UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
| x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended September 30, 2003
OR
| o | Transition report under Section 13 or 15(d) of the Exchange Act. |
For the transition period from to .
Commission file number 333-99065
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Minnesota
41-1997390
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
2448 – 540
th
Street, Suite 1
P. O. Box 216
Granite Falls, Minnesota 56241-0216
(Address of principal executive offices)
(320) 564-3100
(Issuer’s telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
State the number of shares outstanding for each of the issuer’s classes of common equity as of the latest practicable date: As of November 11, 2003, there were 1,417 units of Ownership outstanding.
Transitional Small Business Disclosure Format (Check one): o Yes x No
CONTENTS
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| No. | |||||
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| PART I. |
FINANCIAL INFORMATION
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| Item 1. |
Financial Statements
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2 | |||
| Item 2. |
Plan of Operation
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13 | |||
| Item 3. |
Controls and Procedures
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18 | |||
| PART II. |
OTHER INFORMATION
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| Item 1. |
Legal Proceedings
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18 | |||
| Item 2. |
Changes in Securities
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18 | |||
| Item 3. |
Defaults Upon Senior Securities
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19 | |||
| Item 4. |
Submission of Matters to a Vote of Security Holders
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19 | |||
| Item 5. |
Other Information
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19 | |||
| Item 6. |
Exhibits and Reports on Form 8-K
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19 | |||
|
SIGNATURES
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20 | ||||
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CERTIFICATIONS
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1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
C O N T E N T S
Page
3
4
6
7
2
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Balance Sheets
September 30,
December 31,
2003
2002
(Unaudited)
(Audited)
$
2,601
$
251,987
6,035
1,005
8,636
252,992
6,317
6,317
1,052
105
5,265
6,212
177,794
134,978
177,794
134,978
$
191,695
$
394,182
$
63,946
$
39,095
8,254
5,201
99,000
—
47,800
—
219,000
44,296
—
47,800
628,641
628,641
(655,946
)
(326,555
)
(27,305
)
302,086
$
191,695
$
394,182
Notes to Financial Statements are an integral part of this Statement.
3
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Statements of Operations
From Inception
Quarter Ended
Quarter Ended
(December 29, 2000)
September 30,
September 30,
to September 30,
2003
2002
2003
(Unaudited)
(Unaudited)
(Unaudited)
$
—
$
—
$
—
12,513
17,512
135,613
10,020
6,700
112,573
40,063
58,066
271,752
35,835
3,928
131,619
98,431
86,206
651,557
(98,431
)
(86,206
)
(651,557
)
32
1,330
3,969
—
—
1,000
(1,155
)
(1,175
)
(9,358
)
(1,123
)
155
(4,389
)
$
(99,554
)
$
(86,051
)
$
(655,946
)
$
(70.26
)
$
(64.41
)
$
(909.77
)
Notes to Financial Statements are an integral part of this Statement.
4
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Statements of Operations
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2003
2002
(Unaudited)
(Unaudited)
$
—
$
—
42,473
44,890
22,855
33,531
148,845
94,312
112,912
10,463
327,085
183,196
(327,085
)
(183,196
)
748
2,322
(3,054
)
(4,102
)
(2,306
)
(1,780
)
$
(329,391
)
$
(184,976
)
$
(232.46
)
$
(242.43
)
Notes to Financial Statements are an integral part of this Statement.
5
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Statements of Cash Flows
From Inception
Nine Months Ended
Nine Months Ended
(December 29, 2000)
September 30,
September 30,
to September 30,
2003
2002
2003
(Unaudited)
(Unaudited)
(Unaudited)
$
(329,391
)
$
(184,976
)
$
(655,946
)
947
—
1,052
(5,030
)
(2,435
)
(6,035
)
29,282
(30,900
)
63,946
3,053
4,102
9,357
(301,139
)
(214,209
)
(587,626
)
—
—
(6,317
)
—
—
(6,317
)
99,000
—
99,000
—
—
72,800
—
638,500
638,500
—
(35,962
)
(35,962
)
(47,247
)
(82,650
)
(177,794
)
51,753
519,888
596,544
(249,386
)
305,679
2,601
251,987
17,557
—
$
2,601
$
323,236
$
2,601
$
—
$
9,131
$
—
$
—
$
26,103
$
26,103
Notes to Financial Statements are an integral part of this Statement.
6
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
The statements included herein have been prepared by the company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments which are, in the opinion of
management, necessary to a fair presentation of the financial statements for
the interim period, on a basis consistent with the annual audited financial
statements. The adjustments made to these statements consists only of normal
recurring adjustments. These financial statements should be read in
conjunction with the financial statements and the summary of significant
accounting polices and notes thereto included in the company’s Registration
Statement on Form SB-2, as amended (SEC Registration No. 333-99065).
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company, which anticipates its plant location to be near Granite Falls,
Minnesota, was organized to fund and construct a 40 million gallon ethanol
plant with distribution to upper Midwest states. In addition, the Company
intends to produce and sell distillers dried grains as a co-product of ethanol
production. Construction is anticipated to begin in 2004. As of September 30,
2003, the Company is in the development stage with its efforts being
principally devoted to organizational, project feasibility, equity raising and
permitting activities.
Fiscal Reporting Period
The Company has adopted a fiscal year ending December 31 for reporting
financial operations.
Accounting Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could differ from those
estimates.
Significant estimates include the deferral of expenditures for offering costs
which are dependent upon successful financing and project development, as
discussed below. It is at least reasonably possible that these estimates may
change in the near term.
7
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
Cash
The Company maintains its accounts at one financial institution which is a
member of the Company. At times throughout the year, the Company’s cash
balances may exceed amounts insured by the Federal Deposit Insurance
Corporation.
Deferred Offering Costs
The Company defers the costs incurred to raise equity financing until that
financing occurs. At such time that the issuance of new equity units occurs,
these costs will be netted against the proceeds received; or if the financing
does not occur, they will be expensed.
Equipment
Equipment is stated at the lower of cost or estimated fair value. Depreciation
is provided over an estimated useful life of five years by use of the straight
line depreciation method. Depreciation expense for the nine months ending 2003
and 2002 was $947 and $0, respectively. Maintenance and repairs are expensed
as incurred; major improvements and betterments are capitalized.
