GLOBAL ENERGY HOLDINGS GROUP, INC. (XTHN) SPO
|Company Name||GLOBAL ENERGY HOLDINGS GROUP, INC.|
|Company Address||3348 PEACHTREE ROAD, NE
TOWER 200, SUITE 250
ATLANTA, GA 30326-1067
|Employees (as of 10/20/2005)||29|
|State of Inc||CO|
|Fiscal Year End||2/5|
|Shares Over Alloted||--|
|Shareholder Shares Offered||19,765,603|
|Lockup Period (days)||180|
|Quiet Period Expiration||1/23/2006|
The selling stockholders will receive all of the proceeds from the sale of the shares offered for sale by them under this prospectus. We will receive none of the proceeds from the sale of the shares by the selling stockholders, except upon exercise of the warrants currently outstanding. In that case, we could receive a maximum of $3,574,830 (1,431,032 shares at a range of $1.90 to $5.25 per share), which would be used for working capital and general corporate purposes. Additionally, we may receive up to $20 million in net proceeds from the sale of our common stock to Fusion Capital under the common stock purchase agreement. We anticipate using any net proceeds we receive from Fusion Capital under the common stock purchase agreement for working capital and the corporate purposes stated below, assuming the net proceeds equal $10 Million, $15 Million and $20 Million. We note that Fusion Capital does not have the right or the obligation to purchase our common stock if the market price of our common stock is below $2.00 per share. $10 Million $15 Million $20 Million Application of Net % of Net % of Net Dollar % of Proceeds Dollar Amount Proceeds Dollar Amount Proceeds Amount Net Proceeds Expansion of $7.0 Blairstown plant(1) $7.0 Million 70.0% $7.0 Million 46.6% Million 35.0% Development and implementation of certain intellectual $2.0 property(2) $2.0 Million 20.0% $2.0 Million 13.3% Million 10.0% Plant $8.0 acquisitions(3) — — $3.0 Million 20.0% Million 40.0% Investment in regional $1.0 strategy(4) — — $1.0 Million 6.7% Million 5.0% $1.0 Working capital(5) $1.0 Million 10.0% $1.0 Million 6.7% Million 5.0% $1.0 Management team(6) — — $1.0 Million 6.7% Million 5.0% $20.0 Total $10.0 Million 100% $15.0 Million 100% Million 100% —————— (1) Includes amounts anticipated to be invested in capital improvements and equipment to increase production capacity up to 15 million gallons per year. (2) Includes amounts anticipated to be used to develop and commercialize certain patents and licenses with the National Renewable Energy Laboratory, USDA Forest Products Laboratory, Queens University, Canada and Virginia Polytechnic Institute. (3) Includes amounts anticipated to be used as initial equity investments to acquire existing ethanol production facilities or developable properties for ethanol production. (4) Includes amounts anticipated to be used to implement our growth strategy in targeted regions including the Southeast, Mid-Atlantic and Northeast. (5) Includes amounts anticipated to be used to pay officers’ salaries, professional fees, office-related expenses and other corporate expenses, including interest and overhead. (6) Includes amounts anticipated to be used to recruit and hire additional operating executives to our management team. We will bear all expenses incident to the registration of the shares of our common stock under federal and state securities laws other than expenses incident to the delivery of the shares to be sold by the selling stockholders. Any transfer taxes payable on these shares and any commissions and discounts payable to underwriters, agents, brokers or dealers will be paid by the selling stockholders.
At our current and projected levels of output, our production is insignificant relative to the overall size of the U.S. ethanol market. Most of the ethanol supply in the United States is derived from corn and is produced at approximately 85 facilities, ranging in size from 300,000 to 300 million gallons per year, located predominately in the corn belt in the Midwest. According to the American Coalition for Ethanol, the largest domestic producer of ethanol is Archer Daniels Midland, which owns some of the largest plants in the country. Archer Daniels Midland accounts for approximately one-third of all domestic capacity with more than 1 billion gallons of production. Its larger plants are wet milling, as opposed to dry milling, and each plant produces 150 to 300 million gallons of ethanol per year. These large plants have certain cost advantages and economies of scale. Due to the recent improvements in the economics for corn-based ethanol production, we may encounter competitors in our efforts to acquire idled plants. Some of these competitors could include private equity firms, energy companies or chemical companies. It is also possible that the better operating environment could reduce the number of plants that are idled or become available for sale. We have identified several potential acquisitions that conform to our model. Traditional corn-based production techniques are mature and well entrenched in the marketplace, and the entire industry's infrastructure is geared toward corn as the principal feedstock. However, in the area of biomass-to-ethanol production, there are few operators and low output characteristics, and production infrastructure is yet to be developed. We believe our long-term growth prospects in biomass-to-ethanol depend on our ability to acquire and commercialize new technologies. As we continue to advance our biomass technology platform, we are likely to encounter competition for the same technologies from other companies that are also attempting to manufacture ethanol from cellulosic biomass feedstocks.
