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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
þ | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the fiscal quarter ended December 31, 2006
OR
o | Transition report under Section 13 or 15(d) of the Exchange Act. |
For the transition period from to .
Commission file number 000-52426
E ENERGY ADAMS, LLC
(Exact name of small business issuer as specified in its charter)
Nebraska (State or other jurisdiction of incorporation or organization) | 20-2627531 (I.R.S. Employer Identification No.) |
510 Main Street, P.O. Box 49, Adams, Nebraska 68301
(Address of principal executive offices)
(Address of principal executive offices)
(402) 988-4655
(Issuer’s telephone number)
(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. þ Yes o No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes þ 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 January 31, 2007 there were 5,133 units outstanding.
Transitional Small Business Disclosure Format (Check one): o Yes þ No
INDEX
Page No. | ||||||||
3 | ||||||||
3 | ||||||||
12 | ||||||||
25 | ||||||||
26 | ||||||||
26 | ||||||||
26 | ||||||||
27 | ||||||||
27 | ||||||||
27 | ||||||||
27 | ||||||||
29 | ||||||||
Natural Gas Firm Transportation Rate Discount Agreement | ||||||||
Section 302 Certification | ||||||||
Section 302 Certification | ||||||||
Section 1350 Certification | ||||||||
Section 1350 Certification |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Balance Sheet
December 31, | ||||
2006 | ||||
(Unaudited) | ||||
ASSETS | ||||
Current Assets | ||||
Cash and equivalents | $ | 24,643,658 | ||
Prepaid and other | 189,284 | |||
Total current assets | 24,832,942 | |||
Property and Equipment | ||||
Land | 1,438,162 | |||
Computers and office equipment | 55,983 | |||
Leasehold improvements | 4,408 | |||
Construction in progress | 28,420,183 | |||
Total property and equipment | 29,918,736 | |||
Less accumulated depreciation | 5,109 | |||
Net property and equipment | 29,913,627 | |||
Other Assets | ||||
Debt issuance costs | 373,750 | |||
Total other assets | 373,750 | |||
Total Assets | $ | 55,120,319 | ||
LIABILITIES AND MEMBERS’ EQUITY | ||||
Current Liabilities | ||||
Accounts payable | $ | 104,546 | ||
Accrued expenses and other | 6,307 | |||
Construction and retainage payable | 5,751,546 | |||
Total current liabilities | 5,862,399 | |||
Commitments and Contingencies | ||||
Members’ Equity | ||||
Member contributions, net of costs related to capital contributions, 5,133 units outstanding at December 31, 2006 | 49,957,383 | |||
Deficit accumulated during development stage | (699,463 | ) | ||
Total members’ equity | 49,257,920 | |||
Total Liabilities and Members’ Equity | $ | 55,120,319 | ||
Notes to Financial Statements are an integral part of this Statement.
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Statement of Operations
Three Months | Three Months | From Inception | ||||||||||
Ended | Ended | (March 25, 2005) to | ||||||||||
December 31, 2006 | December 31, 2005 | December 31, 2006 | ||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Revenues | $ | — | $ | — | $ | — | ||||||
Operating Expenses | ||||||||||||
Professional and consulting fees | 151,057 | 104,056 | 831,669 | |||||||||
Project coordinator | — | — | 231,789 | |||||||||
General and administrative | 115,720 | 74,106 | 561,835 | |||||||||
Total operating expenses | 266,777 | 178,162 | 1,625,293 | |||||||||
Operating Loss | (266,777 | ) | (178,162 | ) | (1,625,293 | ) | ||||||
Other Income (Expense) | ||||||||||||
Other income | — | — | 5,000 | |||||||||
Interest income | 383,312 | 4,228 | 956,871 | |||||||||
Interest expense | — | — | (36,041 | ) | ||||||||
Total other income (expense) | 383,312 | 4,228 | 925,830 | |||||||||
Net Income (Loss) | $ | 116,535 | $ | (173,934 | ) | $ | (699,463 | ) | ||||
Weighted Average Units Outstanding | 5,133 | 194 | 1,269 | |||||||||
Net Income (Loss) Per Unit | $ | 23 | $ | (897 | ) | $ | (551 | ) | ||||
Notes to Financial Statements are an integral part of this Statement.
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Statement of Cash Flows
Three Months | Three Months | From Inception | ||||||||||
Ended | Ended | (March 25, 2005) to | ||||||||||
December 31, 2006 | December 31, 2005 | December 31, 2006 | ||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income (loss) | $ | 116,535 | $ | (173,934 | ) | $ | (699,463 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | 1,734 | 565 | 5,109 | |||||||||
Changes in assets and liabilities | ||||||||||||
Prepaid and other | 43,344 | (24,624 | ) | (189,284 | ) | |||||||
Accounts payable | (1,633 | ) | (17,286 | ) | 104,546 | |||||||
Accrued expenses and other | 3,337 | — | 6,307 | |||||||||
Net cash provided by (used in) operating activities | 163,317 | (215,279 | ) | (772,785 | ) | |||||||
Cash Flows from Investing Activities | ||||||||||||
Payment for land options | — | (1,000 | ) | — | ||||||||
Capital expenditures | (16,435,695 | ) | (798 | ) | (24,167,190 | ) | ||||||
Net cash used in investing activities | (16,435,695 | ) | (1,798 | ) | (24,167,190 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Debt issuance costs | — | — | (373,750 | ) | ||||||||
Member contributions | — | — | 50,360,000 | |||||||||
Costs related to capital contributions | — | (68,222 | ) | (402,617 | ) | |||||||
Net cash provided by (used in) financing activities | — | (68,222 | ) | 49,583,633 | ||||||||
Net Increase (Decrease) in Cash and Equivalents | (16,272,378 | ) | (285,299 | ) | 24,643,658 | |||||||
Cash and Equivalents — Beginning of Period | 40,916,036 | 737,053 | — | |||||||||
Cash and Equivalents — End of Period | $ | 24,643,658 | $ | 451,754 | $ | 24,643,658 | ||||||
Supplemental Cash Flow Information | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | — | $ | — | $ | 36,041 | ||||||
Supplemental Disclosure of Noncash Investing and Financing Activities | ||||||||||||
Land options exercised for land purchased | $ | — | $ | — | $ | 7,000 | ||||||
Deferred offering costs in accounts payable | $ | — | $ | 4,752 | $ | — | ||||||
Construction in progress in construction and retainage payable | $ | 5,751,546 | $ | — | $ | 5,751,546 | ||||||
Notes to Financial Statements are an integral part of this Statement.
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended September 30, 2006, contained in the Company’s annual report on Form 10-KSB.
In the opinion of management, the interim financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments.
Nature of Business
E Energy Adams, LLC, (a Nebraska Limited Liability Company) was organized with the intentions of developing, owning and operating a 50 million gallon dry mill corn-processing ethanol plant in Gage County, Nebraska. As of December 31, 2006, the Company is in the development stage with its efforts being principally devoted to organizational activities and preliminary construction of the plant. The Company anticipates completion of the plant in fall of 2007.
Fiscal Reporting Period
The Company has adopted a fiscal year ending September 30 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.
Cash and Equivalents
The Company maintains its accounts primarily at two financial institutions. At times throughout the year, the Company’s cash and cash equivalents balances, which include cash invested in mutual funds, may exceed amounts insured by the Federal Deposit Insurance Corporation. At December 31, 2006, cash invested in mutual funds totaled approximately $24,600,000, which was uninsured.
Property and Equipment
Property and equipment is stated at the lower of cost or estimated fair value. Depreciation is provided over an estimated useful life by use of the straight line depreciation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.
The Company capitalizes construction costs until the assets are placed in service, at which time depreciation will be provided over the asset’s estimated useful life. As of December 31, 2006, the Company had a construction and retainage payable of approximately $5,750,000 which includes approximately $2,456,000 of retainage.
Debt Issuance Costs
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
Debt issuance costs will be amortized over the term of the related debt by use of the effective interest method.
Income Taxes
E Energy Adams, 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 its members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements.
Fair Value of Financial Instruments
The carrying value of cash and equivalents approximates the fair value.
Recently Issued Accounting Pronouncements
Management has reviewed recently issued, but not yet effective, accounting pronouncements and does not expect the implementation of these pronouncements to have a significant effect on the Company’s financial statements.
2. DEVELOPMENT STAGE ENTERPRISE
The Company was formed on March 25, 2005 to have a perpetual life. The Company was initially capitalized by a member who contributed $400,000 for 80 membership units. Additionally, the Company was further capitalized by 25 additional members, contributing an aggregate of $570,000 for 114 units. These contributions were pursuant to a private placement memorandum in which the Company offered a maximum of 200 units of securities at a cost of $5,000 per unit for a maximum of $1,000,000. Each investor was required to purchase a minimum of two units for a minimum investment of $10,000 and increments of one unit thereafter. This offering was closed and the units were issued May 31, 2005.
