HCTL Healthcare Tech Ltd (MM)

ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

NexGen has no history of operating a bio-fuels production facility. While Mr. Ram Ajjarapu has extensive experience and knowledge within the ethanol/bio-diesel industry in carrying out projects involving 100 million gallons per year production facilities, NexGen does not have experience in constructing, developing or operating an ethanol or bio-diesel production facility.

We may be unable to manage the start-up of our facilities in a timely and cost-effective manner, and any failure by us to do so would delay our ability to begin producing and selling ethanol or bio-diesel. A delay in start-up operations is likely to further delay our ability to generate revenue and satisfy our debt obligations and our financial condition and results of operations could be materially adversely affected.

We anticipate a period of significant growth, involving the construction and start-up of operations of several production facilities. This period of growth and the start-up of our facilities are likely to be a substantial challenge to us. If we fail to manage this start-up effectively, you could lose all or a substantial part of the value of your shares.

WE MAY BE UNABLE TO MEET THE ADMINISTRATIVE AND OPERATIONAL NEEDS OF OUR DEVELOPMENT AND GROWTH EFFECTIVELY, WHICH COULD RESULT IN OUR INABILITY TO ADEQUATELY INCREASE OUR SALES OR TO EFFICIENTLY OPERATE OUR BUSINESS.

Our strategy envisions a period of rapid growth and that may impose a significant burden on our administrative and operational resources. The completion of construction of our facilities and growth of our business, will require significant investments of capital and management's close attention. Our ability to effectively manage our growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage and retain qualified management, technicians and other personnel. We may be unable to retain and hire the number of qualified persons necessary to operate our facilities effectively.

WE ARE DEPENDENT UPON OUR OFFICERS AND DIRECTORS, AND OUR FAILURE TO HIRE OR THE LOSS OF ANY OF THESE PERSONS COULD ADVERSELY AFFECT OUR OPERATIONS AND RESULTS.

We are dependent upon our officers and directors for execution of our business plan. The assembly of our management team is still not complete. Our failure to hire or the loss of any of our officers or directors could adversely affect the execution of our business plan and have a material adverse effect upon our results of operations and financial position. We do not intend to maintain "key person" life insurance for any of our officers or directors.

OUR MANAGEMENT'S TIME AND ATTENTION WILL BE DIVIDED AMONG OUR PLANTS, AND EACH OF OUR PLANTS WILL BE MANAGED UNDER A SIMILAR MANAGEMENT MODEL, WHICH MAY PREVENT US FROM ACHIEVING A MAXIMUM RETURN FROM ANY ONE PLANT.

Our business model calls for us to establish a U.S. holding company, NewCo, that will wholly-own separate business entities which in turn will each own one of our plants; however each of such entities will be managed by a centralized management team. The demands on our management's time from one plant may, from time to time, compete with the time and attention required for the operation of the other plants. This division of our management's time and attention among our plants may make it difficult for us to realize the maximum return from any one plant.

IF OUR PRINCIPAL AGREEMENTS ARE TERMINATED OR BECOME UNFAVORABLE, OUR PROJECTS MAY FAIL OR BE HARMED IN WAYS THAT SIGNIFICANTLY REDUCE THE VALUE OF YOUR SHARES.

We will be dependent on various contractors, suppliers, lenders and other third parties for the implementation and financing of each project. If agreements with such parties are terminated or if the terms are amended unfavorably to us, our projects may be harmed or even fail. Because we will be dependent on the success of several large-scale projects, the impairment or failure of any of these projects could significantly reduce our production and revenues.

GIVEN THAT ALL OF OUR REVENUE WILL BE PRIMARILY DERIVED FROM THE PRODUCTION AND MARKETING OF ETHANOL AND BIO-DIESEL AND THEIR CO-PRODUCTS, ANY DISRUPTION IN OUR OPERATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

Assuming we will successfully construct and bring some or all of the proposed facilities to operation, our primary source of revenues will be from the sale of ethanol and bio-diesel and related co-products that we will produce at our facilities. We will not have an alternative line of business in the event that we are unable to operate our facilities for any reason. Any delay or stoppage in our anticipated production would substantially reduce our revenues and adversely affect our results of operations.

OUR DEPENDENCY ON KEY SUPPLIERS TO DESIGN AND BUILD OUR FACILITIES AND

SUPPLY NECESSARY EQUIPMENT MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

We are highly dependent upon general contractors and key vendors to design, engineer and build the proposed facilities. We do not have any definitive agreements or understandings with any such contractors or vendors at this time. If one of our future contractors or vendors were to terminate its relationship with us, there is no assurance that we would be able to obtain a replacement contractor or vendor or that a replacement would be able to complete construction within the originally contracted time frame and at the same or a lower price. Any delay in the planning, construction or commencement of operations of our facilities or problems in the design or engineering of our facilities could have a material adverse effect on our production and results of operations and could force us to abandon our business plan.

OUR GENERAL CONTRACTORS, SUPPLIERS AND VENDORS MAY HAVE CONFLICTING INTERESTS THAT COULD CAUSE THEM TO PUT THEIR FINANCIAL INTERESTS AHEAD OF OURS, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT OUR BUSINESS.

Our contractors, suppliers and vendors may experience conflicts of interest that cause them to put their financial interests ahead of our best interests. Our contractors, suppliers and vendors may also have conflicts of interest due to the fact that they are involved in the design and construction of other ethanol/bio-diesel plants. Although schedule and performance guarantees may motivate our contractors, suppliers and vendors to perform their agreements with respect to our facilities, we cannot ultimately require them to devote their full time or attention to our activities. As a result, they may come to have, a conflict of interest in allocating personnel, materials and other resources to our facilities which could result in inefficiencies and delays in our production, which could materially adversely affect our business. Such conflicts of interest may reduce our profitability and the value of our shares.

THE COST AND TIME TO CONSTRUCT OUR FACILITIES AND COMMENCE OPERATIONS MAY

BE MORE THAN WE ANTICIPATE.

The cost to construct our facilities and commence operations may be higher than expected and the construction of any of our facilities could take longer than anticipated. For example, in order to commence construction of our facilities, we will need to obtain numerous governmental and regulatory permits, including the consent of municipal authorities to change the zoning regarding some of our proposed facilities. It may take us significantly more time than anticipated to obtain the necessary permits and consents for us to commence construction.

Any significant increase in the estimated construction cost of, or in the estimated length of time for, one or more of our facilities could hinder our ability to complete construction and would delay our ability to generate revenues and as a result could have a material adverse effect on our business and results of operations or even force us to abandon our business plan. Moreover, our failure to receive any of the required permits or consents could have a material adverse effect on our business and results of operations or even force us to abandon our business plan.

WE MAY ENCOUNTER DEFECTIVE MATERIAL AND WORKMANSHIP OR PROCESS ENGINEERING

THAT COULD CAUSE SIGNIFICANT DELAYS IN THE COMMENCEMENT OF OUR OPERATIONS.

Any defects in material or workmanship may cause substantial delays in the commencement of operations of our facilities. If defects are discovered after commencement of operations, or if our facilities fail to meet the performance criteria, substantial delays in the commencement of operations could occur which may have a material adverse effect on our business and results of operations.

WE WILL BE SUBJECT TO THE RISK OF LOSS DUE TO FIRE BECAUSE ETHANOL AND BIO-DIESEL AND THE MATERIALS TO BE USED TO PRODUCE OUR PRODUCTS ARE HIGHLY FLAMMABLE.

Ethanol and bio-diesel, and products such as natural gas and/or propane which are used in the production thereof, are highly flammable materials and we are therefore subject to the risk of loss arising from fires. The risk of fire associated with these materials cannot be completely eliminated. We intend to maintain insurance policies to reduce losses caused by fire, including business interruption insurance. If any of our production facilities were to be damaged or cease operations as a result of a fire, or if our insurance proves to be inadequate, it would harm our manufacturing capacity and adversely effect our results of operations.

THE CONDITION OF OUR CONSTRUCTION SITES MAY DIFFER FROM WHAT WE EXPECT.

If we encounter concealed or unknown conditions at our facility sites, it could result in an increase in the cost of construction of our facilities and may result in time delays and alternatives may not be available on reasonable terms or at all. Concealed or unknown conditions include any concealed physical conditions at each site that materially differ from the conditions contemplated. Although the sites have undergone limited inspection by NexGen, concealed or unknown conditions are often difficult to detect and there can be no assurance that we will not encounter them. There is no assurance that after full investigation some or all of the sites will be determined to be suitable for the plants. We have not inspected the sites and are relying on NexGen's judgment as to the suitability thereof for the construction and operation of the proposed production facilities.

RISKS RELATED TO FINANCING THE CONSTRUCTION AND DEVELOPMENT OF THE FACILITIES

WE MAY SELL INTERESTS IN OR FORM PARTNERSHIPS OR JOINT VENTURES TO DEVELOP SPECIFIC PROJECTS, WHICH COULD RESULT IN A MATERIAL DECREASE IN OUR INTEREST IN, AND CONTROL OVER, SUCH PROJECTS, MAY AFFECT THE CONSOLIDATION OF THESE PROJECTS IN OUR FINANCIAL STATEMENTS, AND WILL SUBJECT US TO RISKS RELATED TO ATTRACTING AND MAINTAINING RELATIONSHIPS WITH CO-PARTNERS AND CO-VENTURERS.

To finance and develop specific projects, we may sell interests in or form partnerships or joint ventures. Any dispositions of interests in the specific projects may result in a deconsolidation of these project subsidiaries from our consolidated financial results and may result in a material decrease in our interest in, and control over, such projects. In addition, these partnerships or joint ventures may involve the following risks: (i) we may be unable to maintain productive relationships with our co-partners or co-venturers; (ii) we may be unable to locate appropriate parties willing to buy interests or participate in partnerships or joint ventures on a timely and economic basis, if at all; (iii) our co-partner or co-venturer in a project might become bankrupt or encounter liquidity problems; (iv) our co-partner or co-venturer may have economic or business interests or goals that are, or that become, inconsistent with our business interests or goals; (v) we may incur liabilities as the result of the action taken by our co-partner or co-investor; (vi) our co-partner or co-venturer may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; (vii) we may have a right of first refusal to buy out other co-partners or co-venturers, but may be unable to finance such buy-out at the appropriate time; and (viii) we may be unable to sell our interest in a partnership or joint venture if we desire to exit the venture for any reason.

OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED AS A RESULT OF THE RISKS ASSOCIATED WITH ACQUISITIONS OF FUNCTIONAL PLANTS. IN PARTICULAR, WE MAY NOT SUCCEED IN EFFECTIVELY INTEGRATING SUCH ACQUISITIONS.

As part of our business strategy, we may make acquisitions of existing functional plants or of companies owning such plants. We evaluate the tactical or strategic opportunity available related to acquiring existing renewable fuel plants or companies owning such plants. The process of integrating an acquired company's business into our operations, may result in unforeseen operating difficulties and large expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business. Other risks commonly encountered with acquisitions include the effect of the acquisition on our financial and strategic position and reputation, the failure of the acquired business to further our strategies, the inability to successfully integrate or commercialize acquired production facilities or otherwise realize anticipated synergies or economies of scale on a timely basis, and the potential impairment of acquired assets. Moreover, there can be no assurance that the anticipated benefits of any acquisition or investment will be realized. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, and amortization expenses related to intangible assets, any of which could have a material adverse effect on our operating results and financial condition.

WE WILL HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS, WHICH MAY ADVERSELY

AFFECT OUR CASH FLOW AND OUR ABILITY TO OPERATE OUR BUSINESS.

