Filed pursuant to Rule 424(b)(1)
Registration Statement No. 333-170471

Mission NewEnergy Limited

2,785,000 Ordinary Shares

We are offering 2,785,000 of our ordinary shares.

This is the initial public offering of Mission NewEnergy Limited, an Australian corporation, in the United States.

Our ordinary shares are listed on the Australian Securities Exchange under the symbol “MBT”. On March 25, 2011, the closing price of our ordinary shares on the Australian Securities Exchange was A$0.20 per share. At our request, our ordinary shares were voluntarily suspended from trading on the Australian Securities Exchange on March 28, 2011. On March 23, 2011, we obtained shareholder approval for a 50-1 share consolidation of our ordinary shares, which was effected on April 4, 2011. Assuming the 50-1 share consolidation that was effected on April 4, 2011, and assuming an exchange rate of A$1.00 = US$1.0220 (based on the currency exchange rate available from Bloomberg on March 25, 2011), the closing price per share would have been the equivalent of US$10.22. The initial public offering price of our ordinary shares is US$9.00 per share.

Our ordinary shares have been approved for listing on The NASDAQ Global Market under the symbol “MNEL”.

Investing in our ordinary shares involves certain risks. See “Risk Factors” beginning on page 11 to read about risks you should consider before buying our ordinary shares.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

		Per Share		Total
Public offering price			US$9.00				US$25,065,000
Underwriting discounts and commissions (1)			US$0.38				US$1,058,300
Proceeds, before expenses, to us			US$8.62				US$24,006,700

The underwriters may also purchase up to an additional 417,750 of our ordinary shares at the public offering price, less the underwriting discounts and commissions payable by us, to cover over-allotments, if any, within 45 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be US$1,321,483 and our total proceeds, before expenses, will be US$27,503,267.

 

The underwriters expect to deliver the ordinary shares on or about April 26, 2011.

Chardan Capital Markets, LLC		Rodman & Renshaw, LLC
Maxim Group LLC		Northland Capital Markets

 

The date of this prospectus is April 20, 2011.

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		Page
Conventions that apply to this Prospectus			ii
Prospectus Summary			1
Risk Factors			11
Special Note Regarding Forward-Looking Statements			27
Industry and Market Data			28
Use of Proceeds			29
Price Range of Ordinary Shares			30
Dividend Policy			31
Capitalization			32
Dilution			33
Exchange Rate Information			35
Selected Consolidated Financial and Operating Data			36
Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
Our Industry			60
Business			67
Management			96
Principal Shareholders			105
Related Party Transactions			107
Description of Share Capital			108
Shares Eligible for Future Sale			115
Taxation			117
Underwriting			124
Expenses Relating to this Offering			132
Legal Matters			132
Experts			132
Enforceability of Civil Liabilities			133
Where You Can Find Additional Information			133
Index to Consolidated Financial Statements			F-1

 

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, regardless of the time of delivery of this prospectus or the time of sale of our ordinary shares, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. We are offering to sell ordinary shares and seeking offers to buy ordinary shares, only in jurisdictions where offers and sales are permitted.

We have not taken any action to permit a public offering of the ordinary shares outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ordinary shares and the distribution of this prospectus outside of the United States.

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Conventions that apply to this Prospectus

Unless otherwise indicated or the context clearly implies otherwise, references to “we,” “us,” “our,”, “Mission NewEnergy”, “Mission” and “the Company” are to Mission NewEnergy Limited, an Australian corporation, and its subsidiaries. In this prospectus “shares” or “ordinary shares” refers to our ordinary shares.

In this prospectus, references to “$,” “US$” or “U.S. dollars” are to the lawful currency of the United States and references to “Australian dollars” or “A$” are to the lawful currency of Australia. When necessary, historic data were converted at the applicable rate for the date or year indicated. See “Exchange Rate Information.”

Solely for the convenience of the reader, this prospectus contains translations of certain Australian dollar amounts into U.S. dollars at specified rates. Except as otherwise stated in this prospectus, all translations from Australian dollars to U.S. dollars are based on the noon buying rate of the City of New York for cable transfers of Australian dollars, as certified for customs purposes by the Federal Reserve Bank of New York on the date or year indicated. No representation is made that the Australian dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars at such rates or any other rates. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

We have obtained shareholder approval for a 50-1 share consolidation that was effected on April 4, 2011 pursuant to which every 50 ordinary shares were consolidated into 1 ordinary share. In addition, a 50-1 adjustment was made with respect to the number of ordinary shares underlying our convertible notes, warrants, performance rights and options (and a corresponding adjustment to the exercise prices, if any). Consequently, all share information and per share data included in this prospectus has been presented on a post-share consolidation basis, unless otherwise specifically stated or the context otherwise requires.

The following table sets out relevant conversion measures for Mission NewEnergy’s business:

1 Tonne		=		2,204.6226 Pounds biodiesel
1 Tonne		=		1.1023 Tons (short) biodiesel
1 Tonne		=		298 Gallons biodiesel
1 Tonne		=		7.4 Barrels biodiesel
1 Barrel		=		42 Gallons biodiesel
1 Hectare		=		2.4 Acres

Unless otherwise indicated, the consolidated financial statements and related notes as of and for the fiscal years ended June 30, 2008, 2009 and 2010 included elsewhere in this prospectus have been prepared in accordance with Australian Accounting Standards and also comply with International Financial Reporting Standards (“IFRS”) and interpretations issued by the International Accounting Standards Board.

References to a particular “fiscal year” are to our fiscal year ended June 30 of that year. References to a year other than a “fiscal” year are to the calendar year ended December 31.

Market data and industry statistics and forecasts used throughout this prospectus are based on independent industry publications, reports by market research firms and other published independent sources. Some data and other information are also based on our good faith estimates, which are derived from our review of internal surveys and independent sources. Although we believe these sources are credible, we have not independently verified the data or information obtained from these sources.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before deciding to invest in our ordinary shares. Before investing in our ordinary shares, you should carefully read this entire prospectus, including our audited consolidated financial statements and the related notes thereto and the information set forth under the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included in this prospectus.

Overview

Mission NewEnergy Limited is a producer of biodiesel that integrates sustainable biodiesel feedstock cultivation, biodiesel production and wholesale biodiesel distribution. We have a biodiesel production capacity of 105 million gallons per annum and 194,323 productive acres of Jatropha Curcas, or Jatropha, under cultivation in India by farmers with whom we have contracted. Jatropha is an inedible perennial oil seed plant that we seek to grow on marginal soil without displacing agricultural land used for food supply. The inedible oil from the crushed Jatropha seed is a suitable feedstock for biodiesel and the remaining meal, or seedcake, is valued as an input for biofertilizer. We classify acreage as productive when the Jatropha plants are growing in line with our expectations.

Our contract farming of Jatropha provides us with a captive supply of this second generation, or non-food, feedstock which complements our commercial scale refining capacity in Malaysia and a large scale off-take agreement that we have in place to supply our biodiesel to a major North American petroleum refiner and marketer. Based on our first crush of Jatropha seeds on a commercial scale to produce Jatropha oil in mid 2010, we believe that our Jatropha-based biodiesel can generate a gross profit when priced competitively with petroleum-based diesel and the price for crude oil is above US$52.15 per barrel (US$1.25 per gallon). We believe that through scale efficiencies and increases in by-product realization that we will be able to materially lower our costs over time. At current market prices for crude oil, Mission’s Jatropha-based biodiesel is not reliant on government mandates or subsidies to be cost competitive. As further discussed below, petroleum-based diesel prices tend to fluctuate with the price of crude oil as crude oil is the major input for its production.

Based on the median yield estimates, we believe that our existing productive acres of Jatropha under contract farming will yield approximately 22.3 million barrels (936.9 million gallons) of crude Jatropha oil over an estimated productive life of 30 years. We have planted additional acreage each year and expect to continue to do so, thereby adding materially to our aggregate Jatropha oil yield. Our contract farming arrangements allow us to expand with no significant direct capital expenditure and the growth of our network is constrained essentially only by our capability to add to our network farming base while at the same time ensuring the implementation of sound farming, or agronomy practices.

We believe that being vertically integrated will allow us to control our input costs and realize revenues from both our feedstock cultivation and our biodiesel production operations. By having control of our feedstock costs, we are positioned to capture further value from increases in oil prices, if they occur, as well as from premiums that are available to biofuels producers as a result of government mandates and changing consumer preferences.

We have two wind mills in India that generate electricity which is supplied to the Maharashtra State Electricity Distribution Company Limited under a power purchase agreement.

We have a history of net losses. Our auditors have raised substantial doubts as to our ability to continue as a going concern. See “Risk Factors — Risks Related to Our Business — We may not be able to continue as a going concern unless this offering is completed.”

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Industry

As a producer of biodiesel, Mission is a participant in the US$2.7 trillion global market for liquid fuels (Source: U.S. Energy Information Administration, Short Term Energy Outlook, February 8, 2011). Biodiesel can be a direct substitute for various petroleum-based distillates including diesel fuel, jet fuel and heating and bunker oil. Biodiesel is already in widespread use in global markets, according to the U.S. Energy Information Administration.

The consumption of biodiesel by 2012 is forecast to be 3.9 billion gallons in the European Union and 1.4 billion gallons in the United States (Source: The Biofuels Market: Current Situation and Alternative Scenarios, United Nations Conference on Trade and Development, 2009). According to Annual Energy Outlook 2010 by the U.S. Energy Information Administration (April 2010), the switch to biofuels usage is expected to account for more than 80% of the growth in the transport fuels market.

Biodiesel’s value, without taking into consideration any subsidies or incentives available to producers or distributors, is broadly in line with the prevailing value of ultra low sulphur diesel, or ULSD, a petroleum-based diesel benchmark.

Our Strengths

We believe that the following strengths enable us to compete successfully in the biofuels industry:

Our Jatropha-based biodiesel is cost competitive at prevailing crude oil prices and we have the potential to further reduce our cost base and competitiveness with petroleum-based fuels.

We believe that our Jatropha-based biodiesel can be cost competitive with petroleum-based diesel when the crude oil price is above US$52.15 per barrel (US$1.25 per gallon) without any government subsidies or financial support. With an increase in by-product realization and continued scale efficiencies, we aim to further reduce our production costs and significantly increase our cost competitive nature with petroleum-based products at prevailing market prices for petroleum.

We have a captive supply of cost competitive feedstock that does not compete with food crops.

We have established a contract farmer network that provides us with an abundant supply of relatively low cost and price stable Jatropha feedstock. This captive supply gives us some protection from feedstock pricing pressure. As Jatropha is inedible, its price and availability are unlikely to be significantly influenced by demand for food crops. Based on our existing productive acreage and our median yield scenario, we estimate that we will be able to produce approximately 22.3 million barrels of Jatropha oil over the 30-year life of our existing productive acreage.

Our existing contract farming platform allows for continued growth of contracted acreage with no significant direct capital expenditure.

Our contract farming management systems are scalable and the planting costs are borne by our contract farmers. We can expand our existing contract farming network without any significant direct additional capital expenditure on our part. Based on our median growth in productive acreage over the next five years and the median yield scenario, we estimate that we would be able to produce approximately 51 million barrels of Jatropha oil over the 30-year life of our cumulative productive acreage, which includes our existing productive acreage and new productive acreage that we intend to contract.

We believe our leadership position in Jatropha cultivation creates commercial opportunities for us.

We began cultivating Jatropha in 2007 and realized our first commercial oil yields in 2010. Unlike potential innovations in the areas of cellulosic, algae and green diesel which are not yet proven at commercial scale, our products do not require major research and development achievements or the market adoption of new technology. We believe our leadership position in Jatropha cultivation gives us a competitive advantage in securing high-volume customers, favorable supply and distribution agreements and strategic site locations. For instance, we entered into a favorably-priced long-term offtake agreement with North America’s largest independent petroleum refiner for up to 57% of the nameplate production capacity of our biodiesel refineries upon title transfer of the second refinery to us. This offtake agreement is contingent upon U.S. regulatory approval for the sale of palm or Jatropha-based biodiesel. We believe that we will be able to negotiate additional long term, premium priced contracts with other large buyers.

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In connection with the long-term offtake agreement, we issued to North America's largest independent petroleum refiner 81.41 million warrants, providing them with the right to purchase up to 25% of our company at A$0.45 per ordinary share. The warrants were not exercised and expired on August 31, 2010. For the month ended August 31, 2010, the highest reported sale price for our ordinary shares traded on the ASX was A$0.28.

We have established a large scale, cost competitive refining operation.

With a nameplate biodiesel production capacity of 105 million gallons per annum (350,000 tonnes per annum), we are a large biodiesel refiner. This scale makes us commercially relevant to large scale fuel blenders. While our Jatropha plantations mature and when market prices permit, we utilize crude palm oil as a feedstock, which is historically the lowest cost currently available feedstock. Management believes that we are a low cost producer of biodiesel as we have been able to competitively price our biodiesel from time to time even though we have been required to purchase feedstock for immediate cash payment and delivery. Management believes we are able to be cost competitive due to operations in a low cost jurisdiction with local access to commercial quantities of low cost feedstock.

We have established sustainable socially responsible feedstock cultivation and refining operations.

As an inedible feedstock that grows on marginal land without displacing food crops, our Jatropha-based biodiesel is a fully sustainable, socially responsible substitute for diesel. By providing our farmers with a long term annuity income at limited opportunity cost, our contract farming model will directly help to alleviate the poverty cycle for over 140,000 farmers with which we are currently contracted and indirectly provide income for many more. Under our contract farming program on marginal lands, we have successfully planted over 277 million Jatropha saplings to date.

We believe that we have leadership in social responsibility that can provide the political and social support necessary to grow our business.

Our Strategies

Focus on government mandated markets to capture the premium available to qualified producers of biofuels.

While in transition from our existing feedstock to our low cost Jatropha, we are focused on markets that are supported with government mandates. Subsidies, mandated blending requirements and other market forces in Europe and the United States have historically created a significant premium for biodiesel relative to ULSD or gasoil. Our low cost of refining allows us to compete in these favourable margin markets and capture some or all of this historic premium.

Lower our effective biodiesel cost base through increased by-product value realization and economies of scale.

We expect to realize further production cost savings from economies of scale and be able to receive incremental contribution from by-product sales, such that in combination we could generate a positive contribution margin. We believe that through increased by-product value realization and economies of scale we can achieve a net cost of production for our biodiesel that will allow us to be highly cost competitive with petroleum-based transport fuels and other existing biofuels.

Continue to expand our Jatropha contract farming operation.

Our contract farming provides our business with the access to low-cost, high-yield feedstock. We intend to continue building on our success and expand our contract farming acreage. Our existing business systems, practices and successful commercial scale rollout of contract farming provide us with a platform to continue to grow our acreage under contract and do not expect to be constrained by the availability of suitable land.

Continue Jatropha research and development efforts to increase the productivity of our contract farming operation and move into Mission-owned and operated plantations.

Engaging in large scale contract farming has spread the development risk of domesticating Jatropha and we expect to expand our contract farming operations. We believe that the knowledge gained from our contract farming operation will also facilitate our entry into large scale corporate farming of Jatropha. We are

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evaluating advances in Jatropha genetics and hybridization and believe that together with our agronomy knowledge that we will soon be able to attain the consistency and yields to profitably undertake investments in large scale corporate cultivation of Jatropha, including mechanization and other more sophisticated agronomic practices.

Extend vertical integration of our business model.

After establishing refining capacity, we have successfully developed our feedstock cultivation operations. Having secured a long-term offtake agreement in the United States, we are pursuing strategic acquisitions or structured arrangements for off-site biodiesel storage facilities, terminal operations and toll processing in key U.S. markets to grow our distribution capacity. These facilities will allow us to store and blend large volumes of biodiesel “off the rack” to customers at the point of delivery, without the need for an intermediary distributor.

Our Challenges

We face certain challenges, including:

We may not be able to continue as a going concern unless this offering is completed.

Revenue from the cultivation of Jatropha and the production of Jatropha-based biodiesel is unlikely to exceed our expenses for at least two years. Our ability to continue as a going concern depends on our ability to generate positive cash flow from operations, raise further adequate funds (whether through this offering or otherwise), defer the 2012 convertible note capital repayment and defer certain other capital commitments.

An absence of matched feedstock supply and sales contracts constrain our production.

Given the volatility of profit margins on biodiesel production, we do not produce biodiesel unless we have a committed purchase order at a price we believe will be profitable given the cost of procuring feedstock. Historically, these conditions have been met only occasionally, and we cannot be certain when they will occur in the future until our captive supply of Jatropha feedstock increases to a level that would significantly utilize our refining capacity.

Our supplies of palm and Jatropha oil may not satisfy revised standards in key markets.

In February 2010, the U.S. Environmental Protection Agency, or EPA, finalized revisions to the National Renewable Fuel Standard. The new rule, Renewable Fuels Standard 2, or RFS2, only allows soy oil, used cooking oil and tallow as eligible feedstock for biodiesel to fulfill government mandates. Other vegetable oil feedstock, such as rape seed, palm and Jatropha oil must meet certain environmental and green house gas requirements prior to approval. In July 2010, the European Union introduced, with effect from January 1, 2011, the Renewable Energy Directive, which requires palm-based biodiesel to be based on new sustainability criteria. This will require the use of certified palm oil. The majority of our suppliers of the palm oil feedstock, including our primary supplier, Cargill, have not yet been certified. Palm oil and Jatropha oil are not presently, and in the future may not be, approved under RFS2.

We do not yet have sufficient supply of Jatropha oil for profitable operation of our refineries.

Our Jatropha feedstock plantations have not yet matured and we have therefore not yet achieved vertical integration. We do not yet have a sufficient supply of our Jatropha feedstock to run our refineries at a sufficient utilization rate to ensure our profitability.

We have generated 188 tonnes of Jatropha oil from our feedstock operations. This quantity has not been sufficient to operate our first biodiesel refinery with 100,000 tonnes per year nameplate capacity profitably. Rather than produce Jatropha-based biodiesel from the Jatropha oil, we have sold and exported Jatropha oil to clients in the European Union. As our first sales of a Jatropha-based product, they represent a significant commercial milestone for us, albeit a minimal revenue contribution.

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Industry Challenges

In spite of the benefits of biofuels, the industry at large must overcome the following key challenges.

Access to renewable stable priced feedstock.

The rapid escalation of food-based commodity feedstock prices has frequently made it uneconomic to operate biodiesel refineries, a situation that we have faced ourselves. Available quantities of food-based feedstock are of an insufficient volume to meet the quantities of biofuels mandated by governments for future use. Given the shortage in supply of food-based commodity feedstock and the additional demand from government mandates, the price of food-based commodity feedstock is likely to continue to rise and, in turn, make the production of biodiesel from this feedstock uneconomic for the foreseeable future.

Reliance on government subsidies.

The current growth of the biofuels industry substantially relies on the availability and size of government subsidies and economic incentives in the form of production mandates, reduced tariffs and other incentives. Governments may eventually decide to reduce or eliminate these subsidies and economic incentives. The uncertainty of such decisions, as well as the possible elimination of favorable policies, may make it difficult for some biofuels companies to plan future projects and some projects may not be financially feasible without such incentives. As such, it remains a challenge for the biofuels industry and, in particular, the distribution infrastructure to reach sufficient scale to be cost-effective in a non-subsidized marketplace.

Reliance on third party or commodity priced feedstocks.

Manufacturers that source commodities to convert into biofuels from third parties or from the commodity markets have no visibility of their future production costs. This is additionally problematic given the inherent correlation between an underlying commodity being used to make energy and the energy value itself. An inability to manage this commodity exposure has lead to widespread bio-fuel business failures.

Access to working capital and risk management.

With feedstock representing around 85% of the cost of production for a biofuels manufacturer and standardized payment terms within the energy markets that limit trade credit for feedstock, biofuels manufacturers usually require tens of millions of dollars in working capital to allow them to manufacture product. Given the historically low operating margins and the cost of funds, access to such working capital to buy feedstock commodities and the risk management associated with the high volatility of price of the end product and feedstock represent considerable challenges to industry participants.

Development and commercialization risk for second generation and advanced biofuels.

There are and have been promising scientific developments and potential innovations in the pursuit of biodiesel production using low cost, second generation feedstock with particular focus on non-food oil seeds, algae, cellulosic and green diesel. However, developing such technologies into commercial scale projects has thus far been largely unproven in the biofuels industry. Moreover, once a technology is proven at a commercial scale, achieving economic performance, the execution of the project plan, operating the business and entering supply and sales agreements still represent considerable challenges. These challenges are increased when entering highly mature markets such as petrochemical, pharmaceutical and transport fuel markets.

Raising required capital in competitive financial markets for new fuel technologies with limited or no track record.

Highly sophisticated advanced plants can cost many tens or hundreds of millions of dollars in capital expenditure. With unproven, volatile economic models and long lead times to profitability, raising such necessary funds such projects with limited of no track record may not be achievable or at a cost of funds that makes the project economic.

Risk Factors

We are subject to a number of risks which you should be aware of before you buy our ordinary shares. The risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary.

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Our Corporate History

Mission NewEnergy Limited was incorporated in Western Australia under the laws of Australia in November 2005. In 2006, we conducted an initial public offering in Australia, raising A$27.0 million, and listed on the Australian Securities Exchange.

Our refining operations and all associated business contracts are held by two wholly owned subsidiaries. Mission Biotechnologies Sdn Bhd owns the first biodiesel refinery with the 100,000 tonnes (30 million gallons) per year nameplate capacity and Mission Biofuels Sdn Bhd will own the second biodiesel refinery with the 250,000 tonnes (75 million gallons) per year nameplate capacity upon title transfer of the second refinery to us.

Our feedstock cultivation operations are conducted by Mission Biofuels (India) Private Limited.

Corporate Information

Our principal office is located at Unit 4, 97 Hector Street West, Osborne Park, Western Australia 6017 Australia. Our telephone number is 011-61-8-9443-1006. Our website address is www.missionnewenergy.com. Information on our website and websites linked to it do not constitute part of this registration statement. Our agent for service of process in the United States is PJ Trading LLC, whose principal place of business address as of the date of this registration statement is 1777 NE Loop 410, Suite 600, San Antonio, Texas 78217.

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The Offering

The number of ordinary shares to be outstanding immediately following this offering:

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As of December 31, 2010, prior to giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share, we had (1) 280,594,232 ordinary shares outstanding, (2) outstanding warrants to purchase an aggregate of 150,113,332 ordinary shares at a weighted average exercise price of A$0.30, (3) A$60,812,167 in aggregate principal amount of convertible notes convertible into an aggregate of 46,778,845 ordinary shares, (4) outstanding employee options to purchase an aggregate of 3,500,000 ordinary shares at a weighted average exercise price of A$0.17 and (5) 13,750,004 outstanding employee performance rights, each of which may be exercised or converted into one ordinary share.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following summary consolidated statements of operations and other consolidated financial data for fiscal years 2010, 2009 and 2008, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The financial data for the six month periods ended December 31, 2010 and December 31, 2009, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. You should read the summary consolidated financial data in conjunction with our consolidated financial statements and related notes, “Selected Consolidated Financial and Operating Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our historical results do not necessarily indicate our expected results for any future periods.

Our financial statements have been prepared in Australian dollars and in accordance with Financial Reporting Standards, as issued by the International Accounting Standards Board.

