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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the Transition Period fromto
 Commission File No. 001-15795
 
 RENTECH, INC.
  Colorado
    
    84-0957421(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 10877 Wilshire Boulevard, Suite 710
Los Angeles, California 90024
 (310) 571-9800
 
 Securities registered pursuant to Section 12(b) of the Act:
Common Stock
Name of Each Exchange on Which Registered: NYSE Alternext US
Securities registered pursuant to Section 12(g) of the Act:
None
 
 o þ
 o þ
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller
reporting company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PagePART IITEM 1. Business
    
    
    4ITEM 1A. Risk Factors
    
    
    16ITEM 1B. Unresolved Staff Comments
    
    
    28ITEM 2. Properties
    
    
    28ITEM 3. Legal Proceedings
    
    
    28ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    28PART IIITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    29ITEM 6. Selected Financial Data
    
    
    30ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    56ITEM 8. Financial Statements and Supplementary Data
    
    
    57ITEM 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure
    
    
    58ITEM 9A. Controls and Procedures
    
    
    58ITEM 9B. Other Information
    
    
    59PART IIIITEM 10. Directors and Executive Officers of the Registrant
    
    
    60ITEM 11. Executive Compensation
    
    
    60ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    60ITEM 13. Certain Relationships and Related Transactions
    
    
    60ITEM 14. Principal Accountant Fees and Services
    
    
    60PART IVITEM 15. Exhibits and Financial Statement Schedules
    
    
    60Exhibit 10.21Exhibit 12.1Exhibit 14Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FORWARD-LOOKING STATEMENTS
      3




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PART I
 
 ITEM 1. BUSINESS
  Company Overview
         4




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Rentech Energy Midwest Corporation
    Business Strategy
   5




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Standalone Biomass Facilities
 Fossil Facilities
             6




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Financial Information About Our Business Segments
  Our Proprietary Rentech Process
  Rentech Technology
  
    
    In the first stage, commercially available technologies, such as gasification or steam
methane reforming, convert carbon-bearing material into syngas, which is a mixture of
hydrogen and carbon monoxide. Oxygen is usually added for the efficient conversion of any
solid or liquid feedstock.
    
    In the second stage, the Rentech Process is applied and the syngas created in stage one
is fed through a Rentech reactor and chemically altered in the presence of a catalyst to
form synthetic hydrocarbon products. The Rentech Process uses an iron-based catalyst that
enables the use of syngas from a wide variety of feedstocks.
    
    In the third stage, the synthetic hydrocarbon products are upgraded with commercially
proven refining technology to the specifications required for the target product.
  7




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Development of the Rentech Process
      Competition in Fischer-Tropsch Technology
   8




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Sources of Feedstocks for the Rentech Process
    Products and Markets for Hydrocarbon Products
   
    
    clean burning, premium grade diesel fuel that is valuable as both a stand-alone product
and a blending component;
    
    clean burning, jet fuel blending stocks;
    
    naphthas useful as a feedstock for chemical processing;
    
    specialty products such as waxes useful in hot-melt adhesives, inks and coatings;
    
    normal paraffins;
    
    other wax-based products; and
    
    a variety of other chemical intermediaries.
   9




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Clean Air Regulations
   Government Incentives
  2 2 2
      10




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Acquisition of REMC
  Business of Rentech Energy Midwest Corporation
  Production Facility
    CapacityPlant
    
    (Tons per Day)Anhydrous Ammonia
    
    
    830UAN Blending
    
    
    1,100Ammonium nitrate
    
    
    600Urea synthesis
    
    
    400Urea granulation
    
    
    140Nitric acid (2 plants)
    
    
    380Carbon Dioxide (2 plants)
    
    
    650
 Products
  Anhydrous Ammonia.
  11




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UAN.
  Urea.
 Nitric Acid.
 Carbon Dioxide. 2 2 2 2 2 2 2
 Marketing and Distribution
 2
 Seasonality and Volatility
   12