Fair Value of Financial Instruments
The fair value of the Company’s cash and note payable to Granite Falls Bank
approximates its carrying value. It is not currently practicable to estimate
the fair value of the notes payable to the City of Granite Falls since these
agreements contain unique terms, conditions, and restrictions, which were
negotiated at arm’s length with the City of Granite Falls, as discussed in Note
3, there is no readily determinable similar instrument on which to base an
estimate of fair value.
Grants
The Company will recognize grant income as other income for reimbursement of
expenses incurred upon complying with the conditions of the grant. For
reimbursements of capital expenditures, the grants are recognized as a
reduction of the basis of the asset upon complying with the conditions of the
grant.
8
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
Income Taxes
Granite Falls Community Ethanol Plant, LLC is treated as a partnership for
federal and state income tax purposes and generally does not incur income
taxes. Instead, its earnings and losses are included in the income tax returns
of the members. Therefore, no provision or liability for federal or state
income taxes has been included in these financial statements.
Reclassification
Certain amounts in the Statement of Operations for 2002 and Inception to date
have been reclassified to conform to 2003 classifications. These
reclassifications had no effect on net loss as previously reported.
2. DEVELOPMENT STAGE ENTERPRISE
The Company was formed on December 29, 2000 to have an indefinite life. The
Company was initially capitalized by proceeds from notes payable to the City of
Granite Falls, Minnesota and later by contributions from its founding members
and additional seed capital investors. The seven founders contributed an
aggregate of $55,000 for 700 units and subsequently the Board of Governors
approved a 1:2 reverse membership unit split for the founding members. In
addition, six of the seven founding members agreed to return to the Company
one-half of each of their remaining units, thereby reducing the number of units
held by each such founding member to twenty-five. Sixty-five members,
including six of the founders or their affiliates, contributed an additional
aggregate of $583,500 for 1,167 units that were issued between March and July
2002 pursuant to a private placement memorandum. On July 31, 2002, the Company
discontinued selling units under the private placement memorandum. In August
2002, the Company converted a $25,000 note payable plus accrued interest to the
City of Granite Falls to 50 membership units. Net Loss Per Unit retroactively
reflects the two 1:2 reverse membership unit splits as well as the return of
units to the Company by the founders.
Income and losses are allocated to all members based upon their respective
percentage units held. See Note 4 for further discussion of members’ equity.
9
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
3. NOTES PAYABLE
At September 30, 2003 and December 31, 2002, the Company has $47,800 of notes
payable with the City of Granite Falls, Minnesota due on January 1, 2003,
subsequently extended to January 1, 2004, including interest at 7%. All notes
are secured by terms and conditions of the Development Agreement dated February
2, 2001, and subsequently amended, between the City and the Company. The
repayment of up to the entire amount may be forgiven subject to the covenants
set forth in the Development Agreement.
Under the terms of the Development Agreement, partial forgiveness of the notes
payable would have occurred if construction or commencement of construction or
the letting of a contract for the construction of the project occurs on or
before January 1, 2003. The notes payable can be forgiven at a rate of $5,000
for each job created, up to ten jobs, within six months of the start-up of
operations of the facility, provided each job pays a gross annual wage or
salary of not less than $24,500. In addition, upon the completion of financing
and organizational startup, $25,000 of the notes payable may be converted to
equity with a market value of $25,000 or more. In August 2002, the City
Council of Granite Falls approved the conversion of a $25,000 note due from the
Company plus accrued interest into fifty membership units. The notes payable
are completely forgiven, in their entirety, if the project is abandoned.
As of September 30, 2003, the Company has a line of credit from a bank expiring
January 15, 2004 at a maximum of $200,000 with an interest rate of 5.75% and
secured by a separate security agreement and guaranteed by two members of the Company. The
outstanding balance as of September 30, 2003, was $99,000.
4. MEMBERS’ EQUITY
As specified in the Company’s operating agreement, the Company initially will
have one class of membership units. No member shall transfer all or any
portion of an interest without the prior written consent of the Board of
Governors. The Company has prepared an SB-2 Registration Statement for a
minimum of 18,000 units and a maximum of 30,000 units which will be available
for sale at $1,000 per unit with a minimum investment of $5,000. During
February 2003, the Company’s Registration Statement was declared effective.
Should the Company not raise the minimum of $18,000,000 through the offering by
June 30, 2003, the offering period may be extended on two occasions of up to 90
days each. As of September 30, 2003, the Company has not met the minimum
equity and has elected to extend their offering to December 27, 2003. Should
the Company not raise the minimum $18,000,000 through the extension period(s),
the capital raised through the offering will be returned to the respective
investors. As of September 30, 2003, the Company has received
subscriptions for approximately 6,160 membership units or an
aggregate of $6,190,000 subscription payments.
10
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
5. COMMITMENTS AND CONTINGENCIES
The Company has signed a letter of intent with a general contractor, who is
also a member, for various design and construction services. The letter of
intent stipulates that the engineer and general contractor will be engaged to
construct a plant for approximately $43 million. The Company intends to begin
construction in 2004 and anticipates total project costs to approximate $55
million.
In addition to the equity the Company intends to raise by December 27, 2003 of
$18 to $30 million, the Company will need to obtain debt financing of $25 to
$37 million, depending upon the amount of equity raised, to fund the cost of
the project. The Company needs to obtain a debt financing commitment by
January 27, 2003. The Company does not currently have a written commitment to
obtain the additional debt financing. The Company had originally intended to
raise the minimum equity by June 30, 2003, but has elected to exercise
extensions to December 27, 2003.
In February 2002, the Company executed an energy management and engineering
service agreement with an organization that will provide economic comparisons
and engineering cost estimates. The total initial commitment for this
agreement is $20,000 plus a maximum of $2,500 for travel expense. As of
September 30, 2003, $37,750 of these costs are included in accounts payable.
The agreement expired in October 2002 and was extended for seven months. In
May 2003, the Company terminated this agreement.
In fiscal 2001, the Company made a nominal payment to obtain an option to
purchase approximately 31.72 acres of land for a price of $168,000. This
option will expire on December 31, 2003. The Company is considering this
parcel of land as a viable site for their ethanol plant.
In March 2003, the Company made a nominal payment to obtain an option agreement
to purchase approximately 25.3 acres of land for approximately $168,000. This
agreement gives the Company until December 31, 2004 to exercise this option.
