In the COE Old Days

***********************
UPDATE to Mini SKUNK NEWS FLASH:

From GERS Investor Relations:




"The accurate disclosures pertaining to the capital structure of GS AgriFuels can be found in GreenShift's 1/25/08 Form 8K:

http://www.sec.gov/Archives/edgar/data/1269127/000126912708000021/0001269127-08-000021-index.htm

and, more specifically, in its Exhibits to that Form 8K:

http://www.sec.gov/Archives/edgar/data/1269127/000126912708000021/ex10g108.txt
http://www.sec.gov/Archives/edgar/data/1269127/000126912708000021/ex10c108.txt

Additional disclosures that are relevant to GS AgriFuels were provided in our Form 10K for the year ended 12/31/07 (see Note 31, Subsequent Events) and Form 10Q for the first quarter ended 3/31/08 (see Notes 13 and 18)."

*******************
SKUNK mini NEWS FLASH





Thomas Scozzafava, former CEO of GS Agrifuels, present CEO of SWVC, claims to be making a play for 30% of the privately held GS Agrifuels stock.

He does not say "buy". He states he is already a significant shareholder of GS AgriFuels Corporation. He says "secure the rights to" those shares.

"I recently initiated efforts to secure the rights to the approximate 30% equity stake in GS AgriFuels, which in early 2008 merged into GreenShift Corporation. While the outcome of these efforts is yet to be determined, I will certainly pursue the maximum value owed to Seaway and its shareholders."

The news release is 23 July 2008.
http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080723005683&newsLang=en

SKUNK PHOTO FLASH ************

Thanks to one of my readers - The Skunk is able to post this picture of something happening within the last month outside the GERS Manufacturing Plant in Van Wert, Ohio. It appears we may have broke through security (Not exactly Area 51 - this is more interesting) and gotten a first photo scoop of what is very hard to hide - My best guess is the Solar array for the Pilot Bioreactor. (PS to all readers - Next time you put on your meter reading outfit - tell them you have to go inside too!)

From the GERS website:
"The sunlight is then collected using efficient parabolic mirrors that transfer and filter the light to a series of light pipes. The light pipes channel the light into the bioreactor structure where it is distributed and radiated throughout the structure using light panels. The algae requires as little as 1.5% direct light which means that our collected light can be distributed over a substantial surface area."

Skunk Note: Lots of talk on the boards on how we only spent $601 on Research and Development in the 1Q. If you look under "Cash Flow From Investment Activities" you will see nearly 50K on "Project Development Costs". I don't know for sure, but that picture above looks like we were "developing quite a project" in the 1Q.

VIDEO http://www.greenshift.com/media/greenshift_bioreactor.wmv
**************************
MINI Skunk NEWS FLASH
In the August '08 Edition of BioDiesel Magazine (p.70-75) Greenshift is highlighted. (p.73)
Brad Albin of Renewable Energy Group predicts that the few plants implementing corn oil extraction technology are only the beginning. Its only a matter of time and choosing which company's technology works best.

"Between now and the first portion of '09, that curve will be unbelievable," he says, "Its hard to talk to anyone who isn't in the process of making a selection."

The Skunk says GERS is in an "unbelievable", historic position. The stars have aligned to our advantage. In the next few quarters the Skunk expects to see a resurgence of our sales pipelines across the board.

http://mag1.olivesoftware.com/ActiveMagazine/getBookEnc.asp?Path=QkRNLzIwMDgvMDgvMDE=&BookCollection=BDM_AM&ReaderStyle=Normal&browserWindowWidth=1270&browserWindowHeight=974 **********************************
In the COE Old Days
This is an article excerpt from Ethanol Producer Magazine. What makes it special is that Dave Winsness and Dave Cantrell were then working for EORS (Ethanol Oil Recovery Systems), a company they developed to patent and commercialize the COES technology they invented along with Greg Barlage and John W. Davis. Here is a rare discussion about the technology and the equipment involved in terms even the Skunk can understand:

". . . extracting crude corn oil from the ethanol production process was developed by David Winsness and David Cantrell of EORS the company that developed and submitted the patent application on its corn oil extraction technology. Cantrell said that Alfa Laval also worked with EORS to hone this technology. Matt Janes, vice president of technology for VeraSun Energy, said the origin of this breakthrough resulted from the work by Cantrell and Winsness in the animal byproduct recovery business. Cantrell said the work he and Winsness did in the rendering arena could carry over to the ethanol business because, as he said, "The tail-end of the rendering process is very similar to the tail-end of the ethanol production process." He said it was good to see the same process of separation transfer over. "The ethanol industry is a young industry," Cantrell said. "We've got years in other industries, and things don't cross over usually." The workings of this technology revolve around the removal of crude corn oil extract from the syrup in the evaporation stage of the ethanol production process, before the syrup gets mixed with grains in the dryers. The oil is emulsified with various solids and liquids as the "waste product" from the fermentation and distillation processes. This whole stillage, as Winsness said, "is run through the decantering process to squeeze out the liquids at 4000 Gs. What you end up with is cake, or wet cake. In the ethanol process, this cake goes straight through to the dryers. The liquid portion is 92 percent water. This is the thin stillage, which gets boiled out in the evaporation process. The remaining product [after the evaporation process] is syrup." It is somewhere between the thin stillage and syrup stages of the evaporation process when the crude corn oil is extracted.