In order to implement our business plan following the Closing, we expect to have a substantial amount of indebtedness which will result in substantial debt service requirements, which could have important adverse consequences that could hinder our ability to conduct our operations, including our ability to: (i) incur additional indebtedness; (ii) make capital expenditures; (iii) make distributions to shareholders, or redeem or repurchase shares; (iv) make certain types of investments or acquisitions; (v) create liens on our assets; and (vi) merge or consolidate or dispose of assets.

A large amount of indebtedness will reduce the funds available to us for operations because a substantial portion of our operating cash flow will be used to pay interest and principal on debt subject all or substantially all of our operating subsidiaries' assets to liens, limit our ability to adjust to changing market conditions, which could make us more vulnerable to a downturn in the economy, the ethanol/bio-diesel industry or our business. We cannot be certain that our earnings will be sufficient to allow us to pay the principal and interest on our debt and meet our other obligations. If we do not have enough money to service our debt, we may be unable to refinance all or part of our debt, sell assets, borrow more money or raise equity on terms acceptable to us, if at all, in order to meet our obligations. Furthermore, if we breach any of the covenants or undertakings in our loan agreements, a lender could require us to immediately repay all loans made by them to us, plus penalties, and they would be entitled to exercise the remedies available to them under our loan agreements, which may include the enforcement of liens against all of our assets. This would have a material adverse effect on our company and may cause us to cease our operations.

OUR INABILITY TO OBTAIN THE DEBT FINANCING NECESSARY TO CONSTRUCT AND OPERATE OUR PLANNED PRODUCTION FACILITIES COULD RESULT IN THE FAILURE OF THOSE PROJECTS.

Our financing plan requires a significant amount of debt financing. The amount and nature of the debt financing that we will be seeking will be subject to fluctuating interest rates and an ever-evolving credit environment as well as general economic factors and other factors over which we have no control. The construction and start-up of each facility is contingent on our ability to arrange debt financing from third party financing sources. If the debt financing we need is not available for any reason, we could be forced to abandon one or more of our projects which singularly or in the aggregate could adversely impact our business and could force us to abandon our business plan.

RISKS RELATED TO OWNERSHIP OF OUR SHARES FOLLOWING THE ARRANGEMENT

THE PRICE OF OUR SHARES HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH

COULD RESULT IN SUBSTANTIAL LOSSES FOR INDIVIDUAL SHAREHOLDERS.

The market price of the Company's ordinary shares during 2007 ranged between a high sales price of $ 2.03 and a low sales price of $ 0.80 and may continue to be highly volatile and subject to wide fluctuations in response to factors including the following, some of which are beyond the Company's control:

o actual or anticipated variations in the Company's quarterly operating results;

o announcements or new pricing practices by the Company or its competitors;

o changes in government regulations relating to the construction of our production facilities and the production of our products;

o results of regulatory inspections;

o changes in earnings estimates or recommendations by research analysts who might follow us or other companies in our industry;

o announcements by the Company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

o additions or departures of key personnel; and

o sales of additional ordinary shares.

In addition, the stock market in general has from time to time experienced extreme price and volume fluctuations. These broad market fluctuations may adversely affect the market price of the Company's ordinary shares, regardless of the Company's actual operating performance.

OUR ISSUING OF ADDITIONAL SHARES WILL DILUTE OR OTHERWISE LIMIT YOUR VOTING

OR ECONOMIC RIGHTS.

To enable us to plan, construct, develop and/or operate each of the production facilities, we expect to seek additional equity financing, which would cause dilution to the holders of our shares, and a reduction in their voting and equity interests. It is currently anticipated that in the first phase of our business plan, in which we intend to construct two ethanol facilities and one bio-diesel facility, we will seek to raise approximately $150 million through equity. Shareholders do not have any preemptive rights with regard to shares to be issued by us in the future in connection with any such additional equity financing. If we sell additional shares, the sale price of those shares could be higher or lower than the price per share of the Company's shares prior to the Arrangement. In addition, it is likely that we will issue in the future options to purchase additional shares of the Company, to attract, retain and reward our key directors, managers, employees, consultants and service providers, an act that would be dilutive to all existing shareholders. We may also decide to pay in kind all or a portion of the purchase price of the land underlying our land options by issuing shares or other securities.

CONCENTRATION OF OWNERSHIP OF THE COMPANY'S SHARES MIGHT LOWER THEIR

TRADING VOLUME.

MAC, the Company's principal shareholder, owns approximately 85% of our outstanding shares and the shares held by MAC are restricted securities under U.S. securities laws. This concentration of ownership may result in low trading volumes of our shares which could adversely affect our shareholders' ability to sell their shares in the short term period or at all.

MAC, THE COMPANY'S PRINCIPAL SHAREHOLDER, EXERTS SIGNIFICANT INFLUENCE OVER US AFTER THE CONSUMMATION OF THE ARRANGEMENT. ITS INTERESTS MAY NOT COINCIDE WITH YOURS AND IT MAY MAKE DECISIONS WITH WHICH YOU MAY DISAGREE.

MAC, the Company's principal shareholder owns approximately 85% of our outstanding shares. As a result, MAC controls substantially all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our company and make some transactions more difficult or impossible without the support of MAC. The interests of MAC may not always coincide with our interests as a company or the interest of other shareholders. Accordingly, MAC could cause us to enter into transactions or agreements that you would not approve or make decisions with which you may disagree.

WE DID NOT MEET THE NASDAQ CAPITAL MARKET INITIAL LISTING STANDARDS FOLLOWING THE CLOSING WHICH WILL RESULT IN THE DELISTING OF OUR SHARES FROM THE NASDAQ CAPITAL MARKET.

Our ordinary shares are traded on the NASDAQ Capital Market, which has adopted rules that establish criteria for initial and continued listing of securities. We have been advised that NASDAQ believes that the Arrangement constitute a reverse merger transaction under NASDAQ Rule 4340. As a result, we were required to meet the NASDAQ Capital Market initial listing standards, which include shareholders' equity of at least $4 million, market value of publicly held shares of at least $15 million, market value of all shares of at least $50 million and a minimum bid price of $4, immediately following the Closing in order to remain listed on NASDAQ. We did not meet such standards. As a result, we anticipate that Nasdaq shall seek to delist our ordinary shares. If our ordinary shares are delisted from the NASDAQ Capital Market, trading in our ordinary shares could be conducted on an electronic bulletin board established for securities that do not meet the NASDAQ listing requirements, and our shares would be subject to the so-called penny stock rules that impose restrictive sales practice requirements on broker-dealers who sell those securities. Consequently, could affect the ability of our shareholders to sell their ordinary shares in the secondary market. The restrictions applicable to shares that are de-listed, as well as the lack of liquidity for shares that are traded on an electronic bulletin board, may adversely affect the market price of such shares.

A LOW MARKET PRICE MAY SEVERELY LIMIT THE POTENTIAL MARKET FOR OUR ORDINARY SHARES.

Our ordinary shares are currently trading at a price substantially below $5.00 per share, subjecting trading in the stock to certain SEC rules requiring additional disclosures by broker-dealers. These rules generally apply to any equity security that has a market price of less than $5.00 per share, subject to certain exceptions (a "penny stock"). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our ordinary shares.

WE MAY NOT EVER DISTRIBUTE DIVIDENDS.

The Company has not paid cash dividends on its ordinary shares in the past and has no plans to pay such dividends in the future. However, the Company does not rule out the possibility of paying such dividends in the future in the appropriate circumstances. An investor should not rely on an investment in the Company if such investor requires dividend income; the only return that such investor may receive may come from the appreciation, if any, in the value of the Company's ordinary shares. In determining whether to pay dividends, the Company's Board of Directors will consider many factors, including its earnings, capital requirements and financial condition. In addition, under Israeli law, the Company may only pay cash dividends from its retained earnings, if any, as calculated under Israeli law.

RISKS RELATED TO GOVERNMENT REGULATION

THE UNITED STATES RENEWABLE FUELS INDUSTRY IS HIGHLY DEPENDENT UPON A MYRIAD OF FEDERAL AND STATE LEGISLATION AND REGULATIONS, AND ANY CHANGES IN LEGISLATION OR REGULATIONS COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

The elimination of or significant reduction in federal ethanol and bio-diesel tax incentives could have a material adverse effect on our results of operations and financial condition. The cost of production of ethanol and bio-diesel is made significantly more competitive with regular gasoline by federal tax incentives. Before January 1, 2005, the federal excise tax incentive program allowed gasoline distributors who blended ethanol with gasoline to receive a federal excise tax rate reduction for each blended gallon they sold while there was no credit for bio-diesel blends. If the fuel was blended with 10% ethanol, the refiner/marketer paid $0.052 less tax per gallon of blended fuel, which equated to an incentive of $0.52 per gallon of ethanol. The $0.52 per gallon incentive for ethanol was reduced to $0.51 per gallon in 2005 and a refund system was created for bio-diesel, allowing an incentive of $0.50 per gallon of bio-diesel. Unless otherwise extended, the refund system for ethanol and bio-diesel will expire at the end of 2010 (2008 in the case of bio-diesel). We cannot provide you with any assurance that the federal tax incentives will be renewed in 2010 (2008 in the case of bio-diesel) or if renewed, on what terms they will be renewed. The elimination or any significant reduction in the federal tax incentives may have a material adverse effect on our results of operations and financial condition.

The effect of the Renewable Fuels Standard, or RFS, in the recent U.S. Energy Policy Act of 2005 is uncertain. The use of fuel oxygenates, including ethanol, was mandated through government regulations, and much of the forecasted growth in demand for ethanol was expected to result from additional mandated use of oxygenates. The Energy Policy Act of 2005, or the Energy Policy Act, however, eliminated the mandated use of oxygenates and established minimum nationwide levels of renewable fuels, including ethanol to be included in gasoline. The Energy Policy Act also included provisions for trading of credits for use of renewable fuels. We can provide no assurance that the favorable ethanol provisions in the Energy Policy Act will not be adversely affected by regulations or the enactment of additional legislation in the future.

FEDERAL REGULATIONS CONCERNING TAX INCENTIVES COULD EXPIRE OR CHANGE WHICH

COULD REDUCE OUR REVENUES.

The U.S. federal government presently encourages ethanol and bio-diesel production by taxing it a lower rate. This currently equates to a $0.51 per gallon subsidy of ethanol and $0.50 per gallon subsidy of bio-diesel. Some states and cities provide additional incentives. The Energy Policy Act of 2005 effectively mandates increases in the amount of annual ethanol and bio-diesel consumption in the United States. The result is that the ethanol/bio-diesel industry's economic structure is highly dependent on government policies. Although current policies are favorable factors, any major change in federal policy, including a decrease in ethanol/bio-diesel production incentives, would have significant adverse effects on our proposed plan of operations and cause us to discontinue our ethanol/bio-diesel business.

There is disagreement in the scientific community about the wisdom of policies encouraging ethanol/bio-diesel production, which could result in changes in governmental policies concerning ethanol.

Some past studies have challenged whether ethanol is an appropriate source of fuel and fuel additives because of concerns about energy efficiency, potential health effects, cost and impact on air quality. Federal energy policy, as set forth in the Energy Policy Act of 2005, strongly supports ethanol production. If a consensus develops that ethanol production does not enhance the U.S. overall energy policy, our ability to produce and market ethanol could be materially and adversely affected.