Income and losses are allocated to all members based upon their respective percentage of units held. See Note 3 for further discussion of members’ equity.
3. MEMBERS’ EQUITY
The Company had filed Form SB-2 Registration Statement with the Securities and Exchange Commission (SEC), which was declared effective May 15, 2006. The Offering was for a minimum of 1,990 and up to 5,810 membership units for sale at $10,000 per unit. The minimum purchase requirement was two units for a minimum investment of $20,000. The Company has one class of membership units with each unit representing a pro rata ownership interest in the Company’s capital, profits, losses and distributions. The Company raised the minimum of $19,900,000 through the Offering and has executed a written debt financing commitment with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA for a total credit facility of $49,500,000. On August 11, 2006, the Company released funds from escrow having obtained subscription proceeds in excess of $49,000,000. As of December 31, 2006, the Company has raised approximately $49,390,000 (4,939 units) under this offering. The Company has not closed the offering, but is no longer actively seeking sales of the units.
4. BANK FINANCING
In August 2006, the Company entered into a credit agreement with a financial institution for the purpose of funding a portion of the cost of the ethanol plant. Under the credit agreement, the lender has provided a construction term loan for $35,000,000 and a revolving loan of $14,500,000, which are both secured by substantially all assets. An additional revolving loan for $3,000,000 is being provided for the financing of grain inventory, receivables and margin account equity.
The Company is required to make monthly interest payments for all loans at a variable rate equivalent to the three-month LIBOR short term index rate plus 3.05% during the construction period. The variable rate will be adjusted to
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
the three month LIBOR short term index rate for any year after the first year of operations in which, at the end of the preceding year, the Company’s owners’ equity, is equal to or greater than 60%. Interest will be calculated on a 360 day basis. For the term loan, the Company is required to make 29 principal installments of $1,237,500 plus accrued interest quarterly beginning six months following substantial completion, but no later than April 1, 2008 until October 1, 2015. In addition to the required payments, the Company will have to make additional principal payments equal to 65% of the Company’s excess cash flow as defined in the loan agreement not to exceed $2,000,000 per fiscal year and an aggregate total of $8,000,000. For the revolving loan, the Company is required to pay interest monthly until three months after the repayment of the term loan or January 1, 2016, at which point the Company is required to make 10 quarterly installments of $1,450,000 plus interest until April 1, 2018. For the second revolving loan, the Company is required to pay interest monthly until November 1, 2008, when the entire unpaid principal, plus accrued interest and any unpaid fees, costs or expenses shall be due. If the Company prepays any portion of the construction loans prior to April 1, 2009, the Company will owe a prepayment charge of 3% in addition to certain surcharges. The prepayment charge will be reduced by 1% each year thereafter and any prepayment made on the construction loan after April 1, 2011 will not be subject to a prepayment charge.
The Company has paid approximately $374,000 in debt financing costs and is obligated to pay an annual servicing fee of $25,000. Additionally, the Company will pay the lender an unused commitment fee quarterly equal to 0.5% of the average unused portion of the $14,500,000 revolving loan beginning September 1, 2007 and of the $3,000,000 revolving loan beginning November 1, 2007.
The Company is subject to various financial and non-financial loan covenants that include among other items minimum working capital amounts, debt coverage ratio and net worth requirements. The Company is permitted to make distributions once a year not to exceed 40% of the net income as long as the Company is in compliance with these and other loan covenants. For fiscal years ending 2008 and thereafter, the Company may make distributions which may exceed 40% of the net income as long as the Company has made the excess cash flow payments and is in compliance with these and other loan covenants on a post-distribution basis.
5. COMMITMENTS AND CONTINGENCIES
Design build agreement
The total cost of the project, including the construction of the ethanol plant and start-up expenses, is expected to approximate $103,100,000. The Company has signed a lump sum design-build contract with a contractor, a related party, to design and build the ethanol plant at a total contract price of approximately $67,860,000. As part of the contract, the Company paid a mobilization fee of approximately $5,000,000, subject to retainage. Monthly applications will be submitted for work performed in the previous period. Final payment will be due when final completion has been achieved. The design-build agreement includes a provision whereby the general contractor receives an early completion bonus of $10,000 per day for each day the construction is complete prior to 485 days from the date construction began. However, the total amount paid for the early completion bonus shall not exceed $1,000,000. The contract may be terminated by the Company upon a ten day written notice subject to payment for work completed, termination fees, and any applicable costs and retainage. As of December 31, 2006, the Company has incurred approximately $23,190,000 for these services with approximately $5,347,000 included in construction and retainage payable.
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
Construction contracts
In June 2006, the Company entered into a construction agreement with an unrelated contractor for work associated to the civil and site grading detail, temporary access road and spur track for an amount of approximately $2,406,000, including subsequent change orders. Monthly applications will be submitted for work performed in the previous period. Final payment will be due when final completion has been achieved. As of December 31, 2006, the Company has incurred approximately $2,246,000 with approximately $173,000 included in construction and retainage payable.
In September 2006, the Company entered into three license agreements with an unrelated party for the right to use and construct and maintain a pipeline according to the terms of the agreement. The Company paid $2,500 for each lease agreement and is also responsible for reimbursement of all costs and expenses, estimated to be approximately $484,000, incurred by the licensor associated with the land use and presence, construction and maintenance of the pipeline. The term of the agreement shall commence on the effective date of the agreement and will continue for 25 years thereafter. Either party may terminate the agreement upon certain conditions defined in the agreement. As of December 31, 2006, the Company has incurred approximately $483,900 under this contract.
The Company entered into a construction agreement with an unrelated contractor for work associated with auger cast piling required for support of the grain silos for approximately $355,000. Work began in September 2006, and as of December 31, 2006, the Company had incurred approximately $236,000 under this contract.
In October 2006, the Company entered into an agreement with an unrelated contractor for protection of the pipeline facilities from the rail spurs to be constructed. The Company paid approximately $1,087,000 in advance, which is the full estimated cost of the construction of the pipeline protection. Upon completion of the project, an additional payment will be made if the actual costs exceed the advance payment, or a refund will be issued in the event the actual costs are less than the advance payment. The Company also executed a pipeline construction agreement with the same contractor for the construction of an inter-connection between the ethanol plant and the natural gas pipeline facilities for approximately $627,000. A down payment of approximately $307,000 was made upon execution of the agreement. Two additional payments of $160,000 each will be made on April 1, 2007 and August 1, 2007. Upon completion of the project, an additional payment will be made if the actual costs exceed the advance payment, or a refund will be issued in the event the actual costs are less than the advance payment.
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
Consulting contracts
In June 2005, the Company entered into an agreement with a related party to provide organizational and development services. The Company is to pay a development fee equal to $250,000 on the date upon which the Company first generates net income from operations. The Company is to also reimburse the related party for expenses incurred in the performance of his duties. The term of this agreement shall terminate upon the earlier of any of the following — payment in full of the development fee, upon the dissolution, bankruptcy, or insolvency of the Company, the related party’s voluntary resignation as a member of the board, or by mutual written agreement of the parties.
In January 2006, the Company entered into an agreement with a related party, for Phase I and Phase II engineering services for a fee of $92,500, which shall be included in and credited to the Design-Build Agreement’s contract price. In addition to this fee, the Company will reimburse the contractor for agreed upon subcontractors’ fees and other reimbursable expenses. Either party may terminate this agreement upon twenty days written notice if the non-terminating party has defaulted through no fault of the terminating party or if the Company abandons development of the plant. In such event, the Company would be obligated for any services rendered and any reimbursable expenses. As of December 31, 2006, the Company has incurred approximately $78,600, with $13,900 being included in construction and retainage payable.
Financing Contracts and Grants
In May 2006, the Company entered into a redevelopment contract with the Village of Adams for the redevelopment of the ethanol plant site. The Village will issue some form of tax increment financing (TIF) to assist the Company in the costs of redeveloping the site. The maximum amount of TIF real estate valuation will be $20,000,000 with interest to be determined by the Company (but not to exceed 10%). The Company expects to receive approximately $3,000,000 in TIF financing. Payments are to be made semi-annually with interest only until 2009 and will mature December 31, 2021. The Company has also agreed to reimburse Gage County for up to $1,000,000 for the redevelopment of certain county roads near the plant site. The Company is obligated to pay all project costs for the project that are in excess of the amounts paid from the tax increment financing. As of December 31, 2006, the Company has incurred approximately $384,000, with $177,000 being included in construction and retainage payable.
