Business Strategy

What is Important?

The Skunk has had a few general themes since he took on the business of publishing his due diligence. One of these themes is "What is important?" I will try and restate these in the clearest of terms. The Business Strategy of GERS is based on two essential components. Both of which are required for the success of this company. If either one fails - the company fails. If both succeed - it will be hard to fail. The first is the Deployment of the Corn Oil Extraction Systems (COEs). The second is Financing.

Once you have re-read the paragraph above until you can mumble it in your REM sleep - once you can suffer a full frontal lobotomy without forgetting either - then, Kit* you are prepared to move on to the next step - one that involves judgement.

How should I judge the actions of the GERS Board of Directors?

You should judge the actions of the Board of Directors on two principles. The first of which is: Did their actions promote the deployment of the Corn Oil Extraction Systems? The second is: Did their actions promote access to good financing?

What can an investor expect?

An Investor can expect the Chairman of GERS and the Board of Directors to do whatever it takes to first: Install as many COEs as quickly as possible. Secondly: To pursue good financing in order to build as many COEs as quickly as possible.

Now here is where the reader must be tested in order to ensure they are ready to take on even higher levels of GERS investment information. If you fail this portion - do not be alarmed - just go back to the blue paragraphs above and restudy and retest until you pass.

Final Test**

GERS Business Strategy consists of Two Key components - they are:

a. Maintaining old company divisions for tired old shareholders.

b. Losing money and issuing shares

c. COES deployment and financing

d. Starting Internet rumors and stirring the pot.

** The Correct Answer is "C" - it always is.

* FYI "Kit" or a "Kitten" is a baby Skunk

Well Congratulations! If you made it this far you graduated and you get it. (Or you cheated and skipped the test!) In either case lets take a look at the Annual Report for 2007. On Pages 18-20
we see the Official "Business Strategy". The strategy is laid out in eight items, in order of importance. The first paragraph reads:

1. Financing, Construction and Operation of Corn Oil Extraction Facilities
"Given the nature of our competitive advantages and the current and foreseeable market dynamics in our target industries, the highest and best use of our resources and our primary objective is to get as many corn oil extraction systems installed in as many corn ethanol facilities as possible, as quickly as possible. We expect that our annualized operational corn oil extraction capacity will be about 15 million gallons per year by the end of this year and our target is to have at least 50 million gallons per year of extraction online by December 31, 2009. The total market opportunity for our extraction technology is many times this extraction rate and our longer term goals involve the deployment of extraction systems corresponding to over 150 million gallons per year of extraction."

I know what you are thinking - Nearly every week the Skunk pounds on this theme - for example - here from over a month ago: "SKUNK Believes that the Corn Oil Extraction in the First 7 plants is the key to our success. In order to flourish - we must have these units on line - on time. This is what will fuel the turn-a-round for this company. This is what brought the ol'Skunk a snooping around in the first place. Without these revenue producers on the cusp of delivering - Greenshift might be just another dry dream scrawled on a wet napkin at the 2'O'clock club in downtown Hooterville."

Now the rest of these seven items listed in the Business Strategy are important - but important only in how they affect COEs Construction and COEs financing:

2. Financing, Construction and Operation of Biodiesel Production Facilities
3. Financing and Expansion of Our Oilseed Crush

4. Transition Project Execution to Strategic Vendors and Partners
5. Develop International and Other Strategic Partnerships
6. Completion of Financing
7. Pay Off and Refinance Convertible Debt
8. Applied Technology Development

The Skunk will take them one at a time to show you what I mean.

2. Financing, Construction and Operation of Biodiesel Production Facilities
This is correctly put in the second slot because otherwise we would be a victim of our own success. The market for corn oil is small. Only so much can be used to feed humans and animals. The millions of gallons we will soon be flooding the market with will overwhelm this small market, causing the price to crash. The market for bio-diesel, on the other hand, is basically limitless. Until the Skunk gets the bugs worked out of his three-dimensional FAX machine – North America will count on diesel trucks to move goods from place to place. The government does not even have a category for the production of corn oil bio-diesel. That will soon change. Our Bio-diesel technology is required to process our corn oil. That is why we are currently selling our corn oil to a third party (NEXTDiesel) who has purchased and is running our technology.

