**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**


**FORM
      10-Q/A**


(Amendment
      No. 1)





xQuarterly
      report
      pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




For
      the
      quarterly period ended September 30, 2008




o        
      Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934




For
      the
      transition period from ___________ to _____________




Commission
      File No. 1-34022




**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


(Exact
      name of registrant as specified in its charter)





**Florida**
            **26-0067474**(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)




**1000
      Primera Boulevard, Suite 3130**


**Lake
      Mary, Florida 32746**


(Address
      of principal executive offices)




**(321)
      363-5100**


(Registrant’s
      telephone number, including area code)




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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated filer  ̈ Smaller
      reporting company þ




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




At
      October 31, 2008, the registrant had 19,093,455 shares of common stock,
      $0.001 par value, issued and outstanding.







**Explanatory
        Note**
  This
        Amendment No. 1 (the “Amendment”) to our Quarterly Report on Form 10-Q for the
        period ended September 30, 2008 is being filed solely to correct a typographical
        error contained in the liquidity section of Item 2. Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations .
        The
        section stated “ Under
        the
        license agreement with the inventor of our proprietary technology, we are
        required to pay $6.0 million per year over the next six years, of which $1.0
        million is due in February 2009” but it should have stated “Under the license
        agreement with the inventor of our proprietary technology, we are required
        to
        pay $6.0 million over the next six years, of which $1.0 million is due in
        February 2009.” The Amendment contains the complete text of the original report with the corrected disclosure appearing in Item 2 of Part I.
 
 Except
        as
        specifically referenced herein, this Amendment does not reflect any event,
        results or developments concerning our business, financial condition or results
        of operations occurring subsequent to November 7, 2008, the filing date of
        the
        original report.
 
 Pursuant
        to the rules of the Securities and Exchange Commission, Item 6 of Part II
        is
        also hereby amended to provide currently dated certifications from our Chief
        Executive Officer and Chief Financial Officer, as required by Rule 13a-14(a)
        under the Securities Exchange Act of 1934, which certifications are filed
        herewith as Exhibits 31.1, 31.2, 32.1 and 32.2.








**INDEX**







Page**PART
                I. FINANCIAL INFORMATION**Item
                  1.
              Financial
                  StatementsConsolidated
                  balance sheets as of September 30, 2008 (Unaudited) and December
                  31,
                  2007
              3Consolidated
                  statements of operations for the three and nine months ended September
                  30,
                  2008 (Unaudited), for the three and nine months ended September
                  30, 2007
                  (Unaudited) and for the period from February 28, 2006 (Inception)
                  through
                  September 30, 2008 (Unaudited)
              4Consolidated
                  statement of stockholders’ equity for the nine months ended September 30,
                  2008 (Unaudited)
              5Consolidated
                  statements of cash flows for the nine months ended September 30,
                  2008
                  (Unaudited), for the nine months ended September 30, 2007 (Unaudited)
                  and
                  for the period from February 28, 2006 (Inception) through September
                  30,
                  2008 (Unaudited)
              6Notes
                  to consolidated financial statements
              7-15Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              16-21Item
                  3.
              Qualitative
                  and Quantitative Disclosures About Market Risk
              21Item
                  4.
              Controls
                  and Procedures
              21**PART
                  II. OTHER INFORMATION**Item
                  1A.
              Risk
                  Factors
              22Item
                  6.
              Exhibits
              23Signatures
              
              24




2




**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Consolidated
      Balance Sheets**





September
                30,
            
            December
                31,2008
            
            2007ASSETSCurrent
                assets:Cash
            
            $
            3,779,073
            
            $
            1,644,145Prepaid
                expenses
            
            
            160,751
            
            
            84,968Total
                current assets
            
            
            3,939,824
            
            
            1,729,113Property
                and Equipment - net
            
            
            131,967
            
            
            -Deposits
            
            
            82,031
            
            
            -License
                agreement
            
            
            8,061,300
            
            
            8,061,300TOTAL
                ASSETS
            
            $
            12,215,122
            
            $
            9,790,413LIABILITIES
                AND STOCKHOLDER'S EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            658,565
            
            $
            634,587Loan
                payable-related party
            
            
            50,000
            
            
            50,000License
                agreement payable-current portion(net
                of unamortized discount of $192,264 and $78,153)
            
            
            807,736
            
            
            921,847Accrued
                dividend on preferred stock
            
            
            722,480
            
            
            210,275Liability
                under registration rights agreement
            
            
            43,986
            
            
            78,956Total
                current liabilities
            
            
            2,282,767
            
            
            1,895,665License
                agreement payable(net
                of unamortized discount of $1,456,961 and $1,993,830)
            
            
            3,543,039
            
            
            4,006,1705,825,806
            
            
            5,901,835Stockholders'
                equity:Series
                A Cumulative Convertible Preferred Stock: $100 stated value, 300,000
                shares authorized, 29,900 and 42,050 shares issued and outstanding
                as of
                September 30, 2008 and December 31, 2007, respectively
            
            
            1,155,326
            
            
            1,624,798Series
                B Cumulative Convertible Preferred Stock: $100 stated value, 250,000
                shares authorized, 79,405 shares issued and outstanding as of September
                30, 2008
            
            
            5,556,361
            
            
            -Common
                stock, $0.001 par value, 100,000,000 shares authorized; 18,890,455
                and
                18,165,793 shares issued and outstanding as of September 30, 2008
                and
                December 31, 2007, respectively
            
            
            18,890
            
            
            18,166Additional
                paid-in-capital
            
            
            27,258,267
            
            
            18,955,101Deficit
                accumulated during the development stage
            
            
            (27,599,528
            )
            
            (16,709,487
            )Total
                stockholders' equity
            
            
            6,389,316
            
            
            3,888,578TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            12,215,122
            
            $
            9,790,413




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


3


**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Consolidated
      Statements of Operations**





For the Three
              Months
              Ended
              September 30,
              2008
            
            For the Three
              Months Ended
              September 30,
              2007
            
            For the Nine
              MonthsEnded
              September 30,
              2008
            
            For the Nine
              Months
              Ended
              September
              30, 2007
            
            For the Period
              from February
              28,
                2006
              (Inception) to
              September 30,
              2008(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Operating
                expenses:Research
                and development expenses
            
            $
            497,773
            
            $
            217,060
            
            $
            840,545
            
            $
            419,799
            
            $
            1,703,995Merger
                expenses
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            340,000General
                and administrative expenses
            
            
            1,739,009
            
            
            2,151,344
            
            
            5,787,887
            
            
            4,295,465
            
            
            17,606,004Legal
                settlement
            
            
            -
            
            
            -
            
            
            359,595
            
            
            -
            
            
            359,595Total
                operating expenses
            
            
            2,236,782
            
            
            2,368,404
            
            
            6,988,027
            
            
            4,715,264
            
            
            20,009,594Net
                loss from operations
            
            
            (2,236,782
            )
            
            (2,368,404
            )
            
            (6,988,027
            )
            
            (4,715,264
            )
            
            (20,009,594
            )Interest
                income
            
            
            10,525
            
            
            29,389
            
            
            27,114
            
            
            36,818
            
            
            76,648Interest
                expense
            
            
            (136,138
            )
            
            (195,667
            )
            
            (422,758
            )
            
            (585,185
            )
            
            (1,835,223
            )Other
                expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (250,000
            )(Loss)
                gain on fair value adjustment
            
            
            -
            
            
            78,705
            
            
            (30,169
            )
            
            629,640
            
            
            601,267Net
                loss
            
            
            (2,362,395
            )
            
            (2,455,977
            )
            
            (7,413,840
            )
            
            (4,633,991
            )
            
            (21,416,902
            )Preferred
                dividends
            
            
            (225,976
            )
            
            (85,259
            )
            
            (3,476,201
            )
            
            (2,620,844
            )
            
            (6,182,626
            )Net
                loss available to common shareholders
            
            $
            (2,588,371
            )
            $
            (2,541,236
            )
            $
            (10,890,041
            )
            $
            (7,254,835
            )
            $
            (27,599,528
            )Basic
                and diluted net loss per share
            
            $
            (0.14
            )
            $
            (0.15
            )
            $
            (0.59
            )
            $
            (0.42
            )Weighted
                average number of shares outstanding
            