In September 2006, the Company entered into a Memorandum of Understanding with the Nebraska Department of Economic Development (“DED”) and the Village of Adams, Nebraska (“Village”) for the award of a $355,000 Community Development Block Grant (“CDBG”) from DED to the Village, $5,000 of which is unconditionally granted for the Village’s costs of administration of the grant, and the remaining $350,000 is conditionally granted to the Village from the DED for a portion of the costs for the development of certain public streets for the benefit of E Energy Adams. The Village will provide matching funds up to $350,000, which will come from tax increment financing funds. E Energy Adams is required to satisfy certain job requirements and if the job requirements are not met, E Energy Adams will be obligated to repay the Village and the Village will be obligated to repay the DED for the conditional amount of $350,000. The job creation and maintenance requirements imposed on E Energy Adams are as follows:
1. | The Company must create at least 26 new permanent jobs on a full-time basis at our facility in Adams, Nebraska within 18 months from September 1, 2006, and 51% or more of all of these jobs must be held by or at least made available to low-to-moderate income persons; | ||
2. | The Company must maintain the 26 jobs for 12 months from the date of hire for each respective job; and | ||
3. | The Company must pay all of our employees a minimum hourly rate of $9.50 per hour, and provide all employees with an appropriate employee benefits package. |
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E ENERGY ADAMS, LLC
(A Development Stage Company)
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
December 31, 2006
Utility Contracts
In March 2006, the Company entered into an agreement with an unrelated party to purchase and receive electric power and energy. The Company is obligated to pay a minimum of $30,000 per month for service or for having service available, commencing with the first full billing period, anticipated to be in fall of 2007. The agreement shall remain in effect for five years following the first billing period and thereafter until terminated by either party giving to the other six months notice in writing. The Company was also required to provide a letter of credit of approximately $136,000 in favor of the unrelated party.
In November 2006, the Company entered into an agreement with an unrelated party to provide natural gas required by the Company, at an agreed upon rate ranging from $3.0417 to $3.1177 per Dth/d, for up to a specified quantity, as specified in the agreement. This agreement begins September 2007 and continues for a period of ten years.
Marketing Agreement
In October 2006, the Company entered into a marketing agreement with an unrelated party for the marketing, sale and delivery of ethanol the Company is expected to produce. The Company will receive payment for the ethanol sold based on the Alliance Net Pool Price as defined in the agreement, net of a commission of .75% of the total Alliance Net Pool Price. The initial term is for three years beginning in the month when ethanol production begins with renewal options thereafter in one year increments.
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Item 2. Management’s Discussion and Analysis and Plan of Operations.
Forward Looking Statements
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 following factors:
• | Construction delays and technical difficulties in constructing the plant; | ||
• | Availability of sufficient capital to construct the plant and begin operations; | ||
• | Ability to secure all necessary licenses and permits; | ||
• | Increases in the price of corn as the corn market becomes increasingly competitive; | ||
• | Our inelastic demand for corn, as it is the only available feedstock for our plant; | ||
• | Changes in our business strategy, capital improvements or development plans; | ||
• | The loss of any license or permit; | ||
• | Changes in the environmental regulations that apply to our plant site and operations; | ||
• | Ability to secure marketing services; | ||
• | Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries; | ||
• | Changes in the availability and price of natural gas and the market for distillers grains; | ||
• | Changes in federal and/or state laws (including the elimination of any federal and/or state ethanol tax incentives); | ||
• | Changes and advances in ethanol production technology; and | ||
• | Competition in the ethanol industry and from other alternative fuel additives. |
Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described 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.
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Overview
E Energy Adams, LLC is a development-stage Nebraska limited liability company. It was formed on March 25, 2005 for the purpose of raising capital to develop, construct, own and operate a 50 million gallon dry mill corn-based ethanol plant near Adams, Nebraska. References to “we,” “us,” “our” and the “Company” refer to E Energy Adams, LLC. We are in the process of constructing the plant and have not yet engaged in the production of ethanol and distillers grains. Based upon engineering specifications from Fagen, Inc., we expect the ethanol plant to process approximately 20.4 million bushels of corn per year and use as much as 1,870,000 Million British Thermal Units (“MMBtu”) of natural gas per month to produce approximately 55 million gallons of fuel grade ethanol and 186,000 tons of distillers grains for animal feed each year. We expect to complete construction of our plant in fall of 2007. As of December 31, 2006, we estimate that construction of our plant is 30% complete, based on the costs we have incurred for construction as of December 31, 2006.
We are financing the development and construction of the ethanol plant with a combination of equity and debt. We have raised equity in our public offering registered with the Securities and Exchange Commission and as of our fiscal quarter ended on December 31, 2006, we have issued 4,939 units and received $49,390,000 in offering proceeds. Until we received offering proceeds, our development activities were funded with our seed capital equity of $970,000. As of December 31, 2006, we have not yet formally closed the registered public offering, but are no longer actively seeking subscriptions from potential investors. On August 25, 2006, we entered into a Credit Agreement with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (“Farm Credit”) establishing a senior credit facility with Farm Credit for the construction of the plant. The construction financing is in the amount of $49,500,000 consisting of a $35,000,000 term loan and a $14,500,000 revolving loan. We also have entered into a $3,000,000 line of credit. In addition, we expect to receive Tax Increment Financing of approximately $3,000,000 and we had earned approximately $244,000 in interest on our offering proceeds that were contained in our escrow account prior to their release from escrow on August 11, 2006. Based on our current total project cost estimate of $103,100,000, we expect our equity and debt capital sources to be sufficient to complete plant construction and begin start-up operations.
We have entered into a Lump Sum Design-Build Agreement with Fagen, Inc. to establish a 50 million gallon per year dry grind ethanol production facility on our plant site located near the village of Adams, and we have engaged Aventine Renewable Energy, Inc. to market our ethanol. We are currently in negotiations with possible third party marketers for our distillers grains.
We have obtained our minor source construction permit for air emissions from the Nebraska Department of Environmental Quality (NDEQ) for emissions from our equipment, such as the boiler, ethanol process equipment, storage tanks, scrubbers, and baghouses. We have also applied for a construction storm water discharge permit from NDEQ, as well as have started preparing a Stormwater Pollution Prevention Plan for Construction Activities, which outlines various measures we plan to implement to prevent storm water pollution.
We have completed the necessary State Historical Society research, and we have received a letter from the United States Department of Interior, Fish and Wildlife Service indicating that our proposed site does not appear to impact federal fish and wildlife management facilities or will not adversely affect federal listed threatened and endangered species, or their designated critical habitat.
We are still in the development phase, and until the proposed ethanol plant is operational, we will generate no revenue. We anticipate that accumulated losses will continue to increase until the ethanol plant is operational. Since we have not yet become operational, we do not yet have comparable income, production or sales data.
Plan of Operations for the Next 12 Months
We expect to spend at least the next 12 months (as measured from the date of this report) focused on project development, plant construction, hiring of our remaining necessary employees, and preparing for start-up operations. We also plan to negotiate and execute final contracts concerning the provision of natural gas and other power sources and a marketing agreement for distillers grains. We also plan to negotiate agreements for the procurement of corn.
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Due to our successful completion of the registered offering and the related debt financing, we expect to have sufficient cash on hand to cover all costs associated with construction of the project, including, but not limited to staffing, site development, utilities, construction and equipment acquisition, office costs, audit, legal, compliance and staff training. In the event that we do not have sufficient cash from our registered offering and debt financing, we may seek additional equity, debt or a combination of both. We estimate that we will need approximately $103,100,000 to complete the project.
Plant Construction Activities
Construction of the Plant
Plant construction is progressing on schedule with no significant deviation from our original construction timetable to date. We anticipate completion of plant construction during fall 2007. As of December 31, we estimate that plant construction is approximately 30% complete, based on the costs we have incurred for construction as of December 31, 2006.
On August 4, 2006, we entered into a Lump Sum Design-Build Agreement with Fagen, Inc. to establish a 50 million gallon per year dry mill ethanol production facility on our plant site located near the Village of Adams, Nebraska. Pursuant to the Lump Sum Design-Build Agreement, the effective date is August 1, 2006. Under the terms of the Lump Sum Design-Build Agreement, we agreed to pay Fagen, Inc. approximately $65,900,000, subject to any mutually agreed-upon adjustments and previously paid amounts that may be treated as credits. Fagen, Inc. will design and build the plant using ICM, Inc. technology. We currently expect the construction to be completed in fall of 2007; however, there is no assurance or guarantee that construction will stay on schedule or that we will be able to commence operations at the plant by fall 2007. As of the date of this report, we estimate that plant construction is approximately 30% complete, based on the costs we have incurred for construction as of the date of this report.