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Raw Materials
   Transportation
  Competition
  Intellectual Property and Patents of the Company
    13




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® ® ®
   Regulation
     14




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Implementation of Carbon Dioxide Emissions Reduction Strategy
    Employees and Labor Relations
  Available Information
   15




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ITEM 1A  RISK FACTORS
  Risks Related to Our Liquidity, Financial Condition, and Results of Operations
 Our liquidity and capital resources are limited and we must raise substantial additional capital
to execute our business plan and to fund our operations.
   We have never operated at a profit. If we do not achieve significant amounts of additional
revenues and become profitable, we may be unable to continue our operations.
  REMCs operations may not be profitable and may require substantial working capital financing.
  We have substantial secured debt and our Senior Credit Agreement includes restrictive covenants
that could limit our flexibility in obtaining additional financing and impair our ability to
operate our business.
  
    
    limiting our ability to obtain additional debt financing or make needed capital
expenditures without restructuring the covenants in our existing indebtedness;
    
    requiring prepayments of principal and interest under the Senior Credit Agreement in an
amount equal to distributions and loans made by REMC to its shareholders, including Rentech;
  16




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
    
    limiting our ability to respond to changing business, industry and economic conditions
and to withstand competitive pressures, which may affect our financial condition;
    
    incurring higher interest expense in the event of increases in the Senior Credit
Agreements variable interest rates;
    
    limiting our ability to make investments, dispose of assets, pay cash dividends or
repurchase stock;
    
    restricting our business or operations, compared to the business and operations of
competitors with less debt or greater resources; and
    
    subjecting us to financial and other restrictive covenants in our indebtedness, which a
failure to comply with could result in an event of default.
 We do not expect our historical operating results to be indicative of future performance.
  Recent disruptions in the global markets and unstable economic conditions have made it more
difficult for companies to secure financing. If we are unable to access financing on terms and at
a time acceptable to us for any reason, it could have a material adverse effect on our operations,
financial condition and liquidity.
    17




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The investment portfolio for our available for sale securities includes investments in auction
rate securities. Negative conditions in the global credit markets have impaired the liquidity of a
portion of our investment portfolio and required us to adjust the carrying value of our investment
through an impairment of earnings. Further impairments may occur in the future.
   We have disclosed a material weakness in our internal control over financial reporting with regard
to the preparation of purchase orders for equipment and services ordered for the PDU, which could
adversely affect our business, our prospects, any new financing or the valuation of our common
stock .
   Risks Related to the Rentech Process
 We and our licensees may be unable to successfully implement use of the Rentech Process at
commercial scale synthetic fuels plants.
  
    
    higher than anticipated capital and operating costs to design, construct or reconfigure
and operate a plant using the Rentech Process;
    
    reaction activity different than that demonstrated in laboratory and pilot plant
operations, which could increase the amount of catalyst or number of reactors required to
convert synthesis gas into hydrocarbons;
    
    shorter than anticipated catalyst life, which would require more frequent catalyst
replacement or addition, catalyst purchases, or both;
    
    insufficient catalyst separation from the crude wax product stream could impair the
operation of the product upgrading unit;
    
    product upgrading catalyst sensitivities to impurities in the crude synthetic fuel
products, which would impair the efficiency and economics of the product upgrade unit and
require design revisions; and
    
    higher than anticipated costs for the catalyst and other materials used to operate a
plant using the Rentech Process.
   18




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Our receipt of revenues from licensees is dependent on their ability to successfully develop,
construct and operate synthetic fuels plants using the Rentech Process.
   Plants that would use the Rentech Process rely upon complex gas process systems. This creates
risks of fire and explosions, which could cause severe damage and injuries, create liabilities for
us, and materially and adversely affect our business.
  We could have potential indemnification liabilities to licensees relating to the operation of
Fischer-Tropsch plants based on the Rentech Process and to intellectual property disputes.
  
