The Bottom Line

Now the SkunK likes to keep things simple, and I have heard many a well thought out opinion over the years that I am well equipped for simple arguments. lol.  Having read a complicated argument or two, I always choose to take "simple" as a complement.  After all - most of life's decisions are easy if you remember what  is important.

Lets take a look at four different forests and you decide where to plant your tree.

The First Scenario is an Ethanol Plant that decided today to go with a non-patented corn oil extraction system.  Over the course of five years they produce 700,000 x 5 = 3.5Million gallons of corn oil worth about $1.75 x 3.5M = $6.125M in Ebitda.  (This scenario assumes no plant risk in the present litigation. )  (The SkunK takes the ***announced Cardinal rate below (see last note) of .3965 mmgy and jumps it to .7 mmgy.   I will fudge their numbers in their favor and add over 70% to the their announced rate of production - Why?  Why not.  Heck, they might have had some technical problems starting out.) 

The Second Scenario is the first scenario after a final ruling in which the GreenShift patents are enforced* - and after five years - the plant is faced with treble royalty payments for having consciously violated an issued patent over the course of five years.   The 6.125M in revenues minus 60% royalties equals $6.125 x .4 = $2.45M in Ebitda. (After faced with a $3.675 Million dollar partial judgement)

The Third Scenario is an Ethanol Plant that decided today to go with a Patented GreenShift Corn oil extraction system producing at a 1.1 mmgy rate. Over the course of five years they produce 1.1 x 5 = 5.5 Million gallons of corn oil worth about $1.75 x 5.5M = $9.625M. After a 20% payment of royalties $9.625 x .8 = they have earned $7.7M in Ebitda.

The Fourth Scenario is an Ethanol Plant that decided today to go with a Patented GreenShift Corn oil extraction system producing at a 1.5 mmgy rate.**  Over the course of five years they produce 1.5 x 5 = 7.5Million gallons of corn oil worth about $1.75 x 7.5M = $13.125M.  After 20% payment of royalties 13.125 x .8 = they have earned $10.5M in Ebitda.

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SkunK
If its underlined when you put your mouse cursor over it -  its a referenced link
The SkunK left out capital payments#, energy savings, lawyer costs, fees, sleepless nights, damages, et cetera, et cetera.
The four plants above are 50mmgy ethanol plants.
Corn Oil @ $1.75/Gallon

# Example of Capital payments p.33
Effective July 31, 2008, we amended our construction loan agreement to include a new loan up to the maximum amount of $3,600,000 for the purchase and installation of a corn oil extraction system and related
equipment.
* From Cardinal Annual Report p. 18
We may be subject to litigation involving our corn oil extraction technology. We have received written correspondence from GreenShift Corporation asserting its intellectual property rights to certain corn oil extraction processes we obtained from ICM, Inc. in August 2008. The correspondence from GreenShift indicates that it will seek to enforce its patent rights against ICM and the Company. According to information available through the U.S. Patent and Trademark Office, certain patents have been issued and other patents will be issued to GreenShift. If GreenShift files an intellectual property infringement action against the Company, GreenShift will likely seek damages from the Company. If GreenShift pursues an intellectual property claim against the property, we may incur significant expense in defending such claims and if GreenShift is victorious we may be force to pay damages to GreenShift as a result of our use of such technology.

**"Integration of GreenShift’s patented Method I corn oil extraction technologies into a 100,000,000 gallon per year ethanol production facility will result in the production of between 1,500,000 and 3,000,000 gallons (11,400,000 to 22,800,000 pounds) per year of corn oil, and about $2,300,000 to about $4,500,000 in additional net income to the ethanol producer at the current market price of corn oil (not including the impact of energy savings) – net of GreenShift’s 20% royalty."

***This link suggests a 7.93mmgy annual rate of production for a 101mmgy/ year Ethanol plant. (note 14 months). Since the SkunK is using 50mmgy plants in his example we cut that in half to .3965mmgy/year of corn oil production- p. 1
"Since we began operations (14 months of production), we have ground nearly 42,500,000 bushels of corn, turning it into approximately 117,750,000 gallons of ethanol, 325,000 tons of DDGs and extracted about 925,000 gallons of corn oil. The first fiscal quarter of this year we achieved a net income of over $10,700,000."

Here is my math.  Sometimes the "nine" sticks, but I did it twice:
117,750,000 / 14 = 8,410,071.42/month.  8,410,000 x 12 = 100.92857mmgy of Ethanol.
925,000 / 14 = 66,071/month.  66,071 x 12 = 792,857/year corn oil at a 100mmgy Ethanol Plant
792,857/ 2 = 396,428gy at a 50mmgy Ethano Plant.

EBITDA - definition of EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization.