traded companies.

Comparison of the Year ended December 31, 2008 and the Year ended December 31, 2007

Research and Development Expenses

Research and development expenses were approximately $1.1 million for the year ended December 31, 2008, compared to $0.8 million for the year ended December 31, 2007. The increase in research and development expenses in 2008 reflects primarily costs from conducting tests to evaluate additional customized fuel formulations using our proprietary blending technology and costs to focus on further optimizing emissions as well as combustion tuning to enhance reliable cold engine starts.

General and Administrative Expenses

General and administrative expenses were $9.7 million for the year ended December 31, 2008, compared to $7.5 million in the prior year. The increase of $2.2 million in 2008 over the prior year was primarily attributable to increased expenses of $1.0 million associated with personnel and related costs, increases related to legal and audit fees of $0.5 million, and an increase of $0.2 million for rental costs.

Interest Expense

Interest expense was $0.5 million for the year ended December 31, 2008, compared to $0.8 million in the prior year. The decrease of $0.3 million in 2008 over the prior year was attributable to a reduction in license agreement payable. Interest expense consists of interest incurred related to the License Agreement payable.

Other Expense

Other Expense was zero for the year ended December 31, 2008, compared to $0.3 million in the prior year. The decrease was attributable to the recognition of a charge, in the prior year, associated with a forfeited deposit of $250,000 as a result of the termination by Global Energy of our stock purchase and termination agreement.

(Loss) Gain on Fair Value Adjustment

Loss on fair value adjustment was $717 for the year ended December 31, 2008, compared to a gain of $0.6 million in the prior year. During December 2007, we recorded an $80,752 contingent liability for 2% of the shares issued in the December 2007 private placement. During 2008, we recorded an additional $186,291 contingent liability for 4% of the shares issued, up to the maximum penalty of 6%. For the year ended December 31, 2008 and 2007, we recorded a loss on fair value adjustment of $30,169 and a gain on fair value adjustment of $1,796, respectively, related to this liability as our stock price fluctuated during this period. Upon issuance of the shares the contingent liability was eliminated.

In connection with the Series B Private Placement completed on March 31, 2008, we recorded a contingent liability of $43,986 for 1% of the amount invested, due to the registration statement not being declared effective within 180 days of the initial required filing date. We recorded a gain on fair value adjustment of $29,452 related to this liability as our stock price declined during this period. Upon issuance of the shares the contingent liability was eliminated.

We recorded a $1,574,100 contingent liability at January 1, 2007 based on our stock price at that date. For the year ended December 31, 2007, we recorded a gain on fair value adjustment of $629,640 related to this liability as our stock price declined during this period. Upon issuance of the shares the contingent liability was eliminated.

Liquidity and Capital Resources

Liquidity

At December 31, ~~2009~~2010, we had $0.62 million in cash, compared to $10.32 million at September 30, ~~2009~~2010.

Although we completed a private placement of senior secured convertible notes of $1,~~304~~000,~~692~~000 in gross proceeds in the first quarter of ~~2010~~2011, we will need to reduce costs and raise additional financing to continue our operations beyond ~~the second~~April ~~quarter of 2010~~2011. We expect that our available cash and interest income will be sufficient to finance currently planned activities through mid ~~May~~April ~~2010~~2011. Accordingly, we will need to complete a financing by end of April of 2011. We estimate that we will require an additional $65.0 million to fund our operations through ~~2010~~2011. These estimates are based on certain assumptions, which could be negatively impacted by the matters discussed under “Risk Factors.”

Several existing commitments that require significant expenditures will continue to impact our liquidity and capital resources. We have monthly lease ~~and other outstanding payment~~ obligations under our production facility site lease ~~and terminaling service~~ agreement ~~for past production~~. We also have incurred costs associated with developing, upgrading and expanding the capacity of our biofuel production facility in Baltimore, Maryland. Under the license agreement with the inventor of our ~~proprietary~~licensed technology, we also are required to pay $1.0 million per year over the next four years. We will continue incurring costs to test and optimize our fuels, enhance research and development, pay our employees and sustain operations.

We are unlikely to be able to continue our operations unless we can obtain additional financing. We likely will seek such funding through public or private financings or some combination of them. Additional funding may not be available to us on acceptable terms, or at all. Even after funding our short term needs, given our ongoing need for capital, we may raise money on an opportunistic basis when the market makes such funding available on acceptable terms.30

We ~~have financed~~will ~~our~~be ~~operations~~unable to ~~date~~continue ~~primarily through the sale of~~ our ~~common~~operations ~~and preferred~~unless ~~stock~~we ~~and~~can ~~warrants~~obtain inadditional ~~private placements with accredited investors and registered direct offerings~~financing. InWe ~~March~~likely ~~2009,~~will weseek ~~raised~~such ~~$3,166,000~~funding inthrough ~~gross proceeds~~public ~~from~~or ~~the~~private ~~sale~~financings ofor ~~shares~~some ofcombination ~~common stock at a purchase price~~ of $0them.~~80 per~~ ~~share~~Additional ~~and~~funding ~~warrants~~may ~~with~~not anbe ~~exercise~~available ~~price~~to ofus ~~$0.90~~on ~~per~~acceptable ~~share. In July 2009~~terms, we ~~raised~~or ~~$3,196,600 in gross proceeds from the sale of shares of common stock~~ at ~~a price of $1~~all.05 ~~per~~Even ~~share~~after ~~and~~funding ~~warrants~~our ~~with~~short anterm ~~exercise~~needs, ~~price~~given ofour ~~$1.60~~ongoing ~~per share. In~~need ~~December~~for ~~2009~~capital, we ~~raised~~may ~~$1,541,000~~raise inmoney ~~gross~~on ~~proceeds from the sale of shares of common stock at a purchase price of $0.80 per share and warrants with~~ an ~~exercise~~opportunistic ~~price~~basis ofwhen ~~$0.90 per share. In February 2010, we raised $1,304,700 in gross proceeds from~~ the ~~sale~~market ofmakes ~~shares~~such offunding ~~common~~available ~~stock~~on atacceptable ~~a purchase price of $0~~terms.~~69 per share and warrants with an exercise price of $0.90 per share.~~

We have financed our operations to date primarily through the sale of our common and preferred stock and warrants in private placements with accredited investors, sale of convertible notes and registered direct offerings. In February 2010, we raised $1.3 million in gross proceeds from the sale of shares of common stock at a purchase price of $0.69 per share and warrants with an exercise price of $0.90 per share. In April 2010, we raised $700,000 in gross proceeds from the issuance of secured convertible notes and warrants with an exercise price of $0.90 per share. In June2010, we raised $500,000 in gross proceeds from the sale of shares of common stock at a price of $0.45 per share and warrants with an exercise price of $0.60 per share. In August 2010, we raised $1.0 million in gross proceeds from the sale of shares of common stock at a purchase price of $0.20 per share and warrants with an exercise price of $0.30 per share. In September 2010, we raised $462,500 in gross proceeds from the sale of shares of common stock at a purchase price of $0.13 per share and warrants with an exercise price of $0.15 per share. In October 2010, we raised $600,000 in gross proceeds from the sale of shares of common stock at a purchase price of $0.13 per share and warrants with an exercise price of $0.13 per share. In November 2010, we raised $350,000 in gross proceeds from the issuance of convertible notes and $86,000 from the exercise of warrants. In February 2011, we raised $1.0 in gross proceeds from the issuance of senior secured convertible notes and two (2) sets of warrants with exercise prices of $0.10 per share and $0.005 per share.

If we continue to raise capital through the sale of equity securities, or securities convertible into equity, dilution to our then existing shareholders would result. If we raise additional capital through the incurrence of debt, we would likely become subject to covenants restricting our business activities, and holders of debt instruments would have rights and privileges senior to those of our equity investors. In addition, servicing the interest and repayment obligations under these borrowings would divert funds that would otherwise be available to support research and development or commercialization activities.

Cash Flows

Net cash used in operating activities was $74.16 million for the year ended December 31, ~~2009~~ 2010 primarily reflecting our net loss of $1411.46 million, partially offset by $32.3 million in non-cash stock-based compensation expense, $01.70 million in non-cash stock based expense for services rendered by consultants, $0.54 million in non-cash amortization expense associated with our license agreement payable, $0.6 million in non-cash amortization expense related to the license, and $1.7 5 million loss on change in fair value of warrant liability. Net cash used in operating activities was $6.39 million for the year ended December 31, ~~2008~~ 2009 primarily reflecting our net loss of $1314.54 million, partially offset by $3.4 3 million in non-cash stock-based compensation expense, $0.67 million in non-cash stock based expense for services rendered by consultants, $0.5 million in non-cash amortization expense associated with our license agreement payable, $0.26 million in non-cash amortization expense related to the license, ~~$0.2 million in non-cash penalty share expense, $0.4 million in warrant expense associated with legal settlement~~ and $1.67 million inloss ~~impairment~~on ~~expense~~the ~~related to~~change ~~the~~in ~~write-down~~fair value of ~~license~~warrant ~~value~~liability.

Net cash used in investing activities was $0.92 million primarily attributable to plant additions for the year ended December 31, ~~2009~~2010. Net cash used in investing activities was $01.50 million for the year ended December 31, ~~2008~~2009. Net cash used in investing activities in ~~2008~~2009 was attributable to $0.49 million to build out our plant ~~facility~~ ~~and purchase furniture and equipment~~facility, and $0.1 million of patent costs.

29Net cash provided by financing activities was $4.4 million for the year ended December 31, 2010. Net cash provided by financing activities in 2010 was attributable to $3.5 million to the issuance of common stock related to public and private offerings, $0.1million to the exercise of warrants, $1.1 million to issuance of convertible notes payable and partially offset by $0.1 to license agreement payable.

Net cash provided by financing activities was $7.1 million for the year ended December 31, 2009, and is attributable to the issuance of common stock related to public and private offerings..

Net cash provided by financing activities was $6.6 million for the year ended December 31, 2008, and consisted of $7.2 million in net proceeds from the issuance of preferred stock, and $0.4 million in proceeds from exercise of warrants, partially offset by $1.0 million in payments for our License Agreement.

Capital Requirements and Resources

Our future capital requirements will depend on many factors, including:

the level of cash flows from product sales;

conducting additional testing with utilities, independent power producers or others, including product application testing, to gain market acceptance of our biofuel among customers and equipment manufacturers;

· maintaining and improving our production facility in Baltimore, Maryland under our ~~terminal~~site lease agreement with Pennington Partners, LLC or with others to supply our products initially for testing and eventually for the broader biofuels market;

the scope and results of our research and development efforts;

developing and executing a sales marketing plan for the commercial and industrial heating fuel and marine market segments and a technology plan that complements the marketing plan;

entering into feedstock supply and transportation logistics agreements to supply our production facilities;

developing additional strategic relationships to attract potential customers and sublicensees and to obtain the capital commitments necessary to engineer, construct and operate biofuel plants in our exclusive territory;

· continuing to pursue favorable tax incentives for our biofuel, particularly efforts to include our biofuel in the $1 per gallon credit afforded biodiesel and to have the benefit of such a change extend beyond the current expiration date of December 31, ~~2009~~2011 and to pursue obtaining EPA approval;

recruiting additional key employees to expand the capabilities of our existing management team; and

the costs of maintaining, expanding and protecting our intellectual property portfolio, including litigation costs and liabilities.

Off−Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements may be found on pages F-1 through F-31 of this report.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T).

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, we are required to carry out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. ~~This~~ ~~required~~Based ~~evaluation~~on ~~was carried out with~~ the ~~participation~~ ofCompany’s ~~our principal executive officer and principal financial officer. Based upon such~~ evaluation ~~as of December 31~~, ~~2009,~~management ~~our principal executive officer and principal financial officer~~ concluded that ~~our~~the Company’s disclosure controls and procedures were effective at a reasonable assurance level such that the information relating to us and our consolidated subsidiary required to be disclosed in our Exchange Act reports (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure as of December 31, 2010.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) includes those policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over reporting, because of its inherent limitations, may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of the Company’s management, including the principal executive officer and the principal financial officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the Company’s evaluation under the COSO framework, management concluded that the Company maintained effective internal control over financial reporting as of December 31, ~~2009~~2010.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

During the year ended December 31, ~~2009~~ 2010, there were no significant changes in our control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

3233

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information with respect to the identity, business experience and directorships of our directors and their remuneration is incorporated by reference to the information set forth in the section captioned “Election of Directors” in our Proxy Statement for the 2010 Annual Meeting of Shareholders, which is anticipated to be filed pursuant to Regulation 14A no later than one hundred twenty (120) days following the end of fiscal year 2009 (the “Proxy Statement”). The information with respect to our Audit Committee is incorporated by reference to the information set forth in the section captioned “Committees of the Board of Directors – Audit Committee” in the Proxy Statement. The information with respect to material changes in the nominating process for the Board of Directors, if any is, incorporated by reference to the information set forth in the appropriate subsection of the section captioned “Election of Directors” in the Proxy Statement. The information with respect to compliance with Section 16(a) of the Exchange Act is incorporated by reference to the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. The information with respect to our Code of Ethics is incorporated by reference to the section captioned “Code of Business Conduct and ~~Ethics”~~ inExecutive ~~the Proxy Statement.~~Officers

~~The~~Set ~~information~~forth ~~with~~below ~~respect~~are to the ~~identity~~ names, ages and ~~business~~other ~~experience~~biographical information of our directors and executive officers. isThere ~~set~~are ~~forth~~no infamily ~~the Section~~relationships ~~captioned~~between ~~“Executive~~any ~~Officers”~~director inor ~~Part~~executive ~~I of this Annual Report on Form 10-K~~officer.