Income statement data for the fiscal years ended June 30, 2010, 2009 and 2008 and the balance sheet data as at June 30, 2010 and 2009 have been derived from our audited financial statements that are included elsewhere in this prospectus. Operating results for the half year ended December 31, 2010 are not necessarily indicative of the results that may be expected for the full year ending June 30, 2011.

		As of and for the half year ended December 31		As of and for the year ended June 30
		2010 US$ (1)		2010 A$		2009 A$		2010 US$ (2)		2010 A$		2009 A$		2008 A$
				(unaudited)				(audited)
		(in thousands, except per share data)
Income Statement data:
Total sales revenue			4,430				4,752				14,007				12,696				14,394				43,368				9,403
Total other income			922				989				946				1,822				2,066				11,809				20,530
Cost of sales			(4,408	)			(4,728	)			(13,353	)			(13,249	)			(15,021	)			(45,709	)			(10,964	)
Employee benefits expense			(1,797	)			(1,927	)			(2,142	)			(4,681	)			(5,307	)			(5,117	)			(2,694	)
Other income (expenses)			(9,752	)			(10,460	)			(9,362	)			(78,278	)			(88,751	)			(19,271	)			(5,962	)
Finance costs			(2,512	)			(2,695	)			(2,573	)			(4,544	)			(5,152	)			(8,401	)			(5,868	)
Profit/(loss) from operations before income tax			(13,116	)			(14,069	)			(12,477	)			(86,234	)			(97,771	)			(23,321	)			4,445
Income tax (expense) benefit			(4	)			(4	)			(98	)			(26	)			(29	)			(434	)			(161	)
Net (loss)/profit			(13,120	)			(14,073	)			(12,575	)			(86,260	)			(97,800	)			(23,755	)			4,284
Basic and diluted earnings (loss) per share			(0.047	)			(0.05	)			(0.06	)			(0.366	)			(0.415	)			(0.240	)			0.046
Weighted average ordinary number of shares outstanding			279,916,127				279,916,127				206,465,155				235,562,471				235,562,471				98,986,256				92,642,651
Pro-forma basic and diluted earnings (loss) per share (3)			(2.331	)			(2.5	)			(3	)			(18.31	)			(20.76	)			(12.00	)			2.31
Pro-forma weighted average ordinary number of shares outstanding (4)			5,598,323				5,598,323				4,129,303				4,711,249				4,711,249				1,979,725				1,852,853
Balance Sheet data:
Total current assets			11,818				11,676				25,007				21,206				25,007				26,372				54,317
Total assets			20,165				19,922				33,749				28,619				33,749				118,030				114,580
Total current liabilities			3,437				3,396				4,300				3,646				4,300				9,550				10,379
Total non-current liabilities			60,313				59,586				59,137				50,148				59,137				57,441				55,579
Total liabilities			63,750				62,982				63,437				53,795				63,437				66,991				65,958
Retained earnings (accumulated losses)			(132,934	)			(131,332	)			(117,259	)			(99,436	)			(117,259	)			(19,475	)			2,904
Total equity			(43,585	)			(43,060	)			(29,688	)			(25,175	)			(29,688	)			51,039				48,622
Other financial data:
Dividends per share			—				—				—				—				—				—				—

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RISK FACTORS

An investment in our ordinary shares involves significant risks. You should carefully consider the risks described below and the other information in this prospectus, including our consolidated financial statements and related notes included elsewhere in this prospectus, before you decide to buy our ordinary shares. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially harmed, the trading price of our ordinary shares could decline and you could lose all or part of your investment.

Risks Related to Our Business

We may not be able to continue as a going concern unless this offering is completed.

We have a history of net losses and there is a substantial doubt about our ability to continue as a going concern. We had a loss for the six months ended December 31, 2010 of A$14.1 million, and as of December 31, 2010, the company had a current assets less current liability surplus of A$8.3 million and a net asset deficiency of A$43.1 million at balance date. The net asset deficiency is primarily as a result of the impairment of refinery assets during the financial year ended June 30, 2010.

Our ability to continue as a going concern depends on our ability to generate positive cash flow from operations, raise further adequate funds (whether through this offering or otherwise), defer the 2012 convertible note capital repayment and defer certain other capital commitments. The restructure of the capital commitments, equity funding and convertible note restructure referred to above have not been agreed to at the date of this prospectus.

The financial statements have been prepared on a going concern basis which has been assessed based on detailed cash flow forecasts extending out twelve months from the date of our most recent financial report. In addition to the twelve month cash flow forecast, our Board is cognizant of the current requirement to repay the convertible notes on May 16, 2012 to a value of A$60.8 million, although upon completion of the exchange offer that will occur upon consummation of this offering, our convertible note repayment obligations will be restructured so that we are required to only repay A$15.0 million aggregate principal amount of convertible notes by May 16, 2012 and the remaining A$45.8 million aggregate principal amount of convertible notes by May 16, 2014. The cash flow forecasts from operations are based on the forecast cash flows required to sustain the business, cash on hand at December 31, 2010 of A$6.6 million, the ongoing receivables collection associated with historic sapling sales and further capital raising. Based on the cash flow forecasts and without further capital raisings, we will require further funds from June 2011 to continue our operations in their current form.

At the date of this prospectus, our Board is exploring the following key opportunities.

Mission is in discussions with the turnkey contractor about the finalisation and handover of the second biodiesel plant. When this is finalised, the final instalment will be due and payable. Mission is in discussions with the contractor to defer the payments after handover.

On March 23, 2011, Mission obtained shareholder approval to proceed with an exchange offer to restructure the settlement terms of the convertible notes. Mission has received acceptances for the exchange offer from six convertible note holders, representing 75.33% of the existing convertible notes, and the opportunity to participate in the exchange offer has expired for the convertible note holder representing 24.67% of the existing convertible notes. The Company's main purpose in completing the exchange offer is to extend the maturity of the debt represented by the convertible notes by two years to May 16, 2014. After giving effect to the exchange offer, 230,770 of the existing convertible notes having a principal value of A$15.0 million remain outstanding and are due May 16, 2012. After giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share, such notes can be converted into an aggregate of 230,770 ordinary shares at a conversion price of A$65.00 per share. Upon consummation of this offering, the exchange offer will be completed for the remaining 704,809 convertible notes having a principal value of A$45.8 million remain outstanding and due on May 16, 2014. After giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share, these 704,809 convertible notes can be convertible into an aggregate of 2,819,236 ordinary shares at a conversion price of A$16.25 per share.

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If we are unable to generate sufficient alternative revenue to offset the losses from our primary business, our business and financial condition will suffer a significant adverse effect.

Revenue from our primary business, the cultivation and conversion of Jatropha seeds and the production of Jatropha-based biodiesel, is unlikely to exceed our expenses for at least two years. Should the cultivation and conversion of Jatropha seeds and the production of Jatropha-based biodiesel not produce revenue in excess of our expenses there is substantial risk that we will not be able to generate enough alternative revenue to reverse our pattern of historical losses and negative cash flow, which would have a significant adverse effect on our business and financial condition.

Our substantial level of indebtedness could impair our ability to service our indebtedness, finance our operations and compete with less leveraged players in the industry.

We have substantial indebtedness. As of June 30, 2010, we had total indebtedness of A$64.5 million, including approximately A$60.8 million outstanding under our convertible notes, and A$3.7 million of other debt. Our high level of indebtedness could have important consequences. For example, it could:

We may not be able to generate sufficient cash to service our indebtedness and the terms of our indebtedness, as well as economic conditions, may prevent us from successfully refinancing.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our future performance, which will be affected by financial, business and economic conditions and other factors. We will not be able to control many of these factors, such as economic conditions in the industry in which we operate and competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our debt and to meet our other obligations. Any limitation on our ability to pay principal of, and interest on, the convertible notes would likely reduce the value of our ordinary shares. If our cash flows and capital resources are insufficient to fund our debt service obligation, including those obligations under our convertible notes, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the convertible notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements, including our convertible notes, may restrict us from pursuing any of these alternatives.

If we do not meet certain EPA requirements under Renewable Fuels Standard 2, fuels produced from palm oil may not be able to generate retroactive Renewable Identification Numbers, or RINs, which are commercially necessary to supply biodiesel produced from palm oil into the United States, which would limit our market opportunity and jeopardize our near term financial viability.

In February 2010, the EPA finalized revisions to the National Renewable Fuel Standard. The new rule, RFS2, incorporates changes mandated by the U.S. Energy Independence and Security Act of 2007 and amends

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the original created under the U.S. Energy Policy Act of 2005. In December 2010, the EPA completed the roll out of the RFS2 program by setting renewable fuel quality requirements for 2011. At the time RFS2 became effective on July 1, 2010, the EPA had not completed its lifecycle analysis of several common biodiesel feedstocks, including canola, sorghum and palm oil. Under the prior rule, fuels produced from these feedstocks were not recognized as having established fuel pathways and therefore did not generate RINs. A RIN is a 38-character numeric code that is generated by the producer or importer of renewable fuel representing gallons of renewable fuel produced/imported and assigned to batches of renewable fuel that are transferred (change of ownership) to others. RINs are then turned into the EPA each year by petroleum refiners to prove that they have blended the required amount of renewable fuel under RFS2. Therefore, biodiesel that does not generate a RIN has a very limited market in the U.S. In the final rule adopted in December 2010, the EPA allowed the generation of retroactive or “delayed RINs”for fuels produced by grain sorghum ethanol, pulpwood biofuel, palm oil biodiesel and canola oil biodiesel. To be eligible, fuel producers must meet certain requirements including having a commercialized production process that existed on July 1, 2010, and completing the EPA petition process. We have historically used palm oil as feedstock for our biodiesel production. If we are not able to meet these requirements, we may suffer a significant adverse effect on our business, financial performance and financial condition and could cause us to cease operations. Additionally, our offtake agreement with Valero Energy Corporation is contingent upon meeting these requirements and we will not have any near term sales under that agreement if we fail to meet these requirements.

If Jatropha oil is not approved as a feedstock under Renewable Fuels Standard 2, biodiesel produced from Jatropha oil will not generate RINs which will significantly limit our market opportunity and could have a significant adverse effect on our business, financial performance and financial condition.

Under RFS2, biofuels produced from Jatropha oil are not yet recognized by the EPA as having established fuel pathways and therefore do not generate RINs. Jatropha-based biodiesel must demonstrate that it meets certain environmental and green house gas requirements prior to its approval by the EPA as a feedstock eligible to generate RINs under RFS2.

We believe that Jatropha will meet these requirements and we expect the approval of Jatropha-based biodiesel, but there is no assurance that this feedstock will meet the RFS2 requirements or that approval of this feedstock will be achieved. We have historically used palm oil as feedstock for our biodiesel production and our future strategy is conditioned upon the viability of Jatropha oil as a feedstock. Palm oil is not presently, and in the future may not be, approved under RFS2. Any significant delay or the failure of palm or Jatropha oil to be accepted under the RFS2 requirements in the United States could have a significant adverse effect on our business, financial performance and financial condition and could cause us to cease operations.

If more of our palm oil suppliers are not certified as compliant with the Renewable Energy Directive, our ability to sell palm-based biodiesel into the European Union will be significantly constrained and the results of our operations will be adversely impacted.

In July 2010, the European Union introduced, with effect from January 1, 2011, the Renewable Energy Directive, which requires palm-based biodiesel to be based on new sustainability criteria. This will require the use of certified palm oil. Our production facilities have been registered and are compliant with the Renewable Energy Directive, although the majority of our suppliers of the palm oil feedstock that is used in our production facilities have not yet been certified. This includes Cargill, which has historically been our primary supplier of palm oil, along with a range of palm oil producers and traders that supply to us. Continued failure by our suppliers of palm oil feedstock to satisfy the Renewable Energy Directive could affect our ability to sell palm-based biodiesel into the European Union. Trafigura Beheer B.V. Amsterdam, a European oil trading company, contributed over 82% of our biodiesel sales in fiscal 2009 and fiscal 2010 (although as our ability to produce product at a positive contribution margin during 2009 and 2010 was driven solely by our intermittent ability to buy feedstock on favourable terms and not by the availability of buyers, we believe that in the periods when we sold product to our primary customer we could have consummated sales to other trading company counterparties for substantially the same volumes and prices if we had sought to do so). Despite the fact that the contract with this customer has expired, the European Union has been and remains a key market for us. Any limitation on our ability to sell biodiesel into the European Union could have a significant adverse effect on our business, financial performance and financial condition.

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The design and technology of our refineries may be unable to meet future biodiesel specifications and further capital expenditures may be required.

Recent specification changes have been introduced in the United States requiring biodiesel to meet the cold soak filtration test. For a discussion of the changes, see “Business — Biodiesel Production — Refining Process.” We are also in the process of retrofitting our refineries with a distillation column to meet current quality specifications for our biodiesel despite the use of varying feedstock. If the distillation column does not perform to its specifications, we may be unable to meet the requirements of the cold soak filtration test and we would be unable to meet the current performance specifications and sell compliant biodiesel into the United States market. The specifications for biodiesel are continually evolving and are subject to further change. Further capital expenditures may be required to ensure that our refineries meet new specifications, adversely affecting our financial performance and financial position. There is also no assurance that the equipment and technology used in our capital improvements will achieve performance specifications. The failure of utilized equipment and technology in this regard may adversely affect our business.

The operation and maintenance of our refineries involve significant risks that could result in disruptions in production or reduced output.

The operations of our refineries are exposed to significant risks, including:

There are operational hazards inherent in chemical manufacturing industries, such a fires, explosions, abnormal pressures, blowouts, pipeline ruptures, and transportation accidents. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension or termination of operations and the imposition of civil or criminal penalties. In addition, our insurance may not be adequate to fully cover the potential operation hazards described above, and we may not be able to renew our insurance on commercially reasonable terms or at all. See “Risk Factors — Our insurance coverage may not be sufficient to cover our liability risks.”

If we are unable to replace the sales historically generated by Trafigura this may significantly reduce our revenues and harm our results of operations.

Notwithstanding our continuing efforts to further diversify our customer base, Trafigura Beheer B.V. Amsterdam, a European oil trading company, contributed over 82% of our biodiesel sales in fiscal 2009 and fiscal 2010. Our contract with Trafigura has since expired and we cannot assure you that we will be able to source new customers and establish and maintain long-term relationships with such customers. As a result, if we are unable to replace the sales historically generated by Trafigura, such inability may significantly reduce our revenues and could have a material adverse effect on our results of operations.

An increase in cost or an interruption in the supply of our feedstock may inhibit production and adversely affect our financial performance.

The operation of our refineries is dependent on our ability to procure substantial quantities of suitable quality feedstock. While the commercial oil yields from our feedstock cultivation business of Jatropha ramp up, palm oil is likely to be our primary feedstock.

At this time, our palm oil supply is sourced primarily from Cargill through a contracted supply agreement and secondarily from a range of palm oil producers and traders. Crude palm oil accounted for

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approximately 87% of our input costs associated with our production of biodiesel in fiscal 2009 and fiscal 2010. The failure to procure a sufficient supply of raw materials satisfying our quality, quantity and cost requirements in a timely manner could impair our ability to produce our products or could increase our costs. Any interruption to the supply of suitable quality feedstock may result in disruptions in production or reduced output, which may materially and adversely affect our financial performance.

Additionally, our financial results are substantially dependant on the prices for our feedstock. A substantial increase in feedstock price relative to the value of our end products would adversely affect our financial performance. Although we may attempt to offset the effects of fluctuations in prices by entering into arrangements with our customers on a feedstock price plus contract basis through which we receive a predetermined margin over the price of the feedstock or by engaging in transactions that involve exchange-traded futures contracts (or other contractual arrangements securing future commodity prices), the amount and duration of these hedging and risk mitigation activities may vary substantially over time. These activities also involve substantial risks.

Additionally, if a negative spread exists between our input costs to produce biodiesel and the potential sales price of the biodiesel, we will be unable to profitably produce product and to generate revenue. We did not operate for nine months in fiscal 2010 and we did not operate for five months in fiscal 2009 due to negative spreads that existed during those periods. Future increases in purchased feedstock costs may prevent us from resuming production and may materially and adversely affect our performance and ability to continue as a going concern.

Our contract farming model is subject to inherent risks and if we can not improve the results of poor performing farmers in certain states, our Jatropha oil yield and the results of our operations will be adversely impacted.

We have diversified our operations to include the cultivation of Jatropha to meet our feedstock supply requirements internally in the future and to protect us from increases in cost and interruptions in delivery from external suppliers. In that regard, we have entered into contracts with farmers in five different states in India to grow the Jatropha plants and provide the seeds that are crushed to produce feedstock oil. However, there is no assurance that the contracted farmers will be able meet our expected yields of seeds for feedstock oil whether due to the poor farm management of individual farmers or the poor health, low productivity or mortality of the Jatropha plants. We employ a continuous review of the condition and success of the contract farming across the wide geographic area in which we have acreage under contract and we have noted differing results from state to state. If we are unable to enhance the results of the low performing states, we will have to focus our operations in the areas giving the best results and a lower than expected yield of oil will occur. Given that our current strategy is based on contract farming and that the Jatropha oil is primarily an agricultural product subject to agronomic risks, it is unlikely that all recorded acreage will provide us with Jatropha oil and we can provide no assurances as to our Jatropha oil yield.

If our farmers are unable to obtain financing, they may be unable to perform under their contracts and our feedstock supply could be disrupted.

The model for our feedstock cultivation strategy relies on a contract farming agreement with our farmers. To assist our farmers in their purchase of saplings from us and to provide the necessary working capital to operate their farms until their acreage produces yield, we have facilitated arrangements with certain Indian banks to provide loans to some of the farmers to finance their planting, including purchases from us of saplings and materials required for the cultivation of Jatropha plants. If we cannot facilitate such loans on similar terms or at all in the future, the farmers with whom we have entered into contracts will likely be unable to pay for the saplings provided by us and therefore may limit our ability to grow our business. An inability to collect payment on accounts receivable for sold saplings may require us to alter our intended growth of acreage under contract, which ultimately could adversely affect our financial performance. In addition, the inability of our contract farmers to obtain financing or their failure to perform under their contracts for any reason would cause disruptions in our future feedstock supply chain and subject us to risks of disruption and reduction in output at our plants.

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We have experienced and may in the future experience volatile capacity utilization which may adversely affect our results of operations.

As we ramp up our Jatropha cultivation, we remain reliant on palm oil as a feedstock. If the price of our palm oil is greater than the value of our biodiesel, which is priced relative to ULSD, we may not be able to profitably sell biodiesel into the immediate cash payment and delivery market. Our ability to supply palm-based biodiesel profitably is based on having positive margins where our input costs are lower than the value of our refined product. We are unable to influence the price of palm oil or the price of biodiesel. Resultantly, our biodiesel profitability is reliant on the existence of a positive spread between these two commodities. Between March 1, 2006 and February 10, 2010, 28% of the time there has been positive spread between crude palm oil and mineral diesel. As we only operate when a positive operating margin exists, we have and expect to continue to have in the future erratic capacity utilization which may adversely affect our results of operations.

We have suffered and may continue to suffer low capacity utilization if we are unable to secure term contracts.

Given the volatility of profit margins on biodiesel production due to fluctuations in commodity pricing for palm oil (our major input until our Jatropha supply matures) and the value of our finished product, we have not converted palm oil to biodiesel unless we have a committed contract customer willing to accept pricing based on our cost of purchasing foodstock and earning a positive margin from refining. Historically, we have had few such contract customers and their purchases have been insufficient to utilize our full refining capacity, resulting in our historic low capacity utilization. If palm oil is approved under RFS2, the contract with Valero would meet these criteria. However, if palm oil does not receive approval, there is no assurance that we can find another customer willing to do so.

If we are unable to perform under the offtake agreement with Valero or if there is a breach, termination or reduction by Valero of its commitments under the agreement, our financial performance and condition would be adversely impacted.

Our offtake agreement with Valero is currently for 60 million gallons per annum of biodiesel, which represents 57% of our nameplate refining capacity upon title transfer of our second refinery to us. This is currently the only major long-term biodiesel customer contract that we have. Changes in economic, regulatory or other factors could have a significant effect on this customer or our contractual relationship.

Due to recent regulatory changes, our palm and Jatropha-based biodiesel is not compliant with governmental mandates in the United States, the intended market for the biodiesel under the offtake agreement. In February 2010, the EPA finalized RFS2, which only allows soy oil, used cooking oil and tallow as eligible feedstock for biodiesel to fulfil government mandates and requires our feedstock of palm and Jatropha oil to meet certain environmental and green house gas requirements prior to approval. Palm oil and Jatropha oil are not presently, and in the future may not be, approved under RFS2. Additionally, ASTM International has recently revised the U.S. standard ASTMD6751 to include specifications for a Cold Soak Filter Test. We are currently installing additional equipment that will enable both our refineries to meet the standard. However, our biodiesel is presently not compliant with RFS2 and does not meet the ASTMD6751 standard as is contractually required under the offtake agreement.

As a result, we do not expect to supply biodiesel to Valero under the offtake agreement until these regulatory hurdles are resolved. The term of the offtake agreement with Valero does not begin nor do payment obligations for Valero arise under the offtake agreement until the first shipment of biodiesel to Valero. The termination of, or a significant reduction in biodiesel purchased under, the Valero offtake agreement for any reason, including our inability to perform under the agreement, would materially reduce our revenue and would harm our financial condition and results of operations. Additionally, if Valero failed to pay us or was delayed in its payments under the offtake agreement, we would be adversely affected to the extent that we were unable to find other customers at the same level of profitability. A failure to make payments under the offtake agreement with Valero or another material breach of the offtake agreement would have a significant adverse affect on our business, financial performance and financial condition.

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If we are unable to enter into sufficient offtake agreements for our second biodiesel refinery, our financial performance could be adversely affected.

We have contracted to supply Valero with 60 million gallons per annum of biodiesel, which represents 57% of the nameplate refining capacity of our two refineries upon title transfer of the second refinery to us. If we are unable to increase our contracted capacity utilization to higher levels, our ability to generate revenue will be limited and our financial condition will be adversely affected. The offtake agreement does not expressly prohibit our entry into other offtake agreements. However, our contractual relationship with Valero may affect our ability to secure other offtake agreements with competitors to Valero, which could reduce our profitability and limit our ability to grow.

Our ability to supply biodiesel under the offtake agreement with Valero may be adversely affected by markets risks that are beyond our control.

Under the biodiesel offtake agreement, Valero will purchase our entire production of Jatropha-based biodiesel up to 60 million gallons per annum with an option for Valero to double this amount. We have the option to cover any production shortfall from the contracted amount with palm-based biodiesel. However, with a pricing formula benchmarked off Gulf Coast Harbor ULSD, our ability to supply palm-based biodiesel is subject to favorable pricing for the palm oil and Gulf Coast Harbor ULSD and the availability of palm oil. Already subject to fluctuations in price and availability, new or revised standards in key markets may impose requirements to limit production of palm-based diesel from sustainable crude palm oil, further limiting availability and subjecting the palm oil to unfavorable commodity price movements. If we are unable to source palm oil at favorable prices and a negative spread exists between our input costs and the potential sales price of the biodiesel, we will be unable to make profitable sales and we would halt production. As a result, our ability to supply biodiesel to Valero under the offtake agreement may be adversely affected. See “— An increase in cost or an interruption in the supply of our feedstock may inhibit production and adversely affect our financial performance.”

