Add
GRH to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| GRH > SEC Filings for GRH > Form 10-K on 16-Apr-2009 | All Recent SEC Filings |
16-Apr-2009
Annual Report
Based upon available capital, we expect a technical grade glycerin project
production unit to be completed and commissioned by May 2009, and to have a
glycerin distillation project which will produce US Pharmaceutical Grade
Glycerin - Non Certified, in August 2009 - also pending availability of funding
for the glycerin project. All 638 thousand barrels of the Houston Terminal
Project bulk storage tanks are presently erected. There remains some minor
piping, pumps, instruments, containment and lighting yet to be completed for
final completion of the Houston terminal project.
We do not expect to operate at a profit before our biodiesel and glycerin
refineries are completely constructed and operational. Due to current economic
conditions of both available capital and the biodiesel markets overall, we made
the decision during March 2009 to suspend operations of the biodiesel refinery
until the biodiesel market conditions recover. Until the refinery resumes
operations, we plan to provide terminal and distillation services at the
refinery to provide a base level of cash flow.
BioMass
In May 2007 we acquired Mesquite Lake, an inactive 18.5 megawatt (nameplate
capacity) biomass plant located in El Centro, California, which we began
refurbishing during 2008. During 2008 we found that the existing air permit for
the plant was not sufficient to support our planned operations, and we are
currently going through a re-permitting process with the appropriate
governmental agencies. Due to this process, we are able to incorporate a
possible expansion of up to 7 megawatt ("MW") as well as to terminate the
existing power purchase agreement in order to pursue improved pricing for our
output. Accordingly, we put this project on hold during the fourth quarter of
2008 while we go through the re-permitting process; we expect the new air permit
to be issued in the latter half of 2009. We expect to sign the new power
purchase agreement in the second quarter of 2009 and to resume construction
sometime during the fourth quarter of 2009, assuming additional sources of
funding are obtained.
Wind Energy
Until April, 2007, our primary business was the investment in and development
of wind energy farms. We continue to own rights to potential wind energy farm
locations in Montana, Wyoming, Texas, China, New Mexico, and California and
continue to operate and gather data produced from wind measurement equipment
located on these sites. We also continue to seek additional potential
development sites, particularly those that would be near our other renewable
energy projects. The nature of these wind energy projects necessitates a longer
term than our other projects before they become operational, if ever. We expect
to commence construction on at least one of our Texas wind farms in 2009 which
would involve construction of a 35 MW wind farm. We expect this wind farm to
become operational by the first quarter of 2010 if adequate funding can be
obtained.
During 2007, we entered into a master wind turbine supply agreement with
Guandong MingYang Wind Power Technology Co., LTD ("MingYang"), a Chinese
company. The agreement provides for the availability of any size of wind
turbines supplied by MingYang for use on our wind farm projects in North America
through December 31, 2012. We estimate that the total capacity of wind available
under this agreement could approach 900 MW through 2012. We are also seeking
additional supply agreements with other domestic and foreign manufacturers.
We also entered into a subscription agreement with MingYang during 2007 to
acquire an equity interest in MingYang. At December 31, 2008, we funded
approximately 60% of the subscription agreement, for approximately $7.0 million.
We held an approximate 3.59% equity interest in Ming Yang at that date. We have
the option to acquire an additional 2.39% interest in this entity for
approximately 30 million RMB ($4.4 million USD at December 31, 2008) once
certain conditions of the subscription agreement are met by MingYang and
provided that we have obtained additional funding. In 2008, its
initial year of manufacturing wind turbines, MingYang shipped 80 units for
installment in China and expects to substantially increase the number of units
shipped during 2009. We believe this investment will further our goal of
developing renewable energy sources on a worldwide basis.
Results of Operations
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007:
Due to the acquisition of our BioFuels business unit on April 13, 2007, our
operating results in the 2007 period included approximately nine months of
BioFuels' operating results, while the 2008 period contains a full twelve months
of operating results for 2008.