John E. Mack, 63, has served as a Director since February 2007 and has served as the Chairman of the Board since May 2010. Mr. Mack has over 30 years of international banking, financial business management and mergers and acquisitions experience, and has worked closely with investment bankers and external advisors with regard to the sale of international import-finance products to domestic customers. From November 2002 through September 2005, Mr. Mack served as Senior Managing Executive Officer and Chief Financial Officer of Shinsei Bank, Limited of Tokyo, Japan. Prior to joining Shinsei Bank and for more than twenty-five years Mr. Mack served in senior management positions at Bank of America and its predecessor companies, including twelve years as Corporate Treasurer. Mr. Mack is also a member of the Board of Directors of Flowers National Bank, Incapital Holdings LLC, Wilson TurboPower, and is Vice-Chairman and a director of Islandsbanki hf. Mr. Mack holds an MBA from the University of Virginia and received his bachelor’s degree in economics from Davidson College.

David H. Goebel, Jr., 51, has served as Interim Principal Executive Officer since March 2011. Mr. Goebel also serves as our Chief Operating Officer and has done so since July 2009, and Vice President of Global Sourcing and Supply Chain from September 2007 through July 2009. Prior to joining the Company, Mr. Goebel worked at MeadWestvaco, a packaging solutions and products company, as the acting Vice President of Supply Chain/Director of Customer Service. He was responsible for redesigning the corporate order-to-cash processes, strategizing organizational and process changes in capacity planning, demand forecasting, inventory management/ operations, logistics/distribution, and customer service. Additionally, for nearly 20 years, Mr. Goebel worked at ExxonMobil and its predecessor, Mobil Corporation, in many different leadership capacities including manufacturing, engineering, supply chain, operations, marketing, and sales. Mr. Goebel holds a bachelor of science degree in microbiology from University of Minnesota along with graduate studies at both the University of Texas at Dallas and Northeastern University.

Douglas S. Perry, 61, has served as a Director since March 2010. Mr. Perry is currently, and since 2005 has been, President of Davenport Power LLC, a privately-held developer of geothermal power projects. Since January 1, 2010, Mr. Perry has been President and Chief Executive Officer of Davenport Newberry Holdings LLC. From 2003 to 2005, Mr. Perry was a consultant working with start-up companies and projects to develop technology verification and commercialization strategies, improve business operations and obtain funding. Before that he spent 20 years at Constellation Energy Group, including as President of Constellation Power Development and Vice President and General Counsel for Constellation Holdings, the holding company for various businesses including real estate, financial investments and power plant acquisition, development and operation. Prior to working at Constellation, Mr. Perry held legal positions, including serving as Special Counsel/Attorney with the Securities and Exchange Commission’s Divisions of Corporation Finance and Enforcement. Mr. Perry holds an engineering degree and an MBA from Duke University and law degrees from Emory University and Georgetown University.

J. Robert Sheppard, Jr., 63, has served as a Director since August 2007. Mr. Sheppard has been the Managing Director of J.R. Sheppard & Company LLC, a consulting firm, since 2002. One of Mr. Sheppard’s current assignments, initiated by the Infrastructure Experts Group, an organization formed under the auspices of the United Nations (“UN”), is to arrange capital markets financing for up to two developing-country infrastructure projects as part of a Demonstration Project financed by the Swiss Agency for Cooperation and Development. He is also working currently as a consultant to the UHN, as an advisor to an agency of the U.S. Government, and as the financial advisor to a U.S. firm that has developed a new technology for treating fly ash. In his capacity as Managing Director of J.R. Sheppard & Company LLC, Mr. Sheppard has served as a consultant to The World Bank on projects including advising on structures to mitigate foreign exchange risk for electric power and water projects in developing countries and concerning application of partial risk guarantees in the transport sector and local capital markets financing for infrastructure. He is also an adjunct professor of finance at the University of South Carolina and an instructor in the Global Infrastructure Forum at Stanford University. Mr. Sheppard holds a JD and an MBA from the University of North Carolina at Chapel Hill. He is a member of the North Carolina Bar and was a member of the Task Force on US Participation in Multilateral Development Banks, as well as the Financing Project Advisory Committee for the North Carolina Alternative Energy Corporation.

Dane R. Saglio, 53, has served as Chief Financial Officer since March 2010. From December 2008 until joining our company, Mr. Saglio owned and operating his own consulting firm which provided business and management advisory services to emerging private companies in the areas of strategic planning, including exit strategies, transaction evaluation, capital structure, corporate governance, and financial and business operations evaluation. Prior to joining the Company, Mr. Saglio was the Chief Financial Officer of EntreMed, Inc., a publicly traded biotech company. Mr. Saglio joined EntreMed in April 2000 as Corporate Controller and then served as Chief Financial Offer from February 2003 through December 2008. Mr. Saglio holds a bachelor of science degree in business administration from the University of Maryland. Mr. Saglio is also a Certified Public Accountant.

Andrea Festuccia, Ph.D, 39, has served as Chief Technology Officer since April 2006. Currently, Mr. Festuccia is Partner, Technical Director and member of the Board of Directors of IGEAM S.r.l. (since February 2009), a private Italian company with about 100 employees engaged in consulting environmental and safety problems where he has worked since June 1999. Prior to his current position with IGEAM S.r.l., Mr. Festuccia was the Director of the B.U. “Environment and Territory” at IGEAM S.r.l.. Mr. Festuccia was Adjunct Professor of General and Inorganic Chemistry with the University of “La Tuscia” of Viterbo from 1999 to 2000. Mr. Festuccia was a former Technical Director and member of the Board of Directors of 3TI Progetti Italia (from July 2004 to January 2009). Mr. Festuccia is currently an external consultant with the University “La Sapienza” of Rome, a position that he has held since 2001. He also worked as an external expert for the Minister of Foreign Affairs of Italy-Farnesina from 2002-2004 and as Technical Director of Ecosystems S.r.l. from 2002 to present. He is the Chairman of the Board of Directors of OPT SENSOR, a private Italian company dealing with R&D for electronic equipments to measure chemical/physical parameters, a spin-off company of University “La Sapienza” of Rome. He is also the CEO of BART-Biotechnology and Recovery Technologies, a small private Italian company engaged in biotechnology. In October 1996, he received a degree in chemical engineering and subsequently, in 2007, his doctor of philosophy degree in chemical engineering from the University of Rome - “La Sapienza”.

Director Qualifications

The following list of experience, qualifications, attributes or skills of each director contributed to the Nominating Committee’s conclusion that each director is qualified to serve on the Board in light of our business and structure:

Director		Qualifications
John E. Mack		Management experience, including asset/liability management, corporate investments, insurable risk management, corporate governance and shareholder relations due to various positions with Bank of America and predecessor companies, NationsBank Corporation and NCNB Corporation; Expertise in public company accounting, disclosure and financial system management due to roles as Senior Managing Executive Officer and Chief Financial Officer of Shinsei Bank, Limited

David H. Goebel, Jr.		Experience in supply chain and operations management; Extensive experience in the fuels business sector; Interim Principal Executive Officer and Chief Operating Officer of the Company.

Douglas S. Perry		President of Davenport Power LLC, a privately-held developer of geothermal power projects; Experience working with start-up companies in the energy industry and projects to develop technology verification and commercialization strategies, improve business operations and obtain funding; Legal experience, including serving as Special Counsel/Attorney with the Securities and Exchange Commission’s Divisions of Corporation Finance and Enforcement

J. Robert Sheppard, Jr.		Experience in the energy industry and in financing energy-related projects companies due to positions with Bank of America, Nations Banc Capital Markets, Inc. and NationsBank Investment Banking; Managing Director of J.R. Sheppard & Company, LLC which provides consulting services relating to international infrastructure, capital markets, financing and risk management; Adjunct professor of finance teaching international project finance at the Moore School of Business at the University of South Carolina

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the SEC. Such reporting persons are required by rules of the SEC to furnish us with copies of all Section 16(a) reports they file.

All Section 16(a) filings required by any directors and executive officers and holders of more than 10% of the Company’s common stock during the fiscal year ended December 31, 2010 were filed on time except for the following:

•

David Goebel, Jr., filed a Form 5 in 2011 to report the grant of restricted common stock in 2010 and the grant of one option in 2009 and two options in 2010.

•

John Mack filed a Form 5 in 2011 to report the 2010 conversion of preferred stock to common stock, and to report the acquisition of common stock issued as a dividend on the preferred stock.

•

Cary Claiborne filed a Form 5 in 2011 to report the grant of restricted common stock in 2010 and the grant of an option in 2010.

•

Miles Mahoney filed a Form 3 one day late and one late Form 4 to report the grant of a stock option.

•

Lee Rosen filed one late Form 4 to report the grant of restricted stock and two stock options.

•

Abraham Jacobi filed one late Form 4 to report the 2010 conversion of preferred stock to common stock, and to report the acquisition of common stock issued as a dividend on the preferred stock.

Code of Ethics

The Board and Audit Committee adopted a Code of Business Conduct and Ethics (the “Code”) that applies to each of our directors, officers and employees. The Code is available to our shareholders on our website at www.newgenerationbiofuels.com. The Code sets forth our policies and expectations on a number of topics, including:

•

compliance with laws, including insider trading;

•

preservation of confidential information relating to our business and that of our clients;

•

conflicts of interest;

•

reporting of illegal or unethical behavior or concerns regarding accounting or auditing practices;

•

corporate payments;

•

corporate opportunities; and

•

the protection and proper use of our assets.

We have also established and implemented formal “whistleblower” procedures for receiving and handling complaints from employees. As discussed in the Code, we encourage our employees to promptly report illegal or unethical behavior as well as questionable accounting or auditing matters and other accounting, internal accounting controls or auditing matters on a confidential, anonymous basis to their supervisors. Any concerns regarding accounting or auditing matters reported will be communicated to the Audit Committee. The Audit Committee intends to review the Code on an annual basis, and the Board will review and act upon any proposed additions or amendments to the Code as appropriate.

Description of Nominating Process

There have been no material changes to the procedures by which our shareholders may recommend nominees to our Board of Directors.

Audit Committee and Financial Expert

The Board of Directors has established an Audit Committee to oversee our accounting and financial reporting processes and audits of our financial statements. The Audit Committee consists of three members, Messrs. Mack, Perry and Sheppard. The Board has determined that Mr. Mack is the “audit committee financial expert” and serves as the Chairman of the Audit Committee. In the opinion of the Board of Directors, each of the members of the Audit Committee is independent as defined by Rule 5605(a)(2) of the NASDAQ listing standards as applicable to members of an audit committee.

ITEM 11. EXECUTIVE COMPENSATION.

~~The information~~Summary ~~required by this item is incorporated by reference to the information set forth under the caption “Executive~~ Compensation” ~~in our Proxy Statement.~~Table

The following table presents information concerning compensation for each of our named executive officers for services in all capacities during the years indicated:

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)(1)		Option Awards ($)(1)		Nonequity Incentive Plan Compensation ($)(2)		All Other Compensation ($)			Total ($)
Lee S. Rosen (3)	2010		86,308		60,000		92,211		17,280		–		91,192	(4)		346,991
Former Chairman of the	2009		156,472		190,000		1,001,475		916,819		–		–			2,272,086
Board	2008		180,000		–		–		–				–			180,000

Cary Claiborne (5)	2010		190,817		60,000		110,024		30791		-		70,000	(4)		461,632
Former President, CEO	2009		211,716		–		262,114		1,109,912		27,405		10,105	(6)		1,621,252
and CFO	2008		225,000		–		44,110		–		75,294		–			344,404

David H. Goebel, Jr. (7)	2010		200,000		4,909		157,981		-							362,890
Interim Principal Executive Officer and Chief Operating Officer	2009		173,230		–		100,321		296,561		32,480		8,062	(6)		610,674

Dane R. Saglio (8)	2010		150,000		-				231,600		-		-			381,600
Chief Financial Officer

Miles F. Mahoney (9)	2010		47,596				110,000		87,054		-		-			244,650
Former President and
CEO

(1)

Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to restricted stock and stock option awards granted to our Named Executive Officers. For more information concerning the assumptions used for these calculations, please refer to the notes to the financial statements contained in the 2008, 2009 and 2010 Annual Reports on Form 10-K.

(2)	Represents the performance-based cash bonuses earned by each Named Executive Officer in each respective year.

(3)	Effective July 23, 2009, we entered into an employment agreement with Mr. Rosen. Effective May 7, 2010, Mr. Rosen resigned as the Chairman of the Board.

