**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**FORM      10-Q**

|   | x | Quarterly                report pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934 |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------|

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

**NEW      GENERATION BIOFUELS HOLDINGS, INC.**

| Florida                                        | 26-0067474                         |
|------------------------------------------------|------------------------------------|
|                                           |                               |
| (State                or other jurisdiction of | (I.R.S.                Employer    |
|                                           |                               |
| incorporation                or organization)  | Identification                No.) |

----

**INDEX**

| **PART                I. FINANCIAL INFORMATION**    |                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                1.                              | Financial                Statements                                                                                                                                                                                                                                                                                    |   |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                | Consolidated                balance sheets as of March 31, 2008 (Unaudited) and December 31,                2007                                                                                                                                                                                                       | 3 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                | Consolidated                statements of operations for the three months ended March 31, 2008                (Unaudited), for the three months ended March 31, 2007 (Unaudited)                and for                the period from February 28, 2006 (Inception) through March 31, 2008                (Unaudited) | 4 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                | Consolidated                statement of stockholders’ equity for the three months ended March 31,                2008 (Unaudited)                                                                                                                                                                               | 5 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                | Consolidated                statements of cash flows for the three months ended March 31, 2008                (Unaudited), for the three months ended March 31, 2007 (Unaudited)                and for                the period from February 28, 2006 (Inception) through March 31, 2008                (Unaudited) | 6 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                | Notes                to consolidated financial statements                                                                                                                                                                                                                                                              | 7-12 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                2.                              | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                                                                                                                              | 13-17 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                3.                              | Qualitative                and Quantitative Disclosures About Market Risk                                                                                                                                                                                                                                              | 17 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                4.                              | Controls                and Procedures                                                                                                                                                                                                                                                                                 | 18 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| **PART                II. OTHER INFORMATION**  |                                                                                                                                                                                                                                                                                                                   |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                1A.                             | Risk                Factors                                                                                                                                                                                                                                                                                            | 19 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Item                6.                              | Exhibits                                                                                                                                                                                                                                                                                                               | 20-21 |
|                                                |                                                                                                                                                                                                                                                                                                                   |   |
| Signatures                                          |                                                                                                                                                                                                                                                                                                                   | 22 |

----

| **NEW                GENERATION BIOFUELS HOLDINGS, INC.** |
|-----------------------------------------------------------|
| **(A                Development Stage Enterprise)**       |
| **Consolidated                Balance Sheets**            |