Our original Contract Price with Fagen, Inc. of approximately $65,900,000 was increased to approximately $67,500,000, as a result of an increase in the Construction Cost Index (“CCI”), published by Engineering News Record Magazine. Under our design-build contract with Fagen, Inc., if the CCI for the month in which a notice to proceed with the project is given has increased over 7695.40, the CCI for April 2006, the contract price would be increased by an equal percentage amount. We issued our Notice to Proceed on October 27, 2006. The October CCI was 7882.53. Thus, there was a 2.43% increase in the CCI and, as a result, our Contract Price increased by 2.43%, or approximately $1,600,000, for a final Contract Price of approximately $67,500,000. Subsequent to the increase in Contract Price due to the CCI, the final Contract Price has increased to approximately $67,860,000 due to change orders agreed to by both Fagen, Inc. and E Energy Adams. As part of the contract, we have paid a mobilization fee of $5,000,000 to Fagen, Inc.
We also agreed under the Design-Build Agreement with Fagen, Inc. that if the plant was substantially complete within 485 days (16 months) for each day that substantial completion was achieved prior to 485 days from the date construction began, we would pay Fagen, Inc. an early completion bonus of $10,000 per day for each day that substantial completion was achieved prior to 485 days from the date construction began. However, in no event will we have to pay Fagen, Inc. an early completion bonus of more than $1,000,000. We expect that initial start-up and operations of the plant will also be under the general direction and guidance of Fagen, Inc. employees and our own personnel, who will have experience in ethanol production or will have received on-site training provided by Fagen, Inc. We further anticipate that additional on-site support will be provided by Fagen, Inc. for the first 30 days of plant operation.
Permitting and Regulatory Activities
We will be subject to extensive air, water and other environmental regulations and we will need to obtain a number of environmental permits to construct and operate the plant. In addition, it is likely that our senior debt financing will be contingent on our ability to obtain the various required environmental permits. We have engaged ICM, Inc. to coordinate and assist us with obtaining certain environmental permits, and to advise us on general environmental compliance. Olsson Associates has been retained to obtain our NPDES permits. We expect the cost of obtaining the required permits to be approximately $200,000.
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Many of the permits outlined below will be required shortly before or shortly after we begin to operate the plant. If for any reason any of these permits are not granted, construction costs for the plant may increase, or the plant may not be constructed at all. In addition to the state requirements, the United States Environmental Protection Agency (“EPA”) could impose conditions or other restrictions in the permits that are detrimental to us or which increase permit requirements or the testing protocols and methods necessary to obtain a permit either before, during or after the permitting process. The State of Nebraska and the EPA could also modify the requirements for obtaining a permit. Any such event would likely have a material adverse impact on our operations, cash flows and financial performance.
Even if we receive all required permits from the State of Nebraska, we may also be subject to regulatory oversight from the EPA. Currently, the EPA’s statutes and rules do not require us to obtain separate EPA approval in connection with the construction and operation of the proposed plant. Nebraska is authorized to enforce the EPA’s federal emissions program. However, the EPA does retain authority to take action if it decides that Nebraska is not correctly enforcing its emissions program. Additionally, environmental laws and regulations, both at the federal and state level, are subject to change, and changes can be made retroactively. Consequently, even if we have the proper permits at the present time, we may be required to invest or spend considerable resources to comply with future environmental regulations or new or modified interpretations of those regulations to the detriment of our financial performance.
Minor construction permit for air emissions
We obtained a minor source construction permit in May of 2006 for air emissions from the Nebraska Department of Environmental Quality (NDEQ) for emissions from our equipment, such as the boiler, ethanol process equipment, storage tanks, scrubbers, and baghouses. The types of regulated pollutants that are expected to be emitted from our plant include PM10, CO, NOx and VOCs. Exceeding the limitations contained in our minor source construction permit could subject us to very expensive fines, penalties, injunctive relief and civil or criminal law enforcement actions. Exceeding these production limitations could also require us to pursue a Title V air permit. There is also a risk that further analysis prior to construction, a change in design assumptions or a change in the interpretation of regulations may require us to file for a Title V air permit. If we must obtain a Title V air permit, then we will experience significantly increased expenses and a significant delay in obtaining a subsequently sought Title V air permit. There is also a risk that the State might reject a Title V air permit application and request additional information, further delaying startup and increasing expenses. Even though we have obtained a minor source construction permit, the air quality standards may change, thus forcing us to later apply for a Title V air permit. There is also a risk that the area in which the plant is situated may be determined to be a nonattainment area for a particular pollutant. In this event, the threshold standards that require a Title V permit may be changed, thus requiring us to file for and obtain a Title V air permit. The cost of complying and documenting compliance should a Title V air permit be required is also higher. It is also possible that in order to comply with applicable air regulations or to avoid having to obtain a Title V permit, we would have to install additional air pollution control equipment such as additional or different scrubbers.
Construction Storm Water Discharge Permit and Storm Water Pollution Prevention Program (General NPDES Permits)
We have submitted our application for a construction storm water discharge permit prior to starting construction from NDEQ, as well as have begun preparation of a Stormwater Pollution Prevention Plan for Construction Activities, which will outline various measures we plan to implement to prevent storm water pollution.
State Archeological and Endangered Species Research
We have completed the necessary State Historical Society research, and we have received a letter from the United States Department of Interior, Fish and Wildlife Service indicating that our proposed site does not appear to impact federal fish and wildlife management facilities or will not adversely affect federal listed threatened and endangered species, or their designated critical habitat.
Above Ground Storage Tank Permit
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We have submitted our application for an Above Ground Storage Tank permit from NDEQ. As of the date of this report, we have not received this permit.
Air pollution standard
There are a number of standards which may effect the construction and operation of the plant going forward. The Prevention of Significant Deterioration (“PSD”) regulation creates more stringent and complicated permit review procedures for construction permits. It is possible, but not expected, that the plant may exceed applicable PSD levels for NOx, CO, and VOCs.
Waste Water National Pollutant Discharge Elimination System Permits (NPDES Permit)
We expect that we will use water to cool our closed circuit systems in the proposed plant based upon engineering specifications. Although the water in the cooling system will be re-circulated to decrease facility water demands, a certain amount of water will be continuously replaced to make up for evaporation and to maintain a high quality of water in the cooling tower. In addition, there will be occasional blowdown water that will have to be discharged. As of the date of this report, we have drilled three wells on our site that will provide us with our necessary water supply. To date, the water quality on two of the three wells appears to be adequate based on tests performed on samples from the two wells, and water samples have been submitted for testing on our third well. We expect these wells to provide us with an adequate supply of water for our plant. Although unknown at this time, the quality and quantity of the water source and the specific requirements imposed by the Nebraska DEQ for discharge will materially affect the financial performance of the Company. We expect to apply for a Nebraska Pretreatment Permit (NPP) for the discharge of the non-process waste water. We expect to file for a permit to allow the discharge of wastewater from a manufacturing or commercial operation. We have applied for an NPDES wastewater construction site permit. This permit will require submission of plans and specifications with the Nebraska DEQ. We do not expect to require a permit for the land application or discharge of process wastewater based on the design proposed by our engineers. There can be no assurances that these permits will be granted to us. If these permits are not granted, then our plant may not be allowed to operate. However, we anticipate receiving the permits. Because Nebraska has no statute or regulation governing or limiting the withdrawal of water from wells, and because we will not be transferring water from one waste district or basin to another, no well withdrawal permit will be sought or required.
We have engaged Olsson Associates to assist us with obtaining the necessary water discharge permits. Olsson Associates is expected to provide us with preliminary evaluations of our waste water discharge system, field investigations, follow-up waste management options screening and assistance with permit applications as well as other on-call services.
Industrial Storm Water Discharge Permit and Storm Water Pollution Prevention Program (General NPDES Permits)
We must file a separate application for a General Permit for industrial storm water discharges. The application for the General Permit for industrial storm water discharges must be filed 24 hours prior to the start of operations. We anticipate, but there can be no assurances, that we will be able to obtain a General Permit NER000000 storm water discharge permit. Olsson Associates is expected to assist us in obtaining this permit.
New source performance standards
The plant will be subject to New Source Performance Standards for both the plant’s distillation processes and the storage of volatile organic compounds used in the denaturing process. These duties include initial notification, emissions limits, compliance, monitoring requirements, and record keeping requirements.
Spill prevention, control, and countermeasures plan
Before we can begin operations, we must prepare and implement a Spill Prevention Control and Countermeasure (“SPCC”) plan in accordance with the guidelines contained in 40 CFR § 112. This plan will address oil pollution
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prevention regulations and must be reviewed and certified by a professional engineer. The SPCC must be reviewed and updated every three years.
Alcohol and Tobacco Tax and Trade Bureau,Requirements
Before we can begin operations, we must comply with applicable Alcohol and Tobacco Tax and Trade Bureau (formerly the Bureau of Alcohol, Tobacco and Firearms) regulations. These regulations require that we first make application for and obtain an alcohol fuel producer’s permit. The application must include information identifying the principal persons involved in our venture and a statement as to whether any of them have ever been convicted of a felony or misdemeanor under federal or state law. The term of the permit is indefinite until terminated, revoked or suspended. The permit also requires that we maintain certain security measures. We must also secure an operations bond pursuant to 27 CFR § 19.957. There are other taxation requirements related to special occupational tax and a special stamp tax.