    
    use of patent rights and technical information relating to the Rentech Process; and
    
    acts or omissions by us in connection with our preparation of preliminary and final
design packages for the licensees plant and approval of the licensees construction plans.
  Industry rejection of the Rentech Process would adversely affect our ability to receive future
license fees.
    19




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If our competitors introduce new technology, new legislation or regulations are adopted, or new
industry standards emerge, our technologies and products could become obsolete and unmarketable.
  Our success depends in part on the continued successful operation of the PDU.
  Our success depends on the performance of our management team, project development team and
technology group. The loss of key individuals within these groups would disrupt our business
operations.
  We may not be able to successfully manage our growing business.
  Our success depends in part on our ability to protect our intellectual property rights, which
involves complexities and uncertainties.
   20




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The Rentech Process may not compete successfully against Fischer-Tropsch technology developed by
our competitors, many of whom have significantly more resources.
  Our processes (including the Rentech Process) incorporate technologies and processes developed by
third parties the failure of which could harm our prospects for success.
  If we have foreign operations, our business there would be subject to various risks due to
unstable conditions.
   21




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Risks Related to Possible Inability to Complete Project Developments and the Financing Required for
Construction and Subsequent Operation
 We are pursuing alternative fuels projects, including at the Natchez Project, that will involve
substantial expense and risk.
  The construction of a commercial scale project that utilizes the Rentech Process and the
development of other alternative fuel projects will require several years and substantial
financing, and may not be successful.
  We may not be able to successfully negotiate and execute the engineering, procurement and
construction contracts with construction and other vendors necessary for our development
projects.
  If we do not receive funds from additional financing or other sources of working capital for our
business activities and future transactions, we will not be able to execute our business plan.
   The volatility in the price for certain commodities that we may purchase in the open market to use
as feedstock and the price for oil used to create petroleum derived fuels could adversely affect
our ability to develop, build and operate commercial scale synthetic fuels plants or our ability
to license our technology.
   22




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The level of indebtedness we expect to incur could adversely affect our ability to raise
additional capital to fund our operations, limit our ability to react to changes in the economy or
our industry and prevent us from meeting our obligations.
   
    
    increasing our vulnerability to general economic and industry conditions;
    
    requiring a substantial portion of our cash flow from operations to be dedicated to the
payment of principal and interest on our indebtedness, therefore reducing our ability to use
our cash flow to fund our operations, capital expenditures and future business
opportunities;
    
    limiting our ability to obtain additional financing for working capital, capital
expenditures, debt service requirements, acquisitions and general corporate or other
purposes; and
    
    limiting our ability to adjust to changing market conditions and placing us at a
competitive disadvantage compared to our competitors who have greater capital resources.
  The issuance of shares of our common stock could result in the loss of our ability to use our net
operating losses.
    23




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Risks Related to Our Operations of Plants
 A reduction in government incentives for FT fuels, or the relaxation of clean air requirements,
could materially reduce the demand for FT fuels or the Rentech Process.
  Changes in existing laws and regulations, or their interpretation, or the imposition of new
restrictions relating to emissions of carbon dioxide may give rise to additional compliance costs
or liabilities and could materially reduce the demand for FT fuels or the Rentech Process which
could, in turn, have a material adverse effect on our business, financial condition, results of
operations or prospects.
 2 2 2
 Changes in United States government regulations and agricultural policy that affect the demand for
products made at the East Dubuque Plant could materially and adversely affect its operations.
   24




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We could be subject to claims and liabilities under environmental, health and safety laws and
regulations arising from the production and distribution of nitrogen fertilizers and alternative
fuel products at our facilities.
  The market for natural gas has been volatile. If prices for natural gas increase significantly, we
may not be able to economically operate the East Dubuque Plant.
  Lower prices for nitrogen fertilizers or downturns in market demands could reduce the revenues and
profitability of the East Dubuque Plants nitrogen fertilizer business.
  Weather conditions may materially impact the demand for REMC products.
   25