In March 2001, the Company executed an agreement, as subsequently amended, with
a member to serve as project coordinator. The agreement pays a maximum of
$5,000 per month, renews every thirty days, and may be terminated by the
Company at any time with no less than 10 days written notice.
11
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Financial Statements
September 30, 2003
In February 2003, the Company entered an agreement with unrelated party for the
Company’s project consultant. The agreement pays $1,250 per week, with a
one-time bonus of $40,000 ($20,000 minimum in Company stock), if, after the
Company has raised the minimum amount of equity required to close on its public
offering, and as required by a prospective lender to secure a loan adequate to
finance the Company’s project. As of September 30, 2003, $1,747 of these costs
are included in accounts payable.
In April 2003, the Company entered an agreement with David E. Thompson, a
principal of Flolo-Thompson, Inc. (FTI), to primarily focus on transportation,
with an emphasis on rail rates, competing modes, transloading alternatives,
potential rail-water outlets and new types of rail equipment. The consulting
fee will be $75 per hour plus any out-of-pocket expenses, with fees prior to
start up at a maximum of $10,000, of which $5,000 will be at risk. As of
September 30, 2003, $292 of these costs are included in accounts payable.
6. GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net
loss of $655,946 from inception to September 30, 2003. The Company has spent
approximately $135,000 for engineering, permitting, and water resource
exploration which have been expensed. The Company has incurred a shortage of
operating cash. The Company had not raised the minimum offering by June 30,
2003 and extended its offering a final time through December 27, 2003. These factors create
an uncertainty about the Company’s ability to continue as a going concern.
Management of the Company has obtained a line of credit and is seeking
additional grants, although they have not yet secured any commitments for such
grants. The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
7. SUBSEQUENT EVENT
In October 2003, the Company entered into a corn storage and grain handling
agreement with a member. The parties agree that their obligations shall be
subject to and conditioned upon final approval by the lenders and final
financial close of the public offering. In addition, the member does agree
that it shall execute a subscription agreement in connection with the above
referenced public offering and that the minimum subscribed amount and
contribution with respect to the project represented thereby shall be no less
than $500,000.
12
(A Development Stage Company)
Table of Contents
(A Development Stage Company)
Table of Contents
(A Development Stage Company)
Table of Contents
(A Development Stage Company)
Table of Contents
(A Development Stage Company)
Table of Contents
(A Development Stage Company)
Table of Contents
Item 2. Plan of Operation.
This report contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in our Registration Statement on Form SB-2, as amended (SEC Registration No. 333-99065) and appearing elsewhere in this report. We are not under any duty to update the forward-looking statements contained in this report. We cannot guarantee future results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.
Overview
We are a start-up limited liability company. We plan to build an ethanol processing plant that will produce ethanol and dry distillers grains utilizing corn as the feed stock. We plan to locate the plant near Granite Falls, Minnesota on two parcel 56 acre site we have options to purchase. We expect our plant to consume approximately 15 million bushels of corn annually, and produce approximately 40 million gallons of fuel-grade ethanol and 130,000 tons of distillers grains for livestock and poultry feed annually.
We filed a Registration Statement on Form SB-2 (SEC Registration No. 333-99065), as amended (the “Registration Statement”), with the Securities and Exchange Commission, which became effective on February 10, 2003, for an initial public offering of an aggregate minimum of 18,000 and an aggregate maximum of 30,000 Membership Units priced at $1,000 per Unit (the “Offering”). We have until December 27, 2003 to complete this Offering. See “Liquidity and Capital Resources.”
We expect that the project will cost a total of approximately $55,000,000. We have raised $638,500 in seed capital and plan to raise a minimum of $18,000,000 and a maximum of $30,000,000 in equity pursuant to the Offering and secure the balance through debt financing. We will require a significant amount of debt financing to complete the project. The amount of debt financing required depends on the amount of equity we raise in the Offering. We will close on the entire Offering when we raise the minimum amount offered and secure a commitment from a lender for our debt financing. Although we are reviewing proposals from multiple lenders, we currently have no agreement with any lender for the debt financing that we need. Assuming we raise the minimum amount of equity through the Offering, we have until January 27, 2003 to secure our debt financing. If we do not secure the debt financing that we need, we will not be able to construct our proposed ethanol plant and may have to liquidate our assets and abandon our business. See “Liquidity and Capital Resources.”
We expect that it will take 14-16 months from the date we close the Offering and secure our debt financing to construct the ethanol plant subject to additional delays due to permitting and adverse weather conditions. We have no agreement with any party to sell any of our expected production. We plan to pay commissions or fees to distributors to market and sell our products. We intend to hire staff only for direct operations of our ethanol business.
13
We plan to use the calendar year as our fiscal year.
Plan of Operation to Close of the Offering
We are not using any underwriter or selling agents to sell the Units being offered pursuant to our Public Offering. Our officers and Board of Managers are personally handling the sales efforts and the necessary investor meetings and follow up will require the bulk of our attention to the close of the Offering.
In addition to our sales efforts, we are in the process of finalizing various air and water permitting requirements with the Minnesota Pollution Control Agency and with the Minnesota Department of Natural Resources, respectively, which we anticipate obtaining.
We have retained a consultant to negotiate our rail contract and he is working with both the TC&W railroad and the Burlington Northern Sante Fe railroad.
The natural gas commitments to our site are being negotiated both as to cost and a final provider contract. We are also working to finalize agreements with our electrical service provider.
We have entered into an option agreement to acquire an additional 25 acres of land adjoining our original 31 acre plant site for which we also have an option. This additional land will allow us to better locate the actual plant on the site and provide land that we intend to lease to Farmers Cooperative Elevator Company. We have obtained from the City of Granite Falls an orderly annexation agreement to rezone our plant on these two sites as one parcel contingent on completing the offering.
Farmers Cooperative Elevator, a member of the Company, agreed to build a new elevator on our plant site. In October 2003, we entered into a Corn Storage and Delivery Agreement with Farmers Cooperative Elevator for the land lease and corn procurement which is subject to lender approval and the closing of the Offering.
We also are meeting with potential marketers for our ethanol and distillers dried grains. We will seek to have arrangements completed for marketing well before the plant is completed.