Risk management plan
Pursuant to § 112(r)(7) of the Clean Air Act, stationary sources with processes that contain more than a threshold quantity of a regulated substance are required to prepare and implement a Risk Management Plan. Since we plan to use anhydrous ammonia, we must establish a plan to prevent spills or leaks of the ammonia and an emergency response program in the event of spills, leaks, explosions or other events that may lead to the release of the ammonia into the surrounding area. The same requirement may also be true for denaturant. This determination will be made as soon as the exact chemical makeup of the denaturant is obtained. We will need to conduct a hazardous assessment and prepare models to assess the impact of an ammonia and/or denaturant release into the surrounding area. The program will be presented at one or more public meetings. In addition, it is likely that we will have to comply with the prevention requirements under OSHA’s Process Safety Management Standard. These requirements are similar to the Risk Management Plan requirements. The Risk Management Plan should be filed before use.
Environmental Protection Agency
Even if we receive all Nebraska environmental permits for construction and operation of the plant, we will also be subject to oversight activities by the EPA. There is always a risk that the EPA may enforce certain rules and regulations differently than Nebraska’s environmental administrators. Nebraska or EPA rules and regulations are subject to change, and any such changes may result in greater regulatory burdens.
Key Operating Contracts Entered Into during our Fiscal Quarter Ended December 31, 2006
Ethanol Marketing Agreement with Aventine Renewable Energy, Inc.
We have engaged experienced marketers to market most of our ethanol to local, regional and national markets. On October 9, 2006, we entered into an Ethanol Marketing Agreement with Aventine Renewable Energy, Inc., an unrelated party, for the marketing, sale and delivery of most of the ethanol produced by E Energy Adams, LLC. Under this agreement, we have the flexibility to market 10% of our ethanol ourselves to local markets. Pursuant to this agreement, Aventine will pay us a price per gallon for our ethanol based on an “Alliance Net Pool Price,” subject to various adjustments. In addition, for each gallon of ethanol sold to Aventine under this agreement, Aventine will deduct a commission of .75% of the Alliance Net Pool Price. The initial term of the agreement with Aventine will run for three years from the date of entering into the agreement. After that, it will automatically renew for successive one year terms, unless terminated by either Party with at least one year written notice prior to such expiration date, or for breach of terms. Please see our Annual Report on Form 10-KSB, filed on December 22, 2006, for more information regarding this agreement.
Agreements with Natural Gas Pipeline Company of America
On November 20, 2006, we entered into an agreement with Natural Gas Pipeline Company of America for the supply of natural gas to our plant. The effective date of this agreement is November 20, 2006. Natural Gas Pipeline Company of America will supply the natural gas at an agreed upon rate ranging from $3.0417 to $3.1177 per Dth/d,
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for up to 4,400 Dth/day, as specified in the agreement, attached hereto as Exhibit 10.19. Our service will begin in September of 2007 and will continue for ten years thereafter.
We entered into a Pipeline Protection Agreement with Natural Gas Pipeline Company of America on October 5, 2006 for the construction of new pipeline facilities to protect the pipeline facilities from the rail spurs being constructed for our ethanol plant. We will pay, in advance, the full estimated cost for the pipeline protection to be constructed, which is estimated to be approximately $1,100,000. Upon completion of construction, Natural Gas Pipeline Company of America will submit to us a summary billing. In the event the actual cost differs from the estimated cost, payment or refund will be made, depending on the difference between the actual costs and the advance payment.
We entered into a Pipeline Construction Agreement with Natural Gas Pipeline Company of America on October 27, 2006. for the construction of an interconnection between our plant and the Pipeline Company’s line, at a cost which is estimated to be $627,000, which we will pay in advance. Upon completion of construction, Natural Gas Pipeline Company of America will submit to us a summary billing. In the event the actual cost differs from the estimated cost, payment or refund will be made, depending on the difference between the actual costs and the advance payment.
Agreements with BNSF Railway Company
We have entered into three license agreements with BNSF Railway Company (“BNSF”) for the right to construct, use, and maintain a pipeline along certain rail corridors of BNSF. We paid $2,500 for each license agreement and we are also obligated to reimburse BNSF for all costs and expenses incurred by BNSF associated with the use of the land and the presence, construction and maintenance of the pipeline. These license agreements commenced on September 22, 2006, and will continue for 25 years thereafter, subject to termination by BNSF through 30 days’ written notice to us, or termination by us upon execution of the licensor’s mutual termination letter agreement in effect at that time.
In November, 2006, we also entered into a lease agreement with BNSF Railway Company for the lease of certain land for the construction and rehabilitation of our railway track. This agreement has an effective date of June 22, 2006. We have agreed to pay a one time fee of $500 for the lease of the land, and the lease will continue on a monthly basis, until terminated by either party giving 30 days’ written notice to the other. Should BNSF decide to terminate this lease, our rail service may be temporarily interrupted pending the execution of a new lease agreement.
In November, 2006, we also entered into an Industry Track Agreement with BNSF Railway Company, under which BNSF will maintain and operate certain track owned by BNSF and certain track owned by E Energy Adams, to provide service to our plant. This Agreement also has an effective date of June 22, 2006, and will continue on a monthly basis, until terminated by either party giving 30 days’ written notice to the other.
Agreement with McCormick Construction Company, Inc. for Auger Cast Piling
On October 3, 2006, we accepted a proposal from McCormick Construction Company, Inc. (“McCormick”) for work associated with auger cast piling for the support of our grain silos. We have agreed to pay McCormick $355,000 in exchange for this work. Work began under this contract in September 2006.
Trends and Uncertainties Impacting the Ethanol Industry and Our Future Operations
If we are able to build the plant and begin operations, we will be subject to industry-wide factors that affect our operating and financial performance. These factors include, but are not limited to, the available supply and cost of corn from which our ethanol and distillers grains will be processed; the cost of natural gas, which we will use in the production process; dependence on our ethanol marketer and distillers grains marketer to market and distribute our products; the intensely competitive nature of the ethanol industry; possible changes in legislation at the federal, state and/or local level; possible changes in federal ethanol tax incentives and the cost of complying with extensive environmental laws that regulate our industry.
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We expect ethanol sales to constitute the bulk of our future revenues. In the past few years, ethanol prices have been much higher than their 10 year average. Increased demand, firm crude oil and gas markets, public acceptance, and positive political signals all contributed to the increase in ethanol prices. However, due to recent swings in crude oil prices, a recent decline in the price of ethanol, and increased prices of corn, our profit margins may not be as high as they have been in the industry over the past few years once we are operational. In addition, due to the anticipated increase in the supply of ethanol from new ethanol plants scheduled to begin production and the expansion of current plants, we believe current price levels are subject to downward pressure.
The total domestic production of ethanol is at an all time high. According to the Renewable Fuels Association, as of February 2, 2007 there are 113 operational ethanol plants nationwide that have the capacity to produce approximately 5.58 billion gallons annually. In addition, there are 76 ethanol plants and 7 expansions under construction, which when operational are expected to produce approximately another 6.14 billion gallons of ethanol annually. A greater supply of ethanol on the market from other plants could reduce the price we are able to charge for our ethanol. This would have a negative impact on our future revenues once we become operational.
The Energy Policy Act of 2005 includes various provisions that are expected to favorably impact the ethanol industry by enhancing both the production and use of ethanol. It created a 7.5 billion gallon renewable fuels standard (RFS). The RFS is a national flexible program that promotes ethanol production while allowing refiners to use renewable fuel blends in those areas where it is most cost-effective rather than setting requirements for ethanol use in any particular area or state. The RFS began at 4 billion gallons in 2006, and increases to 7.5 billion gallons by 2012. The RFS has encouraged new production and is expected to lead to about $6 billion in new investment in ethanol plants across the country. An increase in the number of new plants will bring an increase in the supply of ethanol. Due to the anticipated increase in the supply of ethanol from new ethanol plants scheduled to begin production and the expansion of current plants, we believe current price levels are subject to downward pressure. In addition, because the RFS begins at 4 billion gallons in 2006 and national production exceeded this amount, there could be a short-term oversupply. This could have an adverse effect on our future earnings.
The Energy Policy Act of 2005 also amended the definition of “small ethanol producer” to increase the size of the plant eligible for the small producer tax credit from 30 million gallons per year to 60 million gallons per year. Small ethanol producers are allowed a 10-cent per gallon production income tax credit on up to 15 million gallons of production annually. The tax credit is capped at $1.5 million per year per producer. The credit is effective for taxable years ending after the date of enactment through 2010. Since we expect to now qualify as a small ethanol producer under the Act, we expect to be eligible for this tax credit this taxable year and to pass this credit on to our members.