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The business of the East Dubuque Plant is highly seasonal.
  The operations of the East Dubuque Plant are subject to risks and hazards that may result in
monetary losses and liabilities.
  Acts of terrorism and continued conflict and instability in the Middle East could affect both the
supply and price of various fertilizer materials that we sell.
  The nitrogen fertilizer industry is very competitive and the actions of our competitors could
materially affect the results of operations and financial position of the Company.
  We rely on Agrium as distributor of the nitrogen fertilizer products we produce at the East
Dubuque Plant.
   26




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Risks Related to the Market for Rentech Common Stock
 We have a very substantial overhang of common stock and future sales of our common stock will
cause substantial dilution and may negatively affect the market price of our shares.
     The market price of the Companys common stock may decline.
  
    
    the construction of a commercial scale synthetic fuels plant, including the Natchez
Project, or other process plants is not completed in a timely, economical and efficient
manner;
    
    the construction of a commercial scale synthetic fuels plant, including the Natchez
Project or other process plants does not yield the expected benefits to our revenues as
rapidly or to the extent that may be anticipated by financial or industry analysts,
stockholders or other investors;
    
    the effect of the construction of a commercial scale synthetic fuels plant, including the
Natchez Project or other process plants on our consolidated financial statements is not
consistent with the expectations of financial or industry analysts, stockholders or other
investors;
    
    significant shareholders of the Company decide to dispose of their shares of common stock
because of any of the above or other reasons; or
    
    any of the other risks referred to in this section materialize.
  27




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Rentech Energy Midwest Corporation Properties
  Product Demonstration Unit Properties
  Natchez Project Property
  Office Leases
   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   28




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Fiscal Year Ended September 30, 2008
    
    High
    
    
    LowFirst Quarter, ended Dec. 31, 2007
    
    $
    2.37
    
    
    $
    1.75Second Quarter, ended Mar. 31, 2008
    
    $
    1.72
    
    
    $
    0.83Third Quarter, ended Jun. 30, 2008
    
    $
    2.41
    
    
    $
    0.90Fourth Quarter, ended Sep. 30, 2008
    
    $
    2.43
    
    
    $
    1.25
 Fiscal Year Ended September 30, 2007
    
    High
    
    
    LowFirst Quarter, ended Dec. 31, 2006
    
    $
    4.53
    
    
    $
    3.56Second Quarter, ended Mar. 31, 2007
    
    $
    3.95
    
    
    $
    2.00Third Quarter, ended Jun. 30, 2007
    
    $
    3.20
    
    
    $
    2.20Fourth Quarter, ended Sep. 30, 2007
    
    $
    2.64
    
    
    $
    1.90
 Fiscal Year Ended September 30, 2006
    
    High
    
    
    LowFirst Quarter, ended Dec. 31, 2005
    
    $
    4.16
    
    
    $
    2.33Second Quarter, ended Mar. 31, 2006
    
    $
    5.32
    
    
    $
    3.72Third Quarter, ended Jun. 30, 2006
    
    $
    5.07
    
    
    $
    3.35Fourth Quarter, ended Sep. 30, 2006
    
    $
    5.24
    
    
    $
    4.12
   Company Purchases of Equity Securities
   29




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ITEM 6. SELECTED FINANCIAL DATA
  Rentech, Inc. and Subsidiaries
 Years Ended September 30,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Thousands, except per share data)CONSOLIDATED STATEMENT OF OPERATIONS DATARevenues
    
    $
    210,971
    
    
    $
    132,320
    
    
    $
    44,517
    
    
    $
    589
    
    
    $
    984Cost of Sales
    
    $
    160,425
    
    
    $
    116,567
    
    
    $
    44,077
    
    
    $
    617
    
    
    $
    679Gross Profit
    
    $
    50,546
    
    
    $
    15,753
    
    
    $
    440
    
    
    $
    (28
    )
    
    $
    305Research and Development Expense
    
    $
    64,477
    
    
    $
    43,127
    
    
    $
    12,054
    
    
    $
    496
    
    
    $
    749Loss from Continuing Operations
    
    $
    (62,978
    )
    
