Knight - The Market Maker

Who is Knight Equity Markets?

Knight Equity operates as a market-maker in over-the-counter (“OTC”) equity securities, primarily those traded in The Nasdaq Stock Market and on the OTC Bulletin Board. If you follow GERS, and you follow the Level2s, you know they handle most of the trades for Greenshift Corporation. They are normally in the lead for both the bid and the ask. As you can see from this site - last month Knight Equity handled 82% of the GERS shares traded. http://www.otcbb.com/asp/tradeact_mv.asp?SearchBy=issue&SortBy=volume&Issue=Gers&Month=7-1-2008

What does that mean? Well, you can get your information from the boards and close your eyes and come up with the following "fantasy" scenario:

The Knight operation sits in an 1974 airstream trailer with a cinder block bail bondsman on one side and a leakin' roof pawn shop on the other. A pit bull with a diamond collar barks viciously at the end of a rusty chain. The dog keeps an wary eye on the company lookout, standing on the corner taking a drag on his last Pall Mall. The skinny man nervously squints down the street for looking for SEC investigators . . . . After all, they are headquartered in Jersey City, NJ for goodness sakes! Isn't that also where the evil Cornell Capital lurks (YAGI)?. Maybe the two share a double wide and print stock together in the basement!?!

Sorry to disappoint - but like most of real life - it varies quite a bit from the dime novel picture above. It may surprise you to know that Knight Equity is a big operation. How big? They do not publish a list of stocks they trade - since trade nearly every domestic equity. (One of the only stocks they do not trade - is their own - because of self imposed ethics.) They have a market Cap of nearly $1.5 Billion with 900M in revenues. Gross margins close to 80% - Now that's a business!

************************
Where are Knight’s locations?

It is true Knight is headquartered in Jersey City, NJ. But they have Global Markets offices located in Atlanta, GA, Boston, MA, Chicago, IL, Garden City, NY, Dallas, TX, Jersey City, NJ, London, UK, New York, NY, Purchase, NY, Red Bank, NJ, San Francisco, CA, Santa Clara, CA, Los Angeles, CA, and Singapore. Asset Management offices are headquartered in Minnetonka, MN with offices in Hong Kong and London. That's an awful lot of airstream trailers!

What is a market maker?
A market maker in a security is a broker-dealer that regularly and continuously holds itself out to its clients as ready, willing and able to buy or sell that security from or to its clients in amounts less than block size; (i.e., in amounts less than 10,000 shares). A market maker continuously publishes (quotes) a bid price and an ask price and must honor the quote by trading at that price when an incoming order satisfies that price. A Specialist performs a similar role when the transaction occurs on an Exchange.

What is an over-the-counter market?
A decentralized market (as opposed to an exchange market) where geographically-dispersed dealers are linked by telephones and computer screens. The market is for securities not listed on a stock or bond exchange. The Nasdaq market is an over-the-counter (OTC) market for US stocks.

What is the over-the-counter bulletin board (OTCBB)?
The OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities. An OTC equity security generally is any equity that is not listed or traded on Nasdaq® or a national securities exchange. OTCBB securities include national, regional, and foreign equity issues, warrants, units, American Depositary Receipts (ADRs), and Direct Participation Programs (DPPs).

White? Knight? Not Quite?

Does a company as large as Knight get into court once and a while? You bet. Seems the SEC was forced to drop charges this summer against a former CEO and John Leighton, the former head of institutional sales at Knight. The federal judge said the SEC failed to prove their case. The Judge said witness testimony “undermined” the SEC’s theory of the case. (Dang witnesses!) The SEC had alleged that the CEO failed to execute customers’ stock orders at the best price and made millions of dollars in “excessive” comp from the trades. Knight 1/ Govt 0. http://blogs.wsj.com/law/2008/07/01/grasso-knight-equity-others-the-summer-of-vindication/

Now if we go back to 2004 we see a $79M Settlement that Knight paid to "settle charges that it defrauded its institutional investors by delaying trades and intervening in transactions to raise the price, regulators said yesterday." These were institutional trades by a former institutional sales trader. http://query.nytimes.com/gst/fullpage.html?res=9803E0DE1530F934A25751C1A9629C8B63&fta=y

And that's all I could find on a billion dollar business that makes deals for a living.

What is your point Skunk? My point is Knight is one HUGE! market maker. Sure they are HQ in New Jersey - but they have offices in Hong Kong, Singapore and London (among others.) Although they trade a large percentage of shares of GERS - The sale of GERS stock is an insignificant amount of their revenues. They may well make a market for you, me, Mr. Kreisler, YAGI and all the various members of the Board - this is not in itself any kind of bad thing. They are the YTD #1 0r #2 market maker for all the Biofuels Digest Index listings on the OB or PK sheets. They trade nearly every domestic stock except their own. GERS stock is one of thousands that they handle. Sorry to disappoint - now off to the next conspiracy!

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

Up Against the Boards:

The SkunK's unspoken policy has been to report on this stock (which includes the boards) and stay away from the boards themselves. (Nothing worse than a reporter thinking he makes the news.) Well the SkunK has occasionally strayed from that wise decision. In one recent instance the SkunK pointed out the same post by "two" people - separated by a few months. I have also come on the boards with information when people have asked and when they seemed to actually want an answer.

Having read the financial news lately it is really hard to keep a sane perspective. When responsible adults in government talk of massive recession and even the big "D" (depression) it is easy to see how nerves can get frayed. Some great banking institutions have crumbled and many jobs have been lost in the last few days and weeks. They talk of hundreds of thousands of people losing their homes. I am sure that for those close to the financial world the pain may have hit home already. For my part I will assume the recent craziness on the boards is somehow related to this Wall Street mess and hope everyone is able to bounce back quickly from any challenges they now face.

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

The 18 component stocks of the Biofuels Digest Index:
Archer-Daniels-Midland (ADM) Andersons (ANDE) Aventine Renewable Energy (AVR) Better Biodiesel (BBDS.OB) Bluefire Ethanol (BFRE.OB) Bio Solutions Manufacturing (BSLM.OB) Environmental Power (EPG) Green Plains Renewable Energy (GPRE) Green Energy Resources (GRGR.PK) GreenShift (GERS.OB) Intrepid Technology & Resource (IESV.OB) MGP Ingredients (MGPI) Nova Biosource Fuels (NBF) Pacific Ethanol (PEIX) Texcom (TEXC.PK) US BioEnergy (USBE) V erasun Energy (VSE) Xethanol (XNL)

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

The Chart continues to improve over the previous weeks. Forget Friday - nothing traded and the ask stood firm all day at 4.7 cents. It is true nobody bought at the higher price - but then no one is selling at the +3 cent bid either. We had 9 trading days in a row closing at 4 cents or higher. It certainly seems the huge selling is over for now and we find most trades are between 4 and 5 cents the last couple weeks. Four cents is a double over the famous 200K traded after hours and would be a great place to start firming up a low. This week will be interesting in both GERS and in the broader market. The end of the third quarter is only a few days away. . . .

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

In case you missed it - here is end of last weeks blog - still pertains so put it on your GERS worry list.

1 October 2008
Does GERS have about $2.25M due at the begining of October?

YAGI"Effective July 1, 2008, the Credit Agreement was amended to extend the commencement of payments to YAGI to October 1, 2008 and to extend all performance timelines to December 31, 2008." 2Q

"Commencing on October 1, 2008, GS COES must pay to YAGI on account of the principal amount of the Loans an amount equal to the greater of (a) $100,000 and (b) 30% of its EBITDA for the month." 2Q

Bollheimer & Associates

As a result of its acquisition of 100% of the stock of Bollheimer & Associates, Inc., the Company entered into a purchase obligation of $320,000. This amount does not bear interest and is payable in the amount of $80,000 on or before July 1, October, 2008 and January 1, 2009 with the remaining $80,000 due on or before January 1, 2011 subject to certain sales based hurdles. 2Q

Stillwater

According to the amended terms, all amounts of principal and interest not previously satisfied will be due on September 30, 2008. Annual '07
The balance due to Stillwater at June 30, 2008 was 2,071,886. 2Q p23
*********
EOY FORECAST**24 cents per share (18-30 cent trading range)

Long Range Forecast Feb 2010: **$3.72.

**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. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.SkunK - (Blogger formerly know as Skunk)

New Research Confirms Ethanol’s Growing Energy Efficiency

Thanks to Hapitomcat for this post

'An upcoming study from the University of Nebraska-Lincoln has found that ethanol production is more energy efficient than previously thought,' according to the Cattle Network. 'The research was praised by the National Corn Growers Association for showing how much of a difference technology improvements can make. 'We are looking forward to seeing this research publicly released,' said Steve Ruh, chairman of NCGA’s ethanol committee. 'It’s going to go far in dispelling one of the most persistent and incorrect myths about ethanol. But even beyond improved energy efficiency, there are many reasons why Americans should be embracing domestic biofuels for increased energy independence.' ' The Cattle Network said the research was conducted by Kenneth Cassman at the university’s Nebraska Center for Energy Sciences Research. The study results were submitted to the Journal of Industrial Ecology. ' 'Recent research conducted at the University of Nebraska clearly shows that estimates for the energy balance of corn-based ethanol are much more favorable -- in fact two to three times more favorable, than previous estimates,' Cassman said,' according to Cattle Network. ' 'That's because most of the published values for energy efficiency of corn-ethanol are 'backward looking' in the sense they evaluated older technologies with regard to energy use in corn production, the biorefinery, and co-product utilization.' '

here is the article:
http://www.dtnethanolcenter.com/index.cfm?show=10&mid=22

Check it out -
You can get a free daily Ethanol Newsletter update with articles like this - at this link:
http://www.dtnethanolcenter.com/index.cfm?show=newsletter&action=signup&MarketerCustomerID=0&mkt=0&emailPass

SkunK has been using it for a few months now.
Mention SkunK's name and they might still give it to you free!
(that's a joke - cause they don't know who the heck SkunK is!)

Technicals and an "after hours","jello jiggler" laugh.

"Are we there yet?" You haven't lived until you've heard that phrase more than a few times from the back seat. Well, since today the SkunK is setting with you in the back seat - we might want to answer that question ourselves. OR at least figure out how we will be able to tell when "we are there?!?"

The SkunK is a high risk value investor and does not believe in strict technical analysis. I can name a few Billionaire "Value Investors" - Not a single Billionaire Technical Analysis Investor comes to mind. I suspect there is a very good reason for that.

