Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc.
Reporting Period: Quarter and nine months ended August 31, 2005.
Status: Development stage company incorporated June 29, 2004.
Objective: Construct and operate a 50 million gallon dry mill fuel-grade ethanol plant in Iowa. The company has no current operating revenues and is focused on financing and pre-construction activities.
Key Financial Metrics
| Metric | Three Months Ended Aug 31, 2005 | Nine Months Ended Aug 31, 2005 | Inception to Aug 31, 2005 |
|---|---|---|---|
| Revenues | $0 | $0 | $0 |
| Net Loss | $(222,013) | $(563,027) | $(613,022) |
| Loss Per Share (Basic/Diluted) | $(0.29) | $(0.74) | $(0.86) |
| Cash and Equivalents | $93,498 (as of Aug 31, 2005) | ||
| Total Assets | |||
| Total Liabilities | $45,518 | ||
| Stockholders' Equity | $60,266 | ||
| Debt (Credit Lines) | $7,117 outstanding balance on two credit card lines |
Material Changes and Operational Status
- Revenue Generation: The company remains in the development stage with zero revenue. All activity is pre-operational.
- Expense Growth: Operating expenses for the nine months ended August 31, 2005, totaled $564,913, driven primarily by consulting/professional fees ($244,825) and general/administrative expenses ($320,088).
- Cash Flow: Net cash used in operating activities for the nine-month period was $521,678. Cash provided by financing activities (stock issuance) totaled $635,788 since inception.
- Capital Structure: 765,000 shares of common stock are outstanding. The company has raised approximately $637,500 in seed capital prior to its public offering.
Guidance, Outlook, and Risks
Financing Requirements
The company estimates a total project cost of approximately $75.9 million. To proceed, it must:
- Raise a minimum of $29.67 million and a maximum of $35.34 million in its public offering (currently holding escrowed deposits of approx. $33.86 million).
- Secure debt financing of approximately $36 million to $41.7 million. No binding debt agreements are currently in place.
- Obtain state/federal grants (e.g., $300k zero-interest loan and $100k forgivable loan from Iowa), which are contingent on closing financing.
Outlook
Management expects to spend the next 24 months on financing, design, and construction. Profitability is not expected until the plant is fully operational. The company anticipates producing 50 million gallons of ethanol and 160,000 tons of DDGS annually once operational.
Risks and Contingencies
- Financing Failure: If the minimum offering proceeds are not raised or debt financing is not secured by November 29, 2005, escrowed funds will be returned to investors, and the project may be abandoned.
- Market Risk: Future operations will be sensitive to corn and natural gas price fluctuations. The company plans to use hedging strategies but has no current operations to hedge.
- Management: The company currently lacks an experienced general manager and relies heavily on the President and Board for record-keeping.
- Product Sales: No agreements are currently in place to sell ethanol or animal feed products.
Investor Verification Checklist
- Escrow Status: Verify if the $33.86 million in escrowed deposits has been confirmed as firm subscriptions and if the November 29, 2005, deadline for closing is being met.
- Debt Commitments: Confirm the status of negotiations with prospective lenders for the required $36M+ in construction debt.
- Grant Eligibility: Verify the conditions for the Iowa state loans and grants, specifically the requirement to close financing before funds are released.
- Management Hiring: Check for the appointment of a General Manager or Project Manager to oversee construction.
- Site and Permits: Confirm the status of the property tax abatement from the City of Shenandoah and necessary regulatory permits.