(4)	Amounts represent severance paid to such Named Executive Officer.

(5)

Mr. Claiborne was appointed as President, Chief Executive Officer and Director on March 16, 2009, and retained his role as Chief Financial Officer until March 2010, when Mr. Saglio was appointed as Chief Financial Officer. Effective October 8, 2010, Mr. Claiborne resigned as President, Chief Executive Officer, and Director of the Company.

(6)	Amounts represent the “gross-up” amount we paid on behalf of such Named Executive Officer.

(7)	Mr. Goebel was appointed as Chief Operating Officer in July 2009 and Interim Principal Executive Officer in March 2011.

(8)	Mr. Saglio was appointed as Chief Financial Officer on March 29, 2010.

(9)	Mr. Mahoney was appointed as Chief Executive Officer, President, and Director on October 9, 2010. Effective March 14, 2011, Mr. Mahoney was terminated as Chief Executive Officer, President, and Director of the Company.

Performance Goals

The Compensation Committee sets performance goals each year to prospectively align financial rewards for management with overall corporate and shareholder objectives. The performance goals provide a basis for the Compensation Committee and management to objectively measure achievement of these objectives and to pay or grant performance-based incentive compensation under various employment agreements and our Management Equity Compensation Plan. Each performance goal is assigned a weighting based on its relative importance, and some goals were assigned minimum thresholds below which no credit for performance is recognized. Some performance goals apply collectively to all our employees, and some goals apply only to our Chairman and our Chief Executive Officer.

2010 Performance Goals

For fiscal year 2010, the Compensation Committee adopted performance goals relating to:

Management Team

•

Develop technical process around feedstocks to facilitate positive cash flow sales.

Chairman and Chief Executive Officer

•

Execute on a strategic partnership with one or more strategic partners; and

•

raising sufficient capital to execute our business.

In March 2011, the Compensation Committee reviewed the 2010 performance goals and determined that neither the management team nor the Chairman and Chief Executive Officer met the 2010 performance goals. Consummation of a strategic partnership transaction was anticipated to be a catalyst for creating organizational value and capital pathways. Failure to complete this transaction had a negative impact on the Company’s market value and resulted in a series of senior management changes. As 2010 became a transitional period marked by management changes and financial challenges, the Compensation Committee views the operation failures as a by-product of the financial challenges. In consideration of the Company’s continued financial struggles, the Committee has determined that there will be no cash bonus award for 2010 performance goals. The Committee considered the possibility of accelerating previously awarded performance based restricted stock and stock options but deferred any decision to a later date to give it further consideration. Also in consideration of the Company’s capital challenges, that there will be no salary increases but employees will be granted additional stock options as incentive compensation. See the “Summary Compensation Table” for further information on the non-equity incentive compensation earned in 2010.

Management Equity Compensation Plan

In May 2008, the Compensation Committee approved a Management Equity Compensation Plan (the “Equity Compensation Plan”) to ensure that equity remains a significant component of management compensation, to align employee and shareholder interests by providing opportunities for employees to own our common stock and to motivate and retain key employees with multi-year equity incentives. The Equity Compensation Plan generally contemplates annual restricted stock grants based on achieving certain performance targets and vesting annually over three years. The amount of each award is relative to an employee’s total compensation and based on the individual’s ability to affect our results, with higher level positions generally receiving grants equal to a greater percentage of their compensation than lower level positions. In 2010, we issued no restricted shares under the Equity Compensation Plan to any employees based on achieving certain 2010 performance targets. Grants are made under the Equity Compensation Plan pursuant to our shareholder approved Omnibus Incentive Plan.

Employment and Separation Agreements

Lee S. Rosen

On July 23, 2009, we entered into an employment agreement with Mr. Rosen to serve as our Chairman of the Board. Under the employment agreement, Mr. Rosen received an initial annual base salary of $198,000, was eligible to earn an annual performance-based cash bonus of up to 50% of his annual salary and a special cash bonus of up to $160,000 for assistance and support in raising equity capital for the Company. The Compensation Committee awarded $100,000 of the special cash bonus in July 2009, and such amount has been subtracted from any cash compensation payable based on the achievement of 2009 performance goals. The Compensation Committee awarded the remaining $60,000 of such special cash bonus in February 2010.

In addition, Mr. Rosen’s employment agreement provided for a grant of 932,500 stock options at a price of $1.05, of which 150,000 vested immediately, 104,353 time-based options that vest on each of July 23, 2010 and July 23, 2011, 104,354 time-based options that vest on July 23, 2012 and 469,440 performance-based options that vest equally over three years beginning on December 31, 2009, if certain performance targets for such years are met. Mr. Rosen’s agreement also provided for the grant of 782,500 shares of restricted stock, of which 260,833 shares vest on each of July 23, 2010 and July 23, 2011 and 260,834 that vest on July 23, 2012. Of the 932,500 options and 782,500 shares of restricted stock granted under the employment agreement, 521,667 options and 521,667 shares were subject to shareholder approval of additional shares available under the Omnibus Incentive Plan. The additional shares were approved at the Company’s annual shareholders’ meeting on July 8, 2010.

Mr. Rosen resigned as our Chairman of the Board, effective May 7, 2010, and we entered into a separation agreement with Mr. Rosen under which his employment agreement was terminated, which included the following material terms:

$95,000 in cash, less standard deductions and withholding;

the right to receive an additional $105,000, at the election of Mr. Rosen, in the form of (i) a note issued by the Company with a maturity date of three years from date of issuance and an interest rate equal to the interest rate of a three-year United States Treasury Note plus 2.0% on the date of issuance and other customary terms and conditions; or (ii) a number of shares of the Company’s common stock equal to the amount of the cash election divided by the closing price of the Company’s common stock on the NASDAQ Capital Market on the election date. Mr. Rosen elected to receive stock on May 17, 2010;

accelerated vesting on certain time-based stock options and stock grants under Mr. Rosen’s previous Amended and Restated Employment Agreement with the Company, dated July 23, 2009 (the “Employment Agreement”), consisting of (1) options to purchase 104,353 shares of the Company’s common stock; and (2) 260,833 shares of the Company’s common stock;

accelerated vesting on a certain previously granted three-year restricted stock grants, consisting of 226,316 shares of the Company’s common stock;

upon receipt of shareholder approval to issue sufficient available shares under the Company’s Omnibus Incentive Plan, (i) accelerated vesting on additional time-based options to purchase 208,707 shares of the Company’s common stock (the “Conditional Options”) and (ii) issuance of additional common stock grants consisting of 521,677 shares of the Company common Stock less the number of shares equal to $105,000 divided by the closing price of the Company’s common stock on the NASDAQ Capital Market on the election date (the “Conditional Stock Grant”). The Conditional Options and Conditional Stock Grant were granted under Mr. Rosen’s previous Employment Agreement;

18 months of reimbursement for COBRA premiums in order to provide health and life insurance benefits at least equal to those provided at the time of separation; and

Cary J. Claiborne

Effective December 1, 2007, we entered into an employment agreement with Cary J. Claiborne to serve as our Chief Financial Officer. This agreement was similar to employment agreements other senior executive officers. Under the employment agreement, Mr. Claiborne received an initial salary of $18,750 per month and options to purchase 750,000 shares of our common stock at an exercise price of $4.00 per share, the fair market value of the our common stock on the grant date of December 1, 2007, and shares of restricted common stock in the amount of $75,000. The stock options consisted of 300,000 time based options and 450,000 performance based options. The stock options and the restricted stock vested incrementally through 2010. The options expire on December 1, 2017. The agreement included other customary terms.

Mr. Claiborne’s employment agreement provided that his employment may be terminated by the company upon death, disability, for “cause,” and “without cause” and that he can resign from us with or without good reason or retire.

Mr. Claiborne resigned as our President and Chief Executive Officer and Director effective October 9, 2010, and we entered into a separation agreement with Mr. Claiborne under which his employment agreement was terminated, which included the following material terms:

$70,000 in cash, less standard deductions and withholding;

within 21 calendar days after the separation date, the Company was required to file an S-8 Registration Statement to register all shares and options granted under the Company’s Omnibus Incentive Plan;

a grant of 1,500,000 shares of common stock , which was registered under the aforementioned S-8 Registration Statement;

accelerated vesting on certain time-based stock options and stock grants dated December 1, 2007, and April 9, 2009, consisting of (1) options to purchase 65,000 shares of the Company’s common stock; and (2) 300,000 shares of the Company’s common stock respectively;

accelerated vesting on certain performance-based stock options and stock grants dated December 1, 2007, and April 9, 2009, consisting of (1) options to purchase 125,000 shares of the Company’s common stock; and (2) 307,604 shares of the Company’s common stock respectively;

accelerated vesting on a certain previously granted three-year restricted stock grants, consisting of 251,715 shares of the Company’s common stock;

reimbursement for up to $12,000 in documented outplacement services;

18 months of reimbursement for COBRA premiums in order to provide health and life insurance benefits at least equal to those provided at the time of separation; and

Entering into a consulting agreement with the Company to provide advisory and other transition services.

Andrea Festuccia

On September 19, 2006, we entered into an amended and restated employment agreement with Dr. Festuccia to serve as the Chief Technology Officer for a term expiring on April 1, 2009, which is automatically extended for additional one-year terms unless notice of termination is given at least ninety (90) days prior to the end of the term by either Dr. Festuccia or us.

The employment agreement with Dr. Festuccia provides that he will initially receive a fixed base salary at an annual rate of $150,000 and customary employee benefits. Dr. Festuccia’s employment agreement also provides that if the board of directors establishes an incentive compensation plan or a bonus plan, he will be eligible to participate in such incentive compensation plan and bonus plan. Dr. Festuccia’s agreement provides for a grant of 500,000 stock options at a price of $1.50 per share, of which 100,000 vest immediately and the balance vest, in two annual installments.

The employment agreement for Dr. Festuccia provides that his employment may be terminated by us upon death, disability, for “cause,” and “without cause” and that such executive can resign from with or without good reason or retire. Upon his death, his employment would automatically terminate and (i) any unvested equity compensation granted to such executive shall immediately vest and any vested options may be exercised on or before the earlier of (A) the expiration date of such options and (B) twelve months after such executive’s death (payments made under this subsection (i) are referred to as “Equity Compensation”); and (ii) the executive’s legal representatives shall receive (A) such executive’s compensation that is earned but unpaid and (B) any other amounts or benefits owing to such executive under an employee benefit plan, long term incentive plan or equity plan (payments made under this subsection (ii) are collectively referred to as, the “Accrued Amounts”). If Dr. Festuccia’s employment is terminated without cause, because he becomes disabled or if he resigns for good reason, then he would receive (i) his base salary for the time period that is remaining under his employment agreement or six months, whichever amount is less; (ii) his Equity Compensation; and (iii) such executive’s Accrued Amounts. If Dr. Festuccia is terminated by us for “cause,” resigns without good reason or retires, then he shall receive the Accrued Amounts.

Each employment agreement requires the executive to adhere to our policy that (a) prohibits an executive from disclosing confidential information regarding us, and (b) confirms that all intellectual property developed by an executive and relating to our business constitutes the sole and exclusive property of us.

David H. Goebel, Jr.

Effective October 9, 2010, we entered into a thirty (30) month employment agreement with David H. Goebel, Jr. our, Chief Operating Officer, who has since been promoted to our Interim Principal Executive Officer, and has also retained his title of Chief Operating Officer. The employment agreement automatically renews for consecutive one (1) year periods unless either party gives notice of non-renewal ninety (90) days prior to the expiration of the then current term. This agreement is similar to employment agreements with other senior executive officers. Under the employment agreement, Mr. Goebel will receive a base salary of $200,000 and time-based and performance-based options to purchase 300,000 shares of the Company’s common stock at an exercise price of $0.91 per share. The stock options vest incrementally through 2012. The options expire ten years from the date of issuance, unless sooner exercised. Under the employment agreement, Mr. Goebel is also eligible for an annual performance-based restricted stock grant of up to 75% of his annual salary, which vest in annual equal tranches over a three year period. The employment agreement provides for participation in our executive bonus plan, with a maximum eligible bonus of 50% of base salary, subject to achieving certain performance targets.

Mr. Goebel’s employment agreement provides that his employment may be terminated by the company upon death, disability, for “cause,” and “without cause” and that he can resign from us with or without good reason or retire. Upon Mr. Goebel’s death, his employment will automatically terminate and (i) any vested options may be exercised on or before the expiration date of such options (payments made under this subsection (i) are referred to as “Equity Compensation”); and (ii) his legal representatives shall receive (A) his compensation that is earned but unpaid and (B) any other amounts or benefits owing to him under an employee benefit plan, long term incentive plan or equity plan (payments made under this subsection (ii) are collectively referred to as, the “Accrued Amounts”).