A chart is something like a map - The Skunk does not use a chart/map to tell him where we are going to end up - he knows that before he picks up the chart/map. The value of a stock will ultimately determine where we end up. However, I do find a chart helpful in determining where we have been, and the route we are likely to take to that value determined destination.

MOVING AVERAGES (MA)

A technical analysis term meaning the average price of a security over a specified time period (the most common being 20, 30, 50, 100 and 200 days), used in order to spot pricing trends by flattening out large fluctuations.

The 200 day Moving Average is a powerful indicator of where we have been, and good arguments can be made (if you believe in the big MO - momentum) that it can also shine a dim flash light in the direction we are headed. The 50 day average is a mid term MA that responds quicker to change.

If you click on the chart above - you should get it to expand enough to read it. Around 1 September 2006 we had the 50 day MA plow through the 200 day MA. Now this event did not make the stock go down over the last two years. It was an objective weather vane that told us the direction of the wind. It said we had been going down at an accelerated rate. It was a very powerful indicator that momentum and investor confidence had turned south. If you look at the chart following that cross of the 50 day MA and the 200 MA we can see the momentum has not yet changed. During the latter part of 2007 we see we built a ledge of support, which allowed the gap to significantly close between the MAs. At the culmination of the reverse split and corporate consolidation we saw the Gap nearly close - and the SkunK's blog to appear - only to have the 50 day MA head off to where we find ourselves today - bumping our collective heads on a glass ceiling called a "nickel".

Now if the SkunK thought the best way to drive a boat was by looking at the wake and the prop wash, we could say that looking backwards tells us where we were going - rather than simply were we had been. Just as investor sentiment had reversed momentum in September, 2006, I see another investor driven, momentum reversal within sight. I had given previous indicators of when we would know we are past the bottom. Here is one more. When we see the 50 day MA move above the 200 day MA - when this happens - it will be the coup de grâce to all skeptics. This is not an indicator of what might happen - it will be objective proof of what already has happened - a positive change of momentum. When we see all the MAs on a chart - with the lowest numbered on the top (20, 30, 50, 100, 200), and the highest numbered on the bottom, we can expect us high risk speculator positions to be quickly "discovered" by regular investors. That will help cause the sustained share price increase we are all looking for.

{To show a tiny indicator of momentum change - our 5 day moving average (.044) is already higher than our 20 day MA (.0393)}

If you double click on the chart above, you should be able to see a more recent chart that attempts to take us out past the present - into the SkunK-o-shere! That's right! Of all the zillion possibilities looking into the future - the SkunK picks one! (I hope that doesn't make the odds a zillion to one?)

In any case, the SkunK believes that a 50% increase of the 50 day MA will certainly cause it to plow through the 200 day MA over the next 2-4 months. As the 200 day MA continues to lose daily prices above 20 cents - it will pick up present levels below 5 cents - causing it to drop rapidly. It stands today at 12.8, two days ago it was at 13.1. On 22 August it was 15.7. The Skunk believes it will be below a dime by the end of October. The cross can be expected to take place between 5 and 10 cents. The rate of increase in the more volatile 50 day MA is harder to predict. It stands today at .048, as it was two days ago. On 22 August it was .0638. If we have seen the bottom, and we get to the .24 cents at years end as the SkunK has forecast - then we might see that 50/200 day MA positive cross by Thanksgiving.

*********

AFTERHOURS TRADING

After a solid week of trading significantly off our recent all time lows - with 4 closes at 4.5 cents and a Friday close at 4 - we are faced with an "After hours Trade" that seems to make no sense. Up on the board springs a sale of 200,000 shares for .02 cents a share. Not only is it half of what we closed at, not only is it 25% below our all time low, it happened without filling many orders setting significantly above .02 cents!! So what happened???

Well the SkunK thinks one of three things happened.

1. The most likely is we had a trader with lots of shares and little experience. They gained access to after market trading and came in with a sell of 200,000 shares at market price. They may not have realized after hours trading is completely different from the day market. They may have seen the trading going on at .04 and assumed they would all sell for that or at least the .03 cent bid price. However, the only competition for those shares is other "after market" traders on the same Electronic Communications Networks, or ECNs. A seasoned trader may have left a sizable buy limit order at .02 on his after market ECN and waited for just such a "deal". In any case, by using the "after hours" sales, the investor went around the SkunK's and others higher priced bid orders and settled for the .02 cents he got on the "after hours" sales. If this is as the SKunK believes - it has nothing to do with the value of this stock - only the seller's real cost of knowledge gained in the school of hard knocks.

Since this happened at 16:03 - only three minutes after the close - the SkunK is confident the trade had nothing to do with news about the company. Here are a couple of various other scenarios I consider - "possible" - but improbable.

2. Market Makers having to settle up accounts for a week that showed a positive change in momentum. Market Makers risk their own capital by "making a market" for trades less than 10,000 shares. Most times they guess right and make money. Sometimes they guess wrong and eventually have to right the books. Not sure, but it being after a momentum changing week and being on a Friday - this might be a possibility here.