            
            18,882,266
            
            
            17,258,462
            
            
            18,585,469
            
            
            17,147,192





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


4


**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Consolidated
      Statement of Changes in Stockholders’ Equity**


**For
      the Nine Months ended September 30, 2008**





**Common
                Stock**
            
            **Preferred Stock**
              **Series
                A**
            
            **Preferred Stock**
              **Series
                B**
            
            **Additional**
              **Capital**
            
            **Deficit**
              **Accumulated**
              **During
                the**
              **Development**
              **Stage**
            
            **Total****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**Balance
                at January 1, 2008
            
            
            18,165,793
            
            $
            18,166
            
            
            42,050
            
            $
            1,624,798
            
            
            -
            
            $
            -
            
            $
            18,955,101
            
            $
            (16,709,487
            )
            $
            3,888,578Compensation
                expense associated with options
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,538,212
            
            
            -
            
            
            1,538,212Issuance
                of options and warrants for services rendered
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            510,326
            
            
            -
            
            
            510,326Warrant
                expense related to legal settlement
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            359,595
            
            
            
            
            
            359,595Issuance
                of common stock for services rendered
            
            
            16,250
            
            
            16
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            78,484
            
            
            -
            
            
            78,500Issuance
                of common stock - registration rights agreement
            
            
            53,229
            
            
            53
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            295,368
            
            
            -
            
            
            295,421Issuance
                of preferred stock and warrants in private offering
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            79,405
            
            
            5,556,361
            
            
            2,032,739
            
            
            -
            
            
            7,589,100Dividend
                associated with the beneficial conversion feature of the preferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,963,995
            
            
            (2,963,995
            )
            
            -Private
                placement costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (401,450
            )
            
            -
            
            
            (401,450
            )Conversion
                of preferred stock into common stock
            
            
            303,750
            
            
            304
            
            
            (12,150
            )
            
            (469,472
            )
            
            -
            
            
            -
            
            
            469,168
            
            
            -
            
            
            -Exercise
                of warrants into common stock
            
            
            351,433
            
            
            351
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            456,729
            
            
            -
            
            
            457,080Dividends
                accrued on preferred stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (512,206
            )
            
            (512,206
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,413,840
            )
            
            (7,413,840
            )Balance
                at September 30, 2008
            
            
            18,890,455
            
            $
            18,890
            
            
            29,900
            
            $
            1,155,326
            
            
            79,405
            
            $
            5,556,361
            
            $
            27,258,267
            
            $
            (27,599,528
            )
            $
            6,389,316





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


5


**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Consolidated
      Statement of Cash Flows**





For the Nine
              Months ended
              September 30, 2008
            
            For the Nine Months
              ended September 30,
              2007
            
            For the Period from
              February 28, 2006
              (Inception) to September
              30, 2008CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (7,413,840
            )
            $
            (4,633,991
            )
            $
            (21,416,902
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                expense
            
            
            1,190
            
            
            -
            
            
            1,190Amortization
                of discount
            
            
            422,758
            
            
            585,185
            
            
            1,835,223Compensation
                expense associated with stock options
            
            
            1,538,212
            
            
            1,882,516
            
            
            6,529,602Compensation
                expense associated with accrued warrants
            
            
            85,626
            
            
            167,735
            
            
            85,626Issuance
                of common stock, options and warrants for services
                rendered
            
            
            588,826
            
            
            97,402
            
            
            2,874,309Penalty
                share expense
            
            
            230,277
            
            
            -
            
            
            230,277Warrant
                expense related to legal settlement
            
            
            359,595
            
            
            -
            
            
            359,595Loss
                (gain) on fair value adjustment
            
            
            30,169
            
            
            (629,640
            )
            
            (601,267
            )Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (75,783
            )
            
            46,525
            
            
            (160,751
            )Deposits
            
            
            (82,031
            )
            
            -
            
            
            (82,031
            )Accounts
                payable and accrued expenses
            
            
            (61,644
            )
            
            425,765
            
            
            572,943Net
                cash used in operating activities
            
            
            (4,376,645
            )
            
            (2,058,503
            )
            
            (9,772,186
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Payments
                for acquisition of property and equipment
            
            
            (133,157
            )
            
            -
            
            
            (133,157
            )Acquisition
                of License Agreement
            
            
            -
            
            
            -
            
            
            (1,500,000
            )Cash
                used in investing activities
            
            
            (133,157
            )
            
            -
            
            
            (1,633,157
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Payments
                for license agreement payable
            
            
            (1,000,000
            )
            
            (600,000
            )
            
            (3,500,000
            )Proceeds
                from issuance of founders' shares
            
            
            -
            
            
            -
            
            
            554Proceeds
                from private offering issuances of common stock, net of
                costs
            
            
            -
            
            
            -
            
            
            6,405,483Proceeds
                from private offering issuance of preferred stock, net of
                costs
            
            
            7,187,650
            
            
            3,818,649
            
            
            11,006,299Proceeds
                from the exercise of warrants
            
            
            457,080
            
            
            -
            
            
            457,080Proceeds
                from convertible note payable
            
            
            -
            
            
            -
            
            
            765,000Proceeds
                from loan payable - related party
            
            
            -
            
            
            -
            
            
            50,000Net
                cash provided by financing activities
            
            
            6,644,730
            
            
            3,218,649
            
            
            15,184,416Net
                increase in cash and cash equivalents
            
            
            2,134,928
            
            
            1,160,146
            
            
            3,779,073Cash
                and cash equivalents - beginning of period
            
            
            1,644,145
            
            
            1,031,923
            
            
            -Cash
                and cash equivalents - end of period
            
            $
            3,779,073
            
            $
            2,192,069
            
            $
            3,779,073Supplemental
                Disclosure of Non-Cash Investing and Financing ActivitiesPayable
                for License Agreement (net of discount)
            
            $
            -
            
            $
            -
            
            $
            6,015,552License
                Agreement acquired in exchange for issuance of common
                stock
            
            $
            -
            
            $
            -
            
            $
            545,747Preferred
                Stock Dividend
            
            $
            512,206
            
            $
            -
            
            $
            722,481





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




6


**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Notes
      to Consolidated Financial Statements**


**NOTE** **1 – ORGANIZATION AND GOING CONCERN**





New
      Generation Biofuels Holdings, Inc. (the “Company”), formerly known as H2Diesel
      Holdings, Inc., a Florida corporation, is a development stage company that
      through its wholly owned subsidiary, New Generation Biofuels, Inc., formerly
      known as H2Diesel Inc., a Delaware corporation, holds an exclusive license
      for
      North America, Central America and the Caribbean to commercialize proprietary
      technology (the “Technology”) to manufacture alternative biofuels from vegetable
      oils and animal fats that the Company intends to market as a new class of
      renewable fuel for power generation, commercial and industrial heating and
      marine transportation.




The
      Company is in the development stage and has not generated any revenues. As
      a
      result, the Company has incurred a net loss of $21.4 million and negative cash
      flows from operating activities of $9.8 million since Inception. The Company
      is
      obligated to pay $6 million in additional payments under the Master License,
      of
      which $1.0 million is due in February 2009. These matters raise substantial
      doubt about the Company’s ability to continue as a going concern. The Company’s
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty. The Company has fully funded its
      operating budget for 2008 but needs to raise additional financing during 2009
      to
      fund operations and long term business objectives. The Company’s continued
      existence is dependent upon several factors, including obtaining additional
      debt
      or equity financing, producing biofuel, developing a market for its biofuel,
      and
      achieving certain levels of sales volume and profitability from the sale of
      its
      biofuel and sublicenses of its technology. Management is investigating various
      sources of debt or equity financing and is developing marketing and production
      plans for its products.




**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




Basis
      of presentation




The
      accompanying unaudited consolidated financial statements of the Company have
      been prepared in accordance with generally accepted accounting principles in
      the
      United States and the rules and regulations of the Securities and Exchange
      Commission (the “SEC”) for interim financial information. Accordingly, they do
      not include all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements and should be read
      in
      conjunction with the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2007. The interim financial statements are unaudited, but in the
      opinion of management, all adjustments, consisting only of normal recurring
      accruals, considered necessary for a fair statement of the results of these
      interim periods have been included. The results of the Company’s operations for
      any interim period are not necessarily indicative of the operating results
      that
      may be expected for any other interim period or a full fiscal year.