THE COST OF COMPLIANCE AND/OR NON-COMPLIANCE WITH THE EXTENSIVE ENVIRONMENTAL LAWS AND REGULATIONS THAT APPLY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

We will be subject to various federal, state and local environmental laws and regulations, with regards, inter alia, to the construction of the facilities, and operation of the plants, such as, discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials. We are required to obtain permits that must be renewed from time to time to operate our business. Additionally, compliance with new or amended environmental laws, regulations and/or permits, or new interpretations of such laws, regulations and/or permits, could require us to incur significant expense. Such changes in laws, regulations and/or permits, or increased enforcement by governmental authorities, may have a material adverse effect on our financial condition. These laws, regulations and permits may limit our operations, require us to alter our production process or purchase pollution control equipment, any of which could negatively impact our business. We may not at all times be in complete compliance with these laws, regulations and/or permits and we cannot guarantee that we will be successful in obtaining all permits required to operate our business. A violation of these laws and regulations or permits can result in significant fines, criminal sanctions, permit revocations, damages and/or operational shutdowns, all or any of which may adversely affect our business.

WE MAY BE SUBJECT TO LEGAL ACTIONS BROUGHT BY THIRD PARTIES FOR ACTUAL OR ALLEGED VIOLATIONS OF CERTAIN OF OUR ENVIRONMENTAL PERMITS OR ENVIRONMENTAL LAWS AND REGULATIONS.

We also may be subject to legal actions from third parties alleging that we have an obligation to remediate or respond to an environmental condition or alleging property damage and/or personal injury resulting from the handling, producing, storing, transporting, and/or using our raw materials and/or products. Ethanol and bio-diesel production may produce an odor which may be objectionable to surrounding residents, and may increase dust in the vicinity of the plant due to our operations and the transportation of grain to our facilities and transportation of ethanol, bio-diesel, glycerin and distillers grains from our facilities. Such activities could subject us to nuisance, trespass or similar claims by employees of our facilities or property owners or residents in the vicinity of the plant. The occurrence of events which result in significant personal injury or damage to property or third parties that is not fully covered by insurance could have a material adverse impact on our results of operations and financial condition.

We may be subject to liability for the investigation and cleanup of environmental contamination at our facilities and/or at off-site properties where we arrange for the disposal of hazardous materials. If such materials are disposed of or released at sites that undergo investigation and/or remediation, we may be responsible under environmental laws for all or part of the costs of such investigation and/or remediation, and for damages to natural resources. We may also be subject to related claims by private parties alleging property damage and/or personal injury due to exposure to hazardous or other materials at, on, under or from such properties. Some of these matters may require us to expend significant amounts of money for investigation and/or cleanup or other costs.

AS A RESULT OF THE CLOSING OF THE PLAN WE ARE NO LONGER CONSIDERED A FOREIGN PRIVATE ISSUER UNDER U.S. SECURITIES LAWS, AND ARE SUBJECT TO BROADER REPORTING REQUIREMENTS, WHICH MAY PUT A STRAIN ON OUR ACCOUNTING, INTERNAL AUDIT AND OTHER MANAGEMENT SYSTEMS AND RESOURCES, AND MAY SUBJECT OUR SHAREHOLDERS TO ADDITIONAL LEGAL REQUIREMENTS.

As a result of the closing of the Plan we are required to comply with reporting requirements for a domestic company rather than a foreign private issuer under U.S. securities laws. As a domestic reporting company, the Company is required to file more detailed reports with the SEC. Furthermore, the Company's officers and directors will also be subject to certain liabilities such as the reporting and "short swing" profit recovery provisions contained in
Section 16 of the U.S. Securities Exchange Act, and reporting requirements to which they are currently exempted, such as the requirement to report their holdings of the Company's shares.

Since NexGen Bio was a privately held company, we anticipate that we will need to implement additional financial and management controls, reporting systems and procedures, implement an internal audit function and hire additional accounting, internal audit and finance staff in order to prepare our new management to comply with the financial reporting and other requirements to which we are or may become subject. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and share price.

RISKS RELATED TO THE ETHANOL AND BIO-DIESEL INDUSTRY

THE MARKET PRICE OF ETHANOL/BIO-DIESEL IS VOLATILE AND SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH MAY CAUSE OUR PROFITABILITY TO FLUCTUATE SIGNIFICANTLY.

The market prices of ethanol/bio-diesel are influenced by many factors, including the price of gasoline and diesel and crude oil and the supply of ethanol/bio-diesel in the market. Oil prices are highly volatile and difficult to forecast due to frequent changes in global politics and the world economy and the demand for petroleum-derived products. The supply and demand for oil throughout the world is affected by incidents in unstable political environments, the demand for oil from rapidly developing countries such as China and India, weather conditions, drilling, extraction and refinery technology, success in exploration, decisions made by OPEC and its member countries, industrial output and many other factors. We cannot predict the future price of crude oil or gasoline. Although the market price of ethanol/bio-diesel has historically tracked the market price of gasoline and diesel, we cannot provide any assurance that this will continue to occur. Low prices for crude oil, gasoline and diesel and the relationship between ethanol/bio-diesel supply and demand may reduce the price of ethanol/bio-diesel to a level that makes it unprofitable to produce. In recent years, the prices of crude oil, gasoline and diesel and ethanol/bio-diesel have all reached historically high levels. If the prices of crude oil, gasoline or diesel were to decline, our revenues and ultimately our profitability may be adversely affected. Fluctuations in the market price of ethanol or bio-diesel may cause our profitability to fluctuate significantly.

OUR BUSINESS WILL BE HIGHLY SENSITIVE TO CORN, SOYBEAN OIL AND OTHER FEEDSTOCK PRICES AND WE GENERALLY WILL NOT BE ABLE TO PASS ON INCREASES IN CORN, SOYBEAN OIL AND OTHER FEEDSTOCK PRICES TO OUR FUTURE CUSTOMERS.

The principal raw materials we will use to produce ethanol and bio-diesel and co-products, including dry and wet distiller grains in ethanol plants and glycerin in bio-diesel plants, will be corn, soybean oil, animal fats and palm oil or other vegetable oils. We may also use other feedstock. As a result, changes in the prices of our feedstock can significantly affect our business. In general, rising feedstock prices result in lower profit margins. For example, because ethanol and bio-diesel compete with non-corn-based fuels, we generally will be unable to pass on increased corn costs to our future customers. At certain levels, feedstock prices may make ethanol and bio-diesel uneconomical to use in fuel markets. The prices of feedstock are influenced by many factors including world supply and demand, weather conditions, crop yields, farmer planting decisions and general economic, market and regulatory factors and subsidies with respect to agriculture. The significance and relative effect of these factors on the price of our feedstock is difficult to predict. Any event that tends to negatively affect the supply of our feedstock, such as adverse weather or crop disease, could increase our feedstock prices and potentially harm our future business. In addition, we may also have difficulty, from time to time, in physically sourcing feedstock on economical terms due to supply shortages. Such a shortage could require us to suspend operations until feedstock is available at economical terms, which would have a material adverse effect on our business, results of operations and financial position. If an additional ethanol/bio-diesel production facility is built in the same general vicinity as where we intend to build our facilities, the price we pay for our feedstock at a facility could increase and the local supply of the feedstock be reduced, which may result in increased costs and reduced profits.

THE SPREAD BETWEEN ETHANOL/BIO-DIESEL AND THE PRICES OF DOMESTIC RENEWABLE RESOURCES CAN VARY SIGNIFICANTLY AND WE DO NOT EXPECT THE SPREAD TO REMAIN AT RECENT HIGH LEVELS WHICH COULD MATERIALLY ADVERSELY IMPACT OUR GROSS MARGINS.

Our gross margins will be principally dependent on the spread between ethanol/bio-diesel and the prices of the renewable resources used in their production (such as corn, soybean, animal fats and palm oils). In the past, this spread fluctuated widely and we cannot provide any assurance that fluctuations in this spread will not continue to occur. In recent periods, the spread between ethanol/bio-diesel and the renewable resources prices reached historical levels. Any reduction in the spread between ethanol/bio-diesel and renewable resources prices, whether as a result of an increase in corn, soybean, animal fats or palm oil prices or a reduction in ethanol/bio-diesel prices, would adversely affect our results of operations and financial condition.

WE MAY ENGAGE IN HEDGING TRANSACTIONS WHICH INVOLVE RISKS THAT CAN HARM OUR

BUSINESS.

In an attempt to partially offset the effects of the volatility of ethanol/bio-diesel prices and feedstock costs, we may take hedging positions in order to limit our exposure to commodity price fluctuations. These may include
(i) purchasing feedstock through spot cash, fixed-price forward and delayed pricing contracts, (ii) utilizing hedging positions in the corn, soybean oil, animal fats and palm oil futures and options markets on the Chicago Board of Trade, or CBOT, to manage the risk of corn, soybean oil, animal fats or palm oil price fluctuations, (iii) entering into contracts to supply a portion of our ethanol or bio-diesel production on a forward basis and, in connection with our feedstock hedging positions, to lock in specific "crush" margins for a portion of our feedstock requirements, and (iv) establishing from time to time an unleaded gasoline/NYMEX RBOB/diesel hedge position using futures to reduce our exposure to unleaded gasoline and diesel price risk. The financial impact of these activities is dependent upon, among other things, the commodity futures prices involved and our ability to sell sufficient products to use all of the feedstock for which we have futures contracts. Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging contract defaults or, in the case of physical contracts, where there is a change in expected differential of an open position and the underlying price in the hedging agreement affecting the actual prices paid or received by us. Hedging activities can themselves result in losses when a position is purchased in a declining market or a position is sold in a rising market. A hedge position often settled in the same time frame as the physical commodity, is either purchased, as in the case of corn, soybean oil, animal fats or palm oil, and natural gas, or sold as in the case of ethanol or bio-diesel. Hedging losses may be offset by a decreased cash price for corn, soybean oil, animal fats and palm oil, and an increased cash price for ethanol and bio-diesel. We may also vary the amount of hedging or other risk mitigation strategies we undertake, and we may choose not to engage in hedging transactions at all. Our hedging activities may cause us to forego additional future profits or result in our making cash payments.

SINCE THE PRODUCTION OF ETHANOL/BIO-DIESEL REQUIRES A SIGNIFICANT SUPPLY OF WATER AND ELECTRICITY, OUR BUSINESS WILL BE MATERIALLY HARMED IF WE ARE UNABLE TO OBTAIN AN ADEQUATE QUALITY AND QUANTITY OF WATER AND ELECTRICITY.

Our facilities will require a significant and uninterrupted supply of water and electricity to operate. We anticipate that we will enter into arrangements with local electric companies and municipalities to provide our supply of electricity and water. However, there can be no assurances that, with respect to water, we will be able to reach definitive agreements for our water supply. In the event that we do not reach definitive agreements for our water supply, we may be required to expend significant amounts to drill wells and to provide for the necessary infrastructure for such well water to reach our planned facilities. In addition, there are no assurances that such water will be of an adequate quality. If the water quality from any of these sources is not adequate, we may, at greater cost to us, need to treat the water or find other sources. In addition, there can be no assurances that the water and electricity companies will be able to reliably supply the water and electricity that we need at any of our facilities or that back-up water wells that we may build will be adequate to sustain production over an extended period of time. If there is an interruption in the supply of water or electricity for any reason, which may include natural disasters, we might be required to halt production. If production is halted for an extended period of time, or there is any interruption in the quantity or quality of our water or electricity, it may have a material adverse effect on our operations, cash flows and financial performance.

THE TRANSPORTATION OF FEEDSTOCK TO US AND OF ETHANOL/BIO-DIESEL TO OUR CUSTOMERS WILL BE AFFECTED BY BUSINESS RISKS THAT ARE LARGELY OUT OF OUR CONTROL, ANY OF WHICH COULD SIGNIFICANTLY REDUCE OUR REVENUES AND OPERATING MARGINS.