|                                                                                |   |                      |        |                        |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------|-------------|-----------------------------|--------|
|                                                                                |   |                      |        |                        |   |
|                                                                                |   |  March                31, |        | December                31, |   |
|                                                                                |   |  2008                     |        | 2007                        |   |
| ASSETS                                                                              |   |                           |        |                        |   |   |   |
|                                                                                |   |                           |        |                        |   |   |   |
| Current                assets:                                                      |   |                           |        |                        |   |   |   |
| Cash                                                                                |   | $                              | 4,493,574   |                        | $      | 1,644,145 |   |
| Prepaid                expenses                                                     |   |                           | 78,559      |                        |   | 84,968 |   |
| Total                current assets                                                 |   |                           | 4,572,133   |                        |   | 1,729,113 |   |
|                                                                                |   |                           |        |                        |   |   |   |
| License                agreement                                                    |   |                           | 8,061,300   |                        |   | 8,061,300 |   |
|                                                                                |   |                           |        |                        |   |   |   |
| TOTAL                ASSETS                                                         |   | $                              | 12,633,433  |                        | $      | 9,790,413 |   |
|                                                                                |   |                           |        |                        |   |   |   |
|                                                                                |   |                           |        |                        |   |   |   |
| LIABILITIES                AND STOCKHOLDER'S EQUITY                                 |   |                           |        |                        |   |   |   |
|                                                                                |   |                           |        |                        |   |   |   |
| Current                liabilities:                                                 |   |                           |        |                        |   |   |   |
|                                                                                |   |                           |        |                        |   |   |   |
| Accounts                payable and accrued expenses                                |   | $                              | 533,371     |                        | $      | 634,587 |   |
| Loan                payable-related party                                           |   |                           | 50,000      |                        |   | 50,000 |   |
| License                agreement payable-current portion                            |   |                           |        |                        |   |   |   |
| (net                of unamortized discount of $453,410 and $78,153)                |   |                           | 1,396,590   |                        |   | 921,847 |   |
| Accrued                dividend on preferred stock                                  |   |                           | 290,813     |                        |   | 210,275 |   |
| Liability                under registration rights agreement                        |   |                           | 149,038     |                        |   | 78,956 |   |
| Total                current liabilities                                            |   |                           | 2,419,812   |                        |   | 1,895,665 |   |
|                                                                                |   |                           |        |                        |   |   |   |
| License                agreement payable                                            |   |                           |        |                        |   |   |   |
| (net                of unamortized discount of $1,464,131 and $1,993,830)           |   |                           | 3,535,869   |                        |   | 4,006,170 |   |
|                                                                                |   |                           | 5,955,681   |                        |   | 5,901,835 |   |
|                                                                                |   |                           |        |                        |   |   |   |
|                                                                                |   |                           |        |                        |   |   |   |
| Stockholders'                equity:                                                |   |                           |        |                        |   |   |   |
| Series                A Cumulative Convertible Preferred Stock: $100 stated         |   |                           |        |                        |   |   |   |
| value,                300,000 shares authorized, 39,550 and 42,050 shares           |   |                           |        |                        |   |   |   |
| issued                and outstanding as of March 31, 2008 and                      |   |                           |        |                        |   |   |   |
| December                31, 2007, respectively                                      |   |                           | 1,528,199   |                        |   | 1,624,798 |   |
| Series                B Cumulative Convertible Preferred Stock: $100 stated         |   |                           |        |                        |   |   |   |
| value,                250,000 shares authorized, 43,986 shares issued and           |   |                           |        |                        |   |   |   |
| outstanding                as of March 31, 2008                                     |   |                           | 3,007,375   |                        |   | - |   |
| Common                stock, $0.001 par value, 100,000,000 shares                   |   |                           |        |                        |   |   |   |
| authorized;                18,285,964 and 18,165,793 shares issued and              |   |                           |        |                        |   |   |   |
| outstanding                as of March 31, 2008 and December 31, 2007, respectively |   |                           | 18,286      |                        |   | 18,166 |   |
| Additional                paid-in-capital                                           |   |                           | 22,576,974  |                        |   | 18,955,101 |   |
| Deficit                accumulated during the development stage                     |   |                           | (20,453,082 | )                           |   | (16,709,487 | ) |
| Total                stockholders' equity                                           |   |                           | 6,677,752   |                        |   | 3,888,578 |   |
|                                                                                |   |                           |        |                        |   |   |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                           |   | $                              | 12,633,433  |                        | $      | 9,790,413 |   |

----

|  **NEW                GENERATION BIOFUEL HOLDINGS, INC.** |
|----------------------------------------------------------------|
|  **(A                Development Stage Enterprise)**      |
|  **Consolidated                Statements of Operations** |