We are a producer of ethanol and its co-products. On August 8, 2005, President George W. Bush signed into law the Energy Policy Act of 2005. The Energy Policy Act transformed ethanol from a niche gasoline additive under the 1990 Clean Air Act to a primary gasoline substitute under the Energy Policy
Act. Ethanol is a clean, high-octane, high-performance automotive fuel commonly blended in gasoline to extend supplies and reduce harmful emissions. In 2004, according to the American Coalition for Ethanol, an independent organization of ethanol producers, approximately 30% of all U.S. gasoline was blended with some percentage of ethanol. As reported in the Renewable Fuels Association's "Ethanol Industry Outlook 2005," U.S. ethanol consumption exceeded 3.4 billion gallons in 2004, more than double that produced in 2000. Xethanol was formed in January 2000 to capitalize on the growing market for ethanol and its co-products. We are a biotechnology-driven company with the primary goal of becoming a leader in the waste-to-ethanol industry. We commenced ethanol production with our first acquisition and plant, Iowa-based Permeate Refining, Inc., in August 2003, which has a production capacity of approximately 1.6 million gallons of ethanol per year from both corn starch and industrial food processing wastes. In April 2005, we temporarily ceased operations at the Permeate Refining plant in order to refurbish the facility and evaluate alternatives to maximize the strategic uses of this facility. We expect to complete our review during the fourth quarter of 2005. In October 2004, we purchased a second plant in Blairstown, Iowa. This plant, operated by our subsidiary Xethanol BioFuels, LLC, became operational in July 2005 and is currently producing at its production capacity of 5.5 million gallons per year. Our business and growth strategy encompasses a two-pronged approach. The first prong of our business and growth strategy is to opportunistically acquire and upgrade existing ethanol production facilities in the traditional ethanol production belt which is situated in the corn farming states of the Midwest. We look to acquire corn-based ethanol plants with 2.0 million to 15.0 million gallons of capacity located in proximity to biomass sources, such as corn stover, which can eventually utilize our proprietary biomass-to-ethanol technologies. We intend to upgrade these plants as well as integrate proprietary technologies that we own or license to increase their production capacity and make them more efficient ethanol producers, and in the process potentially increase margins and profitability. Our aim under this strategy is to become a low-cost producer of ethanol in these areas. Xethanol BioFuels is our first plant employing this strategy. The second prong of our business and growth strategy is to build ethanol production facilities co-located in proximity with waste feedstock generators in the major ethanol usage areas clustered on the East Coast and West Coast. To date, U.S. ethanol production is concentrated around the corn farming states in the Midwest since corn is presently the major feedstock in ethanol production. However, ethanol buyers are clustered on the East Coast and West Coast around major trans-shipment points such as ports. We intend to partner with local entities that have real estate and tanker storage facilities available at these trans-shipment points and use their facilities to build local ethanol production facilities with a lower capital outlay on our part. We intend to implement proprietary bio-separation and bio-fermentation technologies at these port facilities that will allow us to use local biomass waste streams, such as industrial food processing wastes, in ethanol production. Our aim is to become a low-cost ethanol producer at major coastal trans-shipment points, and thus become the ethanol supplier of choice for large, local users. We are in preliminary discussions with a Georgia-based group with respect to establishing Atlantic Xethanol, LLC, our first venture under this strategy. As part of this process, Atlantic Xethanol is exploring opportunities in Savannah, Georgia and Jacksonville, Florida. We believe that prospective demand for ethanol outstrips current supply. Our projected level of ethanol output is insignificant in terms of overall market size; therefore, we believe that the U.S. market can absorb all of our production for the foreseeable future. Using the technologies we have acquired, we believe we can monetize biomass waste streams and not only produce ethanol efficiently and with higher margins than traditional production allows, but also generate income from valuable co-products. We were formed as a Colorado corporation on April 19, 1991. After the merger described below, we discontinued our previous business and succeeded to the business of Xethanol as our sole line of business. On February 2, 2005, we completed a so-called "reverse merger" transaction, in which we caused Zen Acquisition Corp., a Delaware corporation and our newly-created, wholly-owned subsidiary, to be merged with and into Xethanol Corporation, a Delaware corporation. At the closing of the merger, we changed the corporate name of our Delaware subsidiary, which was known as Xethanol Corporation, to Xethanol BioEnergy, Inc. As a result of the merger, Xethanol became our wholly-owned subsidiary, with Xethano's former security holders acquiring a majority of the outstanding shares of our common stock, par value $.001 per share. ------- Our corporate headquarters are located at 1185 Avenue of the Americas, 20th Floor, New York, New York 10036, and our telephone number is (646) 723-4000. Our website is located at www.xethanol.com.