3. I "Trust" the SkunK's favorite improbable scenario is this: It could be a way for a short- who made a short sale at .02 (thinking by now GERS PPS would be driven subpenny) - being forced by his broker to deliver on his promise - by selling 200,000 shares back to his broker (or whoever is covering the short)- for delivery at the stated price - "after hours" - for .02 - after having to buy the shares at more than twice that price during the previous week? AND having to pay the commissions at both ends?? A scenario "Worthy" of any short who plays a stock in which the SkunK is long! LOLOL HEhehehe. I guess a better SkunK wouldn't find this one so dang funny - hehehehe. Somebody help me off the floor! -he he he.

SkunK's Cliff Notes: After Hours Trading
http://www.sec.gov/investor/pubs/afterhours.htm

http://www.investingonline.org/aio/facts_after_hours.html
*********

1 October 2008

Does GERS have about $2.25M due at the begining of October?

YAGI
"Effective July 1, 2008, the Credit Agreement was amended to extend the commencement of payments to YAGI to October 1, 2008 and to extend all performance timelines to December 31, 2008." 2Q

"Commencing on October 1, 2008, GS COES must pay to YAGI on account of the principal amount of the Loans an amount equal to the greater of (a) $100,000 and (b) 30% of its EBITDA for the month." 2Q

Bollheimer & Associates
As a result of its acquisition of 100% of the stock of Bollheimer & Associates, Inc., the Company entered into a purchase obligation of $320,000. This amount does not bear interest and is payable in the amount of $80,000 on or before July 1, October, 2008 and January 1, 2009 with the remaining $80,000 due on or before January 1, 2011 subject to certain sales based hurdles. 2Q

Stillwater
According to the amended terms, all amounts of principal and interest not previously satisfied will be due on September 30, 2008. Annual '07

The balance due to Stillwater at June 30, 2008 was 2,071,886. 2Q p23

*********

EOY FORECAST**24cents per share (18-30 cent trading range)
Long Range Forecast Feb 2010: **$3.72.

**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. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.
SkunK - (Blogger formerly know as Skunk)

GERS: Today Earning Revenues over 49 cents/share

Long Range Forecast **- Feb 2010
The SkunK's long Range forecast is based on GERS meeting its EOY 2009 goals. The old goals of

'. . . at least 50 million gallons per year of corn oil extraction capacity, 50million gallons per year of biodiesel production capacity, and 16 million gallons per year of oilseed crush capacity online by the end of 2009."

were not restated in the 2Q and are "no longer operative". The 16 million gallons per year of oilseed crush capacity will remain in my equation - based on this statement 2Q, p.28-29:

"While there can be no assurances in this regard, we expect to receive this approval this year. The expansion [" . . . to increase our oilseed crush capacity to about 16 million gallons per year."] can be expected to be completed within approximately six months after the successful completion of a cost-effective financing for this project."

I will also include 40mmgy of extraction capacity based on this information:

"We are currently operating and building facilities that correspond to 18 million gallons per year of corn oil extraction and 10 million gallons per year of biodiesel production capacity, and we are under contract to later expand existing and build new corn oil extraction facilities to extract more than an additional 20 million gallons per year of corn oil, and to increase our oilseed crush capacity to about 16 million gallons per year."


I will also include 40mmgy of biodiesel capacity based on the information below. The SkunK reads this to say we will develop our biodiesel capacity as it is required to meet our rising extraction capacity:

"In addition to expanding our existing 10 million gallon per year biodiesel production facility in Adrian, Michigan to 20 million gallons per year over the next three quarters, we have executed agreements to build GreenShift-owned biodiesel facilities at Global Ethanol’s Lakota, Iowa ethanol facility and Northeast Biofuels’ Fulton, New York ethanol facility. Each new facility is designed to commence production at the rate of 10 million gallons per year and to scale to higher capacities as warranted by the availability of our corn oil supplies as our extraction facilities are brought online. Our development plan for these new facilities is to phase them into construction in a staggered fashion that follows after the construction of our extraction facilities."


So based on all the above the SkunK has decided to use 40mmgy extraction and biodiesel capacity and 16mmgy oilseed crush capacity for his "conservative" long range forecast.

At $1.40 of operating income per gallon (2Q, p.33) the skunk will figure $56M of Operating Income produced from converting 40mmgy of extracted corn oil into biodiesel. With 13M to cover the bills plus extra to finance the additional production - at 1.50/gallon capital expenditure for the 32*mmgy COES and 1.50/gallon 22*mmgy biodiesel production (at 20% interest) we reach a 29.2M break even point. That leaves us with a 26.8M dollar profit.


[54M X 1.50 X .2 = 16.2M] [13M + 16.2M = 29.2M] [*32 and 22* {rather than 35.5 and 30} low-ball figure in the SkunK estimated (guesstimated) portion of the under constructed facilities {as of 30 June we have over 9.7M assets labeled "construction in progress"} already included in our current financing - and any 2009 invested profit that would lower our initial financing outlay.] [Future financing should be under 20%, but since that is what our last deal was - the SkunK feels obligated to go with that.]

*****

The Construction and Technology sales have very high margins. Any revenues here will have a large positive impact on the bottom line. In a humongous effort towards being conservative in my predictions - and the lack of actionable guidance by management, the SkunK will leave this portion blank as a buffer in the other two revenue areas. $0.00.
*****

The Oilseed crush capacity is expected to be at 16mmgy capacity by mid year 2009. Even given time to ramp up - it should be producing at this capacity by EOY 2009. Plenty of time to influence the Feb 2010 long range share price. The following is from the Feb '08 Shareholder letter, when oil prices were a "little" lower and not so profitable.


"Once the expansion is complete and we scale up to full production, this plant is expected to generate more than $80 million per year in oil sales and $12 million in annualized EBITDA at current market prices."



Using 7.8M as the additional financing needed to finish the expansion, the SkunK will assign 20% interest and charge $1.6M in interest and fees to service the new debt. Since we already have the COES paying the corporate bills not included in the $12M EBITDA above - the SkunK is gonna allow [$12-1.6= $10.4M] - another $10.4M to drop to Net Income.

26.8M + 10.4M = 37.2M Net Income/profit


EBITDA & Shares Outstanding = Using the formulas in the Feb 2008 Shareholder's letter we can first estimate EBITDA and then the shares outstanding. Ebitda is estimated at $1/gallon with biodiesel at 3.60/gallon. I will go with a more current $1.40/gallon - since we are now estimating shares outstanding - in this case the higher number is more conservative. So we now add the two and get 68M EBTDA. [56M + 12M}

Including performance based compensation, this is the theoretical OS shares with $68M EBITDA:

current os 82,751,515
series "b" 60,633,325
series "d" 108,160,000
series "e" 20,000,000
Total 271,544,840


adding another +28M shares as a "SkunK Factor" to cover possible dilution to cover equity conversions - we end up with an even 300M shares outstanding in Feb 2010.


With $37.2M profit and 300M shares OS we get over 12.4 cents per share or using a PE of thirty - we get a share price of $3.72.

************
History of Long Range forecasts

Just cannot make this stuff up:

The SkunK, feeling a rare reflective moment coming on, decided to play it out and went back to his first post on his long range forecast from over seven months ago!!! Although it is true he predicted $12.50 per share for Feb 2010 - he based that on predicted earnings of 12.5 cents a share!!!!!!!!! After a lot of water has gone under the bridge - today he used a totally different method/with different inputs and came up with 12.4 cents a share!! That is a tenth of a penny gap! Just substitute my conservative p/e of 30 today with the aggressive 100 I came up with earlier - and we are right back at over twelve dollars. {If we had a disruption in world oil supply concomitant with a bull run in the domestic energy sector - a p/e of "100" is still not out of the question.} The four long range forecasts the SkunK has done between Feb '08 and today all come in between about 9 and 12.5 cents earnings/share. The price investors are willing to pay for those earnings is anyones guess. The SkunK has thought today it is 30 times - but he has been as high as 100 times.

*********
SkunK's Feb 22th figures
25m/200m = (net income)/(TotalOS) = diluted EPS = .125
(PE) X (Diluted EPS) = (PPS)
100 x 12.5 =
$12.50 Share Price in FEB 2010**
First SkunK Blog: http://greenshift-gers.blogspot.com/2008_02_01_archive.html
**********
SkunKs April 19th figures:
28.97M/280M Shares = (net income)/TotalOS) = .1035
(PE) X (Diluted EPS) = (est PPS)
100 x .1035 = $10.35 Share Price in FEB 2010**
*************
SkunK's May 30th figures
34.7M/388.3M Shares = (net income)/Total OS) = .08936 (PE) X (Diluted EPS) = (est PPS) 55 x .08936 = $4.91 Share Price in FEB 2010**
*************
At just $4.25/ gallon of Biodiesel (x 40mmgy= $170M) and using the $80M in culinary oil sales above - the Skunk can easily see $250M in revenues by Feb 2010. {This is with NO Construction and technology sales - our current revenue leader.} At $250M revenues and a market cap of $1.1Billlion (3.72 x 300M shares), we would be at a price/sales ratio or PSR of of 4.4. This type of PSR is not out of the question as we see from this 2007 graphic: We see Google sitting with a market cap almost 13 times revenues, and Apple at almost 5 times revenues. As mentioned in a previous Blog - we are reversed - today we sit with a market cap about 1/20th of our ttm (trailing 12 months) revenues.

Here are the 4 trailing quarters for GERS revenues ($40.7M): $11.5M Q2 '08; $6.6 M Q1 'o8; $18.2M Q4 '07; $4.4M Q3 '07.

At $40.7M ttm revenues combined with an os of 82,751,515 shares from the 2Q, gives us a revenues production of over 49 cents a share!


If we take the 2M market cap (that .025 represents) and divide by 40.7M we get a PSR of .049!!

{Revenue-based valuations are assessed using the price/sales ratio, or PSR. The price/sales ratio takes the current market capitalization of a company and divides it by the past 12 months trailing revenue. (or in my example the rate of revenues at an annualized rate, for a specific time. The market capitalization is the current market value of a company, arrived at by multiplying the current share price times the shares outstanding. This is the current price at which the market is valuing the company.}

EOY FORECAST**
24cents per share (18-30 cent trading range)

Long Range Forecast Feb 2010: $3.72.