Our inability to meet margin calls on hedged positions would adversely affect our financial condition.

To maximize the profitability of the offtake agreement with Valero, we may enter into hedging positions on both palm oil and ULSD. Upon entering the hedging positions and the inherent volatility in the commodity markets, we will likely be required to make margin call payments from time to time. Inability to meet such margin calls would adversely affect our financial condition and financial performance.

We may suffer losses due to sales of competing products that infringe on our intellectual property.

We rely on a combination of patents, trademarks, domain names and contractual rights to protect our intellectual property. We cannot assure you that the measures we take to protect our intellectual property rights will be sufficient to prevent any misappropriation of our intellectual property, or that our competitors will not independently develop alternative technologies that are equivalent or superior to technologies based on our intellectual property. In the event that the steps we have taken and the protection afforded by law do not adequately safeguard our proprietary technology, we could suffer losses due to the sales of competing products that exploit our intellectual property, and our profitability would be adversely affected.

If we are subject to claims of infringement of the intellectual property of others, the defense of these claims could drain our resources and any adverse determination could adversely impact or halt our biodiesel production.

Our biodiesel refineries include contracts with Crown Iron Works, Inc., or Crown, and Axens for the supply of our proprietary systems, over which they have intellectual property that they have licensed to us. This intellectual property includes the operating procedures and technical schematics of our biodiesel refineries, which are required to operate and maintain the plants. The unauthorized use or disclosure of Crown’s, Axens’ or our intellectual property or the infringement by us of another person’s intellectual property right may adversely affect our financial performance.

To the best of our knowledge, our patented process does not infringe any third party’s intellectual property rights. However, intellectual property rights are complex and there exists the risk that our process may infringe, or be alleged to infringe, another party’s intellectual property rights.

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The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our products or manufacturing processes or subject us to injunctions prohibiting the manufacture and sale of our products or the use of our technologies.

Any inability to obtain and maintain all the required licenses and permits related to our business and the resulting increased compliance costs may adversely affect our financial performance.

We are required to hold or obtain a number of licenses and permits, including environmental and those related to materials handling, in various jurisdictions in order to implement and operate our business. In particular our biodiesel refining operation in Malaysia holds a Lembaga Minyak Sawit Malaysia license (which allows for the buying, selling, movement and importation of palm oil products) and a Kementerian Perusahaan Perladangan & Komoditi license (which allows the production of bidoiesel). The Lembaga Minyak Sawit Malaysia license is renewed annually and is currently valid until September 30, 2011. Mission has held this license since July 1, 2008 and we have no reason to believe that this license will not be renewed, although renewal is not assured. The Kementerian Perusahaan Perladangan & Komoditi license is renewed every three years and is currently valid until March 17, 2013 and we have no reason to believe that this license will not be renewed, although renewal is not assured. In particular, our Jatropha operations in India hold a Foreign Investment Promotion Board (“FIRB”) license (which allows investment by Mission into its Indian feedstock business and approves the activity of being engaged in the contract farming of Jatropha Curcas and utilization of the Jatropha oil for domestic or export markets). This license is in place and is not required to be renewed. There is a risk that we will not comply with the ongoing requirements imposed under those licenses or permits, although we are not aware of any compliance deficiency that jeopardizes our standing as a licensee. There is also a risk that the licenses and permits required, or the conditions imposed on us under them, will change from time to time. Our ongoing compliance costs may increase as a result. Either of the above may adversely affect our financial performance.

We are subject to environmental regulations, the compliance with which imposes substantial costs on us and the violation of which could result in penalties and other liabilities.

Laws dealing with protection of the environment provide for penalties and other liabilities for the violation of such laws and establish, in certain circumstances, obligations to remediate facilities and locations where operations are conducted. We may incur substantial costs in the future as part of our continued efforts to comply with these environmental laws and to avoid violations of them.

We may experience a significant chemical or biodiesel spill at our refineries or we may experience a chemical spill or human ingestion of toxic materials during the Jatropha crude oil crushing process. If any of these events occur or if we otherwise fail to comply with the applicable environmental or other regulations, we could be subject to significant monetary damages and fines or suspensions of our operations, and our business reputation and profitability could be adversely affected.

Any amendments to the environmental laws could impose substantial pollution control measures that could require us to make significant expenditures to modify our production process or change the design of our products to limit actual or potential impact to the environment. Moreover, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures, which may adversely affect our business, results of operations and financial condition.

Our insurance coverage may not be sufficient to cover our liability risks.

Our insurance arrangements may not adequately protect us against liability for all losses, including but not limited to environmental losses, property damage, public liability or losses arising from business interruption and product liability risk. Additionally, we may be unable to renew our existing insurance arrangements on commercially reasonable terms or at all. Should we be unable to maintain sufficient insurance

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coverage in the future or experience losses in excess of the scope of our insurance coverage, our financial performance could be adversely affected.

Changes in government policy could adversely affect our business.

Our contract farming operations are in India, our refineries are located in Malaysia and the bulk of our expected biodiesel sales will be in the United States. In addition, the equipment for our plants is imported from, and our products are sold in, various other countries. There is a risk that actions of a government in any of these countries may adversely affect our ability to implement and operate our business.

Government action or policy change in relation to access to lands and infrastructure, import and export regulations, environmental regulations, taxation, royalties and subsidies could adversely affect our operations and financial performance. In particular, upon significant changes in U.S. legislation, including changes in the renewable fuels standard or the biodiesel blenders excise tax credit, our offtake agreement with Valero can be renegotiated. Generally, however, a policy change in any of the jurisdictions in which we operate, or intend to operate, may inhibit our ability or the financial viability of our operations to export feedstock oil or the refined products that we market. This, in turn, could adversely affect our operations and financial performance.

The Indian government has developed a National Policy on Biofuels, which establishes a framework for the industry until 2017. The policy limits the export of biofuels until domestic Indian usage mandates are met. If we are unable to produce biofuels domestically in India, the legislation is changed to limit the export of feedstock, such as Jatropha, or our existing export approval for unlimited amounts of Jatropha is repealed, we would be unable to sell Indian sourced Jatropha-based biodiesel into the key markets of the European Union and the United States which would adversely affect our operations and financial performance.

Our financial performance may be adversely affected by fluctuations in exchange rates.

Our revenues and expenditures are denominated in a number of currencies, including U.S. dollars, euros, Australian dollars, Indian rupees and Malaysian ringgit. Historically, we have experienced losses due to unhedged negative changes in exchange rate. Additionally, we have experienced foreign currency translation differences (which are held on our balance sheet in the foreign currency translation reserve) as a result of reporting consolidation of non-Australian subsidies. We have limited foreign currency hedging arrangements in place. As a result, our financial performance may be adversely affected by fluctuations in exchange rates.

Risks Related to Our Strategy

Our future growth will depend on our ability to establish and maintain strategic relationships with distributors and feedstock suppliers.

Our future growth depends on our ability to establish and maintain relationships with third parties, including distributors and feedstock suppliers. We may not be able to establish strategic relationships with third parties on terms satisfactory to us or at all, and any arrangements that we enter into may not result in the type of collaborative relationship with the third party that we are seeking. Further, these third parties may not place sufficient importance on their relationship with us and may not perform their obligations as agreed. Any failure to develop and maintain satisfactory relationships with distributors and feedstock suppliers would have a material adverse effect on our business.

If we fail to effectively manage our planned expansion, we may fail to meet our strategies and objectives and our financial performance could be materially and adversely impacted.

The further expansion of our business and production, including our biodiesel refining capacity, is one of our key growth strategies. Our planned expansion requires us to identify suitable locations for plantations and related infrastructure (such as nurseries, warehouses, ports and mills) at competitive prices. Even if we successfully identify suitable locations, we may be unable to expand our business into these new locations if potential competitors enter the market before us. In addition, we may not have the necessary management or financial resources to oversee the successful and timely development of plantations and construction of new facilities. Additionally, our ability to generate cash from existing operations may be slower than expected or not eventuate at all, resulting in the requirement for further funding to achieve our expansion plans. Our expansion plans could also be affected by cost overruns, failures or delays in obtaining government approvals of necessary permits and our inability to secure the necessary equipment.

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We cannot assure you that we will be able to effectively manage our planned expansion or achieve our expansion plans at all. If we are unable to do so, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures, any of which could materially and adversely affect our business, results of operations and financial condition.

If we are unable to successfully enter new markets for Jatropha by-products, we may be unable to enhance by-product realization.

One of our key strategies is to lower our effective biodiesel cost base through increased by-product value realization. Our ability to enhance the value of the by-products of our Jatropha-based biodiesel production process, such as Jatropha seed cake, will require us to enter and operate in new markets for us. We cannot be sure of our ability to enter into these new markets, nor the market reaction to us as a new entrant. If we are unable or unsuccessful in these new markets, it would limit our ability to enhance the value of our by-products, which could have a significant adverse effect on our strategy and on our business, financial performance and financial condition.

If our contract farming model does not perform to expectations our business may suffer.

Our access to Jatropha oil is based on our ability to buy Jatropha seeds under our existing contract farming model. Despite our contract farmers being under definitive contract farming agreements we may be unable to effectively enforce these contracts in the event of a breach. Our expansion strategy includes entering into further contract farming agreements to increase our access to Jatropha seeds. If we are unable to enforce our contract farming agreements or enter into additional contract farming agreements, this could have a significant adverse effect upon our business, financial performance and financial condition.

We may unable to generate sufficient revenue to fund our operational and capital requirements and service our existing indebtedness and we may be unable to obtain adequate financing on fabourable terms to meet these needs.

We expect that over the next several years, a portion of our cash flow will be used to fund operating losses and capital expenditures. We will also require substantial working capital and, given that we may enter into derivative transactions in connection with our offtake agreement with Valero, margin call capital in the future. Additionally, as of the date of this prospectus we are required to repay approximately A$60.8 million to redeem our outstanding convertible notes in May 2012. On March 23, 2011 we obtained shareholder approval to proceed with an exchange offer to restructure the settlement terms of the convertible notes. Mission has received acceptances for the exchange offer from six convertible noteholders, representing 75.33% of the existing convertible notes. Upon completion of the exchange offer that will occur upon consummation of this offering, our convertible note repayment obligations will be restructured so that we are required to only repay A$15.0 million aggregate principal amount of convertible notes by May 16, 2012 and the remaining A$45.8 million aggregate principal amount of convertible notes by May 16, 2014. We cannot assure you that we will be successful in generating sufficient revenue and we may require financing to meet our needs.

Our ability to access to equity and debt capital and trade financing on favorable terms may be limited by factors such as:

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Our ability to access equity capital is limited without shareholder approval and we may be unable to obtain the required shareholder approval to obtain financing in subsequent equity offerings.

Our ability to access equity capital is also limited by ASX Listing Rule 7.1, which provides that a company must not, subject to specified exceptions (including approval by shareholders), issue or agree to issue during any 12-month period any equity securities, or other securities with rights to conversion to equity, if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12-month period. The issue of ordinary shares contemplated by this offering exceeds the 15% threshold. On March 23, 2011 we obtained shareholder approval of the issue of ordinary shares contemplated by this offering and the 50-1 share consolidation. As a result of obtaining shareholder approval of the issue of ordinary shares in connection with the offering, we will be able to issue all of the ordinary shares without impacting our future ability to issue equity securities up to the 15% annual placement capacity set out in ASX Listing Rule 7.1. However, our ability to issue shares in certain subsequent offerings will be restricted by this 15% annual placement capacity to the extent that we are unable to obtain shareholder approval of the offerings.

The sale of our wind farm assets may not generate sufficient funds to pay off the related loans and we may need to scale back planned initiatives as a result.

Our wind farm assets and our office buildings in Malaysia and India are mortgaged or otherwise secured in relation to loan financings. We are exploring discontinuing our wind business, which may result in the sale of our wind farm asset. If we are unable to realize sufficient funds from the sale of these assets to fully pay off the loan associated with the mortgage on the wind farm assets or if we are unable to obtain additional financing as needed, we might need to reduce the scope of our operations and scale back expansion and development programs.

Future financing may cause a dilution in your shareholding or place restrictions on our operations.

We may be required to raise additional funding to meet our working capital or capital expenditure requirements in the future or to redeem our convertible notes outstanding as at the date of this prospectus. If we raise such funding through issuance of new equity or equity-linked securities, it may cause a dilution in the percentage ownership of existing shareholders. Alternatively, if we meet such funding requirements by way of additional debt financing, we may have restrictions placed on us through such debt financing arrangements which may:

Risks Related to Our Industry

A decline in the price of diesel or other fuel sources or an increase in their supply could constrain the selling price of our biodiesel.

Biodiesel prices are influenced by market prices for petroleum diesel, the pricing of which is affected by global and domestic market prices for crude oil. The pricing of petroleum diesel is also subject to typical market movements and decreases when there is an increase in supply in the face of unchanged or decreased demand. To remain competitive, the price of biodiesel tends to decrease as the price of petroleum diesel decreases. As a result, any decline in petroleum prices will likely lead to lower prices for biodiesel. If the price of our inputs, such as palm oil feedstock, is greater than the price of our biodiesel in the market, we will be unable to make profitable sales and we would halt production. We did not operate our refinery for five months in the first half of fiscal 2011, nine months in fiscal 2010 and five months in fiscal 2009 due to

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negative spreads that existed between the potential sales price of biodiesel and the input costs to produce the biodiesel. Declines in the pricing of our biodiesel relative to the cost of the inputs for production may cause us to halt production in the future which may materially and adversely affect our performance.

The biodiesel industry is a new industry and its continued development is subject to a number of risks and obstacles.

Our primary product is biodiesel. The global biodiesel industry is at an early stage of development and acceptance as compared to petroleum-based fuels. Biodiesel has experienced significant growth only during that last five years and demand for biodiesel as our primary product may not grow as rapidly as expected or at all. Biodiesel and the global biodiesel industry, as a whole, also face a number of obstacles and drawbacks, including:

Delayed market acceptance of our products may adversely affect our pricing and profitability. The lack of infrastructure to store, ship and distribute our products may also increase our logistical costs and diminish our profitability.

We may be subjected to new or amended standards for biodiesel from time to time and required to modify our production process or procure alternate or additional feedstock.

New standards may be introduced and existing standards may be amended or repealed from time to time. The production of biodiesel that meets stringent quality standards is complex. Concerns about fuel quality may impact our ability to successfully market and sell our biodiesel. If we are unable to produce biodiesel that meets the industry quality standard, our credibility and the market acceptance and sales of our biodiesel could be negatively affected. In addition, actual or perceived problems with quality control in the industry generally may lead to a lack of consumer confidence in biodiesel. This could result in a decrease in demand or mandates for biodiesel, with a resulting decrease in revenue.

A change to the quality standards for biodiesel in any market in which we sell biodiesel may require us to modify our production process or procure alternate or additional feedstock, which may affect our revenue and expenditure and adversely affect our share price. While we have no reason to believe that Jatropha will not be a suitable feedstock for our existing refineries, should Jatropha prove to not be suitable, we may need to modify our existing refineries and this could have an adverse affect on our financial condition.

We face significant competition from existing and new competitors as well as competing technologies and other clean energy sources.

Our primary product is a substitute for mineral diesel and a global commodity and as such is highly cost competitive. There are already many global producers of biodiesel with which we currently compete. While these existing competitors are limited by installed refining capacity, we would expect further new entrants into the market if economic opportunities present themselves thereby increasing competition. In addition to existing and new direct competitors, as a relatively new industry with distribution channels still in the development stage, market forces may limit our access to end markets or make our costs of delivering product to end-users uncompetitive. Our future financial performance and earnings growth may be adversely affected if either of the above occurs.

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In addition, new technologies may be developed or implemented for alternative energy sources and products that use such energy sources. Advances in the development of fuels other than biodiesel, or the development of products that use energy sources other than diesel, such as gasoline hybrid vehicles and plug-in electric vehicles, could significantly reduce demand for biodiesel and thus affect our sales. Biodiesel also faces competition from fuel additives that help petroleum diesel burn cleaner and therefore reduce the comparative environmental benefits of biodiesel in relation to petroleum diesel.

Other clean energy sources such as liquefied petroleum gas, hydrogen and electricity from clean sources may be more cost-effective to produce, store, distribute or use, more environmentally friendly, or otherwise more successfully developed for commercial production than our products. These other energy sources may also receive greater government support than our products in the form of subsidies, incentives or minimum use requirements. As a result, demand for our products may decline and our business model may no longer be viable and our results of operations and financial condition may be materially adversely affected. The introduction, increase in the availability or reduction in costs of alternative energy sources may materially and adversely affect the demand for our products and our financial performance.

Any increase in competition arising from an increase in the number or size of competitors or from competing technologies or other clean energy sources may result in price reductions, reduced gross profit margins, loss of our market share and departure of key management, any of which could adversely affect our financial condition and profitability.

Risks Related to Our Ordinary Shares and this Offering

The market price and trading volume of our ordinary shares may be volatile and may be affected by economic conditions beyond our control.

The market price of our ordinary shares may be highly volatile and could be subject to wide fluctuations. The initial public offering price for our ordinary shares will be determined by negotiation among us and the underwriters and the price at which the ordinary shares are traded after this offering may decline below the initial public offering price. This means you could experience a decrease in the value of your ordinary shares regardless of our operating performance or prospects. The market prices of securities of fuel-related companies have often experienced fluctuations that have been unrelated or disproportionate to the operating results of these companies. In addition, the trading volume of our ordinary shares may fluctuate and cause significant price variations to occur. If the market price of our ordinary shares declines significantly, you may be unable to resell your ordinary shares at or above the purchase price, if at all. We cannot assure you that the market price of our ordinary shares will not fluctuate or significantly decline in the future.

Some specific factors that could negatively affect the price of our ordinary shares or result in fluctuations in their price and trading volume include:

In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation against that company. If we were involved in a class

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action suit, it could divert the attention of senior management and, if adversely determined, could have a material adverse effect on our results of operations and financial condition.

An active trading market in the United States for our ordinary shares may not develop.

Prior to this offering, there has been no public market in the United States for our ordinary shares. If an active public market in the United States for our ordinary shares does not develop after this offering, the market price and liquidity of our ordinary shares may be adversely affected. While we have applied for the listing of our ordinary shares on the NASDAQ Global Market, a liquid public market in the United States for our ordinary shares may not develop or be sustained after this offering.

Investors purchasing our ordinary shares will suffer immediate and substantial dilution.

The public offering price for our ordinary shares will be substantially higher than the net tangible book value per share of our outstanding ordinary shares immediately after this offering. If you purchase ordinary shares in this offering, you will incur substantial and immediate dilution in the net tangible book value of your investment. Net tangible book value per ordinary share represents the amount of total tangible assets less total liabilities, divided by the number of ordinary shares, respectively, then outstanding. To the extent that warrants, convertible notes, performance rights and options that are currently outstanding are exercised or converted, there will be further dilution in your ordinary shares. We may also issue additional ordinary shares, warrants, convertible notes, performance rights, options and other securities in the future that may result in further dilution of your shares. See “Dilution” for a calculation of the extent to which your investment will be diluted.

We may not use the proceeds of this offering effectively.

We expect to use the net proceeds of this offering to expand our operations by acquiring or investing in strategic businesses or assets that complement our service and product offerings, as well as for working capital and other general corporate purposes. We have not determined the exact amounts or timing of these expenditures and our Board may be required to exercise their discretion, in the best interests of Mission NewEnergy, in utilizing the net proceeds of this offering. We may use the proceeds in ways that are different from our current intentions and you may not agree with the uses we choose. Despite our best intentions, we may use the proceeds in ways that do not necessarily improve our results of operations or enhance the value of our ordinary shares. The failure to apply these funds effectively could result in financial losses that could cause the price of our ordinary shares to decline.

Future sales of our ordinary shares, or the perception that such sales may occur, could depress our ordinary share price.

The ordinary shares we are selling in this offering may be resold in the public market immediately after this offering. We expect that almost all other ordinary shares will become available for resale in the public market. All of our directors and executive officers (subject to specific exceptions), have signed lock-up agreements for a period of 180 days following the date of this prospectus. See “Underwriting.”

The underwriters may, in their sole discretion and without notice, release all or any portion of the ordinary shares subject to lock-up agreements. As restrictions on resale end, the market price of our ordinary shares could drop significantly if the holders of these ordinary shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our ordinary shares or other securities.

As a foreign private issuer, we are permitted to, and we will, follow certain home country corporate governance practices in lieu of certain NASDAQ global market requirements applicable to U.S. issuers. This may afford less protection to holders of our ordinary shares.

As a foreign private issuer whose ordinary shares are listed on the NASDAQ Global Market, we are permitted to follow certain home country corporate governance practices in lieu of certain NASDAQ Global Market requirements. A foreign private issuer must disclose in its annual reports filed with the Securities and Exchange Commission, or SEC, each NASDAQ Global Market requirement with which it does not comply followed by a description of its applicable home country practice. As a company incorporated in Australia and

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listed on the Australian Securities Exchange, or ASX, we expect to follow our home country practice with respect to the composition of our board of directors and nominations committee and executive sessions. Unlike the requirements of the NASDAQ Global Market, the corporate governance practice and requirements in Australia do not require us as to have a majority of our board of directors to be independent; do not require us to establish a nominations committee, and do not require us to hold regular executive sessions where only independent directors shall be present. Such Australian home country practices may afford less protection to holders of our ordinary shares.

As a foreign private issuer, we are permitted to file less information with the SEC than a company incorporated in the United States. Accordingly, there may be less publicly available information concerning us than there is for companies incorporated in the United States.

As a foreign private issuer, we are exempt from certain rules under the Exchange Act, which impose disclosure requirements, as well as procedural requirements, for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC’s Regulation FD, which restricts the selective disclosure of material non-public information. Accordingly, there may be less information publicly available concerning us than there is for U.S. public companies.

Currency fluctuations may adversely affect the price of our ordinary shares.

Our ordinary shares will be quoted in Australian dollars on the ASX and will be quoted in U.S. dollars on the NASDAQ Global Market. Movements in the Australian dollar/U.S. dollar exchange rate may adversely affect the U.S. dollar price of our ordinary shares. In the past year the Australian dollar has generally appreciated against the U.S. dollar. Any continuation of this trend may positively affect the U.S. dollar price of our ordinary shares, even if the price of our ordinary shares in Australian dollars increases or remains unchanged. However, this trend may not continue and may be reversed. If the Australian dollar weakens against the U.S. dollar, the U.S. dollar price of the ordinary shares could decline, even if the price of our ordinary shares in Australian dollars increases or remains unchanged.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.

We do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current fiscal year ending June 30, 2011. However, we must make a separate determination each fiscal year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year ending June 30, 2011 or any future fiscal year. A non-U.S. corporation will be considered a PFIC for any fiscal year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during the fiscal year) is attributable to assets that produce or are held for the production of passive income. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ordinary shares, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any fiscal year during which a U.S. holder (as defined in “Taxation — U.S. Federal Income Tax Considerations”) holds an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. holder. See “Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.”

We have never declared or paid dividends on our shares and we do not anticipate paying dividends in the foreseeable future.

We have never declared or paid cash dividends on our shares. We currently intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business. Any future determination to declare cash dividends will be made at the discretion of our board of directors, or the Board, subject to compliance with applicable laws and covenants under current or future

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credit facilities, which may restrict or limit our ability to pay dividends, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board may deem relevant. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. As a result, a return on your investment will only occur if our share price appreciates.