The Energy Policy Act of 2005 also created a new credit that permits taxpayers to claim a 30% credit (up to $30,000) for the cost of installing clean-fuel vehicle refueling equipment, such as an E85 fuel pump, to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. Under the provision, clean fuels are any fuel, at least 85% of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel. The provision is effective for equipment placed in service after December 31, 2005, and before January 1, 2010. While it is unclear how this credit will affect the demand for ethanol in the short term, we expect it will help raise consumer awareness of alternative sources of fuel and could positively impact future demand for ethanol.
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Trends and Uncertainties Impacting the Corn and Natural Gas Markets and Our Future Cost of Goods Sold
We expect our future cost of goods sold will consist primarily of costs relating to the corn and natural gas supplies necessary to produce ethanol and distillers grains for sale. The United States Department of Agriculture has recently projected the 2006 corn crop at approximately 10.8 billion bushels, which would be the third largest corn crop on record. Despite the large 2006 corn crop, corn prices have increased sharply since August 2006 and we expect corn prices to remain at historically high price levels well into 2007. A recent USDA report entitled “World Agricultural Supply and Demand Estimates” (December 11, 2006), states that U.S. corn prices could increase in the year 2007 to as much as $3.30 per bushel or more. However, market trends show that U.S. corn prices are currently over $3.30 per bushel.
Generally, higher corn prices will produce lower profit margins. Grain prices are primarily dependent on world feedstuffs supply and demand and on U.S. and global corn crop production, which can be volatile as a result of a number of factors, the most important of which are weather, current and anticipated stocks and prices, export prices and supports and the government’s current and anticipated agricultural policy. The price at which we will purchase corn will depend on prevailing market prices. There is no assurance that a shortage will not develop, particularly with other area ethanol plants competing for corn, an extended drought or other production problems. Because the market price of ethanol is not related to grain prices, ethanol producers are generally not able to compensate for increases in the cost of grain feedstock through adjustments in prices charged for their ethanol. We, therefore, anticipate that our plant’s profitability will be negatively impacted during periods of high corn prices.
We have hired a Commodities Manager to ensure the consistent scheduling of corn deliveries and to establish and fill forward contracts. The Commodities Manager will utilize forward contracting and hedging strategies, including certain derivative instruments such as futures and option contracts, to manage our commodity risk exposure and optimize finished product pricing on our behalf. We anticipate that most of our grain will be acquired in this manner. Forward contracts allow us to purchase corn for future delivery at fixed prices without using the futures market. The corn futures market allows us to trade in standard units of corn for delivery at specific times in the future. Option contracts consist of call options (options to purchase a fixed amount of a commodity) and put options (options to sell a fixed amount of a commodity). We expect to use a combination of these derivative instruments in our hedging strategies to help guard against corn price volatility. Hedging means protecting the price at which we buy corn and the price at which we will sell our products in the future. It is a way to attempt to reduce the risk caused by price fluctuation. The effectiveness of such hedging activities will depend on, among other things, the cost of corn and our ability to sell enough ethanol and distillers grains to use all of the corn subject to futures and option contracts we have purchased as part of our hedging strategy. Although we will attempt to link hedging activities to sales plans and pricing activities, such hedging activities themselves can result in additional costs because price movements in corn contracts are highly volatile and are influenced by many factors that are beyond our control. We may incur such costs and they may be significant.
Natural gas is also an important input commodity to our manufacturing process. We estimate that our natural gas usage will be approximately 10% to 15% of our annual total production cost. We intend to market our wet or dried distillers grains to our local market. For our dried distillers grains, we plan to use natural gas to dry the grain product to a moisture content at which they can be stored for long periods of time, and can be transported greater distances. Dried distillers grains have a much broader market base, including the western cattle feedlots, and the dairies of California and Florida. Recently, the price of natural gas has risen along with other energy sources. Natural gas prices are considerably higher than the 10-year average. Any ongoing increases in the price of natural gas will increase our cost of production and may negatively impact our future profit margins.
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 budget for these
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expenses, but cannot assure 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.
Liquidity and Capital Resources
Estimated Sources of Funds
The following schedule sets forth our estimated sources of funds to build the ethanol plant to be located near Adams, Nebraska. This schedule could change in the future depending on whether we receive additional grants and the level of senior debt incurred.
Sources of Funds | Percent | |||||||
Offering Proceeds (1) | $ | 49,390,000 | 47.90 | % | ||||
Seed Capital Proceeds (2) | $ | 970,000 | 0.94 | % | ||||
Senior Debt Financing (3) | $ | 49,500,000 | 48.01 | % | ||||
Tax Increment Financing (4) | $ | 3,000,000 | 2.91 | % | ||||
Interest on Escrow (5) | 244,000 | 0.24 | % | |||||
Total Sources of Funds | $ | 103,104,000 | 100.00 | % | ||||
(1) | We currently have funds from investors for approximately $49,390,000. | |
(2) | We have issued a total of 194 units to our seed capital investors at a price of $5,000 per unit in our private placement in exchange for proceeds of $970,000. | |
(3) | We currently have entered into a definitive loan agreement with a senior lender for debt financing in the amount of $49,500,000. | |
(4) | We have entered into a Redevelopment Contract with the Village of Adams for the redevelopment of our plant site. The Village will issue some form of TIF indebtedness to assist the Company in the costs of redeveloping the site. The maximum amount of TIF real estate valuation will be $20,000,000 with interest to be determined by the Company (but not to exceed ten percent). | |
(5) | We earned approximately $244,000 in interest on our escrow account containing the offering proceeds prior to their release from escrow. |
Estimated Use of Proceeds
We expect the project to cost approximately $103,100,000 to complete. The following table reflects our estimate of costs and expenditures, as of the date of this report, for the ethanol plant expected to be built near Adams, Nebraska over the next 12 months. These estimates are based on discussions with Fagen, Inc., ICM Inc., our lenders and management research. The following figures are intended to be estimates only, and the actual use of funds may vary significantly from the descriptions given below due to a variety of factors described elsewhere in this report.
Use of Proceeds | Amount | Percent of Total | ||||||
Plant construction | $ | 65,900,000 | (1) | 63.92 | % | |||
Road and ditch construction costs | 750,000 | 0.73 | % | |||||
Land cost | 1,100,000 | 1.06 | % | |||||
Site development costs | 5,278,000 | 5.12 | % | |||||
Construction contingency | 3,600,000 | 3.50 | % | |||||
Construction performance bond | 500,000 | 0.48 | % | |||||
Construction insurance costs | 120,000 | 0.12 | % |
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Use of Proceeds | Amount | Percent of Total | ||||||||
Administrative building | 400,000 | 0.39 | % | |||||||
Office equipment | 75,000 | 0.07 | % | |||||||
Computers, Software, Network | 150,000 | 0.15 | % | |||||||
Rail infrastructure | 3,594,750 | 3.49 | % | |||||||
Rolling stock | 515,000 | 0.50 | % | |||||||
Fire Protection / Water Supply | 3,180,000 | 3.08 | % | |||||||
Water treatment system | 1,500,000 | 1.45 | % | |||||||
Capitalized interest | 2,000,000 | 1.94 | % | |||||||
Facility for Additional Grain Storage | 3,000,000 | (2) | 2.91 | % | ||||||
Start up costs: | ||||||||||
Financing costs | 506,250 | 0.49 | % | |||||||
Organization costs | 1,300,000 | 1.26 | % | |||||||
Pre production period costs | 1,345,000 | 1.30 | % | |||||||
Inventory — working capital | 3,000,000 | 2.91 | % | |||||||
Inventory — corn | 2,000,000 | 1.94 | % | |||||||
Inventory — chemicals and ingredients | 150,000 | 0.15 | % | |||||||
Inventory — work in process — Ethanol | 1,500,000 | 1.45 | % | |||||||
Inventory — work in process — DDGS | 500,000 | 0.48 | % | |||||||
Inventory spare parts — process equipment | 750,000 | 0.73 | % | |||||||
Operating costs: | ||||||||||
Office labor, expense and equipment | 165,000 | 0.16 | % | |||||||
Telephone, Internet, Postage service | 25,500 | 0.03 | % | |||||||
Directors Expense | 30,000 | 0.03 | % | |||||||
Payroll Tax | 17,000 | 0.02 | % | |||||||
Accounting and Legal Fees | 55,000 | 0.05 | % | |||||||
Insurance— D & O and Operations | 70,000 | 0.07 | % | |||||||
Miscellaneous | 23,500 | 0.02 | % | |||||||
Total | $ | 103,100,000 | 100.00 | % | ||||||
(1) | Our original Contract Price with Fagen, Inc. was approximately $65,900,000. This was increased in October, 2006, to approximately $67,500,000, based on the increase in the Construction Cost Index (“CCI”) as of October 2006 compared to our baseline index as of April 2006. Subsequent to the increase based on the CCI, the Contract Price has been increased to approximately $67,860,000 due to change orders agreed to by both Fagen, Inc. and E Energy Adams. We anticipate that our Construction Contingency will cover the increase to the Contract Price. | |
(2) | We may decide to defer the construction of the additional grain storage on our site until after operations have begun in the event that construction costs are higher than the amounts we have budgeted above, in an effort to keep our project costs within our anticipated budget of $103,100,000. |
Quarterly Financial Results for Fiscal Quarter Ended December 31, 2006
As of December 31, 2006, we have total assets of approximately $55,120,000 consisting primarily of cash, cash equivalents and land. We have current liabilities of approximately $5,862,000 consisting primarily of accounts payable. Total members’ equity as of December 31, 2006, was approximately $49,258,000. Since our inception, we have generated no revenue from operations. For the three months ended December 31, 2006, we had net income of approximately $117,000. For the period from inception to December 31, 2006, we had a net loss of approximately $699,000, primarily due to start-up business costs.