The point at which the crude oil is extracted during the evaporation process differs from plant to plant. "The plants that we find easiest to extract the oil from are the Fagen/ICM plants,"

"We use a specially modified disk-stack centrifuge as the heart of the extraction skid,” Janes said. “This high-speed centrifuge operates on a vertical plane, which is different from those used in ethanol plants that operate horizontally. It is similar to what's used in the separation of fat in milk processing."

The beauty of the technology lies in the "ready-to-go" extraction skids that retrofit into the existing dry mill evaporation process. Janes said, aside from the disk-stacked centrifuge unit, the extraction skid consists of heat exchangers, pumps, tanks and, most importantly, an EORS-developed control unit. Cantrell said once the unit is installed, "If something happens to the unit, that won't disrupt the ethanol process. We pull the oil out and send the syrup back."

The Skunk finds much interesting here. First the disk-stacked centrifuge caught my eye since I had once tried to figure what they called that big cream separator in the middle of every COES PR shot. Pulling 4000 G's - man that's spinning. Also, who is this wiseguy"Matt Janes" from Vera Sun Energy and why is he trying to Bogart the reporter's attention?




The most important thing I find here though is that these COES are not a cookie cutter installation. On each one they have to decide where to tap into the syrup to pull off the corn oil. Even at this early stage of the game they knew that the Fagen/ICM constructed Ethanol Plant were easier to develop than the others. Hmmm, we have a reason for uneven performance among the COES - even when the COES equipment is the same.

I see the initial Lakota IA plant was of the ICM type.

Lakota, IA The traditional dry-mill plant consists of two distinct production trains, the first commissioned in 2002 utilizing ICM technology with a name-plate capacity of 53 million gallons per year; and the second, Lurgi /Thermal Kinetics, commissioned in January 2006 with 45 million gallons of nameplate capacity each year.

http://www.globalethanolservices.com/Riga.html

From the Feb 2006 Issue of Biodiesel Magazine we have this:

"In 2005, we witnessed Ethanol Oil Recovery Systems (EORS) team up with ethanol producer VeraSun Energy, which is working to get several participant plants onboard with using EORS’ corn oil extraction skids. In late 2005, VeraSun said its plan was to get 14 ethanol plants (40 MMgy or larger) to agree to sell their corn oil extract to VeraSun. In turn, VeraSun said it would eventually establish a 50 MMgy biodiesel plant under the name VeraSun Biodiesel. Meanwhile, EORS’ founders have launched another company, Mean Green BioFuels Corp., which will install its corn oil extraction systems into client ethanol facilities on a turnkey basis for no up-front cost. Mean Green says it will customize the design of its system to meet the desired corn oil recovery objectives of participating facilities, and then purchase the extracted oil from the plants at a premium. In turn, Mean Green intends to build five 30 MMgy biodiesel plants over the next two years. The feedstock for these facilities will include corn oil, soybean oil and animal fats."

*****************************
A little COES history lesson here. We can track the COES technology by tracing the employment of Dave Winsness and Dave Cantrell - two of the main inventors.

*****************************
FIRST. In July 2005 Greenshift acquired a 15% share of EROS for $1.2M. EROS was a start up by the inventors to commercialize the invention. Under the terms of its agreement GreenShift acquired the 15% stake in EORS for about $1.2 million. At the same time, EORS agreed to transfer its technology to a new development partnership called SunSource BioEnergy, LLC, that was comprised of and managed by some of the ethanol industry's leading producers, including VeraSun Energy, Glacial Lakes Energy, KAAPA Ethanol, and Golden Grain Energy. EORS owned an 18% stake in the SunSource BioEnergy partnership. I do not know if any of this technology transfer took place.
http://www.enn.com/top_stories/article/16282

****************************
SECOND. In August of 2005 INSEQ Corporation signed on to manufacture the systems that will be used by SunSource BioEnergy to extract corn oil. Under the terms of INSEQ’s manufacturing agreement with EORS, EORS granted INSEQ right of first refusal rights relating to the manufacture of the extraction systems and any other manufacturing needs relating to the extraction systems. EORS and INSEQ are respectively 15% and 70% owned by GreenShift Corporation.
http://www.greencarcongress.com/2005/08/inseq_to_manufa.html

********************************
THIRD. In November of 2005 GreenShift now owns 49% of Mean Green, which is run by Dave Winsness and is the apparent direct descendant of EORS. We hear no more of SunSource BioEnergy or of EORS.
http://findarticles.com/p/articles/mi_m0EIN/is_2005_Nov_21/ai_n15862874

*******************************
FOURTH. In February of 2006, David Winsness is now the chief executive officer of Veridium's industrial design division. The COES system is now called "Veridium's Corn Oil Extraction System(TM)" even though Mean Grean is still around. Veridium at the time is about 65% owned by GreenShift Corporation.
http://findarticles.com/p/articles/mi_m0EIN/is_2006_Feb_21/ai_n16072681

******************************
Fifth. Veridium became Clean Tech in July 2006 which became Greenshift Corporation (new) in Feb 2008.