If Mr. Goebel’s employment is terminated without cause or by Mr. Goebel for good reason, then he shall receive (i) an amount equal to the sum of (a) his annual salary in effect as of his termination date, and (b) the average of the two (2) highest annual cash bonuses earned by Mr. Goebel for the three (3) prior years; (ii) his Equity Compensation, including all unvested time vesting options and the next unvested tranche of performance vesting options; and (iii) his Accrued Amounts. My Goebel shall also be entitled to reimbursement for COBRA premiums for a period of eighteen (18) months following the termination date.

If Mr. Goebel’s employment is terminated because he is disabled, then he shall receive (i) his base salary, for the time period that is remaining under his employment agreement or six months, whichever amount is less; (ii) his Equity Compensation, including the next unvested tranche of performance vesting options; and (iii) his Accrued Amounts. If Mr. Goebel’s employment is terminated by the company for “cause,” then he shall receive the Accrued Amounts and may exercise his vested options for a period of thirty days. If Mr. Goebel resigns without good reason or retires then he shall receive the Accrued Amounts.

Mr. Goebel’s employment agreement also provide that in the event that a “Change of Control” (as defined in the agreement) of the company shall occur during the term of his employment agreement, and within 12 months thereafter his employment is terminated without cause or by him for good reason, then (1) his severance compensation will be as set forth above for termination without cause or by him for good reason, as the case may be, and (2) all his unvested time vesting options and performance vesting options will vest and remain exercisable for the balance of the option term.

Dane R. Saglio

Effective March 29, 2010, we entered into a three (3) year employment agreement with Dane R. Saglio to serve as our Chief Financial Officer. The employment agreement automatically renews for consecutive one (1) year periods unless either party gives notice of non-renewal ninety (90) days prior to the expiration of the then current term. This agreement is similar to employment agreements with other senior executive officers. Under the employment agreement, Mr. Saglio receives an initial annual salary of $200,000 and time-based and performance-based options to purchase 400,000 shares of the Company’s common stock at an exercise price of $0.73 per share. The stock options will vest incrementally through 2012. The options expire in ten (10) years, unless sooner exercised. Under the employment agreement, Mr. Saglio is also eligible for an annual performance-based restricted stock grant of up to 75% of his annual salary, which vest in annual equal tranches over a three (3) year period. The employment agreement provides for participation in our executive bonus plan, with a maximum eligible bonus of 50% of base salary, subject to achieving certain performance targets.

Mr. Saglio’s employment agreement provides that his employment may be terminated by the Company upon his death or disability, for “cause,” or “without cause” and that he can resign from us with or without good reason or retire. Upon Mr. Saglio’s death, his employment would automatically terminate and (i) any vested options may be exercised on or before the expiration date of such options (payments made under this subsection (i) are referred to as “Equity Compensation”); and (ii) his legal representatives shall receive (A) his compensation that is earned but unpaid and (B) any other amounts or benefits owing to him under an employee benefit plan, long term incentive plan or equity plan (payments made under this subsection (ii) are collectively referred to as, the “Accrued Amounts”).

If Mr. Saglio’s employment is terminated without cause or by Mr. Saglio for good reason, then he shall receive (i) an amount equal to the sum of (a) his annual salary in effect as of his termination date, and (b) the average of the two (2) highest annual cash bonuses earned by Mr. Saglio for the three (3) prior years; (ii) his Equity Compensation, including all unvested time vesting options and the next unvested tranche of performance vesting options; and (iii) his Accrued Amounts. My Saglio shall also be entitled to reimbursement for COBRA premiums for a period of eighteen (18) months following the termination date.

If Mr. Saglio’s employment is terminated because he is disabled, then he shall receive (i) his base salary, for the time period that is remaining under his employment agreement or six months, whichever amount is less; (ii) his Equity Compensation, including the next unvested tranche of performance vesting options; and (iii) his Accrued Amounts. If Mr. Saglio’s employment is terminated by the company for “cause,” then he shall receive the Accrued Amounts and may exercise his vested options for a period of thirty days. If Mr. Saglio resigns without good reason or retires then he shall receive the Accrued Amounts.

Mr. Saglio’s employment agreement also provides that in the event that a “Change of Control” (as defined in the agreement) of the company shall occur during the term of his employment agreement, and within 12 months thereafter his employment is terminated without cause or by him for good reason, then (1) his severance compensation will be as set forth above for termination without cause or by him for good reason, as the case may be, and (2) all his unvested time vesting options and performance vesting options will vest and remain exercisable for the balance of the option term.

Outstanding Equity Awards At Fiscal Year-End Table

The following table sets forth certain information with respect to all outstanding option awards and stock awards held by each of our named executive officers at December 31, 2010.

	Option Awards								Stock Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#) (1)		Market Value of Shares or Units of Stock That Have Not Vested ($) (2)
Lee S. Rosen		1,500,000		–			1.50	9/15/2016
Former Chairman of the Board		499,363		–			1.05	7/22/2019
		22,500		–			0.90	3/17/2019
		36,303		–			0.63	5/06/2020

Cary J. Claiborne (3)		622,600		–			4.00	11/30/2017
Former President, Chief		793,286		–			1.25	5/26/2019
Executive Officer, and		30,672		–			0.90	3/17/2019
Chief Financial Officer		64,682		–			0.63	5/06/2020

David H. Goebel, Jr.		206,664		–			6.00	9/16/2017		250,152		15,009
Chief Operating Officer		24,509		–			0.90	3/17/2019
		127,840		140,000	(4)		0.91	9/8/2019

Dane R. Saglio		160,000		240,000	(5)		0.73	3/28/2020
Chief Financial Officer

Miles F. Mahoney		500,000		500,000	(6)		0.11	10/08/2020		500,000		30,000
Former President and CEO

(1)	Of the 250,152 shares of unvested restricted stock owned by Mr. Goebel, 1,275 vest on May 12, 2011; 32,465 vest equally in two installments on April 09, 2011 and April 09 2012 and 216,412 vest equally in three installments on March 6, 2011, March 6, 2012 and March 6, 2013.

The 500,000 shares of unvested stock owned by Mr. Mahoney would of vested on October 9, 2011, however the shares were forfeited on March 14, 2011 as a result of his termination.

(2)	Market value based on $0.06, the closing price of our common stock on the OTCQB on December 31, 2010.

(3)	Mr. Gillespie resigned as President, Chief Executive Officer and Director, effective March 16, 2009. The Board of Directors has appointed Mr. Claiborne as President, Chief Executive Officer and Director and he has retained his role as Chief Financial Officer.

(4)

The 140,000 options to purchase common stock are comprised of 80,000 time-based options which vest in two equal installments on September 9, 2011 and September 9, 2012, and 60,000 performance-based options which vest on December 31, 2011, contingent upon the achievement of certain performance targets.

(5)

Of the 240,000 options to purchase common stock, 120,000 are time-based options and 120,000 are performance based options. The time based options vest in three equal installments on each March 29, 2011, March 29, 2012 and March 29, 2013. The performance based options vest upon the achievement of certain performance targets determined at the end of December 31, 2011 and December 31, 2012.

(6)	The 500,000 options to purchase common stock are all comprised of time-based options which would have all vested on October 9, 2011, however the shares were forfeited on March 14, 2011 as a result of his termination.

Director Compensation

We pay our directors for their attendance and participation at board and committee meetings. We pay cash compensation to the non-executive directors according to the following schedule. In addition, we reimburse our directors for their out-of-pocket expenses.

Description	Compensation
Annual retainer for board membership	$	20,000
Annual retainer for committee membership (retainer paid for each committee membership held)	$	3,000
Annual retainer for serving as committee chairman (other than Audit) 1 (retainer paid for each chair position held)	$	5,000
Annual retainer for Audit Committee chairman 1	$	10,000
Meeting fee for board and committee meeting attendance (including in person and telephonic meetings but not board consents)	$	1,000 per meeting

(1)	Directors who are paid a committee chair retainer are not also paid a committee membership retainer.

The following table summarizes the compensation earned by our non-executive directors for their service as members of the Board of Directors during 2010.

Name and Principal Position	Fees Earned or Paid in Cash ($)(1)		Option Awards ($)(2)		Total ($)
John E. Mack		67,000		-		67,000
J. Robert Sheppard, Jr.		65,000		-		65,000
Douglas S. Perry		55,167		-		55,167

(1)	Includes annual retainers for board and committee membership earned or paid during fiscal year 2010.

(2)	Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

~~The information required by this item is incorporated by reference to the information set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” and “~~Securities Authorized ~~for~~For Issuance Under Equity Compensation Plans~~” in our Proxy Statement.~~

The following table sets forth the aggregate information of our equity compensation plan in effect as of December 31, 2010.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders		5,439,734	(1)	$	1.34		1,356,256

Equity compensation plans not approved by security holders		4,742,700	(2)	$	2.77		N/A

Total		10,157,418		$	2.01		1,356,256

(1)

Consists of, as of December 31, 2010: (i) an aggregate of 2,759,156 presently exercisable and 913,333 presently unexercisable options issued to our named executive officers and directors under individual written option agreements, (ii) an aggregate of 1,109,745 presently exercisable and 347,500 presently unexercisable options issued to our employees under individual written option agreements, and (iii) an aggregate of 110,000 presently exercisable and 200,000 presently unexercisable non-employee options issued to consultants of the Company.

(2)

Consists of, as of December 31, 2010: (i) an aggregate of 3,987,035 presently exercisable and 0 presently unexercisable options issued to our named executive officers and directors under individual written employment and/or option agreements, (ii), an aggregate of 674,665 presently exercisable and 0 presently unexercisable employee options issued to our employees under individual written option agreements and (iii) an aggregate of 81,000 presently exercisable and 0 presently unexercisable non-employee options issued to consultants of the Company.

Security Ownership Of Certain Beneficial Owners And Management

The following table sets forth information regarding the beneficial ownership of shares of our capital stock as of March 31, 2011 by:

Each of our directors;

Each of our named executive officers;

All of our directors and executive officers as a group; and

Each person known by us to beneficially own more than 5% of our outstanding common stock.

Under SEC rules, beneficial ownership includes any shares of common stock which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. Percentage of beneficial ownership is calculated based on 93,075,564 shares of our common stock outstanding as of March 31, 2011. In calculating the number of shares beneficially owned and the percentage ownership, shares of common stock subject to Preferred Stock conversion rights (including accrued dividends), options or warrants held by that person that are currently exercisable or convertible or become exercisable or convertible within 60 days after March 31, 2011, are deemed outstanding even if they have not actually been exercised or converted. The shares issuable under these securities are treated as outstanding for computing the percentage ownership of the person holding these securities but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, we believe that all persons named in this table have sole voting power and investment power over all the shares beneficially owned by them.

Security Ownership of Management and Directors:

Title of Class	Name Beneficial Owner	Amount and Nature of Beneficial Ownership (1)			Percentage of Class
Common Stock	Lee S. Rosen		3,124,479	(2)		3.3
Common Stock	Cary J. Claiborne		3,451,377	(3)		3.6
Common Stock	David H. Goebel, Jr.		672,446	(4)		**
Common Stock	John E. Mack		261,051	(5)		**
Common Stock	Miles F. Mahoney		1,000,000	(6)		1.1
Common Stock	Dane R. Saglio		160,000	(7)		**
Common Stock	Douglas S. Perry		-			**
Common Stock	J. Robert Sheppard, Jr.		250,000	(8)		**
Common Stock	Directors and executive officers as a group (8 people)		10,052,536			10.2

Other Shareholders:

Title of Class	Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership (1)				Percentage of Class
Common Stock	2020 Energy, LLC Abraham Jacobi 2600 N. Central Avenue Phoenix, Arizona 85004			9,542,904	(9)			10.0

(1)

Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Also includes shares if the named person has the right to acquire those shares within 60 days after March 31, 2011, by the exercise of any warrant, stock option or other right. Unless otherwise noted, shares are owned of record and beneficially by the named person.

(2)

Consists of: a) 1,060,063 shares of common stock as to which Mr. Rosen has sole voting and investment power, b) 6,250 shares common stock issuable upon the exercise of 6,250 warrants and c) 2,058,166 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(3)

Consists of: a) 1,924,318 shares of common stock as to which Mr. Claiborne has sole voting and investment power, b) 17,000 shares of common stock issuable upon the conversion of 510 shares of Series B Preferred Stock, c) 4,250 shares common stock issuable upon the exercise of 4,250 warrants, d) 4,513 shares of common stock from accrued but unissued dividends on Series B Preferred Stock as to which Mr. Claiborne has sole voting and investment power and e) 1,501,296 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(4)

Consists of: a) 43,287 shares of common stock as to which Mr. Goebel has sole voting and investment power, b) 250,152 shares of unvested restricted stock as to which Mr. Goebel has sole voting power, and c) 379,007shares issuable pursuant to options exercisable within 60 days of March 31, 2010.

(5)

Consists of: a) 7,926 shares of common stock as to which Mr. Mack has sole voting and investment power , b) 3,125 shares of common stock issuable upon the exercise of 3,125 warrants and c) 250,000 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(6)

Consists of: a) 500,000 shares of common stock as to which Mr. Mahoney has sole voting and investment power and b) 500,000 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(7)

Consists of: 160,000 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(8)

Consists of: 250,000 shares issuable pursuant to options exercisable within 60 days of March 31, 2011.