The operation of our facilities will depend on our ability to receive adequate amounts of feedstock (over and above our storage capability) in a timely manner and our failure to receive sufficient feedstock could have a material adverse effect on our production, revenues and results of operations. We anticipate purchasing corn, soybean oil, animal fats and other feedstock from states in the U.S. Midwest, to be delivered to us by rail and truck. We will rely on third parties to transport feedstock to us and our ethanol/bio-diesel to our customers. The transportation companies with whom we contract may be subject to risks that are largely out of their and our control, including weather, limitations on capacity in the transportation industry, security measures, fuel prices, taxes, license and registration fees, and insurance premiums. In addition, to the extent we will rely upon delivery by trains and trucks of feedstock to us and ethanol/bio-diesel to our customers, we may be affected by any overall shortage of rail road service or truck drivers caused by the Hazmat Threat Assessment Program implemented under the US Patriot Act or any other security measures instituted as a result of the threat of terrorism. This shortage may result in increased shipping costs or delays in transport, which could adversely affect our production and profits.

WORK STOPPAGES AND OTHER LABOR RELATIONS ISSUES COULD RESULT IN DECREASED SALES OR INCREASED COSTS, EITHER OF WHICH WOULD NEGATIVELY IMPACT OUR FINANCIAL CONDITION AND RESULTS OF OPERATION.

We do not anticipate that our employees will be unionized. However, while we believe that our relations with employees will be satisfactory, any prolonged work stoppage or strike could have a negative impact on our business, financial condition or results of operations. In addition, our suppliers, contractors or other third parties associated with the construction of our facilities or the operation of our business may have unionized work forces. A labor strike, work stoppage or slowdown by unionized employees could halt or slow the construction of our facilities or the production, transportation or sale of our products, which could increase our costs and have a significant adverse impact on our operations.

NATURAL DISASTERS, SUCH AS FIRES, HURRICANES, FLOODS, UNUSUALLY HEAVY OR PROLONGED RAIN AND DROUGHTS MAY CAUSE FLUCTUATIONS IN THE PRICE, AVAILABILITY AND QUALITY OF SUPPLIES, LABOR AND RAW MATERIALS WHICH COULD RESULT IN PRODUCTION DELAYS AND INCREASE COSTS CAUSING A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

Fluctuations in the price, availability and quality of supplies, labor, and raw materials that we need in order to produce, transport and sell ethanol/bio-diesel could have a material adverse effect on our construction, cost of sales or ability to meet our customers' demands. The price and availability of such supplies, labor, and raw materials may fluctuate significantly, depending on many factors, including natural disasters, such as fires, hurricanes, floods, unusually heavy or prolonged rain, and droughts natural resources. These events can also cause increased freight costs.

OUR BUSINESS WILL BE SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD

ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION.

Our operating results will be influenced by seasonal fluctuations in the price of our primary operating inputs such as corn, soybean oil, animal fats and palm oil, and the price of our primary products, ethanol and bio-diesel. In addition, ethanol and bio-diesel prices are substantially correlated with the price of unleaded gasoline and diesel. The price of unleaded gasoline and diesel tends to be highest in the summer and winter months. Given our lack of operating history, we do not know yet how these seasonal fluctuations will affect our results over time.

WE WILL BE DEPENDENT ON OTHERS FOR THE SALE OF OUR PRODUCTS.

As is customary in the ethanol/bio-diesel industry, we intend to sell ethanol/bio-diesel and their by-products through strategic alliance partners or marketing firms as opposed to maintaining our own sales force. As such, we will be highly dependent on third parties to sell our products. Such third parties may not have exclusive contracts with us and therefore may put the interests of their other customers, which may be competitors to us, ahead of our interests.

WE WILL OPERATE IN A COMPETITIVE INDUSTRY AND COMPETITION MAY NEGATIVELY

IMPACT OUR PROFITABILITY.

We will be in competition with numerous other ethanol/bio-diesel producers, some of whom may have greater resources than we do. Additional ethanol/bio-diesel producers may enter the market if the demand for ethanol/bio-diesel increases and existing producers may increase the capacity of their current plants or build new ethanol/bio-diesel production facilities. The largest ethanol/bio-diesel producers in the United States include Archer-Daniel-Midland Company, VeraSun Energy Corporation, Hawkeye Holdings, Inc., Aventine, Cargill, Inc. and Abengoa Bioenergy Corp., all of which are capable of producing as much or more ethanol/bio-diesel than we expect to initially produce.

We also face increasing competition from international suppliers of ethanol/bio-diesel. According to the Renewable Fuel Association, or RFA, Brazil is currently the world's second largest producer and exporter of ethanol/bio-diesel. In Brazil, ethanol/bio-diesel is produced primarily from sugarcane, which is also used to produce food-grade sugar. Brazil experienced a dramatic increase in ethanol/bio-diesel production and trade in 2006, exporting several million gallons to the U.S. alone. Ethanol/bio-diesel imported from Brazil may be a less expensive alternative to U.S. domestically produced ethanol, which is primarily made from corn. For example, the current $0.54 per gallon import duty imposed on Brazilian ethanol may be reduced in the future. Competition from ethanol/bio-diesel imported from Brazil may affect our ability to sell our ethanol/bio-diesel profitably, which would reduce the value of your shares.

Lastly, ethanol/bio-diesel is not the only product that can be added to gasoline to reduce emissions and increase octane levels. Oil companies have historically used methyl tertiary butyl ether, or MTBE, as a fuel additive to reduce emissions, and although the use of MTBE has been limited or banned in 25 states in the U.S. due to potentially adverse environmental effects from its production, it is still used by several major oil companies in some markets. Alternatives to ethanol/bio-diesel and MTBE are continually under development and existing alternatives, such as alkylates and ethyl tertiary butyl ether, or ETBE, may become more cost effective. Our competitors may be able to successfully develop and market alternatives to ethanol/bio-diesel which could adversely affect our business and results of operations.

NEW PLANTS UNDER CONSTRUCTION OR DECREASES IN THE DEMAND FOR ETHANOL OR BIO-DIESEL MAY RESULT IN EXCESS PRODUCTION CAPACITY IN OUR INDUSTRY CAUSING A MATERIAL ADVERSE EFFECT ON OUR REVENUES AND PROFITABILITY.

According to the Renewable Fuels Association of the U.S. Energy Information Administration, domestic ethanol production capacity has increased steadily from
1.77 BGY (or billion gallons per year) in 2001 to an annualized rate of approximately 4.9 BGY in 2006. In addition, 2006 closed with no fewer than 73 bio-refineries under construction in the U.S. and 8 expanding that are expected to add 6 billion gallons of new production capacity by 2009. According to the U.S. National Bio-diesel Board, there are 101 bio-diesel production plants under construction or expansion as of June 2007 representing a total potential production of 1.89 BGY. Excess capacity in the ethanol and bio-diesel industries would have an adverse impact on our results of operations, cash flows and financial condition. In a manufacturing industry with excess capacity, producers have an incentive to manufacture additional products for so long as the price exceeds the marginal cost of production. This incentive can result in the reduction of the market price of ethanol/bio-diesel to a level that is inadequate to generate sufficient cash flow to cover our costs. In addition, increased production of ethanol/bio-diesel could result in increased demand for corn, soybean oil, animal fats, palm oil or other feedstock. This could result in higher prices for corn, soybean oil, animal fats, palm oil and other feedstock and cause higher ethanol/bio-diesel production costs and, in the event that we are unable to pass increases in the price of corn or other feedstock to our customers, would result in lower profits. Excess capacity may also weaken pricing for wet distiller grains with solubles, known as WDGS, or dry distiller grains with solubles, known as DDGS, an ethanol co-product we intend to produce and sell to local feedyards and feed lots. Any material decline in the price of ethanol, WDGS or DDGS will adversely affect our revenues and results of operations.

Excess capacity may result or intensify from increases in capacity coupled with insufficient demand. Demand could be impaired due to a number of factors, including regulatory developments and reduced U.S. gasoline and diesel consumption. Reduced gasoline and diesel consumption could occur as a result of increased prices for gasoline and diesel or crude oil.

For example, price increases could cause businesses and consumers to reduce driving or acquire vehicles with more favorable gasoline mileage. There is some evidence that this has occurred in the recent past as U.S. gasoline prices have increased.

DEVELOPMENT OF ALTERNATIVE ETHANOL OR BIO-DIESEL PRODUCTION SYSTEMS OR

ALTERNATIVE FUELS COULD AFFECT OUR RESULTS OF OPERATIONS.

Alternative fuels and gasoline and diesel oxygenates production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing more efficient engines, hybrid engines and alternative clean power systems using fuel cells or clean burning gaseous fuels. Vehicle manufacturers are working to develop vehicles that are more fuel efficient and have reduced emissions using conventional gasoline. Vehicle manufacturers have developed and continue to work to improve hybrid technology, which powers vehicles by engines that utilize both electric and conventional gasoline fuel sources. The emerging fuel cell industry may offer a technological option to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. If the fuel cell and hydrogen industries continue to expand and gain broad acceptance, and hydrogen becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. This additional competition could reduce the demand for ethanol or bio-diesel, which would negatively impact our profitability.

In addition, many of our competitors invest heavily in research and development of alternative ethanol or bio-diesel production systems and alternative fuels. Our inability to meet the substantial capital investments required to remain technologically competitive could result in our competitors being able to produce ethanol or bio-diesel more cost effectively or produce less expensive alternative fuels, which could adversely affect the demand for our production. These events could have a material adverse effect on our business.

CORN-BASED ETHANOL MAY COMPETE WITH CELLULOSE-BASED ETHANOL IN THE FUTURE, WHICH COULD MAKE IT MORE DIFFICULT FOR US TO PRODUCE ETHANOL ON A COST-EFFECTIVE BASIS AND COULD REDUCE THE VALUE OF YOUR INVESTMENT.

Most ethanol is currently produced from corn and other raw grains, such as milo or sorghum (especially in the United States Midwest). The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass such as agricultural waste, forest residue, municipal solid waste, and other biomass material. This trend is driven by the fact that cellulose-based biomass is generally cheaper to obtain than corn and that the use of cellulose-based biomass to produce ethanol would create opportunities to locate plants and produce ethanol in areas that are not suitable to grow corn in significant amounts. Although the current technology for converting cellulose-based biomass to ethanol is not sufficiently efficient to be competitive with ethanol produced from corn, a report by the U.S. Department of Energy entitled "Outlook for Biomass Ethanol Production and Demand" indicates that new conversion technologies may be developed in the future. If an efficient method of producing ethanol from cellulose-based biomass is developed, we may not be able to compete effectively. Our facilities will not be equipped to convert cellulose-based biomass into ethanol, and to convert our facilities to be able to process cellulose-based ethanol would require significant additional capital investments. If we are unable to produce ethanol as cost-effectively as cellulose-based producers, our ability to generate revenue will be negatively impacted and your shares could lose value.

CONSUMER RESISTANCE TO THE USE OF ETHANOL OR BIO-DIESEL, WHICH MAY BE BASED ON THE BELIEFS THAT ETHANOL IS EXPENSIVE, ADDS TO AIR POLLUTION, HARMS ENGINES OR TAKES MORE ENERGY TO PRODUCE THAN IT CONTRIBUTES, MAY AFFECT THE DEMAND FOR ETHANOL AND BIO-DIESEL.