    $
    (94,867
    )
    
    $
    (39,912
    )
    
    $
    (15,615
    )
    
    $
    (7,087
    )Net Loss (1)
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,647
    )
    
    $
    (14,359
    )
    
    $
    (7,211
    )Loss Applicable to Common Stockholders (2)
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,722
    )
    
    $
    (23,700
    )
    
    $
    (7,211
    )BASIC AND DILUTED LOSS PER SHARE (3)Loss from Continuing Operations Per Common Share (1)
    
    $
    (.381
    )
    
    $
    (.627
    )
    
    $
    (.314
    )
    
    $
    (.269
    )
    
    $
    (.083
    )Loss Per Common Share (2)
    
    $
    (.380
    )
    
    $
    (.606
    )
    
    $
    (.304
    )
    
    $
    (.255
    )
    
    $
    (.084
    )CONSOLIDATED BALANCE SHEET DATAWorking Capital
    
    $
    15,479
    
    
    $
    37,961
    
    
    $
    65,316
    
    
    $
    32,031
    
    
    $
    (1,267
    )Construction in Progress
    
    $
    19,548
    
    
    $
    4,192
    
    
    $
    3,916
    
    
    $
    
    
    
    $
    Total Assets
    
    $
    256,640
    
    
    $
    183,063
    
    
    $
    150,686
    
    
    $
    43,492
    
    
    $
    9,379Total Long-Term Liabilities
    
    $
    118,787
    
    
    $
    65,728
    
    
    $
    58,135
    
    
    $
    2,850
    
    
    $
    3,019Total Liabilities
    
    $
    269,729
    
    
    $
    140,351
    
    
    $
    74,101
    
    
    $
    9,221
    
    
    $
    6,341Accumulated Deficit (4)
    
    $
    (255,260
    )
    
    $
    (192,373
    )
    
    $
    (100,658
    )
    
    $
    (62,009
    )
    
    $
    (47,650
    )
 
 (1)
    
    Excludes dividends of $0, $0, $75, $9,341, and $0 for years ended
September 30, 2008, 2007, 2006, 2005 and 2004, respectively.(2)
    
    Includes dividends of $0, $0, $75, $9,341, and $0 for years ended
September 30, 2008, 2007, 2006, 2005 and 2004, respectively.(3)
    
    The weighted average number of basic and dilutive shares of common stock
outstanding during the years ended September 30, 2008, 2007, 2006, 2005
and 2004 were approximately 165,480,000, 151,356,000, 127,174,000,
92,919,000 and 85,933,000, respectively.(4)
    
    Includes other comprehensive loss of $2 for year ended September 30, 2006.  30




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   OVERVIEW OF OUR FINANCIAL CONDITION, LIQUIDITY, AND RESULTS OF OPERATIONS
     CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
   31




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Inventories
 Valuation of Financial Instruments, Long-Lived Assets and Intangible Assets.
 Stock Based Compensation
 Deferred Income Taxes
  32




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RESULTS OF OPERATIONS
  Selected Business Segment Information
   For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Revenues:Nitrogen products manufacturing
    
    $
    210,293
    
    
    $
    131,816
    
    
    $
    44,398Alternative fuels
    
    
    678
    
    
    
    504
    
    
    
    119Total revenues
    
    $
    210,971
    
    
    $
    132,320
    
    
    $
    44,517Operating income (loss):Nitrogen products manufacturing
    
    $
    46,731
    
    
    $
    13,222
    
    
    $
    (1,320
    )Alternative fuels
    
    
    (103,207
    )
    
    
    (107,685
    )
    
    
    (38,099
    )Total operating loss
    
    $
    (56,476
    )
    
    $
    (94,463
    )
    
    $
    (39,419
    )Net income (loss) applicable to common stockholders:Nitrogen products manufacturing
    
    $
    44,952
    
    
    $
    11,869
    
    
    $
    (1,482
    )Alternative fuels
    
    
    (107,930
    )
    