Risks Relating to Takeovers

Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares.

We are incorporated in Australia and are subject to the takeovers laws of Australia. Among other things, we are subject to the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition of a direct or indirect interest in our issued voting shares if the acquisition of that interest will lead to a person’s voting power in us increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below 90%. Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares. This may have the ancillary effect of entrenching our board of directors and may deprive or limit our shareholders’ strategic opportunities to sell their ordinary shares and may restrict the ability of our shareholders to obtain a premium from such transactions. See “Description of Share Capital —  Change of Control.”

Our Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders.

As an Australian company we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that are unique to us as an Australian company. These requirements operate differently than from many U.S. companies and may limit or otherwise adversely affect our ability to take actions that could be beneficial to our shareholders. You should carefully review the summary of these matters set forth under the section entitled, “Description of Share Capital,” as well as our Constitution, which is included as an exhibit to this prospectus, prior to investing in our ordinary shares.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that relate to our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” all of which are difficult to predict and many of which are beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “likely to” or other similar expressions. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events

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or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

INDUSTRY AND MARKET DATA

This prospectus includes information with respect to market and industry conditions and market share from third party sources or that is based upon estimates using such sources when available. We believe that such information and estimates are reasonable and reliable. We also believe the information extracted from publications of third party sources has been accurately reproduced and, so far as we are able to ascertain from information published by the third party sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, we have not independently verified any of the data from third party sources. Similarly, our internal research is based upon the understanding of industry conditions, and such information has not been verified by any independent sources.

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USE OF PROCEEDS

At an initial public offering price of US$9.00 per ordinary share, we will receive net proceeds from this offering of approximately US$22.3 million, or approximately US$25.8 million if the underwriters exercise their over-allotment option in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. A US$1.00 increase (decrease) in the initial public offering price of US$9.00 per ordinary share would increase (decrease) the net proceeds to us from this offering by approximately US$2.6 million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds received by us from this offering to expand our feedstock operations, including but not limited to Jatropha acreage expansion and construction of crude Jatropha oil extraction facilities, as well as for working capital and other general corporate purposes including but not limited to capital expenditure at our current production facilities and payment of company overheads (including the costs of this offer). We may also seek to expand by acquiring or investing in strategic businesses or assets that complement our service and product offerings. At this time, we have not entered into any agreement or commitment with respect to any material acquisitions or investments.

We have not yet determined all of our expected expenditures and we cannot with any precision estimate the amounts to be used for the purposes set forth above. Assuming we receive net proceeds from this offering of approximately US$22.3 million, after deducting underwriting discounts and estimated offering expenses payable by us and assuming no exercise of the over-allotment option based on the public offering price of US$9.00 per ordinary share, we currently propose to use the net proceeds as follows:

Use of Funds

The amounts and timing of any expenditures will depend on the amount of cash generated by our operations, competitive and market developments and the availability of acquisition or investment opportunities on terms acceptable to us. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering.

Pending use of the net proceeds as described above, we intend to invest the net proceeds of this offering in short-term, interest-bearing bank deposits, money market funds or U.S. Government securities. These investments may have a material adverse effect on the U.S. federal income tax consequences of your investment in our ordinary shares. See “Risk Factors — Risks Related to Our Ordinary Shares and this Offering — We May Be Classified as a Passive Foreign Investment Company, Which Could Result in Adverse U.S. Federal Income Tax Consequences to U.S. Holders of Our Ordinary Shares” and “Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.”

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PRICE RANGE OF ORDINARY SHARES

The following tables present, for the periods indicated, the high and low market prices for our ordinary shares reported on the ASX (symbol: “MBT”) for the periods indicated. All prices are in Australian dollars and do not give effect to the 50-1 share consolidation that became effective on April 4, 2011.

		High		Low
Fiscal year ended		A$		A$
June 30, 2011
First Quarter			0.29				0.19
Second Quarter			0.20				0.17
Third Quarter (through March 25, 2011)			0.24				0.17
June 30, 2010
First Quarter			0.30				0.16
Second Quarter			0.51				0.24
Third Quarter			0.49				0.30
Fourth Quarter			0.35				0.22
June 30, 2009
First Quarter			0.81				0.50
Second Quarter			0.71				0.205
Third Quarter			0.33				0.195
Fourth Quarter			0.35				0.16
Month ended
March 2011 (through March 25, 2011)			0.21				0.17
February 2011			0.24				0.17
January 2011			0.22				0.18
December 2010			0.20				0.17
November 2010			0.20				0.19
October 2010			0.20				0.19
September 2010			0.24				0.19
Fiscal year ended June 30,
2011 (through March 25, 2011)			0.29				0.17
2010			0.51				0.16
2009			0.81				0.16
2008			1.58				0.57
2007			1.78				0.95
2006 (from May 4, 2006)			1.60				1.29

On March 25, 2011, the last reported sale price for ordinary shares as traded on the ASX was A$0.20. At our request, our ordinary shares were voluntarily suspended from trading on the ASX on March 28, 2011.

As of December 31, 2010, 926,414 of our ordinary shares were held in the United States by 5 holders of record, and 222,855,410 of our ordinary shares were held in Australia by 890 holders of record. A large number of Mission shares are held in nominee companies as such we cannot be certain of the beneficial owners origin.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our ordinary shares and we do not anticipate paying any cash dividends in the foreseeable future. Our Board’s current intention is to reinvest any income in the continued development and operation of our business.

Under our Constitution dividends may only be paid out of our profits.

Payment of cash dividends, if any, in the future will be at the discretion of our Board or, if our directors do not exercise their power to issue dividends, our shareholders in a general meeting may exercise the powers. See “Description of Share Capital — Our Constitution — Rights and Restrictions on Classes of Shares — Right to Share in our Profits.”

Even if our Board decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial conditions, contractual restrictions and other factors that the Board may deem relevant.

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CAPITALIZATION

The following table sets forth our unaudited capitalization as of December 31, 2010:

You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

		As of December 31, 2010
		(unaudited)
		Actual		Actual		As Adjusted		As Adjusted
		(A$’000) (1)		(US$’000)		(A$’000)		(US$’000)
Non-current liabilities
Convertible Notes (unsecured)			57,192				57,890	(2)			57,192				57,890
Secured loan			2,394				2,423				2,394				2,423
Total non-current liabilities			59,586				60,313				59,586				60,313
Equity
Issued capital			76,468				77,401				98,732				99,934
Reserves			11,798				11,942				11,798				11,942
Retained earnings (accumulated losses)			(131,332	)			(132,934	)			(131,332	)			(132,934	)
Minority interests			6				6				6				6
Total equity			(43,060	)			(43,585	)			(20,796	)			(21,052	)
Total capitalization			16,527				16,729				38,790				39,261

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DILUTION

If you invest in our ordinary shares, your interest will be diluted to the extent of the difference between the initial public offering price per ordinary share and our net tangible book value per ordinary share after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our currently outstanding ordinary shares.

Our net tangible book value as of December 31, 2010 was approximately negative A$43.1 million (US$43.6 million) or negative A$7.85 (US$7.95) per ordinary share, after taking into account the 50-1 share consolidation that was effected on April 4, 2011. Net tangible book value represents our total consolidated assets less the amount of our total consolidated intangibles, liabilities and minority interest.

Without taking into account any change in such net tangible book value after December 31, 2010 other than the issuance and sale of 2,785,000 ordinary shares offered by us in this offering at the initial public offering price of US$9.00 per ordinary share, and after deducting underwriting discounts and estimated offering expenses payable by us, our pro forma net tangible book value as of December 31, 2010 would have been negative US$21.3 million or negative US$2.54 per ordinary share.

This represents an immediate dilution in net tangible book value of US$11.54 per ordinary share to investors purchasing ordinary shares in this offering.

The following table illustrates such per share dilution:

Initial public offering price per ordinary share			US$9.00
Net tangible book value per ordinary share as of December 31, 2010 after taking into account the 50-1 share consolidation			US$(7.95	)
Adjusted net tangible book value per ordinary share after giving effect to this offering and the ordinary share issuances described above			US$(2.54	)
Amount of dilution in net tangible book value per ordinary share to new investors in this offering			US$11.54

The following table summarizes, on a pro forma basis as of December 31, 2010, the differences between existing shareholders, and the new investors with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per ordinary share (after taking into account the 50-1 share consolidation). In the case of the ordinary shares purchased by the new investors, the total consideration paid and amounts per share paid are before deducting underwriting discounts and estimated offering expenses payable by us. The total number of ordinary shares does not include ordinary shares issuable upon the exercise of the underwriters’ option to purchase additional ordinary shares.

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The information in the following table is illustrative only and the total consideration paid and the average price per ordinary share is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

Ordinary shares purchased

Total consideration

Average price per ordinary share

Number

Percent

Amount

Percent

Existing shareholders

5,611,885

66.83%

US$64,986,000

72.17%

US$11.58

New investors

2,785,000

33.17

US$25,065,000

27.83

US$9.00

Total

8,396,885

100.00%

US$90,051,000

100.00%

US$10.72

The discussion and table above also assumes no exercise of any outstanding convertible notes, warrants, options and performance rights. As of April 7, 2011, there were (i) outstanding warrants to purchase an aggregate of 3,002,324 ordinary shares at a weighted average exercise price of A$15.09, (ii) A$60,812,499 in aggregate principal amount of convertible notes, comprising A$14,999,935 in aggregate principal amount of convertible notes convertible into 230,770 ordinary shares at a price of A$65.00 per share, and after the exchange offer has been completed upon consummation of this offering, A$45,812,232 in aggregate principal amount of convertible notes convertible into 2,819,236 ordinary shares at a price of A$16.25 per share (in each case after giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share), (iii) outstanding employee options to purchase an aggregate of 70,000 ordinary shares at a weighted average exercise price of A$8.50 and (iv) 158,810 outstanding employee performance rights, each of which may be exercised or converted into one ordinary share (in each case after giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share). To the extent that any of these warrants convertible notes, performance rights and options are converted or exercised (as the case may be), there will be further dilution to new investors.

If the underwriters exercise their over-allotment option in full, the number of ordinary shares held by new investors in this offering will increase to 36.33% of the total number of ordinary shares outstanding after this offering.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

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EXCHANGE RATE INFORMATION

The Australian dollar is convertible into U.S. dollars at freely floating rates. There are no legal restrictions on the flow of Australian dollars between Australia and the United States.

For your convenience, we have translated some Australian dollar amounts into U.S. dollar amounts at the noon buying rate in The City of New York for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the “noon buying rate”). On April 8, 2011, the noon buying rate for Australian dollars into U.S. dollars was A$1.00 = US$1.0531.

We make no representation that any Australian dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Australian dollars, as the case may be, at any particular rate, the rates stated below, or at all.

The following table contains information for the noon buying rate for the Australian dollar into U.S. dollars for the periods indicated.

		At Period End		Average Rate (1)		High		Low
Fiscal year ended June 30,
2006			0.7423				0.7472				0.7781				0.7056
2007			0.8491				0.7925				0.8491				0.7407
2008			0.9562				0.9042				0.9644				0.7860
2009			0.8055				0.7423				0.9797				0.6073
2010			0.8480				0.8837				0.9369				0.7751
Month ended
September 30, 2010			0.9640				0.9399				0.9714				0.9093
October 31, 2010			0.9796				0.9811				0.9943				0.9666
November 30, 2010			0.9607				0.9889				1.0143				0.9594
December 31, 2010			1.0122				0.9929				1.0153				0.9675
January 31, 2011			0.9976				0.9962				1.0200				0.9868
February 28, 2011			1.0174				1.0084				1.0176				0.9984
March 31, 2011			1.0358				1.0113				1.0358				0.9823

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated statements of operations and other consolidated financial data for the fiscal years 2010, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The financial data for the six month periods ended December 31, 2010 and December 31, 2009, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. You should read the selected consolidated financial data in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our historical results do not necessarily indicate our expected results for any future periods.

Our financial statements have been prepared in Australian dollars and in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Income statement data for the fiscal years ended June 30, 2010, 2009 and 2008 and the balance sheet data as at June 30, 2010, 2009 and 2008 have been derived from our audited financial statements that are included elsewhere in this prospectus. Income statement data for the fiscal years ended June 30, 2007 and 2006 and the balance sheet data as at June 30, 2007 and 2006 have been derived from our audited financial statements that are not included in this prospectus. Operating results for the half year ended December 31, 2010 are not necessarily indicative of the results that may be expected for the full year ended June 31, 2011.

		As of and for the half year ended December 31		As of and for the year ended June 30
		2010 US$ (1)		2010 A$		2009 A$		2010 US$ (2)		2010 A$		2009 A$		2008 A$		2007 A$		2006 A$
				(unaudited)								(audited)
								(in thousands, except per share data)
Income Statement data:
Total sales revenue			4,430				4,752				14,007				12,696				14,394				43,368				9,403				77				—
Total other income			922				989				946				1,822				2,066				11,809				20,530				1,436				424
Cost of sales			(4,408	)			(4,728	)			(13,353	)			(13,249	)			(15,021	)			(45,709	)			(10,964	)			(46	)			—
Employee benefits expense			(1,797	)			(1,927	)			(2,142	)			(4,681	)			(5,307	)			(5,117	)			(2,694	)			(1,476	)			(1,042	)
Other income (expenses)			(9,752	)			(10,460	)			(9,362	)			(78,278	)			(88,751	)			(19,271	)			(5,962	)			(1,433	)			341
Finance costs			(2,512	)			(2,695	)			(2,573	)			(4,544	)			(5,152	)			(8,401	)			(5,868	)			(269	)			(109	)
Profit/(loss) from operations before income tax			(13,116	)			(14,069	)			(12,477	)			(86,234	)			(97,771	)			(23,321	)			4,445				(1,711	)			(386	)
Income tax (expense) benefit			(4	)			(4	)			(98	)			(26	)			(29	)			(434	)			(161	)			(199	)			(227	)
Net (loss)/profit			(13,120	)			(14,073	)			(12,575	)			(86,260	)			(97,800	)			(23,755	)			4,284				(1,910	)			(613	)
Basic and diluted earnings (loss) per share (dollars)			(0.047	)			(0.05	)			(0.06	)			(0.366	)			(0.415	)			(0.240	)			0.046				0.021				0.015
Weighted average ordinary number of shares outstanding			279,916,127				279,916,127				206,465,155				235,562,471				235,562,471				98,986,256				92,462,615				91,000,000				41,461,700
Pro-forma basic and diluted earnings (loss) per share (3)			(2,331	)			(2.5	)			(3	)			(18.31	)			(20.76	)			(12.00	)			2.31				(1.05	)			(0.74	)
Pro-forma weighted average ordinary number of shares outstanding (4)			5,598,323				5,598,323				4,129,303				4,711,249				4,711,249				1,979,725				1,852,853				1,820,000				829,234
Balance Sheet data:
Total current assets			11,818				11,676				25,007				21,206				25,007				26,372				54,317				79,714				35,374
Total assets			20,165				19,922				33,749				28,619				33,749				118,030				114,580				103,288				42,388
Total current liabilities			3,437				3,396				4,300				3,646				4,300				9,550				10,379				2,666				635
Total non-current liabilities			60,313				59,586				59,137				50,148				59,137				57,441				55,579				53,102				177
Total liabilities			63,750				62,982				63,437				53,795				63,437				66,991				65,958				55,768				812
Retained earnings (accumulated losses)			(132,934	)			(131,332	)			(117,259	)			(99,436	)			(117,259	)			(19,475	)			2,904				(2,433	)			(613	)
Total equity			(43,585	)			(43,060	)			(29,688	)			(25,175	)			(29,688	)			51,039				48,622				47,520				41,576
Other financial data:
Dividends per share			—				—				—				—				—				—				—				—				—

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial and Operating Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this prospectus. Unless specifically noted, all figures in this section do not take into account and are exclusive of, the 50-1 share consolidation that was effected on April 4, 2011.

Overview

We are a producer of biodiesel that integrates sustainable biodiesel feedstock cultivation, biodiesel production and wholesale biodiesel distribution, focused on the government mandated markets of the United States and Europe.

During fiscal 2010, we incurred a net loss of A$97.8 million (US$86.3 million), the majority of which can be primarily attributed to the impairment of our refinery assets under accounting rules. We generated revenues of A$16.5 million (US$14.5 million) in fiscal 2010. If we are unable to achieve our business growth strategies and objectives and obtain sufficient financing on acceptable terms in order to meet our future operational needs, there is a significant doubt as to whether we will be able to continue as a going concern.

We have three sources of total revenue: biodiesel refining, upstream feedstock business and wind farm operations. In fiscal 2010, biodiesel refining contributed 86% of our revenue, upstream feedstock business contributed 11% of our revenue and other operations (including wind farm operations) contributed 3% of our revenue.

Revenue from our primary business, the cultivation and conversion of Jatropha seeds and the production of Jatropha-based biodiesel, is unlikely to exceed our expenses for at least two years. We have already crushed and exported commercial quantities of Jatropha oil, but we have not yet produced a commercial quantity of Jatropha-based biodiesel. There is substantial risk that we will not be able to generate alternative revenue during the interim to offset the shortfall from our primary business and reverse our pattern of historical losses and negative cash flow.

Biodiesel refining

Our first biodiesel refinery plant began operations in fiscal 2008 under immediate cash payment and delivery market and term contracts. Due to unattractive refining margins, capacity utilization was low and the revenue generated from biodiesel sales has thus far been insufficient to cover costs.

Selling prices (and profit margin) for biodiesel are largely affected by the price of crude oil and the price of feedstock oil. During recent years, crude oil prices have fluctuated significantly as has the price of feedstock oils. We are positioned to operate with a positive contribution margin when the spread between our feedstock oil (primary input cost) and oil prices (primary output value) are greater than our other variable costs. Greater contribution margin per tonne or greater number of tonnes produced drives our profitability.

Our financial performance relies on successfully arranging positive — margin sales contracts for biodiesel, crude Jatropha oil or Jatropha by-products. During each of the past two fiscal years we have been successful in arranging positive-margin sales for immediate cash payment and delivery (i.e. on the spot market) and we anticipate that there will be opportunities to do so in the coming fiscal years, although the timing and quantity of such sales is unpredictable and there is no assurance that we will achieve this objective.

With our long-term off-take agreement with Valero, we expect to improve capacity utilization and profitability as the refining margins under our long-term contract are more attractive than traditional immediate cash payment and delivery market contracts. The significant base production expected from the Valero off-take agreement should enable us to avoid costly shut-down procedures experienced in the past and allow us to be more responsive to short term pricing movements in the immediate cash payment and delivery market. In

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order to start selling product to Valero, the use of palm oil and Jatropha oil as biodiesel feedstock must meet certain EPA requirements under the RFS2. We expect the approval of palm-based and Jatropha-based biodiesel, but there is no assurance that approval of either feedstock will be achieved. See “Risk Factors — Risks Related to Our Business — If we do not meet certain EPA requirements under Renewable Fuels Standard 2, fuels produced from palm oil may not be able to generate retroactive Renewable Identification Numbers, or RINs, which are commercially necessary to supply biodiesel produced from palm oil into the United States, which would limit our market opportunity and jeopardize our near term financial viability” and “— If Jatropha oil is not approved as a feedstock under Renewable Fuels Standard 2, biodiesel produced from Jatropha oil will not generate RINs, which will significantly limit our market opportunity and could have a significant adverse effect on our business, financial performance and financial condition.”

The production of biodiesel from vegetable oil feedstock (e.g. palm and Jatropha) results in the generation of glycerin and a limited quantity of fatty acids. We can sell these products into the immediate cash payment and delivery market without further processing, although the price varies unpredictably depending on market conditions at the time. Our production complex in Malaysia is capable of further refining the glycerin into a pharmaceutical-grade glycerin. We expect to undertake this further refinement of glycerin if the value of the higher-grade glycerin (which is also subject to significant price volatility) is sufficiently greater than the incremental cost to undertake the enhancement process.

Our cost of goods sold is primarily affected by the cost of feedstock oil and other refining inputs such as light fuel oil and methanol. The principal feedstock for our refinery has historically been palm oil. The price of palm oil can vary as a result of a variety of factors, including weather, market demand and general economic conditions. As our Jatropha plantation operation matures, we will shift the mix of feedstock from palm oil to Jatropha oil, and we expect to reduce our costs of feedstock from their current levels.

Upstream Feedstock Business

Our feedstock business generates other revenue from the recognition of fair value revenue of Jatropha sapling biological assets in the initial years of the business, and sales revenue of Jatropha oil and Jatropha seed cake (which is used as an input for organic fertilizer) in subsequent years. Although our Jatropha feedstock contract farming operations are still in the development stage (i.e. not yet producing quantities of Jatropha crude oil that allow us to continually run our biodiesel refineries) we are striving to expand our future revenue potential by taking steps to increase the supply of Jatropha seeds from existing acreage under contract, by coordinating the planting of additional Jatropha saplings and by contracting for the expansion of our acreage under contract.

We currently generate other revenue in the feedstock business solely by growing and then selling Jatropha saplings from our nurseries to contract farmers. Please note the discussion on revenue recognition principles discussed in the “Critical Accounting Policies” section on page 45 . The sale of saplings to a contract farmer is a one time upfront event for us and therefore sapling sales to our contracted farmers does not constitute recurring income, except to the extent that we are able to expand our acreage under contract.

Our contract farming arrangements, whereby we sell Jatropha saplings to farmers who plant and maintain them, include agreements with these farmers to buy back all the seeds from the farmers once the planted saplings have matured into trees and begin to bear fruit. We are the exclusive supplier of Jatropha saplings to our contract farmers. As saplings take approximately three years to begin providing fruits, continue to mature for an additional three to five years and then continue to bear fruit for approximately 30 years thereafter, it will be several years before we will be in a position to generate significant cash flows from seed cake sales.

We sell the Jatropha saplings to farmers on credit, securing the receivables of the farmers against our future purchase of oil seeds produced by these saplings. In order to accelerate the recovery of such receivables, we have established relationships with a number of Indian banks that are willing to fund the farmers associated with us. These loans are required to be processed and approved by small rural branches, which require extensive documentation and a physical inspection of the fields. This process has taken more time than expected and we continue to work with the banks and farmers to improve the receipt of cash. Mission has no obligation to pay the banks that made loans to its contract farmers if those contract farmers default on their loans.

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We expect to continue to increase the number of farmers under contract because they are attracted by the ability to grow Jatropha where most other crops cannot successfully grow, the guaranteed market for the product, the lack of any capital outlay by them and the provision of necessary technical support by us.

The quantity of seed cake (husk and meal left over from the crude oil extraction process) by-product from our Jatropha-seed oil-extraction process is insignificant at this stage due to the low quantity of Jatropha seeds available from our plantations, which are in an early stage of development. As a result, we have had minimal Jatropha seed cake revenue to date. In the future we expect that for each three tonnes of Jatropha seeds, we will generate two tonnes of Jatropha seed cake that can be sold as an input to organic fertilizer, and that this will become a material source of revenue and cash flow.

Windfarm Business

Mission NewEnergy’s two wind mills began generating electricity in February 2008 in India. By June 30, 2010, the two wind mills had generated and delivered 5,855,621 kwh of total electricity. The electricity is supplied to the Maharashtra State Electricity Distribution Company Limited under a power purchase agreement that expires in 2021.

We are in the process of exploring the disposition of our two wind turbines and do not currently expect to make further investments in or realize material financial contributions from this line of business. If the turbines are sold, we do not expect that it would have a material financial impact on our balance sheet or cash flow, given the partial impairment in the valuation of these assets recognized during fiscal 2010.

Seasonality

Jatropha sapling fair value income is recognized at the beginning of the planting season in India, which generally runs from late June to the end of October. Therefore, income from the recognition of the fair value of Jatropha saplings is minimal during other periods of the year. An outline of the yearly cycle for our Jatropha business is presented below:

Year 1

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Procure seeds

Grow saplings in Mission’s nurseries

Delivery/sale of saplings to contract farmers

Provide agronomy support to contract farmers and initiate bank loan process

Business operational activity

Seeds are purchased from the general market (note that these seeds have traditionally been collected by local farmers from Jatropha plants growing in the wild).   Mission field staff sign a 30 year Contract Farming Agreement with prospective contract farmers.

Seeds are sown in nurseries. These seeds germinate and grow rapidly into saplings over a period of around three months.   During this time in the nursery, local labor is employed to tend to the growing saplings and water and fertilizer is applied.

Around mid-July the rain starts in India (locally called the monsoons). Saplings are then uprooted and transported to our contract farmers to be re-planted in the required wet conditions.   Thus Mission is selling its biological assets to the contract farmers, which we term “on-sold”.   A Delivery Cum Demand Note (“DCDN”) is signed by the contract farmer accepting the delivery of the saplings. It is the farmer’s responsibility to plant and tend to the saplings in his own fields.

Mission staff provide agronomy advice to contract farmers on matters such as;     •  Pruning     •  Weeding     •  Fertilizer      application   Mission staff starts communications with farmers and banks to initiate the bank loan process.

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Year 1

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Procure seeds

Grow saplings in Mission’s nurseries

Delivery/sale of saplings to contract farmers

Provide agronomy support to contract farmers and initiate bank loan process

Biological asset and other income assessment

Not applicable as the definition of a biological asset is not met.

The saplings take around three months to grow to a stage where they are robust enough to be uprooted and transported to contract farmers.   When the sapling is deemed robust enough to survive uprooting and transportation to contract farmers, the recognition and measurement criteria of a biological asset are deemed to be met, and hence Mission recognizes a biological asset, with the associated contra journal entry crediting other income.

Due to the fact that Mission has uprooted and transferred ownership and responsibility of the saplings to the contract farmers, the biological assets are derecognized upon delivery to the contract farmer.

Not applicable as Mission does not have the biological asset under its control.

Due to the relatively short growth period of the biological asset until uprooting and distribution to farmers (around three months) and the fact that the material growth in value occurs within one reporting period, Mission recognizes the value of the biological asset once, i.e. the fair value does not increase systematically over a number of reporting periods, and hence multiple

tranches of fair value revenue are booked to account.

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Year 1

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Procure seeds

Grow saplings in Mission’s nurseries

Delivery/sale of saplings to contract farmers

Provide agronomy support to contract farmers and initiate bank loan process

Revenue recognition assessment

Not applicable as no biological asset or sales made.

The contra entry related to the recognition of the biological asset is recognized in other income when the biological asset is recognized.

Mission does not recognize revenue when the saplings are delivered to the farmer.   This is because other income from the change in fair value of the biological asset has already been recognized and the further recognition of revenue when the sapling is delivered to the contract farmer would result in revenue being recognized twice in regard to the same sapling, which would not be showing the true and fair position of the financial transactions associated with the growing and ultimate sale of the saplings. Hence we derecognize the biological asset and recognize a receivable on delivery of the sapling to the contract farmer.

Not applicable.

Receivables

Not applicable during this period as no deliveries of saplings has occurred to the contract farmers.

Not applicable during this period as no deliveries of saplings has occurred to the contract farmers.

A receivable is recognized at the point in time when the saplings are delivered to the contract farmer. The DCDN signed by the farmer confirms acceptance by the farmer for the saplings delivered, the price per sapling, and that the amount is due and payable to the company on companies demand.

Receivable remains in existence until paid in cash or offset through the future buy back of seeds from the farmer.   Please refer to the discussion below on the business activities from year 2 – 30 for information on the recoverability of the receivable.

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Year 1

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Procure seeds

Grow saplings in Mission’s nurseries

Delivery/sale of saplings to contract farmers

Provide agronomy support to contract farmers and initiate bank loan process

Cost of sales

Not applicable because seeds purchased are recognized in inventory and held on balance sheet until distributed to the nurseries for growing saplings or to the crushing unit for oil extraction.

Costs incurred in growing the saplings include;     •  cost of seeds issued to the      nursery; and     •  water, labor and fertilizer.   All such costs are expensed to the profit and loss and shown as cost of sales. There are no elements of cost of sale expenses held on balance sheet to be expensed at a later point in time.

Costs incurred in transporting the saplings to the contract farmers are expensed to the profit and loss as cost of sales.

Not applicable.

Event		Years 2 – 5		Years 6 – 30
Business operational activities		Continued monitoring, agronomy support and assisting farmers to get bank loans.		Continued monitoring, agronomy support, assisting farmers to get bank loans and purchase seeds.Seeds will be crushed to produce Jatropha crude oil and Jatropha seedcake.
Condition of sapling/tree		Sapling grows steadily into a fruit/seed producing tree.   Minimal seeds produced during these initial years.		Mature tree delivers fruit/seeds.
Mission purchases seeds from the farmer.		Mission buys whatever seeds are delivered to our warehouses, but volume expected to be low.		Mission buys seeds from farmers.
Mission can offset the purchase value payable to the contract farmers against any outstanding receivables (if any).		If the receivable is still outstanding, Mission has the right to offset any amounts payable for the purchase of seeds against any outstanding receivable.   If a portion of the saplings/trees owned and managed were to die, Mission can still recover the full value of the receivable through the offset against purchase of seeds.		If the receivable is still outstanding, Mission has the right to offset any amounts payable for the purchase of seeds against any outstanding receivable.   If a portion of the saplings/trees owned and managed were to die, Mission can still recover the full value of the receivable through the offset against purchase of seeds.

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Event		Years 2 – 5		Years 6 – 30
Mission assists the contract farmer in applying for the bank loans and will act as a collection agent for the bank.		If no bank loan has been applied for or granted the Mission team assist the contract farmer in arranging bank finance. A portion of the proceeds of the bank loan to the contract farmer is utilized to pay Mission for the outstanding receivable.   Under this bank loan process, the lending bank is paid directly by us with the proceeds from our purchase of the farmer’s seeds and the remaining proceeds are paid to the farmer. Mission has no obligation to pay the banks that made loans to its contract farmers if those contract farmers default on their loans.   When Mission buys seeds from the farmer, the value of the seeds procured will be recognized as inventory, along with a corresponding payable to the bank (to the value owing by the farmer to the bank) with any remaining value recognized as a payable to the farmer. Mission will then pay the bank and the farmer the value of the payable outstanding. For example, Mission buys $300 worth of seeds from the farmer, which is recognized as inventory. Assuming the farmer owes the bank $100, a payable of $100 will be recognized to the bank, with the remaining $200 recognized as a payable to the farmer.		Bank loan activities may continue for a number of years.
Impairment of receivables		Mission assesses the recoverability of the receivable based on an estimate of mortality of the saplings, as mortalities will affect seed yield, and hence reduce Mission’s ability to recover the receivable.		The Board assesses the recoverability of the receivable based on an estimate of mortality of the saplings, as mortalities will affect seed yield, and hence reduce Mission’s, ability to recover the receivable.
Revenue recognition		Nil.		The Jatropha crude oil can be sold directly to the market and revenue is recognized when the oil is sold.   The seedcake produced can also be sold directly to the market and revenue is recognized when the seedcake is sold.

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Revenue growth

Our Jatropha feedstock plantations have not yet matured and we have therefore not yet achieved vertical integration or realized the economic benefits of our Jatropha plantations. While our Jatropha feedstock cultivations are maturing we are seeking to generate revenue from the immediate cash payment and delivery market for biodiesel contracts that utilize our existing refinery capacity. Our ability to significantly increase revenue from current levels and become profitable depends upon the following:

Many of these events are outside our control. There can be no assurance as to if or when any of these events will occur.

Critical Accounting Policies

Our discussion and analysis of our operating and financial performance and prospects are based upon our consolidated financial statements. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of revenue, assets, liabilities and expenses. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 3 to our audited consolidated financial statements included elsewhere in this prospectus. However, critical accounting policies that affect our more significant judgments and estimates used in the preparation of our financial statements are set forth below.

Sale of goods

We recognize revenue from the sale of goods when reasonable certainty exists that such revenues will be realized and the risks and rewards of ownership have been transferred. In the case of biodiesel sales the transfer of risks and rewards of ownership under Free on Board and Cost Insurance Freight sales contracts occurs when the biodiesel passes the ships flange, i.e. when it is pumped onto the ship directly from our refinery.

Change in fair value of Biological assets

We recognize revenue in our feedstock segment in two primary phases. The first phase recognizes the change in fair value of the Jatropha saplings where we grow saplings from seeds in our own self managed nurseries. The saplings meet the definition of biological assets under International Accounting Standard (IAS) 41 Agriculture and hence the change in fair value of these biological assets is recognized in other income. The seeds germinate into saplings over a period of three to four months into a condition that can be sold to the contract farmers and the fair value of the biological assets (and hence other income) is recognized at this point in time. These saplings are sold to contract farmers (at principally the same value as the fair value) who are responsible for tending to the saplings until they mature into seed producing trees. We do not recognize revenue again when the sapling is sold to the farmer because this would result in revenue being recognized twice. When the biological assets are sold and delivered to the contract farmer, management control and the risks and rewards beneficial to the ownership of the saplings are lost and, as a result, the saplings are derecognized as biological assets at this point in time.

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The second phase where we recognize revenue results from sale of Jatropha crude oil and the by-product, seedcake. This occurs after we buy the seeds from these contract farmers and crush the seeds into Jatropha crude oil with seedcake being the by-product. We then recognize revenue from the sale of the Jatropha crude oil or seedcake in line with the sale of goods policy above.

Impairment of assets

We assess impairment of assets by evaluating conditions that may lead to impairment of particular assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. We have based a number of assumptions and estimates on an independent review commissioned to determine the life span, yield of fruit, yield of oil and key operating costs of the Jatropha Curcas feedstock operations.

Property, Plant and Equipment

Property, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of “value in use” (being the net present value of expected future cash flows of the relevant cash generating unit) and “fair value less costs to sell.”

In determining value in use, future cash flows are based on:

Value in use is calculated based on the present value of cash flow projections over the anticipated lives of the assets, with the material portion of the assets having anticipated lives of 20 years, with a discount rate for each cash generating unit (e.g., refinery operations, Jatropha operations and windfarm operations) was estimated based on our weighted average cost of capital, adapted for the regions in which the cash generating unit operates.

There is a risk of the actual outcomes being different from those forecast due to changes in economic, market and agricultural conditions and/or assumption regarding events, which may result in the carrying value of biodiesel plants exceeding the recoverable amount.

During fiscal 2010, we announced the completion of our new 250,000 tonnes per annum transesterification plant, adjacent to the 100,000 tonnes per annum plant in Kuantan Port, Malaysia. Both plants are on full operational standby to produce biodiesel as and when required. In addition, the construction of a distillation column within the plant property is underway which will allow the refineries to meet different specifications of biodiesel, as required by various customers.

As of December 31, 2009, the value of the refinery assets were carried at their depreciated cost (A$66.9 million) because the forecast profits to be generated by the refineries exceeded their carrying value. This assessment was based on a number of assumptions including forecast oil yields, commodity prices, and volumes. In addition, management considered the absence of orders to date under our 5-year Valero offtake sales contract signed in December 2009.

During the second half of fiscal 2010, the United States introduced its revised RFS2. RFS2 introduced a requirement for vegetable oil feedstocks, such as soy, rape seed, palm oil and Jatropha oil to meet certain environmental and green house gas requirements. At this point in time, the detailed analysis required to demonstrate that palm and Jatropha will meet these requirements is in progress. Palm oil and Jatropha oil are not presently, and in the future may not be, approved under RFS2. In addition, a key subsidy, called the Biodiesel Blending Tax Credit (being US$1 per gallon), lapsed on December 31, 2009. In December 2010, the subsidy was retroactively reinstated and extended through 2011.

In addition, in July 2010 the European Union introduced, with effect from January 1, 2011, the Renewable Energy Directive, which requires palm-based biodiesel to be based on new sustainability criteria. This will require the use of certified palm oil. Our production facilities have been registered and are compliant with the Renewable Energy Directive, although the majority of our suppliers of the palm oil feedstock that is

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used in our production facilities have not yet been certified under the Renewable Energy Directive, which would affect our ability to sell palm-based biodiesel to the European Union.

Despite our efforts to address RFS2 compliance and the Renewable Energy Directive compliance and despite the reinstatement of the Biodiesel Blending Tax Credit, we are required, under International Financial Reporting Standards, to assess the refineries ability to generate revenue based on existing conditions. At the time of assessment, the recent legislative developments and our lack of other contracts or evidence that would indicate profitable sales, forced us to provide for an impairment of the refining assets in fiscal 2010 until the legislative hurdles are cleared or alternative sales contracts are secured. This accounting write-off is not indicative that the refinery assets cannot produce biodiesel under the required specifications.

A reversal of the impairment value (up to depreciated cost) of our refinery assets would occur if and when the following occurred:

Credit risk of receivables in feedstock business

The carrying value of receivables is reviewed for impairment and expected timing of receipt at each reporting date. The carrying value of our receivables (after providing for impairment and discounting) as at December 31, 2010 was A$1.1 million.

In assessing such recoverability, the following factors are taken into account:

During fiscal 2010 we achieved a significant improvement in the collection of receivables from our contracted farmers, primarily as a result of our role in facilitating discussions between some of our farmers with financial institutions in India in relation to the provision of finance to the farmers for their purchase of Jatropha saplings and to repay receivables owed by the farmers to us.

In fiscal 2010 we introduced a proprietary GPS mapping and agronomy management system into a significant portion of our Jatropha fields and reviewed the existence, condition, maturity and stem girth of the Jatropha saplings. The results indicated that approximately 50% of the plantation acreage were performing to target. While we have increased agronomy training for underperforming farmers, given the results of our review in relation to sapling mortality, we have revised our assessment of recoverability of receivables from the sale of saplings and increased the provision for impairment to A$17.9 million as at December 31, 2010. The table below demonstrates the gross carrying value of receivables at each financial year end, the provision for impairment, discounting and the allocation between current and noncurrent receivables. On June 30, 2008 Mission had signed memorandums of understanding with a number of banks in India and the management’s view was that receivables would be collected via the farmer bank loan process within the forthcoming year. By June 2009, the practical issues around the bank’s inability to process a large number of small value loans to the farmers became evident, and hence a reallocation of receivables to noncurrent was made. This re-allocation reflected the view that despite the slow take up of bank loans by farmers, Mission would still be able to recover the loans through the purchase of seeds from the farmer and the associated offset against the outstanding receivable. In addition the provision for doubtful debts was increased to reflect the estimate of plant mortality at that point in time. The provision was then re-assessed again at June 30, 2010 and at December 31, 2010 to take into account amendments to the USA renewable fuel standard, which requires Jatropha-based biodiesel to be approved by the EPA. The Board was unable to provide sufficient audit evidence at June 30, 2010 to substantiate the recoverability of these receivables and thus the Board took the decision to fully provide for the non current receivables at June 30, 2010.

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		As of and for the half year ended		As of and for the year ended
		December 31, 2010 A$ in millions		December 31, 2009 A$ in millions		June 30, 2010 A$ in millions		June 30, 2009 A$ in millions		June 30, 2008 A$ in millions
Gross carrying value of the sapling sale receivable			21.7				22.7				23.4				24.9				11.9
Provision for impairment			(17.9	)			(13.3	)			(18.6	)			(8.9	)			(1.2	)
Discount on non-current portion of receivable			(2.7	)			(1.9	)			(2.8	)			(3.2	)			(0.6	)
Net carrying value of receivables			1.1				7.5				2.0				12.8				10.1
Current			1.1				2.0				2.0				1.3				8.6
Non-current			—				5.5				—				11.5				1.5
Total Carrying value			1.1				7.5				2.0				12.8				10.1

Amounts collected in the Jatropha operations are presented below:

As of and for the half year ended

As of and for the year ended

December 31, 2010 A$ in millions

December 31, 2009 A$ in millions

June 30, 2010 A$ in millions

June 30, 2009 A$ in millions

June 30, 2008 A$ in millions

Cash collected

0.6

—

1.9

0.6

—

Comparison of Results of Operations

Half year ended December 31, 2010 compared with half year ended December 31, 2009

Revenue. Revenue decreased A$9.2 million (62%) from A$15.0 million in the half year ended December 31, 2009 to A$5.7 million in the half year ended December 31, 2010, principally as a result of a lower volume in sales from the refining segment (reduced A$9.2 million from A$13.7 million in the half year ended December 31, 2009 to A$4.4 million in the half year ended December 31, 2010). Other income remained primarily the same increasing from A$0.9 million in the half year ended December 31, 2009 to A$1 million in the half year ended December 31, 2010. Our refinery (Plant I) operated for approximately one month in the half year ended December 31, 2010 and approximately 3 months in the half year ended December 31, 2009. We operated Plant I at lower capacity (in the first-year than in the first half-year of 2009 (8% in the half year ended December 31, 2010 and 28% in the half year ended December 31, 2009), and hence generated less revenue in the half year ended December 31, 2010 than in the half year ended December 31, 2009. This lower capacity utilization was due to lower than expected demand as a result of the negative margin spread which existed between the potential sales price of biodiesel and the input costs to produce the biodiesel or more simply, the cost of producing biodiesel was more expensive than the price the market was prepared to pay for the biodiesel. Because the post-commissioning hand-over from the construction contractor had not yet occurred, the capacity of Plant II is not included in the utilization calculation for either period. The sales made in the half year ended December 31, 2010 were pursuant to a single immediate cash payment and delivery market deal. The change in margin spread is as a direct comparison between the market price of crude palm oil as the key input for biodiesel and the price of ULSD which is closely linked to the price of crude oil. Fair value revenue did not change materially between the half year ended December 31, 2010 and the half year ended December 31, 2009. We expect that our revenue will increase from our refining operations if and when margins between the sales price and input costs are profitable, and other income in our feedstock operations if and when we sell more saplings and generate revenue from Jatropha crude oil sales.

Our operating margins are primarily dependent on the relationship between the price of crude palm oil as our feedstock for the month of production and the price of mineral diesel, or the end market price for our refined product. Both the feedstock and refined product are commodities with highly volatile prices. During the half year ended December 31, 2009, feedstock was more expensive than refined product 100% of the days. During the half year ended December 31, 2010, our feedstock was more expensive than refined product 100% of the days.

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Cost of sales. Cost of biodiesel decreased from A$13.0 million in the half year ended December 31, 2009 (95% of sales revenue) to A$4.3 million in the half year ended December 31, 2010 (95% of sales revenue), in line with the reduced level of sales revenue.

Cost of growing our biological assets remained materially the same at A$0.3 million in the half year ended December 31, 2009 and A$0.4 million in the half year ended December 31, 2010.

Expenses. Total expenses increased by A$1.0 million (7%) from A$14.0 million for the half year ended December 31, 2009 to A$15.0 million for the half year ended December 31, 2010, principally due to an increase in non-cash share based payments expenses and foreign currency losses due to the strengthening in the Australian dollar against the United States dollar. Additional movements in expenses include:

At June 30, 2010 the Board wrote down the full carrying value of our refinery assets due to changes in U.S. and European policies discussed below, which restrict the use of palm and Jatropha based biodiesel, thereby impacting our ability to currently sell into these primary markets. These U.S. and European restrictions limited the Board's ability to demonstrate with a sufficient level of certainty the forecast of any significant sales volumes and, therefore, no sale volumes were forecast. Hence, the full value of the refinery assets were impaired at June 30, 2010. This change in our sales volume estimate at June 30, 2010 stemmed from policy changes in February 2010, when the U.S. EPA finalized revisions to RFS2, which only allows soy oil, used cooking oil and tallow as eligible feedstock for biodiesel to fulfil government mandates. Other vegetable oil feedstock, such as rape seed, palm and Jatropha oil must meet certain environmental and green house gas requirements prior to approval. Additionally, in July 2010, the European Union introduced, with effect from January 1, 2011, the Renewable Energy Directive, which requires palm-based biodiesel to be based on new sustainability criteria. Despite efforts and international support to address the U.S. and European policies, there has been no material changes to these policies between June 30, 2010 and December 31, 2010. At December 31, 2010, the Board continued to apply the above key assumptions and

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estimates of zero sales volumes. As a result, the Board approved an additional impairment of asset expenditure incurred during the half year ended December 31, 2010. This expenditure related primarily to the continuing capital expenditure of a distillation column that will enable our biodiesel to meet U.S. biodiesel specifications.

Income tax. Income tax expense decreased marginally from A$0.1 million in the half year ended December 31, 2009 to A$4,000 in the half year ended December 31, 2010 principally due minimal taxable revenue in the group in the half year ended December 31, 2010.

Profit/(loss) for the year. As a result of the foregoing, our loss before income tax increased from A$12.5 million in the half year ended December 31, 2009 to A$14.1 million in the half year ended December 31, 2010.

Fiscal 2010 compared with fiscal 2009

Revenue.   Revenue decreased A$38.7 million (70%) from A$55.2 million in fiscal 2009 to A$16.5 million in fiscal 2010 principally as a result of a lower volume in sales from the refining segment (reduced A$29 million from A$42.9 million in 2009 to A$13.9 million in 2010) and reduced other income primarily from fair value revenue of Jatropha Curcas saplings in the feedstock segment (reduced A$7.7 million from A$9.4 million in 2009 to A$1.7 million in 2010). Our refinery operated for approximately three months in fiscal 2010 and approximately 7 months in 2009. We operated at lower than full capacity (13% in 2010 and 32% in 2009), and hence generated less revenue in 2010 than 2009. This lower capacity utilization was due to lower than expected demand as a result of the negative margin spread which existed between the potential sales price of biodiesel and the input costs to produce the biodiesel or more simply, the cost of producing biodiesel was more expensive than the price the market was prepared to pay for the biodiesel. The sales made in 2010 were pursuant to a contract signed in early 2009 when margins were positive. The change in margin spread is as a direct comparison between the market price of crude palm oil as the key input for biodiesel and the price of ULSD which is closely linked to the price of crude oil. This positive and negative spread can be seen on the graph on page 62 which compares the market price of crude palm oil and the market price of ULSD. In addition, fiscal 2010 was a year of consolidation in the feedstock business, with minimal new sapling planting undertaken, resulting in other income in the feedstock business decreasing from fiscal 2009. We expect that our revenue will increase from our refining operations if and when margins between the sales price and input costs are profitable, and other income in our feedstock operations if and when we sell more saplings and generate revenue from Jatropha crude oil sales.

Of the total sales revenue in fiscal 2010, the refinery business generated revenue of A$13.9 million (97%), with other operations (including wind farm) generating A$0.5 million (3%).