Certain individuals believe that the use of ethanol/bio-diesel will increase consumer gasoline prices such as at gas stations. Some also believe that ethanol/bio-diesel adds to air pollution and harms car and truck engines. Still other consumers believe that the process of producing ethanol/bio-diesel actually uses more fossil energy, such as oil and natural gas, in relation to the amount of ethanol/bio-diesel that is produced and its benefits. These consumer beliefs could potentially be wide-spread. If consumers choose not to buy ethanol/bio-diesel, it would affect the demand for our products and negatively affect our profitability and financial condition.

THE EXPANSION OF DOMESTIC ETHANOL AND BIO-DIESEL PRODUCTION IN COMBINATION WITH STATE BANS ON MTBE AND/OR STATE RENEWABLE FUELS STANDARDS MAY BURDEN RAIL AND TERMINAL INFRASTRUCTURE, RAISING THE COST OF OUR SHIPMENT TO BLENDING TERMINALS.

If the volume of ethanol/bio-diesel shipments continues to increase and blenders switch from MTBE to ethanol and bio-diesel, there may be weaknesses in infrastructure such that our ethanol/bio-diesel cannot reach its target markets. Many terminals may need to make infrastructure changes to blend ethanol/bio-diesel instead of MTBE. If the blending terminals do not have sufficient capacity or the necessary infrastructure to make the switch, there may be an oversupply of ethanol/bio-diesel in the market, which could depress ethanol/bio-diesel prices and negatively impact our financial performance. In addition, rail infrastructure may be inadequate to meet the expanding volume of ethanol/bio-diesel shipments, which could prevent us from shipping our products to our target markets.

Substantial development of infrastructure will be required for our operations and the ethanol/bio-diesel industry generally, to grow. Areas requiring expansion include, but are not limited to additional rail capacity, additional storage facilities for ethanol/bio-diesel, increases in truck fleets capable of transporting ethanol/bio-diesel within localized markets, expansion of refining and blending facilities to handle ethanol/bio-diesel, and growth in service stations equipped to handle ethanol/bio-diesel.

There is no assurance that the substantial investments required for these infrastructure changes and expansions will be made or that they will be made on a timely basis. Any delay or failure in making the changes to or expansion of infrastructure could hurt the demand or prices for our products, impede our delivery of products, impose additional costs on us or otherwise have a material adverse effect on our results of operations or financial position. Our business is dependent on the continuing availability of infrastructure and any infrastructure disruptions could have a material adverse effect on our business.

ETHANOL CAN BE IMPORTED DUTY FREE FROM CERTAIN COUNTRIES INTO THE UNITED

STATES, WHICH MAY UNDERMINE THE ETHANOL INDUSTRY IN THE UNITED STATES.

Ethanol can be imported into the U.S. duty-free from some countries, which may negatively affect the ethanol industry in the U.S. and our operations. Imported ethanol is generally subject to a $0.54 per gallon tariff that was designed to offset the $0.51 per gallon ethanol incentive available under the federal excise tax incentive program for refineries that blend ethanol in their fuel. A special exemption from the tariff exists for ethanol imported from 24 countries in Central America and the Caribbean, which is limited to a total of 7% of the previous year's U.S. production per year. Imports from the exempted countries may increase as a result of new plants under development in such countries and also due to increased domestic production. In addition, reductions in the tariff currently applicable to ethanol imports from countries other than those in Central America and the Caribbean that qualify for the exemption, or increases in the percentage of ethanol that may be imported from Central America and the Caribbean on a duty-free basis, may result in more ethanol from countries having a lower cost of production than the United States being imported into the U.S. An increase in such imported ethanol could adversely affect the demand for domestically-produced ethanol and the price at which we will be able to sell our ethanol.

COMPETITION FOR QUALIFIED PERSONNEL IN THE ETHANOL AND BIO-DIESEL INDUSTRIES IS INTENSE AND MAY PREVENT US FROM HIRING AND RETAINING QUALIFIED PERSONNEL TO OPERATE OUR PRODUCTION PLANTS.

Our success will depend in part on our ability to attract and retain competent personnel. For each of our plants, we must hire qualified managers, engineers, operators and other personnel, which can be challenging in the rural communities in which our facilities will be located. Competition for both managers and plant employees in the ethanol and bio-diesel industries is intense, and we may be unable to attract and retain qualified personnel. If we are unable to hire and retain productive and competent personnel, the implementation of our business plan may be adversely affected, the amount of ethanol/bio-diesel we produce may decrease and we may not be able to efficiently operate our production plants and execute our business strategy.

CHANGES IN SPECIFICATION STANDARDS FOR BIO-DIESEL FUEL MAY INCREASE PRODUCTION COSTS OR REQUIRE ADDITIONAL CAPITAL EXPENDITURES TO UPGRADE AND/OR MODIFY OUR BIO-DIESEL FACILITY TO MEET THEM. SUCH UPGRADES AND/OR MODIFICATIONS MAY ENTAIL DELAYS IN OR STOPPAGES OF PRODUCTION.

The American Society of Testing and Materials (ASTM) is the recognized standard-setting body for fuels and additives in the United States. ASTM's specification for pure bio-diesel (to be used in blends of up to 20% with diesel fuel), ASTM D 6751, has been adopted by the Environmental Protection Agency, and compliance is required in order for our bio-diesel to qualify as a legal motor fuel for sale and distribution. ASTM has modified its D 6751 specification in the past, and is expected to continue to modify the specification in the future as the use of and experience with bio-diesel expands. There is no guarantee that our future production facility will be able to produce compliant bio-diesel fuel in the event of changes to the specification. We may need to invest significant capital resources to upgrade or modify our future bio-diesel facility, which might cause delays in or stoppages of production and the resultant loss of revenues, or which might not be economically feasible at all. Any modifications to the production facility or to the bio-diesel specifications may entail increased production costs or reduced production capacity. These consequences could result in a negative impact on our financial performance.

ITEM 2. MANAGEMENT'S ANALYSIS OR PLAN OF OPERATION

NEXGEN'S FINANCIAL PLANS

We intend to plan, develop, construct and operate and own four 100 million gallon per year Ethanol plants and one 100 million gallon biodiesel plant. The ethanol plants will be corn-based dry mill fuel-grade ethanol plants located in Arkansas, Indiana, Ohio and Wisconsin. The biodiesel plant will use palm and/or soybeans as well as animal fats and will be located in Iowa. Each ethanol plant is expected to process approximately 37 million bushels of corn each per year into 100 million gallons of fuel grade ethanol. The biodiesel plant will process approximately 333 MT of soybean and or palm oil. It is anticipated that in the first phase, three plants will be constructed and brought to operation (two ethanol plants and one bio-diesel) and in the second phase two additional ethanol plants will be constructed.

We will not generate any revenues until we acquire an operating plant or complete construction of one of our plants. We anticipate that our losses will continue to increase until at least one plant is operational. The construction period for an ethanol plant is approximately 18 to 24 months. The construction period for a bio-diesel plant is approximately 12 to 18 months. Our intention is to start construction on the bio-diesel plant first.

In order to be responsive to changing market conditions in the ethanol and biodiesel industries, we will also consider acquiring existing ethanol and biodiesel plants rather than constructing new plants if we are able to make such acquisitions at favorable enterprise valuations and have access to reasonable financing terms.

We have limited financial resources and are entirely dependent on funds that will be raised from third party financing sources for working capital purposes and for the development of the ethanol and bio-diesel plants. Our goal is to raise $500 million, utilizing different financial instruments in order to fund the first phase of our development plans. The following is the estimated breakdown of the sources and uses of such financing:

Preferred/Common Equity 30% $150,000,000
Long Term Debt 60% $300,000,000
Subordinate Debt 10% $ 50,000,000

Total Source of Funds 100% $500,000,000

 USE OF FUNDS

Design, Construction & Startup
Plant Construction $425,000,000
Land & Site-Development Cost $ 15,000,000

STARTUP COSTS
Inventory $ 19,500,000
Working Capital $ 17,400,000
Pre-production Costs $ 1,350,000
Rolling Stock $ 3,000,000
Fire Protection/Water Supply $ 3,000,000
 $ 44,250,000

ORGANIZATIONAL & FINANCING
Equity Raising Costs $ 10,500,000
Organizational Costs $ 3,125,000
Operating Costs $ 2,125,000
 $ 15,750,000

Total Use of Funds $500,000,000

We estimate that we will need an additional $400 million to fund the second phase of our development plans with approximately $300 million to be obtained from third party financing sources and the balance to be generated by funds from operations of the plants that are built in the first phase.

PLAN OF OPERATIONS UNTIL PLANT START-UP

From the present to the third quarter of 2008, or earlier if possible, we will be actively involved in six principal tasks in connection with the first phase of our development plans:

(1) Raising our equity and securing debt capital;

(2) Acquiring and preparing our plant sites;

(3) Completing construction agreements and securing necessary permits;

(4) Constructing our plants;

(5) Arranging and negotiating agreements for the purchase of corn, natural gas and other needs and for marketing our ethanol and distillers grains; and

(6) Hiring and training management and operating employees.

Assuming that we successfully complete our financing objectives and obtain adequate debt and equity financing, we believe that we will have sufficient cash resources to cover all of our expenses associated with the construction and commencement of operations of the plants, including site acquisition and development, installation of road and rail access and utilities, application for and receipt of permits, equipment acquisition and plant construction. We also believe that we will have sufficient operating capital to cover our staff, office, audit, legal, compliance, training and other start-up expenses during this period.

We have contacted and have had limited discussions with prospective lenders and investors, but have no agreement with any lender for the debt or investors for the equity financing that we need.

At any time after we have received at least $50,000,000 in debt and or equity financing, we expect to begin the construction of the bio-diesel plant, for which, as mentioned, we will need to raise an additional approximately $50,000,000 to complete the construction thereof.

If for any reason our options on one or more sites expire before we have our equity and debt financing available to acquire such sites, we may find it necessary to pay more than the option purchase price for such sites or to locate alternative sites. There is no assurance that after full investigation we will determine that any of our sites will be suitable for our plants or will be acquired for those purposes. New sites could be identified by our site acquisition team. Our Board of Directors reserves the right to change the locations of the sites for our plants, in its sole discretion, for any reason. We expect to continue the permitting process on our sites, and, if necessary conduct investigations on other sites, including overall suitability for our plants, environmental matters and road and rail access considerations.

CONSTRUCTION AGREEMENTS AND PERMITS

We expect to enter into an agreement with EPC contractors which will provide for the construction of each of our plants. We anticipate that the agreement will provide that the EPC contractors will prepare engineering diagrams and drawings for our sites, plants, utilities and process systems, assist us in obtaining permits for the construction of our plants, establish final project specifications, contract documents and contract pricing and place orders on our behalf for equipment, particularly equipment with lengthy order lead times.

We anticipate that the EPC agreements will state the complete set of design and construction services to be provided by our EPC contractors to construct our ethanol and biodiesel plants for us, state the allocated costs of the work to be performed, state the manner in which increased costs due to equipment and materials expense increases and change orders requested by us would be allocated, state the responsibility for our EPC contractors and us to acquire permits, provide a timetable for construction, and include warranties and guarantees with respect to plant capacity and operation, payment terms and similar matters.

After we identify our EPC contractors, we expect to work with the contractors on the preliminary and final designs of the plants so construction may be commenced as soon as possible following successful completion of our equity and debt financings. Concurrently, we will seek necessary construction permits, environmental permits and other contracts and permits necessary for the construction of our plants.