3. Financing and Expansion of Our Oilseed Crush

This is in third place because we want this Montana plant to be able to expand enough to self-finance – it then becomes a financial asset which we can leverage for more CEOs – and not a liability or distraction. I suspect it is ranked third due to GERS now having opened re-negotiations with its former owners.

4. Transition Project Execution to Strategic Vendors and Partners

We only have so many trained technicians. We must have them in house and focused to expand OUR COEs quickly – not hired out working for others.

5. Develop International and Other Strategic Partnerships.

Yeah this is great – but it can wait.

6. Completion of Financing.

Hey – if we take care of #1 and #2 this will fall into place.

7. Pay Off and Refinance Convertible Debt.

Hey – if we take care of #1 and #2 this will fall into place. (Is that an Echo?)

8. Applied Technology Development.

I covered this part last week and I see this as a part of #1 and #2. This is fixing stuff on the fly – making it work better (read more efficient & more profits).

SKUNK’s GRADE for APRIL 21-25th
BEST BUYS .9-.10 (Actual .10-.11) The Skunk got some under .11 – a couple of you got some for a dime = Skunk gets an A-
Closes above 20 - NONE this week (Actual NONE) Made it look too easy = B+
Range for the week .9-.13 (Actual .10-.12) Just tighten a Penney on each side and it was perfect = B+
Friday's close .12 (Actual .12) So what do I win? A+
This has got to be my best (or second best week) ever = A

FORECAST FOR THE WEEK OF April 28th – May 2nd
With nothing in the forecast to move the share price – I see our back against a firm dime bottom and a continued slow drift higher throughout the week. Friday we closed above the 25 day moving average. Since the 18th of April when we kissed off the bottom Bollinger Band – we have steadily moved to meet the top band. It presently sets at .14 and just as of Friday I see a hint of another contraction. I am reading this as no large movement till the end of this week at the earliest – more likely next week if the contraction continues. I saw a lot of emotion on both sides of the three major boards this week. Not sure how to factor in this sentiment. The Longs and the Shorts were both yelling at the top of their lungs. I know it means something - but I am just smart enough to know I am not smart enough to know what it means! But since you pay me to guess (not!) – I would have to combine it with the 4th successful testing of the dime low and say it was due to the psychological tension and exhaustion built up as we teetered for days on the brink of new lows. Does this mean we have finally set a base on which to grow? After the 4th test is the dime low finally secure? Have we started the long anticipated move north? Tune in next week – same skunk time – same skunk channel!

Detailed Forecast April 28th – May 2nd
Best Buys(.11-.12)
Closes above 20 (none - not this week)
Range for the week (.11-.15)
Fridays Close (.14)

Long Term Prediction FEB 2010
We stand with the details in last week’s blog.
The Skunk sees 280M Shares Outstanding - some 4.2 times the present levels. In order to have that number of OS shares - the EBITDA will be over 37 times its present amount - and that difference will be reflected in the share price. Using a factor of one-third to project net income from EBITDA, we can see:
28.97M/280M Shares = (net income)/TotalOS) = .1035
(PE) X (Diluted EPS) = (est. PPS)
100 x .1035 = $10.35 Share Price in FEB 2010**

Afterthought:

Ever since I was a misguided child in the employ of my sometimes favorite Uncle, I thought priorities were important. Once when given a large number of tasks and a short time to achieve them - I asked for my tasker's priorities. He said "Everything is important." What that meant to me was that "Nothing was important" - in that in both cases everything had the same priority. If you are a juggler trained to juggle 4 things - but are given 6 - you had better determine quickly which items will bounce and which will break. If you are a CEO with limited resources - you had better determine quickly where your resources are best spent. I see in this annual report - decisions have been made - and priorities have been set. I agree with those priorities of COEs Construction and Financing - That is the first step in making it happen.

**Note: I am a shareholder - I do not work for, nor do I receive any direct or indirect payment from GERS or anyone associated with them. (But it would be Kapitalist Kool if I did) I will not intentionally mislead - but I can be wrong (ask Mrs. Skunk for specific frequencies) - so do your own due diligence - and take responsibility for your own financial decisions – (and your own life in general) good or bad. And some good garage logic luck to ya.