Property
      and Equipment




Property
      and equipment are stated at cost. Depreciation has been calculated over the
      estimated useful lives of the assets ranging from 5 to 7 years. Depreciation
      expense for the nine month ended September 30, 2008 and 2007 was $1,190 and
      $0,
      respectively.




Property
      and equipment consists of the following at September 30, 2008 and
      2007:




7


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


2008
            
            2007Furniture
                and fixtures
            
            **$**
            69,730
            
            **$**
            -Property
                and equipment
            
            
            42,627
            
            
            -Construction
                in progress
            
            
            20,800
            
            
            -133,157
            
            
            -Less
                accumulated depreciation
            
            
            (1,190
            )
            
            -Fixed
                assets, net
            
            **$**
            131,967
            
            **$**
            -




Use
      of
      Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues and expenses and related disclosure of contingent assets and
      liabilities. The Company’s most significant estimate is the value of its
      exclusive license. Other significant estimates include the valuation of shares,
      warrants or options issued for services and the estimated useful life of the
      exclusive license. The Company evaluates its estimates on an ongoing basis.
      Actual results could differ significantly, especially as to the estimated value
      of its exclusive license from those estimates under different assumptions or
      conditions.




Loss
      per Common Share




Loss
      per
      share (“EPS”) is computed based on the weighted average number of common shares
      outstanding and excludes any potential dilution. Diluted EPS reflects the
      potential dilution that could occur if securities or other contracts to issue
      common stock were exercised or converted into common stock or resulted in the
      issuance of common stock, which would then share in the earnings of the Company.
      The shares issuable upon the exercise of stock options and warrants are excluded
      from the calculation of net loss per share as their effect would be
      antidilutive. As of September 30, 2008 and 2007, there were 11,446,315 and
      9,345,125, respectively, shares of common stock equivalents including options
      (6,410,000 shares of common stock as of September 30, 2008 and 5,605,000 shares
      of common stock as of September 30, 2007), non employee options (1,591,000
      shares of common stock as of September 30, 2008 and 1,531,000 shares of common
      stock as of September 30, 2007) and warrants (3,445,315 shares of common stock
      as of September 30, 2008 and 2,209,125 shares of common stock as of September
      30, 2007) that could potentially dilute EPS in the future that were not included
      in the computation of EPS because to do so would have been antidilutive. As
      of
      September 30, 2008 and 2007 there were 29,900 and 42,550, respectively, shares
      of Series A Convertible Preferred Stock which are convertible into 747,500
      and
      1,063,750, respectively, shares of common stock that were not included in the
      computation of EPS because to do so would have been antidilutive as well. As
      of
      September 30, 2008 there were 79,405 shares of Series B Convertible Preferred
      Stock which are convertible into 1,868,353 shares of common stock that were
      not
      included in the computation of EPS because to do so would have been antidilutive
      as well.




Stock
      Based Compensation




The
      Company issues stock as compensation to employees and outside consultants for
      services provided to the Company. Employee share-based awards are accounted
      for
      in accordance with SFAS 123R, “Share-Based Payment”, which requires the Company
      to measure the cost of employee services received based on the grant date fair
      value of the award and be recognized as an expense over the requisite service
      period. The Company reports any tax benefits resulting from tax deductions
      in
      excess of stock based compensation expense recognized as a source of financing
      cash flows with an offsetting amount classified as a use of operating cash
      flows. The Company accounts for non-employee share-based awards in accordance
      with EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other
      Than Employees for Acquisition, or in Conjunction with Selling, Goods or
      Services” (“EITF 96-18”). Costs are measured at the estimated fair market value
      of the consideration received or the estimated fair value of the equity
      instrument issued, whichever is more reliably measurable. The value of equity
      instruments issued for consideration other than employee services is determined
      on the earliest of a performance commitment or completion of performance by
      the
      provider for goods or services as described in EITF 96-18.


8


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


**NOTE
      3 – OPTIONS**




In
      October 2007, the Company’s board of directors approved an Omnibus Incentive
      Plan (the “Incentive Plan”) to attract, retain and motivate key employees, to
      provide an incentive for them to achieve long-range performance goals and to
      enable them to participate in the long-term growth of the Company. The Company’s
      shareholders approved the Incentive Plan at their annual meeting in November
      2007. Options granted under the Incentive Plan may include non-qualified stock
      options as well as incentive stock option intended to qualify under Section
      422A
      of the Internal Revenue Code. The aggregate number of shares of common stock
      that are reserved for issuance under the Incentive Plan must not exceed 2.7
      million shares. Each stock option agreement specifies when all or any
      installment of the option becomes exercisable. Option awards are generally
      granted with an exercise price equal to the market price of the Company’s common
      stock on the grant date, generally vest from 0 to 3 years of continuous service
      and have a 10 year contractual term.




Prior
      to
      November 2007, the Company issued stock options to employees based on employment
      and other agreements and issued stock options to non-employees based on
      contractual agreements. Each stock option agreement specifies when all or any
      installment of the option becomes exercisable. Option awards are generally
      granted with an exercise price equal to the market price of the Company’s common
      stock on the grant date, generally vest from 0 to 3 years of continuous service
      and have a 5 to 10 year contractual term.




The
      Company utilizes the Black-Scholes option valuation model to estimate the fair
      value of option and warrant grants on the date of grant. The following table
      summarizes information about the stock options outstanding at September 30,
      2008:




Weighted
                Average Exercise Price
            
            $
            2.78Expected
                Life
            
            
            5
                yearsVolatility
            
            
            100.0
            %Dividend
                Yield
            
            
            0
            %Risk-free
                interest rate
            
            
            3.08%
                – 3.28
            %


9




**NEW
      GENERATION BIOFUELS HOLDINGS, INC.**


**(A
      Development Stage Enterprise)**


**Notes
      to Consolidated Financial Statements**




*Employee
      Options*




A
      summary
      of the status of the Company’s options outstanding as of September 30, 2008 and
      the changes during the year ending on that date is presented below:




Number
                of
              Shares
            
            Weighted
              Average
              Exercise
              Price
            
            Weighted
              Average
              Remaining
              Contractual
              Life
              (Years)
            
            Aggregate
              Intrinsic
              ValueOptions
                outstanding at December 31, 2007
            
            
            5,605,000
            
            $
            2.63
            
            
            8.04Granted
            
            
            805,000
            
            $
            3.88
            
            
            9.56Options
                outstanding at September 30, 2008
            
            
            6,410,000
            
            $
            2.78
            
            
            8.23Vested
                and expected to vest – September 30, 2008
            
            
            4,760,000
            
            $
            2.73
            
            
            8.16
            
            $
            8,100,000Options
                exercisable at September 30, 2008
            
            
            3,740,000
            
            $
            2.58
            
            
            8.03
            
            $
            7,075,000





Options
      outstanding at September 30, 2008 have an exercise price of $1.50 to $10.50
      per
      share. Options exercisable at September 30, 2008 do not include 1,650,000
      performance based options. For the nine months ended September 30, 2008 and
      2007, the Company recorded a non-cash compensation charge of $1,512,621 and
      $1,882,516 respectively.




The
      aggregate intrinsic value in the table above represents the total intrinsic
      value (the difference between the Company’s closing stock price on September 30,
      2008 and the exercise price, multiplied by the number of in-the-money options)
      that would have been received by the option holders had vested option holders
      exercised their options on September 30, 2008. This amount changes based upon
      changes in the fair market value of the Company’s common stock. As of September
      30, 2008, $1,825,411 of the total unrecognized compensation costs related to
      stock options is expected to be recognized over a period of approximately two
      years and three months.




