MIDWEEK UPDATE

Occasionally, the Skunk needs to post an update. First of all - it looks like GERS has taken the 15 day extension - so we can expect the annual to be posted between the 15 -17 of April, with an outside chance that it is posted in the interim. This is news that is neither good nor bad in its own right - but it is news and the wait continues. With active shareholders interested and waiting for the release, the pps can move on rehash and rumor. With the mob of shareholders swelling as large and as interested as it may be all year, attempts can be made to move the share price either up or down. Absent any news from the company, I prefer to wait, watch and enjoy the circus - and be poised to latch ahold of the fleeting leg of opportunity if he strolls by. As I write this, the stock revisited and is moving off the dime low for the third time. So far, we remain with no closes below a dime. Everytime the floor is tested with success it becomes stronger. We got some huge volumes Monday and some after market trades that combined for over 900,000 shares. Yet for every seller there was a buyer - and Skunk can only guarantee in a few months there will be 900,000 regrets - on which side of those trades will be the regrets? - is yet to be determined. I remain confident in the outcome - but with both eyes open.

Having addressed current events - now the real reason for the update. I have asked for help in nailing down the cost for the COEs. All the other cost and revenue factors we have had plenty of information on which to base a reasonable opinion. I though the COE capital costs were lacking. Here again the Skunk was mistaken. Re-reading the 9 November 2007 shareholder letter I came across this gem:

"Capital Intensity (per gallon of installed capacity) 2.00 (Extraction Only) 3.00 (Biodiesel & Extraction)"


I had also remembered highlighting a part of the 19 Feb 2008 shareholder letter about bio-diesel production:"These systems correspond to 15 million gallons of annualized biodiesel production capacity and about $5.5 million in sales. We are building an additional four 10 million gallon per year biodiesel production facilities for third party clients. These facilities . . . correspond to more than $15 million in additional equipment sales."

Putting these two items together I think we may have the ROSSETTA STONE (it's software right?) for COE capital overhead. If we can make a ratio of bio-diesel production that is close to three - we can use the same ratio to solve for COE. (Since we produced for "clients I think we can take 10% markup off the top of costs since we might give ourselves wholesale prices.)

The capital intensity for Bio-diesel capacity produced= 55Mgal/$20.5M = 2.68 or if we subtract out the 10% markup suggested above we get 20.5 x .9 = 18.45M. Therefore 55Mgal/$18.45M = 2.98 or what we call 3! In short terms we get 3 gallons of annual production for each dollar of capital invested.

So Now we have proven the ratio - we can solve for COE:

The capital intensity for Extraction = 1,500,000Gal (plate capacity of a COE system) /cost of that capacity = 2 Or using those fancy algebra switcheroo rules we get:

1.5M/2 = cost of capital. Therefore each COE system costs $750,000 dollars each.

I have changed my draw assumptions accordingly. I still have a 5 month draw - from 120 days prior to 30 days post installation. The draw is 100K each month, except for 30 days prior it is 150K, and the month of installation it is 350K. This comes out to 750K total. If you see fault in this logic - please give me an E-mail.

Now when I plug the numbers in everything works in my spreadsheet. I am still working on referencing my assumptions - but I feel confident telling you this much: If we meet the minimum of 8 COEs on line as per the YAGI agreement schedule - we can make all the YAGI payments - including the $250,000 monthly debentures payments paying down the baggage debt. And we are left with 8 COEs - paid for- on 30 August 2009. My figures show these things pay for themselves/with interest in about 9 months at full production - even with the 20% interest and .10/gallon - so it will have to be a race to see how many they can have up by Thanksgiving this year! Any COEs coming on line after Christmas and before the balance comes due to YAGI on 30 August 2009 will be a net drain on these particular ledgers. (They could still be build with cash flow or with other financing.) Any online before Thanksgiving 2008 provide a positive cash flow and are in production long enough to pay for themselves and help pull the financial weight on this Greenshift dogsled.

Wishing all a Successful GERS Annual Trading Season
Skunk