(9)

2020 Energy LLC is the record owner of 9,501,300 shares of our common stock, including 7,301,300 shares of common stock and 2,200,000 shares of common stock issuable upon the exercise of 2,200,000 warrants. As the sole member, Abraham Jacobi has sole power to vote or to direct the vote and sole power to dispose or to direct the disposition of the securities. Mr. Jacobi is also the record owner of 41,604 shares of common stock as to which Mr. Jacobi has sole voting and investment power. Mr. Jacobi has partnered with Mr. Petrucci to form PTJ Bioenergy Holdings, Ltd., an entity that is the licensor (by assignment from Mr. Petrucci) under our Exclusive License Agreement for our biofuel technology.

** Less than 1%

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

~~The information~~Certain ~~required by this item, if any, is incorporated by reference to the information set forth under the captions “Transactions with~~ Related ~~Parties”~~Party ~~and “Independence of the Board of Directors” in our Proxy Statement.~~Transactions

There have been no material transactions, series of similar transactions or currently proposed transactions during 2010 in which we or our subsidiaries were or are to be a party, in which the amount involved exceeded the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years and in which any director or executive officer or any security holder who is known to us to own of record or beneficially more than 5% of our common stock, or any member of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons, had a direct or indirect material interest, other than the following:

In connection with the resignation of David Gillespie as President, Chief Executive Officer and a Director in March 2009, all the independent directors and Mr. Rosen unanimously approved a separation agreement with Mr. Gillespie that included the following material terms:

we paid Mr. Gillespie $50,000 in cash upon execution of the separation agreement (after the expiration of any required waiting periods) and an additional $50,000 in cash after raising $1.5 million in additional financing, in lieu of certain other cash amounts that may have been owed to Mr. Gillespie;

we issued Mr. Gillespie 100,000 shares of restricted common stock;

we deemed 67% of Mr. Gillespie’s 400,000 performance-based options for 2008 to be vested (which reflects the percentage of the 2008 Performance Goals met by all employees); and

both parties signed certain customary releases.

In March 2009, the Board of Directors unanimously approved an investment by our largest shareholder, 2020 Energy, LLC (“2020 Energy”), on the same terms offered to other investors in our March 2009 private placement of common stock and warrants. In this private placement, 2020 Energy invested $1,600,000 to purchase 2,000,000 shares of our common stock at a price of $0.80 per share and warrants, exercisable after six months, to purchase 2,000,000 shares at an exercise price of $0.90 per share. Before this investment, 2020 Energy had purchased 5,301,300 shares of our common stock from Global Energy Holdings Group, Inc. (formerly Xethanol Corporation). 2020 Energy now owns 9,501,300 shares of our common stock, including 2,200,000 shares issuable upon the exercise of 2,200,000 warrants, representing approximately 10% of our outstanding shares as of March 31, 2011. Abraham Jacobi, the sole member of 2020 Energy, has partnered with Ferdinando Petrucci, the inventor of our proprietary biofuel technology, to form PTJ Bioenergy Holdings, the licensor (by assignment from Mr. Petrucci) of our technology. Mr. Petrucci owns approximately 2.1% of our outstanding common stock, as of March 31, 2011.

In connection with the resignation of Lee Rosen as Chairman of the Board in May 2010, all the independent directors unanimously approved a separation agreement with Mr. Rosen that included the following material terms:

$95,000 in cash, less standard deductions and withholding;

accelerated vesting on a certain previously granted three-year restricted stock grants, consisting of 226,316 shares of the Company’s common stock;

18 months of reimbursement for COBRA premiums in order to provide health and life insurance benefits at least equal to those provided at the time of separation.

In connection with the resignation of Cary Claiborne as President, Chief Executive Officer and a Director in October 2010, all the independent directors unanimously approved a separation agreement with Mr. Claiborne that included the following material terms:

$70,000 in cash, less standard deductions and withholding;

a grant of 1,500,000 shares of common stock , which was registered under the aforementioned S-8 Registration Statement;

accelerated vesting on a certain previously granted three-year restricted stock grants, consisting of 251,715 shares of the Company’s common stock;

reimbursement for up to $12,000 in documented outplacement services;

18 months of reimbursement for COBRA premiums in order to provide health and life insurance benefits at least equal to those provided at the time of separation; and

Entering into a consulting agreement with the Company to provide advisory and other transition services.

Indebtedness Of Management

No officer, director or security holder known to us to own of record or beneficially more than 5% of our common stock or any member of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons is indebted to us.

Transactions With Promoters

We did not expressly engage a promoter at the time of its formation. We have used selling agents and consultants from time to time. The terms of those arrangements have been disclosed in previous filings with the Securities and Exchange Commission.

Independence Of The Board Of Directors

Our common stock is listed on the OTCQB. While the OTCQB does not require any governance standard with respect to independence of directors, we sill try to follow NASDAQ listing standards, which require a majority of our Board of Directors to be “independent.” For a director to be “independent” under these standards, the Board must affirmatively determine that the director has no material relationship with us, either directly or as a partner, shareholder, or officer of an organization that has a relationship with us. In addition, the NASDAQ rules specify certain relationships between a director, or an immediate family member of a director, and the company which would preclude the Board from determining a director to be independent. Applying the NASDAQ corporate governance standards, and all other applicable laws, rules and regulations, the Board of Directors has determined that all of our directors presently in office are independent, except for our Interim Principal Executive Officer and Chief Operating Officer David H. Goebel, Jr.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

~~The information~~During ~~required~~the byyears ~~this~~ended ~~item~~December is31, ~~incorporated~~2010, byand ~~reference~~2009, towe ~~the information~~were ~~set~~billed ~~forth~~or ~~under~~expect ~~the~~to ~~caption~~be ~~“Independent~~billed ~~Registered~~by ~~Public Accounting~~Reznick ~~Firm~~Group, ~~Fees~~P.C., ~~and~~our ~~Services”~~independent inregistered ~~our~~public ~~Proxy~~accounting ~~Statement.~~firm, the following fees:

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

	2010		2009
Audit Fees (1)	$	169,000	$	235,775
Audit-Related Fees (2)		-		95,092
Tax Fees (3)		15,000		24,194
All Other Fees (4)		-		13,525
Total	$	184,000	$	368,586

15(~~a)(~~1) ~~Financial~~Audit ~~Statements~~ fees principally include those for services related to the annual audit of the consolidated financials statements, SEC registration statements and other filings and consultation on accounting matters.

~~The consolidated~~(2) ~~financial~~Audit-related ~~statements~~fees ofprincipally ~~the~~include ~~registrant~~assurance asand ~~listed~~related inservices ~~the~~that ~~“Index~~were reasonably related to ~~Consolidated~~ ~~Financial~~the ~~Statements”~~performance ~~found~~of onour ~~pages~~independent ~~F-1~~registered ~~through~~public ~~F-32~~accounting firm’s assurance and review of ~~this report,~~the ~~are~~financial ~~filed~~statements asand ~~part~~not ofreported ~~this~~under ~~report~~the caption “Audit Fees.”

15(a3)~~(2)~~ ~~Financial~~Tax ~~Statement Schedules~~ fees principally include services for federal, state and international tax compliance, tax planning and tax consultation, but excluding tax services rendered in connection with the audit.

~~Consolidated financial~~(4) ~~statement~~Our ~~schedules~~independent ~~have~~registered ~~been~~public ~~omitted~~accounting ~~because~~firm ~~the~~did ~~required information is~~ not ~~present,~~perform orany ~~not~~services ~~present~~for inus ~~amounts~~other ~~sufficient~~than tothose ~~require~~described ~~submission of the schedules, or because the required information is provided in the consolidated financial statements or notes thereto~~above.

3350

~~15(a)(3)~~Audit ~~Exhibits~~ Committee’s Pre-Approval Policies and Procedures

The ~~exhibits~~ ~~required~~Audit toCommittee behas ~~filed~~not asadopted ~~part~~procedures offor ~~this~~the ~~Annual~~pre-approval ~~Report~~of onall ~~Form~~audit 10and non-Kaudit ~~are listed~~services inrendered by our independent registered public accounting firm, Reznick Group. Our Audit Committee Charter provides that the ~~Exhibit~~Audit ~~Index~~Committee ~~attached~~may ~~hereto~~adopt pre-approval policies and ~~are~~procedures ~~incorporated~~to ~~herein~~avoid the need of the Audit Committee approval of services on an engagement-by ~~reference~~-engagement basis. The policies and procedures must be detailed as to the particular service and may not involve a delegation of pre-approval responsibility to management.

34All of the services set forth under the table “Independent Registered Accounting Firm Fees and Services” above were approved by the Audit Committee.

In connection with the audits of our financial statements for the years ended December 31, 2010 and 2009, there were no disagreements with Reznick Group on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, that would have caused either firm to report the disagreement if it had not been resolved to their satisfaction.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	New Generation Biofuels Holdings, Inc
	By:	/s/ ~~Cary~~David JH. ~~Claiborne~~Goebel, Jr.
		President, Chief Executive Officer & Chief Financial Officer
		Interim Principal Executive Officer and Chief Operating Officer
	Date: March 26, 2010
	Date: April 15, 2011

Power of Attorney

Know all men by these presents, that each person whose signature appears below constitutes and appoints ~~Cary~~Dane JR. ~~Claiborne~~ Saglio as his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this annual report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Cary J. Claiborne	President, Chief Executive Officer and Chief Financial Officer	March 26, 2010
/s/ David H. Goebel, Jr.	Interim Principal Executive Officer, Chief Operating Officer and Director	April 15, 2011
Cary J. Claiborne	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
David H. Goebel	(Principal Executive Officer)
/s/ Lee S. Rosen	Chairman of the Board	March 26, 2010
/s/ Dane R. Saglio	Chief Financial Officer	April 15, 2011
Lee S. Rosen
Dane R. Saglio	(Principal Financial Officer)
/s/ John E. Mack	~~Director~~Chairman of the Board	~~March~~April 2615, ~~2010~~2011
John E. Mack
/s/ Douglas S. Perry	Director	~~March~~April 2615, ~~2010~~2011
Douglas S. Perry
/s/ James R. Sheppard, Jr.	Director	~~March~~April 2615, ~~2010~~2011
James R. Sheppard, Jr.

3552

EXHIBIT INDEX

Exhibit No.		Exhibit Description
2.1		Agreement of Merger and Plan of Reorganization dated October 17, 2006 (incorporated by reference to Exhibit 2 to the Current Report on Form 8-K filed October 18, 2006).
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed March 31, 2008).
3.2		Articles of Amendment to the Amended and Restated Articles of Incorporation relating to our Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed March 31, 2008).
3.3		Amended and Restated Bylaws, dated March 5, 2008 (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed March 31, 2008).
3.3†		Articles of Amendment to the Articles of Incorporation dated March 3, 2011.
3.4		Amended and Restated Bylaws dated March 5, 2008 (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed March 31, 2008).
4.1		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed October 26, 2006).
4.2		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed March 31, 2008).
4.3		Form of Warrant (incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K filed March 31, 2008).
4.4		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed March 31, 2008).
4.5		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed March 4, 2009).
4.6		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed March 4, 2009).
4.7		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed July 23, 2009).
4.8		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed July 23, 2009).
4.9		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed December 11, 2009).
4.10		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed December 11, 2009).
4.11		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed February 3, 2010).
10.1		Exclusive License Agreement dated as of March 20, 2006 between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 26, 2006, portions of which have been omitted pursuant to a request for confidential treatment.
4.12		Form of Secured Convertible Promissory Note and Security Agreement (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed May 6, 2010).
10.2		Amendment #1, dated September 11, 2006, to the Exclusive License Agreement between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed October 26, 2006).
4.13		Form of Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed May 6, 2010).
10.3		Amendment #2, dated December 13, 2006, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed December 15, 2006).