Finally, we continue to seek and negotiate with potential lenders for our long-term debt financing. Currently, we are reviewing proposals from various lenders; however, no decision has been made.
Plan of Operation to Start-Up of Ethanol Plant
If we close on the Offering and the debt financing that we need, we plan to spend the following 14 – 16 months designing, developing and constructing the ethanol plant. We believe that the proceeds of the Offering and the necessary debt financing will provide sufficient cash on hand to cover development costs, including, but not limited to, installation of utilities, construction, equipment acquisition, and interest expenses. In addition we expect to have sufficient cash on hand to cover our operating and administrative costs, such as raw materials, personnel, general and administrative expenses and legal and accounting fees for the first few weeks of operations until we begin collecting payment for the ethanol and distillers grains we produce and sell.
The following is an estimate of our sources and uses of funds until the ethanol plant is built and we begin operations. The information set forth below is only an estimate and actual sources and uses of
14
funds could be much higher due to a variety of factors, including those
described in the Registration Statement and elsewhere in this report.
SOURCES OF FUNDS:
USES OF FUNDS:
(1) We estimate that total land and site development costs will approximate
$2,500,000 to meet the contractor’s requirements. These costs include:
Purchase of 31 acre land parcel $168,000, obtaining all legal authority to use
the site for its intended purpose, installation of natural gas, electrical and
water supply infrastructure.
(2) We anticipate expending approximately $200,000 to build a 2,600 square foot
light office administration building on the site and install our computer and
telephone systems, furniture and other office equipment.
(3) We have budgeted $750,000 to design and construct a 3,400 foot rail spur
from our plant site to the TC&W main rail line and to purchase and install the
associated switching gear.
(4) Capitalized interest consists of the interest we anticipate accruing during
the development and construction period of our project. We plan to borrow
between $25 and $37 million, depending upon the amount we raise in the
offering. Our actual capitalized interest will vary on the amount we borrow
and the applicable interest rate.
(5) Financing costs consist of all costs associated with the procurement of our
$25 to $37 million of project debt financing. These costs include bank
origination and legal fees, loan processing fees, appraisal and title insurance
charges, recording and deed registration tax, our legal and accounting fees
associated with the financing and project coordinator fees, if any, associated
with securing the financing. Our actual financing costs will vary on the
amount we borrow.
(6) We project $4,800,000 of start-up costs. These represent costs of
beginning production after the plant construction is finished but before we
begin generating income. Start-up costs include $600,000 of pre-production
period expenses, $1,500,000 of initial inventories of corn and other
ingredients and chemicals, our initial $500,000 of work-in-process, $950,000 of
ethanol and dry distillers grain inventories, $500,000 of spare parts for our
process equipment, and $750,000 of working capital.
15
We expect to spend the majority of our funds, approximately $46,000,000,
on site acquisition, site preparation, and construction of the ethanol plant,
infrastructure and equipment. These costs include leveling and grading the
site, general site work to prepare for construction of the ethanol plant,
preparing and pouring foundations, and material and labor to construct the
plant and ancillary facilities. We will also be purchasing and installing
ethanol production equipment, such as pumps, grinders, processing equipment,
storage tanks and conveyors. Fagen, Inc., our contractor, will handle
construction, equipment purchases and installation, which we will pay for by
making monthly progress payments based on the work completed and invoiced to us
by Fagen.
Administration
We currently employ a project coordinator and a project consultant. We do
not have a full-time office staff and we do not expect to retain one until the
ethanol plant is near completion. Until then, we are dependent on our
part-time officers and the board of managers to maintain our books and records.
These individuals are responsible for complying with the rules and regulations
promulgated under the Securities and Exchange Act of 1934 concerning the
maintenance of accurate books and records, and the timely submission of
periodic reports and other requirements with the Securities Exchange
Commission.
Operating Expenses
When the ethanol plant nears completion, we expect to incur various
operating expenses, such as supplies, utilities and salaries for administration
and production personnel. Along with operating expenses, we anticipate that we
will have significant expenses relating to financing and interest. We have
allocated funds in our capital structure for these expenses, but cannot assure
you that the funds allocated will be sufficient to cover these expenses. We
may need additional funding to cover these costs if sufficient funds are not
available or if costs are higher than expected.
Employees
Upon completion of the ethanol plant, we expect to have approximately 30
employees, including 20 in ethanol production operations, and ten in general
management and administration. We will not maintain an internal sales
organization. We anticipate that we will need the following personnel to
operate and manage our ethanol plant:
The position titles, job responsibilities and numbers allocated to each
position may differ when we begin to employ individuals for each position.
16
In
October 2003, we engaged the Farmers Cooperative Elevator Company, a
member of the Company, to
serve as our commodities manager to manage our corn supply and hedging
positions.
Liquidity and Capital Resources
As of
September 30, 2003, we had cash and cash equivalents of $2,601 and
total assets of $191,695. We raised $638,500 in seed capital which we have
used to fund our organization and operation to date. As of September 30, 2003,
we had current liabilities of $219,000, which consists primarily of accounts
payable, a Note to the City of Granite Falls in the amount of $47,800 due
January 1, 2004 and a note payable to Granite Falls Bank for $99,000 due on
January 15, 2004. Total members’ equity as of September 30, 2003 was $(27,305).
Since inception, we have generated no revenue from operations, and cash flows
provided by financing activities through September 30, 2003 consists primarily
of member contributions.
As of September 30, 2003, our current liabilities exceed our current
assets and our total liabilities exceed our total assets. We have continued to
incur losses since that time. In order to cover our cash shortfall we are
seeking to arrange loans and grants to bridge our liquidity to closing of the
Offering. We have not as yet secured any commitments for such
financing. We have available $101,000 under our line of credit with
Granite Falls Bank.
We are seeking to raise a minimum of $18,000,000 and a maximum of
$30,000,000 in the Offering. We believe the project will cost a total of
approximately $55,000,000. We plan to finance the project with seed capital,
proceeds from the Offering, any grants we are able to obtain and debt
financing. Other than forgivable loans from the City of Granite Falls totaling
$47,800, we have no commitment for any other grants. We do not have any
commitments for the debt financing that we need. Completion of the proposed
ethanol plant depends on our ability to satisfy all conditions to breaking
escrow and close on the entire Offering.