*Non
      Employee Options* **




The
      Company has issued options in exchange for services rendered. The table below
      summarizes stock option information with respect to all non employee stock
      options as of September 30, 2008:




Number
                of
              Shares
            
            Weighted
              Average
              Exercise
              PriceOptions
                outstanding at December 31, 2007
            
            
            1,531,000
            
            $
            6.01Granted
            
            
            60,000
            
            $
            6.40Options
                outstanding at September 30, 2008
            
            
            1,591,000
            
            $
            6.02Options
                exercisable at September 30, 2008
            
            
            116,000
            
            $
            6.19





Non
      employee options outstanding at September 30, 2008 have an exercise price of
      $6.00 to $6.40 per share. Options exercisable at September 30, 2008 do not
      include 1,450,000 performance based options. For the nine months ended September
      30, 2008 and 2007, the Company recorded a non-cash compensation charge of
      $377,999 and $49,436 respectively. As of September 30, 2008, $48,179 of the
      total unrecognized compensation costs related to non employee stock options
      is
      expected to be recognized over a period of approximately three
      months.


10


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


*Restricted
      Stock Grants*




In
      May
      2008, the Compensation Committee of the Company’s board of directors 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 the Company’s 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 the Company’s results, with higher level
      positions generally receiving grants equal to a greater percentage of their
      compensation than lower level positions.




In
      May
      2008, the Company issued under the Equity Compensation Plan 31,989 restricted
      shares to certain employees based on achieving certain 2007 performance targets.
      The number of shares was calculated based on the dollar value of the award
      divided by the closing price of the Company’s common stock on the American Stock
      Exchange on the date the grant was approved by the Compensation Committee.
      For
      the nine months ended September 30, 2008, the Company recorded a non-cash
      compensation expense of $25,591. As of September 30, 2008, $179,138 of the
      total
      unrecognized compensation costs related to restricted stock grants is expected
      to be recognized over a period of approximately two years and nine
      months.




**NOTE
      4 – LOSS / GAIN ON FAIR VALUE ADJUSTMENT**




On
      January 1, 2007, the Company implemented EITF 00-19-2, which requires a company
      to recognize a liability for registration rights payments when they are probable
      and the amount is reasonable estimable. As of December 31, 2006, the Company
      had
      not filed a “resale” registration statement for shares issued in connection with
      an October 2006 common stock offering (the “October 2006 Offering”). On January
      1, 2007, the Company recorded a liability for 6% of the shares issued in the
      October 2006 Offering. The Company recorded a $1,574,100 contingent liability
      based on the Company’s stock price at that date. For the nine months ended
      September 30, 2007, the Company recorded a gain on fair value adjustment of
      $629,640 related to this liability as the Company’s stock price declined during
      this period.




On
      December 14, 2007, the Company determined that they would not be able to file
      a
“resale” registration statement for the December 2007 common stock offering (the
“December 2007 Offering”) within 30 days. The Company anticipated that they
      would file the registration statement by April 30, 2008 and recorded a liability
      of $78,956 for 2% of the shares issued in the December 2007 Offering. For the
      nine months ended September 30, 2008, the Company recorded a loss on fair value
      adjustment of $30,169 related to this liability as the Company’s stock price
      increased during this period.




The
      Company filed the registration statement for the December 2007 Offering on
      May
      30, 2008. Since the Company filed its registration statement late and it was
      not
      declared effective by the SEC within 180 days of the initial required filing
      date, for the nine months ended September 30, 2008, the Company recorded an
      additional expense of $186,291 for 4% of the shares issued in the December
      2007
      Offering, up to the maximum penalty of 6% which is included in general and
      administrative expenses on the consolidated statement of operations.




In
      May
      2008, the Company issued 35,486 shares of common stock representing penalty
      shares of 4% of shares issued in the December 2007 Offering. In August 2008,
      the
      Company issued an additional 17,743 shares of common stock representing the
      balance of penalty shares of 2% of the shares issued in the December 2007
      Offering.


11


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


**NOTE
      5 – PREFERRED STOCK** **




*Series
      A Preferred Stock*




On
      May 9,
      2007, the Company completed the offering (the “Series A Private Placement”) of
      27,950 shares of the Company’s newly issued Series A Cumulative Convertible
      Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) at
      price of $100.00 per share to “accredited investors” as defined under the
      Securities Act of 1933, as amended (the “Securities Act”). The gross proceeds
      were $2,795,000. Under the terms of the Series A Private Placement, each
      investor had the option to purchase additional securities up to the amount
      initially purchased on the same terms as those of the Series A Private Placement
      (the “Subscriber Option”). On June 8, 2007, the Company sold an additional
      14,600 shares of Series A Preferred Stock at price of $100.00 per share in
      connection with exercises of the Subscriber Option. The gross proceeds were
      $1,460,000.




At
      any
      time prior to the third anniversary of the initial date of issuance, any holder
      of Series A Preferred Stock may convert all or a portion of their shares into
      shares of the Company’s common stock calculated by multiplying the number of
      shares to be converted by such shares’ “stated value” ( *i.e* ,
      $100
      per share plus the amount of all dividends accumulated thereon) and dividing
      the
      result by the “conversion price” then in effect.  The initial
      conversion price of each share of Series A Preferred Stock is $4.00, and each
      share of Series A Preferred Stock is initially convertible into 25 shares of
      our
      common stock.  Upon the third anniversary of the date of issuance,
      each share of Series A Preferred Stock shall automatically, and without any
      action on the part of the holder, convert into that number of shares of our
      common stock computed by dividing such share’s “stated value” by the “conversion
      price” then in effect.  The “conversion price” is subject to
      adjustment upon the occurrence of certain events, including, among others,
      a
      stock split, reverse stock split, stock dividend or combination of our common
      stock. The Series A Preferred Stock is not redeemable.




Each
      share of Series A Preferred Stock will accrue cumulative dividends on a
      quarterly basis at a rate of 8% per annum. All dividends will be paid in shares
      of common stock having a fair market value at the time of issuance equal to
      the
      amount of dividends to be paid, provided that to the extent the shares of common
      stock to be issued are not then registered under the registration rights
      agreements with the Series A Preferred Stock investors, dividends shall cumulate
      but shall remain unpaid until such time as the shares are registered and
      issued.  The Company may elect to pay any dividends in cash in lieu of
      issuing shares of common stock.  The Series A Preferred Stock shall
      also participate on an as-converted basis with all dividends paid on the shares
      of common stock. For the nine months ended September 30, 2008 the Company
      accrued dividends for the Series A Preferred Stock of $227,097.




Upon
      any
      liquidation of the Company, the holders of the Series A Preferred Stock will
      be
      entitled to be paid, prior to the common stock or any other securities that
      by
      their terms are junior to the Series A Preferred Stock, the original issue
      price
      of the Series A Preferred Stock plus all accrued and unpaid dividends. To the
      extent the proceeds of liquidation are insufficient to pay such amounts in
      full,
      the proceeds available will be allocated pro rata among the shares of Series
      A
      Preferred Stock. As of the most recent balance sheet date, September 30, 2008,
      the liquidation value of the Series A Preferred Stock was
      $3,427,372.




Each
      investor in the Series A Private Placement also received a warrant exercisable
      for a number of shares of common stock equal to 50% of the number of shares
      of
      common stock into which the Series A Preferred Stock purchased by such investor
      is initially convertible. The initial exercise price of the warrants is $6.00
      per share. At any time following the first anniversary of the Closing Date
      and
      provided that the shares of Common Stock issuable upon exercise of the Warrants
      are not then registered for resale pursuant to an effective registration
      statement under the Securities Act, the Warrants may also be exercised by means
      of a “cashless exercise.” The warrants had a fair value of $2,610,882 on the
      date of issuance based on the Black-Scholes options pricing
      method.


12


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


*Series
      B Preferred Stock*




On
      March
      31, 2008, the Company completed the offering (the “Series B Private Placement”)
      of a total 43,986 shares of the Company’s newly issued Series B Convertible
      Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”) at a
      price of $100.00 per share to “accredited investors” under the Securities Act..
      The gross proceeds from the issuance of 40,768 shares of Series B Preferred
      Stock was $4,076,800. In addition, the Company issued 3,218 shares of Series
      B
      Preferred Stock as commission in connection with the Private
      Placement.