|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
|----------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|                                                     |   |   | For                the Three Months Ended March 31, 2008 |   |   | For                the Three Months Ended March 31, 2007 |   |   | For                the Period from February 28, 2006                (Inception) to March 31, 2008 |   |
| Operating                expenses:                       |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Research                and development expenses         |   | $      | 196,841                                                  |   |   | 103,282                                                  |   | $      | 1,060,291                                                                                         |   |
| Merger                expenses                           |   |   | -                                                        |   |   | -                                                        |   |   | 340,000                                                                                           |   |
| General                and administrative expenses       |   |   | 1,899,427                                                |   |   | 1,119,848                                                |   |   | 13,717,544                                                                                        |   |
|  Total                operating expenses            |   |   | 2,096,268                                                |   |   | 1,223,130                                                |   |   | 15,117,835                                                                                        |   |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Net                loss from operations                  |   |   | (2,096,268                                               | )      |   | (1,223,130                                               | )      |   | (15,117,835                                                                                       | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Interest                income                           |   |   | 5,269                                                    |   |   | -                                                        |   |   | 54,803                                                                                            |   |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Interest                expense                          |   |   | (154,442                                                 | )      |   | (193,683                                                 | )      |   | (1,566,907                                                                                        | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Other                expense                             |   |   | -                                                        |   |   | -                                                        |   |   | (250,000                                                                                          | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| (Loss)                gain on fair value adjustment      |   |   | (20,404                                                  | )      |   | 445,995                                                  |   |   | 611,032                                                                                           |   |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Net                loss                                  |   |   | (2,265,845                                               | )      | $      | (970,818                                                 | )      |   | (16,268,907                                                                                       | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Preferred                dividends                       |   |   | (1,477,750                                               | )      |   | -                                                        |   |   | (4,184,175                                                                                        | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Net                loss available to common shareholders |   | $      | (3,743,595                                               | )      | $      | (970,818                                                 | )      | $      | (20,453,082                                                                                       | )      |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Basic                and diluted net loss per share      |   | $      | (0.21                                                    | )      | $      | (0.06                                                    | )      |   |                                                                                              |   |
|                                                     |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| Weighted                average number of                |   |   |                                                     |   |   |                                                     |   |   |                                                                                              |   |
| shares                outstanding                        |   |   | 18,227,292                                               |   |   | 17,091,250                                               |   |   |                                                                                              |   |

----

| **NEW                GENERATION BIOFUELS HOLDINGS, INC.**                                         |
|---------------------------------------------------------------------------------------------------|
| **(A                Development Stage Enterprise)**                                               |
|                                                                                              |
| Condensed                Statement of Changes in Stockholders' Equity                             |
| For                the Period from February 28, 2006 (Inception) to March 31,                2008 |
| (Unaudited)                                                                                       |

|                                                                                                                |   |   | **Common                Stock** |   |  **Preferred                Stock - Series A** |   | **Preferred                Stock - Series B** |   |                **Additional** |   | **Deficit                Accumulated During the****Development** |   |             |      |
|---------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------|--------|------------------------------------|--------|------------------------------------------------------------------|--------|------------------|-----------|
|                                                                                                                |   |   | **Shares**                      |   | **Amount**                                          |   |  **Shares**                              |   |  **Amount**                   |   |  **Shares**                                                 |   |  **Amount** |      | **Capital** |   | **Stage** |   | **Total** |   |
|                                                                                                                |   |   |                            |   |                                                     |   |                                          |        |                               |   |                                                                  |   |             |           |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |
| Balance                at January 1, 2008                                                                           |   |   |                            |   | 18,165,793                                          |   | $                                             | 18,166 |                               |   | 42,050                                                           |   | $                | 1,624,798 |   |   | - |   | $ | - |   | $ | 18,955,101 |   | $ | (16,709,487 | ) | $ | 3,888,578 |   |
|                                                                                                                |   |   |                            |   |                                                |   |                                          |   |                               |   |                                                             |   |             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation                expense associated with options                                                         |   |   |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | 791,969 |   |   | - |   |   | 791,969 |   |
| Issuance                of options and warrants for services rendered                                               |   |   |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | 269,435 |   |   | - |   |   | 269,435 |   |
| Issuance                of preferred stock and warrants in private offering, net of                costs            |   |   |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | 43,986 |   |   | 3,007,375 |   |   | 1,066,778 |   |   | - |   |   | 4,074,153 |   |
| Dividend                  associated with the beneficial conversion feature of the preferred                  stock |   |   |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | 1,397,212 |   |   | (1,397,212 | ) |   | - |   |
| Conversion                of preferred stock into common stock                                                      |   |   |                            |   | 62,500                                              |   |                                          | 63     |                               |   | (2,500                                                           | )      |             | (96,599   | ) |   | - |   |   | - |   |   | 96,536 |   |   | - |   |   | - |   |
| Exercise                of warrants into common stock                                                               |   |   |                            |   | 57,671                                              |   |                                          | 57     |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | (57 | ) |   | - |   |   | - |   |
| Dividends                accrued on preferred stock                                                                 |   |   |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | - |   |   | (80,538 | ) |   | (80,538 | ) |
| Net                loss                                                                                             |   |        |                            |   | -                                                   |   |                                          | -      |                               |   | -                                                                |   |             | -         |   |   | - |   |   | - |   |   | - |   |   | (2,265,845 | ) |   | (2,265,845 | ) |
|                                                                                                                |   |   |                            |   |                                                |   |                                          |   |                               |   |                                                             |   |             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at March 31, 2008                                                                            |   |        |                            |   | 18,285,964                                          |   | $                                             | 18,286 |                               |   | 39,550                                                           |   | $                | 1,528,199 |   |   | 43,986 |   | $ | 3,007,375 |   | $ | 22,576,974 |   | $ | (20,453,082 | ) | $ | 6,677,752 |   |