**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. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.

SkunK - (Blogger formerly know as Skunk)

Counting COES and Planet X*

OK - so I am not really looking for "Planet X". That was just a cheesy marketing bait and switch to get you to read the blog. However, I am looking for COES "Plant X". We have never before had a complete list of the plants that were signed up for the COES systems. From my calculations on the back of my NFL week 2 sports bet, we are only 1.5mmgy (one COES) away from doing that today.

In the paragraph below management has told investors they are "operating and building" 18 million gallons/year of corn oil extraction. They also have an additional 20 million gallons per year "under contract". We are certainly aware of where the 18mmgy is going. The COES are plainly laid out in the 2Q and the ones scheduled to be completed by the the end of 1Q '09 give us the 18mmgy of capacity. So where is the additional 20mmgy capacity? Well it says the 20 mmgy will come from both "expand existing" and "build new" COES. On 22 August Mr. Kreisler explained on this blog (see link below) who was signed up for the Method II extraction. The Ethanol Plants who have signed up for these additional systems should more than double corn oil production at each of their plants.

The Skunk is always interested in GERS minutia and fact checking. I wanted to see how much of the 38mmgy of contracted extraction could now be traced to an individual plants. I have listed and added up the added up the information released and found we have 22.5mmgy Method I and 14mmgy Method II tied to specific Ethanol Plants. That gives us a total of 36.5mmgy - or just 1.5mmgy lass than the published 38mmgy. That is exactly one Method I COES short. So where is this COES Plant "X"? Well the Skunk has been sifting through the 2Q filings for Ethanol Plants for the wording that normally goes along with a GERS contract. No luck on a new one yet - any ideas out there?

Here's an idea from Ethanol Man:

http://www.dakotaethanol.com/lacp.html

See June newsletter on bottom right of site.

Could Plant "X" be Dakota Ethanol, LLC located in Wentworth, SD?

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

Sources

22 August Skunk Blog: http://greenshift-gers.blogspot.com/2008/08/coes-information.html

Method II Extraction Explanation: http://www.greenshift.com/pdf/Corn_Oil_Extraction_Presentation-100mmgy.pdf
http://greenshift-gers.blogspot.com/2008/06/do-things-change-these-two-pictures-are.html

"We are currently facilities that correspond to 18 million gallons per year of corn oil extraction and 10 million gallons per year of biodiesel production capacity, and we are under contract to later expand existing and build new corn oil extraction facilities to extract more than an additional 20 million gallons per year of corn oil, and to increase our oilseed crush capacity to about 16 million gallons per year." 2Q p.9

COUNT THEM FOR YOURSELF!
Location-Capacity- Current Status-Method II
Oshkosh, 1.5mmgy, Operational, Method II 1.75mmgy
Medina, 1.5mmgy, Operational, Method II 1.75mmgy
Marion, 1.5mmgy Operational, Method II 1.75mmgy

*****
Riga, 1.5mmgy Q4 '08 Commissioning, Method II 1.75mmgy
Lakota, 3.0mmgy Q4 '08 Commissioning, Method II 3.5mmgy
Richardton, 1.5mmgy Q4 '08 Commissioning

*****
Albion, 1.5mmgy Q1 '09 Commissioning
Milton, 1.5mmgy Q1 '09 Commissioning

Fulton, 3.0mmgy Q1 '09 Commissioning, Method II 3.5mmgy
Adams, 1.5mmgy Q1 '09 Commissioning

******

Fergus Falls, 1.5mmgy, Q1 '09 Commissioning

*****

Concordia, 3.0mmgy Pending Financing

Plant "X" 1.5mmgy????

*****

*****

*****

Say What??

" . . . the birth of a new American Energy Company - the start of a Biodiesel Giant."

That is how I closed the introductory paragraph of last week's blog - so let me explain what I am talking about.

The size of the Pie:

"In 2008, the NBB anticipates the domestic biodiesel industry will produce more than 500 million gallons. . ."

Our Piece of the PIE:

As the soy based Biodiesel slows or even shuts down as their feedstock become too costly. As the corn oil extraction industry, led by Greenshift, begins to seriously replace soy as the feedstock of choice. As Greenshift makes strides towards the 200mmgy longer range extraction goals . . .

It is certainly within the realm of possibility that the Greenshift Corporation will produce more than 10% of the nations biodiesel within a few years.

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

*Serious and not so serious - just for Fun/Cultural History/Planet X Stuff
http://www.coasttocoastam.com/shows/2008/08/18.html

http://en.wikipedia.org/wiki/Planet_X

Infamous Simpsons FBI lineup showing Marvin the Martian (who previously combated Duck Dodgers for Planet X) at just over two feet tall.

EOY FORECAST**

24cents per share (18-30 cent trading range)

**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. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.

More to come,

Skunk

Level Three?

Greenshift presently has two unique levels of technology that they have commercialized. The corn oil extraction and the corn oil to biodiesel . The Skunk spends most of his time looking at that part of the business since he knows the profitability there will make or break the rest of the company. There are three other levels of technology that we have - that are not yet in commercial production - that we know of.