3653

10.4		Amendment #3, dated November 3, 2007, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-QSB filed November 14, 2007).
4.14		Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed June 14, 2010).
10.5		Amendment #4, dated November 9, 2007, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-QSB filed November 14, 2007).
4.15		Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed August 17, 2010).
10.6		Amendment #5, dated February 20, 2008, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 25, 2008).
4.16		Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 24, 2010).
10.7		Amendment #6, dated March 25, 2008, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed March 31, 2008).
4.17		Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed October 6, 2010).
10.8		Amendment #7, dated January 8, 2009, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed January 12, 2009).
4.18		Form of Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed November 2, 2010).
10. 9		Addendum, dated March 30, 2009, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and PTJ Bioenergy Holdings Ltd. (as successor by assignment to Ferdinando Petrucci) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 7, 2009).
4.19		Form of Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed February 7, 2011).
10.10		Amendment #8, dated February 19, 2010, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 23, 2010).
4.20		Form of Class A Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed February 7, 2011).
10.11*		Omnibus Incentive Plan adopted November 14, 2007 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed March 31, 2008).
4.21		Form of Class B Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed February 7, 2011).
10.12		Form of Director Non-Qualified Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed March 31, 2008).
4.22		Form of Preferred Stock Offering Warrant (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form10QSB filed May 15, 2007).
10.13		Amended Form of Non-Qualified Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed March 31, 2009).
10.1		Exclusive License Agreement dated as of March 20, 2006 between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 26, 2006, portions of which have been omitted pursuant to a request for confidential treatment).
10.14		Amended Form of Incentive Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed March 31, 2009).
10.2		Extension of License Agreement dated September 11, 2006, to the Exclusive License Agreement between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed October 26, 2006).
10.15		Amended Form of Restricted Stock Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed March 31, 2009).
10.3		Letter Agreement dated December 13, 2006, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed December 15, 2006).
10.16*		Employment Agreement dated as of October 18, 2006 between David A. Gillespie and H2Diesel, Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed October 26, 2006).
10.4		Amendment #3 dated November 3, 2007, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-QSB filed November 14, 2007).
10.17*		Employment Agreement dated as of July 23, 2009 between Lee S. Rosen and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 29, 2009).
10.5		Amendment #4 dated November 9, 2007, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-QSB filed November 14, 2007).
10.18*		Separation Agreement, dated March 24, 2009, between the David A. Gillespie and the Company (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed March 31, 2009).
10.6		Amendment #5 dated February 20, 2008, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 25, 2008).
10.7		Amendment #6 dated March 25, 2008, to the Exclusive License Agreement dated March 20, 2006, as amended, between H2Diesel, Inc. and Ferdinando Petrucci (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed March 31, 2008).

3754

10.8		Amendment #7, dated January 8, 2009, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed January 12, 2009).
10. 9		Addendum, dated March 30, 2009, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and PTJ Bioenergy Holdings Ltd. (as successor by assignment to Ferdinando Petrucci) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 7, 2009).
10.10		Amendment #8 dated February 18, 2010, to the Exclusive License Agreement, dated March 20, 2006, as amended, between New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and Ferdinando Petrucci (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 23, 2010).
10.11*		Omnibus Incentive Plan adopted November 14, 2007 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed March 31, 2008).
10.12		Form of Director Non-Qualified Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed March 31, 2008).
10.13		Amended Form of Non-Qualified Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed March 31, 2009).
10.14		Amended Form of Incentive Stock Option Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K filed March 31, 2009).
10.15		Amended Form of Restricted Stock Agreement under Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed March 31, 2009).
10.16*		Employment Agreement dated as of October 18, 2006, between David A. Gillespie and H2Diesel, Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed October 26, 2006).
10.17*		Employment Agreement dated as of July 23, 2009, between Lee S. Rosen and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 29, 2009).
10.18*		Separation Agreement dated March 23, 2009, between the David A. Gillespie and the Company (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed March 31, 2009).
10.19*		Amended and Restated Employment Agreement dated as of September 19, 2006, between Andrea Festuccia and H2Diesel, Inc. (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed October 26, 2006).
10.20*		Amended and Restated Employment Agreement dated as of December 18, 2007 between Cary J. Claiborne and H2Diesel, Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed January 11, 2008).
10.22		Form of Registration Rights Agreement in connection with Private Placement of Common Stock in February 2010 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 32, 2010) .
10.23		Option Agreement dated September 15, 2006, between Lee S. Rosen and H2Diesel, Inc. (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed October 26, 2006).
10.24		Option Agreement dated September 19, 2006, between Andrea Festuccia and H2Diesel, Inc. (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed October 26, 2006).
10.25		Option Agreement dated October 18, 2006, between David A. Gillespie and H2Diesel, Inc. (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed October 26, 2006).
10.26		Option Agreement dated December 19, 2008 between Cary J. Claiborne and H2Diesel Holdings, Inc. (incorporated by reference to Exhibit 10.30 to the amended Annual Report on Form 10-K/A filed July 25, 2008).
10.27		Form of Independent Director Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 21, 2007).
10.28		Option Agreement dated April 24, 2007, between Kim Johnson and H2Diesel Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-QSB filed May 15, 2007).
10.29		Site Lease Agreement, dated September 12, 2008, by and between Pennington Partners, LLC and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 18, 2008).
10.30		Terminaling Services Agreement, dated September 12, 2008, by and between Atlantic Terminalling, LLC and N the Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed September 18, 2008, portions of which have been omitted pursuant to a request for confidential treatment).
10.31		Lease Termination Agreement, dated August 28, 2009, by and between Central Florida Educators’ Federal Credit Union and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 3, 2009).
14.1		Code of Business Conduct and Ethics adopted November 13, 2007 (incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed March 31, 2008).
16.1		Letter of Imowitz Koenig & Co. LLP, dated October 20, 2009, addressed to the Securities and Exchange Commission (incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed October 21, 2009).
16.2		Letter of Imowitz Koenig & Co. LLP, dated November 1, 2009, addressed to the Securities and Exchange Commission (incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed November 3, 2009).
21.1†		Subsidiaries of the Company
23.1†		Consent of Reznick Group, P.C.
23.2†		Consent of Imowitz Koenig & Co., LLP

3855

24.1†		Power of Attorney (included on signature page).
10.25		Option Agreement dated October 18, 2006, between David A. Gillespie and H2Diesel, Inc. (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed October 26, 2006).
31.1†		Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 (includes both Principal Executive Officer and Principal Financial Officer)
10.26		Option Agreement dated December 19, 2008, between Cary J. Claiborne and H2Diesel Holdings, Inc. (incorporated by reference to Exhibit 10.30 to the amended Annual Report on Form 10-K/A filed July 25, 2008).
32.1†		Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (includes both Principal Executive Officer and Principal Financial Officer)
10.27		Form of Independent Director Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 21, 2007).
10.28		Option Agreement dated April 24, 2007, between Kim Johnson and H2Diesel Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-QSB filed May 15, 2007).
10.29		Agreement of Lease dated September 12, 2008, by and between Pennington Partners, LLC and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 18, 2008).
10.30		Terminating Services Agreement dated September 12, 2008, by and between Atlantic Terminalling, LLC and the Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed September 18, 2008, portions of which have been omitted pursuant to a request for confidential treatment).
10.31		Lease Termination Agreement dated August 28, 2009, by and between Central Florida Educators’ Federal Credit Union and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 3, 2009).
10.32*		Employment Agreement dated March 29, 2010, between Dane R. Saglio and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 2, 2010).
10.33		Form of Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 6, 2010).
10.34		Reimbursement Agreement dated April 30, 2010, by and between 2020 Energy, LLC and the Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed May 6, 2010).
10.35*		Separation Agreement dated May 7, 2010, by and between Lee S. Rosen and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 13, 2010).
10.36		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed June 14, 2010).
10.37		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed August 17, 2010).
10.38		Amendment to Agreement of Lease dated August 27, 2010, by and between Pennington Partners, LLC and the Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 2, 2010).
10.39		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 24, 2010).
10.40		Order Approving Stipulation for Settlement of Claim dated September 27, 2010, entered by the Superior Court of the State of California (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 28, 2010).
10.41		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 6, 2010).
10.42*		Separation Agreement dated October 8, 2010, by and between Cary J. Claiborne and the Company (incorporated by reference to Exhibit 10.5 to the Quarterly Report filed November 22, 2010).

10.43*		Employment Agreement dated October 9, 2010, by and between Miles F. Mahoney and the Company (incorporated by reference to Exhibit 10.6 to the Quarterly Report filed November 22, 2010).

10.44*		Employment Agreement dated October 9, 2010, by and between David H. Goebel, Jr. and the Company (incorporated by reference to Exhibit 10.7 to the Quarterly Report filed November 22, 2010).

10.45*		Amendment to Separation Agreement dated October 19, 2010, by and between Cary J. Claiborne and the Company (incorporated by reference to Exhibit 10.8 to the Quarterly Report filed November 22, 2010).

10.46		Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 23, 2009).

10.47		Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed December 11, 2009).

10.48		Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 3, 2010).

10.49		Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 7, 2011).

10.50		Form of Security Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed February 7, 2011).

14.1		Code of Business Conduct and Ethics adopted November 13, 2007 (incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed March 31, 2008).

21.1†		Subsidiaries of the Company

23.1†		Consent of Reznick Group, P.C.

24.1†		Power of Attorney (included on signature page).

31.1†		Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 (includes both Principal Executive Officer and Principal Financial Officer).

32.1†		Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (includes both Principal Executive Officer and Principal Financial Officer).

†	Filed herewith.

*	Management contract or compensatory plan or arrangement.

3957

New Generation Biofuels Holdings, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	~~Page~~	Page
Report of Independent Registered Public Accounting Firm	~~F-2~~	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of December 31, 2010 and 2009		F-3
Consolidated Balance Sheets as of December 31, 2009 and 2008	F-4
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009		F-4
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008	F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010 and 2009		F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009 and 2008	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008	F-7
Notes to Consolidated Financial Statements		F-7
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

New Generation Biofuels Holdings, Inc.

We have audited the accompanying consolidated balance ~~sheet~~sheets of New Generation Biofuels Holdings, Inc. (a Florida Corporation) and subsidiaries (~~the~~collectively “the Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the ~~year~~years then ended. These ~~consolidated~~ financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these ~~consolidated~~ financial statements based on our ~~audit~~audits.

We conducted our ~~audit~~audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit ~~also~~ includes examining, on a test basis, evidence supporting the amounts and disclosures in the ~~consolidated~~ financial statements,. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audit~~audits ~~provides~~provide a reasonable basis for our opinion.

In our opinion, the ~~consolidated~~ financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Generation Biofuels Holdings, Inc. and subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the ~~year~~years ~~the~~then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying ~~consolidated~~ financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the consolidated financial statements, the Company has experienced negative cash flows from operations since inception and is dependent upon future financing in order to ~~fund~~meet its planned operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management'’s plans regarding these matters are described in Note 1. The ~~consolidated~~ financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Emerging Issues Task Force 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (codified in FASB ASC Topic 815), effective as of January 1, 2009 and adjusted its accounting for its consolidated financial statements for the year ended December 31, 2009 presented herein.

/S/ REZNICK GROUP, P.C.

Vienna, Virginia

~~March~~April 2615, ~~2010~~ 2011

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

New Generation Biofuels Holdings, Inc.

We have audited the accompanying consolidated balance sheet of New Generation Biofuels Holdings, Inc. (the “Company”) (A Development Stage Enterprise) as of December 31, 2008 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor have we been engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Generation Biofuels Holdings, Inc. (A Development Stage Enterprise) as of December 31, 2008 and the results of its operations and its cash flows for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company is in the development stage and has incurred losses and negative cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Imowitz Koenig & Co., LLP Certified Public Accountants

New York, New York

March 31, 2009

F-3

NEW GENERATION BIOFUELS HOLDINGS, INC.

Consolidated Balance Sheets

	December 31, 2009			December 31, 2008
	December 31, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	~~567~~149,~~647~~909		$	1567,~~476,246~~647
Accounts receivable		63,900			22,943
Restricted cash		14,706			-
Other receivables		41,406			–
Accounts receivable		-			63,900
Inventories		11,708			–
Other receivables		9,095			41,406
Prepaid expenses and other current assets		237,635			195,369
Inventories		-			11,708
Total current assets		922,296			1,694,558
Debt issuance costs, net		25,000			-
Property, plant and equipment, net		1,120,911			378,946
Prepaid expenses and other current assets		904,254			237,635
License agreement, net		5,650,988			6,267,460
Total current assets		1,102,964			922,296
Other assets, net		346,073			392,208
Property, plant and equipment, net		1,189,620			1,120,911
TOTAL ASSETS	$	8,040,268		$	8,733,172
License agreement, net		5,034,545			5,650,988
LIABILITIES AND STOCKHOLDER'S EQUITY
Other assets, net		370,906			346,073
Total assets	$	7,698,035		$	8,040,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	1,~~472~~647,~~519~~449		$	1,~~385~~472,~~311~~519
Loan payable		~~50,000~~-			50,000
Convertible notes payable
(net of unamortized debt discount of $11,141 and $-)		518,859			-
License agreement payable, current portion
(net of unamortized discount of $375,467 and $71,270)		624,533			928,730
(net of unamortized debt discount of $291,844 and $375,467)		708,156			624,533
Accrued dividends on preferred stock		1,~~078~~083,~~003~~666			~~765~~1,~~369~~078,003
Common stock warrant liability and antidilution obligation		110,874			-
Derivative liabilities		12,692			110,874
Total current liabilities		3,~~335~~970,~~929~~822			3,~~129~~335,~~410~~929
License agreement payable
(net of unamortized discount of $622,274 and $1,464,132)		3,377,726			3,535,868
(net of unamortized debt discount of $331,995 and $622,274)		2,668,005			3,377,726
Deferred rent		~~324~~149,~~409~~069			–324,409
Total liabilities		76,~~038~~787,~~064~~896			67,~~665~~038,~~278~~064
Commitments and contingencies		-			-
Stockholders' equity:
Stockholders’ equity:
Preferred stock; $0.001 par value; 9,450,000 shares authorized; no shares issued and outstanding at December 31, 2009 and 2008		-			-
Preferred stock; $0.001 par value; 9,450,000 shares authorized; no shares issued and outstanding at December 31, 2010 and 2009		-			-
Series A Cumulative Convertible Preferred Stock; $0.001 par value; $100.00 stated value; 300,000 shares authorized, 18,400 and 26,400 shares issued and outstanding as of December 31, 2009 and 2008, respectively; aggregate liquidation preference of $2,264,328		710,970			1,020,087
Series A Cumulative Convertible Preferred Stock; $0.001 par value; $100.00 stated value; 300,000 shares authorized, 0 and 18,400 shares issued and outstanding as of December 31, 2010 and 2009, respectively; aggregate liquidation preference of $-		-			710,970
Series B Cumulative Convertible Preferred Stock; $0.001 par value; $100.00 stated value; 250,000 shares authorized, 45,785 and 72,126 shares issued and outstanding as of December 31, 2009 and 2008, respectively; aggregate liquidation preference of $5,232,234		3,094,872			5,023,429
Series B Cumulative Convertible Preferred Stock; $0.001 par value; $100.00 stated value; 250,000 shares authorized, 45,785 shares issued and outstanding as of December 31, 2010 and 2009, respectively; aggregate liquidation preference of $5,662,200		3,094,872			3,094,872
Common stock; $0.001 par value; 100,000,000 shares authorized; 31,711,578 and 19,299,168 shares issued and outstanding as of December 31, 2009 and 2008, respectively		31,712			19,299
Common stock; $0.001 par value; 100,000,000 shares authorized; 82,083,896 and 31,711,578 shares issued and outstanding as of December 31, 2010 and 2009, respectively		82,083			31,712
Additional paid-in-capital		4760,~~593~~380,~~489~~709			2947,~~889~~593,~~220~~489
Accumulated deficit		(5062,~~428~~647,~~839~~525	)		(3350,~~884~~428,~~141~~839	)
Total stockholders' equity		1,002,204			2,067,894
Total stockholders’ equity		910,139			1,002,204
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	8,040,268		$	8,733,172
Total liabilities and stockholders’ equity	$	7,698,035		$	8,040,268