----

| **NEW                GENERATION BIOFUELS HOLDINGS, INC.** |
|-----------------------------------------------------------|
| **(A                Development Stage Enterprise)**       |
| **Consolidated                Statement of Cash Flows**   |

|                                                                                                              |   |   | For                    the Three Months ended March 31, 2008 |   |   | For                    the Three Months ended March 31,                    2007 |   |   | For                    the Period from February 28, 2006                    (Inception) to March 31, 2008 |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                              |   |   | (Unaudited)                                                  |   |   | (Unaudited)                                                                     |   |   |  (Unaudited)                                                                                         |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| CASH                    FLOWS FROM OPERATING ACTIVITIES:                                                          |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Net                    loss                                                                                       |   | $      | (2,265,845                                                   | )      | $      | (970,818                                                                        | )      | $      | (16,268,907                                                                                               | )      |
| Adjustments                    to reconcile net loss to net cash used in operating                    activities: |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Amortization                    of discount                                                                       |   |   | 154,442                                                      |   |   | 193,683                                                                         |   |   | 1,566,907                                                                                                 |   |
| Compensation                    expense associated with stock options                                             |   |   | 791,969                                                      |   |   | 610,744                                                                         |   |   | 5,783,359                                                                                                 |   |
| Issuance                      of common stock, options and warrants for services                      rendered    |   |   | 269,435                                                      |   |   | -                                                                               |   |   | 2,554,918                                                                                                 |   |
| Penalty                    share expense                                                                          |   |   | 49,678                                                       |   |   | -                                                                               |   |   | 49,678                                                                                                    |   |
| Loss                    (gain) on fair value adjustment                                                           |   |   | 20,404                                                       |   |   | (445,995                                                                        | )      |   | (611,032                                                                                                  | )      |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Changes                    in operating assets and liabilities:                                                   |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Prepaid                    expenses                                                                               |   |   | 6,409                                                        |   |   | (30,658                                                                         | )      |   | (78,559                                                                                                   | )      |
| Accounts                    payable and accrued expenses                                                          |   |   | (101,216                                                     | )      |   | 144,889                                                                         |   |   | 533,371                                                                                                   |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|  Net                    cash used in operating activities                                                    |   |   | (1,074,724                                                   | )      |   | (498,155                                                                        | )      |   | (6,470,265                                                                                                | )      |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| CASH                    FLOWS FROM INVESTING ACTIVITIES:                                                          |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Acquisition                    of License Agreement                                                               |   |   | -                                                            |   |   | -                                                                               |   |   | (1,500,000                                                                                                | )      |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|  Cash                    used in investing activities                                                        |   |   | -                                                            |   |   | -                                                                               |   |   | (1,500,000                                                                                                | )      |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES:                                                          |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Payments                    for license agreement payable                                                         |   |   | (150,000                                                     | )      |   | -                                                                               |   |   | (2,650,000                                                                                                | )      |
| Proceeds                    from issuance of founders' shares                                                     |   |   | -                                                            |   |   | -                                                                               |   |   | 554                                                                                                       |   |
| Proceeds                    from private offering issuances of common stock, net of                    costs      |   |   | -                                                            |   |   | -                                                                               |   |   | 6,405,483                                                                                                 |   |
