FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION FILE NO. 333-127714
PACIFIC ETHANOL, INC.
PROSPECTUS SUPPLEMENT NO. 1 DATED DECEMBER 23, 2005
TO FINAL PROSPECTUS DATED DECEMBER 5, 2005
The final prospectus of Pacific Ethanol, Inc. dated December 5, 2005 is
supplemented to include the following updated information:
Selling Security Holder Table
-----------------------------
The "Selling Security Holder" table contained in the final prospectus
dated December 5, 2005 is updated as follows (1) to correct mistakes made in the
original prospectus as to the number of shares of common stock beneficially
owned and offered for resale by Alex Jachno and Agafia Jachno, on the one hand,
and Alex Jachno and Lisa Jachno, on the other hand, and (2) to reflect a
transfer of warrants to purchase 12,500 shares of common stock of Pacific
Ethanol, Inc. from Laird Q. Cagan to Fairmont Analytics, Inc., which warrants
were initially to be transferred to Fairmont Analytics, Inc. from Cagan-McAfee
Capital Partners, LLC instead of to Laird Q. Cagan, as more particularly
described in footnotes (c), (h) and (l) set forth below. Percentage of
beneficial ownership is based on 28,773,191 shares of common stock outstanding
as of December 23, 2005.
Shares of Shares of
Common Stock Common Stock
Beneficially Owned Beneficially Owned
Prior to Offering Shares of After Offering
Name of ----------------------- Common Stock ---------------------
Beneficial Owner Number Percentage Being Offered Number Percentage
---------------- ------ ---------- ------------- ------ ----------
Alex Jachno and Agafia Jachno......... 2,000 * 2,000 (b) -- --
Alex Jachno and Lisa Jachno........... 10,000 * 10,000 (b) -- --
Laird Q. Cagan........................ 736,449 (82) 2.54% 223,949 (h)(82) 512,500 1.62%
Fairmont Analytics, Inc............... 25,000 (86) * 25,000 (l)(86) -- --
__________
* Less than 1.0%.
(a) The shares of common stock and the warrants exchanged by the selling
security holder in connection with the Share Exchange Transaction for the
shares of common stock offered hereunder, including shares of common
stock that underlie warrants, were initially acquired from PEI California
in a private placement transaction in March 2005 under which PEI
California raised an aggregate of $21.0 million at $3.00 per share and
issued 7.0 million shares of common stock and warrants to purchase an
aggregate of 700,000 and 1.4 million shares of common stock at an
exercise price of $5.00 and $3.00 per share, respectively. PEI California
also issued placement agent warrants to acquire up to an aggregate of
678,000 shares of common stock at an exercise price of $3.00 per share.
In aggregate, 9,778,000 shares of common stock resulting from this
private placement transaction are being offered hereunder for resale.
(b) The shares of common stock and the warrants exchanged by the selling
security holder in connection with the Share Exchange Transaction for the
shares of common stock offered hereunder were initially acquired from PEI
California in a private placement transaction in February 2004 under
which PEI California raised an aggregate of approximately $1.1 million at
$1.50 per share and issued 752,201 shares of common stock. PEI California
also issued placement agent warrants to acquire up to an aggregate of
43,487 shares of common stock at an exercise price of $1.50 per share. In
aggregate, 795,688 shares of common stock resulting from this private
placement transaction are being offered hereunder for resale.
(c) The shares of common stock and the warrants exchanged by the selling
security holder in connection with the Share Exchange Transaction for the
shares of common stock offered hereunder were initially acquired from PEI
California in a private placement transaction in May 2004 under which PEI
California raised an aggregate of $1.0 million at $2.00 per share and
issued 500,000 shares of common stock. PEI California also issued
placement agent warrants to acquire up to an aggregate of 50,000 shares
of common stock at an exercise price of $2.00 per share. In aggregate,
550,000 shares of common stock resulting from this private placement
transaction are being offered hereunder for resale.