On
      May
      13, 2008, the Company completed a second closing of the Series B Private
      Placement of a total 35,419 shares of the Company’s Series B Preferred Stock.
      The gross proceeds from the issuance of 35,123 shares of Series B Preferred
      Stock was $3,512,300. In addition, the Company issued 296 shares of Series
      B
      Preferred Stock as commission in connection with the Private Placement. In
      summary, in the offering that was closed on March 31, 2008 and May 13, 2008,
      the
      Company sold a total of 75,891 shares of Series B Preferred Stock and warrants
      to purchase 446,413 shares of its common stock for total gross proceeds of
      $7,589,100.




The
      Series B Preferred Stock ranks junior to the Series A Preferred Stock and senior
      to the common stock with respect to the payment of dividends and amounts payable
      upon liquidation, dissolution or winding up of the Company. The Series B
      Preferred Stock also is not redeemable.




At
      any
      time prior to the third anniversary of the date of issuance, any holder of
      Series B Preferred Stock may convert all or a portion of their shares into
      shares of the Company’s common stock calculated by dividing the sum of the
      Stated Value and all accrued dividends not previously paid or added to the
      Stated Value to the date of such conversion by the Series B Conversion Price
      then in effect. Upon the third anniversary of the initial issue date of the
      Series B Preferred Stock, each share of Series B Preferred Stock will
      automatically convert into the number of shares of common stock into which
      it is
      then convertible. The initial conversion price is $4.25 per share, subject
      to
      adjustment upon the occurrence of certain major corporate events such as
      reorganizations and stock splits (the “Series B Conversion Price”).




Dividends
      will be payable from the date of issuance at a rate of 8% per year when and
      as
      declared by the board of directors. To the extent that dividends are not
      declared, or cannot be paid, there will be an increase in the Stated Value
      of
      the Series B Preferred Stock in the amount of 8% per year. In the event
      dividends are declared by the Board and paid by the Company on the Common Stock,
      holders of Series B Preferred Stock will either share ratably in such dividends
      based on the number of shares of common stock into which the Series B Preferred
      Stock may be converted or (to the extent that dividends are not declared or
      cannot be paid), there will be a corresponding increase in the Stated Value.
      Dividends will be paid semiannually, at the Company’s election, in cash, in
      shares of Series B Preferred Stock (valued at Stated Value) or in common stock
      valued at the market price, on September 30 and March 31 of each year beginning
      on September 30, 2008 to holders of record on the 15th day of the preceding
      month. If there is an increase in Stated Value because dividends were not or
      could not be paid, that increase will occur semiannually on the dates that
      dividends would have been paid. For the nine months ended September 30, 2008,
      the Company accrued dividends on the Series B Preferred Stock of $285,109.




The
      Series B Preferred Stock is convertible into 1,868,367 shares of common stock,
      at the election of the holders, at an initial conversion price of $4.25 per
      share. The fair market value of this beneficial conversion was calculated based
      on the difference between the share price of the common stock, at the time
      of
      issuance, and the initial conversion price. This resulted in a Series B
      Preferred Stock dividend in the amount of $2,963,995 recorded during the nine
      months ended September 30, 2008.




Upon
      any
      Liquidation of the Company, after the Company has made the required
      distributions to the holders of Series A Preferred Stock (and any other
      preferred stock then outstanding, if any, ranking in liquidation senior to
      the
      Series B Preferred Stock), and before any distribution is made to the holders
      of
      Common Stock (and any other stock ranking in liquidation junior to the Series
      B
      Preferred Stock), the holders of Series B Preferred Stock will be entitled
      to be
      paid an amount in cash equal to the aggregate liquidation value of Series B
      Preferred Stock, which equals the Stated Value plus all accrued dividends not
      previously paid or added to Stated Value. As of the most recent balance sheet
      date, September 30, 2008, the liquidation value of the Series B Preferred Stock
      was $8,225,609.


13


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


Each
      investor in the Series B Private Placement also received a warrant exercisable
      for a number of shares of Common Stock equal to 25% of the number of shares
      of
      Common Stock into which the Series B Preferred Stock purchased by such investor
      is initially convertible. The initial exercise price of the warrants is $6.25
      per share. Both the Series B Preferred Stock and the warrants include
      antidilution provisions that, if triggered, could result in a reduction of
      the
      conversion price of the Series B Preferred Stock or the exercise price of the
      warrants, but not below $3.00 per share. The warrants have a fair value of
      $2,032,739 based on the Black-Scholes option pricing method.




In
      connection with the Series B Private Placement, the Company agreed to register
      the resale of the shares of common stock issuable (i) upon conversion of the
      Series B Preferred Stock, (ii) as dividends on the Series B Preferred Stock,
      and
      (iii) upon exercise of warrants, all in accordance with registration rights
      agreements among the Company and each of the investors. Under the registration
      rights agreement, the Company is required to file a “resale” registration
      statement with the SEC covering such shares on or before the 30th day following
      the closing of the Series B Private Placement. The Company filed the
      registration statement on May 30, 2008, within the required time period. As
      of
      November 7, 2008, the registration statement was not yet effective. Since the
      registration statement was not yet declared effective by the SEC within 180
      days
      of the initial required filing date, for the nine months ended September 30,
      2008, the Company recorded an expense of $43,986 for 1% of the shares issued
      in
      the March 31, 2008 Series B Private Placement. The Company anticipates that
      the
      registration statement will be declared effective by November 30, 2008.




If
      at any
      time prior to the first to occur of (i) the first anniversary of the
      registration of the common stock underlying the Series B Preferred Stock or
      (ii)
      18 months after the closing , the Company issues any additional shares of Common
      Stock with a purchase price less than the Conversion Price of the Series B
      Preferred Stock, or additional convertible securities with a conversion price
      less than the Conversion Price of the Series B Preferred Stock, the Conversion
      Price of the Series B Preferred Stock will be reduced to the purchase price
      at
      which such Common Stock has been issued or the conversion price of such
      additional convertible securities, but not below a Conversion Price of $3.00
      per
      share. The antidilution adjustments in the Series B Preferred Stock and warrants
      will not apply to certain issuances of equity securities or warrants, including
      those not issued in capital-raising transactions (such as to customers,
      suppliers, joint venture partners or in connection with acquisitions of
      property) or in connection with equity award or options granted by the Company
      to employees, consultants and directors under employee benefit plans approved
      by
      the Board of Directors under which options generally are granted with exercise
      prices at least equal to the Company’s stock price on the grant
      dates.




In
      connection with the Series B Private Placement, the Company paid a commission
      of
      $249,288, issued 3,514 shares of Series B Preferred Stock and warrants
      exercisable for 197,437 shares of Common Stock as consideration for investors
      introduced to the company. The warrants had a fair value of $770,858 on the
      date
      of issuance based on the Black-Scholes option pricing model. The warrants are
      considered a cost directly associated with the issuance of stock.




**NOTE
      6 – AGREEMENTS**




In
      August
      2007, the Company entered into an equipment rental agreement with the equipment
      manufacturer for a nominal fee for equipment used in the production process
      at
      the Twin Rivers plant facility.




On
      March
      14, 2008, the Company entered into a lease agreement for office space in Lake
      Mary, Florida in connection with the relocation of its corporate headquarters
      to
      Florida. The lease commitment is for approximately 6,000 square feet of office
      space commencing in July 2008 for a period of sixty six months. The total rental
      commitment, for the entire rental period, is approximately $952,000.


14


**NEW
        GENERATION BIOFUELS HOLDINGS, INC.**
 **(A
        Development Stage Enterprise)**
 **Notes
        to Consolidated Financial Statements**


On
      March
      20, 2008, the Company paid $150,000 of the $1,000,000 payment due on March
      20,
      2008 under the Exclusive License Agreement. On March 23, 2008, the Exclusive
      License Agreement, as amended, was further amended to extend the due date of
      the
      remaining $850,000 that was due on March 20, 2008 to the closing of the
      Company’s next financing, with net proceeds that exceed $850,000. On April 3,
      2008, the Company paid the $850,000 that was due under the Exclusive License
      Agreement.