Project Capitalization
Seed Capital Offering
During the time period beginning with E Energy Adams’ formation on March 25, 2005 and ending on May 31, 2005, we raised $970,000 in seed capital through a private placement. We issued a total of 194 units to our seed capital investors at a price of $5,000 per unit.
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Registered Offering
We filed a Registration Statement for an initial public offering of our units with the Securities and Exchange Commission on Form SB-2 (SEC Registration No. 333-123473), as amended, which became effective on May 15, 2006. We also registered the units with the state securities authorities in Nebraska, Iowa, South Dakota, Kansas, Missouri, Wisconsin and Florida. We offered a minimum of 1,990 and a maximum of 5,810 units for total proceeds of a minimum of $19,900,000 and a maximum of $58,100,000. We planned to secure the balance needed to construct the plant through federal, state and local grants and debt financing. As of September 30, 2006, we had issued 4,939 units in the registered offering and have received offering proceeds in the amount of $49,390,000. As of the date of this report, we have not formally closed the offering, but we are no longer actively seeking subscriptions.
Bridge Loan
On May 31, 2006, we entered into a Promissory Note (the “Operating Loan”) and Loan Agreement (the “Bridge Loan”) with Farm Credit Services of America, PCA establishing a credit facility for interim financing. The Bridge Loan was in the amount of $2,000,000. We used the funds to purchase the land for our plant site and we repaid the loan in full in September, 2006.
Senior Debt Financing
On August 25, 2006, we entered into a Credit Agreement with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (“Farm Credit”) establishing a senior credit facility with Farm Credit for the construction of a 50 million gallon per year dry mill ethanol plant. The construction financing is in the amount of $49,500,000 consisting of a $35,000,000 term loan and a $14,500,000 revolving loan. We also have entered into a $3,000,000 line of credit.
We must pay interest on the borrowed funds at a variable rate equivalent to the London InterBank Offered Rates (“LIBOR”) Short Term Index Rate plus 3.05%. The variable rate will be adjusted to the three-month LIBOR Short Term Index Rate (LIBOR + 280 basis points) for any year after the first year of operations in which, at the end of the preceding year, our owners’ equity (defined as net worth to total tangible assets) is equal to or greater than 60% provided we are not otherwise in default. Interest will be calculated on a 360-day basis.
We have paid an origination fee of $371,250 to Farm Credit for the loans. We will pay an annual administration fee of $25,000 to Farm Credit. For the revolving credit facility and the line of credit facility, we will pay a non-use fee in the event that the average outstanding balance on these facilities is less than the maximum principal balance of said facilities. This fee will be equal to .5% per annum of the difference between the maximum principal balance and the actual usage. This fee will be due quarterly.
We are obligated to repay the term construction loan in 29 equal, consecutive, quarterly installments of $1,237,500 plus accrued interest commencing on the first of the month which is six months following substantial completion of our ethanol plant, but no later than April 1, 2008, and the last installment due no later than October 1, 2015. On the earlier of January 1, 2016 or three months following repayment of the term loan we will begin repayment on the revolving term loan in ten equal, consecutive, quarterly principal installments of $1,450,000 plus accrued interest with the last installment due by April 1, 2018. We are obligated to repay the line of credit plus accrued interest, unpaid fees, costs or expenses by November 1, 2008. During the term of the construction loan, we are required to make special principal payments in an annual amount equal to 65% of our excess cash flow for each year, not to exceed $2,000,000 in any fiscal year and the aggregate total of those payments will not exceed $8,000,000. These payments will be applied to scheduled principal installments of the construction term loan in inverse order of maturity.
The loans are secured by a first mortgage on our real estate and a lien on all of our personal property. If we prepay any portion of the construction loans prior to April 1, 2009, we will pay a prepayment charge of 3% in addition to certain surcharges. This prepayment charge will be reduced by 1.0% each year thereafter and any prepayment made on the construction loan after April 1, 2011 will not be subject to a prepayment charge.
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During the term of the loans, we are subject to certain financial loan covenants consisting of a minimum working capital, minimum debt coverage, and minimum tangible net worth. After the construction phase, we are only allowed to make annual capital expenditures up to $500,000 annually without prior approval. We are also prohibited from making distributions to our members; however, for each fiscal year commencing with the fiscal year ending 2008, we may make a distribution to our members of 40% of the net profit for such fiscal year after our lender has received audited financial statements for the fiscal year and provided no event of default or potential default exists. We may exceed 40% only if we have made the required free cash flow payment for that fiscal year. We must be in compliance with all financial ratio requirements and loan covenants before and after any distributions to our members.
Upon an occurrence of an event of default or an event which will lead to our default, Farm Credit may upon notice terminate its commitment to loan funds and declare the entire unpaid balance of the loans, plus accrued interest, immediately due and payable. An event of default includes, but is not limited to, our failure to make payments when due, insolvency, any material adverse change in our financial condition or our breach of any of the covenants, representations or warranties we have given in connection with the transaction.
Tax Increment Financing (“TIF”)
On May 1, 2006, we entered into a Redevelopment Contract with the Village of Adams for the redevelopment of our plant site. The Village will issue some form of TIF indebtedness to assist the Company in the costs of redeveloping the site. The maximum amount of TIF real estate valuation will be $20,000,000 with interest to be determined by the Company (but not to exceed 10%). Payments are to be made semi-annually with interest only until 2009 and will mature December 31, 2021. We have also agreed to reimburse Gage County for up to $1,000,000 for the redevelopment of certain county roads near the plant site. We are obligated to pay all costs for the project that are in excess of the amounts paid from the tax increment financing. As of the date of this report, we are currently in negotiations with an institution to provide us with our tax increment revenue bonds. We anticipate that bonds will be issued in the aggregate amount of approximately $3,000,000 through the Village of Adams for the benefit of E Energy Adams.
Nebraska Department of Economic Development Community Development Block Grant
On September 1, 2006, we entered into a Memorandum of Understanding with the Nebraska Department of Economic Development (“DED”) and the Village of Adams, Nebraska (“Village”) for the award of a $355,000 Community Development Block Grant (“CDBG”) from DED to the Village, $5,000 of which is unconditionally granted for the Village’s costs of administration of the grant, and the remaining $350,000 is conditionally granted to the Village from the DED for a portion of the costs for the development of certain public streets for the benefit of E Energy Adams. The Village will provide matching funds up to $350,000, which will come from tax increment financing funds. E Energy Adams is required to satisfy certain job requirements and if the job requirements are not met, E Energy Adams will be obligated to repay the Village and the Village will be obligated to repay the DED for the conditional amount of $350,000. The job creation and maintenance requirements imposed on E Energy Adams are as follows:
1. | We must create at least 26 new permanent jobs on a full-time basis at our facility in Adams, Nebraska within 18 months from September 1, 2006, and 51% or more of all of these jobs must be held by or at least made available to low-to-moderate income persons; | ||
2. | We must maintain the 26 jobs for 12 months from the date of hire for each respective job; and | ||
3. | We must pay all of our employees a minimum hourly rate of $9.50 per hour, and provide all employees with an appropriate employee benefits package. |
Under the terms of the Memorandum of Understanding, project funding approval is not expressed or implied by DED’s execution of the Memorandum of Understanding. Additional steps are required before the project receives a Notice of Approval, including obtaining the approval of the Governor of the State of Nebraska. As of the date of this report, the Governor of the State of Nebraska has approved the funding.
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Employees
Prior to commencement of operations, we intend to hire approximately 36 full-time employees. Approximately eight of our employees will be involved primarily in management and administration and the remainder will be involved primarily in plant operations.