    
    (106,736
    )
    
    
    (38,430
    )Cash dividends paid to preferred stockholders
    
    
    
    
    
    
    
    
    
    
    (75
    )Net income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    225
    
    
    
    1,265Gain on sale of discontinued operations, net of tax
    
    
    91
    
    
    
    2,925
    
    
    
    Total net loss applicable to common stockholders
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,722
    )
  33




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Comparison of Changes Between Periods
  Years Ended September 30,2008
    
    
    2007
    
    
    2006Net Sales by CategoryNitrogen products manufacturing
    
    
    99.7
    %
    
    
    99.6
    %
    
    
    99.7
    %Technical services
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    Rental income
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.3
    %Total net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross ProfitNitrogen products manufacturing
    
    
    23.8
    %
    
    
    12.1
    %
    
    
    0.7
    %Technical services
    
    
    (80.2
    )%
    
    
    (72.7
    )%
    
    
    Rental income
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Total gross profit percentage
    
    
    24.0
    %
    
    
    11.9
    %
    
    
    1.0
    %Income Statement Components
as a Percentage of Consolidated Net Sales from Continuing OperationsOperating ExpensesSelling, general and administrative expense
    
    
    15.8
    %
    
    
    21.2
    %
    
    
    61.2
    %Depreciation and amortization
    
    
    0.6
    %
    
    
    0.6
    %
    
    
    1.2
    %Research and development
    
    
    30.6
    %
    
    
    32.6
    %
    
    
    27.1
    %Loss on impairment
    
    
    4.5
    %
    
    
    28.9
    %
    
    
    Recovery of payment to vendor
    
    
    (0.7
    )%
    
    
    
    
    
    
    Total operating expenses
    
    
    50.8
    %
    
    
    83.3
    %
    
    
    89.5
    %Loss from Operations
    
    
    (26.8
    )%
    
    
    (71.4
    )%
    
    
    (88.5
    )%Other Income (Expenses)Interest and dividend income
    
    
    0.9
    %
    
    
    2.1
    %
    
    
    4.6
    %Interest expense
    
    
    (2.6
    )%
    
    
    (1.8
    )%
    
    
    (5.4
    )%Loss on investments
    
    
    (1.4
    )%
    
    
    
    
    
    
    (0.7
    )%Gain (loss) on disposal of fixed assets
    
    
    
    
    
    
    (0.6
    )%
    
    
    0.2
    %Other income
    
    
    0.1
    %
    
    
    
    %
    
    
    0.2
    %Total other income (expense)
    
    
    (3.0
    )%
    
    
    (0.3
    )%
    
    
    (1.1
    )%Net Loss from Continuing Operations before Taxes
    
    
    (29.8
    )%
    
    
    (71.7
    )%
    
    
    (89.7
    )%Income tax expense
    
    
    
    
    
    
    
    
    
    
    Net Loss from Continuing Operations
    
    
    (29.8
    )%
    
    
    (71.7
    )%
    
    
    (89.7
    )%Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    (0.1
    )%Loss Applicable to Common Stock
    
    
    (29.8
    )%
    
    
    (71.7
    )%
    
    
    (89.8
    )%
  34




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##### Table of Contents



FISCAL YEAR 2008 COMPARED TO FISCAL YEAR 2007
 Continuing Operations:
 Revenues
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Revenues:Nitrogen products manufacturing
    
    $
    210,293
    
    
    $
    131,816Total product revenues
    
    $
    210,293
    
    
    $
    131,816Technical services
    
    $
    547
    
    
    $
    382Rental income
    
    
    131
    
    
    
    122Total services revenues
    
    $
    678
    
    
    $
    504Total revenues
    
    $
    210,971
    
    
    $
    132,320
 Nitrogen products manufacturing.
  Technical Services.
 Rental Income.
 Cost of Sales
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Cost of sales:Nitrogen products manufacturing excluding inventory write down
    