Of the other income in fiscal 2010, the fair value revenue from biological assets in the feedstock business generated revenue of A$1.7 million (80%), with sundry income (including interest) generating A$0.4 million (20%).

Our production capacity for Plant I is 8,333 tonnes per month or 274 tonnes per day. We run the plant to meet scheduled sales orders, which may result in a utilization rate of less than 100% for a given month.

		Fiscal 2009		Fiscal 2010
Plant I		– Plant fully commissioned twelve months – Plant operated seven months – Yearly capacity utilization of 32%		– Plant fully commissioned twelve months – Plant operated three months – Yearly capacity utilization of 13%
Plant II		– Not commissioned – No capacity utilization		– Not commissioned – No capacity utilization

Our operating margins are primarily dependent on the relationship between the price of crude palm oil as our feedstock for the month of production and the price of mineral diesel, or the end market price for our

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refined product. Both the feedstock and refined product are commodities with highly volatile prices. During 2009, feedstock was more expensive than refined product 32.9% of the days. During 2010, our feedstock was more expensive than refined product 67.7% of the days. Please see the graph on page 81 .

Cost of sales.   Cost of biodiesel decreased from A$44.1 million in fiscal 2009 (102% of sales revenue) to A$13.6 million in fiscal 2010 (93% of sales revenue), in line with the reduced level of sales revenue.

Cost of growing our biological assets reduced from A$1.6 million in fiscal 2009 to A$1.4 million in fiscal 2010, attributed to lower production volumes in 2009.

Expenses.   Total expenses increased by A$66.4 million (202%) from A$32.8 million in fiscal 2009 to A$99.2 million in fiscal 2010 principally due to a non-cash impairment of property plant and equipment of A$73.1 million in fiscal 2010 compared to none in fiscal 2009.

Our Board reviews the carrying value of our refinery assets at each reporting date. During fiscal 2010, the United States introduced its Renewable Fuels Standard 2, which legislated a significant mandate for the use of biodiesel in the United States. This in itself is promising for the biofuels industry. However, this legislation also introduced a requirement for vegetable oil feedstocks such as soy, rape seed, palm oil and Jatropha oil to meet certain environmental and green house gas requirements. At this time, the detailed analysis required to demonstrate that palm and Jatropha will meet these requirements is in progress. In addition, a key subsidy, called the Biodiesel blending credit (being US$1 per gallon), lapsed in December 2009. In December 2010, the subsidy was retroactively reinstated and extended through 2011.

In addition, the European Union will introduce, with effect in January 2011, legislation that requires all biodiesel to be based on new sustainability criteria (named the Renewable Energy Directive). Currently, there are limited suppliers of palm oil that meet these criteria. However, numerous producers of palm oil are in the process of getting their product certified to be in compliance with the European requirements. Our biodiesel refineries are already attested under the ISCC which has been recognized as an approved certification by the German Government.

Despite the significant efforts to address these legal requirements, we are required under the accounting standards to assess the refining cash generating unit’s ability to generate sufficient revenue based on existing conditions. The combination of these factors in the United States and Europe have compelled us to provide for an impairment of the refining assets until the legislative hurdles are cleared. This non-cash accounting write-off is in no way an indication that the plant cannot produce biodiesel under the required specifications.

We anticipate that the Malaysian Palm Oil Board who is in regular communication with the EPA international community will make it possible for the refining assets to be put to productive use in fiscal 2011, at which time the value of these refining assets can may be reinstated to their useful carrying value at that point in time.

Additional movements in expenses include:

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Income tax.   Income tax expense decreased from A$434,000 in fiscal 2009 to A$29,000 in fiscal 2010 principally due to higher deferred taxes in the feedstock business being recognized in fiscal 2009.

Profit/(loss) for the year.   As a result of the foregoing, our loss before income tax increased from A$23.3 million in fiscal 2009 to A$97.8 million in fiscal 2010.

Fiscal 2009 compared with fiscal 2008

Revenue.   Revenue increased A$25.3 million (85%) from A$29.9 million in fiscal 2008 to A$55.2 million in fiscal 2009 principally as a result of a increased volume in sales from the refining segment (increased A$33.9 million from A$9.0 million in 2008 to A$42.9 million in 2009) and reduced other income primarily from fair value revenue of Jatropha saplings in the feedstock segment (reduced A$8.8 million from A$18.2 million in 2008 to A$9.4 million in 2009). Our refinery operated for approximately four months in fiscal 2008 and most of fiscal 2009, although at 32% capacity in fiscal 2009. We operated at lower than full capacity in fiscal 2009 due to lower than expected demand as a result of the high cost of materials relative to the price of oil.

Of the total sales revenue in fiscal 2009, the refinery business segment generated revenue of A$42.9 million (99%), other operations (including wind farm) generating A$0.5 million (1%).

Of the other income in fiscal 2009, the fair value revenue from biological assets in the feedstock business generated revenue of A$9.4 million (80%), with sundry income (including interest) generating A$2.4 million (20%).

Cost of sales.   Cost of biodiesel increased from A$8.2 million in fiscal 2008 (87% of sales revenue) to A$44.1 million in fiscal 2009 (102% of sales revenue), in line with the increased level of sales revenue.

Cost of growing our biological assets reduced from A$2.7 million in fiscal 2008 to A$1.6 million in fiscal 2009, attributed to lower production volumes in 2008.

Cost of sales increased from A$11.0 million in fiscal 2008 (36.6% of total revenue) to A$46.0 million (82.8% of total revenue) in fiscal 2009, reflecting the first full year of refinery operations in fiscal 2009. Increased cost of sales primarily related to increased purchases of palm oil and other key commodities used in the production of biodiesel. The change in the percentage of cost of sales to revenue is a result of a switch in the proportion of revenue from sapling sales in 2008 (a high contribution margin business unit) to revenue in 2009 from biodiesel sales (a lower contribution margin business unit).

Expenses.   Total expenses (excluding cost of sales and income tax expenses) more than doubled from A$14.5 million in fiscal 2008 to A$32.8 million in fiscal 2009. Significant movements in expenses were:

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Income tax.   Income tax expense increased from A$161,000 in fiscal 2008 to A$434,000 in fiscal 2009 principally due to higher deferred taxes in the feedstock business.

Profit/(loss) for the year.   As a result of the foregoing, we had a loss before income tax of A$23.3 million compared to a profit of A$4.4 million in fiscal 2008.

Effects of Currency Fluctuations

Our reporting currency is the Australian dollar. In accordance with IFRS, costs not denominated in Australian dollars are re-measured in Australian dollars, when recorded, at the prevailing exchange rates for the purposes of our financial statements. Consequently, fluctuations in the rates of exchange between the Australian dollar, Malaysian Ringgit, Indian Rupee and the U.S. dollar affect our results of operations. An increase in the value of a particular currency relative to the Australian dollar will reduce the Australian dollar reporting value for transactions in that particular currency, and a decrease in the value of that currency relative to the Australian dollar will increase the Australian dollar reporting value for those transactions.

The effect of foreign currency translation is reflected in our financial statements in the statements of changes in shareholders’ equity and is reported as accumulated foreign currency translation reserve. We have not entered into any hedging arrangements to mitigate the effects of currency fluctuations.

Liquidity and Capital Resources

Overview

Our operations have been financed primarily from operating activities and the issuance of convertible notes and equity securities to investors.

The following table sets forth our consolidated cash flows since fiscal 2008.

		Half Year ended December 31		Year ended June 30
		2010		2009		2010		2009		2008
		(unaudited)				(audited)
		(A$ in thousands)
Net cash provided by (used in) operating activities			(5,584	)			(6,244	)			(6,902	)			(10,891	)			(16,548	)
Net cash provided by (used in) investing activities			(2,638	)			(5,293	)			(6,405	)			(14,396	)			(37,335	)
Net cash provided by (used in) financing activities			(439	)			12,109				14,937				12,385				7,254
Effect of exchange rate changes on cash held in foreign currency			(1,911	)			(903	)			(722	)			4,416				(7,479	)
Net movement in cash and cash equivalents			(8,661	)			572				908				(8,486	)			(54,108	)
Cash and cash equivalents at the beginning of the year			17,155				16,247				16,247				24,733				78,841
Cash and cash equivalents at the end of the year			6,583				15,916				17,155				16,247				24,733

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In the half year ended December 31, 2010, the net cash used in operations was A$5.6 million, which included a coupon payment on our outstanding convertible notes of A$1.2 million, A$5.1 million received from customers and A$9.3 million paid to suppliers and employees. In the half year ended December 31, 2009, the net cash used in operations was A$6.2 million, which included a coupon payment on our outstanding convertible notes of A$1.0 million, A$10.6 million received from customers and A$15.7 million paid to suppliers and employees. The reduction in cash received in the half year ended December 31, 2010 compared to the half year ended December 31, 2009, was as a direct result of lower biodiesel sales in the half year ended December 31, 2010 as compared to the half year ended December 31, 2009.

Our total cash and cash equivalents were A$6.6 million, A$17.2 million, A$16.2 million and A$24.7 million as of December 31, 2010 and June 30, 2010, 2009 and 2008, respectively. Our financial statements have been prepared on a going concern basis, which has been assessed based on detailed cash flow forecasts. We have forecasted that our level of cash and cash equivalents may not be sufficient to execute our current planned expenditures for the next 12 months.

Net cash used in operating activities in 2009 was A$10.9 million, which included a coupon payment on the convertible note of A$2.4 million, A$53 million received from customers and A$61.5 million paid to suppliers and employees. In 2010, the net cash used in operations was A$6.9 million, which included a coupon payment on the convertible note of A$2.4 million, A$17.1 million received from customers and A$21.3 million paid to suppliers and employees. The reduction in cash received, and paid to suppliers and employees was as a direct result of lower biodiesel sales in 2010 as compared to 2009, and the associated lower costs of sales.

We believe we have sufficient financial resources to meet our committed short term financial liabilities. However, our ability to continue as a going concern depends on our ability to generate positive cash flow from operations, raise further adequate funds (whether through this offering or otherwise), defer the 2012 convertible note capital repayment and defer certain other capital commitments. The restructure of the capital commitments, equity funding and convertible note restructure referred to above have not been agreed to at the date of this prospectus. See “Risk Factors — Risks Related to Our Business — We may not be able to continue as a going concern unless this offering is completed.”

Half year ended December 31, 2010 compared with half year ended December 31, 2009

Net cash used in operating activities in the half years ended December 31, 2009 and December 31, 2010 consisted of losses incurred in operations.

Net cash used in investing activities related principally to purchases of property, plant and equipment for our refineries.

Net cash provided by financing activities was A$12.1 million in the half year ended December 31, 2009, consisting of A$7.8 million from the issuance of 50 million units (prior to the 50-1 share consolidation that was effected on April 4, 2011, with each unit comprising one ordinary share and one warrant to purchase one ordinary share) to Ir Lee Swee Eng and net proceeds of A$4.7 million from borrowings (these borrowings were subsequently repaid in the second half of the fiscal 2010), less loan repayments in the amount of A$0.3 million. In comparison, net cash provided by financing activities in the half year ended December 31, 2010 was an outflow of A$0.4 million that related to costs of our current capital raising activity and loan repayments.

Fiscal 2010 compared with fiscal 2009

Net cash used in operating activities in fiscal 2009 and 2010 consisted of losses incurred in operations.

Net cash used in investing activities related principally to purchases of property, plant and equipment for our refineries.

Net cash provided from financing activities was A$14.9 million in fiscal 2010, consisting of A$7.8 million from the issuance of 50 million units (prior to the 50-1 share consolidation that was effected on April 4, 2011, with each comprising one ordinary share and one warrant to purchase one ordinary share) to Ir Lee Swee Eng and net proceeds of A$7.7 million from the issue of 30 million (prior to the 50-1 share consolidation) ordinary shares to various accredited investors in a private placement, less loan repayments in

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the amount of A$0.6 million. In comparison, net cash provided from financing activities was A$12.4 million in fiscal 2009, including a private placement of 100 million units (each comprising one ordinary share and one warrant to purchase one ordinary share) that raised gross proceeds of A$16.0 million in fiscal 2009, less asset and working capital loan repayments of A$3.8 million.

Fiscal 2009 compared with fiscal 2008

Net cash used in operating activities in fiscal 2008 and 2009 consisted of losses incurred in operations.

Net cash used in investing activities decreased A$22.9 million (61%) from A$37.3 million in fiscal 2008 to A$14.4 million in fiscal 2009 principally as a result in purchases of property, plant and equipment decreasing A$21.7 million from A$35.8 million in fiscal 2008, when our 100,000 tpa refinery was completed, to A$14.1 million in fiscal 2009. Most of this expenditure in fiscal 2009 related to the construction of our 250,000 tpa refinery.

Net cash provided from financing activities increased from A$7.3 million in fiscal 2008 to A$12.4 million in fiscal 2009 principally due to a private placement of 100 million units (each comprising one ordinary share and one warrant to purchase one ordinary share) that raised net proceeds of A$16.0 million in fiscal 2009. Approximately A$3.8 million of those proceeds were used in fiscal 2009 to repay borrowings related to asset and working capital funding lines that had been utilized in fiscal 2008.

Impact on liquidity as a result of less than expected productive acres

Our 194,323 productive acres as compared to our estimate of 321,383 total cumulative acres planted will have an impact on liquidity in two areas. Firstly, the reduction is as a result of sapling mortality, and thus less than expected seeds will be purchased. To the extent that Mission has not been paid from bank loans received by the farmer the reduction in seed collection will limit our ability to offset the receivable, thereby we are less likely to collect the receivable relating to the sale of the sapling. The impact of this factor has been taken into account in assessing the recoverability of receivables and an appropriate impairment provision has been made. Secondly, due to the lower than expected productive acreage, we would expect lower quantities of seeds available for procurement from the contract farmers. The result of lower volumes of seeds would negatively impact Mission’s profitability and therefore negatively impact retained earnings and liquidity. The carrying value of receivables as at December 31, 2010 is A$1.1 million. We expect that the full value of these receivables will be funded through bank loans to farmers.

Credit terms for receivables

Historically, the receipt of payment for sales to biodiesel customers was required on the date the ship was loaded with biodiesel. Credit risk was managed through the use of letters of credit. However market conditions dictate that future sales to customers may be made on credit terms of up to 60 days, depending on our assessment of customers’ creditworthiness, and we may have to maintain ownership of products during transit to customers which could extend our cash collection cycle well beyond our historical experience and increase our need for working capital.

For sales of Jatropha saplings to contract farmers, the receivable arises and is recorded as of the date of delivery of the saplings, with credit risk mitigated by our right to offset the receivable for each farmer against amounts we may owe that farmer for future purchases of seeds. Our current assessment is that we cannot begin to collect a material fraction of receivables from sapling sales prior to the third harvest season following planting unless farmers elect to take bank loans and apply the proceeds to satisfy their obligations to pay for saplings. Our limited experience to date is that the majority of farmers approached to partake in the scheme apply for the loans and are successful. We are working closely with banks and farmers through our field personnel to improve the take up of these loans.

Convertible Notes

We issued 50,000,000 convertible notes at a price of A$1.30 per note in May 2007. Holders may convert all or part of the notes at any time until maturity (May 16, 2012) at a conversion price of A$1.30 per note. Each note is convertible into one ordinary share (subject to adjustment for customary events, such as share consolidation). The notes bear interest at a rate of 4.0% per annum and interest is payable semi-annually.

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Mission NewEnergy may convert some or all of the notes at any time if the daily volume weighted average price of Mission NewEnergy’s ordinary shares on the Australian Securities Exchange, or ASX, for a period of 90 consecutive days is 1.5 times the face value of the notes.

As at December 31, 2010, 935,579 convertible notes were outstanding (after giving effect to the 50-1 share consolidation that was effected on April 4, 2011).

On March 23, 2011, we obtained shareholder approval to proceed with an exchange offer with all holders of existing convertible notes in the Company to exchange all of their convertible notes for new Series 2 Convertible Notes on the basis of one new note for every existing note held (after giving effect to the 50-1 share consolidation that was effected on April 4, 2011). Mission has received acceptances for the exchange offer from six convertible note holders, representing 75.33% of the existing convertible notes. The Company’s main purpose in completing the exchange offer is to extend the maturity of the debt represented by the existing notes by two years.

After giving effect to the exchange offer, 230,770 of the existing convertible notes having a principal value of A$15.0 million remain outstanding and are due May 16, 2012. After giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share, such notes can be converted into an aggregate of 230,770 ordinary shares at a conversion price of A$65.00 per share. Upon consummation of this offering, the exchange offer will be completed for the remaining 704,809 convertible notes having a principal value of A$45.8 million remain outstanding and due on May 16, 2014. After giving effect to the 50-1 share consolidation that was effected on April 4, 2011, pursuant to which every 50 ordinary shares were consolidated into one ordinary share, these 704,809 convertible notes can be convertible into an aggregate of 2,819,236 ordinary shares at a conversion price of A$16.25 per share.

The new notes will have substantially similar terms and conditions to the existing notes, with some key differences being:

We are subject to negative covenants under the convertible note deed poll that may impact our ability to undertake additional debt or equity financing. Without noteholders' consent in each instance, we cannot incur total indebtedness in excess of 2.5 times our net worth nor can we issue more than 25% of our share capital in options or convertible notes. We believe that these are the only two covenants reasonably likely to impact our ability to undertake additional financing. We confirm that we are in compliance with these covenants.

Bank facility

In March 2009, we entered into a US$17 million senior credit facility with the Singapore branches of two Indian banks (Bank of India and Bank of Baroda). We borrowed US$4.5 million in April 2010 and deposited the full amount with the lending banks. In May 2010, we repaid the full amount of the loan and terminated the credit facility. No amounts are outstanding nor available under the credit facility. The average annual interest rate on the borrowed funds in fiscal 2010 was 5.3%.

We do not currently have any bank credit facility but are in discussions with banks and expect to enter into a working capital facility during fiscal 2011.

Secured loans

As of December 31, 2010, we had secured loans of A$2.9 million that relate to our wind mill in India and our offices in Mumbai, India and Kuala Lumpur, Malaysia. These loans are recourse only to the assets securing the loans.

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Other material commitments

Our only material capital expenditures commitment relates to our second biodiesel refinery. In 2007, we entered into an engineering, procurement, construction and commissioning contract, or the EPCC Contract, with KNM Process Systems Sdn Bhd, or KNM.

We are in discussions with KNM to finalize the transfer of the second biodiesel refinery to us. We cannot be certain when such discussions will be finalized. We have secured all approvals and licenses required to operate the second biodiesel refinery. When the transfer of the second biodiesel refinery to us has been completed, we would owe KNM approximately 30.5 million Ringgit (US$9.4 million), before any late delivery fees and other costs incurred by us on behalf of KNM that may be offset against the outstanding payments. We believe that we can fund the outstanding payments from cash on hand and cash flow from operations, upon the successful completion of this offering.

In addition to the transfer of the second biodiesel refinery, a new process capable of producing different “cuts” of biodiesel is being incorporated into our refinery operations. We have commenced construction of this new process, which is a stand-alone unit which will serve both of our refineries and should enable us to become one of the few biodiesel producers in the South East Asian region who can meet the Cold Soak Filter Test requirements under the revised ASTM D6751:2009 biodiesel specification. When the installation of this new process is completed we will owe a final payment of approximately A$1.4 million. We believe that the new process will be completed and payment made within the first quarter of 2011.

Warrants

Over the past two fiscal years, we issued a total of 150 million units (each comprising one ordinary share and one warrant to purchase one ordinary share at an exercise price of A$0.30 per share), before any adjustment for share consolidation. The expiration date is five years from the date of issuance. If at any time on or after April 15, 2012 the preceding 20-trading day volume weighted average price of our ordinary shares on the ASX is at least A$1.00 (prior to adjustment for share consolidation), then Mission NewEnergy may give written notice to each warrant holder that if such holder does not exercise its warrants within 15 days from the date of such notice, then the warrants would expire on the 15 ^th day.

In addition, we have issued 731,492 warrants to placement advisers with a strike price of A$1.00 and A$1.20 and an expiration date of July 31, 2011. 365,746 warrants issued to placement advisers have lapsed. We have also issued 3,500,000 warrants in accordance with the shareholder approved employee option plan to senior executives. The warrants have a strike price of $0.17 and an expiration date of June 30, 2011.

Research and Development

Our research and development efforts are focused on ligno-cellulosic ethanol technology and are discussed in “Business.” Our R&D team comprises internal professional research experts. In addition to our internal capability, Mission NewEnergy has technical research collaborations with:

Much of the cash expenditure relating to our collaborative research efforts has been borne by our collaborative partners. Our expenditure on research and development was A$154,000 and A$367,000 in fiscal years 2010 and 2009, respectively. We did not have any research and development expenditure in fiscal 2008.

We are presently exploring the future viability of selling crude Jatropha oil as another means of revenue. While biodiesel refining remains our primary business, we are considering future sales of crude Jatropha oil should demand materialize at an attractive price.

The sale of our Jatropha seed cake at the moment is limited to sales as an input for organic fertilizer. We may in the future also explore the possibility of producing our own organic fertilizer to expand our revenue stream.

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Trend Information

Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our revenue, income, profitability, liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Off-Balance Sheet Arrangements

Except for amounts due under the EPCC Contract (discussed above) and operating lease commitments disclosed in “Tabular disclosure of contractual obligations” below, we do not have any material off-balance sheet commitments or arrangements.

Quantitative and Qualitative Disclosures about Market Risk

Our business activities are exposed to a variety of market risks, including credit risk, foreign currency risk, interest rate risk and commodity risk.

Credit Risk

Credit risk arises from the sale of biodiesel, Jatropha saplings and cash held at period end. Cash is only held in accredited banks and credit risk arising from the sale of biodiesel is managed through the use of letters of credit.

Our contracts with famers in relation to Jatropha saplings are typically unsecured. Credit risk arising from sales of Jatropha saplings is managed through the following approach:

We believe there is significant risk of loss in the event of non-performance of contract by the farmers we have contracted with for the sale of Jatropha saplings and this is reflected in the valuation allowances applied to our contract-farmer receivables and reflected in our financial statements.

Credit risk also arises from the corporate guarantee we have provided to the contractor of our second refinery in place of the standard letter of credit originally placed at construction commencement. Credit risk on sapling sales at June 30, 2010, is A$2.1 million (A$13.0 million in fiscal 2009) after providing for impairment and discounting charge.

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Foreign Exchange Risk

Mission NewEnergy operates internationally through a number of subsidiaries and is thus exposed to fluctuations in foreign currencies, arising from the foreign currencies held in its bank accounts, the sale of goods in currencies other than Mission NewEnergy’s measurement currency, and the translation of results from investments in foreign operations. Our foreign exchange exposures are primarily to the Indian rupee, Malaysian ringgit and the U.S. dollar.

Foreign exchange risks arising from the sale of products are not hedged. At June 30, 2010, if foreign currencies had changed by ± 10%, with all other variables held constant, the effect on post tax profit and equity A$1 million.

Foreign currency risks arising from commitments in foreign currencies are managed by holding cash in that currency. Foreign currency translation risk is not hedged.

Interest Rate Risk

Interest rate risk is managed with a mixture of fixed and floating rate deposits, fixed rate convertible note debt and floating rate debt. Our main interest rate risk, being fair value interest rate risk, arises from our long term convertible note debt. At June 30, 2010, if interest rates had changed by ± 25 basis points, with all other variables held constant, the effect on post tax profit and equity would be unchanged and A$280,000 higher/lower on the fair value of the convertible notes.

Commodity Risk

We are exposed to market prices of input costs into the production of biodiesel. The key raw material currently being used to manufacture biodiesel is crude palm oil. We are also exposed to fluctuations in the price of our biodiesel products because the price at which we are able to sell biodiesel fluctuates with changes in the price of petroleum and refined petroleum products. These risks are managed by negotiating ‘cost plus a margin’ sales contracts which minimizes our exposure to variations in this key input cost.

Tabular disclosure of contractual obligations

The following table summarizes our contractual obligations and commitments as of June 30, 2010:

		Payments due by period
		Total A$’000		less than 1 year		1 – 3 years		3 – 5 years		more than 5 years
Operating lease obligations			3,899				186				463				464				2,786
Secured loans			3,662				624				1,164				1,874				—
Convertible notes			60,812				—				60,812				—				—
Interest on convertible notes			4,864				2,432				2,432				—				—
Capital commitments			7,785				7,785				—				—				—
Total			81,022				11,027				64,871				2,338				2,786

Depending on specific market prices for Jatropha relative to our contracted price, we have a contractual obligation to buy back all seeds from our contract farmers delivered to Mission’s warehouse. At this point in time it is not possible to reasonably estimate what this value could be.

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OUR INDUSTRY

Introduction

As a producer of biodiesel, Mission is a participant in the US$2.7 trillion global market for liquid fuels (Source: U.S. Energy Information Administration, Short Term Energy Outlook, February 8, 2011). The two largest liquid fuels market are the United States and Europe, which collectively represent 40% of the liquid fuels market. The graph below shows the breakdown of the global liquid fuels market:

Source: Management analysis of U.S. Energy Information Administration,
Short Term Energy Outlook, February 8, 2011 data.

Biodiesel can be a direct substitute for certain petroleum-based distillates, including diesel fuel, jet fuel and heating and bunker oil. Biodiesel is typically mixed with conventional petroleum-based diesel to produce a blended fuel that can be used in vehicles with diesel engines under a wide range of temperature and use conditions. Biodiesel is widely understood in the major transport fuels markets in the European Union and the United States, according to the U.S. Energy Administration, and its price and volumes are quoted by major industry sources, including OPIS, Platts and Bloomberg. Its value, without taking into consideration any subsidies or incentives available to producers or distributors, is broadly in line with the prevailing value of ultra low sulphur diesel (ULSD), a petroleum-based diesel benchmark. From February 2006 to February 2011, the ULSD premium to crude oil has been as high as US$34.7 per barrel (on July 21, 2009) and has averaged US$11.3 per barrel (based on our calculations of data we obtained).

This price of biodiesel relative to petroleum-based fuel drives demand for the product. Demand is also driven by regulatory and legislative requirements and consumer preferences for fuels that have a lower impact on the environment than those derived from petroleum. According to Annual Energy Outlook 2010 (April 2010) by the U.S. Energy Information Administration, the switch to biofuels usage is expected to account for more than 80% of the growth in the transport fuels market (which makes up more than 70% of the liquid fuel consumption in the United States) over the next 25 years (Source: U.S. Energy Information Administration, April 2010).

The estimated consumption of biodiesel by 2012 is forecast to be 3.9 billion gallons (14.9 billion liters) in the European Union and 1.4 billion gallons (5.2 billion liters) in the United States. Countries such as Argentina, China and Malaysia, which have programs to stimulate the use of biodiesel, will present a combined demand similar to that of the United States (Source: The Biofuels Market: Current Situation and Alternative Scenarios, United Nations Conference on Trade and Development, 2009). Although biodiesel is consumed in many parts of the world, we are focused on sales into regulated markets in the United States and Europe, two of the largest segments of the global market where we believe demand and pricing for biofuels will be most favorable in the near term.

The Biodiesel Value Chain

There are three fundamental components to the biodiesel industry: feedstock, refining and distribution. The feedstock component provides the underlying crude plant or animal fat oil to be refined. The refining component involves the conversion of the feedstock material into the finished biodiesel, which is then distributed in the final component of the value chain.

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Suitable feedstocks include a variety of plant and animal fat oils. Biodiesel producers raise their own feedstock or purchase feedstock from farmers or other producers either under contracts or in the immediate cash payment and delivery market. The production of biodiesel takes place by means of a base catalyzed transesterification of the oil with methanol. Base catalyzed transesterification is the industry standard chemical process for converting vegetable or animal oil to a methyl ester (widely known and commonly referred to as biodiesel) and the by-products glycerin and fatty acids. After separation and in some cases distillation, the biodiesel is ready to pass requisite quality control tests and can be sold into the established transport fuels market.

Within the three fundamental components of the biodiesel value chain, there are five distinct segments where monetary value is captured as diagrammed below:

Historically, the bulk of that monetary value has been captured upstream in the plantation and in the crude oil production stages. Midstream biodiesel production in isolation, like refining operations for other commodities, generally captures limited value as it has limited control of its input costs and limited ability to influence the price of its output. Plant and animal fat crude oil feedstock suppliers instead exercise greater control and have typically increased their prices in tandem with any increase in the value of the refined biodiesel. These lock-step price movements diminish the value captured in the biodiesel production segment and the distribution component while favoring the upstream suppliers of feedstock.

Biodiesel refining profitability depends on the premium between feedstock oil and biodiesel as the finished product. The premium to be realized by biofuels cannot be predicted with certainty and will depend on the availability of supply against demand. Based on projections included in the Annual Energy Outlook 2010 (April 2010) prepared by the U.S. Energy Information Administration, there will be a shortfall in biofuels supply in 2022 of 10.3 billion gallons. Due to this anticipated shortfall in supply, biofuels will enjoy a premium in the years ahead. This premium has already been reflected in recent years in the pricing for feedstock oils.

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Plant Oil Prices from January 1983 to March 2008

Source: ISTA Mielke, various issues; International Monetary Fund, March 2008.

Historically, as the above chart shows, the prices that plant and animal-fat crude oil feedstock suppliers have realized tend to increase in tandem with the value of the refined products. This correlation has strengthened in recent years and coincides with legislated incentives and mandates for biofuels that have come into effect. More recent data shows the very close relationship between the price of ULSD and crude palm oil (CPO) and soybean oil, two plant oils that are often converted into biodiesel.

Source: Mission compiled this graph from our analysis of data we obtained.

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Such lock-step price movements for vegetable oils marginalize the value of conversion while favoring biofuel feedstock suppliers. This data has led our management to conclude that:

Continued reliance on conventional petroleum-based fuels faces challenges

We believe that continued growth in biofuels, and biodiesel in particular, will result from challenges facing the market for conventional petroleum products as outlined below:

Biofuels are becoming increasingly cost competitive with conventional petroleum-based fuels.

We believe that biofuels will become increasingly cost competitive with conventional petroleum-based fuels as petroleum becomes more expensive and as the cost of feedstock and biofuel production declines. As biofuels become more cost competitive, government mandates for biofuels blending will be less of a driver in the overall demand equation. According to the U.S. Energy Information Administration in Annual Energy Outlook 2010 (April 2010), U.S. production of biofuels ultimately will surpass the RFS2 mandates recently enacted by the U.S. federal government as higher oil prices and lower production costs improve their competitiveness.

As biofuels achieve greater cost competition and taking environmental concerns into consideration, we believe that there will be a significant increase in the demand for biofuels.

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Mandates and policies in key markets directly affect biofuels usage

Most major countries have a mix of mandates and subsidies in place to support their national biofuels industries as a means to increase fuel supply security, reduction of greenhouse gas emissions or support local farming revenues.

Policies of governments in major biofuels markets are summarized below:

United States		Brazil		European Union		China		India
•    Mandate of 36 billion      gallons of biofuels by      2022. •    Volumetric tax credit      of US$0.51/gallon of      ethanol and US$1.00/      gallon of biodiesel.* •    Cellulosic biofuel      producer tax credit of      US$1.01/gallon. Small      producer tax credit of      US$0.1/gallon. •    US$1 billion in      support for second      generation technology.		•    30 plus year      commitment to      ethanol program. •    Annual blending      target of 25% for      ethanol. •    5% blending target      of 5% for biodiesel      by 2013. •    Lower taxes for      ethanol (E100) than      gasoline. •    Flex Fuel Vehicle      (FFV) sales tax of      14% compared to      16% for gasoline-      only vehicles.		•    5.75% blending      target by 2010 and      10% by 2020. •    Discussion on target      waiver triggered by      food crisis, but no      change of policy so      far. •    Country-level      subsidies average      US$1.90/gallon for      ethanol and      US$1.50/gallon for      biodiesel. •    Penalty fee in five      (5) countries for      noncompliance with      biofuel target.		•    Plan to substitute      20% of crude      imports by 2020. •    Target of 1.7 billion      gallons of ethanol by      2010. •    Investments in      feedstock-rich      countries.		•    Blending targets in      current drafts are 5%      by 2012, 10% by      2017, 20% for long-      term. •    Target of 20%      biofuels      by 2020. •    Duty-free imports of      Jatropha to support      biodiesel. •    Individual states may      set additional      measures to promote      biofuels or restrict      transport of molasses      over state boundaries.

Source:  Coyle, W., The Future of Biofuels: A Global Perspective , Economic Research Service, USDA, 2007

For many of the countries analyzed above, there is a gap between the potential demand generated by mandatory or voluntary blending targets and their production capacity. In a 2009 report, the United Nations Conference on Trade and Development estimated that expected blending targets will increase global demand for biodiesel to 17.8 billion gallons by 2022, while total production capacity based on existing production facilities and those being constructed will be approximately 12.9 billion gallons (Source: The Biofuels Market: Current Situation and Alternative Scenarios, United Nations Conference on Trade and Development, 2009).

The table below shows potential increases in demand for biofuels in the European Union 27 member countries and in the United States based on the EU directive on the promotion of the use of energy from renewable resources and the U.S. Energy Independence and Security Act of 2007, respectively.

		2010		2015		2020
		Demand (in millions of gallons)
USA			650				2,498				4,494
EU-27			2,904				3,630				6,283
Total			3,554				6,128				10,778

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U.S. national and state mandates and policies are favorable to rapid growth of biodiesel demand

Increased social sentiment about environmental concerns of petroleum use and global warming have created enough political will in the United States at both the federal and state levels to mandate the use of biofuels as a means to reduce greenhouse gas emissions. These government policies currently provide a minimum level of biofuels demand.

Specifically, the latest version of the U.S. congressionally mandated Renewable Fuels Standard, or RFS2, sets targets for biofuels consumption in order to reduce greenhouse gas emissions. The 2022 target for transport fuels is to use at least 36 billion gallons of biofuels broken down into 15 billion gallons of conventional biofuels such as corn ethanol and 21 billion gallons of advanced biofuels. Biodiesel, which is classified as an advanced biofuel, has a specific mandate of 1 billion gallons per annum under the RFS2 target for 2022 but higher consumption of biodiesel could offset, in part, the requirement for other advanced biofuels or conventional biofuels. This in itself is especially promising for the biofuels industry and biodiesel producers in particular. However the revised legislation only allows soy oil, used cooking oil and tallow oil as eligible feedstock for biodiesel to meet mandates under RFS2. Other plant oil feedstocks such as rape seed, palm and Jatropha oil are required to meet certain environmental and greenhouse gas requirements prior to approval as feedstock under RFS2. Detailed analyses are currently being progressed by the EPA to determine if palm and Jatropha are able to meet these requirements. Palm oil and Jatropha oil are not presently, and in the future may not be, approved under RFS2.

The graph and table below outline the United States mandatory biofuels blending requirements:

Source: U.S. Energy Information Administration               2010 Energy Report (April 2010).		Billions of gallons Source: Impact of U.S. Legislation on Global               Biofuel Markets, U.S. Department of               Energy (February 2009).

Under RFS2, biofuels producers and importers receive credits from the Environmental Protection Agency, or EPA, in the form of RINs for qualifying product that they register. Under RFS2, crude oil refiners in the United States are obligated each year to either produce the required quantities of qualifying biofuels to reach the blending targets for the fuels they produce or to buy RINs in the open market to meet their regulatory obligations. Normally, biofuel manufacturers or importers sell the RINS along with their product to the refiners, who are also the largest distributors of blended products. However, there is an active secondary market for RINs and their market value represents another component of the price premium that is currently paid for biofuel because of the limited supply and mandated demand. As seen in the chart, the value of RINs rose dramatically as the RFS2 mandate came into effect in mid-2010.

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Renewable Identification Number (RIN)

Source:  Mission compiled this graph from our analysis of data we obtained.

Another federal initiative that was favorable to biodiesel was a transferable $1.00 per gallon subsidy that was available to distributors of qualifying blended product from 2005 through the end of 2009, and in December 2010, the subsidy was retroactively renewed for 2010 and continued through December 31 2011. In part, this credit subsidized large price premiums for certain biodiesel feedstocks over the price of ULSD while it was in effect and underpinned financing for the construction of the large surplus of biodiesel refining capacity that was built in the United States in the five years prior to 2010. There has been considerable speculation about whether or not a tax credit for biodiesel will be renewed and we cannot provide any assurances in this regard. If a tax credit is renewed, there is no assurance that, as a foreign producer, we or our customers would qualify for the credit.

In addition to federal mandates, state legislatures are also adopting policies supporting the production and consumption of biofuels. For example, in California, the Low-carbon Fuel Standard introduced in 2007 is an example of a potential industry driver, requiring fuel providers to reduce greenhouse gas emissions of the fuel they sell to achieve a 10% reduction in the carbon intensity of transport fuels by 2020.

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BUSINESS

Overview

Mission NewEnergy is a producer of biodiesel that integrates sustainable biodiesel feedstock cultivation, biodiesel production and wholesale biodiesel distribution focused on the government mandated markets of the United States and Europe. Our business model is illustrated below:

Although portions of our operation are still in the development stage we have achieved the following key milestones:

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We believe that being vertically integrated will allow us to control our input costs and realize revenues from both our feedstock cultivation and our biodiesel production operations. For this reason, following the commissioning of our first refinery we developed a low-cost and sustainable approach to the cultivation of Jatropha in 2007 and have been expanding our cultivated acreage ever since. Jatropha is an inedible perennial oil seed plant that we seek to grow on marginal soil without displacing agricultural land used for food supply. The inedible oil from the crushed Jatropha seed is a suitable feedstock for biodiesel and the remaining meal, or seedcake, is valued as an input for biofertilizer. Until our existing Jatropha cultivations fully mature, which will not occur for at least two more years, we have sought to utilize our low-cost refinery to opportunistically produce biodiesel on short-term contracts for third parties using purchased feedstocks other than Jatropha oil. With the completion of our first commercial crush (albeit small) of Jatropha seeds at the end of calendar year 2009, we negotiated our first long-term supply agreement that includes Jatropha-based biodiesel. This offtake agreement gives us defined long-term access to a downstream market with a large, well capitalized customer. We hope that deliveries under this agreement will begin during 2011, although there is no assurance that we will be able to do so. Our ability to deliver biodiesel under this agreement is largely dependent on the regulatory approval of palm oil and Jatropha oil as feedstock under RFS2 and the successful installation of equipment that will enable both our refineries to produce biodiesel that meets the ASTMD6751 standard, the applicable U.S. standard for biodiesel. Palm oil and Jatropha oil are not presently, and in the future may not be, approved under RFS2.

As illustrated by the diagram below, our business footprint spans multiple countries, with developing Jatropha plantation operations in India, established biodiesel refining operations in Malaysia, a history of sales to multiple European Union countries and a long-term offtake agreement in the United States. Our principal markets are those that utilize biodiesel and the by-products produced during the biodiesel production process, notably being crude glycerine and palm fatty acid distillate. Historic sales have been made to customers located in Europe (96% total to date) and Singapore (4% total to date), with very small test quantities sold to Malaysia, Japan, India and South Korea. In 2010, 99% of our sales were to European customers with the remainder to Singapore based customers. In 2009, 100% of sales were to European customers. In 2008, 72% of sales were to European customers and 28% to Singaporean customers. The configuration of our operations allow us to selectively sell our products into government mandated markets while operating in low-cost jurisdictions.

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All of our feedstock cultivation is currently based in India, focused solely on Jatropha and still in the development stage. It encompasses the growth of Jatropha saplings in our nurseries, the sale of saplings to contract farmers, long-term support of those farmers to implement sound agronomy practices through the Jatropha plant life-cycle and the purchase of harvested Jatropha seeds from our contract farmer network. Under our control and supervision, purchased seeds are then crushed and crude Jatropha oil is extracted to be used as feedstock in the biodiesel production process. The residual Jatropha seed cake, a by-product of the oil extraction process, can be sold to manufacturers of bio-fertilizer or potentially used by us in the production of our own bio-fertilizer.

Based on (i) our experience as an active participant in the Jatropha industry, while operating in multiple jurisdictions with global attention from equity capital markets, news media and direct contact with other industry participants, and (ii) our review of what we believe to be the most recent comprehensive study on Jatropha, the Global Market Study on Jatropha produced by GEXSI (2008), we believe that we are one of the world’s largest Jatropha feedstock cultivation business in terms of acreage under contract. As of February 1, 2011, we had contracts with 140,650 farmers in India to cultivate Jatropha in five states in India. We determined that as of February 1, 2011, we had 194,323 acres of Jatropha under cultivation that was growing to expectations, which we refer to as productive acres. We expect that our current productive acreage will produce at maturity approximately 120 thousand tonnes per year of Jatropha oil and approximately double that amount of seed cake. See “— Feedstock Cultivation — Seed yield expectations” and “— Feedstock Cultivation — Crude Jatropha oil estimate.”

Our biodiesel production facilities are comprised of two separate transesterification refineries that convert feedstock oil to biodiesel located at Port Kuantan, Malaysia. Our first biodiesel refinery (Plant I) has a 30 million gallons-per-year nameplate capacity. Plant I has achieved ISO9001:2008 certification. Plan I is also the only non-German biodiesel production facility certified to produce BPAC-AGQM technical standard biodiesel. The BPAC-AGQM is a quality German certification system that assures customers that our products are high quality. This certification assists us to sell compliant biodiesel in Germany, the largest biodiesel market in Europe. The transesterification process utilized at this facility incorporates leading proprietary technology that allows us to produce biodiesel simultaneously from multiple feedstocks, allowing us to shift in and out of different feedstocks based on feedstock supply, customer demand and market cost dynamics. Our second biodiesel transesterification refinery (Plant II) was commissioned adjacent to Plant I with a 75 million gallons-per-year nameplate capacity. As further discussed below, Plant II uses highly efficient second-generation transesterification technology. Our production facility in Kuantan is connected by two-way pipelines to a dedicated jetty 200 meters away at an all-weather, deep sea, international port.

Historically, we have produced biodiesel product for the European market that we have sold to various customers. As more fully described below, we have arranged for initial access for our biodiesel to the U.S. market pursuant to the Valero offtake agreement.

We have a captive supply of second generation feedstock, commercial scale refining capacity and a large scale offtake agreement.

Our Competitive Strengths

We believe that the following strengths enable us to compete successfully in the biofuels industry:

Our Jatropha-based biodiesel is cost competitive at prevailing crude oil prices and we have the potential to further reduce our cost base and competitiveness with petroleum-based fuels

Based on our first commercial scale crush of Jatropha oil and our analysis of historical results, we believe that our Jatropha-based biodiesel can be cost competitive with petroleum-based diesel at a crude oil price above US$52.15 per barrel (US$1.25 per gallon) calculated based on the average premium of ULSD to crude oil since 2006 without any government subsidies or financial support. As discussed below under the heading “Business — Feedstock Cultivation — Our net production costs of Jatropha-based biodiesel”, with an increase in by-product realization and continued scale efficiencies, we aim to further reduce our production costs and significantly increase our cost competitive nature with petroleum-based products at prevailing market prices for petroleum.

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We have a captive supply of cost competitive feedstock that does not compete with food crops

We expect that Jatropha will be one of the lowest cost feedstock that can be viably used for biodiesel production. We have established a contract farmer network that provides us with an abundant supply of this low cost and relatively price stable feedstock. This captive supply gives us some protection from feedstock pricing pressure. Also, as Jatropha is inedible, its price and availability are unlikely to be significantly influenced by demand for food crops. Based on our existing productive acreage, the median yield scenario and our analysis of historical results, we estimate that we will be able to produce approximately 22.3 million barrels of Jatropha oil over the life of our productive acreage. See “Business — Feedstock Cultivation — Crude Jatropha oil estimate.”

Our existing contract farming platform allows for continued growth of contracted acreage with no significant direct capital expenditure

We can expand our existing contract farming network without any significant direct additional capital expenditure on our part. During the Jatropha maturing cycle, our only capital requirements are limited to maintaining general working capital and corporate overhead. Our contract farming management systems are scalable and the planting costs are borne by our contract farmers.

By growing on marginal land, the farming of Jatropha represents a low opportunity cost for our contract farmers. Additionally, by arranging third party financing and providing support services to our farmers, we have demand from new and existing contract farmers to add acreage to our contract network. With these favorable arrangements, we believe that we can continue to grow the number of our contract farmers to meet the needs of our biodiesel production operations without any significant capital expenditures on our end. Based on our median growth in productive acreage over the next five years and the median yield scenario, we estimate that we would be able to produce approximately 51 million barrels of Jatropha oil over the life of our cumulative productive acreage. See “Business — Feedstock Cultivation — Crude Jatropha oil estimate.”

We believe our leadership position in Jatropha cultivation creates commercial opportunities for us

We began cultivating Jatropha in 2007 and realized our first commercial oil yields in 2010. Unlike potential innovations in the areas of cellulosic, algae and green diesel which are not yet proven at commercial scale, our products do not require major research and development achievements or the market adoption of new technology. We have used the breadth of our experience gained over this time to optimize our agronomic practices in the cultivation of Jatropha. We believe our leadership position in Jatropha cultivation gives us a competitive advantage in securing high-volume customers, favorable supply and distribution agreements and strategic site locations. For instance, we entered into a favorably priced long-term offtake agreement with Valero Energy Corporation, North America’s largest independent petroleum refiner for 57% of the nameplate production capacity upon title transfer of the second refinery to us. Under the terms of the agreement, while our Jatropha oil supply is ramping up to the maximum contract volume, our sales price of biodiesel may be priced at a premium to ultra low sulphur diesel, which lessens the impact of commodity price volatility that has severely hindered the industry.

We believe that we will be able to negotiate additional long term, large scale, premium priced contracts with other large buyers.

We have established a large scale, cost competitive refining operation

With a cumulative nameplate production capacity of 105 million gallons per annum (350,000 tonnes per annum), we are one of the world’s largest biodiesel refiners. This scale makes us commercially relevant to large scale fuel blenders. While our Jatropha plantations mature, we utilize crude palm oil as a feedstock, which is historically the lowest cost currently available feedstock. Management believes that we are a low cost producer of biodiesel as we have been able to competitively price our biodiesel to capture market share. Management believes our cost competitive nature is due to operations in a low cost jurisdiction with local access to commercial quantities of low cost feedstock.

We have established sustainable socially responsible feedstock cultivation and refining operations

As an inedible feedstock that grows on marginal land without displacing food crops, Jatropha is a completely sustainable feedstock. Unlike petroleum, which is a finite resource, we can plant, and replant

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feedstock sources thereby replenishing our supply on a perpetual basis. We anticipate that our pioneering position in Jatropha cultivation will allow us to become the first company to utilize only dedicated non-food energy crops to produce biodiesel on a commercial scale.