As of the date of this report, we have hired a Chief Executive Officer, Sam Sacco, a Plant Manager, Lance Liebergen, a Commodities Manager, Andrew Johansen and two office employees. We entered into an employment agreement with our Chief Executive Officer on November 6, 2006, which was effective as of October 30, 2006. We entered into employment agreements with our Plant Manager and Commodities Manager on December 21, 2006. The employment agreement with Lance Liebergen, our Plant Manager was effective as of December 11, 2006, and the employment agreement with Andrew Johansen was effective on January 2, 2007. One of our directors, Jack L. Alderman, is currently engaged as an independent contractor to provide project development and consulting services in exchange for cash compensation.
The following table represents some of the anticipated positions within the plant and the minimum number of individuals we expect will be full-time personnel:
Position | # Full-Time Personnel | |||||
CEO/General Manager | 1 | |||||
CFO | 1 | |||||
Plant Manager | 1 | |||||
Commodities Manager | 1 | |||||
Grain Handling | 3 | |||||
Product Manager | 1 | |||||
Office Manager/Human Resources Manager | 1 | |||||
Lab Manager | 1 | |||||
Lab Technician | 1 | |||||
Accounting/Clerical | 4 | |||||
Plant Operators/Shift Supervisors | 12 | |||||
Chief Mechanical Operator/Assistants | 5 | |||||
Maintenance Supervisor | 1 | |||||
Maintenance Craftsmen | 3 | |||||
TOTAL | 36 | |||||
The positions, titles, job responsibilities and number allocated to each position may differ when we begin to employ individuals for each position.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Item 3. Controls and Procedures
Our management, including our Chief Executive Officer (the principal executive officer), Sam Sacco, along with our Treasurer (the principal financial officer), Nicholas Cusick, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2006. Based upon this review and evaluation, these officers believe that our disclosure controls and procedures are effective in ensuring that material information related
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to us is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission.
Our management, consisting of our Chief Executive Officer and our Treasurer, have reviewed and evaluated any changes in our internal control over financial reporting that occurred as of December 31, 2006, and there has been no change that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the time period beginning with E Energy Adams’ formation on March 25, 2005 and ending on May 31, 2005, we raised $970,000 in seed capital through a private placement. We issued a total of 194 units to our seed capital investors at a price of $5,000 per unit. Our seed capital private placement was made directly by us without use of an underwriter or placement agent and without payment of commissions or other remuneration.
Our private placement was made under the registration exemption provided for in Section 4(2) of the Securities Act and Rule 504 of Regulation D. With respect to the exemption, neither we, nor any person acting on our behalf, offered or sold the securities by means of any form of general solicitation or advertising. Prior to making any offer or sale, we had reasonable grounds to believe and believed that each prospective investor was capable of evaluating the merits and risks of the investment and were able to bear the economic risk of the investment. Each purchaser represented in writing that the securities were being acquired for investment for such purchaser’s own account and agreed that the securities would not be sold without registration under the Securities Act or exemption therefrom. Each purchaser agreed that a legend was placed on each certificate evidencing the securities stating the securities have not been registered under the Securities Act and setting forth restrictions on their transferability.
We filed a Registration Statement for an initial public offering of our units with the Securities and Exchange Commission on Form SB-2 (SEC Registration No. 333-128902), which was declared effective on May 15, 2006. We commenced our initial public offering of our units shortly thereafter. Certain of our officers and directors are offering and selling the units on a best efforts basis without the assistance of an underwriter. We do not pay these officers or directors any compensation for services related to the offer or sale of the units.
We registered a total of 5,810 units at $10,000 per unit for an aggregate maximum gross offering price of $58,100,000. As of the date of this report, we have issued 4,939 units, for an aggregate amount of $49,390,000. Our units are subject to transfer restrictions under our operating agreement and by applicable tax and securities laws. Except for transfers in limited circumstances, such as a transfer made without consideration to or in trust for an investor’s descendants or spouse or involuntary transfers by operation of law, members will not be able to transfers their units prior to the time that our ethanol plant is substantially operational. Once we begin substantial operations, transfers will still be subject to approval by our board and must be made in compliance with applicable tax and securities laws. As a result, investors will not be able to easily liquidate their investment in our company. Pursuant to our prospectus, all subscription payments from the offering were deposited in an escrow account. On August 11, 2006, we met the conditions to breaking escrow and received our offering proceeds at that time. We have not closed the offering but are not actively seeking additional subscriptions at this time. We may determine to sell additional equity in the future.
The following is a breakdown of units registered and units sold in the offering as of December 31, 2006:
Aggregate price of | ||||||||||||
Amount | the amount | Aggregate price of | ||||||||||
Registered | registered | Amount Sold | the amount sold | |||||||||
5,800 | $ | 58,000,000 | 4,939 | $ | 49,390,000 |
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As of December 31, 2006, our total expense related to the registration and issuance of these units was approximately $385,400, which was netted against the offering proceeds when the units were issued and the offering proceeds were released from escrow in August 2006. All of these expenses were direct or indirect payments to unrelated parties. Our net offering proceeds, including the $970,000 we raised in seed capital, after deduction of expenses were approximately $49,957,000. The following table describes ourapproximateuse of net offering proceeds from the date of effectiveness of our registration statement (May 15, 2006) through our quarter ended December 31, 2006:
Plant Construction(1) | $ | 22,669,000 | ||||||
Financing Costs(2) | $ | 374,000 | ||||||
Real Estate Purchases and Land Improvements(3) | $ | 1,438,000 | ||||||
Repayment of Indebtedness(4) | $ | 2,000,000 | ||||||
Operating Expenses(5) | $ | 1,022,000 | ||||||
Total | $ | 27,503,000 |
(1) | This includes approximate expenses incurred as of December 31, 2006 for plant construction, rail infrastructure construction, and natural gas pipeline construction and maintenance and other miscellaneous construction costs. | |
(2) | We incurred approximately $374,000 in a bank commitment fee for our senior debt financing. | |
(3) | We have paid approximately $1,438,000 to purchase and improve the real estate for our plant site. | |
(4) | We incurred approximately $2,000,000 for the repayment of our bridge loan. | |
(5) | The Operating Expenses includes payments to directors Bill Riechers and Jack Alderman, and former director Everett Larson pursuant to consulting agreements entered into between the forgoing individuals and E Energy Adams. |
All of the foregoing payments were direct or indirect payments to persons or entities other than our directors, officers, or unit holders owning 10% or more of our units, except for the payments to Bill Riechers, Jack Alderman and Everett Larson.
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
The following exhibits are incorporated by reference in this report:
Exhibit No. | Description | Method of Filing | ||||
10.6 | Pipeline Construction Agreement between Natural Gas Pipeline Company of America and E Energy Adams, LLC, dated October 11, 2006 | 1 | ||||
10.7 | Design-Build Agreement between Fagen, Inc. and E Energy Adams, LLC, dated August 1, 2006 | 1 + | ||||
10.8 | Ethanol Marketing Agreement between Aventine Renewable Energy, Inc. and E Energy Adams, LLC, dated October 9, 2006 | 1 |
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Exhibit No. | Description | Method of Filing | ||||
10.9 | Auger Cast Piling Agreement between McCormick Construction Company, Inc. and E Energy Adams, LLC, dated September 14, 2006 | 1 | ||||
10.10 | Pipeline Protection Agreement between Natural Gas Pipeline Company of America and E Energy Adams, LLC, dated October 5, 2006 | 1 | ||||
10.13 | BNSF Railway Company Lease of Land for Construction/Rehabilitation of Track, dated June 22, 2006 | 1 | ||||
10.14 | Employment Agreement — Commodities Manager, dated December 22, 2006 | 1 | ||||
10.15 | Employment Agreement — Plant Manager, dated December 22, 2006 | 1 | ||||
10.19 | Natural Gas Firm Transportation Rate Discount Agreement between Natural Gas Pipeling Company of America and E Energy Adams, LLC, dated November 20, 2006, | * | ||||
31.1 | Certificate pursuant to 17 CFR 240 15d-14(a) | * | ||||
31.2 | Certificate pursuant to 17 CFR 240 15d-14(a) | * | ||||
32.1 | Certificate pursuant to 18 U.S.C. Section 1350 | * | ||||
32.2 | Certificate pursuant to 18 U.S.C. Section 1350 | * |
(1) | Incorporated by reference to the exhibit of the same number on our Annual Report on Form 10-KSB, No. 333-128902, filed on December 31, 2006. | |
(*) | Filed herewith. | |
(+) | Material has been omitted pursuant to a request for confidential treatment and such materials have been filed separately with the Securities and Exchange Commission. |
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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.
E ENERGY ADAMS, LLC | ||||
Date:February 14, 2007 | /s/ Sam Sacco | |||
Sam Sacco | ||||
Chief Executive Officer (Principal Executive Officer) | ||||
Date:February 14 , 2007 | /s/ Nicholas J. Cusick | |||
Nicholas J. Cusick | ||||
Treasurer (Principal Financial and Accounting Officer) | ||||
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