The three technologies are best described here:

http://www.greenshift.com/technologies.php

Here is the short official like version followed by the Skunk abbreviation :
Biomass Gasification for Heat and Power Applications - (burn DDGs/cellulose to power boiler/generator)
Integral Biomass Gasification for Liquid Fuels Applications - (Synthetic Liquid Fuels - Zeropoint)
Integral Bioreformation of Carbon Dioxide into Liquid Fuels - (Algae Bioreactor)

Lightbeam over at the I-hub covers this side of the equation especially well and the Skunk reads the site daily. What he dug up is the purpose of this blog. Utica - the ethanol plant in Oskosh, WI - was the first to sign on for our GERS owned - Corn oil extraction package. The second plant they own - does front end oil extraction - which gets food grade corn oil and other products - prior to the fermentation process. It appears Utica and this second plant are on the leading edge of "Integral Biomass Gasification for Heat and Power Applications". We do not know who is providing the technology. But with the close history to Greenshift it would appear that it is at least a possibility worth closely watching.

i-hub thread:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=31990187

Utica "First COES" Plant:

http://www.renewenergyllc.com/who_we_are_renew_utica.php

"Research and development is also underway to replace natural gas boiler at the plant with a biomass energy plant. This innovation reduce fossil fuel inputs dramatically, savings dollars and making Utica's carbon footprint smaller than any ethanol plant yet in existence."

Jefferson (Second Plant)

"Renew is deploying state of the art technologies that will result in our plant being more energy efficient and environmentally friendly. We will consume 20% less natural gas per gallon of ethanol produced than the industry standard. For air emissions such as carbon monoxide, nitrous oxides, and volatile organic compounds, we will produce less than at older facilities half our size.”

http://www.renewenergyllc.com/who_we_are_renew_jefferson.php

Important SkunkNote: Although Utica has been a known partner for a long time, I think this reference (from link above) is the first time the Skunk remembers Utica mentioning the relationship on its site:

"Currently working with GS Cleantech, Utica is extracting corn oil from its distillers grains - yielding a basic ingredient for bio-diesel - as well as a higher quality livestock feed."

Skunk

PS - Man, this photo of the Pilot Bioreactor solar array from earlier this year is still really Cool!

Post Labor - Birth of a Biodiesel Giant

We split the "Labor Day" three day weekend with two days for the books. Both Friday and Tuesday saw trades as low as .025/share and volume above 500K. It can be noted that a few days later, we closed Friday the 5th 56% off that bottom. Smok'em if you got 'em* - but it must be noted it's way too early to start handing out cigars! Yet, hopefully this last "Labor Day" will be seen as the event when we painfully gave birth to the upward cycle of this stock - the day the corn oil broke - the birth of a new American Energy Company - the start of a Biodiesel Giant.

EOY FORECAST

"We are operating three corn oil extraction facilities today and our current construction schedule calls for the installation of at least another four facilities prior to year end, and another five extraction facilities and a 10 million gallon per year expansion to our biodiesel refinery during the first quarter 2009. We consequently expect to be producing the annualized equivalent of at least 10 million gallons per year of corn oil derived biodiesel by the end of the year and at least 18 million gallons by the end of the first quarter 2009."

The Skunk has previously made an EOY prediction based on the original GERS goal of 15mmgy of corn oil produced by years end. With the release of the 2Q, our production sights have been lowered for the EOY - causing my estimates to be lowered. With the new information of the 2Q in hand, I will attempt to refine my prediction of 60 cents/share (.45-.75 trading range.) As GERS nears profitability more tools become available to estimate fair market value.

"We are focused on the elimination of our net losses and transitioning to profitability by the end of this year. We plan to achieve this goal by commissioning at least seven corn oil extraction facilities on or before December 31, 2008. Combined, seven corn oil extraction facilities will produce more than 10 million gallons per year of corn oil. At current market prices, extracting and refining 10 million gallons per year of corn oil into biodiesel will produce about $1.40 per gallon, or about $14,000,000 per year, in operating income and greater than break-even profitability."

Just taking into account the COES, we see that we are planning to produce at or above the capacity of our Adrian biodiesel plant by the end of the year. GERS has estimated that we will be making 10mmgy, (10.5mmgy capacity) of corn oil derived biodiesel by EOY. If we have access to significant new financing - we could see both Albiob, MI - "probable" and Milton, WI - "possible". In that scenario we would see the possibility of up to 13.5mmgy production /capacity by the end of year - In any case lets look at the various possibilities. With 10mmgy of production, at $1.40 of operating income/gallon, we see $14M of Operating Revenue. GERS needs less than 13M of operating income to be profitable. So at $1M Profit on an annualized basis - that is 1.2 cents per share. At the optimistic top end - 13.5mmgy or $4.9M profit/year that would be about 5.9 cents/share. The Skunk says that the average P/E across the board is 15. (These indices: DIA, SPY, VTI, are now 12.08, 13.43, 13.7 P/E, respectively in this low market.) Lower for value stocks. Higher for Growth Stocks. GERS is a Growth Stock.

Once profitable and rediscovered, with its hedged feedstocks, huge order backlogs and 10 year contracts, and I suspect GERS by EOY 2009 will not trade below a 30 P/E ratio - likely higher. In the meantime, lets use a more conservative 20 P/E ratio for our figures. In this case we see an EOY price per share of about 24 cents (1.2 x 20 = .24) for just the COES/Biodiesel portion of the mix. With a close on a significant financing deal, I can see the possibility of the two extra plants coming up and closing the year producing at 5.9 cents/share. This should add significantly to the share price - possibly moving a fair market price to the 60 cent** range. (5.9 x 20 = 1.18).

Due to the revenue transformation of this company before our eyes, this company does not get its revenues where it did even 12 months ago - and I suspect revenues will have increased substantially 12 months from now. Therefore these price estimates are not based on the ttm (trailing twelve months) or the projected earnings from the next twelve months - but rather a production rate a specific instant in the future - namely the End of Year (EOY).

We are not to expect much from technology and equipment sales for the rest of the year. They have completed most of the contracted work and as long as feedstock prices remain high, non-corn oil biodiesel operations have slowed or stopped building new plants. They do have high margins, however, so anything they do should help the bottom line. Sustainable Systems will produce at historical levels and over the last six months (excluding other income [expense] taken care of by the COES in our senario) they basically broke even (-$599 2Q p. 23 ). They need the expansion to be completed before they become a force through economies of scale.

By the end of the 1Q '09, (In about seven months) we could have 12 COES producing corn oil, with all the upgrades, at or above capacity. GERS says it needs (less than) 13M/year to pay the bills. 12 COES should produce close to 18M gallons of corn oil. At 1.40/gallon of operating income (2Q p.33 ) produced per gallon, that is 25.2M/year in operating income. Minus the 13M to pay the bills - that is $12.2M of Operating Income. Lets subtract $2.25M of that to service the additional $11.25M loan required to finance those 5 new COES units. (Based on 20% interest and $1.50 capitalization/gallon capacity.) That lets us slide down $9.95M into Net Income on an annualized basis. At our present Shares OS that is an annual earnings per share of 12 cents. Just counting the COES to Biodiesel, with a P/E of 20 - that could give us a fair market value of 12 x 20 = $2.40**/share - production going into the 2Q '09.

The REST of 09?
"After the 10 million gallons of corn oil noted above, our contracted backlog corresponds to in excess of an additional 28 million gallons per year of corn oil extraction. Moreover, we have seen increased activity in our sales pipelines for additional corn oil extraction contracts and we plan to add significantly to our backlog during 2008 and 2009."

Summary

The Skunk thinks we could see 24 cents** a share on December 31st of this year. A trading range of 18 - 30 cents. This is about 10 times the 52 week low we saw on 2 Sept. We have 4.5mmgy capacity today. We should have over 10mmgy by years end. We may have 18mmgy by the end of 1Q '09 and 38mmgy by 4Q '09. Not to sound like a broken record, but most of this will only happen if we get two things.

The first of which is financing. From the 2Q:

"We must complete additional financing to achieve all of the above goals on the stated time frames." and

"We are currently evaluating offers for significant new equity and debt financing to accelerate the completion of our contracted corn oil extraction, biodiesel production and oilseed crush projects. We expect to complete additional financing for this purpose during the third quarter 2008."

A signed financing deal will provide great comfort to investors. ($5M-25M) The Skunk believes a large financing deal ($30M or more) on acceptable terms would immediately propel this stock significantly higher.

The second of which is production:

The Skunk believes outfitted COES are capable of turning out 3 gallons/minute. Will they stand up to the task and produce at this capacity over an entire month and then a quarter? The Skunk believes they can do this as well - but along with many others is waiting to see the results. The Utica plant should be producing at capacity right now. Production numbers at or above capacity over a month or quarterly period will provide great comfort and confidence to investors.

*"Smok'em if you got em." - Please don't. Nothing was smoked in the creation of this blog. In fact - this Skunk is a smoke free blogger. (I got the shocking, radical pictures off the net.)

Skunk

**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. I have been rightfully accused of being a rather cheery, positive individual who laughs at every opportunity. These tendencies may cause me to overlook deficiencies in this stock that are painfully obvious to others. Celebrate today - and some good garage logic luck to ya.

Numbers!

Just give me the numbers!

As of 19 August, 2008 there were 82,751,515 shares outstanding. As of 30 March, 2008 there were about 929 GERS shareholders. Using these most current numbers available* - The Average Shareholder therefore held 89,076 shares.

In the previous 5 trading days 1,815,130 shares traded hands. If we say people moved "all in" or "all out" - That would have been the loss of over twenty average "tired" investors who decided to sell at these prices - and a gain of over twenty average "eager" investors who decided to buy at these prices. (A Skunk guess might have about 10% total of investors (100) or about 50 buying and 50 selling 36K shares each over the last 5 trading days). The demographics here would be both impossible to get, and very interesting. Number of new investors, number of zero'd accounts, number of current total investors.

This volume has generated a 5 day average of over 363K/shares/day. That is more than 18M shares per day at pre-reverse split 50/1 numbers. Yahoo has a GERS 3 month average volume of just over 160K. The five day average volume has more than doubled. This is certainly the highest volume day this year (Tuesday 591,975) and the highest 5 day volume. Whether this is the final washout, or part of it - time will tell us.

Skunk
*Source 2qPg 1 & p. 36 Annual report 2007

Patience and Wisdom

This ol'Dog has Patience and Wisdom
RED TRAIL ENERGY (RTE)

Red Trail Energy, of Richardton, ND confirmed in their 2Q Newsletter (p. 2) that they have a Corn Oil Extraction System coming on line in 2008.

http://redtrailenergyllc.com/images/uploads/Red_Trail_Report_-_Q2-2008.pdf