The accompanying notes are an integral part of these consolidated financial statements.

F-43

NEW GENERATION BIOFUEL HOLDINGS, INC.

Consolidated Statements of Operations

	For the Year Ended December 31, 2009			For the Year Ended December 31, 2008
	For the Year Ended December 31, 2010			For the Year Ended December 31, 2009
Revenues:
Product	$	~~137~~6,~~532~~351		$	22137,~~943~~532
Alternative fuel tax credit		419,~~406~~095			–41,406
Total revenue		~~178~~15,~~938~~446			22178,~~943~~938
Operating expenses:
Cost of product revenue (including depreciation and amortization of $685,806 and $193,471, respectively)		2,311,576			307,541
Cost of product revenue (including depreciation and amortization of $722,432 and $685,806, respectively)		1,604,961			2,311,576
Research and development		~~475~~340,~~013~~559			1475,~~086,723~~013
General and administrative		98,~~751~~791,~~064~~536			9,~~653~~751,~~380~~064
Legal settlement		-			359,595
Total operating expenses		10,737,056			12,537,653
License impairment charge		-			1,600,369
Loss from operations		(10,721,610	)		(12,358,715	)
Total operating expenses		12,537,653			13,007,608
Other income and (expenses):
Loss from operations		(12,358,715	)		(12,984,665)
Interest income		676			3,458
Interest income		3,458			29,418
Interest expense		(790,342	)		(537,661	)
Interest expense		(537,661	)		(536,581)
Gain on extinguishment of trade payables, net		1,330,895			-
Other income		–			7,208
Gain on extinguishment of loan payable		50,000			-
Gain on debt extinguishment		241,500			–
Loss on extinguishment of convertible debt		(33,949	)		-
Loss on net change in fair value of derivative liabilities		(1,745,383)			(717)
Induced conversion loss		(1,198,090	)		-
Net loss		(14,396,801	)		(13,485,337)
Loss on conversion of debt		(475,347	)		-
Dividends to preferred stockholders		(4,691,379	)		(3,689,317)
Gain on extinguishment of license agreement payable		154,000			241,500
Net loss attributable to common stockholders	$	(19,088,180	)	$	(17,174,654)
Gain (loss) on net change in fair value of derivative liabilities		82,800			(1,745,383	)
Basic and diluted net loss per share	$	(0.73	)	$	(0.92)
Total other income (expenses), net		(879,357	)		(2,038,086	)
Weighted average number of shares outstanding		26,236,636			18,725,312
Net loss		(11,600,967	)		(14,396,801	)
Deemed dividend as a result of warrant modification		(123,722	)		-
Dividends to preferred stockholders		(493,997	)		(4,691,379	)
Net loss attributable to common stockholders	$	(12,218,686	)	$	(19,088,180	)
Basic and diluted net loss per share	$	(0.26	)	$	(0.73	)
Weighted average number of shares outstanding		46,454,471			26,236,636	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

NEW GENERATION BIOFUELS HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity

	Common Stock					Preferred Stock Series A						Preferred Stock Series B						Additional Paid-In-			Accumulated
	Shares		Amount			Shares			Amount			Shares			Amount			Capital			Deficit			Total

Balance at January 1, 2009		19,299,168	$	19,299			26,400		$	1,020,087			72,126		$	5,023,429		$	27,085,623		$	(31,340,659	)	$	1,807,779

Issuance of stock options and restricted stock to employees		1,208,325		1,209			-			-			-			-			3,292,109			-			3,293,318
Issuance of stock options to non-employees		-		-			-			-			-			-			35,684			-			35,684
Issuance of warrants to non-employees for prepaid consulting services		-		-			-			-			-			-			595,763			-			595,763
Issuance of warrants for payment of accounts payable and accrued expenses		-		-			-			-			-			-			99,732			-			99,732
Issuance of common stock for payment of accounts payable and accrued expenses		25,000		25			-			-			-			-			24,975			-			25,000
Issuance of restricted stock to non-employees for prepaid consulting services		155,000		155			-			-			-			-			137,745			-			137,900
Issuance of common stock for settlement of license agreement payable		925,000		925			-			-			-			-			757,575			-			758,500
Proceeds from the issuance of common stock and warrants, net of offering costs		8,928,131		8,928			-			-			-			-			7,054,411			-			7,063,339
Accrued preferred stock dividends converted into shares of common stock		113,330		113			-			-			-			-			373,472			-			373,585
Conversion of preferred stock into common stock		1,057,624		1,058			(8,000	)		(309,117	)		(26,341	)		(1,928,557	)		2,236,616			-			-
Warrant liability associated with issuance of common stock		-		-			-			-			-			-			(2,163,943	)		-			(2,163,943	)
Warrant liability associated with issuance of common stock		-		-			-			-			-			-			(50,428	)		-			(50,428	)
Anti-dilution obligation associated with issuance of common stock		-		-			-			-			-			-			(102,500	)		-			(102,500	)
Reclassification of warrant liability associated with anti-dilution triggering event on Series B preferred stock		-		-			-			-			-			-			158,451			-			158,451
Reclassification of warrant liability in connection with waiver of anti-dilution provision		-		-			-			-			-			-			4,053,043			-			4,053,043
Deemed dividend associated with beneficial conversion feature on Series B preferred stock		-		-			-			-			-			-			4,005,161			(4,005,161	)		-
Preferred stock dividends		-		-			-			-			-			-			-			(686,218	)		(686,218	)
Net loss		-		-			-			-			-			-			-			(14,396,801	)		(14,396,801	)

Balance at December 31, 2009		31,711,578	$	31,712			18,400		$	710,970			45,785		$	3,094,872		$	47,593,489		$	(50,428,839	)	$	1,002,204

Issuance of stock options and restricted stock to employees		2,154,275		2,155			-			-			-			-			2,322,513			-			2,324,668
Issuance of stock options to non-employees		-		-			-			-			-			-			17,603			-			17,603
Issuance of restricted stock to non-employees for prepaid consulting services		7,200,000		7,200			-			-			-			-			1,778,800			-			1,786,000
Beneficial conversion feature on convertible debt		-		-			-			-			-			-			69,474			-			69,474
Common stock warrants reclassified to equity from common stock liability on June 3, 2010		-			-		-				-			-		-			43,808			-			43,808
Issuance of common stock in connection with settlement of convertible debt		7,519,068		7,519			-			-			-			-			1,721,404			-			1,728,923
Issuance of common stock in connection with conversion of debt		6,000,000		6,000			-			-			-			-			474,000			-			480,000
Issuance of warrants with convertible debt		-		-			-			-			-			-			149,949			-			149,949
Issuance of warrants for debt issuance costs		-		-			-			-			-			-			38,165			-			38,165
Issuance of warrants in connection with debt modification		-		-			-			-			-			-			77,117			-			77,117
Issuance of common stock for payment of accounts payable and accrued expenses		1,045,455		1,045			-			-			-			-			207,631			-			208,676
Issuance of common stock for separation agreements		1,664,062		1,664			-			-			-			-			268,336			-			270,000
Issuance of common stock for settlement of license agreement payable		1,100,000		1,100			-			-			-			-			724,900			-			726,000
Proceeds from the issuance of common stock and warrants, net of offering costs		16,885,624		16,885			-			-			-			-			3,434,883			-			3,451,768
Issuance of common stock for debt issuance cost		375,000		375			-			-			-			-			37,125			-			37,500
Proceeds from the exercise of warrants		5,764,423		5,764			-			-			-			-			80,701			-			86,465
Accrued preferred stock dividends converted into shares of common stock		122,089		122			-			-			-			-			488,212						488,334
Conversion of preferred stock into common stock		460,000		460			(18,400	)		(710,970	)		-			-			710,510			-			-
Anti-dilution obligation associated with issuance of common stock		-		-			-			-			-			-			(40,000	)		-			(40,000	)
Issuance of common stock for settlement of anti-dilution obligation		82,322		82			-			-			-			-			58,367			-			58,449
Warrant modification due to repricing		-		-			-			-			-			-			123,722			(123,722	)		-
Preferred stock dividends		-		-			-			-			-			-			-			(493,997	)		(493,997	)
Net loss		-		-			-			-			-			-			-			(11,600,967	)		(11,600,967	)

Balance at December 31, 2010		82,083,896	$	82,083			-		$	-			45,785		$	3,094,872		$	60,380,709		$	(62,647,525	)	$	910,139

The accompanying notes are an integral part of these consolidated financial statements.

F-5

NEW GENERATION BIOFUELS HOLDINGS, INC.