BioFuels Revenues
For the year ended December 31, 2008, we had product sales of $4.6 million,
consisting of $621 thousand in methanol sales, $4.0 million in biodiesel sales,
and $18 thousand sales of raw materials. We also had revenue from terminal
operations, including storage and material handling charges, of $373 thousand.
Revenues in the prior year period consisted of $616 thousand in fuel oil sales
related to the acquired plant's prior operations, $96 thousand in processing
revenues, and $341 thousand in methanol sales. Of these prior year revenue
streams, only the methanol sales were continued during 2008.
BioFuels Costs of Sales and Services
For the year ended December 31, 2008, we had costs of sales and services of
$14.2 million compared to $759 thousand during the year ended December 31, 2007.
Our 2008 costs included $10.6 million of costs related to our inventory
consumption and losses which includes a lower of cost or market impairment of
$4.6 million related to the large decrease in both the value of our raw
materials on hand and the biodiesel produced at the plant and $6 million in
costs, including feedstock and chemicals, which are directly related to the
production of our methanol and biodiesel. The remaining $3.6 million in costs of
sales and services were related to our terminal operations and excess capacity
while our refinery was operating, including utilities, direct labor and other
production costs. The prior year cost of sales and services consisted of $307
thousand in material and freight costs and $452 thousand in operating expenses.
Wind Energy Project Costs
We incurred project costs associated with our wind energy projects of $542
thousand in the 2008 period compared to $277 thousand in the 2007 period. The
increase was due to the acquisition of additional wind projects in Shanghai,
China, Texas, and Wyoming during 2008.
Biomass Project Costs
We incurred project costs associated with our biomass projects of $238
thousand in the 2008 period. These costs were associated with consulting and
travel costs associated with the refurbishment of our Mesquite Lake plant.
Hurricane repairs and losses
We incurred a total of $5.6 million in hurricane losses, net of anticipated
insurance recoveries, during 2008 as a result of our Houston BioFuels campus
being hit by Hurricane Ike during September. Our corporate hurricane loss of
$558 thousand was related to power cogeneration equipment which was stored at
our BioFuels site and was damaged due to the high water, and is net of
anticipated insurance recoveries. Our BioFuels hurricane loss of $5.0 million
was due to $2.3 million in inventory losses and contamination, $974 thousand in
environmental clean-up work, and $6.1 million in repairs and equipment
replacements at our plant; these losses were partially offset by anticipated
recoveries of $4.4 million.
Depreciation Expense
Depreciation expense was $2.7 million during the 2008 period compared to $119
thousand during the 2007 period; the increase was due primarily to depreciation
on our biodiesel refinery and terminal which began during August 2008.
Loss on Asset Impairments
Our loss on asset impairment was $21.8 million during 2008. We recorded
impairments of $2.6 million related to a terminated power purchase agreement and
invalid air permits that were acquired at our Mesquite Lake project, and we
recorded an additional $19.1 million in impairments related to our BioFuels
campus due to significant doubt regarding the recoverability of our plant
investment given our liquidity and time constraints and the current condition of
the biodiesel market.
General and Administrative Expense
General and administrative expense ("G&A") was $22.4 million during the 2008
period versus $11.8 million during the 2007 period, an increase of
$10.6 million.
Unallocated corporate G&A increased $5.3 million between the two periods,
increasing from $10.7 million up to $15.9 million. Approximately $1.9 million of
this increase was due to employee stock option expense which increased to
$8.2 million from $6.3 million. Salaries and personnel-related costs decreased
$673 thousand; although we added staff at our corporate headquarters to address
the increased scope of operations and our public reporting requirements, we had
significant decreases in incentive compensation during 2008. Professional fees
increased $2.5 million as a result of public reporting requirements and
litigation, office and related costs increased $670 thousand and travel and
marketing increased $547 thousand, both as a result of added staff and our
increased scope of operations.