Construction of our plants will include completion and approval of the final design for the plant, final site preparation, installation of underground piping, conduits and footings, structural framing, installation of tanks, equipment and above-ground piping, enclosing structures, installation of outside yard facilities, loading docks and related structures, and a variety of other tasks. The construction phase will include testing of the plants through certification by the construction engineers. Commencement of operations will include training of plant operations personnel and incorporation of operational testing, quality control and safety procedures.

The construction process will commence with the completion of final grading for all plant structures and our tank farms, installation of underground plumbing and construction of footings and other concrete work. Subject to weather conditions, we expect that this work can be completed in approximately one month. Immediately thereafter, construction will proceed on the construction of our bio-diesel and ethanol distillation facilities and other structures, a task that will take approximately from 14 to 18 months. Throughout these phases of construction work would continue on our railroad access, including installation of sidings and switches, with completion expected approximately four months after the commencement of construction.

Also in the above phase, six months will be dedicated to the installation of piping and wiring, erection of our tank farm and installation of process and other equipment. The final phase of construction, extending to include an additional month of work, will include the installation of heat tracing equipment and insulation, office build-out, painting and landscaping. During this extended period, we and our EPC contractors will also commence the process to obtain our operating permits, which will involve preparing and submitting applications, working with regulatory authorities and coordinating site inspections and preliminary equipment testing.

With construction complete, we will move to the plant start-up phase, which will involve complete start-up and testing of all equipment and facilities, including any adjustments necessary. This process will take approximately two months. Assuming the availability of final operating permits, and following a final capacity test run and certification by our construction engineers, the plant will be turned over to us for the commencement of commercial operations.

 SIZE OF
LOCATION OF INTENDED TYPE LAND OPTION EXPIRATION
LAND SITE OF FACILITY (ACRES) DATE PURCHASE PRICE
------------- -------------- -------- ----------------- ----------

Arkansas* Ethanol 407 July 9, 2008 $3,715,300

Wisconsin** Ethanol 88 February 1, 2008 $ 800,000

Iowa Bio-diesel 15 August 19, 2009 $ 337,500

Ohio Ethanol 72 January 12, 2008 $1,440,000

Indiana Ethanol 160 April 20, 2008 $4,000,000

* NexGen has an option to purchase the land with a party that itself has an option to purchase the land. NexGen has informed us that it is negotiating the extension of the option.

**Comprised of two options for two adjacent sites.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets out, to the best of our knowledge, the numbers of shares in us beneficially owned as at December 31, 2007 by:

(i) each of our present Executive Officers and Directors,

(ii) each person (including any "group" as that term is defined in Section 13(d)(3) of the Securities Exchange Act) who beneficially owns more than 5% of our Common Stock, and

(iii) all of our present Directors and officers as a group.

 Number of Percentage of Ordinary
Name Ordinary Shares(1) Shares Owned Outstanding(1)
---- ----------------- ------------

J. Ram Ajjarapu 35,630,229(2) 85%
Jim McAlinden 899,199 2%
Eran Rotem 137,000(3)
Bruce W. Wilkinson 64,229
Rodrick D. Morrow 42,820
Kenneth Hoyt 42,820
Israel Amir 386,666 0.9%
Varda Rotter -
Elan Penn -
Officers and Directors
as a Group (9 persons) 38,838,666(3) 93%

MAC Bioventures, Inc. 35,595,229 85%


----------

(1) Based upon 41,759,458 ordinary shares outstanding as of the Closing Date.

(2) Including 35,595,229 shares owned by MAC, as to which Mr. Ajjarapu may be deemed to share beneficial ownership.

(3) Includes 117,000 shares issuable upon exercise of options.

NAME AGE POSITION WITH THE COMPANY
---- ----- -------------------------

J. Ram Ajjarapu 39 Chief Executive Officer (*) & Director
Jim McAlinden 57 Director
Eran Rotem 39 Chief Financial Officer
Bruce W. Wilkinson 69 Director
Rodrick D. Morrow 64 Director
Kenneth Hoyt 70 Director
Israel Amir 65 Director
Varda Rotter 60 Director
Elan Penn 56 Director

(*) MR. AJJARAPU IS EXPECTED TO BE APPOINTED AT THE COMPANY'S UPCOMING
BOARD MEETING.

MR. J. RAM AJJARAPU. has been a board member since the Closing Date and is EXPECTED TO BE APPOINTED AS CHIEF EXECUTIVE OFFICER AT THE COMPANY'S UPCOMING
BOARD MEETING. Mr. Ajjarapu has been President and Chief Executive Officer of NexGen Bio since August 2006. Prior to joining NexGen Bio, Mr. Ajjarapu served as President and a director of American Ethanol until he left the company in July 2006. In 2004, he co-founded Wahoo Ethanol, LLC and Sutton Ethanol, LLC and served as Managing Member until both were sold to American Ethanol in January 2006. While at Wahoo and Sutton, Mr. Ajjarapu negotiated EPC (Engineering Procurement and Construction) agreements, as well as procurement and off-take agreements. Mr. Ajjarapu was also instrumental in obtaining Tax Increment Financing (TIF) of $10 million for each company, as well as sales tax refunds and community grants. In 1995, he co-founded and served as President and Director for 10-years of Global Information Technology, Inc, an IT outsourcing and system design company. He co-founded and also served as Managing Director for an Indian outsourcing company from 1997 to 2004. He received a Bachelors degree in Electronics and Communication Engineering from The Institute of Engineer (India) and a Masters in Business Administration from University of South Florida.

BRUCE W. WILKINSON ESQ. Mr. Wilkinson has been a director of the Company since the Closing Date. Mr. Wilkinson has been Secretary of NexGen Bio since August 2006. Mr. Wilkinson is a corporate lawyer and business consultant providing corporate legal and business counsel to clients nationwide. Following an initial career as in-house counsel, in 2002 he established, Intellysis Inc., a Tampa based outsourcing and consulting firm. As in-house counsel, he served as Vice President and General Counsel of Stromberg Carlson, Vice President and General Counsel of Thorn EMI (U.S.), and, at United Technologies, as corporate counsel in several divisional capacities. His combined career as corporate counsel and independent consultant/entrepreneur has blended skills in corporate law, business and commercial transactions (including acquisitions) as well as other matters affecting the management and operation of his business clients. He holds a Bachelors degree from Williams College, a law degree from Cornell University, and is a member of the California, Illinois and American Bar Associations.

JIM MCALINDEN, Mr. McAlinden has been since the Closing Date a director of the Company. Mr. McAlinden has held the positions of CFO and Chief Operating Officer of NexGen Bio since August 2006. Mr. McAlinden started MicMac Investments, Inc. and Hospitality Communications in 1992. Mr. McAlinden served as President and CEO until their sale to a Phoenix Industries, Inc. in 1999. MicMac was a pay phone provider and Hospitality Communications was a telecom aggregator. In 2001, Jim joined MSHOW.com and served as General Manager and was responsible for turning its losses into profits and the sale of the business in 2002. In 2002, Jim joined AirNet Wireless, Inc. as its President. In 2004, AirNet Wireless merged with AIT Wireless where Jim served as CFO until leaving in 2005. Jim earned a Bachelors of commerce degree from Sir George Williams University.

ERAN ROTEM. Mr. Eran Rotem has served as the Company's Chief Financial Officer since May 2002. During April 2006, Mr. Rotem was appointed as a director of Afferix Ltd. And resigned on January 6, 2008 Mr. Rotem served as a senior manager in Ernst & Young, Certified Public Accountants, from 1995 until April, 2002. He is himself a CPA and received his B.A. in Accounting and Finance form the Tel-Aviv College of Management.

RODRICK P. MORROW. Mr. Morrow has served as a director of the Company since the Closing Date. Mr. Morrow has 30 years of experience with retail and distribution firms in senior management positions in marketing, finance, information technology and human resources. He is currently the CFO and a Director for Southern Imaging Group, Inc. Mr. Morrow was Vice President and CFO for Pelican Companies, Inc., based in Conway, South Carolina. He served as Vice President for Lowe's Companies with responsibilities in marketing, information systems, human resources and administration. He has been a business consultant in several industries, both domestic and international. Mr. Morrow holds a Bachelors degree in Business Administration from the University of North Carolina, Chapel Hill.

KENNETH HOYT. Mr. Hoyt has served as a director of the Company since the Closing Date. Mr. Hoyt is a retired management consultant with a diverse background of corporate and consulting experience in different industries in the US and around the world. During a 20-year consulting career at Arthur D. Little, Ascom AG and KSH International, Inc. Mr. Hoyt focused on serving the business development, advanced technology and strategic investment needs of the telecommunications equipment industry. As an electrical engineer and economist, from 1960 to 1986, he held sales, marketing strategic planning and general management positions in electrical equipment, computers, automotive parts and telecommunications operating divisions at General Electric, Honewell, ITT, General Dynamics and Plessey PLC. Mr. Hoyt also has served on a variety of non-profit boards and governmental agencies in transportation and land-use planning in the Tampa, Florida region where he resides.

ISRAEL AMIR. Mr. Israel Amir has served as a director of the Company since January 2000. Mr. Amir has also served as an external director of Dan Vehicle and Transportation (D.R.T.) Ltd., an Israeli public company and as a member of the boards of directors of several private Israeli companies (A.T. & T. (Israel), TNS Teleseker Ltd., Israel Amir Consulting Ltd., SCT Stem Cell Technologies Ltd. and Tele-Gal Ltd.). Mr. Amir has served since 1989 as an independent economic consultant. He received his M.A. in Economics from the Hebrew University in Jerusalem.

PROF. VARDA ROTTER has served as an External Director of the Company since October 2001. Prof. Rotter received her B.Sc. and M.Sc. from Bar-Ilan University in 1969 and 1971 respectively, and a Ph.D. in Cell Biology from the Weizmann Institute of Science, Rehovot, in 1976. Following post-doctoral research at the Center for Cancer Research of the Massachusetts Institute of Technology, she joined the Weizmann Institute's Department of Cell Biology. She was appointed Associate Professor in 1985 and Full Professor in 1992, and is now the incumbent of the Norman and Helen Asher Professorial Chair in Cancer Research at the Institute. Prof. Rotter is a genetic engineer, building biological bridges in the submicroscopic world of cancer research, focusing on certain tumor suppressor genes which may be used to obstruct the proliferation of cancer cells.

DR. ELAN PENN has served as an External Director of the Company since December 2003. Since 2002, he has owned and managed a private publisher (Penn Publishing Ltd.). Prior to that Dr. Penn was V.P. Finance of A.1-Research & Development of Artificial Intelligence Ltd. From 1998 to 2000 Dr. Penn was a Director and the Chief Executive Officer of Sivan Computer Training Company Ltd (traded on the TASE) and a Director and V.P. Finance of Mentortech Inc. (traded on NASDAQ), both companies being part of the Formula Systems Ltd. group of companies. From 1987 to 2000 Dr. Penn was V. P. Finance, Mashov Computers Ltd. (traded on the TASE) and Magic Software Enterprises Ltd. (traded on NASDAQ), both companies also being part of the Formula Systems Ltd. group. He has served as a member of the Board of Directors of Mashov Computers Ltd. and Walla Communications Ltd. (traded on the TASE), as well as of several international subsidiaries of the Mashov Computers Ltd. group of companies. In 2005, he was appointed as a director and audit committee member of Magic software Enterprises Ltd and Telkor Power Supplies Ltd. Dr. Penn completed his PhD in Management Science, Imperial College of Science & Technology, University of London and read Economics at the Hebrew University of Jerusalem.

