Long Range Price

As you can see from these pictures - I made it home to snow fall and snow melt. I saw Ethanol blended gasoline as far south as Oklahoma - although it was certainly not everywhere like around these parts. It was unusual enough that it had the cardboard Ears of Corn display on the pump. Haven't seen that in years. Its great to be home - and I hope to get through all my E-mails this week. Not to sound like a shareholder's letter - but thanks for your patience.

With all the detailed information now out - its time for the Skunk to re-evaluate his estimate of the long term share price - Feb 2010. The goal for GERS (as it has been for at least the last six months) is to have 50M gal of COE, 50M gal of bio-diesel and 16 M gal of oilseed crush annualized capacity online by the end of 2009. Based on information in the 9 November 2007 shareholder letter, the Skunk conservatively converts Extraction & Bio-diesel to EBITDA at $1.40/cents per gallon (the spot price of diesel has risen quite a bit in the last six months). With 50M gallons value enhanced that is $70M EBITDA .

The expansion in Montana is expected to be completed in 2008 - and a good year running near capacity in 2009 should be a solid start to paying off the $9M debt to its former owners and the service of its own debt. We are expected to add $80M in sales and $12M in EBITDA from the Montana Oilseed crush plant during the years 2009, 2010 and beyond.

We see in the Feb '08 shareholder letter a mention of more than 15M in sales for the construction of four 10M gal Bio-diesel plants to third party clients. Our focus has obviously evolved away from third party sales to building our own COEs and bio-diesel. In the shareholder letter dated 9 November 2007 the total estimated future revenue from Bio-diesel sales was 53m with an EBITDA of 13M. We will use that ratio to find the EBITDA for our 2008 sales - I will then use a conservative flat projection for 2009. Our 15M then, provides a conservative $3.68M EBITDA for our annualized third party sales projected into the future. Totaling up our three major revenue sources in blue font above, we have a projected annualized rate of EBITDA in Feb 2010 of $86.69M.

If we reach these goals - clearly re-stated in the 2007 Annual Report - and the previous shareholder letters - then it will also affect the number of shares outstanding. A detailed employee stock reward program is in effect on page 93 of the 2007 Annual report. Put simply - with well over $75M EBITDA - the outstanding shares will be 241,133,851 - nearly 4 times its present number. Since we want to include all possible dilution to find a conservative number - we also need to look at page 59 of the annual report to learn this:

"Potential future dilutive securities include 996,279 outstanding options and warrants, and 37,865,871 shares issuable for the conversion of convertible debentures."

So even with the employee stock reward program and these remaining convertible debentures all paid through dilution - we get a grand total of 279,996,001 shares outstanding. Or, with your permission, the Skunk will round up to 280M Shares Outstanding. This is where we stand with the OS shares - some 4.2 times the present levels in two years. Yet, what shareholders need to remember is in order to have that kind of 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**

Now the one item that I have not explained yet is the P/E ratio. Granted, the Skunk picked a large number here. I probably agree with most - that a P/E ratio even a significant fraction of 100 is not justified today. But the Skunk is not predicting today's price. The reason I believe 100 is totally justified in Feb 2010 is that my whole prediction is predicated on our goals having been met. We will be at 50M gallons of Corn Oil extracted and value enhanced into bio-diesel in our own facilities. We will have gotten legitimate financing. We will be looking at having achieved about 5% market penetration, with no legitimate competition over the 1B? gallon market. Our previous creditors' terms will be distant memories. With these things accomplished - GERS will be a player in the alternative energy field with both the cash flow and the customer relationships to deploy our remaining three levels of technologies. The Montana Plant will be debt free and a showcase of our technologies.

To give my projections a little flavor: Imagine you are on a ship at sea and you are trying to describe to a shipmate what the rocky mountains look like from a penthouse suite in Denver. If your shipmate cannot imagine the ship making it to port, if he cannot imagine flying in a plane to Denver and if he never stayed in motel with out a number in the name, (Hotel 6, Economy Eight, etc.) you might excuse his insistence that the world consists only of salt water, sea froth and a flat horizon. And he would be right. Our present world at sea does look like that. But I predict the ship will make it to port, the plane will not crash and the suite will be available. From that location in the future, it will be hard to remember the salt water, sea froth and flat horizon. If we make it to the location that I expect - then most would have to concede that a 100 P/E would be a conservative estimate of the potential of this company.

TWO UPDATES on the COES Gleamed from the ANNUAL REPORT:

After much deliberation, the Skunk thought he had figured out the price of an individual COEs. That is until he read this on page 66 of the 2007 of the Annual Report.

"During the year ended December 31, 2007, the Company commissioned the corn oil extraction system in Oshkosh, Wisconsin. This system was commissioned in April 2007. As of December 31, 2007, the total amount invested into the system including system upgrades was $1,285,584."

So we find numerous pieces of information here. The first and most obvious is the price of a COEs. The Skunk's first SWAG on the cost was 1.2M. I appears that he was scary close and should have kept those numbers. Instead he pulled numbers from oblique references that were first significantly less and then more. Until we get specific information from other installations and we can average the costs over different locations - I think that 1.286M for the cost of a COES will remain the gold standard for all financing calculations.

The second piece of information is the verbiage: "including system upgrades". In the message boards over the last few months it has been stated or implied that the installed systems were not producing the plate capacity of corn oil from the ddg slurry. Recently I also read a post referencing the Nov 2007 Shareholder letter where the CEO writes:

"This system is producing oil today at yields that correspond to more than 1.5 million gallons per year and about 1.125 million per year in contribution margin."

Is it possible that both opinions were right? It does appear that the first production COEs at Utica Energy had problems reaching plate capacity. What other reason would we need to install "system upgrades?" What other reason would the CEO in the SEC filed Nov 2007 shareholder letter preface his statement on production with the words "producing oil today"? These opinions are also confirmed on p. 78 of the Annual where the revenue from the Bio-fuels/COES is broken out at $270,866. Since the Utica plant was the only COEs unit owned by GERS and in production at the time - the Skunk thinks that this represents the revenues from the corn oil extraction. Since the Utica Plant was commissioned in April 2007 - if it was operating at full capacity for eight months - the revenues should be about two thirds of the annual rate. If we just take the 1.125M of contribution margin in the quote above, we see that 2/3 of 1.125 is about $750,000. Our actual revenues are about a third of that. So what we see here is the first unit put into a facility, then tweaked with significant system upgrades until it reached full capacity sometime before the 9th of November 2007. This is a technology that was basically drawn on a cocktail napkin a couple years ago - now it is producing in the field at plate capacity. If one expected the system to work in the field the first time without some sort of "system upgrades" - then those expectations were unreasonable. To insist that problems cannot and were not fixed in the field by Dave Winsness - the inventor - and a lot of experienced process engineers - the Skunk believes that is also an invalid assumption.

I did not fully appreciate this portion of the Annual Report below until I put together the information above:

8. Applied Technology Development
Among our core competencies is the ability to develop and implement incremental advances in technologies that add value to existing production infrastructure. As we build our own infrastructure in the short term, we plan to continue to enhance our extraction and bio-diesel technologies with a form of in-the-trenches commercialization that relies on and is then accretive to the cash flows of pre-existing production assets.

From this part of the Annual report on page 20, it sounds like they are talking about the improvements that were made to the COE system at the Utica Plant. They are talking about using hard learned practical improvements - ones that come from the work room floor - not the conference room table, and transferred that knowledge to all of their systems.

SKUNK's Grade for last week

Well, the Skunk saw a move coming in the second part of the week. We had started the week at .12 and were still there all Wednesday afternoon. Come Thursday we got the move as predicted - but without any news from the company - the bears managed to pull the shares back down to the all time lows for the 4th time. Previous closes at a dime have come on 8 Feb, 19 March, 30 March and now 17 April.

Actual in Blue

April 14-18th
Best Buys- 12-13 (best buys were .10-.11) D+
Range for the week: 12-.21 (.10-13.4) D-
Closes over .20 -one (none) D
Fridays close.19 (.10) F

Skunk gives himself a D+ for the week - he saved a failure since he managed to see the move coming with the Bollinger Band contraction - but he got the direction wrong.

FORECAST FOR THE WEEK OF APRIL 21-25th

BEST BUYS .9-.10

Closes above 20 - NONE this week

Range for the week .9-.13

Friday's close .12

I see this week moving generally higher - with a chance of an intraday dip below .10 for a short period. No close below a DIME however is in the cards. Stochastic and others show me an oversold position. I see a close at .12 - gaining back the losses last week. Good information on financing or COEs production or completion and all bets are off. Then we go north fast - how far depends on the news.

Our 100 day moving average is just at .20 cents - while our 20 day moving average sets at just .12 cents. As long as we do not get a close below a dime - this bottom keeps getting stronger. What this stock needs is some good news. First on my list is financing. Any kind of legitimate financing news will instantly propel this stock north. Partly due to eliminating a lot of shareholder risk. Mostly due to shareholders who need the reassurance of a financier looking at the situation and saying - "Hey - I think this is going to work - my company's money is safe here. " A couple good PR's - with maybe a COE coming on line - could certainly help here as well.

** Note/Warning: Dude -do your own DD - I can be and will be occasionally wrong. I will not intentionally mislead. I try to leave sources and page numbers to help you with your due diligence, but don't count on a guy called Skunk to pick your stocks for you. Good Luck to both of us.