BioFuels G&A increased $4.0 million, up from $641 thousand during 2007 to
$4.7 million during 2008. This increase was due to the addition of
administrative and marketing personnel at the plant.
Biomass G&A was approximately $624 thousand during the 2008 period versus
approximately $98 thousand during the 2007 period due to construction and
planning of the Mesquite Lake biomass plant.
Wind Energy G&A increased approximately $832 thousand, up to $1.2 million as
we added personnel, opened two offices, and incurred additional professional
fees as a result of the increased number of projects for this segment during
2008.
Operating Loss
Our operating loss was $62.4 million in the 2008 period versus a loss of
$11.9 million in the 2007 period, due principally to the increase in cost of
sales and services due to our BioFuels plant beginning production during 2008 as
well as our asset impairments and increased G&A related to our increased scope
of operations and public reporting requirements.
Our BioFuels segment generated operating losses of $40.5 million and $422
thousand, respectively, during 2008 and 2007 due to their start-up operations
during 2008 as well as hurricane damage sustained during the third quarter of
2008 and impairment charges to their Houston campus.
Our Wind Energy segment generated an operating loss of $1.8 million during
2008 as compared to an operating loss of $697 thousand during 2007 due to
additional projects entered into during the year.
Our Biomass segment generated operating losses of $3.5 million during 2008
and $98 thousand during 2007; the increase was due to increased operations due
to the construction of Mesquite Lake and the acquisition of Telogia and the
write off of acquisition values assigned to invalid air permits and a terminated
power purchase agreement.
Our unallocated corporate operating losses were $16.7 million and
$10.7 million during 2008 and 2007, respectively, due to increases in our G&A as
a result of our public company filing requirements and increased scope of
operations. Non-cash stock compensation of $8.2 million and $6.3 million was
included in our unallocated operating losses during the 2008 and 2007 periods,
respectively.
Interest and Other Revenues
Interest and other revenues were $644 thousand during the 2008 period and
$373 thousand during the 2007 period primarily due to higher cash balances on
hand during 2008 as a result of our financing activities.
Interest, Accretion and Other Expense
Interest, accretion and other expense increased from $523 thousand during the
2007 period up to $4.0 million during the 2008 period. The 2008 period was
primarily comprised of interest expense related to our construction loan and
redeemable debentures.
Discontinued Operations
We recorded losses from discontinued operations related to four months of
operating costs of our Telogia plant which was sold during the first quarter of
2009. These costs were primarily composed of payroll and utility expenses at the
plant.
Net Loss
We realized a net loss of $66.2 million in the 2008 period compared to a net
loss of $12 million during the 2007 period due to the increases in our operating
loss and interest expense as well as impairment charges at our Houston BioFuels
campus which were partially offset by the increase in interest income in the
current period.
Net Loss to Common Shareholders
Dividends on our preferred stock were $1.7 million in the 2007 period versus
$16.2 million in the 2008 period. The 2008 amount includes deemed dividends of
$15.2 million which were related to the issuance of our Series B preferred stock
and a warrant dividend which was distributed to all common and preferred
shareholders during as well as $1.0 million in dividends paid and accrued on our
Series A 8% Preferred Stock. The 2007 period included $708 thousand in cash
payments and $950 thousand in deemed dividends which were based on the value of
the warrants issued in connection with the issuance of our Series A Preferred
Stock.
Our net loss to common stockholders was $82.4 million in the 2008 period
versus $13.7 million in the 2007 period, primarily due to increased operating
losses due to the increased scope of our operations as well as asset impairments
and the dividend expense of $16.2 million recorded in the 2008 period. Our net
loss per share increased to $4.08 in the 2008 period, up from $0.80 in the 2007
period.
Results of Operations
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006:
Since we acquired 100% of the common stock of CRC on April 13, 2007, our
operating results in the 2007 period included CRC's operating results from
April 14, 2007 through December 31, 2007, while the comparable period in 2006
does not reflect any operating results from CRC.