TERMS OF OFFICE

The Company's Articles of Association, as amended, provide for a board of directors that consists of not less than two and no more than thirteen Directors, including the external directors to be appointed and hold office in accordance with the provisions of the Companies Law and any Regulations enacted thereunder, as amended from time to time.

With the exception of the election of external directors which shall be governed in accordance with the provisions of the Companies Law, directors shall be elected at the Annual General Meeting by an ordinary majority .The directors so elected shall hold office until the next Annual General Meeting unless determined otherwise at a subsequent General Meeting. Notwithstanding the aforesaid, if no directors are appointed at the Annual General Meeting, the directors appointed at the previous Annual General Meeting shall continue to hold office. With the exception of the removal of external directors which shall be governed in accordance with the provisions of the Companies Law, at a General Meeting by an Ordinary Majority, the shareholders shall be entitled to remove any director(s) from office, to elect directors in place of the director(s) so removed or to fill any vacancy, however created, including a vacancy resulting from an enlargement of the Board of Directors by resolution of the Board of Directors, on the Board of Directors.

The Board of Directors may, from time to time, appoint an additional director or additional directors to the Company, in order to fill the office of a director which has been vacated or for any reason or as an additional director or additional directors, provided that the overall number of directors does not exceed the maximum number specified above. A director appointed as aforesaid shall cease to hold office at the end of the Annual Meeting following his appointment.

The Companies Law requires the board of directors of a public company to determine the number of directors who shall possess accounting and financial expertise On March 29, 2006 the board of directors determined the minimum number to be two directors. The Company may be deemed to be a "controlled company" under the applicable Nasdaq regulations because MAC, the Company's principal stockholder owns approximately 85% of the Company's issued and outstanding shares. As such, the Company is exempt from the requirements of Nasdaq Rule 4350(c) with respect to the nomination of directors.

ALTERNATE DIRECTORS

The Articles of Association of the Company provide that any director may, by written notice to the Company, appoint another person to serve as an alternate director, subject to the approval of the directors, and may cancel such appointment. According to the Companies Law, the following persons may not be appointed nor serve as an alternate director: (i) a person not qualified to be appointed as a director, (ii) an actual director, or (iii) another alternate director. Appointment of an alternate director for a member of a committee of the board of directors is only permitted if the alternate director is a member of the board of directors and does not regularly serve as a member of such committee. If the committee member being substituted is an external director, such alternate director may only be another outside director possessing the same expertise as the external director being substituted and may not be a regular member of such committee. There are currently no alternate directors.

EXTERNAL DIRECTORS

Pursuant to Israeli law, the Company is required to appoint two external directors. These directors must be unaffiliated with the Company and its principals. A person shall be qualified to serve as an external director only if he or she possesses accounting and financial expertise or professional qualifications. At least one external director must posses accounting and financial expertise and the other external directors are to possess professional qualifications, as promulgated by regulations to the Companies Law. These regulations provide that financial and accounting expertise require such external director to possess a high level of understanding in business matters, such that he or she can read and understand financial statements in depth and be able to raise issues with respect to the manner in which the financial data is presented therein. The company's board of directors is to determine such candidate's qualifications based on his or her education, experience and skills regarding financial and control matters in companies of similar size and in a similar industry and knowledge of preparation and approval of financial statements under the Companies Law and Israeli securities laws These requirements do not apply to external directors appointed before the recent amendment to the Companies Law but will apply to their re-appointment for an additional term.

External directors are to be elected by a majority vote at a shareholders' meeting, provided that such majority includes at least one-third of the shares held by non-controlling shareholders voted at the meeting or that the total number of shares held by non-controlling shareholders voted against the election of the director does not exceed one percent of the aggregate voting rights in the Company.

The initial term of an external director is three years and may be extended for. additional periods of up to three years each, pursuant to a recent amendment to the Companies Law, provided that the audit committee and the board of directors confirm that, in light of the outside director's expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company External directors may be removed only by the same percentage of shareholders as is required for their election, or by a court, and then only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to the Company. Under the Companies Law, any committee of the Board of Directors must include at least one external director, and the Audit Committee must include all if the external Directors.

The Companies Law details certain standards for the independence of external directors. These directors must be unaffiliated with the company on whose board they serve and such company's principals. They are entitled to obtain all information relating to such company's management and assets and to receive assistance, in special cases, from outside experts at the expense of the company. The Companies Law imposes an obligation on these directors to convene a meeting of a company's board of directors upon becoming aware of matters that suggest infringements of law, neglect of good business practice or improper conduct.

An external director is entitled to compensation, as provided for in regulations adopted under the Companies Law, but is prohibited from receiving any other compensation, directly or indirectly, in connection with service provided as an external director.

In October 2001, the Company's shareholders appointed Prof. Varda Rotter as an External Director, and on December 20, 2004 and there after on December 27, 2007, the shareholders re-appointed her in the same capacity. In December 2003, the Company's shareholders appointed Mr. Elan Penn as an External Director and on December 20, 2006 the shareholders re-appointed him in the same capacity. Both Prof. Rotter and Mr. Penn have been serving as external directors from the date of their respective appointments to date.

DIRECTORS' COMPENSATION

The Company's executive directors (i.e. directors who receive remuneration from the Company either as employees or consultants) are not entitled to receive any separate compensation in consideration for their services as directors of the Company. The Company's non-executive directors receive annual fees which amounted to approximately $6,000 per person in 2006 on account of all services as directors, including participation in board and audit committee proceedings. The members of the board do not receive any additional remuneration upon termination of their services as directors. The Company's non-executive directors for the year of 2006 were Professors. Varda Rotter, Ethan Rubinstein and Samuel Penchas , Mr. Rolando Eisen, and Dr. Elan Penn.

AUDIT COMMITTEE

The Companies Law requires that certain transactions, actions and arrangements be approved in certain cases, by the audit committee of the company's board of directors, whose members meet certain criteria of independence as defined in the Companies Law and by the board of directors itself and in certain circumstances, shareholder approval is also required. The vote required by the audit committee and the board of directors for approval of such matters, in each case, is a majority of the disinterested directors participating in a duly convened meeting. The Company's audit committee is comprised of Professors Varda Rotter, and Dr. Elan Penn. The Company has determined that the members of the audit committee meet the applicable NASDAQ and SEC independence standards. In addition, the Company has determined that Dr. Elan Penn is a financial expert as defined by the SEC.

INTERNAL AUDITOR

Under the Companies Law, Israeli companies whose securities are publicly traded are also required to appoint an Internal Auditor in accordance with the proposal of the audit committee. The role of the Internal Auditor is to examine, inter alia, whether the Company's actions comply with the law, integrity and orderly business procedure. In November 2000, Mr. Yossi Ginosar was appointed as the Company's Internal Auditor. In March 2007, Mr. Yossi Ginosar was re-appointed as such.

ITEM 6. EXECUTIVE COMPENSATION

The following table sets forth the annual salary, bonuses and all other compensation awards and pay outs on account of NexGen Bio's Chief Executive Officer for services rendered to it during the fiscal year ended December 31, 2006. No executive officer received more than US$100,000 per annum during this period.

 Change in
 Pension
 Value and
 Non-Equity Nonqualified
 Incentive Deferred
Name and Stock Option Plan Compensation
Principal Salary Bonus Awards Awards Compensation Earnings All Other Total
Position Year (US$) (US$) (US$) (US$) (US$) (US$) Compensation (US$)
-------- ----- ------- ----- ----- ----- ----- ----- ----- -------
J. Ram
Ajjarapu,
Chairman
and CEO 2006 $76,344(1) - - - $76,344

 Change in
 Pension Value
 Fees Non-Equity and
 Earned Incentive Nonqualified
 or Paid Stock Option Plan Deferred All Other
 in Cash Awards Awards Compensation Compensation Compensation Total
Name (US$) ($) ($) ($) Earnings ($) (US$)
-------- ------ ------ ------ ------ ------ ------ ------
Aruna
Ajjarapu 0 - - - -

Dipak
Sinha 50,000 50,000

Jan
Ohvrall 50,000 50,000

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Mr. Daniel Kropf, who served as Chairman of the Company's Board of Directors until the Closing Date, is the controlling shareholder of the parent company of Gamida.

In consideration for Mr. Israel Amir's commitment to continue to serve as a director of the Company for a period of no less than two years from the Closing, the Purchase Agreement provided that the Company shall issue to Mr. Amir Ordinary shares (or options exercisable into ordinary Shares) in an amount equal to 1% of NexGen Assets Valuation divided by $1.50. In addition, if applicable, the Company shall issue to Mr. Amir 1% of the Option Shares divided by $1.50, in an amount not to exceed 800,000 Ordinary Shares.

Prior to the closing of the Purchase Agreement, NexGen Bio proposed that Mr. Eran Rotem, the Company's chief financial officer, continue in this position following the Closing. A new employment agreement is currently being negotiated.

ITEM 8. DESCRIPTION OF SECURITIES

Set forth below is a summary of the material provisions governing our share capital. This summary is not complete and should be read together with our Memorandum and Articles of Association, as amended, copies of which have been filed as exhibits to our SEC Reports.

As of December 31, 2007, our authorized share capital consisted of 150,000,000 ordinary shares, NIS 0.04 nominal value.

DESCRIPTION OF ORDINARY SHARES

All issued and outstanding ordinary shares of the Company are duly authorized and validly issued, fully paid and nonassessable. The ordinary shares do not have preemptive rights. Neither our Memorandum , Articles of Association nor the laws of the State of Israel restrict in any way the ownership or voting of ordinary shares by non-residents of Israel, except with respect to subjects of countries which are in a state of war with Israel.

DIVIDEND AND LIQUIDATION RIGHTS

Subject to the rights of the holders of shares with preferential or other special rights that may be authorized, the holders of ordinary shares are entitled to receive dividends in proportion to the sums paid up or credited as paid up on account of the nominal value of their respective holdings of the shares in respect of which the dividend is being paid (without taking into account the premium paid up on the shares) out of assets legally available therefor and, in the event of our winding up, to share ratably in all assets remaining after payment of liabilities in proportion to the nominal value of their respective holdings of the shares in respect of which such distribution is being made, subject to applicable law. Our Board of Directors may declare interim dividends and recommend a final annual dividend only out of profits and in such amounts as the Board of Directors may determine. Declaration of the final annual dividend requires shareholder approval at a general meeting, which may reduce but not increase such dividend from the amount recommended by the Board of Directors.

In case of a share dividend, holders of shares can receive shares of a class whether such class existed prior thereto or was created therefore or shares of the same class that conferred upon the holders the right to receive such dividend.

VOTING, SHAREHOLDER MEETINGS AND RESOLUTIONS

Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. Such rights may be affected by the future grant of any special voting rights to the holders of a class of shares with preferential rights. Once the creation of a class of shares with preference rights has been approved, the Board of Directors may issue preferred shares, unless the Board is limited from doing so by the Articles of Association or a contractual provision.

An annual general meeting must be held once every calendar year at such time (not more than 15 months after the last preceding annual general meeting) and at such place, either within or outside the State of Israel, as may be determined by the Board of Directors. The quorum required for a general meeting of shareholders consists of at least two shareholders present in person or by proxy and holding, or representing, more than one-third of the total voting rights in the Company on the record date for such meeting. A meeting adjourned for lack of a quorum may be adjourned to the same day in the next week at the same time and place, or to such time and place as the Board of Directors may determine. At such reconvened meeting, if a quorum is not present within half an hour from the appointed time, any two shareholders present in person or by proxy (and not in default under the articles) will constitute a quorum. Shareholder resolutions generally will be deemed adopted if approved by the holders of a majority of the voting power represented at the meeting, in person or by proxy, and voting thereon. Shareholder resolutions for amending our memorandum and/or articles of association, including making changes in our capital structure, approving mergers with or into our company and/or our liquidation will be deemed adopted if approved by the holders of 75% of the voting power represented at the meeting, in person or by proxy, entitled to vote and voting on the resolution.