We expect that our debt financing will be in the form of a construction
loan that will convert to a permanent loan when we begin operations. We also
expect that the loan will be secured by all of our real property and
substantially all of our other assets, including receivables and inventories.
In addition to repaying the principal, we plan to pay interest at market rates
for loans to start-up ethanol projects, plus annual fees for maintenance and
observation of the loan by the lender. We intend to capitalize all of our
interest until we commence start-up operation, which means that we will not
make any payment on the loan until we construct the ethanol plant and begin
producing ethanol. We expect that our debt financing will consist of a
construction loan with a term of 16 months which will then convert to a
permanent loan when we begin operations. We expect that the permanent loan
will be for a term of 120 months. We expect to repay the permanent loan
through fixed monthly payments of principal and interest beginning after we
commence operations. If the project suffers delays, we may not be able to
timely repay the loan. If interest rates increase, we will have higher
interest payments, which could adversely affect our business.
The amount of debt financing that we need depends on the amount of equity
we raise in the Offering and whether we receive any of the grants we intend to
pursue. We intend to seek debt financing from lenders who have provided debt
financing to other ethanol projects in the past or who have expressed an
interest in providing debt financing to ethanol projects. We plan to locate
these lenders by contacting lenders who currently provide debt financing to the
ethanol industry. These lenders include farm credit system financial
institutions with Title I and Title II authority under the Farm Credit Act,
other state or federally chartered financial institutions, and insurance
companies.
17
MINIMUM
MAXIMUM
18,000,000
30,000,000
(225,000
)
(225,000
)
638,500
638,500
37,000,000
25,000,000
55,413,500
55,413,500
43,050,000
2,500,000
200,000
750,000
500,000
1,000,000
800,000
750,000
425,000
4,800,000
54,775,000
Table of Contents
Position
No. of Employees
1
1
1
1
1
3
4
1
5
12
30
Table of Contents
Table of Contents
Item 3: Controls and Procedures.
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and the principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, the principal executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
There was no change in the Company’s internal controls over financial reporting subsequent to the date of such evaluation that significantly affected, or could significantly affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The Securities and Exchange Commission originally declared our Registration Statement on Form SB-2 (SEC Registration No. 333-99065), as amended (the “Registration Statement”), effective on February 10, 2003. We commenced our initial public offering of our membership units on February 10, 2003. We have no underwriter and our officers and governors are selling the membership units on our behalf directly to investors. We have not obtained and do not plan to use the services of any placement agent or broker-dealer for this offering. We do not pay our officers or managers any compensation for services related to the offer or sale of the units.
We registered a maximum of 30,000 membership units with an aggregate gross offering price of $30,000,000, or $1,000.00 per unit. Each membership unit represents a pro rata ownership interest in our capital, profits, losses and distributions. Investors must purchase a minimum of five membership units ($5,000 minimum investment). We require an aggregate minimum purchase of $18,000,000 by all investors (including purchases by our existing governors and members or their affiliates) before we will accept any subscriptions. When an investor subscribes, that investor must remit 10% of the purchase price for the membership units the investor is purchasing. The investor will sign a promissory note agreeing to pay the 90% balance within 20 days after we send the investor a written notice to pay. We will send that notice after we receive written subscriptions totaling a minimum of $18,000,000. We have extended the closing date for our offering from September 30, 2003 to December 27, 2003, and the date by which our debt financing commitment must be secured to January 27, 2003.
We are holding all funds received from investors in an interest-bearing escrow account at Granite Falls Bank, our escrow agent, until we receive the minimum subscription amount of $18,000,000 and secure a written commitment from one or more lenders for debt financing to construct and start-up the plant. The board of governors, in its discretion, may extend the offering period (and the time we hold investor funds in our escrow account) beyond June 30, 2003 on one more occasion of up to 90 days each upon written notice to our escrow agent. In September 2003, we extended the offering for a final time until December 27, 2003.
18
As of September 30, 2003 and November 11, 2003, we received subscriptions for approximately 6,160 and 6,671 membership units, respectively, or an aggregate of $6,160,000 and $6,671,000 of subscription payments, respectively. We have not yet met the conditions to breaking escrow and therefore have not completed the sale of any of the membership units subscribed. We will not break escrow and complete the sale of any of the units subscribed until we raise at least the minimum amount offered.
From February 10, 2003 (the effective date of the Registration Statement) to September 30, 2003, total expenses incurred related to the Offering were approximately $290,175, of which $87,591 was incurred for the quarter ended September 30, 2003. None of these payments were direct or indirect payments to our managers, officers or their associates, persons owning 10% or more of any class of our equity securities or our affiliates. From February 10, 2003 to September 30, 2003, we did not receive or use any net offering proceeds.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein:
| 3.2 | Third Amended and Restated Operating and Member Control Agreement (Incorporated hereby by reference to Appendix A to the Company’s Form 424(B)(3) filed on February 12, 2003 (SEC Registration No. 333-99065) | ||
| 4.1 | Escrow Agreement, as amended (Incorporated herein by reference to Exhibit 4.2 to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form SB-2 filed on February 7, 2003 (SEC Registration No. 333-99065) | ||
| 4.2 | Letter to the Escrow Agent notifying them of intent of the Company to extend offering 90 days from June 30, 2003 (Incorporated herein by reference to Exhibit 4.2 of the Company’s Form 10-QSB for the period ended June 30, 2003) | ||
| 10.1 | Form of Subscription Application and Agreement (Incorporated hereby by reference to Appendix B to the Company’s Form 424(B)(3) filed on February 12, 2003 (SEC Registration No. 333-99065) | ||
| 10.2 | Corn Storage and Delivery Agreement and Pre-Closing Memorandum dated October 6, 2003 between the Company and Farmers Cooperative Elevator Company* | ||
| 31.1 | Certification by the Chief Manager/Chairman of the Board pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||
| 31.2 | Certification by the Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||
| 32 | Certification by the Chief Manager/Chairman of the Board and the Treasurer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (this Exhibit is “furnished” pursuant to SEC rules, but is deemed not “filed”)* |
* Filed herewith
(b) Reports on Form 8-K:
None.
