Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
For
the fiscal year ended December 31, 2008
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number: 333-141010
JUHL
WIND, INC.
(Name
of registrant as specified in its charter)
Delaware
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20-4947667
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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996
190th Avenue
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Woodstock,
Minnesota 56186
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(507)
777-4310
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(Address
of principal executive offices)
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(Registrant's
telephone number)
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SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
None
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
None
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
|
Yes¨
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Nox
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Indicate
by check mark if the Registrant is not required to file reports pursuant
to Section 13 of Section 15(d) of the Act.
|
Yes¨
|
Nox
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Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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.
Yes x No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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¨
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Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
x
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).Yes ¨
No x
Aggregate
market value of the voting and non-voting stock of the registrant held by
non-affiliates of the registrant as of June 30, 2008: $19,200,000 (Non-affiliate
holdings of 4,800,000 common shares, closing price of $4.00).
As of
March 30, 2009 the registrant’s outstanding common stock consisted of 20,285,637
shares.
TABLE OF
CONTENTS
PART
I
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3
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ITEM
1
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BUSINESS
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3
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ITEM
1A
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RISK
FACTORS
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15
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ITEM
1B
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UNRESOLVED
STAFF COMMENTS
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15
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ITEM
2
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PROPERTIES
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15
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ITEM
3
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LEGAL
PROCEEDINGS
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15
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ITEM
4
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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15
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PART
II
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15
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ITEM
5
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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15
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ITEM
6
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SELECTED
FINANCIAL DATA
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16
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ITEM
7
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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16
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ITEM
8
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CONSOLIDATED
FINANCIAL STATEMENTS
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23
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ITEM
9
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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24
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ITEM
9A
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CONTROLS
AND PROCEDURES
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24
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ITEM
9B
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OTHER
INFORMATION
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26
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PART
III
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26
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ITEM
10
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DIRECTORS
AND EXECUTIVE OFFICERS
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26
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ITEM
11
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EXECUTIVE
COMPENSATION
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30
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ITEM
12
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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32
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ITEM
13
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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34
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ITEM
14
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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35
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PART
IV
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35
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ITEM
15
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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35
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SIGNATURES
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37
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PART
I
Unless
the context otherwise requires, “we,” “our,” “us” and similar expressions refer
to Juhl Wind, Inc., a Delaware corporation (formerly MH & SC Incorporated),
or Juhl Energy Development, Inc., a Minnesota corporation (“Juhl Energy”), and
DanMar and Associates, Inc., a Minnesota corporation (“DanMar”), separately
prior to our share exchange transaction on June 24, 2008, in which Juhl Energy
and DanMar became wholly-owned subsidiaries of Juhl Wind, and Juhl Wind, as
successor to the business of Juhl Energy and DanMar, after giving effect to the
share exchange transaction, or Next Generation Power Systems, Inc., a South
Dakota corporation (“NextGen”), which we acquired separately on October 31, 2008
and which is now our wholly-owned subsidiary.
Overview
of Our Business
Juhl Wind
provides development, management and consulting services to wind farm projects
throughout the Midwestern U.S. and also sells consumer-owned renewable energy
products such as remanufactured small wind turbines and solar
systems.
We are
engaged in the development of a type of wind power in various small communities
in the Midwestern United States and Canada that has been labeled “community wind
power.” Our ultimate goal is to build medium to large-scale wind farms jointly
owned by local communities, farm owners and our company. The wind farms are
connected to the general utility electric grid to produce clean,
environmentally-sound wind power for use by the electric power
industry.
Since
1999, we have developed 14 wind farms, accounting for more than 117 megawatts of
wind power, that currently operate in the Midwest region of the United States.
We are presently engaged in various aspects of the development of 24 wind farms
totaling an additional 425 megawatts of community wind power
systems.
Our
projects are based on the formation of partnerships with the farmers upon whose
land the wind turbines are installed. Over the years, this type of
wind power has been labeled “community wind power” because the systems are
locally owned by the farmers themselves and/or other local stakeholders. Our
Chairman and Chief Executive Officer, Dan Juhl, was one of the creators of
Community Wind power in the United States. Community wind is a specialized
sector in the wind energy industry that differs from the large, utility-owned
wind power systems that are also being built in the United
States. Community wind is a form of community-based energy
development (C-BED). Various states, including Minnesota, have enacted C-BED
initiatives, which include mechanisms to support community wind and are intended
to make it easier for community wind projects to be successful without putting
an excessive burden on utilities.
Historically,
landowners in rural areas could only benefit from the development of wind farms
in their community by leasing their land to large wind developers. These large
developers would then sell the wind energy to the local utility company and
retain a majority of the project’s profits. We provide what we believe is a
better alternative for local communities by specifically concentrating on C-BED
community wind projects that are locally owned by farmers, investors,
businesses, schools, utilities, or other public or private local entities. As a
result, we believe that community wind projects keep more dollars in local
communities, preserve local energy independence, and protect the environment.
Our goal, and Mr. Juhl’s focus over the past years, is to share ownership with
farmers and to build a network of farmer-owned community wind power
systems.
Mr. Juhl
is an acknowledged expert in the wind power field and is considered a pioneer in
the wind industry having been active in the field since 1978. He was
a leader in the passage of specific legislation supporting wind power
development in the states of Minnesota and Nebraska. John Mitola, our
President, is also considered an expert in the energy field having focused his
career on energy efficiency, demand side management and independent power
development. He has significant experience in the energy
industry and electric industry regulation, oversight and governmental policy.
Previously, he served as chief executive officer and a director of Electric City
Corp., a publicly-held company that specialized in energy efficiency systems,
and as the general manager of Exelon Thermal Technologies, a subsidiary of
Exelon Corp. that designed and built alternative energy systems.
Our
management team has been involved in the wind power industry for more than 30
years. We have experience in the design, manufacture, maintenance and sale of
wind turbines, as well as the full-scale development of wind farms. We hold
contract rights, are involved with projects in development and under
negotiation, and provide development activities in the wind power industry. Our
contract rights relate to administrative services agreements which call for
management and administrative services to be provided for seven existing
Minnesota wind farm developments. Our assets include eight development services
agreements, ten projects in early development stages, and six agreements to
conduct wind power feasibility studies.
The
Company’s involvement in the sale consumer-owned renewable energy products
commenced in November 2008 as a result of the acquisition of Next Generation
Power Systems, Inc. (“NextGen”). Prior to the acquisition, Dan Juhl
had been a controlling shareholder in NextGen since it was organized in
2004. The NextGen business restores small wind turbines in the 30 KW
class for sale to consumers for on-site electricity
generation. NextGen also provides solar-powered systems that allow
small businesses and consumers to generate or store electrical power for on-site
use or emergency backup.
Corporate
Information and History
Our
company was formed as a Delaware corporation in January 2006 as Help-U-Drive
Incorporated for the purpose of developing a business to assist impaired
drivers. Upon further investigation, we decided that this was not a business
opportunity we wanted to pursue due to potential liability and other reasons. In
October 2006, we acquired My Health and Safety Supply Company, LLC, an Indiana
limited liability company, pursuant to a plan of exchange with the holders of
100% of the outstanding membership interests of My Health & Safety Supply
Company. We changed our name to MH & SC, Incorporated in September 2006. My
Health & Safety Supply Company, LLC became our wholly-owned subsidiary and
began developing its business to market a variety of health and safety products
on the Internet. This business was sold simultaneously with the exchange
transaction described below since it was incidental to our new wind energy
business. In March 2007, we filed a registration statement with the SEC, which
became effective in December 2007, and we became a publicly-reporting and
trading company.
On June
24, 2008, we entered into a Securities Exchange Agreement with Juhl Energy and
DanMar and, for certain limited purposes, their respective stockholders. On June
24, 2008, the exchange transaction provided for in the Securities Exchange
Agreement was completed and Juhl Energy and DanMar became our wholly-owned
subsidiaries. DanMar and Juhl Energy were formed as Minnesota corporations in
October 2001 and September 2007, respectively, and have been in the wind energy
business since formation.
Pursuant
to the Securities Exchange Agreement, at closing, the two former beneficial
stockholders of Juhl Energy and DanMar received an aggregate of 15,250,000
shares of our common stock, representing approximately 60.6% of our outstanding
shares of common stock, inclusive of shares of common stock issuable upon the
conversion of our series A convertible preferred stock sold in our concurrent
private placement. In exchange for the shares we issued to the former Juhl
Energy and DanMar stockholders, we acquired 100% of the outstanding common stock
of Juhl Energy and DanMar. Concurrently with the closing of the exchange
transaction, we also completed a private placement to institutional investors
and other accredited investors, in which we received aggregate gross proceeds of
$5,160,000.
The
consideration issued in the exchange transaction was determined as a result of
arm’s-length negotiations between the parties. In leading up to the exchange
transaction, Juhl Energy engaged Greenview Capital, LLC to assist and advise it
in an effort to secure financing. Juhl Energy agreed to pay Greenview Capital,
and its designees, a fee for such advice in the amount of $300,000 in cash and
2,250,000 shares of our common stock. Aside from the Greenview Capital
arrangements, no finder’s fees were paid or consulting agreements entered into
in connection with the exchange transaction.
Following
the exchange transaction, we succeeded to the wind farm development and
management business of Juhl Energy and DanMar. Prior to the exchange
transaction, there were no material relationships between us and Juhl Energy or
DanMar, between Juhl Energy or DanMar and our affiliates, directors or officers,
or between any associates of Juhl Energy or DanMar and our officers or
directors. All of our pre-exchange transaction liabilities were settled on or
immediately following the closing.
Through
the share exchange transaction, the stockholders of our privately-held
predecessors, Juhl Energy and DanMar, received a majority of the outstanding
shares of MH & SC and their officers and directors assumed similar positions
with MH & SC. Following the share exchange transaction, we
changed our corporate name to Juhl Wind, Inc.
On
October 31, 2008, we acquired all of the outstanding shares of common stock of
NextGen in exchange for an aggregate purchase price of $322,500 payable by
delivery of an aggregate of 92,143 shares of our common stock allocated among
the NextGen non-controlling interests. The purchase transaction included
assumption of certain liabilities of NextGen including a note payable to First
Farmer’s & Merchant’s National Bank, but excluded the stockholder notes,
which the stockholders of NextGen agreed to contribute to
equity. Simultaneously with the acquisition of all of NextGen, the
Company also purchased a commercial building and associated land located in
Pipestone, Minnesota from the individual owners of NextGen. The Company issued
41,070 unregistered shares of common stock to the minority stockholders of
NextGen for the purchase of the land and building. The 41,070 shares issued to
the NextGen minority interest were valued at $3.50 per share at the date of
acquisition, or $144,000. The acquisition was accounted for at fair
value of the land and building on the date of purchase which totaled
$173,055. NextGen is now our wholly-owned subsidiary and focuses on
consumer-based renewable energy design and advanced conservation technologies
related to community-scaled renewable energy systems such as small scale wind
turbines and solar arrays.
We have
not been a party to any bankruptcy, receivership or similar proceeding at any
time since inception of the Company.
Industry
and Market Overview
Demand
for electricity has dramatically increased as our society has become more
technologically driven, and this trend is expected to continue. Significant new
capacity for the generation of electricity will be required to meet anticipated
demand. According to the U.S. Department of Energy, Energy Information
Administration’s (”EIA”) Annual Energy Review 2007, nearly half of all
electricity produced in the United States was generated by coal, which is the
largest source of carbon dioxide in the atmosphere. Other major sources of
electricity in 2007 were nuclear (19%), natural gas (21%) and hydropower (6%).
Wind power accounted for nearly 1% of electricity production in the United
States. According to the review, the amount of electricity generated from coal
in the United States increased 72% between 1980 and 2007, and is projected to be
51% higher in 2025 than in 2002, according to the U.S. Department of Energy
EIA’s Annual Energy Outlook 2004 with Projections to 2025. The EIA’s
2009 Annual Energy Outlook Early Release Overview released in December 2008
projects that, while coal continues to be the most important fuel for U. S.
electricity generation currently, coal consumption is expected to decline in the
future because of reduced investment in new coal-fired generating capacity
combined with the increased generation of electricity from renewable
energy. These and other independent government and trade publications
cited herein are publicly available on the Internet without charge.
Most of
the world’s main energy sources are still based on the consumption of
non-renewable resources such as petroleum, coal, natural gas and uranium.
However, while still a small segment of the energy supply, renewable sources
such as wind power are growing rapidly in market share. Wind power delivers
multiple environmental benefits. Wind power operates without emitting any
greenhouse gases and has one of the lowest greenhouse gas lifecycle emissions of
any power technology. Wind power results in no harmful emissions, no extraction
of fuel, no radioactive or hazardous wastes and no use of water to steam or
cool. Wind projects are developed over large areas, but their carbon footprint
is light. Farmers, ranchers and most other land owners can continue their usual
activities after wind turbines are installed on their property.
According
to the U.S. Department of Energy EIA’s publication Renewable Resources in the
U.S. Electricity Supply, wind power generation is projected to increase
eight-fold between 1990 and 2010, a rate of 10.4% per year. Annual growth in the
global wind energy capacity for the past ten years has exceeded an average of
28% per year according to the Global Wind Energy Council’s (“GWEC”) Global Wind
2008 Report, with 2008 experiencing an increase of 28.8%. Although wind power
produces under 1% of electricity worldwide according to the GWEC’s Global Wind
2007 Report, it is a leading renewable energy source and accounts for 20% of
electricity production in Denmark (according to the U.S. Department of Energy’s
Energy Facts web page). Elsewhere in the European Union, wind power
generation represented more than 11% of electricity consumption in Spain, and
7.5% of electricity consumption in Germany (according to the GWEC’s Global Wind
2008 Report. The GWEC’s Global Wind 2008 Report predicts that wind
power is positioned to supply 10% to 12% of global electricity demand by 2020,
reducing carbon dioxide omissions by 1.5 billion tons annually.
Wind
power has become a mainstream option for electricity generation, and we believe
that it is a critical element to solving climate change and delivering
cost-effective domestic power in the United States. The U.S. wind power industry
has exceeded all previous records, with a 50% increase in generating capacity in
2008, according to the GWEC Global Wind 2008 Report. Similarly, the
GWEC Global Wind 2007 Report stated an industry growth of 45% in
2007. Wind now provides over 21,000 megawatts of electricity
generating capacity in the United States, producing enough electricity to serve
5.5 million U.S. homes, according to the American Wind Energy Association’s
December 22, 2008 “Year End Wrap Up” press release. According to this press
release, that capacity will generate over 60 billion kilowatt hours of clean,
cost-effective electricity in 2009, which eliminates the burning of 30.4 million
short tons of coal, 91 million barrels of oil and 560 billion cubic feet of
natural gas. Wind power is now one of the largest sources of new
electricity generation of any kind. According to the GWEC Global Wind 2008
Report, wind projects accounted for about 42% of all new power generating
capacity added in the United States in 2008.
The GWEC
Global Wind 2008 Report announced that the United States led the world in wind
power installations in 2008. Global wind capacity increased by more
than 20,000 megawatts in 2008, with installation of 8,358 megawatt capacity in
the United States alone. China and India were the second and third largest wind
power growth countries last year with 6,300 megawatts and 1,800 megawatts of
wind power capacity added, respectively, according to the report.
Wind
power can deliver zero-emissions electricity in large amounts. According to the
American Solar Energy Society’s report, Tackling Climate Change in the U.S.,
energy efficiency and renewable energies can provide most, if not all, of the
U.S. carbon emission reductions needed to keep atmospheric carbon dioxide levels
at no more than 450 to 500 parts per million, the level targeted in the more
protective climate change bills before the U.S. Congress. According to this
report, wind power would offer a large carbon reduction “wedge” by contributing
a 35% relative share from among the various renewable energy contributors, and
can constitute about 20% of the U.S. electricity supply by 2030.
According
to the Emerging Growth Research, LLP’s Industry Report: U.S. Wind Sector
(December 29, 2008) (the “Emerging Growth Report 2008”), the increase in
domestic wind capacity installed in 2008 is equivalent to the capacity of
approximately 35 average sized coal-fired power plants. Considering
that each average size coal-fired power plant in the United States produces
about 3,000,000 tons of carbon emission each year, currently-installed wind
power capacity is reducing total carbon emissions by just over 105,000,000 tons
each year.
Furthermore,
wind power delivers zero-emissions electricity at an affordable cost. No other
power plants being built in the United States today generate zero-emissions
electricity at a cost per kilowatt-hour nearly as affordable as wind power.
Consequently, using wind power lowers the cost of complying with emissions
reduction goals. The affordable cost of wind power is stable over time. Wind
projects do not use any fuel for their operations, so the price of wind power
does not vary when fuel prices increase. When utilities acquire wind power, they
lock in electricity at a stable price for 20 years or more.
Wind,
however, is intermittent and electricity generated from wind power can be highly
variable. Good site selection and advantageous positioning of turbines on a
selected site are critical to the economic production of electricity by wind
energy. In our experience, the primary cost of producing wind-powered
electricity is the turbine equipment and construction cost; wind energy has no
fuel costs and relatively low maintenance costs. As an intermittent resource,
wind power must be carefully positioned into the electric grid along with other
generation resources and we believe Juhl Wind has demonstrated the expertise
necessary to work with local electric utilities to effect the proper integration
plan. As such, we intend to continue to identify new sites to produce
wind energy through the community wind model throughout the United States and
Canada with a focus on the Midwestern region of the U.S.
Growth
in Demand for Wind Power and Our Position and Service Offerings
Demand
for wind power in the United States is growing rapidly and we believe the call
for growth in community wind power is increasing as well. We are one of the few
companies that has actually completed and put into operation a portfolio of
community wind projects, and we are experiencing strong growth in demand to
provide turnkey development of community wind systems across the Midwestern
United States. Our strategy is to leverage our portfolio of existing projects
and to take on new developments located in the Midwestern United States and
Canada, where proper conditions exist for successful developments: acceptable
wind resources, suitable transmission access and an appropriate regulatory
framework providing acceptable power purchase agreements and long-term utility
agreements.
In July
2008, the U.S. Department of Energy issued a report entitled 20% Wind
Energy by 2030, discussing the viability of the potential for wind energy in the
United States to grow to approximately 305 gigawatts from 2007’s level of
approximately 11 gigawatts. This projected level of growth is estimated to cost
billions of dollars per year for the next 22 years of growth. Community wind
systems will make up a segment of this growth, leading to what we estimate will
be significant growth in community wind systems.
Growth in
wind power is being driven by several environmental, socio-economic and energy
policy factors that include:
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ongoing
increases in electricity demand due to population growth and growth in
energy consuming devices such as computers, televisions and air
conditioning systems,
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the
increasing cost of the predominant fuels required to drive the existing
fleet of conventional electric generation such as coal, natural gas,
nuclear and oil,
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the
increasing cost and difficulty faced in the construction of conventional
electric generation plants,
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existing
and growing legislative and regulatory mandates for “cleaner” forms of
electric generation, including state renewable portfolio standards and the
U.S. federal tax incentives for wind and solar
generation,
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ongoing
improvements to wind power systems making them more cost effective and
improving availability to meet demand,
and
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worldwide
concern over greenhouse gas emissions and calls to reduce global warming
due to the carbon dioxide produced by conventional electric
generation.
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In light
of these factors and the resulting increase in demand for wind power, we believe
that we are uniquely positioned to experience significant year-over-year growth
and development of specific community wind farms throughout the United States.
We can provide full-scale development of wind farms across the range of required
steps including:
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initial
feasibility studies and project
design,
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formation
of required land rights agreements to accommodate turbine placement on
each project’s specific farm land,
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studies,
design and agreements with utilities (as well as with independent system
operators (ISOs), which are organizations formed at the direction or
recommendation of the Federal Energy Regulatory Commission (“FERC”) that
coordinate, control and monitor the operation of the U.S. electrical power
grid) with respect to connection to existing electric power transmission
networks,
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negotiation
and execution of power purchase
agreements,
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arrangement
of equity and debt project
financing,
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construction
oversight and services,
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project
commissioning, and
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·
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multi-year
wind farm operations and
maintenance.
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In
addition, we can provide general consulting services to help farmers and
communities evaluate possible community wind farm projects and initiate their
development. Often, we will take on the entire development process including all
of the services outlined above. As project developer, we arrange every aspect of
the development process and would receive payment for the services as each step
or a combination of steps is accomplished. After establishing that a project has
appropriate wind resource and transmission interconnection, we would move on to
complete land right’s agreements, community limited liability company structures
and the power purchase agreement with the local utility.
Through
the community wind approach, we involve land owners and the local community by
establishing a limited liability company that extends ownership to the
participants along with the initial equity investor. Land owners are critical to
any wind farm because wind turbines must be placed in open areas requiring a
large amount of land necessary to “harvest the wind.” Turbines are typically
placed on a small plot of land, less than one acre is removed from normal use
(such as farming or grazing), for each 50 acres of wind resource captured.
Turbines must be spaced a certain minimum distance apart to avoid “shadowing”
each other and reducing power output. By integrating the land owners into the
land rights and ownership structures, we can allow a wind-enabled farm to more
than double the annual net income from cultivation or grazing. As a project
developer, we assist in finding financing, securing the contract with a utility
to buy the electricity produced, negotiation of a turbine supply agreement and
construction of the system, and arrange for operation of the wind
farm.
Company
Structure
As a
result of the exchange transaction, Juhl Energy and DanMar are our wholly-owned
subsidiaries. Juhl Energy and DanMar have primarily been involved in providing
development, management and consulting services to various wind farm projects
throughout the Midwest. DanMar was incorporated in January 2003 and is located
in Woodstock, Minnesota. In September 2007, DanMar assigned certain development
and management business to a newly-formed corporation, Juhl Energy.
Juhl
Energy also has a subsidiary, Community Wind Development Group LLC, which was a
predecessor to Juhl Energy in the nature of the work provided, but which had
more than one owner. Upon formation of Juhl Energy, it was determined to be in
the best interests of Juhl Energy to acquire ownership in Community Wind
Development, so the other owners’ equity interests were acquired by Juhl Energy
on January 1, 2008. The operations of Community Wind Development are now
included in Juhl Energy since the acquisition date.
Historically,
DanMar and Juhl Energy have both engaged in similar development, management and
consulting projects. It is our intention that prospectively, the companies will
perform separate functions. DanMar will engage in purely consultative projects,
offering solely advice on projects being developed by the owners of the projects
or other third parties. Juhl Energy will engage in development and construction
projects where Juhl Energy will, in many cases, oversee the entire development
of wind farms.
In
October 2008, we acquired NextGen, which is now our wholly-owned subsidiary.
NextGen focuses on renewable energy design and advanced conservation
technologies related to community-scaled renewable energy systems such as wind
turbines.