On
      March
      21, 2008, the Company entered into a test burn agreement with FirstEnergy
      Corporation to evaluate the Company’s proprietary biofuel technology in power
      generation applications. The Agreement requires the Company to supply its
      biofuel for a test program to be performed at FirstEnergy’s Edgewater Power
      Plant combustion turbine facility in Lorain, Ohio. The test program includes
      the
      evaluation of both technical and environmental performance characteristics
      of
      its biofuel. The agreement also required the Company to pay 50% of all costs
      of
      environmental emissions testing conducted in connection with the test program,
      provided that its aggregate obligation with respect to such expenses shall
      not
      exceed $15,000. FirstEnergy is entitled to all revenue arising from sales of
      electricity generated during the testing. The parties have agreed to negotiate
      a
      mutually agreeable biofuel purchase agreement in the event the tests are deemed
      successful.




On
      June
      2, 2008, the Company entered into a biofuel sales agreement with Dynegy Oakland
      LLC, a subsidiary of Dynegy, Inc. The agreement provides for Dynegy to purchase
      up to 1.7 million gallons of biofuel per year for use at Dynegy’s power plant in
      Oakland, California, based on Dynegy’s forecasts of a portion of the historical
      fuel consumption at their facility. There is no minimum purchase requirement.
      The product price is based on a variable pricing formula. The contract is for
      a
      term until March 31, 2010 and month to month thereafter unless terminated by
      either party at any time with at least sixty day written notice.




On
      August
      1, 2008, the Company entered into an agreement with an engineering and design
      contractor to develop the design for its first commercial scale biofuel
      manufacturing plant, with expected capacity of 25 million gallons of
      second-generation biofuel a year.




On
      September 12, 2008, the Company entered into a site lease agreement (the “Lease
      Agreement”) with Pennington Partners, LLC (“Pennington”) to locate the Company’s
      first commercial scale biofuel manufacturing plant at a port location in
      Baltimore, Maryland and a terminaling services agreement (the “Services
      Agreement”) with Atlantic Terminalling, LLC (“Atlantic”), an affiliate of
      Pennington, to provide certain terminaling services at the site. The Lease
      Agreement covers the physical premises where the production facility will be
      located as well as approximately six million gallons of storage tank capacity
      and related terminaling facilities. The initial term of the Lease Agreement
      is
      five years with an option to renew for three additional five year periods.
      The
      initial base rent rate is $35,000 per month for the first six months, $55,000
      per month for the next six months, $75,000 per month in the second year and
      then
      to an amount equal to the monthly base rent payable during the preceding rental
      year increased by 3%. The total base rental commitment, for the initial five
      year rental period, is approximately $4,305,000. Under the Services Agreement,
      Atlantic will provide terminaling services that include the receipt, the
      unloading and the transfer of raw materials and the subsequent transfer and
      load
      out of finished product from and to railcars, barges and trucks. The term of
      the
      Services Agreement will run concurrently with the Lease Agreement. The Company
      will pay a throughput charge for each gallon of product outflow, subject to
      certain minimums. The minimum monthly throughput charge will range from $7,802
      through the first six months to $16,600 after the first year. Maximum monthly
      throughput charges will vary based upon our production volume. The total minimum
      throughput charges, for the initial five year service agreement period, are
      approximately $916,000.




**NOTE
      7****–
      LEGAL PROCEEDINGS**




In
      August
      2008, the Company settled a lawsuit with a former consultant involving claims
      for breach of contract and specific performance in order to avoid uncertainties
      and potential litigation expenses. Pursuant to the settlement, the Company
      modified the exercise price and the quantity of stock warrants originally issued
      to the former consultant. Accordingly, for the nine months ended September
      30,
      2008, the Company recorded a legal settlement expense of
      $359,595.


15





**ITEM 2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**




**Overview**




We
      are a
      development stage renewable biofuels provider that is marketing a new class
      of
“second generation” biofuels for use in power generation, commercial and
      industrial heating and marine transportation. 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.





Our
      business commenced in February 2006. Our activities since inception have
      included acquiring our exclusive license, conducting research and development
      to
      improve our product, conducting test burns at power generation facilities,
      launching a pilot production facility, entering into biofuel sales agreements
      in
      both the power generation and commercial heating markets, entering into site
      lease and terminaling services agreement and raising equity capital. Our costs
      have consisted mainly of research and development relating to our product and
      general and administrative costs. We have incurred annual operating losses
      since
      inception and expect to incur substantial operating losses in the future in
      connection with the development of our core products. As of September 30,
      2008, we had an accumulated deficit of $27.6 million.





The
      operation and development of our business will require substantial additional
      capital to fund our operations, payments due under the exclusive license, the
      acquisition or development of manufacturing plants, research and development,
      and other initiatives. In the event we do not raise sufficient capital to meet
      our obligations, we are likely to be unable to continue as a going concern.
      If
      such additional financing is not available you may lose your entire investment
      in our company.




Our
      long-term business strategy consists of developing two revenue streams: (1)
      direct sales from manufacturing plants that we may purchase or build (either
      directly or through joint ventures) in order to process, market and sell our
      chemical additive and/or biofuel using our proprietary technology and (2) the
      collection of royalties through sublicensing our proprietary technology. Our
      near-term business strategy is focusing on direct sales of our biofuel produced
      at manufacturing plants that we may purchase or build, either directly or
      through joint ventures. To execute this strategy, we are pursuing an active
      test
      burn program where we are working with a number of energy producers to validate
      our biofuel. We have completed a number of test burns and expect to conduct
      more
      in the future. In addition, we are working to improve our ability to produce
      our
      biofuel and are continuing negotiations to lease or construct production
      facilities. We are engaged in a highly competitive business where we compete
      with petroleum-based fuels and other alternative fuels, but we believe we have
      a
      competitive advantage because we have the flexibility to utilize multiple raw
      materials in the production of our biofuel without significant impact on the
      performance of our product. We are actively pursuing our eligibility and
      qualification for tax credits and other government incentives.




To
      date,
      we have entered into two biofuel sales agreements but have not recognized any
      revenue or any costs of revenue. In October 2008, we entered into a biofuel
      sales agreement with the Commonwealth of Massachusetts (“Massachusetts”) and the
      Taunton State Hospital. The agreement provides for Massachusetts to purchase
      up
      to 220,000 gallons of renewable biofuel over a twelve-month period. The hospital
      will be the first facility to use our biofuel product in its industrial burners.
      In June, 2008, we entered into a biofuel sales agreement with Dynegy Oakland
      LLC, a subsidiary of Dynegy, Inc. The agreement provides for Dynegy to purchase
      up to 1.7 million gallons of biofuel per year for use at Dynegy’s power plant in
      Oakland, California, based on Dynegy’s forecasts of a portion of the historical
      fuel consumption at their facility. For both sales agreements there is no
      minimum purchase requirement, and product prices are based on a variable pricing
      formula.




In
      September 2008, we entered into a site lease agreement (the “Lease Agreement”)
      with Pennington Partners, LLC (“Pennington”) to locate our first commercial
      scale biofuel manufacturing plant at a port location in Baltimore, Maryland
      and
      a terminaling services agreement (the “Services Agreement”) with Atlantic
      Terminalling, LLC (“Atlantic”), an affiliate of Pennington, to provide certain
      terminaling services at the site. The Lease Agreement covers the physical
      premises where the production facility will be located as well as approximately
      six million gallons of storage tank capacity and related terminaling facilities.
      Under the Services Agreement, Atlantic will provide terminaling services that
      include the receipt, the unloading and the transfer of raw materials and the
      subsequent transfer and load out of finished product from and to railcars,
      barges and trucks.


16





**Financial
      Operations Overview**




*Research
      and Development Costs*




We
      have
      established a research and development group, headed by our Chief Technology
      Officer, Andrea Festuccia, which is based in Rome, Italy and in Milford,
      Connecticut. We have conducted additional development of the product, as well
      as
      testing in laboratory conditions of the performance of biofuel made with our
      technology. From inception through September 30, 2008, we have incurred
      aggregate research and development costs of approximately $1.7
      million.




Our
      research and development costs consist of expenses incurred in identifying,
      developing and testing our product. These expenses consist primarily of salaries
      and related expenses for personnel, fees paid to professional service providers,
      costs of consultants and the costs of manufacturing batches of our biofuel
      for
      use in conducting test burns.




*General
      and Administrative Expenses*




General
      and administrative expenses consist primarily of the costs associated with
      our
      general management, including salaries, benefits and professional fees such
      as
      legal and accounting expenses. Continued increases will also likely result
      from
      the additional hiring of operational, financial, accounting, marketing and
      information systems personnel. We have nine employees, all of whom are full
      time.