| Proceeds                    from private offering issuance of preferred stock, net of                    costs    |   |   | 4,074,153                                                    |   |   | -                                                                               |   |   | 7,892,802                                                                                                 |   |
| Proceeds                    from convertible note payable                                                         |   |   | -                                                            |   |   | -                                                                               |   |   | 765,000                                                                                                   |   |
| Proceeds                    from loan payable - related party                                                     |   |   | -                                                            |   |   | -                                                                               |   |   | 50,000                                                                                                    |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|  Net                    cash provided by financing activities                                                |   |   | 3,924,153                                                    |   |   | -                                                                               |   |   | 12,463,839                                                                                                |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Net                    increase (decrease) in cash and cash equivalents                                           |   |   | 2,849,429                                                    |   |   | (498,155                                                                        | )      |   | 4,493,574                                                                                                 |   |
| Cash                    and cash equivalents - beginning of period                                                |   |   | 1,644,145                                                    |   |   | 1,031,923                                                                       |   |   | -                                                                                                         |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Cash                    and cash equivalents - end of period                                                      |   | $      | 4,493,574                                                    |   | $      | 533,768                                                                         |   | $      | 4,493,574                                                                                                 |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Supplemental                    Disclosure of Non-Cash Investing and Financing                    Activities      |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
|                                                                                                              |   |   |                                                         |   |   |                                                                            |   |   |                                                                                                      |   |
| Payable                    for License Agreement (net of discount)                                                |   | $      | -                                                            |   | $      | -                                                                               |   | $      | 6,015,552                                                                                                 |   |
| License                    Agreement acquired in exchange for issuance of common                    stock         |   | $      | -                                                            |   | $      | -                                                                               |   | $      | 545,747                                                                                                   |   |
| Preferred                    Stock Dividend                                                                       |   | $      | 80,538                                                       |   | $      | -                                                                               |   | $      | 290,813                                                                                                   |   |

----

**      - **

----

| Weighted                Average Exercise Price | $2.69                  |
|------------------------------------------------|------------------------|
| Expected                Life                   | 5                years |
| Volatility                                     | 100.0%                 |
| Dividend                Yield                  | 0%                     |
| Risk-free                interest rate         | 3.08%                  |

----

|                                                        |   | Number                of Shares |      |  Weighted                Average Exercise Price |   | Weighted                Average Remaining Contractual Life (Years) |   | Aggregate                Intrinsic Value |   |
|-------------------------------------------------------------|--------|---------------------------------|-----------|------------------------------------------------------|--------|--------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                        |   |                            |      |                                            |   |                                                               |   |                                     |   |
| Options                outstanding at December 31, 2007     |   |                            | 5,605,000 |                                                 | $      | 2.63                                                               |   |                                     | 8.79   |   |   |   |   |
| Granted                                                     |   |                            | 400,000   |                                                 | $      | 3.50                                                               |   |                                     | 9.79   |   |   |   |   |
| Options                outstanding at March 31, 2008        |   |                            | 6,005,000 |                                                 | $      | 2.69                                                               |   |                                     | 8.62   |   |   |   |   |
| Vested                and expected to vest - March 31, 2008 |   |                            | 4,460,000 |                                                 | $      | 2.63                                                               |   |                                     | 8.55   |   | $ | 14,140,000 |   |
| Options                exercisable at March 31, 2008        |   |                            | 3,415,000 |                                                 | $      | 2.53                                                               |   |                                     | 8.53   |   | $ | 11,263,000 |   |