Biofuels Revenues and Operating Costs
For the year ended December 31, 2007, we had revenues from methanol sales of
$341 thousand, fuel oil sales of $616 thousand and processing revenue of $96
thousand. We also had material and freight costs of $307 thousand and operating
expenses of $452 thousand. Revenue and material and freight costs from CRC's
specialty chemical operations were replaced with revenue and material and
freight costs from methanol processing beginning in September 2007.
Wind Energy Operating Costs
We incurred project costs associated with our wind energy projects of $277
thousand in the 2007 period compared to $1.0 million in the 2006 period; the
decline was due to the winding down of preliminary engineering and environmental
work in 2006 and the transition into a phase where we are concentrating on
acquisition of additional wind data on the projects.
Depreciation Expense
Depreciation expense was $119 thousand during the 2007 period versus $35
thousand during the 2006 period, due primarily to the acquisition of CRC. We did
not record any depreciation on the adjustment to fair value of equipment and
infrastructure of $8.2 million recorded pursuant to the CRC acquisition as these
costs are included with the biodiesel plant under construction.
General and Administrative Expense
General and administrative expense was $11.8 million during the 2007 period
versus $677 thousand during the 2006 period. The 2007 period included employee
stock option expense of $6.3 million as the result of issuing 4,031,500 common
stock options with a weighted average exercise price of $5.60 per share to
employees in 2007. No stock options were granted in the 2006 period. The 2007
period also included general and administrative expense of $641 thousand due to
BioFuel's operations versus none in the 2006 period. Other increases in general
and administrative expense were due to increases in salaries and benefit costs
due to an increase in the number of employees (including executive and other
management staff) to manage the increased scope of operations in 2007, as well
as increases in travel related expenses, professional fees, office and other
expenses, all of which were directly related to the increased scope of
operations in 2007 when compared to 2006.
Operating Loss
Our operating loss was $11.9 million in the 2007 period versus a loss of
$1.7 million in the 2006 period, due principally to the increase in general and
administrative expense which was offset by a reduction in project costs. Our
Wind Energy segment generated an operating loss of $697 thousand during 2007 as
compared to an operating loss of $1.7 million during 2006 due to a decrease in
project costs as we completed the preliminary engineering and environmental
phases and have transitioned into a phase where we are concentrating on the
acquisition of wind data. Our BioFuels and BioPower segments generated operating
losses of $422 thousand and $98 thousand, respectively, during 2007. Both of
these segments began during 2007. Our unallocated corporate operating losses
were $10.7 million during 2007, which included $6.3 million of stock
compensation. Prior to 2007, all corporate activities were allocated to the Wind
Energy segment as this was our primary focus.
Other Income and Expense
Interest income was $373 thousand in the 2007 period versus $487 in the 2006
period due to interest which was earned on the investment of funds raised from
our issuances of common and preferred stock in 2007. Interest and other expense
was $523 thousand in the 2007 period versus $32 thousand in the 2006 period due
to the issuance of the convertible notes in December 2006 and the issuance of
notes payable to the former CRC stockholders in April 2007.
Net Loss
We realized a net loss of $12.0 million in the 2007 period compared to a net
loss of $1.8 million during the 2006 period due to the increases in our
operating loss which includes the $6.3 million non-cash employee stock option
expense in 2007 and interest expense which were partially offset by the increase
in interest income in the current period. Dividends on our preferred stock were
$1.7 million in the 2007 period versus none in the 2006 period due to the
issuance of our Series A 8% preferred stock and common stock warrants related to
the preferred stock during the 2007 period. The dividend included $708 thousand
in cash payments and $950 thousand in non-cash expense which was based on the
value of the warrants issued in connection with the preferred stock. Our net
loss to common stockholders was $13.7 million in the 2007 period versus
$1.8 million in the 2006 period, primarily due to the non-cash employee stock
option expense of $6.3 million and the dividend expense of $1.7 million recorded
in the 2007 period. Our net loss per share increased to $0.80 in the 2007
period, up from $0.12 in the 2006 period.