(h) Of the shares of common stock offered by the selling security holder
hereunder, 198,740 shares underlie warrants transferred to the holder by
Chadbourn Securities, Inc. that were initially acquired from PEI
California in connection with the private placement offering described in
footnote (a) above, 13,459 shares underlie warrants transferred to the
holder by Cagan-McAfee Capital Partners, LLC that were initially acquired
from PEI California in connection with the private placement offering
described in footnote (b) above and 11,750 shares underlie warrants
transferred to the holder by Cagan-McAfee Capital Partners, LLC that were
initially acquired from PEI California in connection with the private
placement offering described in footnote (c) above. Chadbourn Securities,
Inc. and Cagan-McAfee Capital Partners, LLC acted as placement agents and
initially received these warrants as compensation for services performed
in connection with the private placement offerings described in footnotes
(a), and (b) and (c), above, respectively. In connection with its March
2005 offering, PEI California entered into an agreement with Chadbourn
Securities, Inc. for placement agent services. Under this agreement, PEI
California agreed to pay to Chadbourn Securities, Inc. 2% of gross
proceeds plus a 1% non-accountable expense allowance as well as warrants
exercisable at the offering price in an amount equal to 3% of the
aggregate number of shares of common stock sold in the private offering.
Under this agreement, PEI California paid to Chadbourn Securities, Inc.
approximately $625,000 and issued warrants to Chadbourn Securities, Inc.
to purchase 212,700 shares of common stock at $3.00 per share. In April
2004, PEI California entered into an agreement with Cagan-McAfee Capital
Partners, LLC for advisory services. Under this agreement, PEI California
agreed to pay to Cagan-McAfee Capital Partners, LLC 3% of any equity
amount raised through the efforts of Cagan-McAfee Capital Partners, LLC.
In connection with its March 2005 private placement, PEI California paid
to Cagan-McAfee Capital Partners, LLC $235,000 and in connection with the
Share Exchange Transaction, we paid approximately $85,000 to Cagan-McAfee
Capital Partners, LLC. Differences between us, on the one hand, and
Cagan-McAfee Capital Partners, LLC and Chadbourn Securities, Inc., on the
other, arose as to what fees, if any, we would owe to Cagan-McAfee
Capital Partners, LLC and/or Chadbourn Securities, Inc., under the
advisory agreement in the event that our sale of Series A Cumulative
Redeemable Convertible Preferred Stock to Cascade Investment, L.L.C., as
described elsewhere in this prospectus, is completed. See "Description of
Capital Stock - Series A Preferred Stock." Under a Settlement Agreement
and Release with Cagan-McAfee Capital Partners, LLC and Chadbourn
Securities, Inc. dated November 1, 2005, we terminated the advisory
agreement with Cagan-McAfee Capital Partners, LLC on November 1, 2005,
subject to completion of our transaction with Cascade Investment, L.L.C.,
and made a payment of $150,000 in accelerated monthly consulting fees
under the advisory agreement. In addition, in connection with the
termination of the advisory agreement, we agreed that, in the event that
our transaction with Cascade Investment, L.L.C. is completed, we would
pay to Cagan-McAfee Capital Partners, LLC $960,000 within five business
days of the closing. Under the Settlement Agreement and Release, in the
event that our transaction with Cascade Investment, L.L.C. does not close
by March 31, 2006, the advisory agreement will be reinstated. Also,
certain founders of PEI California agreed to sell an aggregate of 500,000
shares of common stock owned by them to Cagan-McAfee Capital Partners,
LLC for a purchase price of $0.01 per share for securing financing to
close the Share Exchange Transaction. Immediately prior to the
consummation of the Share Exchange Transaction, these founders sold these
shares to Cagan-McAfee Capital Partners, LLC at the agreed upon price.
Prior to the aforementioned transactions, PEI California paid fees of
$100,000 to Cagan-McAfee Capital Partners, LLC in connection with other
private placement offerings and issued warrants to Cagan-McAfee Capital
Partners, LLC to purchase 50,000 shares of common stock at $2.00 per
share.
(l) The shares of common stock offered by the selling security holder
hereunder underlie warrants transferred to the holder by Cagan-McAfee
Capital Partners, LLC that were initially acquired from PEI California in
connection with the private placement offering described in footnote (c)
above. Cagan-McAfee Capital Partners, LLC acted as a placement agent and
initially received these warrants as compensation for services performed
in connection with the private placement offering described in footnote
(c) above. See also footnote (h) above.
(82) Includes 223,949 shares underlying warrants. Also includes 512,500 held
directly by Laird Q. Cagan.
(86) Represents shares underlying warrants. Power to vote or dispose of the
shares is held by Lara S. Coviello as President of Fairmont Analytics,
Inc.
(End of Prospectus Supplement No. 1.)