******************************
We first see that EORS seems to have "teamed up" with VeraSun for at least a time. I have heard that the Winsness/Barlage team may have sold some technology to VeraSun in these early days, although I am still looking for the terms of any contract. It seems apparent that if it did - it happened through SunSource BioEnergy LLC.

Well from this review of the 2005 plans we see that Greenshift won the battle for the COES technology. Effective December 15, 2007, the Company executed an Amended and Restated Technology Acquisition Agreement (the "TAA") with Mean Green Biodiesel of Georgia, LLC (f/k/a Cantrell Winsness Technologies, LLC), David F. Cantrell, David Winsness, Gregory P. Barlage and John W. Davis (the "Inventors"). The amendment changed the method of calculating the purchase price for the Company's corn oil extraction technology (the "Technology"). The TAA, as amended, provides for the payment to the Inventors of a one-time license fee of $150,000 per 1.5 million gallon per year system (a "System") built and commissioned based on the Technology plus an ongoing royalty of $0.10 per gallon of corn oil extracted with the Technology. The Company is required to sell, market, deploy or in any way cause the initiation of operations of a total of three Systems on or before December 31, 2008, a total of eight Systems on or before December 31, 2009, and an additional five Systems per year up to a total of eighteen Systems, at which point the Company has no continuing commercialization requirement. p.80 2007 Annual Report.

VeraSun Energy, with I assume much better capitalization, seems to have come up very short on their plans, having failed to spin off even their first gallon of commercial corn oil. They may start later this year. According to the August Issue of Bio-Diesel cited in the mini news flash above, Vera Sun is gonna use a Hexane-based solvent extraction. SO MUCH FOR CLEAN ENERGY! The EPA has identified solvent extraction for vegetable oil production processes as major sources of a single hazardous air pollutant (HAP), n-hexane. The EPA does not consider n-hexane classifiable as a human carcinogen. However, short-term exposure to high levels of n-hexane is reported to cause reactions such as irritations, dizziness, headaches, and nausea. Long-term exposure can cause permanent nerve damage. So much for that competition.

Here is more from the same article:

"There are a number of current and evolving technologies for corn oil extraction. The two basic options are front-end removal, which removes the oil before processing the corn and the back-end process which removes the corn oil after fermentation and distillation. The front-end extraction process produces a cleaner corn oil and captures 50 percent more product. However, as one might expect, the cost is at least triple that of back-end extraction processes. So for the ethanol producer, it becomes a matter of analyzing the intended end use and the capital cost required for implementation."

http://biodieselmagazine.com/article.jsp?article_id=718

We see that the front end extraction is used for food grade extraction (i.e. corn oil in your grocery store and food additives) but its expense is 3 times that of back-end extraction. Back-end extraction can be added after construction, is cheaper, and does not affect the main goal of an ethanol plant - and that is to produce ethanol! So Back-end extraction works for its use - biodiesel.
*****************
NO More Public Relations (Until we make money)

Before we cry for more PR's lets look at what happened the last time. On the 19th of Feb we were at 35C and had traded recently (15 Feb) as high as 40c. Then on the 19th the current shareholders letter was released. This was followed two days later by a deal to install BioDiesel lines at NextDiesel and 25th of Feb the COES commissioning at Western NY. All good news. From the start of this PR blitz on the 19th and over the next 23 trading days we had only 4 up days. We finished 20 March at 10.1 cents. Why pay to drive the price down? Going down on good news?? This is more fodder for the Skunk's idea that this was a turnaround stock on the downward stroke. Remember, good news driving the stock up is one of the keys I will be looking for telling us we have past the bottom.

**************************

FORECASTS . . . in the next six months I expect this stock to have convincingly turned the corner. (Skunk 13 July 2008)

EOY 60 cents with 45 -75 trading range**

After having reviewed the interview and subsequent events as per my assumptions for the EOY forecast - I stay the course. I think the potential to reach our end of year capacity goals is the same. My confidence in EOY COES production % has increased. Confidence in Sustainable Systems running at 10MMgy production or at 16mmgy capacity decreased. Being able to move all or most of COES $2/gal gross profits to EBITDA decreased. Ability to be at a a number significantly less than 200M shares OS by EOY increased. I believe we should use a larger PE ratio (than 20) since the economics and open sources have pointed toward an explosion of interest in corn oil extraction in the ethanol industry. I think we may see a corresponding significant jump in both orders and contracts in the 2Q & 3Q reports. In conclusion, my confidence level in reaching the trading range of 45 - 75 cents by EOY is up. I will await more solid news - most likely in the 2Q Report - before I redo the math.

$4.91 Share Price in FEB 2010**

See past posts for details.

*****************************

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.

Skunk