** **

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

**Overview      **

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**Financial      Operations Overview **

*Research      and Development Costs*

*General      and Administrative Expenses*

*Interest      and Other Income (Expense), Net*

*Income      Taxes*

**Results      of Operations **

*Comparison      of the three months ended March 31, 2008 and the three months ended March      31, 200*
*7*

*Research      and Development Expenses*

*General      and Administrative Expenses*

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*Interest      Expense*

*Gain/Loss      on fair value adjustment*

**Liquidity      and Capital Resources**

***Liquidity***

***Cash      Flows***

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***Capital      Requirements and Resources***

|   | · | 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; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | continuing                operations at our pilot biofuel production facility and constructing                another facility under our arrangements with Twin Rivers 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                a marketing plan for the heating fuel and marine markets 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, 2008; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Critical      Accounting Policies**

**Off−Balance      Sheet Arrangements**

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

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**ITEM      4. CONTROLS AND PROCEDURES **

*Management’s      Report on Internal Control over Financial Reporting*

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**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 material risk and those incorporated      by      reference herein from our Annual Report on Form 10-K for the year ended December      31, 2007, together with the other information contained in our SEC filings,      before you decide to invest in our common stock.  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 Common Stock**

***Our      Series B Preferred Stock and warrants issued in our March and May 2008      private placement include antidilution provisions that, if triggered, could      dilute the ownership interests of our existing common      stockholders.***

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

| **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 Current Report on Form 10-K, filed March 31,                2008).                                                                           |
|                              |                                                                                                                                                                                                                                                                                        |
| 4.1                               | Form                of Warrant (incorporated by reference to Exhibit 4.1 to the Current                Report                on Form 8-K filed October 26, 2006).                                                                                                                      |
|                              |                                                                                                                                                                                                                                                                                        |
| 4.2                               | Form                of $6.00 Warrant (incorporated by reference to Exhibit 4.2 to the                Current                Report on Form 10-K, filed March 31, 2008).                                                                                                                     |
|                              |                                                                                                                                                                                                                                                                                        |
| 4.3                               | Form                of $5.25 Warrant (incorporated by reference to Exhibit 4.3 to the                Current                Report on Form 10-K, filed March 31, 2008).                                                                                                                     |
|                              |                                                                                                                                                                                                                                                                                        |
| 4.4                               | Form                of $6.25 Warrant (incorporated by reference to Exhibit 4.1 to the                Current                Report on 8-K filed March 31, 2008).                                                                                                                            |
|                              |                                                                                                                                                                                                                                                                                        |
| 31.1                              | Certification                of the President and Chief Executive Officer, as adopted pursuant                to                Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                         |
|                              |                                                                                                                                                                                                                                                                                        |
| 31.2                              | Certification                of the Chief Financial Officer, as adopted pursuant to Section 302 of                the Sarbanes-Oxley Act of 2002.                                                                                                                                      |
|                              |                                                                                                                                                                                                                                                                                        |
| 32.1                              | Certification                of the President and Chief Executive Officer, pursuant to 18 U.S.C.                Section 1350, as adopted pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002.                                                           |

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|   |                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2   | Certification                of the Chief Financial Officer, pursuant to 18 U.S.C.                Section 1350, as adopted pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                                                                                |

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**SIGNATURES**

| Date:                May 14, 2008 | By: /s/                David                A. Gillespie |
|-----------------------------------|---------------------------------------------------------------|
|                              | David                A. Gillespie                             |
|                              | President                and Chief Executive Officer          |
|                              |                                                          |

| Date:                May 14, 2008 | By: /s/                Cary                J. Claiborne |
|-----------------------------------|--------------------------------------------------------------|
|                              | Cary                J. Claiborne                             |
|                              | Chief                Financial Officer                       |

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