19
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GRANITE FALL COMMUNITY ETHANOL PLANT, LLC | ||
| Date: November 13, 2003 | /s/ Paul Enstad | |
|
|
||
| Paul Enstad | ||
| Chief Manager and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| Date: November 13, 2003 | /s/ Julie Oftedahl-Volstad | |
|
|
||
| Julie Oftedahl-Volstad | ||
| Treasurer | ||
| (Principal Financial and Accounting Officer) |
20
EXHIBIT 10.2
PRE-CLOSING MEMORANDUM
The undersigned, being the signatories to a Declaration of Restrictions and Covenants and to a Corn Storage and Delivery Agreement both of which are attached hereto and made a part hereof, do by their execution hereof supplement and/or modify the terms and conditions of the same as follows:
| 1. | The parties agree that their obligations under the attached Declaration of Restrictions and Covenants and attached Corn Storage and Delivery Agreement and documents, agreements and/or instruments referred to therein shall be subject to and conditioned upon final approval by the lendors of the respective parties; and final financial close of the public offering made in connection with the project represented thereby and as determined solely by the Board of Governors for the Granite Fall Community Ethanol Plant, LLC. |
| 2. | In addition, the parties agree that upon lender approval and financial close, that they will also thereupon complete and append to the Declaration of Restrictions and Covenants a completed form of Exhibits A, B, C and D as referred to in said Declaration. |
| 3. | In addition, by its execution hereof, Farmers Cooperative Elevator Company does agree that it shall execute a Subscription Agreement in connection with the above referenced public offering and that the minimum subscribed amount and contribution with respect to the project represented thereby shall be no less than $500,000.00. |
| 4. | Any dispute arising hereform, shall be subject to dispute resolutions provided in Article 21 of the Declaration of Restrictions and Covenants. |
IN WITNESS WHEREOF, the parties have executed this Pre-Closing Memorandum to be effective on this 6 th day of October, 2003.
| GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC | ||||||
| By: | /s/ Julie Oftedahl-Volstad | |||||
|
|
||||||
| Its: |
Secretary/Treasurer
|
|||||
| FARMERS COOPERATIVE ELEVATOR COMPANY | ||||||
| By: | /s/ James Hoepner | |||||
|
|
||||||
| Its: |
President
|
|||||
CORN STORAGE AND DELIVERY AGREEMENT
This Corn Storage and Delivery Agreement (“Agreement”) is made this 6 th day of October, 2003 by and between Granite Falls Community Ethanol Plant, LLC, a Minnesota limited liability company (“GFCEP”) and Farmers Cooperative Elevator Co., a Minnesota cooperative association (“FCE”) and is as follows:
RECITALS
1. GFCEP has contemporaneously recorded a Declaration of Restrictions and Covenants as to property to be conveyed to FCE and upon which FCE will construct and operate grain storage and handling facilities to service GFCEP’s adjoining corn dry milling ethanol plant (“Mill”).
2. In addition to the foregoing, the parties wish to enter into additional agreements necessary to further define FCE’s obligations with respect to grain storage and handling; and to make certain additional agreements with respect to purchase of corn required for Mill operations.
3. The parties have reached agreement and wish to reduce the same to writing.
NOW, THEREFORE, in consideration of the terms set forth herein, the parties agree:
1. CONDITIONS .
| a. | Conditions Precedent. Conditions precedent to GFCEP’s obligations hereunder shall be: |
| i. | Execution and recording of a Declaration of Restrictions and Covenants (“Declaration”) as to the property conveyed by GFCEP to FCE, of even date herewith, containing terms and conditions acceptable to GFCEP, and to which FCE consents. |
| ii. | Construction of the Improvements by FCE, as defined in the Declaration, in accordance with the specifications and timelines as set forth therein. |
| iii. | That FCE shall be a member in good standing of GFCEP. FCE shall perform all other obligations as set forth in any written agreements, existing now or in the future, between GFCEP and FCE, which agreements presently include this Corn Storage and Delivery Agreement, the Declaration, an Operating Agreement dated , and a Subscription Agreement dated 9-5-03. |
| b. | Conditions Subsequent. Conditions subsequent required of FCE, in addition to the other terms and conditions stated herein, shall be: |
| i. | That at all times, FCE shall be in material compliance with the Declaration as referred to above. |
| ii. | That at all times, FCE shall be in compliance with matters described at Section 1(a)(iii) above. |
| iii. | That at all times, FCE’s performance of this Agreement shall be consistent with the terms and conditions hereof and with the requirements of GFCEP’s with respect to its Mill. |