Liquidity and Capital Resources
Cash Flow and Working Capital
As of December 31, 2008, we had cash and cash equivalents of approximately
$677 thousand and a working capital deficit of $18.4 million as compared to cash
and cash equivalents of $18.8 million and working capital of $15 million in the
prior period. These decreases in cash and working capital were due to the
activities described below.
Operating Activities
During 2008, we used $29.1 million in operating activities versus
$2.2 million during 2007. This increase in cash used was principally due to the
operation of our biodiesel refinery which commenced operations in August of
2008. The cost of raw materials, processing chemicals, operating and repair
costs, selling and administrative costs and financing costs exceeded the
revenues generated by the refinery. This was due in part to Hurricane Ike which
struck the refinery during September 2008. After extensive repairs, production
operations resumed at the end of November 2008.
Other increases in cash used in operating activities were due to increased
general and administrative expenses due to increased staffing levels as a result
of our increased scope of operations. We had no operating source of income with
which to pay our operating costs in 2008 other than those revenues generated at
our biodiesel refinery, and the use of those revenues are restricted under our
credit agreement with a bank. As a consequence, we were required to use cash
provided by financing activities to fund a significant portion of our operating
activities.
Financing Activities
During the year ended December 31, 2008, we raised $68.3 million under our
financing activities. These activities included issuing $17.3 million in
redeemable debentures, borrowing approximately $50.7 million under our notes
payable, and repayment of approximately $8.4 million under these notes payable.
We also raised $13.1 million from sales of common and preferred stock, paid
$2 million in deferred financing costs, paid $750 thousand in cash dividends and
paid $1.4 million to purchase approximately 89 thousand shares of treasury
stock. These activities are described more fully below.
Notes Payable
During January 2008, we exchanged 117,998 shares of our common stock for the
remaining balance of $1.9 million in notes originally issued in connection with
the acquisition of CRC in a non-cash transaction.
During 2008, we financed our annual insurance premiums in the amount of
$1.6 million. This note bears interest at a fixed rate of approximately 3.84%
and is payable in monthly installments through March 15, 2009. We paid
approximately $1.2 million in principal payments during 2008 related to this
note.
Convertible Debt
During 2008, the note plus accrued interest on our existing convertible note
payable was renewed and extended through the issuance of a GreenHunter
subordinated convertible note in the amount of $3.1 million with interest at an
annual rate of 10%. On August 29, 2008, we converted the entire balance of this
note by issuing 594,011 shares to the holder in a non-cash transaction.
10% Series A Senior Secured Redeemable Debentures
During 2008, we raised an additional $13.7 million under our 10% Series A
Senior Secured Redeemable Debenture offering which was initiated during the
fourth quarter of 2007. Sales of the Debentures continued until April 30, 2008,
at which point the program was cancelled, and all proceeds were received by
June 30, 2008.
9% Series B Senior Secured Redeemable Debentures
During July 2008, we announced the offering of our 9% Series B Senior Secured
Redeemable Debentures. These notes will have a term of five years. These
debentures are non-recourse to GreenHunter Energy and will be secured by our
Mesquite Lake common stock in the event that the program reaches $15 million in
subscriptions. During 2008, we raised $3.6 million under this program.
Nonrecourse Term Loan and Working Capital Loan
During 2007, BioFuels entered into a credit agreement with a bank which
provided for a $38.5 million construction/term loan facility and a $5 million
working capital facility in connection with our development, construction and
operation of our BioFuels campus. During the first quarter of 2008, we amended
the credit agreement to reduce the construction/term loan portion of the
facility to $33.5 million and to increase the working capital portion of the
facility up to $10 million. The construction/term loan portion of the facility
is for a term of six years and the working capital facility revolves annually
upon conversion of the construction loan to a term loan. Both facilities have
. . .
|
|