*Interest
      and Other Income (Expense), Net*




Interest
      income consists of interest earned on our cash and short-term investments.
      Interest expense consists of interest incurred related to the license agreement
      payable.




*Income
      Taxes*




We
      have
      not recognized any deferred tax assets or liabilities in our financial
      statements since we cannot assure their future realization. Because realization
      of deferred tax assets is dependent upon future earnings, a full valuation
      allowance has been recorded on the net deferred tax assets, which relate
      primarily to net operating loss carry-forwards.




**Results
      of Operations**




Comparison
      of the three months ended September 30, 2008 and the three months ended
      September 30, 2007




*Research
      and Development Expenses*




Research
      and development expenses were approximately $498,000 for the three months ended
      September 30, 2008 compared to approximately $217,000 for the three months
      ended
      September 30, 2007. The increase in research and development expenses in 2008
      reflects primarily the cost of conducting test burns and costs from conducting
      tests to evaluate additional customized fuel formulations using our proprietary
      blending technology.





*General
      and Administrative Expenses*




General
      and administrative expenses were $1.7 million for the three months ended
      September 30, 2008 compared to $2.2 million for the three months ended September
      30, 2007. The decrease of $0.5 million in 2008 over the prior period was
      primarily attributable to decrease in expenses associated with stock options
      and
      warrants, partially offset by an increase in personnel and related costs to
      support the company’s growth.


17





*Interest*  *Expense*




Interest
      expense was approximately $0.1 million for the three months ended September
      30,
      2008 compared to approximately $0.2 million for the three months ended September
      30, 2007. The decrease is due to a reduction in the License Agreement payable
      balance. Interest expense consists of interest incurred related to the License
      Agreement payable.





*Gain/Loss
      on fair value adjustment*




Loss
      on
      fair value adjustment was zero for the three months ended September 30, 2008
      compared to a gain of approximately $79,000 for the three months ended September
      30, 2007.




Comparison
      of the nine months ended September 30, 2008 and the nine months ended
      September 30, 2007




*Research
      and Development Expenses*




Research
      and development expenses were approximately $841,000 for the nine months ended
      September 30, 2008 compared to approximately $420,000 for the nine months
      ended September 30, 2007. The increase in research and development expenses
      in 2008 reflects primarily the cost of conducting test burns and of evaluating
      additional customized fuel formulations using our proprietary blending
      technology.





*General
      and Administrative Expenses*




General
      and administrative expenses were $5.8 million for the nine months ended
      September 30, 2008 compared to $4.3 million for the nine months ended
      September 30, 2007. The increase of $1.5 million in 2008 over the prior
      period was primarily attributable to an increase in personnel and related costs
      to support the company’s growth, legal expense and accounting
      expense.





*Interest
      Expense*




Interest
      expense was approximately $0.4 million for the nine months ended
      September 30, 2008 compared to approximately $0.6 million for the nine
      months ended September 30, 2007. The decrease is due to a reduction in the
      License Agreement payable balance. Interest expense consists of interest
      incurred related to the License Agreement payable.





*Gain/Loss
      on fair value adjustment*




Loss
      on
      fair value adjustment was approximately $30,000 for the nine months ended
      September 30, 2008 compared to a gain of approximately $630,000 for the
      nine months ended September 30, 2007.




**Liquidity
      and Capital Resources**




*Liquidity*




At
      September 30, 2008, we had $3.8 million in cash, compared to $5.5 million at
      June 30, 2008.




As
      discussed more fully below under the caption “Capital Requirements and
      Resources,” several existing commitments that require significant expenditures
      will continue to impact our liquidity. We recently incurred monthly lease and
      other payment obligations under our new site lease and terminaling service
      agreement and will need to fund upfront production costs associated with
      manufacturing our biofuels under our recent customer contracts. We also will
      need to fund the costs associated with the build out of our biofuel production
      facility in Baltimore Maryland. Under the license agreement with the inventor
      of
      our proprietary technology, we are required to pay $6.0 million over the next
      six years, of which $1.0 million is due in February 2009. We also will continue
      incurring costs to test our technology, enhance research and development, pay
      our employees and sustain operations. As discussed below, although we have
      fully
      funded our operating budget for 2008 and through February 20, 2009, when the
      next license agreement payment is due, we will need additional financing to
      fund
      our operations in 2009.


18




*Cash
      Flows*




Net
      cash
      used in operating activities was approximately $4.4 million for the nine
      months ended September 30, 2008 primarily reflecting our net loss of
      $7.4 million, partially offset by $2.1 million in non-cash stock-based
      compensation expense, approximately $0.2 million in non-cash penalty share
      expense, approximately $0.4 million in non cash warrant expense related to
      legal
      settlement and $0.4 million in non-cash amortization expense associated with
      our
      license agreement payable.




Net
      cash
      used in investing activities was approximately $0.1 for the nine months ended
      September 30, 2008 and consisted of payments for the acquisition of
      property and equipment.




Net
      cash
      provided by financing activities was $6.6 million for the nine months ended
      September 30, 2008, and consisted principally of $7.2 million in net
      proceeds from the issuance of preferred stock, $0.5 in proceeds from the
      exercise of warrants and 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;




·
            constructing
                a production facility in Baltimore, Maryland under our terminal lease
                agreement with Pennington Partners, LLC or with others to supply
                our
                product initially for testing and eventually for the broader biofuel
                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 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.




Although
      we have fully funded our operating budget for 2008, we do not expect our
      available cash as of September 30, 2008 to be sufficient to fund our operations
      for 2009. We will need additional financing to fund future operations and cover
      our net losses. We would likely 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, especially considering the current
      financial market conditions. 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.




We
      have
      financed our operations to date primarily through the sale of our common and
      preferred stock and warrants in privately negotiated transactions with
      accredited investors. In 2008, we have raised $7,589,100 in gross proceeds
      from
      the sale of Series B Convertible Preferred Stock with a conversion price of
      $4.25 per share and warrants to purchase common stock with an initial exercise
      price of $6.25 per share.


19




If
      we
      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 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.




If
      we are
      unable to obtain adequate financing on a timely basis, we may be required to
      delay, reduce the scope of or eliminate one or more of our programs, any of
      which could have a material adverse effect on our business, financial condition
      and results of operations.




We
      expect
      that our available cash and interest income will be sufficient to finance
      currently planned activities through February 20, 2009 when the next payment
      for
      the license agreement is due. These estimates are based on certain assumptions,
      which could be negatively impacted by the matters discussed under “Risk
      Factors.” Future capital requirements could vary significantly and will depend
      on certain factors, many of which are not within our control. These factors
      include, among others, the extent of development and testing of the technology
      needed before commercial operation, the nature and timing of licensing and
      sublicensing activities, costs of plant construction, sales expenses, hiring
      qualified management and employees, responding to competitive pressures and
      complying with regulatory requirements. If we are successful, the expansion
      of
      our business will require us to commit capital that substantially exceeds our
      current financial resources.




**Critical
      Accounting Policies**




Our
      consolidated financial statements and accompanying notes have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires we make estimates,
      judgments and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expense. Management evaluates the accounting policies
      and estimates it uses to prepare the financial statements. We base our estimates
      on assumptions believed to be reasonable under current facts and circumstances.
      The Company’s most significant estimates are the value of its exclusive,
      perpetual life, Master License Agreement and its useful life.




The
      Company recorded its Master License Agreement at cost in accordance with SFAS
      142 “Goodwill and Other Intangible Assets.” The value of the Master License
      Agreement is tested for impairment in accordance with SFAS 144 “Accounting for
      the Impairment or Disposal of Long-Lived Assets,” which requires a review of the
      value of long-lived assets on a periodic basis for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of the assets may
      not
      be recoverable. Recoverability of assets held and used is measured by a
      comparison of the carrying amount of an asset to future undiscounted cash flows
      expected to be generated by the asset. If such assets are considered impaired,
      the impairment to be recognized is measured by the amount by which the carrying
      amount of the asset exceeds the fair value of the assets.




The
      Company prepared a SFAS 144 analysis of the Master License Agreement at December
      31, 2007 by utilizing a relief of royalty valuation method. The premise behind
      this method is that a buyer would be willing to pay a royalty for the right
      to
      use a developed technology in order to gain market share, as opposed to
      developing a new competitive technology. Accordingly, this method measures
      the
      cash flows of the technology via the relief from the royalty on the technology
      that a willing buyer would typically pay. The key variables used in the
      relief-from-royalty method include the projected royalty base (i.e. product
      revenue or volume), a royalty rate and the effect of taxes.




Based
      on
      a review of the Company’s sublicensing agreement with Xethanol and other
      third-party licensing agreements for various alternative fuel technologies,
      the
      revenue base selected was projected gallons of biofuel production. Because
      of
      the uncertainty associated with the Company’s future production, we considered
      three scenarios for a sensitivity analysis. Scenarios 1 and 2 assume the
      Company’s production will equal 1% and 2%, respectively, of total projected U.S.
      biodiesel production in each of the projected periods. Scenario 3 is based
      on
      the Company’s then current estimate of its anticipated production. We applied
      equal probability to each of the three scenarios.




In
      determining a royalty rate for the Technology, we examined the royalty rates
      for
      alternative energy related technologies, including biofuels, as well as the
      Company’s sublicense with Xethanol. Based on this information, we applied a
      $0.10 per gallon royalty. Taxes were estimated based upon a combined effective
      total state and federal tax rate of 40%.


20




Based
      upon our analysis the probability weighted sum of the undiscounted cash flows
      attributable to the Master License Agreement is greater than its carrying value.
      Therefore, the value of the licensed bio-fuel technology is recoverable in
      accordance with SFAS 144.




The
      useful life of the Master License Agreement was assumed to be thirteen years
      based on management’s assessment of the projected duration of economically
      competitive new product life in the alternative-energy industry. The Company
      plans to update its analysis of the Master License Agreement at December 31,
      2008 based on current economic and market conditions.




Other
      significant estimates include the valuation of shares, stock options and
      warrants issued. Actual amounts and results could differ from these estimates
      made by management.





**Off−Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet arrangement or commitment that will have a current
      effect on our financial condition, lead to changes in our financial condition,
      revenues or expenses, results of operations, liquidity, capital expenditures
      or
      capital resources that is material to investors.




**ITEM
      3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Not
      applicable to “smaller reporting companies” under Item 305(e) of Regulation
      S-K.




**ITEM
      4. CONTROLS AND PROCEDURES**




(a)
      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 SEC’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 Chief Executive Officer and Chief 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 evaluate
      the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of the end of the period covered by this report. This evaluation
      was carried out under the supervision of our Chief Executive Officer and Chief
      Financial Officer. Based upon that evaluation, our Chief Executive Officer
      and
      Chief Financial Officer concluded that our disclosure controls and procedures
      are effective at the 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.




(b)
      Changes in Internal Control over Financial Reporting





During
      the quarter ended September 30, 2008, 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.


21




**PART
      II. OTHER INFORMATION**




**ITEM
      1A. Risk Factors**





*An
      investment in our common stock involves a high degree of risk.  You
      should carefully consider the following updated risks and those incorporated
      by
      reference herein together with the other information contained in our SEC
      filings, before you decide to invest in our common stock. The following
      risk factors supplement those risk factors included in our Annual Report on
      Form 10-K for the year ended December 31, 2007 as filed with the SEC on March
      31, 2008 and our  Quarterly Report on Form 10-Q for the quarter ended June
      30, 2008, filed with the SEC on August 14, 2008.  If any of these risks
      actually occur, our business, results of operations and financial condition
      would likely suffer.  In these circumstances, the market price of our
      common stock could decline, and you may lose all or part of your
      investment.*




**Risks
      Related to Our Business**




***It
      has been several months since our last financing, and we are unlikely to be
      able
      to continue as a going concern if we are unable to complete another financing
      by
      the first quarter of 2009, which could be particularly challenging in the near
      term under current financial market conditions.***





We
      have
      incurred a net loss of $21.4 million and negative cash flows from operating
      activities of $9.8 million since inception. We raised approximately $7.6 million
      in our last financing, completed in March and May 2008, and as of September
      30,
      2008, we had approximately $3.8 million of remaining available cash, a decrease
      of approximately $1.7 million compared to June 30, 2008. We also had
      approximately $0.6 million of accounts payable as of September 30, 2008.
      Beginning October 2008, we need to make monthly payments under our new site
      lease and terminaling service agreement and in February 2009, we are required
      to
      make a $1.0 million payment to the inventor of our proprietary technology under
      our license agreement. Accordingly, we are unlikely to be able to continue
      as a
      going concern unless we are able to obtain additional financing, which could
      be
      particularly challenging in the near term under current financial market
      conditions. The expansion of our business will require us to commit significant
      capital resources in amounts substantially in excess of our current financial
      resources. We have financed our operations to date primarily through the sale
      of
      our preferred stock, common stock and warrants in privately-negotiated
      transaction with accredited investors. Any needed financing may not be available
      on acceptable terms, if at all. In addition, future equity financings, if any,
      could be dilutive to then existing shareholders, and may trigger antidilution
      adjustments in our Series B preferred stock and related warrants. If such
      additional financing is not available, you may lose your entire investment
      in
      our company.





**Risks
      Related to Our Common Stock**




***If
      we do not meet the Nasdaq Capital Market (“NASDAQ”) requirements for continued
      listing, our common stock may be delisted which could negatively impact our
      stock’s liquidity.***




We
      began
      trading on NASDAQ on September 23, 2008 after choosing to delist from the
      American Stock Exchange. 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 stockholders’ equity and market capitalization), the distribution of
      our publicly held securities and compliance with NASDAQ listing agreements
      and
      SEC rules and regulations. If our securities are delisted from NASDAQ, they
      may
      be quoted again for trading on the OTC Bulletin Board which may depress demand
      for our shares and limit market liquidity due to the reluctance or inability
      of
      certain investors to buy stocks on the OTC Bulletin Board. Consequently, an
      investor may find it more difficult to trade our securities.




***Our
      common stock is thinly traded and subject to
      volatility.***




Although
      our common stock is currently traded on NASDAQ and previously was traded on
      Amex, it has traded in relatively small volumes. During the quarter ended
      September 30, 2008, an average of only about 30,000 shares traded each day.
      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.


22


**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**




The
      following exhibits, which are furnished with this Quarterly Report or
      incorporated herein by reference, are filed as part of this Quarterly Report.


**Exhibit Number**
              
              **Exhibit
                  Description**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 Articles of Incorporation relating to our Series
                  B
                  Cumulative 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 for the year ended
                  December
                  31, 2007, filed March 31, 2008)10.1
              
              Site
                  Lease Agreement, dated September 12, 2008, by and between Pennington
                  Partners, LLC and New Generation Biofuels Holdings, Inc. (incorporated
                  by
                  reference to Exhibit 10.1 to the Current Report on Form 8-K, filed
                  September 18, 2008).10.2
              
              Terminaling
                  Services Agreement, dated September 12, 2008, by and between Atlantic
                  Terminalling, LLC and New Generation Biofuels Holdings, Inc. (incorporated
                  by reference to Exhibit 10.2 to the Current Report on Form 8-K,
                  filed
                  September 18, 2008).31.1
              
              Certification
                  of the Chief Executive Officer, as adopted pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.31.2
              
              Certification
                  of the Principal Financial and Accounting Officer, as adopted pursuant
                  to
                  Section 302 of the Sarbanes-Oxley Act of 2002.32.1
              
              Certification
                  of the Chief Executive Officer, pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.32.2
              
              Certification
                  of the Principal Financial and Accounting Officer, pursuant to
                  18 U.S.C. Section 1350, as adopted pursuant to Section 906
                  of the Sarbanes-Oxley Act of 2002.


23




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





Date:
                November 18, 2008
            By:
            /s/
                David A. GillespieDavid
                A. GillespiePresident
                and Chief Executive Officer
              (Principal
                Executive Officer)





Date:
                November 18, 2008
            By:
            /s/
                Cary J. ClaiborneCary
                J. ClaiborneChief
                Financial Officer
              (Principal
                Financial and Accounting
                Officer)


24