Our
Community Wind Farm Portfolio
We
believe that we have completed and placed into service more community wind power
systems than any other U.S. enterprise. To date, we have developed 14 community
wind farms located primarily in the “Buffalo Ridge” area of southwestern
Minnesota. Buffalo Ridge is a large expanse of rolling hills that is 60 miles
long and a part of Lincoln County in the southwest corner of Minnesota. It is
located near the small towns of Hendricks and Lake Benton. We selected Buffalo
Ridge because of its high altitude (approximately 2,000 feet above sea level)
and high average wind speed, making it, in our opinion, an ideal location for
wind-based energy production. These wind farms have been developed since the
mid-1980s and total approximately 117 megawatts. They are fully operational
today. In addition, we provide operating and maintenance services to five of the
14 wind farms.
In
addition to the first 14 wind farms developed by us, we have another 24
community wind projects in various phases of development totaling approximately
425 megawatts. These projects are primarily located in the states of Minnesota
and Nebraska. A sample of the projects, which are in the phase of development
referenced below, include but are not limited to,the following:
Project Name
|
|
Megawatts
|
|
Phase
|
Completed
wind farm developments
|
|
117
|
|
Operational
|
Grant
County, MN
|
|
20
|
|
Construction
2009
|
Valley
View, MN
|
|
10
|
|
Financing/Construction
2009
|
Crofton
Hills, NE
|
|
42
|
|
Financing/Construction
2009/2010
|
Traverse
County, MN
|
|
20
|
|
Interconnection
Study
|
Meeker
County, MN (2 projects)
|
|
40
|
|
Interconnection
Study
|
Kittson/Marshall,
MN
|
|
80
|
|
Interconnection
Study
|
Kennedy/Kittson,
MN
|
|
20
|
|
Interconnection
Study
|
16
Additional Midwest Projects
|
|
193
|
|
Initial
Study/Feasibility
|
|
|
|
|
|
Note: From time to time some of our
projects are not listed publicly due to the preferences of local owner groups or
competitive issues facing our business. However, we strive to provide
regular updates to our projects listing via press releases and corresponding
updates to our corporate website, www.juhlwind.com.
Based on
our pipeline of projects, we believe that we will experience consistent growth
in the number of projects completed and the number of projects for which we are
providing operational oversight. We expect that the continued growth in our
project pipeline will act as a key competitive advantage as the community wind
power industry grows throughout the United States and Canada.
Growth
Strategy
Wind
Farm Development and Management Services:
We
specialize in the development of community wind power systems, and we believe
that we are among the leaders in the field. Our growth strategy is anchored by
the competitive advantage of our portfolio of completed projects coupled with
the projects we currently have under development. Our plan is to continue to
provide the full range of development services across each phase of development,
which we expect will grow our revenue and profitability from each project under
development.
In
addition to growing our revenue per project, we will continue to grow our
projects under development by utilizing competitive strengths and taking
advantage of market conditions to build long-term growth, as
follows:
|
·
|
We
expect to increase our capacity by entering regional markets through
organic development. Upon entering a market we work to become a leading
wind energy operator and an influential voice within the region. We strive
to develop projects in-house from the initial site selection through
construction and operation.
|
|
·
|
We
will expand business relationships within the investment community both in
the U.S. and abroad in order to assist project owners in obtaining the
equity and debt financing for wind farm developments. This will include
considerations with regard to raising additional capital in private or
public equity funds that would invest in our wind project
developments.
|
|
·
|
We
expect to create relationships as a community stakeholder. We prioritize
the creation of strong community relationships that we believe are
essential to generating support and securing land and permits necessary
for our wind farms. Our team works closely with the landowners who will
host the wind farms to ensure that they fully understand the impact of
having turbines on their property. Throughout the development process, we
assess and monitor the landowners’ and broader community’s receptiveness
and willingness to host a wind farm in their area. This proactive
involvement in the community also enables us to submit permit applications
that comply with local regulations while addressing local
concerns.
|
|
·
|
We
expect to work with governmental agencies to help us incentivize the
creation of community wind farms and offer favorable tax breaks. Further,
we intend to use tax equity financing arrangements in order to monetize
the value generated by production tax credits and accelerated tax
depreciation that are available to us as a wind energy
generator.
|
|
·
|
We
will continue to strive to attract, train and retain the most talented
people in the industry. As we continue to grow our business, we will need
to attract, train and retain additional employees. We believe that our
management team will be instrumental in attracting new and experienced
talent, such as engineers, developers and meteorology experts. We plan to
provide extensive training and we believe that we offer an attractive
employment opportunity in the markets in which we
operate.
|
As a
result of the relationships we have established and niche markets we have
identified, we have been able to lay the groundwork for 2009 and
beyond. Some of the areas of focus moving forward include the
following:
|
·
|
moving
into an even larger market of smaller
projects;
|
|
·
|
targeting
5 to 40 megawatt wind farm projects. In the State of Minnesota
alone, industry experts have suggested there exist over 6,000 megawatts of
achievable electricity utilizing our wind power
model;
|
|
·
|
expanding
our market of 1 to 10 megawatt on-site wind projects including
universities and colleges, hospital campuses and other institutional
sites; and
|
|
·
|
additional
growth through targeted
acquisitions.
|
Consumer-based
renewable energy products – smaller on-site wind power and solar
systems:
As a
result of the acquisition of Next Generation Power Systems in October 2008, we
expect to expand efforts in this line of business to take advantage of the
stimulus recently provided by the federal government for tax credits and grants
applicable to renewable energy manufacturing facilities and consumers. Some of
the areas of focus include the following:
|
·
|
Reduce
the reliance on subcontract services within our manufacturing process by
bringing the production and assembly in-house where considered
appropriate, and improve quality control and testing
procedures.
|
|
·
|
Engage
an experienced sales and marketing professional to establish and maintain
a qualified dealer network, and to oversee direct selling efforts underway
with the consumer marketplace.
|
|
·
|
Attract,
train and retain talented individuals in the areas of production,
engineering and selling functions.
|
|
·
|
Assess
the product line for expansion opportunities and turbine sourcing
arrangements.
|
Sales
and Marketing
We
derived approximately 33% and 37% of our Wind Farm development and management
revenues from sales to three wind farm customers under management agreements in
2008 and 2007, respectively. Under these administrative services agreements, we
perform management services for these wind farm projects. The agreements provide
monthly management fees equal to 2% of the project’s gross sales. The
administrative services agreements also provide payments for general and
administrative fees, maintenance fees, and any other out-of-pocket expenses for
the project. The agreements expire at various dates through 2015. The agreements
may also be terminated by the wind farm customer upon the last day of the month
that is at least 30 days after we have received written notice of the intent to
terminate the agreement.
Historically,
DanMar and Juhl Energy have not relied on any direct sales or marketing efforts,
but have gained exposure through trade publications, word of mouth and industry
conferences. We currently have a pipeline of projects we believe will last at
least two years and it is being supplemented on an on-going basis without direct
selling efforts. We anticipate being able to add a significant number of
projects to this pipeline driven primarily by Daniel Juhl, John Mitola and an
expanding development team, trade publications, industry events and word of
mouth. Our web site, www.juhlwind.com, will also serve as a marketing tool. If,
at some point, management determines the pipeline of potential customers is less
than anticipated or desired, or if we are unable to sustain our desired rate of
growth and expansion with these sales and marketing methods, we will reevaluate
the sales and marketing efforts and address the issue at that time.
The
Company is currently utilizing internal direct selling efforts for the sale of
consumer-based renewable energy products. During 2009, we will increase our
efforts to establish sales channels through qualified dealers who demonstrate
technical knowledge in the renewable energy marketplace, and have sales
expertise and financial stability to deliver small scale wind turbine and
solar-related systems.
Wind
Energy Technology, Resources and Suppliers
Wind
power is a form of renewable energy; that is, energy that is replenished daily
by the sun. As portions of the earth are heated by the sun, air rushes to fill
the low pressure areas, creating wind power. The wind is slowed dramatically by
friction as it brushes the ground and vegetation. It may not feel very windy at
ground level, yet the power in the wind may be five times greater at the height
of a 40 story building (the height of the blade tip on a large, modern wind
turbine) than the breeze an individual encounters at ground level.
Wind
power is converted to electricity by a wind turbine. In a typical, modern
large-scale wind turbine, the kinetic energy in the wind (the energy of moving
air molecules) is converted to rotational motion by the rotor (a three-bladed
assembly at the front of the wind turbine). The rotor turns a shaft which
transfers the motion into the nacelle (the large housing at the top of a wind
turbine tower). Inside the nacelle, the slowly rotating shaft enters a gearbox
that greatly increases the rotational shaft speed. The output (high-speed) shaft
is connected to a generator that converts the rotational movement into
electricity at medium voltage (a few hundred volts). The electricity flows down
heavy electric cables inside the tower to a transformer, which increases the
voltage of the electric power to the distribution voltage (a few thousand
volts). Higher voltage electricity flows more easily through electric lines,
generating less heat and fewer point losses. The distribution-voltage power
flows through the underground lines to a collection point where the power may be
combined with other turbines. In many cases, the electricity is sent to nearby
farms, residences and towns where it is used. Otherwise, the
distribution-voltage power is sent to a substation where the voltage is
increased dramatically to transmission-voltage power (a few hundred thousand
volts) and sent through very tall transmission lines many miles to distant
cities and factories.
Wind
turbines come in a variety of sizes, depending upon the use of the electricity.
A large, utility-scale turbine described above may have blades over 40 meters
long, meaning the diameter of the rotor is over 80 meters (nearly the length of
a football field). The turbines might be mounted on towers 80 meters tall (one
blade would extend half way down the tower), produce 1.8 megawatts of power
(1800 kilowatts), supply enough electricity for 600 homes and cost over $1.5
million. Wind turbines designed to supply part of the electricity used by a home
or business is much smaller and less costly. A residential - or farm-sized
turbine - may have a rotor up to 15 meters (50 feet) in diameter mounted on a
metal lattice tower up to 35 meters (120 feet) tall. These turbines may cost
from as little as a few thousand dollars for very small units up to
approximately $40,000 to $80,000.
Per the
Emerging Growth Report 2008, due to the persistent credit crisis, some
wind-based projects are being delayed or cancelled, and the reduction in
commodity prices will likely result in wind power producers experiencing lower
turbine pricing over the coming years. It is also expected that
delivery lead times will be shortened. While turbine prices have
risen significantly over the past few years on a per megawatt capacity basis,
the total number of megawatts produced per turbine has increased dramatically
over the same period. For example, in the year 2000 the average
turbine size was less than 800kW. By 2003, this had increased to just
over 1.2 megawatts. As of the end of 2007, approximately half of the
all installations were for turbines rated at between 1.5 megawatts and 2.5
megawatts, an increase of more than 30% from the previous year.
According
to the Emerging Growth Report 2008, this has abated overall costs because as the
price per megawatt has increased strongly, the price per megawatt hour of
production has risen only modestly. While the efficiency of turbines
continues to increase, it will continue to provide further justification for
capital expenditures for upcoming projects, as well as likely decreases in
turbine pricing and better availability throughout 2009 and into
2010.
Based on
our management’s experience and observations of the industry, wind industry
manufacturing facilities surged in the United States from 2005 to 2007, and many
existing facilities are expanding. In 2007, new tower, blade, turbine and
assembly plants opened in the states of Illinois, Iowa, South Dakota, Texas and
Wisconsin. Also in 2007, seven other facilities were announced in the states of
Arkansas, Colorado, Iowa, North Carolina, New York and Oklahoma.
Our
principal suppliers primarily consist of suppliers of wind turbines, wind
turbine parts and various electrical supplies and services relating to wind
turbine operation. We also source, as needed, wind studies and electrical
engineering expertise from outside suppliers. With respect to wind turbines and
related items, our principal suppliers have been Suzlon Energy Limited, Ventera
Energy Corporation and Vestas Wind Support Systems A/S for turbines; Hub City
Inc. for various wind turbine parts; and Abaris EC, LLC, Echo Group, Inc., Muth
Electric Inc. and T&R Electric Supply Company Incorporated for electric
services and supplies. We also use WindLogics, Inc. for wind studies and
Hoerhauf Consultants, Inc. for specialized electrical engineering. Our business
is not dependent on any one supplier and our list of suppliers is changing and
expanding on an ongoing basis as the market for wind power continues to expand
and new suppliers enter with advanced products, technologies and
services.
Competition
In the
United States, large utility companies dominate the energy production industry,
and coal continues to dominate as the primary resource for electricity
production. Electricity generated from wind energy faces competition from other
traditional resources such as nuclear, oil and natural gas. The advantages of
conventional production of electricity are that:
|
·
|
the
technology and infrastructure already exist for the use of fossil fuels
such as coal, oil and natural gas,
|
|
·
|
commonly-used
fossil fuels in liquid form such as light crude oil, gasoline and
liquefied petroleum gas are easy to distribute,
and
|
|
·
|
petroleum
energy density (an important element in land and air transportation fuel
tanks) in terms of volume (cubic space) and mass (weight) is superior to
some alternative energy sources.
|
However,
energy produced by conventional resources also faces a number of challenges
including:
|
·
|
the
inefficient atmospheric combustion (burning) of fossil fuels leads to the
release of pollution into the atmosphere including carbon dioxide which is
largely considered the primary cause of global
warming,
|
|
·
|
dependence
on fossil fuels from volatile regions or countries of the world creates
energy security risks for dependent
countries,
|
|
·
|
fossil
fuels are non-renewable unsustainable resources which will eventually
decline in production and become exhausted with potentially dire
consequences to societies that remain highly dependent on them,
and
|
|
·
|
extraction
of fossil fuels is becoming more expensive and more dangerous as
readily-available resources are exhausted and mines get deeper and oil
rigs must drill deeper and further out in
oceans.
|
In
contrast, electricity generated from wind energy:
|
·
|
produces
no water or air pollution that can contaminate the environment because
there are no chemical processes involved in wind power generation;
therefore, there are no waste by-products such as carbon
dioxide,
|
|
·
|
does
not contribute to global warming because it does not generate greenhouse
gases,
|
|
·
|
is
a renewable source of energy, and
|
|
·
|
in
the case of community wind power, farming and grazing can still take place
on land occupied by wind turbines.
|
However,
wind energy producers also face certain obstacles including:
|
·
|
the
reality that wind is unpredictable and, therefore, wind power is not
predictably available, and when the wind speed decreases, less electricity
is generated,
|
|
·
|
residents
in communities where wind farms exist may consider them an “eyesore,”
and
|
|
·
|
wind
farms, depending on the location and type of turbine, may negatively
affect bird migration patterns and may pose a danger to the birds
themselves; however, newer, larger wind turbines have slower moving blades
which seem to be visible to most
birds.
|
We expect
that primary competition for the wind power industry will continue to come from
utility company producers of electricity generated from coal and other
non-renewable energy sources.
Within
the U.S. wind power market itself, there is also a high degree of competition,
with growth opportunities in all sectors of the industry regularly attracting
new entrants. For example, in 2008, our management believes, based on our
industry observations that over 15 utility-scale wind turbine manufacturers are
selling turbines in the United States market, up from only six in 2005 of which
we were aware.
New
entrants in the wind power development market, however, face certain barriers to
entry. The capital costs of buying and maintaining turbines are high. Other
significant factors include the cost of land acquisition, the availability of
transmission lines, land use considerations and the environmental impact of
construction and operations. Finally, another critical barrier to entry into the
wind power development business is the necessary experience required to bring
projects to the point where they are able to secure agreements with respect to
connecting to the existing electricity transmission network, power purchase
agreements and project financing for construction.
We are
aware of two companies that are working in the community wind power area and
which management views as being competitive with certain aspects of our
company. The first, Nacel Energy, is a community wind development
company founded in 2006 and focused on developing community wind projects in
Texas and Kansas. To our knowledge, Nacel Energy has yet to fully complete the
development of a project. The second, Wind Energy America, is located
in and focused on community wind power in Minnesota and is currently employing a
strategy where it purchases rights to current or developing wind
projects.
With
respect to the production and sale of consumer-based renewable energy products,
there are numerous businesses operating in the U.S. that are associated with the
manufacturing, sales distribution and installation of products and services. The
competition in this field is not dominated by any one particular company or
group of companies. The industry competition is expected to emerge given the
focus on renewable energy facilities by the federal
government.
Our
Competitive Advantages
We
believe that we have a number of competitive advantages in the community wind
energy production sector; one of our key advantages being that we have completed
14 community wind farm projects to date and currently have over 20 wind farm
projects in various developmental stages, representing 425 megawatts of
electricity and almost $1 billion in project development. We expect that when
owners of new projects consider retaining a development enterprise, the ability
to point to actual projects completed, along with the extensive knowledge base
developed and relationships necessary to get the job done, will provide us an
edge in winning projects in the future. These relationships include those with
utility power purchasers, equity and debt project finance sources, turbine
suppliers and constructors. Led by an industry leader, Dan Juhl, our development
team is unmatched in its general experience, credibility and proven track
record.
We
believe that our experience in developing wind farms in new market areas and in
operating energy companies will enable us to continue to successfully expand our
development portfolio. Further, we believe our management’s understanding of
deregulated energy markets enables us to maximize the value of our development
portfolio. Our team has experience in site selection, market analysis, land
acquisition, community relations, permitting, financing, regulation and
construction.
For
community wind projects to be completed successfully, projects must be
constructed in a cost-effective manner. In the course of completing 14 projects
to date, we have been able to demonstrate to project owners, equity investors
and lenders, that we can build wind farms on a cost-effective
basis.
In the
Midwest U.S. markets where we are active, our management team maintains local
presence and promotes community stakeholder involvement. By maintaining offices
in Woodstock, Minnesota and Chicago, Illinois, and becoming involved in local
community affairs, we develop a meaningful local presence, which we believe
provides us with a significant advantage when working through the local
permitting processes and helps to enlist the support of our local communities
for wind farms. We believe that our local approach has enabled us to secure
approvals and support for our projects in regions that have historically voiced
meaningful opposition and has given us a significant advantage over competitors,
who are not as active in the local communities in which we are developing wind
farms. Our management’s active participation in the state and local regulatory
and legislative processes has led to the growth of community wind across the
Midwest.
As a
result of our project portfolio and industry-respected management team, we enjoy
strong relationships with key trading partners that are required for successful
wind farm development. These relationships include regulators, turbine
suppliers, electric component suppliers, equity investors, project lenders,
engineering firms, constructors, electric transmission operators and electric
utilities.
As the
originator and leader of community wind power, we have been able to offer a
unique ownership-sharing formula with farmers and local communities that provide
us with an ongoing competitive advantage in this large and open sector of the
wind energy arena. Some of the key advantages of our approach are
driven by the fact that our projects are medium-sized which provide the
following key benefits:
|
·
|
the
development of these projects secures economic benefits to the local
community bringing construction, legal and regulatory work to rural areas
by engaging local farmers, engineers, bankers and contractors to assist in
the building and maintenance of the
projects;
|
|
·
|
easier
and less expensive transmission and, in general, projects which are much
easier to build. End users generally receive electricity
through an already established local utility
grid;
|
|
·
|
the
landowner and local community retain more by sharing ownership with the
developer and excluding external interests;
and
|
|
·
|
easier
to obtain regulatory permits and to secure project financing through
established and/or local resources due to the size of each
project.
|
In
addition, while mega-wind projects have gained wide attention, the Company is
uniquely positioned as the only public community wind power company in the U. S.
committed to and actually building projects in the 1 – 50 megawatt sector, which
has received considerable attention by the industry. This market is
largely overlooked by most developers. This oversight provides an
opportunity to rapidly increase the Company’s market share and expansion
plans.
Since
becoming a public company in 2008, Juhl Wind has achieved several significant
milestones:
|
·
|
we
have secured institutional investments of over $5 million available for
use as working capital;
|
|
·
|
we
acquired NextGen which specializes in community scale wind turbine and
solar systems. This acquisition brings smaller wind turbine and
solar expertise to the Company to enhance and expand our existing
community wind power product and service
offerings;
|
|
·
|
establishing
equity financing terms
|
|
·
|
in
the last half of 2008, we have entered into seven new feasibility
consulting studies for community based wind farm projects , including
completing a feasibility study with Abilene Christian University to study
the development of a wind project with capacity of three
megawatts initially with potential growth to a larger wind
farm;
|
|
·
|
we
entered into a development agreement with Winona County, Minnesota for a
$3.6 million, two megawatt wind system to be completed in
2009.
|
Intellectual
Property
We depend
on our ability to develop and maintain the proprietary aspects of our technology
to distinguish our products from our competitors’ products. To protect our
proprietary technology, we rely primarily on a combination of confidentiality
procedures. It is our policy to require appropriate employees and consultants to
execute confidentiality agreements and invention assignment agreements upon the
commencement of their relationship with us. These agreements provide that
confidential information developed or made known during the course of a
relationship with us must be kept confidential and not disclosed to third
parties except in specific circumstances and for the assignment to us of
intellectual property rights developed within the scope of the employment
relationship.
The
Company has no patents, trademarks, licenses, franchises, concessions or royalty
agreements.
Government
Regulation
Traditionally,
utility markets in the United States have been highly regulated. The U.S. power
industry is currently in transition as it moves toward a more competitive
environment in wholesale and retail markets. The commercial viability of wind
power will increasingly depend upon pricing as the trend toward deregulation
continues.
Our
management anticipates that additional favorable government legislation will
have a positive impact on our business.
The
growing concern over global warming caused by greenhouse gas emissions has also
contributed to the growth in the wind energy industry. According to the
Intergovernmental Panel on Climate Change’s Climate Change 2007: Synthesis
Report, 11 of the last 12 years (1995-2006) rank among the warmest years since
1850. Additionally, the global average sea level has risen at an average rate of
1.8 millimeters per year since 1961 and at 3.1 millimeters per year since 1993,
due to the melting of glaciers, ice caps and polar ice sheets, coupled with
thermal expansion of the oceans. The importance of reducing greenhouse gases has
been recognized by the international community, as demonstrated by the signing
and ratification of the Kyoto Protocol, which requires reductions in greenhouse
gases by the 177 (as of March 2008) signatory nations. While the United States
did not ratify the Kyoto Protocol, state-level initiatives have been undertaken
to reduce greenhouse gas emissions. California was the first state to pass
global warming legislation, and ten states on the east coast have signed the
Regional Greenhouse Gas Initiative, which proposes to require a 10% reduction in
power plant carbon dioxide emissions by 2019.
Various
state and federal governments have placed restrictions on fossil fuel emissions,
and it is anticipated that additional requirements for limitation of such
emissions will continue. Substituting wind energy for traditional fossil
fuel-fired generation would help reduce carbon dioxide emissions due to the
environmentally-friendly attributes of wind energy. According to the U.S.
Department of Energy, EIA’s International Energy Annual 2006, updated December
8, 2008, the United States had the second highest carbon dioxide emissions of
all the countries in the world in 2006, with 5,902.75 billion metric
tons. This number was second only to China which had 6,017.69 billion
metric tons. According to the U.S. Department of Energy, EIA’s Annual Energy
Review 2007, from 1990 to 2006, carbon dioxide emissions from the United States’
electric power industry have increased by a cumulative amount of 28.7%, from 1.8
billion metric tons to 2.3 billion metric tons.
Environmental
legislation and regulations provide additional incentives for the development of
wind energy by increasing the marginal cost of energy generated through
fossil-fuel technologies. For example, regulations such as the Clean Air
Interstate Rule and the Regional Haze Rule have been designed to reduce ozone
concentrations, particulate emissions and haze and other requirements to control
mercury emissions can require conventional energy generators to make significant
expenditures, implement pollution control measures or purchase emissions credits
to meet compliance requirements. These measures have increased fossil fuel-fired
generators’ capital and operating costs and put upward pressure on the market
price of energy. Because wind energy producers are price takers in energy
markets, these legislative measures effectively serve to make the return on wind
energy more attractive relative to other sources of generation.
We
believe there is significant support in the U.S. to enact legislation that will
attempt to reduce the amount of carbon dioxide produced by electrical
generators. Although the ultimate form of legislation is still being debated,
the two most likely alternatives are (i) a direct emissions tax or (ii) a
cap-and-trade regime. We believe either of these alternatives would likely
result in higher overall power prices, as the marginal cost of electricity in
the U.S. is generally set by generation assets which burn fossil fuels such as
oil, natural gas and coal and produce carbon dioxide. As a non-carbon emitter
and a market price taker, we are positioned to benefit from these higher power
prices.
Growth in
the United States’ wind energy market has also been driven by state and federal
legislation designed to encourage the development and deployment of renewable
energy technologies. This support includes:
Renewables
Portfolio Standards (RPS). In response to the push
for cleaner power generation and more secure energy supplies, many states have
enacted renewable portfolio standards (“RPS”) programs. These programs either
require electric utilities and other retail energy suppliers to produce or
acquire a certain percentage of their annual electricity consumption from
renewable power generation resources or, as in the case of New York, designate
an entity to administer the central procurement of Renewable Energy Certificates
(“RECs”) for the state. Wind energy producers generate RECs due to the
environmentally beneficial attributes associated with their production of
electricity.
According
to the Lawrence Berkeley National Laboratory’s Renewables Portfolio Standards in
the United States April 2008 report, RPS programs at the state level
have proliferated since the late 1990s and, as of the end of 2007, 29 states and
the District of Columbia had adopted some form of RPS program. The report also
indicates the District of Columbia and 25 of the 29 states have mandatory RPS
requirements and combined, they represent 46% of total U.S. electrical load. A
number of states including Arizona, California, Colorado, Minnesota, Nevada, New
Jersey, New Mexico, Pennsylvania and Texas, have revised their programs to
include higher targets since original adoption. The report adds that other
states such as Missouri, North Dakota, Vermont and Virginia have adopted state
goals, which set targets, not requirements, for certain percentages of total
energy to be generated from renewable resources. In 2008, South Dakota and Utah
also adopted RPS programs.
Almost
every state that has implemented an RPS program will need considerable
additional renewable energy capacity to meet its RPS requirements. We believe
that much of the forecasted 50,000 megawatt installed wind capacity by 2015 will
be driven by current and proposed RPS targets, along with additional demand from
states without renewable standards.
According
to the Emerging Growth Report 2008, these mandatory requirements, which are now
in place in many states, are forcing electric utilities to be at the forefront
of wind power development.
Renewable Energy
Certificates (REC). A REC is a stand-alone
tradable instrument representing the attributes associated with one megawatt
hour of energy produced from a renewable energy source. These attributes
typically include reduced air and water pollution, reduced greenhouse gas
emissions and increased use of domestic energy sources. Many states use RECs to
track and verify compliance with their RPS programs. Retail energy suppliers can
meet the requirements by purchasing RECs from renewable energy generators, in
addition to producing or acquiring the electricity from renewable sources. Under
many RPS programs, energy providers that fail to meet RPS requirements are
assessed a penalty for the shortfall, usually known as an alternative compliance
payment. Because RECs can be purchased to satisfy the RPS requirements and avoid
an alternative compliance payment, the amount of the alternative compliance
payment effectively sets a cap on REC prices. In situations where REC supply is
short, REC prices approach the alternative compliance payment, which in several
states is approximately $50 to $59 per megawatt hour. As a result, REC prices
can rival the price of energy and RECs can represent a significant additional
revenue stream for wind energy generators.
Production Tax
Credits (PTC). The PTC provides wind
energy generators with a credit against federal income taxes, annually adjusted
for inflation, for a duration of ten years from the date that the wind turbine
is placed into service. In 2007, the PTC was $20 per megawatt hour. Wind energy
generators with insufficient taxable income to benefit from the PTC may take
advantage of a variety of investment structures to monetize the tax
benefits.
The PTC
was originally enacted as part of the Energy Policy Act of 1992 for windparks
placed into service after December 31, 1993 and before July 1, 1999. The PTC
subsequently has been extended six times, but has been allowed to lapse three
times (for periods of three, six and nine months) prior to retroactive
extension. Currently, the PTC is scheduled to expire on December 31,
2012. This expiration date reflects a three-year extension passed
under the American Recovery and Reinvestment Act enacted in February
2009.
Accelerated Tax
Depreciation. Tax depreciation is a
non-cash expense meant to approximate the loss of an asset’s value over time and
is generally the portion of an investment in an asset that can be deducted from
taxable income in any given tax period. Current federal income tax law requires
taxpayers to depreciate most tangible personal property placed in service after
1986 using the modified accelerated cost recovery system, or MACRS, under which
taxpayers are entitled to use the 200% or 150% declining balance method
depending on the class of property, rather than the straight line method. Under
MACRS, a significant portion of windpark assets is deemed to have depreciable
life of five years which is substantially shorter than the 15 to 25 year
depreciable lives of many non-renewable power supply assets. In addition, the
federal government has extended the rule regarding 50% additional first year
bonus depreciation for assets placed in service by the end of 2009. This shorter
depreciable life and the accelerated and bonus depreciation methods result in a
significantly accelerated realization of tax depreciation for windparks compared
to other types of power projects. Wind energy generators with insufficient
taxable income to benefit from this accelerated depreciation often monetize the
accelerated depreciation, along with the PTCs, through forming a limited
liability company with third parties.
American Recovery
and Reinvestment Act of 2009 (the “Recovery Act”). On
February 13, 2009 the 11th
Congress passed a stimulus package known as The American Recovery and
Reinvestment Act of 2009 (the
“Recovery Act”). The Recovery Act has the potential to substantially
impact the market for renewable energy initiatives. Approximately $40 billion in
spending was appropriated for clean energy initiatives and an additional $20
billion is estimated for new and modified tax incentives. According to a
discussion at Windustry.org, the Recovery Act’s goal opens up new sources of
funding for renewable energy at a time when the wind energy industry is set for
even more growth. The Recovery Act contains a number of provisions
that focus on the growth of the wind industry. Some of the pertinent
provisions of the Recovery Act include the following: (i) three-year extension
of the federal wind energy production tax credit (PTC) so that eligible projects
placed in service by the end of 2012 will qualify for the credit; (ii) option
for a thirty percent (30%) investment tax credit (ITC) instead of the PTC; (iii)
option to convert the ITC into a grant for wind projects placed in service
before 2013; (iv) eliminates the dollar cap on residential small wind
and solar for ITC purposes, and (v) additional loan guarantees, bonds and tax
incentives. These programs enacted under the Recovery Act allow
community wind farms, such as our Company, to take advantage of these funding
opportunities.
Per
Windindustry.org, wind facilities that qualify for the PTC can now make an
irrevocable decision to take 30% ITC in lieu of the PTC. In order to
do so, the project must be placed into service by December 31, 2012, and the PTC
will no longer be available for the project. This has the potential
to attract more investors who may not have enough passive activity income to
realize the PTC. Which credit a taxpayer uses will depend upon an
analysis of the project revenue and cost projections as well as analysis of the
investor tax appetite.
Further,
if the project qualifies for the PTC or the ITC and is placed into service
between 2009-2010 (or it begins construction at the time and is place into
service before 2013), the project can choose to apply to the Treasury Department
for a cash grant that is equal to 30% of the qualified costs of the
project. This cash grant is in lieu of both the PTC and
ITC. This means the value of the ITC can be realized, even if the
taxpayer cannot take advantage of the credit. The rules and
application guidelines for this program are currently being established by the
Department of Energy. We believe that the cash grant program will
allow us to enhance our ability to attract equity investors for our community
wind projects.
The
Recovery Act removes the $4,000 cap on small wind credit so taxpayers can now
take the full 30% credit for a qualified small wind system. It also
provides for an additional $1.6 billion for Clean Renewable Energy Bonds (CREBs)
that are used to finance renewable energy. Previously, these bonds
have been given at 0% interest rate, and the bondholder receives a tax credit in
lieu of bond interest.
The
Department of Energy received an extension of its authority to provide loan
guarantees for qualified technologies under Title XVII of the federal Energy
Policy Act of 2005 and an additional $6 billion for this
program. Eligible technologies include electricity-generating
renewable energy projects.
Employees
As of
March 20, 2009, we employed 13 full-time employees and no part-time employees,
excluding employees and consultants of any affiliated companies that are not at
least 50%-owned subsidiaries of ours. None of our employees is subject to a
collective bargaining agreement and we believe that relations with our employees
are very good. We also frequently use third-party consultants to assist in the
completion of various projects. Third parties are instrumental to us in keeping
the construction and development of projects on time and on budget.
Not
Applicable.
ITEM
1B
|
UNRESOLVED
STAFF COMMENTS
|
Not
Applicable.
Our
corporate office is located at 996 190th Avenue, Woodstock, Minnesota 56186. We
occupy approximately 2,000 square feet of office and storage space under a
ground lease with Kas Brothers, relatives of an employee of our company. DanMar
subsequently erected a barn-type structure with functional office space on the
leased property and owns the building located on the property. In consideration
of the ground lease, we pay the real property taxes for the land leased to us.
Rent expense was $6,500 in 2008. We own a 5,300 square foot commercial building
located at 1502 17th Street SE, Pipestone, Minnesota 56164 that houses the
operations of our NextGen subsidiary. In addition to operations
of our NextGen subsidiary, we also utilize such commercial space for production,
warehousing and general and administrative purposes. Several
employees maintain suitable office arrangements without charge to the
Company.
We are
not party to any legal proceedings, nor are we aware of any contemplated or
pending legal proceedings against us.
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
On June
16, 2008, Vision Opportunity Master Fund, Ltd., the owner of a majority of the
issued and outstanding common stock of the Company as of that date, executed a
written consent of the majority shareholder approving (1) a Securities Purchase
Agreement for sales of the Company’s Series A Preferred Stock and Warrants, (2)
a Securities Exchange Agreement in connection with the exchange transaction, (3)
the Company’s 2008 Incentive Compensation Plan and (4) a name change amendment
to the Company’s Certificate of Incorporation, all effective as of June 24,
2008.
PART
II
ITEM
5
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
Our
common stock is quoted on the OTC Bulletin Board under the symbol
JUHL. The high and low bid prices for shares of our common stock on
March 30, 2009, were $1.95 and $2.05 per share, respectively, based upon bids
that represent prices quoted by broker-dealers on the OTC Bulletin
Board. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions, and may not represent actual
transactions.
During
the period covered by this report, other than as to matters previously reported
in a current report on Form 8-K or a quarterly report on Form 10-Q, there have
been no sales of unregistered securities or repurchases by the
Company.
As
previously reported on Form 8-K, filed with the SEC on June 25, 2008, the
Company completed a private placement to two institutional investors and two
other accredited investors of units consisting of shares of our newly-created
series A convertible preferred stock, par value $.0001 per share, and detachable
five-year class A, class B and class C warrants to purchase shares of our common
stock at an exercise price of $1.25 (class A), $1.50 (class B) and $1.75 (class
C) per share. In total, we sold 5,160,000 shares of our series A convertible
preferred stock (convertible at any time into a like number of shares of common
stock) and class A, class B and class C warrants to each purchase 2,580,000
shares of common stock, or an aggregate of 7,740,000 shares of common
stock.
In
connection with the private placement, we agreed to file an initial registration
statement, and subsequent registration statements if necessary, on Form S-1 (or
any other applicable form) covering, (a) on a pro rata basis, all the shares of
common stock underlying the preferred stock and warrants (b) on a pro rata
basis, the shares of common stock issuable in connection with the payment of 8%
cumulative dividends for three years on series A preferred stock (if such
dividends were not otherwise paid in cash), and (c) the shares of common stock
owned by Greenview Capital, LLC, subject to SEC Rule 415
restrictions.
Under
that prior agreement, we agreed to file the initial registration statement
within 90 days after closing of the private placement and have it declared
effective within 180 days after the closing. In the event of a full review of
the registration statement by the SEC, the required effective date will be
extended by 30 days. If (i) the initial registration statement (and subsequent
registration statements, if necessary) is not filed on time or declared
effective upon the sooner of (A) within three days after the SEC states that
there will be no review or that the SEC has no further comments, or (B) upon the
dates set forth above, or (ii) we fail to timely satisfy our reporting
requirements, we are required to pay in cash liquidated damages of 2% of the
purchase price of the units in the private placement per each 30-day period or
part thereof for any registration default, up to a maximum penalty of
12%.
Subsequent
to the close of the fiscal year, the Company and the holders of the Company’s
Series A Preferred Stock entered into an agreement amending the Registration
Rights Agreement and the Certificate of Designation of Preferences Rights and
Limitations of Series A 8% Convertible Preferred Stock. Under such agreement,
the Company agreed to issue additional common stock to the holders of the Series
A convertible preferred stock at a price equal to 75% of the average of the
immediately preceding 20 days’ daily volume weighted average price for the
common stock. This issuance of common stock is in lieu of the liquidated
damages and set forth under the Registration Rights Agreement, late fees related
to prior quarterly dividend payments, and constitutes a waiver and
deletion of redemption rights provided by Section 9 of the Company’s Certificate
of Designation of Preferences, Rights and Limitations of Series A 8% Convertible
Preferred Stock of the Company with the Delaware Secretary of State on June 24,
2008. As noted in the accompanying financial statements, the Company
recorded a liability and corresponding expense at December 31, 2008 in the
amount of $258,879 to account for approximate liquidated damages and late fees
to the holders of the Series A shares. The Company and the holders of
the Series A shares agreed to pay the $258,879 in the form of shares of common
stock issuable over the period April 1 through October 1, 2009. The Company
anticipates that approximately 160,000 shares may be issued in connection with
this agreement.
. Transfer Agent
Our
transfer agent is Empire Stock Transfer, 2470 St. Rose Parkway, Suite 304,
Henderson, NV 89074.
ITEM
6
|
SELECTED
FINANCIAL DATA
|
Not
Applicable.
ITEM
7
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Cautionary
Language Regarding Forward-Looking Statements and Industry Data
This
annual report contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties, many of which are beyond our control. Our actual
results could differ materially and adversely from those anticipated in such
forward-looking statements as a result of certain factors, including those set
forth in this report. Important factors that may cause actual results
to differ from projections include, but are not limited to, for
example: adverse economic conditions, inability to raise sufficient
additional capital to operate our business, delays, cancellations or cost
overruns involving the development or construction of our wind farms, the
vulnerability of our wind farms to adverse meteorological and atmospheric
conditions, unexpected costs, lower than expected sales and revenues, and
operating defects, adverse results of any legal proceedings, the volatility of
our operating results and financial condition, inability to attract or retain
qualified senior management personnel, and other specific risks that may be
referred to in this report. All statements, other than statements of
historical facts, included in this current report regarding our strategy, future
operations, financial position, estimated revenue or losses, projected costs,
prospects and plans and objectives of management are forward-looking
statements. When used in this current report, the words “will,”
“may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,”
“plan” and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying
words. All forward-looking statements speak only as of the date of
this report. We undertake no obligation to update any forward-looking
statements or other information contained herein. Stockholders and
potential investors should not place undue reliance on these forward-looking
statements. Although we believe that our plans, intentions and
expectations reflected in or suggested by the forward-looking statements in this
report are reasonable, we cannot assure stockholders and potential investors
that these plans, intentions or expectations will be achieved. These
cautionary statements qualify all forward-looking statements attributable to us
or persons acting on our behalf. Information regarding market and
industry statistics contained in this report is included based on information
available to us that we believe is accurate. It is generally based on
academic and other publications that are not produced for purposes of securities
offerings or economic analysis. Forecasts and other forward-looking
information obtained from these sources are subject to the same qualifications
and the additional uncertainties accompanying any estimates of future market
size, revenue and market acceptance of products and services. We have
no obligation to update forward-looking information to reflect actual results or
changes in assumptions or other factors that could affect those
statements.
Overview
On June
24, 2008, we acquired all of the outstanding shares of common stock of two
related companies, Juhl Energy and DanMar, in exchange for the issuance of
15,250,000 shares of our common stock. As a result, Juhl Energy and DanMar are
now our wholly-owned subsidiaries. The transaction is referred to herein as the
exchange transaction.
As a
result of the exchange transaction, we are now engaged in the development of
community wind power in various small communities in the Midwestern United
States and Canada committed to building medium scale wind farms jointly owned
with local communities and farm owners. The wind farms are connected to the
general utility electric grid to produce clean, environmentally-sound wind power
for use by the electric power industry. Since inception, Juhl Energy and DanMar
have developed 14 wind farms, accounting for more than 117 megawatts of wind
power, that currently operate in the Midwest region of the United States. At the
time of the exchange transaction, Juhl Energy and DanMar were engaged in various
aspects of the development of 16 wind farms totaling an additional 400 megawatts
of community wind power systems.
Before
the exchange transaction, our corporate name was MH & SC, Incorporated and
our trading symbol was MHSC.OB. Concurrently with the exchange transaction, we
changed our corporate name to Juhl Wind, Inc. and changed our trading symbol to
JUHL.OB. As a result of the exchange transaction, Juhl Energy and DanMar became
our wholly-owned subsidiaries, with the former stockholders of Juhl Energy and
DanMar acquiring 15,250,000 shares of our common stock. Both Juhl Energy and
DanMar were controlled by Daniel J. Juhl, their founder and our new Chairman and
Chief Executive Officer. The exchange transaction was consummated pursuant to a
Securities Exchange Agreement, dated June 24, 2008, between us, and Juhl Energy
and DanMar and, for certain limited purposes, the former stockholders of Juhl
Energy and DanMar.
Concurrently
with the closing of the exchange transaction, we completed a private placement
to two institutional investors and two other accredited investors of units
consisting of shares of our newly-created series A convertible preferred stock
and detachable five-year class A, class B and class C warrants to purchase
shares of our common stock at an exercise price of $1.25 (class A), $1.50 (class
B) and $1.75 (class C) per share. In total, we sold 5,160,000 shares of our
series A convertible preferred stock (convertible at any time into a like number
of shares of common stock) and class A, class B and class C warrants to each to
purchase 2,580,000 shares of common stock, or an aggregate of 7,740,000 shares
of common stock. We received gross proceeds of $5,160,000 in consideration for
the sale of the units ($4,560,000 from Vision Opportunity Master Fund, Ltd.,
$500,000 from Daybreak Special Situations Master Fund, Ltd. and $100,000 from
Bruce Meyers and Imtiaz Khan.)
Concurrently
with the closing of the exchange transaction and the private placement, we
cancelled 3,765,000 shares of our common stock held by Vision Opportunity Master
Fund, Ltd. Simultaneously with the closing of the exchange transaction, pursuant
to a purchase and sale agreement, we sold all of the outstanding membership
interests of our wholly-owned subsidiary, My Health & Safety Supply Company,
LLC, an Indiana limited liability company, to Cory Heitz in full satisfaction of
related party advances made by him to us in the principal amount of $121,000,
plus accrued but unpaid interest. We determined that this business was
incidental to our new wind energy business.
On
October 31, 2008, we acquired all of the outstanding shares of common stock of
NextGen in exchange for an aggregate purchase price of $322,500 payable by
delivery of an aggregate of 92,143 shares of our common stock allocated among
the NextGen non-controlling interests. The purchase transaction included
assumption of certain liabilities of NextGen including a note payable to First
Farmer’s & Merchant’s National Bank, but excluded the stockholder notes,
which the stockholders of NextGen agreed to contribute to
equity. Simultaneously with the acquisition of all of NextGen, the
Company also purchased a commercial building and associated land located in
Pipestone, Minnesota from the individual owners of NextGen. The Company issued
41,070 unregistered shares of common stock to the minority stockholders of
NextGen for the purchase of the land and building. The 41,070 shares issued to
the NextGen minority interest were valued at $3.50 per share at the date of
acquisition, or $144,000. The acquisition was accounted for at fair
value of the land and building on the date of purchase which totaled
$173,055. NextGen became our wholly-owned subsidiary and is treated as a
separate business segment.
Basis
of Presentation
Our
financial statements are prepared in accordance with the rules and regulations
of the SEC.
For
accounting purposes, Juhl Energy was the acquirer in the exchange transaction,
and consequently the transaction is treated as a recapitalization of those
companies. Juhl Energy, DanMar and NextGen’s financial statements are
our historical financial statements.
The
acquisition of Next Gen was accounted for in a manner similar to pooling of
interests due to common control ownership. The assets and liabilities of NextGen
were combined at historical cost for the portion (54%) under common control and
at fair value for the non-controlling interest. The revenue and
expense activities of NextGen are included in the accompanying statement of
operations for 2008 and 2007. The following discussion of our financial
condition and results of operations should be read in conjunction with our
financial statements and related notes included in this report.
Significant
Accounting Estimates
We review
all significant estimates affecting our consolidated financial statements on a
recurring basis and record the effect of any necessary adjustment prior to their
publication. Uncertainties with respect to such estimates and assumptions are
inherent in the preparation of financial statements; accordingly, it is possible
that actual results could differ from those estimates and changes to estimates
could occur in the near term. The preparation of our consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of the contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenue and expenses during the reporting period.
Estimates and judgments are used when accounting for revenue, stock-based
compensation, accounts receivable and allowance for doubtful accounts,
impairment of goodwill, deferred income taxes, and contingencies among
others.
Our
management has discussed the development and selection of these significant
accounting estimates with our board of directors and our board of directors has
reviewed our disclosures relating to them.
Results
of Operations – Year ended December 31, 2008 Compared to Year ended December 31,
2007
Overview
Our
general activity for the year ended December 31, 2008 was primarily focused on
the ongoing development of 24 wind farms we have under development with various
parties and in various stages of development. Our management believes that we
are poised for growth as we now have improved our balance sheet liquidity
necessary to work through our current projects under development and ability to
develop future projects. We acquired NextGen in the fourth quarter
2008 as a means to expand the Company’s focus to the consumer sector for
renewable energy product. Our management attention in 2008 to the
consumer segment has primarily been related to the review of NextGen’s
production and distribution capabilities and the integration of these
capabilities into our existing technical and administrative
platforms.
Our Wind
Farm Development and Management services segment is engaged in the development
of a type of wind power in various small communities in the Midwestern United
States and Canada that has been labeled “community wind power” because the
systems are actually owned by the farmers and the local communities they serve.
Our projects are based on the formation of partnerships with the farmers upon
whose land the wind turbines are installed. Revenue is also derived from our
work in the development of wind farms throughout the development process
including four major components: feasibility studies, development fees,
operations and management oversight and construction management
fees.
We hold
contract rights, are involved with projects in development and under
negotiation, and provide development activities in the wind power industry. Once
wind farms are operational, we seek contract rights to provide administrative
services agreements which call for management and administrative services to be
provided to the operating wind farm. Our assets also include four wind power
development services agreements, nine projects in early development and under
negotiation, various agreements to conduct wind power feasibility studies, and
administrative arrangements with six operating wind farm projects.
Due to
the anticipated increased demand for electricity from alternative energy sources
in 2009 and beyond, together with the stimulus from new federal government
regulations, we believe the demand for wind energy developments and
consumer-based renewable energy products will be stable or will increase in the
foreseeable future. We anticipate growing revenues on an annual basis beginning
in 2009; however, revenue will be subject to shifts in timing due to project
development delays due to financing, construction seasons
During
the year ended December 31, 2008, we continued to add new projects under
development, underscoring the demand in the market and specifically for our form
of community wind. We encountered difficult economic conditions with
respect to the financing of wind development projects, and as such, we
commissioned no new wind farm projects during 2008. We did obtain an
equity financing commitment in September 2008 for one of our wind farm
developments, and we expect that construction on this project will occur in
2009. We continue to identify additional debt and equity financing sources in
order to bring additional 2-3 projects forward to actual construction in
2009.
Revenue
Revenue
for the year ended December 31, 2008 was $1,331,497, compared to $1,520,086 for
the year ended December 31, 2007. This represented a decrease of
$188,589, or 12.4%, compared with the corresponding period in 2007. The decrease
in revenues is attributable to approximately a $360,000 decrease from 2007 to
2008 in small wind turbine sales within the recently acquired NextGen business.
This is attributed to the transition of the NextGen business to the Company and
delays in shipping turbines that were in backlog as management reformulated the
subsidiary’s business plan for the future. The wind farm development
and management revenues, inclusive of related party revenue from these sources,
increased from 2007 to 2008 by $171,630, or 25%. All of the Related Party
Revenue is attributable to wind farm development and management services.
Approximately $80,000 of this amount is attributable to one-time upgrade fees
that were charged to the projects for upgraded transmission facilities with the
remainder related to increased feasibility and consulting
services. We did not have any of our development projects become
operational in 2008 as a result of the difficulty in arranging financing amidst
the turmoil in the investment banking and financial institutions during 2008. We
expect project financing conditions to improve in 2009 due to the federal
government intervention within the banking sector and the focus of the recent
federal stimulus package as it relates to the energy industry.
Cost
of Goods Sold
All of
the costs classified in Cost of Goods Sold relate to the NextGen business. Cost
of Goods Sold includes the purchase of previously used turbines, replacement
parts, subcontract refurbishment services and installation project
costs. Costs of Goods Sold decreased by $400,000 in 2008 as only four
turbines were sold versus twelve in 2007. NextGen encountered quality issues in
connection with turbines sold in 2006 and 2007 which resulted in additional
costs in 2007 to provide replacement parts and service without a commensurate
increase in revenue. A warranty reserve of $55,000 is included in the 2007
expenses.
Operating
Expenses
General
and Administrative Expenses. General and administrative expenses for
the year ended December 31, 2008 were $887,242 as compared to $247,945 for the
year ended December 31, 2007, which represented a $639,297, or 258%, increase.
The large increase is attributed to non-recurring type expenses. Approximately
$440,000 of legal, audit and advisory expenses were recorded in 2008 in
connection with the exchange transaction, the NextGen acquisition, and public
company filings. We estimate that our total expenses for one-time
costs associated with these professional services were $300,000. Costs incurred
in connection with the closing of the private placement equity transaction in
2008 were netted against the proceeds of the preferred stock. The
increase in general and administrative expenses in 2008 also included a
provision for bad debts of $134,833 and non-cash stock-based compensation of
$91,552.
Payroll
and Employee Benefits. Salary, wages, employment taxes and fringe
benefits for the year ended December 31, 2008 were $816,463 as compared to
$321,110 for the year ended December 31, 2007, which represented a
$495,353, or 154%, increase. Approximately $250,000 of the increase is related
to an increased rate of compensation for our chief executive officer and the
addition of a new company president. The increase is also attributable to
accrued stock-based compensation expenses of $96,187 in 2008 as compared to $0
in 2007. The remaining increase is primarily related to the addition
of 4 employees during the year.
Wind Farm
Management Expenses. Wind farm management expenses for the year ended
December 31, 2008 were $170,494 as compared to $135,333 for the year ended
December 31, 2007, which represented a $35,161, or 26%, increase. This increase
was primarily due to additional costs incurred to upgrade wind farm facilities
during 2008 as requested by the major equity investor in the
projects.
Other
expenses. The Company recorded $218,965 of investor relations
expenses in 2008. These expenses were paid from a $500,000 restricted cash fund
that had been set up in June 2008 stemming from the private
placement. There were no investor relations expenses in
2007. A goodwill impairment charge was recorded in 2008 in the amount
of $193,974 as a result of an assessment of the fair value of future cash flows
in comparison to the carrying value of the asset. An expense of $258,879 was
recorded in 2008 (as disclosed in Notes 3 and 16 in the financial statements)
for liquidated damages and late fees for the Company’s failure to obtain a
timely effective registration of common stock. This expense will be paid in the
form of common stock between April 1 and October 1, 2009.
Net
Loss
Net
loss for the year ended December 31, 2008 was $1,201,229 as compared to a net
loss of $46,255 for the year ended December 31, 2007, which represented an
increased loss of $1,154,974. This increased loss is primarily attributable to
$440,000 of increased expenses incurred in 2008 for professional fees
(as described above) for which we estimate that $300,000 are one-time costs. The
2008 net loss is also impacted by charges of $193,974 and $258,879 taken for
goodwill impairment and liquidated damages, respectively, and the decreased
revenue within the consumer-based energy segment of $360,000.
Accounts
Receivable
Traditional
credit terms are extended to customers in the normal course of business. We
perform ongoing credit evaluations of our customers’ financial condition and
generally require no collateral.
Property,
Plant and Equipment
As of
December 31, 2008 and 2007, we held $344,124 and $202,721 in net book value of
property, plant and equipment, respectively. These assets included land,
buildings, office equipment, shop equipment and service vehicles.
Liquidity
and Capital Resources
Historically,
we have financed our operations and growth from cash flow from operations. Due
to the anticipated increased demand for power from alternative energy sources in
2008 and 2009, we believe the demand for our services, and therefore our
revenues, will be stable or will increase in the foreseeable future. Based on
our anticipated level of revenues, we believe that funds generated from
operations, together with existing cash and cash available from financing
activities in 2008, will be sufficient to finance our operations and planned
capital expenditures through the next twelve months. At December 31, 2008, we
carried $3,310,789 in cash and short term-investments primarily due to the
private placement transaction in June 2008. However, $700,000 of the short-term
investments have been designated as security for the bank notes
payable of $646,791 and therefore have been reflected in current assets as a
restricted asset. In order to provide additional protection to our cash, we
obtained an excess deposit insurance bond (at a cost of $7,089) for our
wholly-owned subsidiary, Juhl Energy, with respect to cash and certificates of
deposit carried in Juhl Energy’s name at First Farmers & Merchants National
Bank. The insurance bond increased our deposit insurance protection to
$4,500,000 and is effective through February 25, 2011.
We will
continue our internal efforts to arrange financing terms for each project under
development. The ability to obtain debt and equity financing is a material
factor in producing our future revenue streams. We will continue to pursue new
community wind farm developments to maintain an active backlog of projects.
However, we cannot assure you that these actions will be successful. Should
volumes and revenues decline to a level significantly below our current
expectations, we would reduce capital expenditures and implement cost-reduction
initiatives which we believe would be sufficient to ensure that funds generated
from operations, together with existing cash and available borrowings under our
credit agreement, would be sufficient to finance our current operations through
the first quarter of 2010.
Net cash
used in operating activities was $743,401 for the year ended December 31, 2008,
and net cash used in operating activities was $91,581 for the year ended
December 31, 2007. The change in net cash used in operations is primarily due to
significant expenses paid and incurred in connection with the exchange
transaction and investor relations expenses. These expenses include legal and
audit fees of approximately $440,000, and investor relations expenses of
approximately $219,000.
Net cash
used in investing activities used was $339,463 (excluding the $1.3 million
investment of cash reserves into certificates of deposit) for the
year ended December 31, 2008 and $13,289 for the year ended December 31,
2007. The change in net cash used in investing activities
primarily relates to reimbursable project costs incurred on wind farm projects
where Juhl Wind is currently the project developer.
Our net
cash flow provided by financing activities was $3,530,177 for the year ended
December 31, 2008, primarily attributable to the net private placement proceeds
of $4,099,825. The designation of $700,000 in certificates of deposit
as security for bank notes payable is shown as a use for financing
activities. Additional financing activities included borrowings to
support NextGen working capital needs of $114,641, remaining receipts of
$264,557 from a restricted cash fund to pay investor relations expenses, and use
of $216,896 for cash distributions to S Corp stockholders prior to the exchange
transaction. For the year ended December 31, 2007, net cash flow used
in financing activities was $45,587. The $45,587 is attributable to proceeds
from bank borrowings to support the NextGen working capital needs in 2007, net
of S Corp cash distributions made to stockholders of $462,531.
We
maintain an escrow cash account funded by the proceeds received from the
preferred stock private placement, which occurred during the second quarter of
2008. The funds are to be used only for investor relations
initiatives. As of December 31, 2008, we had a balance of
$264,557 in the account. Also, 15% of the gross proceeds generated from the
exercise of the warrants attached to such preferred stock private placement
shall be placed in the account.
Impact
of Inflation
We expect
to be able to pass inflationary increases on to our customers through price
increases, as required, and do not expect inflation to be a significant factor
in our business.
Seasonality
Although
our operating history is limited, we do not believe our services are seasonal
except for future wind farm construction revenue which may be impacted by
climate in the Upper Midwest.
Off-Balance
Sheet Arrangements
There are
no off-balance sheet arrangements between us and any other entity that have, or
are reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
Critical
Accounting Policies
The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires our management to exercise its judgment. We exercise considerable
judgment with respect to establishing sound accounting policies and in making
estimates and assumptions that affect the reported amounts of our assets and
liabilities, our recognition of revenues and expenses, and disclosures of
commitments and contingencies at the date of the financial
statements.
On an
ongoing basis, we evaluate our estimates and judgments. We base our estimates
and judgments on a variety factors including our historical experience,
knowledge of our business and industry, current and expected economic
conditions, the composition of our products/services and the regulatory
environment. We periodically re-evaluate our estimates and assumptions with
respect to these judgments and modify our approach when circumstances indicate
that modifications are necessary.
While we
believe that the factors we evaluate provide us with a meaningful basis for
establishing and applying sound accounting policies, we cannot guarantee that
the results will always be accurate. Since the determination of these estimates
requires the exercise of judgment, actual results could differ from such
estimates. A description of significant accounting policies that require us to
make estimates and assumptions in the preparation of our consolidated financial
statements is as follows:
Revenue
Recognition. We receive a down payment upon the acceptance of a
development contract by the wind farm owner. With no work performed on the
contract, the down payment is considered deferred revenue and is recognized over
the estimated life of the contract. We recognize additional revenue from
development contracts upon completion of each of the two deliverables in the
development contract. Revenue is recognized upon completion due to inherent
uncertainties relating to the wind energy market. The first deliverable is the
acceptance of the power purchase agreement by the wind farm owner and power
company. The compensation relating to the acceptance of the power purchase
agreement is recognized on the date the agreement is executed. The second
deliverable is the commercial operation date of the project. Revenue is
recognized for this deliverable when the project becomes commercially
operational according to the power company.
We have
signed administrative services agreements with several wind turbine projects to
provide management and bookkeeping services. The administrative services
agreements call for quarterly payments in advance or arrears of services
rendered based on the terms of the agreement. The administrative service
payments are carried as deferred revenue and recognized monthly as services are
performed. See “Revenue” above.
Capitalization
and Investment in Wind Farm Project Assets. Our wind farms have four
basic phases: (i) development (which includes pre-development consulting), (ii)
financing and applications, (iii) engineering and construction, and (iv)
operation and maintenance. During the pre-development phase, milestones are
created to ensure that a project is financially viable. Project viability is
obtained when it becomes probable that costs incurred will generate future
economic benefits sufficient to recover these costs.
Examples
of milestones required for a viable wind project include the
following:
|
·
|
the
identification, selection and acquisition of sufficient land for control
of the land area required for a wind
farm,
|
|
·
|
the
confirmation of a regional electricity market and the availability of
RECs,
|
|
·
|
the
confirmation of acceptable wind resources (feasibility
study),
|
|
·
|
the
confirmation of the potential to interconnect to the electric transmission
grid, and
|
|
·
|
the
determination of limited environmental
sensitivity.
|
Wind farm
project costs are generally funded through 50% equity and 50% debt from outside
investors and local banks. We do not invest our capital in the projects we
develop, with the exception of reimbursable project advances from time to time.
We have established relationships with equity investment partners, as well as
with local banks, and these relationships have culminated in the successful
funding of several projects. The investment community and marketplace have
demonstrated a strong appetite for investments in wind energy in the recent
past. These investors recognize a determined rate of return and return of
capital typically over a ten year period. Development fees are
generated by us throughout all phases of project development and represent our
revenue. Expenses incurred relating to operations are applied under generally
accepted accounting principles.
ITEM
8
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
Juhl
Wind, Inc.
Consolidate
Financial Statements
December
31, 2008 and 2007
|
Page Number
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Consolidated
Balance Sheets
|
F-2
|
Consolidated
Statements of Operations
|
F-3
|
Consolidated
Statement of Changes in Stockholders’ Equity - 2008
|
F-4
|
Consolidated
Statement of Changes in Stockholders’ Equity - 2007
|
F-5
|
Consolidated
Statements of Cash Flows
|
F-6
|
Notes
to Financial Statements
|
F-7
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Juhl Wind, Inc. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of Juhl Wind, Inc. and
Subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of income, stockholders’ equity, and cash flows for each of the years
then ended. Juhl Wind, Inc’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Juhl Wind, Inc.
and Subsidiaries as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for each of the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
/s/
Boulay, Heutmaker, Zibell & Co. P.L.L.P
Minneapolis,
Minnesota
March 31,
2009
JUHL
WIND INC.
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$ |
1,310,789 |
|
|
$ |
163,476 |
|
Restricted
Cash
|
|
|
264,557 |
|
|
|
- |
|
Accounts
Receivable
|
|
|
|
|
|
|
|
|
Net
of an allowance of $10,000 as if December 31, 2008
|
|
|
50,782 |
|
|
|
227,804 |
|
Short
Term Investments
|
|
|
1,300,000 |
|
|
|
- |
|
Short
Term Investments - Restricted
|
|
|
700,000 |
|
|
|
- |
|
Unbilled
Receivables at net realizable value
|
|
|
250,699 |
|
|
|
15,000 |
|
Inventory
|
|
|
403,118 |
|
|
|
547,882 |
|
Project
Deposits
|
|
|
147,800 |
|
|
|
- |
|
Other
Current Assets
|
|
|
97,727 |
|
|
|
5,347 |
|
Current
Deferred Income Taxes
|
|
|
422,000 |
|
|
|
- |
|
TOTAL
CURRENT ASSETS
|
|
|
4,947,472 |
|
|
|
959,509 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
344,124 |
|
|
|
202,721 |
|
|
|
|
|
|
|
|
|
|
GOODWILL
|
|
|
227,998 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Deferred
Income Tax Asset
|
|
|
14,000 |
|
|
|
- |
|
Project
Development Costs
|
|
|
302,000 |
|
|
|
- |
|
Unbilled
Receivable - Non-Current Portion
|
|
|
- |
|
|
|
272,000 |
|
Intangible
Assets
|
|
|
72,000 |
|
|
|
- |
|
TOTAL
OTHER ASSETS
|
|
|
388,000 |
|
|
|
272,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
5,907,594 |
|
|
$ |
1,434,230 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
250,285 |
|
|
$ |
361,849 |
|
Accrued
Expenses
|
|
|
346,019 |
|
|
|
68,912 |
|
Deferred
Revenue
|
|
|
332,541 |
|
|
|
149,317 |
|
Notes
Payable
|
|
|
646,791 |
|
|
|
632,150 |
|
TOTAL
CURRENT LIABILITIES
|
|
|
1,575,636 |
|
|
|
1,212,228 |
|
|
|
|
|
|
|
|
|
|
CONVERTIBLE
PREFERRED STOCK
|
|
|
|
|
|
|
|
|
$.0001
par value; 20,000,000 authorized, 5,160,000 issued and
|
|
|
3,342,954 |
|
|
|
- |
|
outstanding
as of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Common
Stock - $.0001 par value; 100,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
20,183,213
issued and outstanding as of December 31, 2008
|
|
|
2,018 |
|
|
|
511,525 |
|
Additional
Paid-In Capital
|
|
|
3,334,762 |
|
|
|
104,344 |
|
Accumulated
Deficit
|
|
|
(2,347,776 |
) |
|
|
(393,867 |
) |
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
989,004 |
|
|
|
222,002 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
5,907,594 |
|
|
$ |
1,434,230 |
|
The
accompanying notes are an integral part of these consolidated
statements.
JUHL
WIND INC.
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Windfarm
Development and Management
|
|
$ |
740,582 |
|
|
|
55.6 |
% |
|
$ |
482,660 |
|
|
|
31.8 |
% |
Comsumer-owned
Energy Products Sales
|
|
|
451,688 |
|
|
|
33.9 |
|
|
|
812,925 |
|
|
|
53.5 |
|
Related
Party Revenue
|
|
|
130,226 |
|
|
|
9.8 |
|
|
|
216,518 |
|
|
|
14.2 |
|
Other
Operating Income
|
|
|
9,001 |
|
|
|
0.7 |
|
|
|
7,983 |
|
|
|
0.5 |
|
TOTAL
INCOME
|
|
|
1,331,497 |
|
|
|
100.0 |
|
|
|
1,520,086 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
414,296 |
|
|
|
31.1 |
|
|
|
814,038 |
|
|
|
53.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
917,201 |
|
|
|
68.9 |
|
|
|
706,048 |
|
|
|
46.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
887,242 |
|
|
|
66.6 |
|
|
|
247,945 |
|
|
|
16.3 |
|
Investor
Relations Expenses
|
|
|
218,965 |
|
|
|
16.5 |
|
|
|
- |
|
|
|
0.0 |
|
Liquidated
Damages
|
|
|
258,879 |
|
|
|
19.4 |
|
|
|
- |
|
|
|
0.0 |
|
Impairment
of Goodwill
|
|
|
193,974 |
|
|
|
14.6 |
|
|
|
- |
|
|
|
0.0 |
|
Payroll
and Employee Benefits
|
|
|
816,463 |
|
|
|
61.3 |
|
|
|
321,110 |
|
|
|
21.1 |
|
Windfarm
Management Expenses
|
|
|
170,494 |
|
|
|
12.8 |
|
|
|
135,333 |
|
|
|
8.9 |
|
TOTAL
OPERATING EXPENSES
|
|
|
2,546,017 |
|
|
|
191.2 |
|
|
|
704,388 |
|
|
|
46.3 |
|
OPERATING
INCOME (LOSS)
|
|
|
(1,628,816 |
) |
|
|
(91.2 |
) |
|
|
1,660 |
|
|
|
53.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
36,485 |
|
|
|
2.7 |
|
|
|
102 |
|
|
|
0.0 |
|
Interest
Expense
|
|
|
(34,195 |
) |
|
|
(2.6 |
) |
|
|
(48,629 |
) |
|
|
(3.2 |
) |
Other
Expense
|
|
|
(10,703 |
) |
|
|
(0.8 |
) |
|
|
612 |
|
|
|
0.0 |
|
TOTAL
OTHER EXPENSE
|
|
|
(8,413 |
) |
|
|
(0.6 |
) |
|
|
(47,915 |
) |
|
|
(3.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE INCOME TAXES
|
|
|
(1,637,229 |
) |
|
|
(91.8 |
) |
|
|
(46,255 |
) |
|
|
50.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAX BENEFIT
|
|
|
436,000 |
|
|
|
32.8 |
|
|
|
- |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(1,201,229 |
) |
|
|
(59.1 |
)% |
|
|
(46,255 |
) |
|
|
50.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED
DIVIDENDS
|
|
|
213,280 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS AVAILABLE FOR COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
|
|
|
(1,414,509 |
) |
|
|
|
|
|
|
(46,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING
- BASIC AND DILUTED
|
|
|
17,765,318 |
|
|
|
|
|
|
|
5,978,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE - BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND
DILUTED
|
|
$ |
(0.08 |
) |
|
|
|
|
|
$ |
(0.01 |
) |
|
|
|
|
The
accompanying notes are an integral part of these consolidated
statements.
JUHL
WIND INC.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
- December 31, 2007
|
|
|
15,250,000 |
|
|
|
1,525 |
|
|
|
104,344 |
|
|
|
572,066 |
|
|
|
677,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,201,229 |
) |
|
|
(1,201,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juhl
Energy Development, Inc.
|
|
|
- |
|
|
|
- |
|
|
|
5,438 |
|
|
|
|
|
|
|
5,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to consultants for merger advisory services
|
|
|
2,250,000 |
|
|
|
225 |
|
|
|
(225 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued and outstanding from the Reverse Merger
|
|
|
2,500,000 |
|
|
|
250 |
|
|
|
(250 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
50,000 |
|
|
|
5 |
|
|
|
62,495 |
|
|
|
|
|
|
|
62,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued in Private Placement Offering
|
|
|
- |
|
|
|
- |
|
|
|
1,438,201 |
|
|
|
- |
|
|
|
1,438,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation to employees
|
|
|
- |
|
|
|
- |
|
|
|
96,187 |
|
|
|
- |
|
|
|
96,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation to non-employees
|
|
|
- |
|
|
|
- |
|
|
|
29,052 |
|
|
|
- |
|
|
|
29,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for NextGen purchase
|
|
|
92,143 |
|
|
|
9 |
|
|
|
1,426,465 |
|
|
|
(1,288,437 |
) |
|
|
138,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for real property acquisition
|
|
|
41,070 |
|
|
|
4 |
|
|
|
173,055 |
|
|
|
- |
|
|
|
173,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(213,280 |
) |
|
|
(213,280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
distributions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(216,896 |
) |
|
|
(216,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
- December 31, 2008
|
|
|
20,183,213 |
|
|
$ |
2,018 |
|
|
$ |
3,334,762 |
|
|
$ |
(2,347,776 |
) |
|
$ |
989,004 |
|
The
accompanying notes are an integral part of these consolidated
statements.
JUHL
WIND INC.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2007
|
|
Juhl Wind, Inc.
|
|
|
Next Generation Power Systems, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Subtotal
|
|
|
Common Stock
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares *
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
|
Shares **
|
|
|
Amount
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
- December 31, 2006
|
|
|
2,750,000 |
|
|
$ |
275 |
|
|
$ |
20,800 |
|
|
$ |
737,830 |
|
|
$ |
758,905 |
|
|
|
510,000 |
|
|
$ |
510,000 |
|
|
$ |
(622,911 |
) |
|
$ |
645,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income/(Loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
296,767 |
|
|
|
296,767 |
|
|
|
|
|
|
|
|
|
|
|
(343,022 |
) |
|
|
(46,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
Contributions Juhl Energy Development, Inc.
|
|
|
12,500,000 |
|
|
|
1,250 |
|
|
|
83,544 |
|
|
|
- |
|
|
|
84,794 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
84,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
Distributions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(462,531 |
) |
|
|
(462,531 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(462,531 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
- December 31, 2007
|
|
|
15,250,000 |
|
|
$ |
1,525 |
|
|
$ |
104,344 |
|
|
$ |
572,066 |
|
|
$ |
677,935 |
|
|
|
510,000 |
|
|
$ |
510,000 |
|
|
$ |
(965,933 |
) |
|
$ |
222,002 |
|
*
|
Common
stock issued and outstanding as of December 31, 2007, adjusted for the
allocation of Juhl Wind, Inc. shares received in the reverse merger
transaction
|
**
|
Common
stock- 2,000,000 authorized; 938,750 shares
issued and outstanding to the majority and minority
shareholders
|
The
accompanying notes are an integral part of these consolidated
statements.
JUHL
WIND INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(1,201,229 |
) |
|
$ |
(46,255 |
) |
Adjustments
to Reconcile Net Loss to Net Cash
|
|
|
|
|
|
|
|
|
Provided
by Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
49,645 |
|
|
|
46,731 |
|
Gain
on the Sale of Equipment
|
|
|
(4,204 |
) |
|
|
- |
|
Stock-Based
Compensation to Employees
|
|
|
96,187 |
|
|
|
- |
|
Stock-Based
Compensation to Consultants
|
|
|
91,552 |
|
|
|
- |
|
Provision
for uncollectible accounts
|
|
|
10,000 |
|
|
|
|
|
Impairment
of goodwill
|
|
|
193,974 |
|
|
|
- |
|
Liquidated
Damages Expense
|
|
|
258,879 |
|
|
|
- |
|
Change
in assets and liabilities, net of contributed company:
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
157,022 |
|
|
|
(78,005 |
) |
Unbilled
Receivable
|
|
|
46,301 |
|
|
|
(15,000 |
) |
Inventory
|
|
|
144,764 |
|
|
|
(220,505 |
) |
Project
Deposits
|
|
|
(147,800 |
) |
|
|
- |
|
Other
Current Assets
|
|
|
(92,380 |
) |
|
|
(612 |
) |
Accounts
Payable
|
|
|
(111,564 |
) |
|
|
223,254 |
|
Accrued
Expenses
|
|
|
18,228 |
|
|
|
(16,022 |
) |
Deferred
Income Taxes
|
|
|
(436,000 |
) |
|
|
- |
|
Deferred
Revenue
|
|
|
183,224 |
|
|
|
14,833 |
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(743,401 |
) |
|
|
(91,581 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Cash
Acquired from Community Wind Development Group, LLC
|
|
|
13,667 |
|
|
|
- |
|
Cash
Paid for Short-term Investments
|
|
|
(1,300,000 |
) |
|
|
- |
|
Investment
in Project Development Costs
|
|
|
(302,000 |
) |
|
|
- |
|
Payments
for Property and Equipment
|
|
|
(51,130 |
) |
|
|
(13,289 |
) |
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(1,639,463 |
) |
|
|
(13,289 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Capital
Contributions
|
|
|
- |
|
|
|
84,794 |
|
Cash
paid for Short-term Investments - Restricted
|
|
|
(700,000 |
) |
|
|
|
|
Change
in Restricted Cash
|
|
|
264,557 |
|
|
|
- |
|
Cash
Paid for Public Offering Costs
|
|
|
(31,950 |
) |
|
|
- |
|
Proceeds
from Notes Payable
|
|
|
114,641 |
|
|
|
332,150 |
|
Proceeds
Received Through the Issuance of
|
|
|
|
|
|
|
|
|
Preferred
Stock and Common Warrants
|
|
|
4,099,825 |
|
|
|
- |
|
Distributions
to Shareholders
|
|
|
(216,896 |
) |
|
|
(462,531 |
) |
NET
CASH (USED IN) FROM FINANCING ACTIVITIES
|
|
|
3,530,177 |
|
|
|
(45,587 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
1,147,313 |
|
|
|
(150,457 |
) |
|
|
|
|
|
|
|
|
|
CASH
BEGINNING OF THE PERIOD
|
|
|
163,476 |
|
|
|
313,933 |
|
|
|
|
|
|
|
|
|
|
CASH
END OF THE PERIOD
|
|
$ |
1,310,789 |
|
|
$ |
163,476 |
|
|
|
|
|
|
|
|
|
|
NONCASH
INVESTING ACTIVITY
|
|
|
|
|
|
|
|
|
Equity
Contribution of Net Assets and Liabilities of Common
|
|
|
|
|
|
|
|
|
Owned
Company by Shareholder
|
|
$ |
5,438 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
NONCASH
FINANCING ACTIVITY
|
|
|
|
|
|
|
|
|
Private
Placement Offering Costs Paid Directly from
|
|
|
|
|
|
|
|
|
Preferred
Stock and Common Warrant Proceeds
|
|
$ |
560,175 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Private
Placement Offering Restricted Cash Deposit
|
|
$ |
500,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Notes
Payable Contributed to Capital upon Acquisition
|
|
$ |
(100,000 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Fair
Value of Common Stock Issued for Land and Building
|
|
$ |
173,055 |
|
|
$ |
- |
|
Notes
Payable repaid directly from the proceeds
|
|
$ |
(532,150 |
) |
|
$ |
- |
|
The
accompanying notes are an integral part of these consolidated
statements.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
1.
|
BACKGROUND,
CHANGE OF CONTROL AND BASIS OF
PRESENTATION
|
Juhl
Wind, Inc. (“Juhl Wind”) conducts business under three subsidiaries, DanMar and
Associates, Inc. (“DanMar”), Juhl Energy Development, Inc. (“JEDI”), and Next
Generation Power Systems, Inc. (“NextGen”). The Company provides development,
management, and consulting services to wind farm projects throughout the
Midwestern U.S. and produces consumer-owned renewable energy products. All
intercompany balances and transactions are eliminated in
consolidation.
On June
24, 2008, the owners of DanMar and Associates, Inc. and Juhl Energy Development,
Inc., both privately held companies under common control, exchanged all of their
outstanding shares of common stock in the companies for 15,250,000 shares of
common stock of MH&SC, Inc., representing approximately 86% of the Company’s
common stock outstanding after the exchange transaction. Upon the
exchange transaction (transaction), MH&SC, Inc. changed its name to Juhl
Wind, Inc. As a result of the transaction, DanMar and Associates, Inc. and Juhl
Energy Development, Inc. (the Companies) are now wholly-owned subsidiaries of
Juhl Wind, Inc. Simultaneously to the closing of the transaction, pursuant to a
purchase and sale agreement, MH & SC, Inc. sold all of the outstanding
membership interest of its wholly owned subsidiary, My Health & Safety
Supply Company, LLC, an Indiana limited liability company, to its former CEO.
The subsidiary was the only operational activities of MH & SC,
Inc. In essence, DanMar and Associates, Inc. and Juhl Energy
Development, Inc. merged into a public shell company with no or nominal
remaining operations; and no or nominal assets and
liabilities.
In
accordance with Statement of Financial Accounting Standards No. 141, Business Combinations, JEDI
is considered the accounting acquirer in the exchange transaction. Because
JEDI’s owners as a group retained or received the larger portion of the voting
rights in the combined entity and JEDI’s senior management represents a majority
of the senior management of the combined entity, the JEDI is considered the
acquirer for accounting purposes and will account for the transaction as a
reverse acquisition. The acquisition was accounted for as a
recapitalization, since at the time of the transaction, MH & SC, Inc. was a
company with no or nominal operations, assets and
liabilities. Consequently, the assets and liabilities and the
historical operations that will be reflected in future consolidated financial
statements will be those of the Companies and will be recorded at its historical
cost basis. The financial statements have been prepared as if JEDI had always
been the reporting company and, on the share transaction date, changed its name
and reorganized its capital stock. The financial statements have been prepared
including DanMar due to the transaction being with a company under common
control.
Acquisition
of Next Generation Power Systems and Related Real Property
On
October 31, 2008, the Company acquired all of the issued and outstanding shares
of common stock of Next Generation Power Systems, Inc. (“NextGen”), an entity
under common control due to the 54% ownership by Dan Juhl, the Company’s
controlling stockholder. The acquisition allows the Company to expand into
consumer-based wind and solar energy market. All of the outstanding stock of
NextGen was acquired in exchange for 92,143 unregistered shares of common stock
of the Company, allocated among the NextGen minority selling
stockholders. The 92,143 shares issued to the minority stockholders
were valued at $3.50 per share at the date of acquisition or
$322,500. The agreement also required the selling shareholders to
contribute the balance of notes payable to stockholders totaling $100,000 to
equity. In accordance with Statement of Financial Accounting Standards No. 141R,
Business Combinations,
the acquisition was accounted for as a combination of entities under
common control (i.e. “as if pooling”) where the assets and liabilities of those
under common control are at historical cost and at fair value for the
noncontrolling interest. The revenue and expense activities of
NextGen are included in the accompanying statement of operations for 2008 and
2007. Due to the noncontrolling interest of NextGen being in a deficit equity
position, the Company had to absorb 100% of the net losses for all periods
presented.
Simultaneously
with the acquisition of all of NextGen, the Company also purchased a commercial
building and associated land located in Pipestone, Minnesota from the individual
owners of NextGen. The Company issued 41,070 unregistered shares of common stock
to the minority stockholders of NextGen for the purchase of the land and
building. The 41,070 shares issued to the NextGen minority interest were valued
at $3.50 per share at the date of acquisition, or $144,000. The
acquisition was accounted for at fair value of the land and building on the date
of purchase which totaled $173,055.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
CASH
The
Company maintains cash balances at various financial institutions located in
Minnesota. Accounts are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $250,000. At times throughout the year cash
balances may exceed the FDIC insurance limits. In August 2008, the
Company obtained an excess deposit insurance bond to insure deposits up to
$4,500,000. The bond is effective August 2008 through February
2011.
The
Company maintains an escrow cash account funded by the proceeds received from
the preferred stock private placement. The funds are to be used for investor
relations initiatives. Also, 15% of the gross proceeds generated from
the exercise of the common stock warrants issued in the private placement
preferred stock shall be placed in the account.
Short-term
investments include certificates of deposits maintained at various financial
institutions. The certificates are intended to be held for investment purposes
through their maturity dates that occur at various times throughout
2009.
ACCOUNTS
RECEIVABLE
Credit
terms are extended to customers in the normal course of business. The
Company performs ongoing credit evaluations of its customers’ financial
condition and, generally, requires no collateral.
Trade
accounts receivable are recorded at their estimated net realizable value, net of
an allowance for doubtful accounts. The Company follows a policy of providing an
allowance for doubtful accounts; however, based on historical experience, and
its evaluation of the current status of receivables, the Company is of the
belief that such accounts will be collectible in all material respects and thus
an allowance is not necessary. Accounts are considered past due if payment is
not made on a timely basis in accordance with the Company’s credit
terms. Accounts considered uncollectible are written
off.
Unbilled
receivables are generated when the revenue from a project has been earned by the
Company but has not been formally billed by the Company due to project relations
with the owners of the project. The unbilled receivables are recorded at their
estimated realizable value. The Company follows a policy providing an allowance
for doubtful accounts reserving for significant timing risk
and other risks associated with energy project
development.
Inventories,
consisting primarily of parts and materials relating to the production of small
scale wind turbines, are stated at the lower of average cost or market value
(average cost).
Project
deposits include reimbursable advances made on behalf of wind farm entities to
assist them in the legal or other costs incurred in the initial development
stages of their respective wind farm project.
PROJECT
DEVELOPMENT COSTS
Project
Development costs represent amounts paid by the Company for projects that Juhl
Wind is the wind farm developer and project owner. Such costs are carried as a
long-term asset until such time that the Company receives a reimbursement as a
part of the permanent financing of a commissioned wind farm project, or
alternatively, upon reimbursement by new project ownership.
Property
and equipment are stated at cost. Major renewals and improvements are
capitalized, while replacements, maintenance and repairs which do not improve or
extend the life of the respective assets are expensed currently. Property and
equipment are being depreciated over their estimated useful lives using the
straight-line method.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Major categories of property and
equipment and their depreciable lives are as follows:
Building
and Improvements
|
7-39
Years
|
Vehicles
|
5
Years
|
Machinery
and Shop Equipment
|
5-7
Years
|
LONG-LIVED
ASSETS
Long-lived
assets, such as property, plant, and equipment, and purchased intangible assets
subject to amortization, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. If circumstances require a long-lived asset be tested for possible
impairment, the Company first compares undiscounted cash flows expected to be
generated by an asset to the carrying value of the asset. If the carrying value
of the long-lived asset is not recoverable on an undiscounted cash flow basis,
impairment is recognized to the extent that the carrying value exceeds its fair
value. Fair value is determined through various valuation techniques including,
but not limited to, discounted cash flow models, quoted market values and
third-party independent appraisals.
Goodwill
and other indefinite lived intangible assets are reviewed for impairment at
least annually and if events or changes in circumstances during the year
indicate that the carrying amount of the indefinite lived intangible may not be
recoverable.
GOODWILL
The
Company’s goodwill resulted from its business acquisition of the minority
interest of NextGen, which occurred in October 2008. Goodwill and other
intangible assets with indefinite lives are not amortized but instead tested at
least annually for impairment. The Company must make assumptions regarding
estimated future cash flows and other factors to determine the fair value of the
respective assets in assessing the fair value of its goodwill and other
intangible assets. We assessed the impairment of goodwill as of
December 31, 2008 as required pursuant to SFAS 142. An impairment of
goodwill was considered necessary as a result of a decrease in fair value of the
entity acquired during November and December 2008 related to the current
economic environment. Our impairment analysis included comparisons of
undiscounted cash flows to the current carrying value of goodwill. The Company
recorded goodwill impairment for the year ended December 31, 2008 of
$193,974 is reflected in the consolidated statement of
operations.
The
Company’s amortizable intangible assets resulted from its business acquisition
of NextGen, which occurred in October 2008 and include customer
backlog. Customer backlog will be amortized as sales commitments
occur which were in place at the time of acquisition. The Company
expects the customer backlog to be fully amortized in 2009.
STOCK
OPTION PLANS
Upon
issuance of employee stock options on June 24, 2008, the Company adopted FASB
Statement No. 123(R), Share-Based Payment (Statement 123(R)). This statement
replaces FASB Statement No. 123, Accounting for Stock-Based Compensation
(Statement 123) and supersedes APB No. 25. Statement 123(R) requires that all
stock-based compensation be recognized as an expense in the financial statements
and that such cost be measured at the fair value of the award. The Company
recognizes compensation expense based on the estimated grant date fair value
using the Black-Scholes option-pricing model.
The
Company accounts for unit based instruments granted to nonemployees under the
fair value method of EITF 96-18, Accounting for Equity Instruments that are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services and EITF 00-18, Accounting for Recognition for Certain
Transactions Involving Equity Instruments Granted to Other than Employees.
Under EITF 96-18 and EITF 00-18, unit based instruments usually are recorded at
their underlying fair value. In certain instances the fair value of the
goods or services is used to determine the value of the equity instrument as it
is a better measure of fair value.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
carrying value of cash and equivalents, restricted cash, short term investments,
receivables, and payables approximates their fair value. The carrying values of
notes payable are based on estimates of current rates at which the Company could
borrow funds with similar remaining maturities.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. 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. The
Company uses estimates and assumptions in accounting for the following
significant matters, among others: revenue recorded from the development
agreements is a significant estimate based on a percentage of estimated project
costs; reliability of accounts receivable; valuation of deferred tax assets,
inventory, stock based compensation and warrants, goodwill, intangible asset,
income tax uncertainties, and other contingencies. Revenue from the development
agreements is adjusted to reflect actual costs incurred by the project upon the
commercial operation date. Accordingly, actual may differ from
previously estimated amounts, and such differences may be material to the
financial statements. The Company periodically reviews estimates and
assumptions, and the effects of any such revisions are reflected in the period
in which the revision is made.
REVENUE
RECOGNITION
Consumer-owned
energy products:
Revenue
from the sale of small wind turbines and other renewable energy systems is
recognized upon shipment to the customer and transfer of ownership. Installation
services are recognized as revenue upon completion of the installation
services. Deposits received from customers are included as Deferred
Revenue until shipment occurs.
Wind
Farm Consulting, Development and Management Services:
Consulting
Services
Consulting
services fees are primarily fixed fee arrangements of a short-term duration and
are recognized as revenue on a completed contract basis.
Wind
Farm Development Services
The
Company normally earns a development service fee from each of the wind farm
projects that it develops in cooperation with wind farm investors. These
development services arrangements are evaluated under EITF 00-21, Revenue Arrangements with Multiple
Deliverables, which addresses certain aspects of accounting by a vendor
for arrangements under which the vendor will perform multiple revenue generating
activities.
The
development services fee revenue is recognized as follows:
|
·
|
Proceeds
received upon the signing of a Development Services Agreement (generally
10% of the total expected development fee) are amortized over the expected
period of the development process, which is generally three years. The
amortization period is re-assessed by management as new timelines are
established for the project in-service date, and the amortization period
is adjusted.
|
|
·
|
The
remaining proceeds are allocated to the following deliverables based on
vendor specific objective evidence (VSOE) of each item: 1) achievement of
a signed Power Purchase Agreement (PPA) with an electrical utility, and 2)
final commissioning of the wind farm turbines. Management has
determined that these deliverables have stand-alone value, and performance
of the undelivered services are considered probable and in the control of
the Company.
|
Wind
Farm Management Services
Revenues
earned from administrative and management services agreements are recognized as
the services are provided. The administrative and management services agreements
call for quarterly payments in advance or arrears of services rendered based on
the terms of the agreement. The administrative and management services payments
in advance are carried as deferred revenue and recognized monthly as services
are performed.
EARNINGS
PER SHARE
Basic net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding during the
period. Diluted net income per share is computed by dividing net
income by the weighted average number of shares and share equivalents
outstanding during the period. As of December 31, 2008, the Company had
8,410,000 unit equivalents outstanding relating to outstanding unit options and
warrants. As of December 31, 2007, the Company had no share equivalents
outstanding. At December 31, 2008, the effects of the share equivalents were
excluded from the computation of diluted units outstanding as their effects
would be anti-dilutive, due to the Company’s net loss for the period ended
December 31, 2008.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
INCOME
TAXES
The
Company records income tax in accordance with FAS No. 109, “Accounting for
Income Taxes”. Under the provisions of FAS 109, deferred income taxes
are provided for timing differences between financial statements and income tax
reporting, primarily from the use of accelerated depreciation methods for income
tax purposes, stock based compensation, accrued liabilities and warranty
costs. The measurement of deferred tax assets and liabilities is
based on provisions of the enacted tax law; the effects of future changes in tax
laws or rates are not anticipated.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In
December 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141 (R) (SFAS 141(R)), Business
Combinations. The pronouncement significantly expands the definition of a
business and of a business combination and thereby increases the number of
transactions and other events that will qualify as business combinations,
including agreements that give rise to variable interest entities. SFAS 141(R)
also requires the expensing of acquisition-related transaction costs, expensing
of most acquisition-related restructuring costs, the fair value measurement of
assets and liabilities, including certain earn-out arrangements, and the
capitalization of acquired in-process research and development. SFAS 141(R) is
effective for business combinations made on or after January 1, 2009, with
earlier adoption prohibited. SFAS 141(R) must be adopted concurrently with SFAS
160. The Company is evaluating the effect, if any, that the adoption of SFAS
141(R) will have on its results of operations, financial position, and the
related disclosures.
In
December 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 160 (SFAS 160), Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51(Consolidated
Financial Statements). SFAS 160 establishes accounting and reporting standards
for a noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. In addition, SFAS 160 requires certain consolidation procedures for
consistency with the requirements of SFAS 141, Business Combinations. SFAS 160
is effective for fiscal year beginning January 1, 2009 and interim periods
within the fiscal year, with earlier adoption prohibited. SFAS 160 must be
adopted concurrently with the effective date of SFAS 141(R). The Company is
evaluating the effect, if any, that the adoption of SFAS 160 will have on its
results of operations, financial position, and the related
disclosures.
In June
2008, the FASB ratified the consensus reached on Emerging Issues Task Force
(EITF) Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock. EITF 07-5
clarifies the determination of whether an equity-linked instrument (or embedded
feature) is indexed to an entity’s own stock, which would qualify as a scope
exception under SFAS No. 133, Accounting or Derivative Instruments
and Hedging Activities. EITF 07-5 is effective financial statements
issued for fiscal year beginning January 1, 2009, and interim periods within
those fiscal years. Earlier application by an entity that has previously adopted
an alternative accounting policy is not permitted. The Company is evaluating
what effect, if any, EITF 07-5 might have on its financial position, operating
results, and the related disclosures.
RECLASSIFICATIONS
Certain
reclassifications were made to the previously issued 2007 financial statements
in the statement of operations and the statement of stockholders’ equity in
order for comparability to the 2008. The 2007 financial statements
have been adjusted to show activity from the pooling of interests transaction
with Next Gen as discussed in Note 1.
3.
|
PRIVATE
PLACEMENT OF SERIES A 8% CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
WARRANTS
|
In June
2008, the Company completed a private placement consisting of shares of
newly-created series A 8% convertible preferred stock (Series A), and
detachable, five-year class A, class B and Class C warrants to purchase shares
of common stock at an exercise price of $1.25 (class A), $1.50 (class B) and
$1.75 (class C) per share. In total, the Company sold 5,160,000
shares of Series A convertible preferred stock (convertible at any time into a
like number of shares of common stock) and class A, class B and class C warrants
to each purchase 2,580,000 shares of common stock, or an aggregate of 7,740,000
shares of common stock. We received gross proceeds of $5,160,000 less
total offering costs of $592,125. The net proceeds of $4,567,875 were
allocated to Series A and the detachable common stock warrants as follows based
on their relative fair value:
Convertible
Preferred Stock
|
|
$ |
3,129,674 |
|
Detachable
Warrants
|
|
$ |
1,438,201 |
|
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
We also
issued 2,250,000 shares of our common stock to Greenview Capital, LLC and
unrelated designees at the closing of the transaction in consideration for
merger advisory services.
Conversion
Rights of Series A
At any
time, each share of Series A is convertible into one share of common
stock. However, the number of shares of common stock issuable
upon conversion of Series A is subject to adjustment upon the occurrence of
certain customary events, including, among others, a stock split, reverse stock
split or combination of our common stock; an issuance of our common stock or
other securities as a dividend or distribution on the common stock; a
reclassification, exchange or substitution of the common stock; or a capital
reorganization of our company. Additionally, until June 24, 2010, the holders of
Series A will have “full-ratchet” anti-dilution price protection, with limited
exceptions for issuances under employee benefit plans and pursuant to
transactions involving a strategic partner preapproved by the holders on a
case-by-case basis. After June 24, 2010, the holders of Preferred Stock will
have “weighted average” anti-dilution price protection.
Voting
Rights of Series A
Holders
of Series A are not entitled to vote their shares with the holders of our common
stock, except for certain extraordinary corporate transactions, in which case
they vote as a separate class. Holders of Series A shall also have any voting
rights to which they are entitled by Delaware law.
Liquidation
Rights of Series
A
In the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
our company, including a merger or consolidation of our company with or into
another company, or any transfer, sale or lease by us of substantially all of
our assets, the holders of Series A will be entitled to receive out of our
assets available for distribution to stockholders, before any distribution is
made to holders of our common stock or any other series of our preferred stock,
liquidating distributions in an amount equal to $1.20 per share, plus accrued
but unpaid dividends.
Redemption
Rights of Series A
Series A
may not be redeemed by the Company at any time. The holders of the Preferred
Stock have redemption rights in the event of the inability of the Company to
register the underlying conversion shares and the shares issuable upon warrant
exercise. The Preferred Stock is classified in a mezzanine equity
classification (outside of stockholders’ equity) as a result of the redemption
feature relating to the registration requirement which is deemed to
be outside the Company’s control.
Dividends
Rights of Series A
Series A
will be entitled to receive dividends at a rate of 8% per year, payable
quarterly in arrears in cash or shares of our common stock. The Company has
accrued dividends to Series A totaling $213,280 as
of December 31, 2008.
Certain
Covenant Rights and Registration Rights of Series A
Series A
contains certain negative covenants, such as a limitation on indebtedness, a
limitation on increases in executive compensation, an incentive compensation
plan not to exceed 10% of our outstanding common equivalent shares, and
restrictions on mergers, acquisitions and other fundamental transactions,
without the prior written consent of a majority of the holders of Series
A, and certain other affirmative covenants. All covenants expire if
Series A position held by its majority original investor falls below 20% of the
original Series A position held by it immediately following the closing of the
original offering. The Company is also required to issue registered common
shares upon conversion of Series A and exercise of the class A, class B and
class C warrants. If the underlying shares are not registered as
required in the Series A offering document, the Corporation would be required to
pay liquidated damages of 2% of the original purchase price per each 30 day
period or part thereof for any registration default up to a maximum of
12%.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
The
Company recorded a liability and corresponding expense at December 31, 2008 in
the amount of $258,879 to account for approximated liquidated damages and late
fees to the holders of the Series A shares. The liquidated damages
and late fees were related to the breach of covenants and rights contained in
the Registration Rights Agreement, primarily as a result of the Company’s delay
in successfully completing an effective registration statement, and to a lesser
extent, the timely payment of quarterly dividends. The Company and
the holders of the Series A shares have agreed in writing in March 2009 to pay
the $258,879 in the form of shares of common stock issuable over the period
April 1 through October 1, 2009. The Company anticipates that approximately
160,000 shares of common stock may be issued in connection with this
agreement.
4.
|
CONCENTRATIONS,
RISKS AND UNCERTANTIES
|
The
Company derived approximately 22% and 17% of its revenue from sales to three
customers in 2008 and 2007, respectively. Also, approximately 33% and 37% of
wind farm development and management revenue related to these three
customers as of December 31, 2008 and 2007, respectively. At December
31, 2008 and 2007, 56% and 14%, respectively, of the Company's accounts
receivable were due from four customers. One customer comprises the Company’s
unbilled receivables as of December 31, 2008 and 2007.
Inventories
consist of the following:
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Materials
and supplies
|
|
$ |
351,213 |
|
|
$ |
547,882 |
|
Work-in-progress
|
|
|
51,905 |
|
|
|
- |
|
|
|
$ |
403,118 |
|
|
$ |
547,882 |
|
6.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following:
|
|
December
31,
2008
|
|
|
December
31,
2007
|
|
Land
|
|
$ |
17,500 |
|
|
$ |
- |
|
Building
and improvements
|
|
|
238,120 |
|
|
|
83,120 |
|
Equipment,
including vehicles
|
|
|
268,326 |
|
|
|
258,935 |
|
Subtotal
|
|
|
523,946 |
|
|
|
342,055 |
|
Less
Accumulated depreciation
|
|
|
(179,822 |
) |
|
|
(139,334 |
) |
Total
|
|
$ |
344,124 |
|
|
$ |
202,721 |
|
Beginning
in 2008, the Company will file a consolidated tax return inclusive of each of
its wholly-owned subsidiaries, DanMar, JEDI, and NextGen, all of whom were
Subchapter S corporations at the time of acquisition in 2008. This initial
consolidated filing will therefore exclude business activity prior to the
acquisition date in which the subsidiary companies were treated for tax purposes
as Subchapter S Corporations. The income tax benefit recorded in the statement
of operations for the period ended December 31, 2008 is primarily due to the
2008 operating loss.
At the time the S corporation
elections were terminated, the Company recorded deferred tax assets and
liabilities arising from the anticipated timing differences recorded in the
financial statements and income tax returns for various accrued expenses and the
methods used in computing depreciation.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
The
components of the deferred income tax asset and liability as of December 31,
2008 are as follows:
Current
Deferred Income Tax Benefit:
|
|
|
|
Accrued
Vacation and Officer’s Compensation
|
|
$ |
9,000 |
|
Liquidated
Damages Provision
|
|
|
104,000 |
|
Reserves
for Doubtful Accounts and Warranty
|
|
|
68,000 |
|
Net
Operating Loss Carryforward
|
|
|
241,000 |
|
Total
|
|
$ |
422,000 |
|
|
|
|
|
|
Non-Current
Deferred Income Tax Benefit:
|
|
|
|
|
Stock
Option Expense
|
|
$ |
38,000 |
|
|
|
|
|
|
Non-Current
Deferred Income Tax Liability
|
|
|
|
|
Depreciation
|
|
$ |
24,000 |
|
The
following represents the reconciliation of the statutory federal tax rate and
the effective tax rate for the year ended December 31, 2008:
Statutory
Tax Rate
|
|
$ |
(556,392 |
) |
|
|
34.0 |
% |
States
Taxes, Net of Federal Benefit
|
|
|
(86,053 |
) |
|
|
5.3 |
|
Nondeductible
Expenses
|
|
|
68,756 |
|
|
|
(4.2 |
) |
Cash
to Accrual Adjustment
|
|
|
96,842 |
|
|
|
(5.9 |
) |
Other,
Net
|
|
|
40,847 |
|
|
|
(2.5 |
) |
|
|
$ |
436,000 |
|
|
|
26.7 |
% |
In
assessing the realization of deferred tax assets, the Company’s management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become
deductible. The Company’s management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. As of December 31, 2008, a
valuation allowance has not been recognized for deferred tax
assets.
At
December 31, 2008, the Company has a federal net operating loss carryforward of
approximately $600,000 which will expire in the year 2023.
We
adopted provisions of , Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109 (FIN No. 48) in June
2008, upon becoming a corporation, with no cumulative effect adjustment
required. FIN 48 clarifies the requirements of SFAS 109, Accounting for Income Taxes,
relating to the recognition of income tax benefits. FIN 48 provides a two-step
approach to recognizing and measuring tax benefits when realization of the
benefits is uncertain. The first step is to determine whether the benefit meets
the more-likely-than-not condition for recognition and the second step is to
determine the amount to be recognized based on the cumulative probability that
exceeds 50%. In accordance with FIN No. 48, we have adopted a policy under
which, if required to be recognized in the future, we will classify interest
related to the underpayment of income taxes as a component of interest expense
and we will classify any related penalties in general and administrative
expenses in the consolidated statement of operations.
8.
|
STOCK-BASED
COMPENSATION
|
The
Company has a non-qualified incentive compensation plan to provide stock
options, stock issuances and other equity interests in the Company to employees,
directors, consultants, independent contractors, and advisors of the Company and
other person who is determined by the Committee of the Board of Directors of the
Company to have made (or expected to make) contributions to the Company. As of
December 31, 2008, the Company has 2,277,111 shares available for award under
the plan.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
On June
24, 2008, the Company granted to key employees and directors of the Company,
520,000 options to purchase common shares under the above plan. These
options carry an exercise price of $1.00 per share with vesting over a two or
three year period beginning June 24, 2008 and expire ten years from the date of
grant. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions, underlying price $1.25, dividend yield of 0%, expected volatility
of 96%, risk-free interest rate of 4%, and expected life of 6 years. Based on
pricing model it was determined that approximately $96,200 of option related
compensation was expense in the year ending December 31, 2008.
In
September 2008, the Company granted 100,000 stock options to an employee through
their incentive compensation plan. These options carry an exercise
price of $2.00 per share and vest over a four year term beginning November 1,
2008 and expire 10 years from the grant date. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model. There was no compensation expense recorded in the year
ending December 31, 2008.
A summary
of the Company’s stock option plan as of December 31, 2008 and changes during
the period then ended is listed below:
Outstanding
at December 31, 2007
|
|
|
- |
|
Granted
|
|
|
620,000 |
|
Exercised
|
|
|
- |
|
Expired
|
|
|
- |
|
Forfeited
|
|
|
- |
|
Outstanding
at December 31, 2008
|
|
|
620,000 |
|
|
|
|
|
|
Options
exercisable at the end of the period
|
|
|
5,000 |
|
As of
December 31, 2008, there was approximately $433,000 of total unrecognized
compensation expense cost. This cost is expected to be recognized
over a weighted-average period of 3 years.
In June
2008, the Company agreed to issue 50,000 common stock warrants to an investor
relations consulting firm. These warrants vested over a six-month service period
ending December 19, 2008 at which they were formally issued. The Company
recognized approximately $29,100 during the year ended December 31, 2008. These
warrants allow the holder to purchase common stock at an exercise price of $7.00
for 25,000 and $10.00 for the other 25,000 shares. To determine fair value of
the warrants the Company uses the Black-Scholes pricing model with the following
assumptions, dividend yield of 0%, expected volatility of 96%, risk-free
interest rate of 4%, and expected life of 5 years.
Subsequent
to year end the Company entered into an employment agreement with their Chief
Financial Officer. The agreement requires the Company to grant 100,000 options
in 25,000 increments. The exercise price will be equal to the closing price of
the Company’s stock on the date of each grant. The Company also issued 10,000
stock options to a board member at an exercise price of $2.11 per share. The
options vest over two years from the date of grant and expire ten years from the
date of grant.
The Board
of Directors has authorized management to grant further stock options to
employees or consultants from shares reserved under the Plan whereby the Company
expects to grant approximately 240,000 options in the second quarter of 2009 in
addition to grants mentioned above.
9.
|
FAIR
VALUE MEASUREMENTS
|
Effective
January 1, 2008, we adopted Statement of Financial Accounting Standard No. 157,
“Fair Value Measurements” (SFAS 157), as it applies to our financial
instruments, and Statement of Financial Accounting Standard No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115” (SFAS 159). SFAS 157 defines fair value,
outlines a framework for measuring fair value, and details the required
disclosures about fair value measurements. SFAS 159 permits companies to
irrevocably choose to measure certain financial instruments and other items at
fair value. SFAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparison between entities that choose different
measurement attributes for similar types of assets and
liabilities.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Under
SFAS 157, fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or most advantageous
market. SFAS 157 establishes a hierarchy in determining the fair value of an
asset or liability. The fair value hierarchy has three levels of inputs, both
observable and unobservable. SFAS 157 requires the utilization of the lowest
possible level of input to determine fair value. Level 1 inputs include quoted
market prices in an active market for identical assets or liabilities. Level 2
inputs are market data, other than Level 1, that are observable either directly
or indirectly. Level 2 inputs include quoted market prices for similar assets or
liabilities, quoted market prices in an inactive market, and other observable
information that can be corroborated by market data. Level 3 inputs are
unobservable and corroborated by little or no market data.
Except
for those assets and liabilities which are required by authoritative accounting
guidance to be recorded at fair value in our Consolidated Balance Sheets, we
have elected not to record any other assets or liabilities at fair value, as
permitted by SFAS 157. No events occurred during the first quarter 2009 which
would require adjustment to the recognized balances of assets or liabilities
which are recorded at fair value on a nonrecurring basis.
The
Company has no assets and liabilities measured at fair value on a recurring
basis that would require disclosure under this pronouncement.
The
Company groups its operations into two business segments–Wind Farm Development
and Management and Consumer-based Renewable Energy. The
Company's business segments are separate business units that offer different
products. The accounting policies for each segment are the same as those
described in the summary of significant accounting policies. Corporate assets
include: cash and cash equivalents, short-term investments, deferred income
taxes, and other assets.
The
following is information for each segment for the years ended December 31, 2008
and 2007:
|
|
Wind Farm
Development
and
Management
|
|
|
Consumer-
owned
Renewable
Energy
|
|
|
Consolidated
|
|
For
the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
Wind
farm development/mgmt
|
|
$ |
740,582 |
|
|
|
|
|
$ |
740,582 |
|
Consumer-owned
Renewable energy products
|
|
|
|
|
|
$ |
451,688 |
|
|
|
451,688 |
|
Related
party revenue
|
|
|
130,226 |
|
|
|
|
|
|
|
130,226 |
|
Other
|
|
|
9,001 |
|
|
|
- |
|
|
|
9,001 |
|
Total
revenue
|
|
$ |
879,809 |
|
|
$ |
451,688 |
|
|
$ |
1,331,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
$ |
(1,260,824 |
) |
|
$ |
(367,992 |
) |
|
$ |
(1,628,816 |
) |
Other
income (loss), net
|
|
|
26,587 |
|
|
|
(35,000 |
) |
|
|
(8,413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax benefit
|
|
$ |
(1,234,237 |
) |
|
$ |
(402,992 |
) |
|
$ |
(1,637,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets at December 31, 2008
|
|
$ |
1,657,480 |
|
|
$ |
879,189 |
|
|
$ |
2,536,669 |
|
Corporate
assets
|
|
|
|
|
|
|
|
|
|
|
3,370,925 |
|
Total
assets at December 31, 2008
|
|
|
|
|
|
|
|
|
|
$ |
5,907,594 |
|
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
Wind Farm
Development
and
Management
|
|
|
Consumer-
owned
Renewable
Energy
|
|
|
Consolidated
|
|
For
the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
Wind
farm development/mgmt Management
|
|
$ |
482,660 |
|
|
|
|
|
$ |
482,660 |
|
Consumer-owned
Renewable energy products
|
|
|
- |
|
|
$ |
812,925 |
|
|
|
812,925 |
|
Related
party revenue
|
|
|
216,518 |
|
|
|
- |
|
|
|
216,518 |
|
Other
|
|
|
7,983 |
|
|
|
- |
|
|
|
7,983 |
|
Total
revenue
|
|
$ |
707,161 |
|
|
$ |
812,925 |
|
|
$ |
1,520,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
$ |
295,939 |
|
|
$ |
(294,279 |
) |
|
$ |
1,660 |
|
Other
income (loss), net
|
|
|
828 |
|
|
|
(48,743 |
) |
|
|
(47,915 |
) |
Income
(loss) before income taxes
|
|
$ |
296,767 |
|
|
$ |
(343,022 |
) |
|
$ |
(46,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets at December 31, 2007
|
|
$ |
745,677 |
|
|
$ |
688,553 |
|
|
$ |
1,434,230 |
|
Corporate
assets
|
|
|
|
|
|
|
|
|
|
|
- |
|
Total
assets at December 31, 2007
|
|
|
|
|
|
|
|
|
|
$ |
1,434,230 |
|
Intangible
assets consist of the following at December 31, 2008:
|
|
Fair
Value
|
|
|
|
|
|
Customer
Backlog
|
|
|
72,000 |
|
The
intangible assets were recorded in connection with the acquisition of all of the
outstanding shares of Next Generation Power Systems (“NextGen”) in October 2008.
The Customer Backlog asset is expected to be fully amortized during
2009.
The
Company’s next Generation Power Systems subsidiary obtained short-term financing
under the following bank note arrangements for the years ended December 31, 2008
and 2007:
|
|
December 31,
2008
|
|
|
|
|
|
|
Note
payable to Bank, due October 2009, interest payable monthly at 5%,
collateralized by certificates of deposit
|
|
$ |
150,000 |
|
|
|
|
|
|
Note
payable to Bank, due October 2009, interest payable monthly at 5%,
collateralized by certificates of deposit
|
|
|
79,938 |
|
|
|
|
|
|
Note
payable to Bank, due October 2009, interest payable monthly at 5%,
collateralized by certificates of deposit
|
|
|
416,853 |
|
|
|
|
|
|
Total
|
|
$ |
646,791 |
|
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
December 31,
2007
|
|
|
|
|
|
|
Note
payable to Bank, due March 2008, interest payable monthly at 7.25%,
collateralized by wind turbine inventory
|
|
$ |
100,000 |
|
|
|
|
|
|
Notes
payable to NextGen shareholders, due May 2008, interest payable monthly at
10%; unsecured; contributed to capital as a part of the NextGen
acquisition in October 2008
|
|
|
100,000 |
|
|
|
|
|
|
Note
payable to Bank, due October 2009, interest payable monthly at 7.25%,
collateralized by receivables, inventory and real property owned by the
NextGen stockholders
|
|
|
432,150 |
|
|
|
|
|
|
Total
|
|
$ |
632,150 |
|
The
weighted average interest rate for December 31, 2008 and 2007 was 6.2% and 9.5%,
respectively. Interest paid for December 31, 2008 and 2007 was $34,195 and
46,114, respectively.
13.
|
TRANSACTIONS
WITH RELATED PARTIES
|
The
Company provides wind farm management services to entities that are controlled
by the Company’s Chief Executive Officer and family members. This revenue is
shown on the face of the consolidated statement of operations. The
fees are billed at rates similar to fee structures charged to unrelated
parties.
The
Company rents additional storage space and the land on which the corporate
office is located from two unrelated parties. These rental agreements are on a
month-to-month basis. The rent expense for 2008 and 2007 was $6,500
and $2,100, respectively.
During
2007 and through the period June 30, 2008, the Company’s subsidiary, NextGen,
provided building lease payments at the rate of $1,500 per month to an entity
controlled by the NextGen stockholders. The rent expense for 2008 and 2007 was
$9,000 and $18,000, respectively.
15.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company enters into development agreements with third parties for the
development of wind projects. The development agreements call for development
fees ranging from 1% to 5% of the total project cost. The development fees are
due in three installments. Ten percent is due at the development agreement
signing. Another 40% is due at the signing of the PPA agreement, and the
remaining 50% is due at the commercial operation date of the project. As of
December 31, 2008 and 2007, the Company was involved with various development
agreements at different stages within the contracts. The Company was also
involved with several new projects for which development agreements have not
been signed.
The
Company has three agreements in place for operational wind projects to perform
management services for those projects. The agreements provide monthly
management fees equal to 2% of the project’s gross sales. These agreements also
provide payments for general and administrative fees, maintenance fees, and any
other out-of-pocket expenses for the project. The contracts expire at various
dates through 2015. The agreements may be terminated by the wind farm upon the
last day of the month that is at least 30 days after the Company has received
written notice of the intent to terminate the agreement.
Administrative
Services Agreements
The
Company has four agreements in place for operational wind projects to perform
administrative services for those projects. These agreements provide quarterly
payments in advance or in arrears of services performed. Payments range from
$4,500 to $5,000 per quarter, and will continue through the Change of Percentage
Ownership Date, as defined by the administrative services agreements, and will
be renewed annually without any additional action. The agreements may be
terminated by the wind farm upon at least 90 days written notice to the
Company.
JUHL
WIND, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
In March
2009, the Company and its holders of Series A preferred stock agreed in writing
to amend the Series A preferred shares agreement and Registration Rights
Agreement to address the ability for the Company to make dividend payments in
shares of common stock, remove a mandatory redemption feature based on
triggering events, and to re-establish current and future damage provisions with
regard to obtaining an effective registration statement for certain currently
unregistered shares. This amendment also contained an estimated settlement of
liquidated damages and late fees totaling $258,879 incurred by December, 31,
2008, which have been expensed and included in accrued expenses on the balance
sheet.
ITEM
9
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
|
On June
24, 2008, upon the closing of the exchange transaction, we dismissed McElravy,
Kinchen & Associates, P.C. (“McElravy Kinchen”), as our independent
registered public accounting firm, which was recommended and approved by our
board of directors on June 24, 2008. McElravy Kinchen audited our financial
statements for the fiscal year ended December 31, 2007. The reason for the
replacement of McElravy Kinchen was that, following the exchange transaction,
the former stockholders of Juhl Energy and DanMar own a majority of the
outstanding shares of our common stock. The wind energy business of Juhl Energy
and DanMar is our new business, and the current independent registered public
accountants of Juhl Energy and DanMar is the firm of Boulay, Heutmaker, Zibell
& Co. P.L.L.P. (“Boulay Heutmaker”). We believe that it is in our best
interest to have Boulay Heutmaker continue to work with our business, and we
therefore retained Boulay Heutmaker as our new independent registered public
accounting firm on June 24, 2008. Boulay Heutmaker is located at 7500 Flying
Cloud Drive, Suite 800, Minneapolis, Minnesota 55344.
The
decision to change auditors and the appointment of Boulay Heutmaker was
recommended and approved by our board of directors. During our two most recent
fiscal years, and the subsequent interim periods, prior to June 24, 2008, we did
not consult Boulay Heutmaker regarding either: (i) the application of accounting
principles to a specified transaction, completed or proposed, or the type of
audit opinion that might be rendered on our company’s financial statements, or
(ii) any matter that was either the subject of a disagreement as defined in Item
304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item
304(a)(1)(v) of Regulation S-K.
McElravy
Kinchen’s report on our financial statements for the year ended December 31,
2007 did not contain any adverse opinion or disclaimer of opinion and was not
qualified as audit scope or accounting principles, however such year-end report
did contain a modification paragraph that expressed substantial doubt about our
ability to continue as a going concern. McElravy Kinchen only reported on our
financial statements for the most recent fiscal year.
During
the fiscal year ended December 31, 2007 and the subsequent interim periods prior
to June 24, 2008, (i) there were no disagreements between us and McElravy
Kinchen on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or
subject
matter of the disagreement in connection with its reports and (ii) there were no
“reportable events,” as described in Item 304(a)(1)(iv) of Regulation S-B of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. The decision
to replace McElravy Kinchen was not the result of any disagreement between us
and McElravy Kinchen on any matter of accounting principle or practice,
financial statement disclosure or audit procedure. Our board of directors deemed
it in our best interest to change independent auditors following the closing of
the exchange transaction.
ITEM
9A
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
Based on
management’s evaluation (with participation of our President and Chief Financial
Officer (CFO), as of the end of the period covered by this report, our President
and CFO have concluded, because of the material weakness in internal control
over financial reporting described below, that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange Act), are ineffective to provide
reasonable assurance that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in SEC rules and
forms, and is accumulated and communicated to management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Changes
in Internal Control over Financial Reporting
There
were changes to our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Management’s
Report on Internal Control over Financial Reporting
This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report in this annual report.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act. Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with U.S. generally
accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projection of any evaluation of effectiveness to future periods is subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Management
has conducted, with the participation of our Chief Executive Officer and Chief
Financial Officer, an assessment, including testing of the effectiveness, of our
internal control over financial reporting as of December 31, 2008. Management’s
assessment of internal control over financial reporting was conducted using the
criteria in Internal Control over Financial Reporting – Guidance for Smaller
Public Companies issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).
A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely
basis. In connection with management’s assessment of our
internal control over financial reporting as required under Section 404 of the
Sarbanes-Oxley Act of 2002, we identified the following material weaknesses in
our internal control over financial reporting as of December 31,
2008:
1. The
Company has not established adequate financial reporting monitoring activities
to mitigate the risk of management override, specifically:
a. Delegation
of authority has not been formally documented;
b. Insufficient
oversight of accounting principle implementation; and
c. Insufficient
oversight of external audit functions;
2. There
is a strong reliance on the external auditors to review and adjust the annual
and quarterly financial statements, to monitor new accounting principles, and to
ensure compliance with GAAP and SEC disclosure requirements;
3. There
is a strong reliance on the external attorneys to review and edit the annual and
quarterly filings and to ensure compliance with SEC disclosure requirements;
and
4. We
have not adequately divided, or compensated for, incompatible functions among
personnel to reduce the risk that a potential material misstatement of the
financial statements would occur without being prevented or
detected.
Because
of the material weaknesses noted above, management has concluded that we did not
maintain effective internal control over financial reporting as of December 31,
2008, based on Internal Control over Financial Reporting – Guidance for Smaller
Public Companies issued by COSO.
Remediation
of Material Weaknesses in Internal Control Over Financial Reporting
Management
is in the process of addressing its material weaknesses in an effort to improve
its system of internal control over financial reporting through the following
actions:
|
1.
|
The
Company hired a Chief Financial Officer in January 2009 to provide
oversight of the internal control systems, compliance with the GAAP and
SEC disclosure requirements, and supervision of the accounting
functions.
|
|
2.
|
In
March 2009, the Board of Directors approved the adoption of a Disclosure
Control policy, which includes, among other things, a Disclosure Committee
consisting of the CEO, President and CFO. This Committee will be
responsible for managing the identification and disclosure of information
in our SEC filings and public
statements.
|
|
3.
|
The
Company has assessed control risks with the assistance of an outside
consultant who has experience with Sarbanes Oxley compliance and has
documented key accounting control areas. We expect to continue this effort
in 2009 to meet attestation
standards.
|
|
4.
|
We
have established a formal delegation policy within the Company which
provides business rules in conjunction with signing and approval authority
by Company employees.
|
|
5.
|
As
a small business, the Company does not have the resources to fund
sufficient staff to ensure a complete segregation of responsibilities
within the accounting function. However, Company management
does review, and will increase the review of, financial statements and
bank reconciliations on a monthly basis, together with the adoption of a
monthly financial closing process. These actions, in addition to the
improvements identified above, will minimize any risk of a potential
material misstatement occurring.
|
The
foregoing initiatives will enable us to improve our internal controls over
financial reporting. Management is committed to continuing efforts aimed at
improving the design adequacy and operational effectiveness of its system of
internal controls. The remediation efforts noted above will be
subject to the Company’s internal control assessment, testing and evaluation
process.
ITEM
9B
|
OTHER
INFORMATION
|
Waiver of Liquidated Damages
and Issuance of Stock Dividends
Subsequent
to the close of the fiscal year, the Company and the holders of the Company’s
Series A Preferred Stock entered into an agreement amending the penalty
provisions (including liquidated damages) provided in the Registration Rights
Agreement for failure to timely file and obtain effectiveness of a registration
statement. Under such agreement, the Company agreed to issue
additional common stock to the holders of the Series A convertible preferred
stock at a price equal to 75% of the average of the immediately preceding 20
days’ daily volume weighted average price for the common stock. This
issuance of common stock is in lieu of the liquidated damages set forth under
the Registration Rights Agreement and constitutes a waiver and deletion of
redemption rights provided by Section 9 of the Company’s Certificate of
Designation of Preferences, Rights and Limitations of Series A 8% Convertible
Preferred Stock of the Company with the Delaware Secretary of State on June 24,
2008. Additional disclosure has been provided in the notes to the financial
statements.
Amended 8-K –NextGen
Transaction
Following
the filing of this annual report on Form 10K with the SEC, the Company will be
filing an amended current report on Form 8-K, originally filed with the SEC on
November 8, 2004. Such report disclosed the entry into a material
definitive agreement with NextGen whereby the Company acquired all its issued
and outstanding shares of common stock in exchange for the issuance of
unregistered shares of common stock of the Company (as described more fully
herein in Item 1). However, during the first quarter of 2009, we
discovered certain information regarding the financial position of NextGen which
at the time of closing would have required us to include financial statements of
NextGen in connection with the disclosure of the transaction on Form 8-K.
Thus, such amended Form 8-K shall include the necessary audited financial
statements for NextGen as required by Section 9.01 of Form
8-K.
PART
III
ITEM
10
|
DIRECTORS
AND EXECUTIVE OFFICERS
|
The
following table shows the positions held by our board of directors and executive
officers, and their ages as of March 31, 2009:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Daniel
J. Juhl
|
|
59
|
|
Chairman
of the Board of Directors and
Chief
Executive Officer
|
|
|
|
|
|
John
P. Mitola
|
|
43
|
|
President
and Director
|
|
|
|
|
|
John
J. Brand
|
|
52
|
|
Chief
Financial Officer
|
|
|
|
|
|
Edward
C. Hurley
|
|
55
|
|
Director
|
|
|
|
|
|
General
Wesley Clark (ret.)
|
|
64
|
|
Director
|
The
principal occupations for the past five years (and, in some instances, for prior
years) of each of our directors and executive officers are as
follows:
Daniel J. Juhl became our
Chairman of the Board and Chief Executive Officer on June 24, 2008, and had
served as President of Juhl Energy since September 2007 and DanMar since January
1989. Mr. Juhl has been involved in the wind power industry for more than 30
years. He has experience in the design, manufacture, maintenance and sale of
wind turbines. He also provides consulting services in the wind power industry
helping farmers develop wind projects that qualify for Minnesota’s renewable
energy production incentives. Mr. Juhl has been involved in the development of
about 1,500 megawatts of wind generation in his 30+ years of experience in the
field. He has served as the chief technology officer of Next Generation Power
Systems, Inc. from October 2005 until the present. He has been the principal
consultant for wind energy projects to Edison Capital, John Deere Capital,
Vestas, EWT, Suzlon Turbine Manufacturing, and various public and private
utilities throughout the United States and Canada. He has appeared before
numerous state and federal governmental bodies advocating wind power and
community-based energy development on behalf of landowners, farmers and
ranchers. Mr. Juhl wrote the popular wind energy reference guidebook,
“Harvesting Wind Energy as a Cash Crop.”
John P. Mitola became our
President and a member of our board of directors on June 24, 2008, and had
served in similar positions with Juhl Energy since April 2008. Mr. Mitola has
more than 20 years of experience in the energy and environmental industries,
real estate development, venture capital, engineering and construction. He has
been a managing partner with Kingsdale Capital International, a private equity
and capital advisory firm that specialized in merchant banking, leveraged
buyouts and corporate finance, since August 2006. Mr. Mitola currently serves as
Chairman of the Illinois Toll Highway Authority, having been appointed to chair
the state authority by the Governor of Illinois to serve two terms starting in
March 2003. The Illinois State Toll Highway Authority is one of the
largest agencies in Illinois and is one of the largest transportation agencies
in North America with a $600 million annual operating budget and a $6.3 billion
capital program, operating over 274 miles of roadway serving the Chicago metro
region.
Most
recently, Mr. Mitola was Chief Executive Officer and a director of Electric City
Corp., a publicly-held company that specialized in energy efficiency systems,
where he served from January 2000 to February 2006. Prior to his role at
Electric City, Mr. Mitola was vice president and general manager of Exelon
Thermal Technologies, a subsidiary of Exelon Corp. that designed and built
alternative energy systems, from March 1997 to December 1999. Prior to serving
as its general manager, Mr. Mitola served in various leadership roles at Exelon
Thermal Technologies from January 1990 until his move to Electric City Corp. in
January 2000. Mr. Mitola is also a member of the board of directors
of publicly-traded companies Composite Technology Corp. and IDO Security
Inc. He is a member of the American Society of Heating, Refrigerating
and Air-Conditioning Engineers, and the Association of Energy Engineers. His
community affiliations include membership in the Economic Club of Chicago, City
Club of Chicago, Union League Club and the governing board of the Christopher
House Board of Directors. He is also a member of the boards of Scholarship
Chicago, the Illinois Council Against Handgun Violence and the Illinois
Broadband Development Council. Mr. Mitola received his B.S. degree in
engineering from the University of Illinois at Urbana-Champaign and J.D. degree
from DePaul University College of Law.
John J. Brand became our Chief
Financial Officer on January 26, 2009. Immediately prior to joining
Juhl Wind, and since 2002, Mr. Brand served as the Chief Financial Officer of
CMS Direct, Inc. Mr. Brand is a former certified public accountant.
He has also held Chief Financial Officer and division controllership positions
in both public and private companies in technology, business services and
energy-related businesses. In addition, Mr. Brand has 14 years of audit and tax
experience in public accounting firms, including Grant Thornton. Mr. Brand
earned a B.S. in Accounting from St. Cloud State University.
Edward C. Hurley became a
director of our Company in July 2008 following our reverse public offering
transaction. Mr. Hurley currently serves as Of Counsel to the law
firm of Chico & Nunes, P.C., which position he has held since January,
2007.During more than 13 years of service at the Illinois Commerce Commission
(“ICC”), the agency that regulates public utilities in Illinois, Mr. Hurley
served as the agency’s Chairman, a Commissioner and an Administrative
Law Judge. As the ICC’s chairman, Mr. Hurley oversaw the work of nearly 300
employees and a budget of $128 million. During his tenure at the ICC, Mr. Hurley
was a decision-maker involved in resolving the most complex issues impacting
Illinois businesses governed by the ICC, including the deregulation of electric
energy markets, process for procurement of electricity by electric utilities,
and mergers and acquisitions of telecommunications, electric and natural gas
utilities. Immediately prior to joining Chico & Nunes, P.C., Mr.
Hurley served as the Special Director of the Office of Emergency Energy
Assistance for the State of Illinois. In this role, Mr. Hurley was responsible
for the successful implementation of the "Keep Warm Illinois" and "Keep Cool
Illinois" Campaigns that were driven by anticipated increases in the costs of
natural gas and electricity
General Wesley Clark (ret.)
became a director of our Company in January 2009. General Clark has
enjoyed a distinguished career that began with his graduation from West Point as
first in his class. In 1966, he was awarded a Rhodes scholarship to Oxford
University, where he earned a Masters in Politics, Philosophy and Economics.
During thirty-four years of service in the United States Army, Wesley Clark rose
to the rank of four-star general as NATO’s Supreme Allied Commander, Europe.
After his retirement in July 2000, he became an investment banker, author,
commentator and businessman. In August 2000, General Clark was awarded the
Presidential Medal of Freedom, the nation’s highest civilian honor. In 2003, he
was also a candidate for the Democratic nomination for the U.S. Presidency. From
July 2000 to February 2003, he was a consultant to and then the Managing
Director of the Stephens Group Inc., a private investment bank. Since March
2003, he has been the Chairman and Chief Executive Officer of Wesley K. Clark
& Associates, a business services and development firm based in Little Rock,
Arkansas. In February 2006, General Clark joined Rodman & Renshaw Holdings,
LLC, which controls Rodman & Renshaw, LLC, as Chairman of the Board and as a
member of their Advisory Board. General Clark also serves on the boards of
directors of AMG Advanced Metallurgical Group N.V., Argyyle Security, Inc., CVR
Energy Inc., NutraCea Inc. and Prysmian S.P.A.
All
directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Officers are elected annually by
the board of directors and serve at the discretion of the board.
We agreed
with Vision Opportunity Master Fund, the lead investor in the private placement,
to nominate to our board of directors an independent and industry-qualified
director selected by it, and reasonably acceptable to us, to serve as a director
for at least three years after the closing of the exchange transaction and
private placement. We also agreed to cause such director to be appointed to the
audit or compensation committee of our board, when established. In
fulfillment of that agreement, Mr. Hurley was appointed as such
director.
Board
Committees
We have
not previously had an audit committee, compensation committee or nominations and
governance committee, nor have we taken any steps to create such committees as
of March 31, 2009. In 2009, our board of directors expects to create such
committees, in compliance with established corporate governance requirements.
Currently, Mr. Hurley and General Clark are our only “independent” directors, as
that term is defined under Nasdaq rules and by the regulations of the Securities
Exchange Act of 1934.
Audit
Committee. We plan to establish an audit committee of the board of
directors. The audit committee’s duties would be to recommend to the board of
directors the engagement of independent auditors to audit our financial
statements and to review our accounting and auditing principles. The audit
committee would review the scope, timing and fees for the annual audit and the
results of audit examinations performed by the internal auditors and independent
public accountants, including their recommendations to improve the system of
accounting and internal controls. The audit committee would at all times be
composed exclusively of directors who are, in the opinion of the board of
directors, free from any relationship which would interfere with the exercise of
independent judgment as a committee member and who possess an understanding of
financial statements and generally accepted accounting principles.
Compensation
Committee. We plan to establish a compensation committee of the board of
directors. The compensation committee would review and approve our salary and
benefits policies, including compensation of executive officers. The
compensation committee would also administer our proposed Incentive Compensation
Plan, and recommend and approve grants of stock options, restricted stock and
other awards under that plan.
Nominations and
Governance Committee. We plan to establish a nominations and governance
committee of the board of directors. The purpose of the nominations and
governance committee would be to select, or recommend for our entire board’s
selection, the individuals to stand for election as directors at the annual
meeting of stockholders and to oversee the selection and composition of
committees of our board. The nominations and governance committee’s duties would
also include considering the adequacy of our corporate governance and overseeing
and approving management continuity planning processes.
Indebtedness
of Directors and Executive Officers
None of
our directors or executive officers or their respective associates or affiliates
is indebted to us.
Family
Relationships
There are
no family relationships among our directors and executive officers.
2008
Incentive Compensation Plan
On June
16, 2008, our board of directors and holders of a majority of our outstanding
shares of common stock adopted and approved a new 2008 Incentive Compensation
Plan, which our board ratified on June 24, 2008. The purpose of our
Incentive Compensation Plan is to provide stock options, stock issuances and
other equity interests to employees, officers, directors, consultants,
independent contractors, advisors and other persons who have made or are
expected to make contributions to our company.
On
June 24, 2008, immediately following the closing of the exchange transaction and
private placement, we granted stock options to purchase 510,000 shares of common
stock at $1.00 per share to John Mitola and stock options to purchase 10,000
shares of common stock at $1.00 per share to Edward C. Hurley. In
September 2008, the Company granted 100,000 stock options to an employee with an
exercise price of $2.00 per share and vest over a four year term beginning
November 1, 2008 and expire 10 years from the grant date.
Subsequent
to the end of the fiscal year, on January 14, 2009, we granted stock options to
purchase 10,000 shares of common stock at $2.11 per share to General Wesley
Clark, and on January 26, 2009, we granted stock options to purchase 100,000
shares of common stock to John Brand, with 25,000 options immediately
issuable at $1.95 per share, and an additional 75,000 options to be issued upon
completion of a six month term.
Administration. Our
Incentive Compensation Plan is to be administered by our Compensation Committee,
provided, however, that except as otherwise expressly provided in the plan, the
committee may delegate some or all of its power or authority to our President,
Chief Executive Officer or other executive officer. Subject to the terms of our
plan, the committee is authorized to construe and determine the stock option
agreements, other agreements, awards and the plan, prescribe, amend and rescind
rules and regulations relating to the plan and awards, determine acceleration of
vesting schedules or award payments and forfeitures, determine terms and
provisions of stock options agreements (which need not be identical), grant
awards for performance goals and option awards and stock appreciation rights
based upon a vesting schedule and correct defects, supply omissions or reconcile
inconsistencies in the plan or any award thereunder, and make all other
determinations as the committee may deem necessary or desirable for the
administration and interpretation of our plan.
Eligibility. The
persons eligible to receive awards under our Incentive Compensation Plan are the
employee, officers, directors, consultants, independent contractors and advisors
of our company or any parent or subsidiary of our company and other persons who
have made or are expected to make contributions to our company.
Types of
Awards. Our Incentive Compensation Plan provides for the
issuance of stock options, incentive stock options, restricted compensation
shares, restricted compensation share units, stock appreciation rights (or
SARs), performance shares, award shares and other stock-based
awards. Performance share awards entitle recipients to acquire
shares of common stock upon the attainment of specified performance goals within
a specified performance period, as determined by the committee.
Shares Available for Awards; Annual
Per-Person Limitations. Subject to certain recapitalization
events described in our plan, the aggregate number of shares of common stock
that may be issued pursuant to our Incentive Compensation Plan at any time
during the term of the plan is 2,897,111 shares. If any award
expires, or is terminated, surrendered or forfeited, the common stock covered by
such award will again be available for the grant of awards under our plan. No
participant may be granted awards during a fiscal year to purchase more than
30,000 shares of common stock subject to recapitalization events.
Stock Options and Stock Appreciation
Rights. The committee is authorized to grant stock
options, including both incentive stock options (or ISOs), and non-qualified
stock options, restricted compensation shares, restricted compensation share
units, stock appreciation rights, performance shares and award shares. The terms
and conditions of awards under the plan including number of shares covered,
exercise price per share and term are determined by the committee, but in the
case of an ISO, the exercise price must not be less than the fair market value
of a share of common stock on the date of grant. For purposes of our Incentive
Compensation Plan, if at the time of a grant, our company’s common stock is
publicly traded, the term “fair market value” means (i) if listed on an
established stock exchange or national market system, the last reported sales
price or the closing bid if no sales were reported on such exchange or system,
or (ii) the average of the closing bid and asked prices last quoted by an
established quotation service for over-the-counter securities if the common
stock is not reported on a national market system. In the absence of an
established market for our common stock, the fair market value shall be
determined in good faith by the committee. The number of shares
covered by each option or stock appreciation right, the times at which each
option or stock appreciation right will be exercisable, and provisions requiring
forfeiture of unexercised options or stock appreciation rights at or following
termination of employment generally are fixed by the committee, except that no
option or stock appreciation right may have a term exceeding ten years. The
committee also determines the terms and conditions of restricted compensation
shares, restricted compensation share units, performance shares, award shares
and other stock-based awards under our plan.
Restricted Compensation Shares and
Restricted Compensation Share Units. The committee is
authorized to grant restricted compensation shares and restricted compensation
shares units. An award of restricted compensation shares is a grant which
entitles recipients to acquire shares of common stock subject to restrictions on
transfer and which may be forfeited if all specified employment, vesting and/or
performance conditions as determined by the committee are not met. An award of
restricted compensation share units confers upon a recipient the right to
acquire, at some time in the future, restricted compensation shares, subject to
forfeiture if all specified award conditions as determined by the committee are
not met
Performance Shares and Award
Shares. The committee is authorized to grant awards
entitling recipients to acquire shares of common stock upon the attainment of
specified performance goals and grant awards entitling recipients to acquire
shares of common stock subject to such terms, restrictions, conditions,
performance criteria, vesting requirements and payment needs as determined by
the committee, subject to such other terms as the committee may
specify.
Other Stock-Based
Awards. The committee is authorized to grant other awards
based upon the common stock having such terms and conditions as the committee
may determine including, without limitation, the grant of securities convertible
into common stock and the grant of phantom stock awards or stock
units.
Performance Goals and Other
Criteria. The committee shall establish objective
performance goals for participants or groups of participants for
performance-based awards under the plan excluding options and stock appreciation
rights. With respect to participants who are “covered employees” (within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended), an
award other than an option or a stock appreciation right may be based only on
performance factors that are compliant with applicable regulations.
Other Terms of
Awards. Options may be exercised by written notice of
exercise to us by way of cashless exercise, settlement of which shall be made
solely in cash. Unless otherwise determined by the committee, awards may not be
transferred except by will or the laws of descent and distribution and, during
the life of the participant, may be exercisable only by the participant.
However, except as the committee may otherwise determine, nonstatutory options
and restricted compensation shares may be transferred pursuant to a qualified
domestic relations order (as defined by ERISA) or pursuant to certain
estate-planning vehicles. To the extent not inconsistent with the plan or
applicable law, the committee may include additional provisions in awards such
as, among other things, restrictions on transfer, commitments to pay cash
bonuses and guaranty loans. The committee shall determine the effect on awards
of disability, death, retirement, leave of absence or other change in
participant status. We have the right to deduct applicable taxes from payments
to award recipients. Participants have no right to continued employment or other
relationship with us, and subject to award provisions, participants have no
rights as stockholders of our company until becoming record
stockholders.
Acceleration or Extension of
Vesting; Change in Control. The committee may, in its discretion,
accelerate the dates on which all or any particular option or award under the
plan may be exercised and may extend the dates during which all or any
particular option or award under the plan may be exercised or vest. In the case
of a “change in control” of our company, as defined in our Incentive
Compensation Plan, we will take one or a combination of the following actions:
(a) make appropriate provision for the continuation or assumption of the awards;
(b) acceleration of exercise or vesting of the awards; (c) exchange of the
awards for the right to participate in a benefit plan of a successor; (d)
repurchase of awards; or (e) termination of awards immediately prior to a change
in control.
Amendment and Termination.
The board of directors may amend, suspend or terminate our Incentive
Compensation Plan provided, however, that no amendment may be made without
stockholder approval if such approval is necessary to comply with any applicable
law, rules or regulations. Our plan became effective upon the date it was
adopted by the committee and approved by our stockholders, and no awards may be
granted under the plan after the completion of ten years thereafter. Awards
previously granted may extend beyond that date.
Section 16(a)
Beneficial Ownership Reporting Compliance
We do not
have securities registered under Section 12 of the Exchange Act and,
accordingly, our directors, officers and affiliates are not required to file
reports under Section 16(a) of the Exchange Act.
Code
of Ethics
Our board
of directors has adopted a code of ethics, which applies to all our directors,
officers and employees. Our code of ethics is intended to comply with
the requirements of Item 406 of Regulation S-K.
Our code
of ethics is posted on our Internet website at www.juhlwind.com. We
will provide our code of ethics in print without charge to any stockholder who
makes a written request to us at Juhl Wind, Inc., 996 190th Avenue,
Woodstock, Minnesota 56186. Any waivers of the application, and any
amendments to, our code of ethics must be made by our board of
directors. Any waivers of, and any amendments to, our code of ethics
will be disclosed promptly on our Internet website,
www.juhlwind.com.
ITEM
11
|
EXECUTIVE
COMPENSATION
|
The
following table sets forth, for the most recent fiscal year, all cash
compensation paid, distributed or accrued, including salary and bonus amounts,
for services rendered to us by our Chief Executive Officer and four other
executive officers in such year who received or are entitled to receive
remuneration in excess of $100,000 during the stated period and any individuals
for whom disclosure would have been made in this table but for the fact that the
individual was not serving as an executive officer as at December 31,
2008:
Summary Compensation Table
|
|
Name and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
$
|
|
|
Bonus
$
|
|
|
Stock
Awards
$
|
|
|
Option
Awards
$
|
|
|
Non-
Equity
Incentive
Plan
Compen-
sation
$
|
|
|
Nonqualified
Deferred
Compen-
sation
Earnings
$
|
|
|
All Other
Compen-
sation
$
|
|
|
Totals
$
|
|
Daniel
J. Juhl
|
|
|
2008
|
|
|
|
147,130 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
147,130 |
|
Chairman
and Chief
|
|
2007
|
|
|
|
74,400 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
74,400 |
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. Mitola 1
|
|
2008
|
|
|
|
153,330 |
|
|
|
- |
|
|
|
- |
|
|
|
92,107 |
4
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
245,437 |
4
|
President
|
|
2007
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey C.
Paulson2
|
|
2008
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
General
Counsel, Vice
|
|
2007
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
President,
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cory Heitz 3
|
|
2008
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Former
Director, Chief
|
|
2007
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Executive
Officer, Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Officer and
Principal Accounting
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Mr.
Mitola joined Juhl Energy in April 2008.
2 Mr.
Paulson was removed as General Counsel, Vice President and Secretary on March
24, 2009.
3 Mr.
Heitz resigned as an officer and director of our Company on June 24,
2008.
4The
determination of value of option awards is based upon the Black-Scholes Option
pricing model, details and assumptions of which are set out in our financial
statements included in this annual report. The amounts represent annual
amortization of fair value of stock options granted to the named executive
officer.
The
aggregate amount of benefits in each of the years indicated did not exceed the
lesser of $50,000 or 10% of the compensation of any named officer.
Outstanding
Equity Awards at Fiscal Year-End
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)1
|
|
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
|
Daniel
J. Juhl
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
John
P. Mitola
|
|
|
2,500 |
|
|
|
507,500 |
|
|
|
- |
|
|
$ |
1.00 |
|
|
06/24/2018
|
|
|
|
507,500 |
|
|
|
1,015,0001 |
|
|
|
- |
|
|
|
- |
|
Edward
C. Hurley
|
|
|
2,500
|
|
|
|
7,500 |
|
|
|
- |
|
|
$ |
1.00 |
|
|
06/24/2018
|
|
|
|
7,500 |
|
|
|
15,0001 |
|
|
|
- |
|
|
|
- |
|
Cory
Heitz
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
1The
market value of shares with respect to options that have not vested are valued
using $2.00 per share, the average bid/ask price.
Compensation
of Directors
Directors
are expected to timely and fully participate in all regular and special board
meetings, and all meetings of committees on which they serve. We compensate
directors through stock options granted under our 2008 Incentive Compensation
Plan and an annual cash stipend .
Subsequent
to the end of the fiscal year, on January 14, 2009, General Wesley K. Clark was
appointed as a director of the Company to serve under the terms of a letter
agreement between the Company and General Clark dated January 13,
2009. The letter agreement, a copy of which is attached as an exhibit
to this report, provides for, among other things, annual cash compensation of
$10,000, a grant of options to purchase 10,000 shares of the Company’s common
stock, $1,500 per day compensation while conducting Company business and expense
reimbursement during his term of office,
The table
below summarizes the compensation that we paid to non-management directors for
the fiscal year ended December 31, 2008 and 2007.
Director
Compensation
Name
|
|
Year
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Edward
C. Hurley
|
|
2008
|
|
|
- |
|
|
|
- |
|
|
|
4,0801 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,080 |
|
|
|
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
1The
determination of value of option awards is based upon the Black-Scholes Option
pricing model, details and assumptions of which are set out in our financial
statements included in this annual report. The amounts represent annual
amortization of fair value of stock options granted to the named
director.
Employment
Agreements
On June
7, 2008, Juhl Energy entered into an Executive Employment Agreement with Daniel
J. Juhl (the “Juhl Employment Agreement”). Under the Juhl Employment Agreement,
which was assigned to us at the closing of the exchange transaction, we will
employ Mr. Juhl as Chief Executive Officer for a term beginning on the closing
date of the exchange transaction and ending on December 31, 2011. Mr. Juhl’s
monthly salary during the three and a half years of the employment agreement
will be $14,583 from June 24, 2008, $16,667 from June 24, 2009 and $18,750 from
June 24 ,2010, respectively. We will pay Mr. Juhl an annual performance bonus of
a maximum of his annual salary upon reaching certain goals established by the
board of directors. The performance bonus is conditioned upon (a) profitable
operation of our company for the full year for which the bonus is to be paid and
(b) minimum revenue growth during the year for which the bonus is to be paid as
established by the board and set for 2008 and 2009 at $4.9 million and $8.9
million, respectively. Mr. Juhl will receive an automobile allowance of $750 per
month and other employee benefits provided to similarly-situated employees. In
the event Mr. Juhl terminates his employment for good reason, he will receive
severance compensation in the amount equal to 90 days’ pay.
On June
7, 2008, Juhl Energy entered into an Executive Employment Agreement with John P.
Mitola (the “Mitola Employment Agreement”). Under the Mitola Employment
Agreement, which was assigned to us at the closing of the exchange transaction,
we will employ Mr. Mitola as President for a term beginning on the closing date
of the exchange transaction and ending on December 31, 2011. Mr. Mitola’s
monthly salary during the three and a half years of the employment agreement
will be $14,583 from April 1, 2008, $16,667 from June 24, 2009 and $18,750 from
June 24, 2010, , respectively. We will pay Mr. Mitola an annual performance
bonus of a maximum of his annual salary upon reaching certain goals established
by the board of directors. The performance bonus is conditioned upon (a)
profitable operation of our company for the full year for which the bonus is to
be paid and (b) minimum revenue growth during the year for which the bonus is to
be paid as established by the board and set for 2008 and 2009 at $4.9 million
and $8.9 million, respectively. Mr. Mitola received stock options to purchase
500,000 shares of our common stock exercisable at $1.00 per share, which options
vest in three increments of one-third each upon completion of each year of
employment. Mr. Mitola will receive an automobile allowance of $750 per month
and other employee benefits provided to similarly-situated employees. In the
event Mr. Mitola terminates his employment for good reason, he will receive
severance compensation in the amount equal to 90 days’ pay.
On
January 26, 2009, our board of directors appointed John J. Brand as our Chief
Financial Officer. In connection with his appointment, Mr. Brand
entered into an employment agreement with us (to be formalized in writing
following Mr. Brand’s first six months of employment with the Company), pursuant
to which he was granted an option with immediate vesting to purchase 25,000
shares of our common stock. Options to purchase an additional 75,000
shares of our common stock will be granted following the first six months of Mr.
Brand’s employment with us.
ITEM
12
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND
MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
Equity
Compensation Plan Information
There are
2,897,111 shares of common stock reserved for issuance under our 2008 Incentive
Compensation Plan. We adopted our 2008 Incentive Compensation Plan on June 16,
2008, and prior to that date, we did not have in place any equity compensation
plan.
The
following table provides information as of December 31, 2008, with respect to
the shares of common stock that may be issued under our existing equity
compensation plan.
Equity
Compensation Plan Information
Plan Category
|
|
Number of shares of common stock
to be issued upon exercise of
outstanding options, warrants and
rights
(a)
|
|
|
Weighted-average exercise price of
outstanding options, warrants and
rights
(b)
|
|
|
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a))
(c)
|
|
Equity compensation plans approved
by security holders
|
|
|
620,000 |
|
|
$ |
1 |
|
|
|
2,277,111 |
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
620,000 |
|
|
$ |
1 |
|
|
|
2,277,111 |
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information regarding the number of shares of our
common stock beneficially owned on March 31, 2009, by:
|
•
|
each
person who is known by us to beneficially own 5% or more of our common
stock,
|
|
•
|
each
of our directors and executive officers,
and
|
|
•
|
all
of our directors and executive officers as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Shares of
our common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days after the date indicated in the table are deemed beneficially owned by the
optionees. Subject to any applicable community property laws, the persons
or entities named in the table above have sole voting and investment power with
respect to all shares indicated as beneficially owned by them.
Name (1)
|
|
Number of
Shares
Beneficially
Owned (2,10)
|
|
|
Percentage of
Shares
Beneficially
Owned (3)
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vision
Opportunity Master Fund, Ltd.
|
|
|
12,725,517 |
(4,10)
|
|
|
40.2 |
% |
|
|
|
|
|
|
|
|
|
Greenview
Capital, LLC
|
|
|
3,172,424 |
(5,10)
|
|
|
14.7 |
% |
|
|
|
|
|
|
|
|
|
Daybreak
Special Situations Master Fund, Ltd.
|
|
|
3,172,424 |
(6,10)
|
|
|
14.7 |
% |
|
|
|
|
|
|
|
|
|
Executive Officers and
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
J. Juhl
|
|
|
14,000,000
|
7
|
|
|
69.0 |
% |
|
|
|
|
|
|
|
|
|
John
P. Mitola
|
|
|
1,254,580 |
8
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
John
J. Brand
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
C. Hurley
|
|
|
4,580 |
9
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
General
Wesley Clark
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group (5 persons)
|
|
|
15,259,160 |
|
|
|
75.2 |
% |
____________________
|
*
|
Represents
less than 1%.
|
1 Other
than the 5% Stockholders listed above, the address of each person is c/o Juhl
Wind, Inc., 996 190th Avenue, Woodstock, Minnesota 56186.
2 Unless
otherwise indicated, includes shares owned by a spouse, minor children and
relatives sharing the same home, as well as entities owned or controlled by the
named person. Also includes shares if the named person has the right to acquire
those shares within 60 days after March 31, 2009, by the exercise or conversion
of any warrant, stock option or convertible preferred stock. Unless otherwise
noted, shares are owned of record and beneficially by the named
person.
3 The
calculation in this column is based upon 20,285,637 shares of common stock
outstanding on March 31, 2009. The shares of common stock underlying warrants,
stock options and convertible preferred stock are deemed outstanding for
purposes of computing the percentage of the person holding them but are not
deemed outstanding for the purpose of computing the percentage of any other
person.
4 Includes
(a) 1,325,517 shares of common stock currently held by Vision Opportunity Master
Fund, (b) 4,560,000 shares of common stock issuable upon the conversion of
series A convertible preferred stock and (c) 6,840,000 shares of common stock
issuable upon the exercise of warrants. The preferred stock and warrants are
subject to the ownership limitation detailed in Note 10 below. The address for
Vision Opportunity Master Fund, Ltd. is c/o Citi Hedge Fund Services (Cayman)
Limited, Cayman Corporate Cenre, 27 Hospital Road, 5th Floor,
Grand Cayman KY1-1109, Cayman Islands.
5 Includes
(a) 1,912,500 shares of common stock owned by Greenview Capital, LLC and its
individual members (John Prinz and Gene Maher), (b) 9,924 shares of common stock
currently held by Daybreak Special Situations Master Fund, an affiliate of
Greenview Capital, LLC, (c) 500,000 shares of common stock issuable upon the
conversion of series A convertible preferred stock held by Daybreak Special
Situations Master Fund, and (d) 750,000 shares of common stock issuable upon the
exercise of warrants held by Daybreak Special Situations Master Fund. The
preferred stock and warrants are subject to the ownership limitation detailed in
Note 10 below. The address for Greenview Capital, LLC is 100 E. Cook Road, 1st
Floor, Libertyville, Illinois 60048.
6 Includes
(a) 1,912,500 shares beneficially owned by Greenview Capital, LLC, an affiliate
of Daybreak Special Situations Master Fund, (b) 9,924 shares of common stock,
(c) 500,000 shares of common stock issuable upon the conversion of series A
convertible preferred stock and (d) 750,000 shares of common stock issuable upon
the exercise of warrants. The preferred stock and warrants are subject to the
ownership limitation detailed in Note 10 below. The address for Daybreak Special
Situations Master Fund, Ltd. is 100 E. Cook Road, 2nd Floor, Libertyville,
Illinois 60048.
7 Includes
3,500,000 shares of common stock held by Mary Juhl, Mr. Juhl’s spouse, and
7,000,000 shares held by the Juhl Family Limited Partnership, a Delaware limited
partnership in which Mr. Juhl is the general partner.
8 Includes
(a) 125,000 shares held by the Mitola Family Limited Partnership, a Delaware
limited partnership in which Mr. Mitola is the general partner and (b) 4,580
shares of common stock issuable upon the exercise of stock options exercisable
within 60 days.
9 Consists
of shares of common stock issuable upon the exercise of stock options granted to
him as compensation for board membership exercisable within 60
days.
10 Vision
Opportunity Master Fund and Daybreak Special Situations Master Fund each hold
series A preferred stock and warrants that are convertible or exercisable into
shares of common stock. The agreement with respect to which these stockholders
purchased the preferred stock and warrants contains a limitation of 9.9% (a
so-called “blocker”) on the number of shares such stockholders may beneficially
own at any time. The 9.9% ownership limitation, however, does not prevent a
stockholder from selling some of its holdings and then receiving additional
shares. In this way, a stockholder could sell more than the 9.9%
ownership limitation while never holding more than this limit. These numbers do
not reflect the 9.9% ownership limitation.
ITEM
13
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
Prior to
the closing of the exchange transaction, Daniel J. Juhl and John P. Mitola
engaged in certain transfers of equity for estate planning and corporate
purposes. The historical ownership of DanMar and Juhl Energy and the ownership
immediately prior to the closing of the exchange transaction were as
follows:
DanMar
& Associates, Inc. - Pursuant to the pre-incorporation subscription
agreement of DanMar, Daniel J. Juhl and Mary Juhl, his spouse, each subscribed
to 500 shares of common stock at $1.00 per share of common stock. On
June 12, 2008, Daniel J. Juhl and Mary Juhl each assigned 250 shares of common
stock of DanMar to the Juhl Family Limited Partnership.
Juhl
Energy Development, Inc. - Upon formation of Juhl Energy, Daniel J. Juhl held
1,000 shares of common stock of Juhl Energy, as the sole
shareholder. Prior to June 7, 2008, Mr. Juhl assigned 450 shares of
common stock of Juhl Energy to Mary Juhl. On June 7, 2008, Daniel J.
Juhl transferred 100 shares of common stock of Juhl Energy to John P. Mitola for
an agreed upon purchase price, which Mr. Mitola paid through a promissory note
to Mr. Juhl. On June 12, 2008, Daniel J. Juhl and Mary Juhl
each assigned 225 shares of common stock of Juhl Energy to the Juhl Family
Limited Partnership. On June 19, 2008, Mr. Mitola assigned 10
shares of Juhl Energy to the Mitola Family Limited Partnership.
Effective
January 1, 2008, the net assets of $5,438 of Community Wind Development Group, a
Minnesota corporation with whom Dan Juhl had a 25% ownership interest, were
contributed to the Company for nominal consideration. The Company recorded the
net asset amount as a contribution to capital.
On
October 31, 2008, the Company acquired all of the outstanding shares of common
stock of Next Generation Power Systems, Inc. Dan Juhl, a director,
officer and beneficial owner of Juhl Wind, Inc. was also a shareholder of Next
Generation Power Systems, Inc. In a related transaction, the Company
purchased a commercial building in Pipestone, Minnesota from six individuals,
one of whom was Mr. Juhl. See notes to the financial statements for a
description of these transactions.
Juhl Wind
provides management, administrative and accounting services to 4 wind farm
operations in which Dan Juhl and immediate family members have less than 5%
equity interests in each entity. The revenues earned in 2008 and 2007 was
$130,226 and $216,518, respectively.
Two of
our directors, Edward C. Hurley and General Wesley K. Clark, are “independent”
directors as that term is defined under Nasdaq rules and by the regulations of
the Securities Exchange Act of 1934.
ITEM
14
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The total
fees charged to the Company for audit services were $136,000, and for
audit-related services $25,000 during the year ended December 31, 2008. The
audit-related services were in conjunction with the audit of NextGen financial
statements. The Company incurred no fees for tax or other services for the year
ended December 31, 2008.
For the
year ended December 31, 2007, the total fees charged to the Company for audit
services were $30,000, and for audit-related services $67,400. The
audit-related services were in conjunction with the audit of DanMar and Juhl
Energy in connection with the exchange transaction. The Company incurred no fees
for tax or other services for the year ended December 31, 2007.
The
current policy of the board of directors, acting as the audit committee is to
approve the appointment of the principal auditing firm and any permissible
audit-related services. The audit and audit-related fees have not been approved
by specific board action in 2008, and alternatively audit and audit-related fees
are reviewed and approved by the Principal Financial Officer and Principal
Executive Officer. Upon establishment of the audit committee in the
near future, the roles and responsibilities of the committee will include
additional oversight of the approval of the audit-related services.
PART
IV
ITEM
15
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
The
Company’s financial statements filed as part of this report are listed in the
Table of Contents and provided in response to Item 8.
Exhibits
required by Item 601 of Regulation S-K:
No.
|
|
Description
|
2
|
|
Securities
Exchange Agreement, dated June 24, 2008 between MH & SC, Incorporated
and Juhl Energy Development, Inc. and DanMar and Associates, Inc. and, for
certain limited purposes, their respective stockholders 1
|
3.1
|
|
Articles
of Incorporation of the Company6
|
3.2
|
|
Certificate
of Amendment to Certificate of Incorporation amending, among other things,
the name of MH & SC, Incorporated to Juhl Wind, Inc., filed June 20,
2008 and effective June 24, 2008, with the Delaware Secretary of
State1
|
3.3
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series A 8%
Convertible Preferred Stock of Juhl Wind, Inc. filed June 24, 2008, with
the Delaware Secretary of State1
|
3.4
|
|
Bylaws
of the Company6
|
10.1
|
|
2008
Incentive Compensation Plan2
|
10.2
|
|
Form
of management Administrative Services Agreement between Juhl Wind, Inc.
and wind farm customers5
|
10.3
|
|
Employment
Agreement, dated June 7, 2008, between Juhl Energy Development, Inc. and
Daniel J. Juhl, as assigned to Juhl Wind, Inc.2
|
10.4
|
|
Employment
Agreement, dated June 7, 2008, between Juhl Energy Development, Inc. and
John P. Mitola, as assigned to Juhl Wind, Inc.2
|
10.5
|
|
Securities
Purchase Agreement, dated June 24, 2008, between Juhl Wind, Inc. and each
of Vision Opportunity Master Fund, Ltd., Daybreak Special Situations
Master Fund, Ltd., Bruce Meyers and Imtiaz Khan 2
|
10.6
|
|
Registration
Rights Agreement in connection with the private placement of units in Juhl
Wind, Inc. 2
|
10.7
|
|
Stock
Purchase Agreement, dated October 31, 2008, between Juhl Wind, Inc., Next
Generation Power Systems, Inc. and the selling shareholders of Next
Generation Power Systems, Inc. 4
|
10.8
|
|
Sales-Purchase
Agreement, dated October 31, 2008, between Juhl Wind, Inc. and six
individuals who are also the selling shareholders of Next Generation Power
Systems, Inc. 4
|
10.9
|
|
Letter
Agreement dated January 13, 2009 between the Company and General Wesley K.
Clark
|
10.10
|
|
Amendment
Agreement dated March 27, 2009 between Juhl Wind, Inc. and each of Vision
Opportunity Master Fund, Ltd., Daybreak Special Situations Master Fund,
Ltd., Bruce Meyers and Imtiaz Khan
|
14
|
|
Code
of Ethics
|
21
|
|
Subsidiaries
of the Registrant
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
|
Certification
of Chief Financial Officer Pursuant 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
1 Incorporated
by reference to the exhibits included with our Current Report on Form 8-K, dated
June 24, 2008, and filed with the U.S. Securities and Exchange Commission on
June 24, 2008
2 Incorporated
by reference to the exhibits included with our Current Report on Form 8-K, dated
June 24, 2008, and filed with the U.S. Securities and Exchange Commission on
June 25, 2008
3 Incorporated
by reference to the exhibits included with our Registration Statement on Form
S-1 (registration no. 333-154617), filed with the U.S. Securities and Exchange
Commission on October 22, 2008
4 Incorporated
by reference to the exhibits included with our Current Report on Form 8-K, dated
October 31, 2008, and filed with the U.S. Securities and Exchange Commission on
November 4, 2008
5 Incorporated
by reference to the exhibits included with Amendment No. 1 to our Registration
Statement on Form S-1 (registration no. 333-154617), filed with the U.S.
Securities and Exchange Commission on January 21, 2009
6 Incorporated
by reference to the exhibits included with the Company’s Registration Statement
on Form SB-2 filed with the U. S. Securities and Exchange Commission on March
31, 2007
SIGNATURES
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
JUHL
WIND, INC.
|
|
|
|
|
|
|
Date: March
30, 2009
|
By: |
/s/ John P. Mitola
|
|
John
P. Mitola |
|
President |
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/John P. Mitola
|
|
President
and Director
|
|
March
30, 2009
|
John
P. Mitola
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/Daniel J. Juhl
|
|
Chief
Executive Officer and Director
|
|
March
30, 2009
|
Daniel
J. Juhl
|
|
|
|
|
|
|
|
|
|
/s/John J. Brand
|
|
Chief
Financial Officer
|
|
March
30, 2009
|
John
J. Brand
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/Wesley K. Clark
|
|
Director
|
|
March
30, 2009
|
Wesley
K. Clark
|
|
|
|
|
|
|
|
|
|
/s/Edward C. Hurley
|
|
Director
|
|
March
30, 2009
|
Edward
C. Hurley
|
|
|
|
|