2. TERM .
| a. | Initial Term. The initial term of this Agreement commences on , 2003 (the “Commencement Date”) and, unless sooner terminated by default, expires on (“Original Term”). |
| b. | Extension. Provided FCE is not in default at the expiration of the Original Term, or at the expiration of any extension, or except as otherwise expressly provided herein, this Agreement shall automatically extend for additional terms of five (5) years each unless and until the parties, by mutual agreement, terminate the Declaration referred to above, or mutually agree to separately terminate this Agreement. |
| c. | Effective Date. This Agreement shall become effective on the date determined by the GFCEP’s Board of Governors, by resolution, as the date on which the Mill begins operating and begins accepting corn for delivery (the “Effective Date”). Until the Effective Date is set by the GFCEP’s Board of Governors, in its sole discretion, the GFCEP has no obligation to accept corn from the FCE. GFCEP shall notify FCE in writing of the estimated Effective Date at least twelve (12) months in advance. GFCEP shall notify FCE of the Effective Date at least thirty (30) days in advance. |
3. STORAGE AND DELIVERY OBLIGATIONS . With respect to storage and delivery obligations:
| a. | Storage Capacity. Upon the Effective Date, FCE shall at all times make available no less than 470,000 bushels of storage for corn to be stored on behalf of GFCEP and/or to be purchased by GFCEP for operation of its Mill. Any proposed increase in storage by FCE shall be subject to GFCEP’s advance written consent. Irrespective of the amount of storage owned by FCE pursuant to the Declaration, FCE shall at all times make available the amount of storage as provided above, and shall, at all times, maintain adequate facilities, either adjoining the Mill or elsewhere, to meet all corn purchase orders required by GFCEP (to include any increase necessitated by any expansion of the Mill). |
2
| b. | Delivery Estimates. GFCEP agrees to provide to FCE an estimate on or before the first day of each calendar quarter with respect to its required deliveries of corn for the following calendar quarter. The parties expressly understand that GFCEP’s notice shall be a good faith estimate and that the parties anticipate reasonable variations between delivery forecast and actual delivery requirements. To that end, GFCEP shall also report to FCE on or before the first business day of each month its estimated delivery requirement of corn for the following month. |
| c. | Delivery Systems. With respect to delivery of corn stored at FCE to the Mill, FCE shall at all times maintain all delivery systems necessary to deliver corn from FCE’s storage facilities to the Mill in good working and operating order and shall make all deliveries to the Mill at the time and in the amount as required by GFCEP. |
| d. | Security. Upon GFCEP’s request, FCE shall issue warehouse receipts for corn owned by GFCEP and stored with FCE. In addition, upon GFCEP’s request FCE shall obtain a warehouseman’s or other form of surety bond which shall fully insure GFCEP for the full value of all corn owned by GFCEP and stored with FCE. At all times, FCE shall have in effect insurance, in the amount of full insurance value, with respect to loss of Corn due to fire, storm or other peril for which GFCEP is unable to obtain insurance. |
4. CORN SPECIFICATIONS . All corn delivered by FCE to GFCEP hereunder shall:
| a. | Corn. Be number 2 yellow corn; |
| b. | Grading. Be graded in accordance with state and federal laws and in accordance with any mutually agreed upon standards set by the parties; and the purchase price for corn shall be subject to discounts in purchase price as set forth on Exhibit A attached hereto and made a part hereof; |
| c. | Merchantable and Quality. Be merchantable and not adulterated; |
| d. | Title Upon Delivery to GFCEP. Be free and clear of all liens and encumbrances. |
5. ADMINISTRATION OF AGREEMENT . With respect to carrying out the terms and conditions hereof, the parties agree:
| a. | Office Space. GFCEP shall make available to FCE reasonable office space in Mill offices such that FCE personnel may carry out their duties and obligations hereunder. |
3
| b. | Non-exclusive Storage. GFCEP acknowledges that the storage facilities owned by FCE may be used from time to time for storage of grain delivered to FCE and unrelated to operations of the Mill. GFCEP consents to such use provided, however, that the same in no way materially impairs the ability of FCE to store and/or deliver corn to the Mill in the amount required by GFCEP at any time. |
| c. | Purchases. The parties acknowledge and agree that GFCEP shall purchase all of its corn requirements from FCE and shall place all actual orders for purchase of corn to be delivered to the Mill with FCE. At all times, FCE, either through its own management or through lawful contracts entered into with third parties, shall maintain or cause to be maintained such licenses and/or authorities as may be required to lawfully engage in the purchase and sale of corn. |
| d. | Risk Management. Notwithstanding the foregoing, GFCEP acknowledges that it shall separately retain appropriate risk management services for evaluating corn pricing and purchases and/or for making trades for price protection and future delivery such as options, future contracts and the like. |
| e. | FCE Obligations. In consideration for the payment, as set forth at Section 6(a), FCE shall perform all work as required by GFCEP with respect to arranging for purchase, transportation, accepting delivery, drying or conditioning, security of, delivering to the Mill, and all other work necessary to cause corn purchased by GFCEP to be delivered to the Mill at the times and in the amounts required by GFCEP. |
6. PAYMENT . With respect to payment:
| a. | Administrative Fee. GFCEP shall pay to FCE and FCE shall accept from GFCEP the sum of 5.3¢ per bushel for each bushel of corn purchased for use at the Mill and delivered through FCE. |
| b. | Excess Storage. |
| i. | In the event that GFCEP requires storage of corn at FCE, for which it has taken ownership and actual delivery, in an amount in excess of ten (10) days supply for the Mill (approximately 470,000 bushels) then GFCEP shall pay to FCE an additional 2¢ per bushel per month (or prorated portion thereof) for the use of such additional storage. |
| ii. | If such excess amount is stored for the benefit of GFCEP, but if GFCEP has not yet paid for such corn then GFCEP shall also pay to FCE a carrying cost for such excess in an amount equal to the amount of interest accrued by FCE (rounded up to the nearest half |
4
| percentage point) and attributable to FCE’s loan obligations for such bushels of corn based upon FCE’s then existing operating loan for grain purchases. |
| c. | Corn Purchase Price. With respect to corn purchases, the price paid for all such purchases shall be as determined from time to time by FCE. GFCEP shall make all cash purchases of corn from FCE. The purchase price (subject to the discounts provided for herein) shall be comparable to that paid to other buyers of corn located within a 20 mile radius of Granite Falls, Minnesota on the day of purchase. Even though on any given day, the board price for corn at the FCE, Granite Falls location may not be the same as the average board price of other grain buyers nearby, it is the intent of the parties that over time the board price at the FCE, Granite Falls location will be equal to or slightly greater than the average board price for other licensed grain buyers of corn located within a 20 mile radius of Granite Falls, Minnesota for the same time period. FCE and GFCEP shall independently track the board price of other licensed corn buyers within a 20 mile radius of Granite Falls and shall, from time to time, compare the data to the board price for corn at the FCE, Granite Falls location to verify that its board price for corn is consistent with the intent of this Agreement. Additionally, FCE shall offer to sell to GFCEP forward purchases of corn as FCE’s corn position allows. |
| d. | Payment. All payments for purchase of corn together with the administrative fee associated with such purchase (and as set forth at Section 6(a) above) shall be made by GFCEP no later than Tuesday of the week following date of purchase. All other payments required hereunder shall be made on or before the first business day of the month following the month in which the obligations are incurred by GFCEP. |
7. FORCE MAJEURE . In case of fire, explosions, interruption of power, strikes or other labor disturbances, lack of transportation facilities, shortage of labor or supplies, floods, action of the elements, riot, interference of civil or military authorities, enactment of legislation or any unavoidable casualty or cause beyond the control of a party and affecting the conduct of its business to the extent of preventing or unreasonably restricting the receiving, handling, production, marketing, or other operations, that party shall be excused from performance during the period that its business or operations are so affected. However, the party not subject to the force majeure event may, during such period, accept performance from the other party or a third party as it may reasonably determine under the circumstances.
8. MODIFICATION . This Agreement may be amended on the written mutual consent of the parties. Except as so amended, this Agreement and the Declaration represent the entire agreement of the parties.