Consolidated Statements of ~~Stockholders'~~Cash ~~Equity~~Flows

	Common Stock						Preferred Stock - Series A						Preferred Stock - Series B						Additional			Accumulated
	For the Year Ended December 31, 2010			For the Year Ended December 31, 2009
	Shares			Amount			Shares			Amount			Shares			Amount			Capital			Deficit			Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Balance at January 1, 2008		18,165,793		$	18,166			42,050		$	1,624,798			–			–		$	18,955,101		$	(16,709,487	)	$	3,888,578
Net loss	$	(11,600,967	)	$	(14,396,801	)
Compensation expense associated with options, stock and restricted stock		–			–			–			–			–			–			3,268,363			–			3,268,363
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of options and warrants for services rendered		–			–			–			–			–			–			558,505			–			558,505
Bad debt expense		5,609			7,208
Warrant expense related to legal settlement		–			–			–			–			–			–			359,595			–			359,595
Inventory write-downs		11,708			-
Issuance of common stock for services rendered		16,250			16			–			–			–			–			78,484			–			78,500
Amortization of prepaid consulting fee		1,041,589			662,323
Issuance of common stock - registration rights agreement		61,128			61			–			–			–			–			309,894			–			309,955
Amortization of debt issuance costs		120,665			-
Issuance of common stock - dividends on conversion of preferred stock		33,947			34			–			–			–			–			135,754			–			135,788
Depreciation and amortization expense		85,012			68,251
Issuance of preferred stock and warrants in private offering		–			–			–			–			79,405			5,556,361			2,032,739			–			7,589,100
Loss on disposal of property and equipment		-			70,974
Dividend associated with the beneficial conversion feature of the preferred stock		–			–			–			–			–			–			2,963,995			(2,963,995	)		–
Amortization of license agreement		616,443			616,472
Private placement costs		–			–			–			–			–			–			(401,450	)		–			(401,450	)
Amortization of patents		33,215			23,700
Conversion of preferred stock into common stock		570,617			571			(15,650	)		(604,711	)		(7,279	)		(532,932	)		1,171,511			–			34,439
Amortization of debt discount on license agreement payable		373,902			537,661
Exercise of warrants into common stock		451,433			451			–			–			–			–			456,729			–			457,180
Amortization of debt premium on convertible notes		(4,367	)		-
Dividends accrued on preferred stock		–			–			–			–			–			–			–			(725,322	)		(725,322	)
Amortization of debt discount on convertible notes		170,228			-
Net loss		–			–			–			–			–			–			–			(13,485,337	)		(13,485,337	)
Compensation expense associated with stock options and restricted stock to employees		2,324,668			3,293,318
Balance at December 31, 2008		19,299,168		$	19,299			26,400		$	1,020,087			72,126		$	5,023,429		$	29,889,220		$	(33,884,141	)	$	2,067,894
Stock options issued to non-employees for services		17,603			35,684
Cumulative effect of reclassification of warrants (ASC Topic 815)		-			-			-			-			-			-			(2,803,597	)		2,543,482			(260,115	)
Non-cash severance expense		270,000			-
Balance at January 1, 2009, as adjusted		19,299,168		$	19,299			26,400		$	1,020,087			72,126		$	5,023,429		$	27,085,623		$	(31,340,659	)	$	1,807,779
Warrants issued in connection with debt modifications		77,117			-
Issuance of stock options and restricted stock to employees		1,208,325			1,209			–			–			–			–			3,292,109			–			3,293,318
Gain (loss) on change in fair value of derivative liabilities		(82,800	)		1,745,383
Issuance of stock options to non-employees		–			–			–			–			–			–			35,684			–			35,684
Gain on extinguishment of trade payables, net		(1,330,895	)		-
Issuance of warrants to non-employees for prepaid consulting services		–			–			–			–			–			–			595,763			–			595,763
Gain on extinguishment of loan payable		(50,000	)		-
Issuance of warrants for payment of accounts payable and accrued expenses		–			–			–			–			–			–			99,732			–			99,732
Loss on extinguishment of convertible debt		33,949			-
Issuance of common stock for payment of accounts payable and accrued expenses		25,000			25			–			–			–			–			24,975			–			25,000
Loss on conversion of debt		475,347			-
Issuance of restricted stock to non-employees for prepaid consulting services		155,000			155			–			–			–			–			137,745			–			137,900
Induced conversion loss		1,198,090			-
Issuance of common stock for settlement of license agreement payable		925,000			925			–			–			–			–			757,575			–			758,500
Gain on extinguishment of license agreement payable		(154,000	)		(241,500	)
Proceeds from the issuance of common stock and warrants, net of offering costs		8,928,131			8,928			–			–			–			–			7,054,411			–			7,063,339
Changes in operating assets and liabilities:
Accrued preferred stock dividends converted into shares of common stock		113,330			113			–			–			–			–			373,472			–			373,585
Accounts receivable		58,291			(40,957	)
Conversion of preferred stock into common stock		1,057,624			1,058			(8,000	)		(309,117	)		(26,341	)		(1,928,557	)		2,236,616			–			-
Other receivables		32,311			(41,406	)
Warrant liability associated with issuance of common stock		–			–			–			–			–			–			(2,163,943	)		–			(2,163,943	)
Inventories		-			(11,708	)
Warrant liability associated with issuance of common stock		–			–			–			–			–			–			(50,428	)		–			(50,428	)
Prepaid expenses and other current assets		77,792			29,073
Antidilution obligation associated with issuance of common stock		–			–			–			–			–			–			(102,500	)		–			(102,500	)
Other assets		(534	)		176,971
Reclassification of warrant liability associated with antidilution triggering event on Series B preferred stock		–			–			–			–			–			–			158,451			–			158,451
Accounts payable and accrued expenses		1,697,176			211,941
Reclassification of warrant liability in connection with waiver of antidilution provision		–			–			–			–			–			–			4,053,043			–			4,053,043
Deferred rent		(112,182	)		324,409
Deemed dividend associated with the beneficial conversion feature on Series B preferred stock		–			–			–			–			–			–			4,005,161			(4,005,161	)		–
Net cash used in operating activities		(4,615,030	)		(6,929,004	)
Preferred stock dividends		–			–			–			–			–			–			–			(686,218	)		(686,218	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net loss		–			–			–			–			–			–			–			(14,396,801	)		(14,396,801	)
Net increase in restricted cash		(14,706	)		-
Balance at December 31, 2009		31,711,578		$	31,712			18,400		$	710,970			45,785		$	3,094,872		$	47,593,489		$	(50,428,839	)	$	1,002,204
Purchases of property and equipment		(153,721	)		(881,190	)
Capitalized patent costs		(57,514	)		(161,744	)
Net cash used in investing activities		(225,941	)		(1,042,934	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for license agreement payable		(120,000	)		-
Proceeds from the issuance of convertible notes		1,075,000			-
Debt issuance costs		(70,000	)
Proceeds from issuance of common stock, net		3,451,768			7,063,339
Proceeds from exercise of warrants		86,465			-
Net cash provided by financing activities		4,423,233			7,063,339
Decrease in cash and cash equivalents		(417,738	)		(908,599	)
Cash and cash equivalents - beginning of year		567,647			1,476,246
Cash and cash equivalents - end of year	$	149,909		$	567,647
Supplemental Disclosure of Non-Cash Operating and Financing Activities
Accrued dividends on preferred stock	$	493,997		$	686,218
Issuance of restricted stock to non-employees for prepaid consulting services	$	1,786,000		$	137,900
Issuance of warrants to non-employees for prepaid consulting services	$	-		$	595,793
Issuance of common stock for payment of accounts payable and accrued expenses	$	208,676		$	25,000
Common stock issued for payment of license agreement payable	$	726,000		$	758,500
Anti-dilution obligation associated with issuance of common stock	$	40,000		$	102,500
Common stock warrant liability	$	-		$	2,214,371
Reclassification of warrant liability in connection with waiver of anti-dilution provision	$	-		$	4,053,043
Reclassification of warrant liability in connection with anti-dilution triggering event	$	-		$	158,451
Cumulative effect of reclassification of warrants (ASC Topic 815)	$	-		$	260,115
Issuance of common stock settlement of anti-dilution obligation	$	58,449		$	-
Issuance of warrants with convertible debt	$	149,949		$	-
Issuance of warrants for debt issuance costs	$	38,165		$	-
Issuance of common stock for debt issuance cost	$	37,500		$	-
Deemed dividend related to beneficial conversion feature on Series B Preferred Stock	$	-		$	4,005,161
Conversion of Series A preferred stock to common stock	$	710,970		$	309,117
Conversion of Series B preferred stock to common stock	$	-		$	1,928,557
Accrued preferred stock dividends converted into shares of common stock	$	488,334		$	373,585
Debt discount as a result of beneficial conversion feature associated with convertible debt modification	$	69,474		$	-
Issuance of warrants in connection with debt modification	$	77,117		$	-
Warrants issued for payment of accounts payable and accrued expenses	$	-		$	99,732
Deemed dividend to as result of warrant modification	$	123,722		$	-
Common stock issued in connection with the settlement of convertible debt	$	500,000		$	-
Common stock issued in connection with the settlement of accrued interest	$	30,833		$	-
Conversion of debt to common stock	$	4,653		$	-
Issuance of common stock for separation agreements	$	270,000		$	-
Embedded conversion feature on convertible debt	$	46,875		$	-
Common stock warrants reclassified to equity from common stock warrant liability on June 3, 2010	$	43,808		$	-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

NEW GENERATION BIOFUELS HOLDINGS, INC.

Consolidated Statement of Cash Flows

	For the Year Ended December 31, 2009			For the Year Ended December 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,396,801	)	$	(13,485,337	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		91,951			7,383
Loss on disposal of property and equipment		70,974			–
Amortization of license agreement		616,472			193,471
Amortization of license agreement payable discount		537,661			536,581
Compensation expense associated with stock, stock options, and restricted stock		3,293,318			3,268,363
Compensation expense associated with accrued stocks and warrants		–			124,732
Stock options issued to non-employees for services		35,684			637,005
Penalty share expense		–			230,277
Warrant expense related to legal settlement		–			359,595
Loss on net change in fair value of derivative liabilities		1,745,383			717
Gain on debt extinguishment		(241,500)			–
Amortization of prepaid consulting fee		662,323			–
License impairment		–			1,600,369
Bad debt expense		7,208			–
					–
Changes in operating assets and liabilities:
Accounts receivable		(40,957	)		(22,943	)
Other receivables		(41,406	)		–
Inventories		(11,708	)		–
Prepaid expenses and other current assets		29,073			(110,401)
Other assets		15,227			(264,136)
Accounts payable and accrued expenses		211,941			625,996
Deferred rent		324,409			–
Net cash used in operating activities		(7,090,748	)		(6,298,328	)
CASH FLOWS FROM INVESTING ACTIVITIES:
					–
Purchase of property and equipment		(881,190	)		(386,329)
Payment for patents		–			(128,072)
Net cash used in investing activities		(881,190	)		(514,401)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for license agreement payable		–			(1,000,000	)
Net proceeds from the issuance of common stock		7,063,339			–
Net proceeds from the issuance of preferred stock		–			7,187,650
Proceeds from the exercise of warrants		–			457,180
Net cash provided by financing activities		7,063,339			6,644,830
Net decrease in cash and cash equivalents		(908,599	)		(167,899)
Cash and cash equivalents at beginning of year		1,476,246			1,644,145
Cash and cash equivalents at end of year	$	567,647		$	1,476,246
Supplemental Disclosure of Non-Cash Operating, Investing and Financing Activities
Accrued dividends on preferred stock	$	686,218		$	725,322
Issuance of restricted stock to non-employees for prepaid consulting services	$	137,900		$	–
Issuance of warrants to non-employees for prepaid consulting services	$	595,763		$	–
Common stock warrant liability	$	2,214,371		$	–
Reclassification of warrant liability in connection with waivers of antidilution provision	$	4,053,043		$	–
Reclassification of warrant liability in connection with antidilution triggering event	$	158,451		$	–
Cumulative effect of reclassification of warrants (ASC Topic 815)	$	260,115		$	–
Common stock issued for payment of license agreement payable	$	758,500		$	–
Common stock issued for payment of accounts payable and accrued expenses	$	25,000		$	–
Warrants issued for payment of accounts payable and accrued expenses	$	99,732		$	–
Accrued preferred stock dividends converted into shares of common stock	$	373,585		$	–
Deemed dividend related to beneficial conversion feature on Series B Preferred Stock	$	4,005,161		$	–
Conversion of Series A preferred stock to common stock	$	309,117		$	–
Conversion of Series B preferred stock to common stock	$	1,928,557		$	–
Antidilution obligation associated with issuance of common stock	$	102,500		$	–

The accompanying notes are an integral part of these consolidated financial statements.

F-7

NEW GENERATION BIOFUELS HOLDINGS, INC.

Notes to Consolidated Financial Statements

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

New Generation Biofuels Holdings, Inc. (the “Company,” “we,” “our,” or “us”), a Florida corporation, ~~through~~ ~~its~~is ~~wholly~~a ~~owned~~clean ~~subsidiary,~~energy ~~New~~company ~~Generation~~deploying ~~Biofuels,~~novel ~~Inc.,~~technologies ato ~~Delaware corporation~~produce cleaner, ~~holds~~renewable anbiofuels. The ~~exclusive~~Company ~~license~~has ~~for~~the ~~North~~rights ~~America,~~to ~~Central~~a ~~America~~portfolio ~~and the~~of ~~Caribbean~~patented toand ~~commercialize~~patent ~~proprietary~~pending technology ~~(the “Technology”)~~ to manufacture alternative biofuels from ~~vegetable~~plant oils and animal fats that ~~the Company~~it ~~intends~~markets ~~to market~~ as a new class of ~~renewable~~biofuel ~~fuel~~ for power generation, commercial and industrial heating and ~~marine~~related ~~transportation~~applications. The Company believes that its proprietary biofuel can provide a lower cost, renewable alternative energy source with significantly lower emissions than traditional fuels.

~~During the~~Through ~~period~~our ~~from~~wholly ~~inception~~owned ~~through~~subsidiary, ~~March 31~~New Generation Biofuels, ~~2009~~Inc., a Delaware corporation, the Company ~~was considered~~holds toan beexclusive alicense ~~development~~for ~~stage~~North ~~company.~~America, InCentral America and the ~~second~~Caribbean ~~and~~to ~~third~~commercialize ~~quarters of~~proprietary ~~2009~~emulsion technology, (the ~~Company~~“Licensed ~~placed~~Technology”), inas ~~service~~fully ~~its~~described ~~first~~in ~~biofuel~~Note ~~production~~3. The ~~plant,~~Company ahas ~~5 million~~two ~~gallon~~patent ~~per~~applications ~~year~~pending ~~facility~~for ~~located~~solution inbased ~~Baltimore,~~biofuel ~~Maryland,~~utilizing ~~and~~low ~~has generated~~alternative ~~revenues~~use feedstocks sourced from ~~planned~~by-products ~~principal~~of ~~operations.~~other technologies. The ~~Company~~Licensed ~~has~~Technology ~~therefore emerged~~coupled ~~from~~with the ~~development~~new ~~stage~~filed aspatents ofconstitute ~~December 31~~the Company’s technology, ~~2009~~(the “Technology”) which centers on the use of precise mixing approaches to blend oils from renewable sources with water to create renewable biofuels.

Filing Compare · New Generation Biofuels Holdings, Inc