In addition, the Companies Law provides for certain extraordinary majorities for the approval of certain related party transactions, nomination of External Directors, authorizing a chairman of a company's board of directors to also act as its general manager as well as certain arrangements between a company and its shareholders and/or creditors.

TRANSACTIONS REQUIRING SPECIAL APPROVAL

An "office holder" is defined in the Companies Law as a director, general manager, chief business manager, deputy general manager, vice general manager and any person assuming the responsibilities of any of the foregoing positions without regard to such person's title and any other manager who is directly subject to the general manager.

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. The duty of care requires an office holder to act with the level of care which a reasonable office holder in the same position would have acted under the same circumstances.

The breach of such duty is governed by Israeli contract laws. The duty of care includes a duty to use reasonable means to obtain:

- information on the appropriateness of a given action brought for his approval or performed by him by virtue of his position; and

- all other important information pertaining to the previous actions.

The duty of loyalty requires an office holder to act in good faith for the interests of the company and includes a duty to:

- refrain from any conflict of interest between the performance of his duties in the company and his personal affairs;

- refrain from any activity that is competitive with the Company;

- refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and

- disclose to the company any information or documents relating to a company's affairs which the office holder has received due to his position as an office holder.

Each person listed in the table under "Item 5 - Directors and Executive Officers, Promoters and Control Persons" is an office holder.

The Companies Law requires that an office holder disclose to the Company any personal interest that he or she may have, and all related material information known to him or her, in connection with any existing or proposed transaction by the company. The disclosure is required to be made promptly and in any event, no later than the board of directors meeting in which the transaction is first discussed. A personal interest of an office holder includes an interest of a company in which the office holder is, directly or indirectly, a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest held by his or her relative.

Under the Companies Law, an extraordinary transaction is a transaction:

- not in the ordinary course of business;

- not on market terms; or

- likely to have a material impact on the company's profitability, assets or liabilities.

Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve the transaction, unless the company's articles of association provide otherwise. A transaction that is adverse to the Company's interest may not be approved. If the transaction is an extraordinary transaction, then it also must be approved by the audit committee, before the board approval, and under certain circumstances, by the shareholders of the Company. A director who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at this meeting or vote on this matter. If a majority of the directors has a personal interest in a transaction, these directors are permitted to be present and vote, but shareholder approval is also required.

Approval by the audit committee and/or the board of directors is required for such matters as: (i) certain transactions to which the company intends to be a party and in which an Office Holder, a controlling shareholder and/or certain other parties (including affiliates of the aforementioned) have a direct or indirect personal interest, (ii) actions or arrangements which could otherwise be deemed to constitute a breach by an Office Holder of a fiduciary duty to the company, (iii) arrangements with directors as to the term of their service, (iv) indemnification and/or insurance of Office Holders, and (v) certain transactions defined in the Companies Law as extraordinary transactions (a transaction which is not in the ordinary course of business or is not at market conditions, or a transaction which is likely to have a material impact on the profitability, property or obligations of the Company).

Under the Companies Law, the disclosure requirements which apply to an office holder also apply to a controlling shareholder of a public company. A controlling shareholder includes a shareholder that holds 25% or more of the voting rights in a public company if no other shareholder owns more than 50% of the voting rights in the company.

Extraordinary transactions of a public company with a controlling shareholder or in which a controlling shareholder has a personal interest, and the terms of compensation of a controlling shareholder who is an office holder, require the approval of the audit committee, the board of directors and the shareholders of the Company. The shareholder approval must satisfy either of the following criteria:

- the majority of the votes for the approval includes the votes of at least one-third of the total votes of shareholders who are present at the meeting and who have no personal interest in the transaction; the votes of abstaining shareholders shall not be included in the number of the said total votes; or

- the total number of votes against the approval, among the shareholders who are present at the meeting and who have no personal interest in the transaction shall not exceed 1% of the aggregate voting rights in the company.

For information concerning the direct and indirect personal interests of certain of our office holders and principal shareholders in certain transactions with us, see "Item 7 - Certain Relationships and Related Party Transactions."

Under the Companies Law, all arrangements as to compensation of office holders who are not directors require approval of the board of directors. Arrangements as to compensation of directors also require audit committee approval, before board approval, and shareholder approval. The Companies Regulations (Rules Regarding Compensation and Expenses of External Directors), 2000, ("Companies Regulations - Compensation of External Directors") regulate compensation of external directors.

SHAREHOLDERS' DUTIES

Under the Companies Law, a shareholder has a duty to act in good faith towards the company and other shareholders and to refrain from abusing his power in the company, including, among other things, when voting at the general meeting of shareholders on the following matters:

o any amendment to the articles of association;

o an increase of the authorized share capital of the company;

o a merger; or -

o approval of certain acts and transactions which require shareholder approval.

In addition, a shareholder has the general duty to refrain from depriving other shareholders of their rights. Furthermore, any controlling shareholder, any shareholder who knows that he possesses the power to determine the outcome of a shareholder vote and any shareholder who, pursuant to the articles of association, has the power to appoint an office holder is under a duty to act in fairness towards the company. The Companies Law does not describe the substance of this duty.

ANTI-TAKEOVER PROVISIONS UNDER ISRAELI LAW

Under the Companies Law, a merger is generally required to be approved by the shareholders and board of directors of each of the merging companies. If the share capital of the company that will not be the surviving company is divided into different classes of shares, the approval of each class is also required. The Companies Law provides that the articles of association of companies, such as ours, that were incorporated prior to February 1, 2000 are deemed to include a provision whereby the approval of a merger requires a majority of three quarters of those present and voting at a general meeting of shareholders. In addition, a merger can be completed only after all approvals have been submitted to the Israeli Registrar of Companies and at least seventy days have passed from the time that a proposal for approval of the merger was filed with the Registrar.

The Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition the purchaser would become a 25% shareholder of the company. This rule does not apply if there is already another 25% shareholder of the company.

Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of tender offer if as a result of the acquisition the purchaser would become a 45% shareholder of the company, unless someone else already holds 50% of the voting power of the company. These rules do not apply if the acquisition is made by way of a merger. Regulations promulgated under the Companies Law provide that these tender offer requirements do not apply to companies whose shares are listed for trading outside of Israel if, according to the law in the country in which the shares are traded, including the rules and regulations of the stock exchange on which the shares are traded, either:

o there is a limitation on acquisition of any level of control of the company; or

o the acquisition of any level of control requires the purchaser to do so by means of a tender offer to the public.

However, under the Companies Law, if following any acquisition of shares the acquirer holds 90% or more of the company's shares or of a class of shares, the acquisition must be made by means of a tender offer for all of the target company's shares or all the shares of the class, as applicable. An acquirer who wishes to eliminate all minority shareholders must do so by way of a tender offer and acquire 95% of all shares not held by or for the benefit of the acquirer prior to the acquisition. If, however, the tender offer to acquire 95% is not successful, the acquiror may not acquire shares tendered if, by doing so the acquiror would own more than 90% of the shares of the target company.

Finally, Israeli tax law treats specified acquisitions, including a share-for-share swap between an Israeli company and a non-Israeli company, less favorably than does U.S. tax law. For example, Israeli tax law may subject a shareholder who exchanges his ordinary shares for shares in a non-Israeli corporation to immediate taxation, although the tax event can be postponed in certain cases for 2 to 4 years upon approval of the tax authorities.

TRANSFER OF SHARES AND NOTICES

Fully paid ordinary shares are issued in registered form and may be transferred freely. Each shareholder of record is entitled to receive at least 21 days prior notice of shareholders' meetings. For purposes of determining the shareholders entitled to notice and to vote at such meetings, the Board of Directors may fix the record date not exceeding 60 days prior to the date of any general meeting.

MODIFICATION OF CLASS RIGHTS

If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by our Articles of Association) may be modified or abrogated by the Company by a special resolution subject to the consent in writing of the holders of the issued shares of the class, or by the adoption of a special resolution passed at a separate general meeting of the holders of the shares of such class.

ACCESS TO INFORMATION

We file reports with the Israeli Registrar of Companies regarding our registered address, our registered capital, our shareholders and the number of shares held by each, the identity of the directors and details regarding security interests on our assets. In addition, the Company must file with the Israeli Registrar of Companies its Articles of Association and a copy of any special resolution adopted by a general meeting of shareholders. The information filed with the Registrar of Companies is available to the public. In addition to the information available to the public, our shareholders are entitled, upon request, to review and receive copies of all minutes of meetings of our shareholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our ordinary shares is Continental Stock Transfer & Trust Company.

2005 HIGH LOW
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First Quarter 1.09 0.58
Second Quarter 0.95 0.60
Third Quarter 0.87 0.65
Fourth Quarter 0.75 0.60

2006 HIGH LOW
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First Quarter 1.31 0.39
Second Quarter 1.06 0.51
Third Quarter 0.99 0.63
Fourth Quarter 4.30 0.85

2007 HIGH LOW
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First Quarter 1.98 1.12
Second Quarter 2.03 0.92
Third Quarter 1.19 0.80
Fourth Quarter 1.15 0.80

ITEM 2. LEGAL PROCEEDINGS

Not applicable

ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

Not applicable.

ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES

Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under the Companies Law, an Israeli company may not exempt an office holder from liability with respect to a breach of his duty of loyalty, but may exempt in advance an office holder from his liability to the company, in whole or in part, with respect to a breach of his duty of care. Under the Companies Law, a company may not (1) indemnify an office holder or absolve him from liability towards the company for, or (2) enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of any one of the following:

o a breach by the office holder of his duty of loyalty unless the office holder acted in good faith and had a reasonable basis to believe that the act would not be detrimental to the benefit of the company;

o an intentional or reckless breach by the office holder of his duty of care;

o any act or omission intended to confer on the office holder an illegal personal gain; or

o any fine levied against the office holder.

Article 109 of the Articles of Association of the Company contains provisions which relate to the indemnity and insurance of officers and directors. Subject to the provisions of the Companies Law, the Company's Articles of Association provide that it may enter into a contract for the insurance of the liability of any of its office holders with respect to:

(i) a breach of his duty of care to the Company or to any other person;

(ii) a breach of fiduciary duty to the Company provided that the Officer has acted in good faith and that he had reasonable grounds to assume that the act would not harm the good of the Company;

(iii) a financial liability which shall be imposed on such Officer in favor of any other person, in respect of an act performed by him by virtue of his being an officer of the Company;

Subject to the provisions of the Companies Law, the Company's Articles of Association provide that it may indemnify an officer holder with respect to any of the following:

(i) a financial liability imposed on him in favor of any other person by any judgment, including a judgment given as a result of a settlement or an arbitrator's award which has been confirmed by a court, in respect of an act performed by him by virtue of his being an Officer of the Company.

(ii) reasonable litigation costs, including lawyer's fees, expended by an Officer or which were imposed on an Officer by a court in proceedings filed against him by the Company or in its name or by any other person or in a criminal charge on which he was acquitted, in respect of an act performed by him by virtue of his being an Officer of the Company.

In addition, under the Companies Law, indemnification of, and procurement of insurance coverage for, the Company's office holders must be approved by its audit committee and its board of directors and, in specified circumstances, by its shareholders.

The Company has obtained directors' and officers' liability insurance.

PART F/S

Reference is made to the disclosure set forth under Item 9.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

PART III