Our Jatropha-based biodiesel is a fully sustainable, socially responsible substitute for diesel. By providing our farmers with a long term annuity income at limited opportunity cost, our contract farming model will directly help to alleviate the poverty cycle for over 140,000 farmers with which we are currently contracted and indirectly provide income for many more. Under our contract farming program on marginal lands, we have successfully planted over 277 million Jatropha saplings to date.

Our leadership in social responsibility provides the political and social support necessary to grow our business.

Our Strategies

In order to achieve our goal of becoming a leading vertically integrated supplier of biodiesel, we intend to pursue the following strategies:

Focus on government mandated markets to capture the premium available to qualified producers of biofuels

While in transition from our existing feedstock to our low cost Jatropha, we are focused on markets that are supported with government mandates. Subsidies, mandate blending requirements and other market forces in Europe and the United States have historically created a significant premium for biodiesel relative to ULSD or Gasoil. We believe that our low cost position in the market will allow us to compete in these favorable margin markets and capture some or all of the historic premium. From January 1, 2010 to February 10, 2011, biodiesel in the United States has traded at a premium to ULSD of US$56.07 per barrel. From January 1, 2011 to February 10, 2011, biodiesel in the United States has traded at a premium to ULSD of US$82.71 per barrel. Based on our analysis, from January 1, 2010 to February 10, 2011, biodiesel in Europe has traded at a premium to Gasoil of US$45.56 per barrel. From January 1, 2011 to February 10, 2011, biodiesel in the Europe has traded at a premium to Gasoil of US$69.02 per barrel. The price of biodiesel reflected in the preceding sentence is assumed to be FAME (Fatty Acid Methyl Ester) Zero in Europe and 100% Soybean-based Methyl Ester (SME) in the United States.

Lower our effective biodiesel cost base through increased by-product value realization and economies of scale

We will continue to identify areas where we can add value and develop multiple ancillary income streams. We seek to realize greater value of the by-products from our Jatropha operation and our refining process.

Through a solvent extraction process used to separate compounds based on their relative solubility in two different liquids, we expect that each three tonnes of Jatropha seeds will yield one tonne of oil and two tonnes of Jatropha seed cake. If standard mechanical extraction is applied as opposed to solvent extraction, the yield of oil would be lower. The Jatropha seed cake is a valuable biomass with profitable commercial applications. With no additional capital expenditure, Jatropha seed cake can be sold as an input to bio-fertilizers. In addition, we believe that our Jatropha seed cake can be enhanced into a competitive bio-fertilizer, thereby realizing increased value.

Refining biodiesel generates the readily saleable by-products of glycerin and fatty acid distillate. Our refineries are equipped to improve the quality of this glycerin to pharmaceutical grade glycerin. The sale of high quality glycerin and other refining by-products further reduces our effective conversion cost.

We expect as our volume of Jatropha increases, our logistics and transportation cost, which make up 34% of our cost base, can be significantly reduced through the realization of cost per unit reductions. Further, we intend to concentrate our go forward planting efforts on our most successful geographic locations thereby increasing density and lowering per unit logistics costs.

We expect to realize further production cost savings from economies of scale and be able to receive incremental contribution from by-product sales, such that in combination we could generate a positive

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contribution margin from our production and sale of biodiesel. See “Business — Feedstock Cultivation — Our net production costs of Jatropha-based biodiesel.”

We believe through by-product value realization and economies of scale, we can achieve a net cost of production for our biodiesel that makes us highly cost competitive with petroleum-based transport fuels and other existing biofuels.

Continue to expand our Jatropha contract farming operation

Our contract farming provides our business with access to low-cost, high-yield feedstock. We intend to continue build on our success and expand our contract farming acreage.

Our contract farming model is to plant on marginal land so that our farmers have a low opportunity cost. We guarantee to buy back 100% of their crop providing them with considerable income. We have increasingly sought to assist willing farmers to arrange bank financing for their required capital expenditures so they have no upfront cash outlay. Farmers who do not arrange, or are ineligible for, bank loans may seek to fund the operations themselves. This model is highly attractive to small scale farmers.

Our existing business systems, practices and successful commercial scale rollout of contract farming provide us with a platform to continue to grow our acreage under contract, as discussed under “Business — Feedstock Cultivation — Productive acreage growth plans,” we do not expect to be constrained by the availability of suitable land.

Continue Jatropha research and development efforts to increase the productivity of our contract farming operation and move into Mission owned and operated plantations

Engaging in large scale contract farming has spread the development risk of domesticating Jatropha. We believe that the knowledge gained from our contract farming operation will be vital in successfully entering into large scale corporate farming of Jatropha.

In collaboration with recognized universities, we continue to advance the genetic development and cultivation practices of Jatropha.

We expect that the genetic characteristics of Jatropha will advance as the crop becomes more domesticated, which will provide the necessary consistency to profitably undertake large scale contiguous corporate style cultivation of Jatropha, including mechanization and other more sophisticated agronomic practices. We expect owning the land and operating the plantation acreage will result in higher yield per acre and lower per unit cost, as a result of uniform agronomy practices and reduced logistics costs.

We have conducted scoping studies to establish plantations that we may be able to own and operate in Africa, Central America, South America and South East Asia. We remain encouraged by the prospects of large-scale corporate farming of Jatropha in each of the aforementioned geographies.

Extend vertical integration of our business model

After establishing refining capacity, we have successfully developed our feedstock cultivation operations. Having secured a long-term offtake agreement in the United States, we are pursuing strategic acquisitions or structured contractual arrangements for biodiesel storage facilities, terminals operations and toll processing in key U.S. markets to grow our distribution capacity. A potential benefit of such acquired facilities or arrangements, if consumated, would be to allow us to store and blend large volumes of biodiesel “off the rack” to customers at the point of delivery, without the need for an intermediary distributor. We believe that this distribution capacity will give us key access to the growing U.S. markets and a strategic advantage over our competitors. Once we have achieved full vertical integration, we will continue to further expand our feedstock and refining operations in tandem.

Feedstock Cultivation

Jatropha

Jatropha is an inedible perennial oil-seed plant that can grow on marginal soil with limited water and without displacing agricultural land used for food supply, factors that make it an ecologically responsible source of fuel oil. The Jatropha plant produces seeds annually over its average productive life of 30 years. Harvested

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seeds of the Jatropha plant are crushed to produce an inedible oil that is a suitable feedstock for the production of biodiesel. The remaining meal of the seed, or seed cake is a valuable by-product of the oil extraction process that we sell for various uses. The amount of biodiesel produced from a hectare of Jatropha on a well managed and irrigated field compares favorably with most other biodiesel feedstocks as indicated by the table below.

Typical biodiesel yields
Plant species		Tonnes per acre
Palm oil			1.40
Jatropha			1.29
Castor bean			0.74
Coconut			0.65
Tung oil			0.63
Sesame			0.47
Sunflowers			0.31
Groundnuts			0.30
Rapeseed			0.30
Safflower			0.29
Linseed			0.26
Mustard seed			0.21
Soybean			0.12
Cotton			0.06

Source:  The Biofuels Market: Current Situation and Alternative Scenarios, United Nations Conference on Trade and Development, 2009.

These favorable yield dynamics and the perennial nature of palm and Jatropha plants contribute to the overall cost advantage that these oil plants have relative to other types of oil-producing species and explain our focus on utilizing these feedstocks.

Jatropha, however, has not been widely cultivated for purposes of harvesting seeds and therefore does not yet figure prominently as a feedstock for biodiesel. The relative price and availability of oil seed crops is depicted in the chart below which is intended to provide a general sense of these oil seed crops relative to one another:

Source:  Mission prepared this graph based on data obtained in October 2010 from the U.S. Department of Agriculture, BarChart and the Food and Agriculture Organization of the United Nations.

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By cultivating Jatropha plants in India, we are working to overcome the limited availability of Jatropha oil. Until our Jatropha cultivations mature, we are striving to take advantage of the relatively low cost of palm oil cost and its ready availability to our refineries in Malaysia. Malaysia is one of the world’s largest sources of palm oil and having access to abundant, locally produced feedstock significantly reduces the cost of inbound transportation and assures us of reliability in our supplies.

Approach to cultivating a new energy crop

Jatropha has been growing wild in India for many years and is well known to local farmers. Historically, its inedible properties and hearty nature led to it becoming widely planted as a hedge for protecting valuable food crops from animals.

The ecological sustainability, low production cost and physical characteristics of Jatropha oil make it a highly sought after feedstock for biodiesel production. However, the plant has not historically been cultivated on a commercial scale for energy use or other purposes. As is typical of a crop in the early stages of commercial development, the yields of Jatropha on our contracted acreage have varied dramatically. It is expected, like most other crops, that the yields will become more consistent and abundant as the agronomy practice develops and higher yielding varieties of the Jatropha plant are cultivated.

Our contract farming model is to plant on marginal land so that our farmers have low opportunity cost and a commercial incentive to share in the development risk of domesticating Jatropha. By engaging in large scale contract farming with over 140,000 different farmers, with wide geographical dispersion, Mission is gaining the practical expertise necessary to better understand and drive yield improvement. With these learnings and the subsequent domestication of the crop, we are positioned to roll out large scale corporate farming of Jatropha.

Scope of Jatropha cultivation operations

We have an upstream feedstock cultivation operation consisting of Jatropha seed research and development, nurseries, contract farming with advanced farm management systems, warehousing and logistics capability, seed crushing and oil extraction capability and access to a banking and financing network.

Our Jatropha cultivation operation is diagrammed below:

We typically enter into 30 year farming contracts, whereby a farmer plants Jatropha saplings in the marginal portions of their fields and we agree to buy back all the seeds from the farmer once the planted saplings have matured into trees and have begun to bear fruit. The farmers with whom we have contracted provide us with a reliable source of low cost feedstock for our biodiesel productions.

We lease and operate nurseries to grow Jatropha saplings, which we sell to our contract farmers. We require no upfront cash outlay by the farmer. Rather, the purchase price for the saplings is secured by, and paid with, the proceeds from our later purchase of the farmer’s seeds. To further facilitate the process, we have established relationships with four key banks in India, most notably the Indian Overseas Bank, to provide the financing needed by our contract farmers to purchase the saplings and also for their working

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capital needs during the three years until the plant begins to bear fruit. Under these financing arrangements, the lending bank is paid directly by us with the proceeds from our purchase of the farmer’s seeds and the remaining proceeds are paid to the farmer. Where farmers are ineligible for, or elect not to take up, bank finance, the payment of the purchase price for the saplings and other Mission related costs are secured by proceeds from the future sale of seeds by that farmer. Our contracted farmers are increasingly taking advantage of these financing arrangements.

Our contract farming model is illustrated below:

Since our contract farming model does not require any upfront cash outlay by the farmer and uses marginal soil not suitable for food crops, there is little opportunity cost for the farmer. The overall arrangement is of significant financial assistance to the farmers and, we believe, a key step to breaking the poverty cycle in which many Indian farmers find themselves. We have achieved a high sign up rate of new farmers. Each farmer has an average of approximately three acres of Jatropha planted.

We have an extensive network of field personnel in India to manage harvesting, storage, extraction and transportation of Jatropha seeds and oil. As of September 15, 2010, the network extended over the five different states in which substantially all of our contracted acreage lies and covered 51 districts and approximately 15,300 villages. We have management on the ground in India and have implemented systems to assure the reliable delivery of Jatropha seeds from our farmers. The contract farmers are managed by approximately 2,185 field representatives, who support our management and operations team in India of over 340 full time employees.

To assist our contract farmers to maximize their yield of Jatropha and therefore our supply of Jatropha, our management and operations teams provides farmer extension services and farmer agronomy support. The extension services are primarily related to education about best practices for Jatropha farming and ongoing trouble shooting as it relates to specific Jatropha agronomy.

Our extensive network of field agents allows us to efficiently provide the extension services to our farmers. Our field agents are enabled with hand-held, data tracking and communication devices including Global Positioning Systems, which will allow us to manage our field agents and ensure that extension services are fully utilized, tracked and monitored.

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Through our extensive field agent network and access to state warehouses and facilities, we are able to aggregate commercial quantities of Jatropha seeds, which via tolling arrangements are then crushed yielding crude Jatropha oil and Jatropha seed sake. Historically, we have sold Jatropha seed cake as a bulk input to bio-fertilizer, but we are evaluating the implementation of processes to produce finished bio-fertilizer that we believe we could sell at a higher profit margin.

Mission Agro Technologies

The management and operations team in India has successfully rolled out our proprietary GPS mapping and agronomy management system, Mission Agro Technologies, or MAT, and is in the process of enhancing the system as a result of lessons learned in the field. The system enhancements are intended to collate and report on the detailed reviews of the conditions on the various farms, including maturity and existence of saplings, conditions and stem girth. The system was designed to provide us with a clear understanding of the performance of our contract farming network, allowing us to improve and rectify the performance of any underperforming contract farmers.

The agronomy software underlying the MAT system is driven by our proprietary Jatropha algorithm, which will determine on a farm by farm basis at any particular month what agronomy activities need to happen given the profile of the specific farm. This software will allow us to maximize the seed yield of each contract farmer, optimize harvesting and extraction and schedule logistics movements, all of which will ultimately maximize system wide yields and minimize costs.

Our MAT system will allow us to capture extensive information about the condition and quality of our contract farming acreage. We will use this detailed information to profile and analyze the development of our contract farms and the data will provide us with a clear understanding of the performance of our contract farming system and will be used to improve the accuracy of our yield prediction and prioritize new plantings. Our last survey captured additional descriptive information covering the matters listed in the table below:

Descriptive Information Captured in MAT Database
•   Average number of branches per plant		•   Percentage of plant flowering
•   Average number of fruits per plant		•   Percentage of plants fruiting
•   Average plant height		•   Pruning Completion
•   Average stem girth (Circumference)		•   Slope of the Land
•   Farmer Attitude in taking care of plantation		•   Soil type in the field
•   Flowering and Fruiting status		•   Type of Land
•   Month of pruning		•   Water logging in the field
•   Mortality

Productive acreage estimates

Based upon information gathered from our field force and using tracking information from our MAT system, as of February 1, 2011, we had 140,650 contract farmers and 194,323 productive acres of Jatropha under cultivation. We classify areas as productive acres when the Jatropha plants are growing in line with our expectations. Based on lessons learned from our initial years of cultivation, we have been able to develop and define the agronomy practices and planting techniques that we expect will lead to higher success rates for our Jatropha cultivation.

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Substantially all of our productive acreage is spread across five states in India as follows:

Productive acreage growth plans

There is ample land in India that is not considered by the Indian government to be suitable or productive for growing food crops on which we could potentially expand our productive acreage. We intend to try to take advantage of this by planting additional acreage annually in the future. The Government of India, Department of Land Resources has identified about 153 million acres of fallow land in India. Of this 153 million acres, it is estimated that about 40.8 million acres, which we refer to as marginal land, are suitable for cultivation of some type, although, not for food crops, based upon further categorizations of the land provided by the Department of Land Resources. The total acreage that we currently have under contract represents less than 0.5% of the marginal land. Historically, we have planted as few as 7,000 and as many as 280,000 new acres in a single year. Based on our learning, we believe that planting about 50,000 new acres per year is an appropriate target and will allow our field forces to ensure that best planting practices are followed to an acceptable degree. Notwithstanding this objective, the actual acres we plant annually may vary and the productive acreage achieved from such new cultivations may be less than the total number or acres planted.

In addition, to planting new acreage, we are encouraging some of our existing contract farmers to recover previously planted acreage where soil and climate conditions warrant doing so, in order to transform it to productive acreage. This entails replacing Jatropha plants that died prematurely, more carefully tending to plants that are weak or underdeveloped and ensuring that agronomy best practices are consistently employed throughout their acreage. At this point, we are unable to estimate the number of acres that can be recovered to productive acreage status. We are also evaluating the merits of planting some directly controlled acreage and, if we decide this would be cost effective, it would further augment our annual targets for adding productive acreage.

Jatropha yield algorithm

The collection of data from such a large number of geographically disperse farmers, each with uniquely different planting environments, has provided us with a rich source of data and a deep understanding of the many factors that affect Jatropha seed and oil yield. Based on our practical field experience and analysis of the data that we have collected on our productive acres, we believe the majority of yield deviations are explained by the following factors:

Crude Jatropha Oil :  The amount of the yield is based on total acreage, plants per acre and yield per plant.

Yield per Plant :  The amount of the yield is based on quality of land, genetic stock, inputs and agronomy practice.

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The following factors have been identified by us as the most important factors in achieving sound agronomic practices.

Agronomy Practice :  The amount of the yield is based on grade of farmer, plant architecture, weeding, planting practices.

Seed yield expectations

Based on the published research on Jatropha, we expect that a Jatropha sapling will take around three years to begin to bear fruit and an additional three years to reach full maturity. At full maturity, the trees will continuously bear fruit for approximately the following 30 years.

Our productive acreage is not yet mature and we do not yet have empirical evidence of yields at maturity. We are aware of 16 published scientific studies of Jatropha seed yields. At maturity, the median seed yields reported in these studies is 1.9 tonnes per acre. We expect, but can provide no assurance, that seed and oil yields on our productive acreage will be at or above reported median levels as a result of dissemination and implementation of sound agronomic practices through our contract farmer base and our efforts to plant Jatropha saplings grown from robust genetic stock available in suitable quantities.

According to The Energy Research Institute of India, or TERI, in a report commissioned and prepared for us in May, 2006, Jatropha seed yields will vary with climate and soil conditions and with the method of cultivation as previously discussed. This report after taking into account averages across different climate conditions and assuming partial irrigation and fertilization shows that seed yields will increase through the sixth year of plant life and stabilize thereafter. However, based on our productive acreage, we have anecdotal evidence to suggest that without fertilizer, irrigation and proper pruning that the development cycle might be delayed, as such we rely on the following maturity curve:

Year Following Planting		Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Yr 7 and Onward
Seed yield as percent of yield at maturity			0.0	%			0.0	%			13.5	%			33.3	%			50.0	%			80.1	%			100	%

At the end of the 2012 calendar-year harvest, we expect to begin to have meaningful empirical evidence about the development cycle of our cultivated productive acreage.

As with certain other oil seed crops, we expect that our achieved seed yield per acre from our Jatropha cultivations will continue to improve over time. For example, according to the International Food and Agribusiness Management Association (2009), the world average soybean yield doubled from 1.16 metric tones per hectare in the period from 1961 to 1965 to 2.31 tonnes per hectare in the period from 2005 to 2007.

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According to The Gallagher Biofuels Review (2008), over roughly the same period 1960 to 2006, the world’s average palm oil yield more than tripled to over 12 tonnes per hectare.

Soybean Yield Over time		Palm Oil Yield Over time
Source:  International Food & Agri Business       Management Association (2009).		Source:  The Gallagher Biofuels Review (2008).

We believe that the key factors that will allow us to improve our contract farming yield are continuous refinements to agronomy practices, the training of underperforming farmers to increase skill levels and the further development of high yielding Jatropha varieties.

Crude Jatropha oil estimate

The published literature also includes statistics on oil yields from Jatropha seeds and consistently reports average yields of oil equal to about one-third of seed mass and average yields of seed cake of about two-thirds of seed mass. Our experience on our first commercial crush is that we can achieve yields consistent with these averages but that we will need to use solvent extraction techniques to do so. Assuming the use of solvent extraction techniques to achieve a 33% oil extraction rate and assuming the aforementioned expected seed yield of approximately 1.9 tonnes per acre at maturity, we would expect to realize 0.6 tonnes of Jatropha oil per productive acre annually at maturity for our contract Jatropha fields. Based on our existing productive acreage of 194,323 acres, we calculate a harvest yield of approximately 120,452 tonnes per year of crude Jatropha oil.

The below table shows a range of potential crude Jatropha oil that can be harvested from our existing contract farming acreage over an expected 30-year life of our current productive acreage, assuming that achieved seed yields vary as much as 20% in either direction of the published median and that the oil-to-seedcake ratio is 1:2. Based on our assumed median seed yield per acre, we calculate that our current productive acreage would produce approximately 936.9 million gallons (22.3 million barrels) of crude Jatropha oil over an estimated productive life of 30 years.

Yield Per Acre at Maturity (Tonnes per year)		Total Jatropha Oil Per Acre over 30 Years (in barrels)		Total Crude Jatropha Oil Estimate over 30 Years (in millions of barrels)		Total Crude Jatropha Oil Estimate over 30 Years (in millions of gallons)
0.48			88.87				17.27				725.33
0.54			99.98				19.43				815.99
0.62			114.79				22.31				936.88
0.68			125.90				24.47				1,027.55
0.74			137.01				26.62				1,118.21

The above figures are illustrative and not intended to be a projection . The yields that we actually achieve cannot be accurately predicted from the limited data we have available on our immature cultivations and could vary outside of the ranges shown.

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If we are able to augment our productive acreage annually as planned, our potential aggregate Jatropha oil production over the expected 30-year life of each productive acre could increase dramatically over the next five years as reflected in the table below. This table was prepared assuming median seed yield and a 1:2 ratio of Jatropha oil to seed cake. Based on our assumed median of growth estimates and mid range of yield per acreage, we believe we could produce approximately 49.34 million barrels of Jatropha oil over 30 years.

Total existing crude Jatropha oil estimate scenarios based on our cumulative productive acreage, which includes existing productive acreage and new productive acreage we intend to contract over the next 5 years, are as follows:

		5-Year Scenarios
New productive acreage added per year for next 5 years			30,000				40,000				50,000				60,000				70,000
Total New Productive Acreage			150,000				200,000				250,000				300,000				350,000
Cumulative Productive Acreage			344,323				394,323				444,323				494,323				544,323
Crude Jatropha Oil 30-Year Production Estimate
Barrels			39.53				45.27				51.00				56.74				62.48
Gallons			11,778.58				13,488.98				15,199.38				16,909.77				18,620.17

The range of outcomes presented in the table above and elsewhere in this prospectus have been prepared by us based on assumptions relating to, plant yield, extraction rate, monsoon seasonality, agronomy practices and numerous other assumptions, all of which are inherently uncertain and are subject to significant business, economic, meteorological, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those projected, which could have a material adverse effect on our results of operation and financial condition.

Our net production costs of Jatropha-based biodiesel

We have successfully delivered our first commercial scale crush of Jatropha oil. From this we have generated sufficient cost data to estimate our cost of producing and delivering Jatropha-based biodiesel to the United States, without subsidies or government support. This estimated amount is US$107.13 per barrel, which includes US$36.32 per barrel of logistics costs related to accumulating and temporarily storing Jatropha seeds and transporting crude Jatropha oil to our refinery and finished biodiesel to the United States. Our business model entails buying seeds from our farmers, which, when crushed, yield crude Jatropha oil and Jatropha seed cake. We estimate that we will be able to realize US$43.78 per barrel from the Jatropha seed cake and other by-products sales at prevailing market prices. Therefore, based on our analysis of historical results, we estimate that our effective net cost of goods sold ( i.e. , total cost less revenue realized from by-products) for Jatropha-based biodiesel could be US$63.35 per barrel.

Our Jatropha-based biodiesel costing is based on the following:

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