9. BINDING EFFECT; ASSIGNMENT . This Agreement is binding upon and shall inure to the benefit of GFCEP and FCE and their respective representatives, successors and permitted assigns. Any transfer, assignment or delegation, in whole or in part, of this Agreement
5
must be consistent with the terms and conditions of the Declaration of even date herewith and any provisions for Assignment as set forth therein.
10. WAIVERS . No waiver of a breach of any of the agreements or provisions contained in this Agreement shall be construed to be a waiver of any subsequent breach of the same or of any other provision of this Agreement.
11. NOTICES . Notices required by this Agreement shall be given in accordance with the notice requirements of the Declaration of even date herewith.
12. CONSTRUCTION OF TERMS OF AGREEMENT . In the event any term, covenant or condition herein contained is held to be invalid or void by any court of competent jurisdiction, the invalidity of any such term, covenant or condition shall in no way affect any other term, covenant or condition herein contained.
13. DEFAULT. Default shall be a material breach of a term or condition of this Agreement and/or the Declaration of even date herewith. In the event the default is not cured to the satisfaction of the defaulting party within twenty (20) days notice (for non-payment of money) or within thirty (30) days notice (for all other defaults), then subject to Section 14 below, the non-defaulting party shall be entitled to any and all remedies that exist at law or in equity.
14. CHOICE OF LAW/DISPUTE RESOLUTION . This Agreement shall be governed in all respects by the laws of the State of Minnesota. A default hereof shall entitle the non-defaulting party, in addition to the option of terminating this Agreement, to any and all remedies that may exist at law or in equity. Notwithstanding anything herein to the contrary, the Parties hereto agree to submit any controversy or claim regarding or relating to the interpretation, application, or any other dispute regarding this Agreement, including any claims for fraud in the inducement, to binding arbitration to be conducted in accordance with the National Grain and Feed Association Arbitration Rules, except that any such arbitration shall proceed with a panel of three arbitrators regardless of the amount in controversy. The arbitrators shall have jurisdiction to award damages, issue a declaratory judgment, and/or grant appropriate injunctive relief as the case may be.
IN WITNESS WHEREOF, the parties have executed this Corn Storage and Delivery Agreement as of the date and year first above written.
| GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC | ||||||
| By: | /s/ Julie Oftedahl-Volstad | |||||
|
|
||||||
| Its: |
Secretary/Treasurer
|
|||||
| FARMERS COOPERATIVE ELEVATOR COMPANY | ||||||
| By: | /s/ James Hoepner | |||||
|
|
||||||
| Its: |
President
|
|||||
6
EXHIBIT A
DISCOUNT SCHEDULE
Corn Discounts that will be charged to FCE from GFCEP:
Moisture
15.0% and under-no discount
15.1-15.5%-2 cents per bu.
15.6%-16.0%-4 cents per bu.
16.1%-16.5%-6 cents per bu.
16.6% to 17.0%-8 cents per bu.
Corn over 17.0% subject to rejection
Test Weight
54.0 lbs and over-no discount
53.0-53.9 lbs-2 cents per bu.
52.0-52.9 lbs-4 cents per bu.
Below 52.0 lbs.-additional 2 cents per lb. per bu.
Regular Damage
5.0% and under-no discount
5.1% and up-2 cents per bu. per each 1%
Over 10.0% subject to rejection
Heat Damage
.2% and under-no discount
.3% and up-1 cent per bu. per each .1%
Foreign Material
4.0% and under-no discount
4.1% and up-3 cents per bu. per each 1%
Musty/Sour -5 cents per bu.
This discount schedule is subject to change as market conditions dictate providing both FCE and GFCEP mutually agree to any change in writing.
7
Exhibit 31.1
CERTIFICATION PURSUANT TO
I, Paul Enstad, certify that:
Date: November 13, 2003
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this quarterly report
on Form 10-QSB of Granite Falls Community Ethanol Plant, LLC;
2.
Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial
statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results
of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4.
The Registrant’s other certifying
officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e) for the Registrant and have:
a)
designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)
evaluated the effectiveness of
the Registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this
report, based on such evaluation; and
c)
disclosed in this report any change in the Registrant’s
internal control over financial reporting that occurred during the
Registrant’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting; and
5.
The Registrant’s other certifying
officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant’s auditors
and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
a)
all significant deficiencies
and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to
adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
b)
any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Registrant’s internal control over financial
reporting.
/s/ Paul
Enstad
Paul Enstad
Chief Manager and Chairman of the Board
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
I, Julie Oftedahl-Volstad, certify that:
Date: November 13, 2003
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this quarterly report
on Form 10-QSB of Granite Falls Community Ethanol Plant, LLC;
2.
Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial
statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results
of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4.
The Registrant’s other certifying
officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e) for the Registrant and have:
a)
designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)
evaluated the effectiveness of
the Registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this
report, based on such evaluation; and
c)
disclosed in this report any change in the Registrant’s
internal control over financial reporting that occurred during the
Registrant’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting; and
5.
The Registrant’s other certifying
officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant’s auditors
and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
a)
all significant deficiencies
and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to
adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
b)
any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Registrant’s internal control over financial
reporting.
/s/ Julie Oftedahl-Volstad
Julie Oftedahl-Volstad
Treasurer
(Principal Accounting Officer)
Exhibit 32
CERTIFICATION PURSUANT TO
In connection with the Quarterly Report of Granite Falls Community Ethanol
Plant, LLC (the “Company”) on Form 10-QSB for the period ended September 30,
2003, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I Paul Enstad, Chief Manager and Chairman of the Board of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
CERTIFICATION PURSUANT TO
In connection with the Quarterly Report of Granite Falls Community Ethanol
Plant, LLC (the “Company”) on Form 10-QSB for the period ended September 30,
2003, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I Julie Oftedahl-Volstad, Treasurer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2)
The information contained in the
accompanying Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Date: November 13, 2003
/s/ Paul Enstad
Paul Enstad
Chief Manager and Chairman of the Board
(Principal Executive Officer)
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2)
The information contained in the
accompanying Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Date: November 13, 2003
/s/ Julie Oftedahl-Volstad
Julie Oftedahl-Volstad
Treasurer
(Principal Accounting Officer)