    $
    151,667
    
    
    $
    115,262Write down of inventory to market
    
    
    8,650
    
    
    
    644Total nitrogen products manufacturing
    
    $
    160,317
    
    
    $
    115,906Technical services
    
    
    108
    
    
    
    661Total cost of sales
    
    $
    160,425
    
    
    $
    116,567
 Nitrogen Products Manufacturing.
  35




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##### Table of Contents



Technical Services.
 Gross Profit
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Gross profit (loss):Nitrogen products manufacturing
    
    $
    49,976
    
    
    $
    15,909Technical services
    
    
    439
    
    
    
    (278
    )Rental income
    
    
    131
    
    
    
    122Total gross profit
    
    $
    50,546
    
    
    $
    15,753
  Nitrogen Products Manufacturing.
 Technical Services.
 Operating Expenses
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Operating expenses:Selling, general and administrative
    
    $
    33,352
    
    
    $
    28,093Depreciation and amortization
    
    
    1,184
    
    
    
    799Research and development
    
    
    64,477
    
    
    
    43,127Loss on impairment
    
    
    9,482
    
    
    
    38,197Recovery of payment to vendor
    
    
    (1,473
    )
    
    
    Total operating expenses
    
    $
    107,022
    
    
    $
    110,216
   36




---



##### Table of Contents



Selling, General and Administrative Expenses.
 
    
    Salaries and benefits increased by $3,904,000. The increase was a result of hiring new
employees primarily related to the construction and operation of the PDU and operations at
REMC.
 
    
    Professional fees including legal services and accounting fees for audit and tax services
increased by $957,000. Significant components of the increase included preparation of tax
returns, analysis and guidance for disclosures under FIN 48  Accounting for Uncertainty in
Income Taxes, legal fees for development of the Natchez Project, and costs for continued
development of the Companys intellectual property portfolio.
 
    
    During fiscal 2008, we charged $571,000 to bad debt expense as a result of uncertainties
on the collectibility of billings under a technical services agreement.
 
    
    Consulting costs increased by $481,000 due primarily to non-cash expenses associated with
changes in terms to previously granted warrants. Refer to Note 15 to the Consolidated
Financial Statements.
 
    
    Non-cash marketing expenses increased by $380,000 due to expenses associated with
equity-based compensation to a vendor that provided marketing services. For more
information, refer to Note 14 to the Consolidated Financial Statements.
 
    
    The stock based compensation expense under SFAS 123(R) was $4,802,000 for the fiscal year
ended September 30, 2008 and $4,464,000 for the fiscal year ended September 30, 2007, an
increase of $338,000. The increase in the fiscal year ended September 30, 2008 was due to an
increase in the expense associated with restricted stock units granted to certain executives
during fiscal 2008 partially offset by reduced expenses associated with stock options. Refer
to Note 15 to the Consolidated Financial Statements.
 
    
    Project development expenses increased by $204,000 primarily due to increased activity in
the current year of scoping and feasibility studies for certain projects.
 
    
    Travel costs increased by $113,000 consistent with the Companys growth and the
geographic location of its potential commercial facilities.
 
    
    Expenses associated with our public company compliance requirements decreased by $116,000
due to reductions in the use of external resources previously utilized for compliance.
 
    
    Insurance expenses decreased by $267,000 during the fiscal year ended September 30, 2008
compared to the same period in 2007 primarily as a result of premium reductions for our
general liability policy and a refund of previously paid premiums upon policy audits which
were partially offset by additional builders risk coverage for the PDU related to the
ongoing construction efforts.
 
    
    Recruitment expenses decreased by $315,000 as a result of a reduction in corporate hiring
costs in fiscal 2008 partially offset by increased recruitment and relocation costs incurred
at REMC.
 
    
    Information technology expense decreased by $874,000 as the Company completed efforts
that enhanced its data and communication infrastructure.
   37




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##### Table of Contents



Depreciation and Amortization.
 
    
    Depreciation expense included in cost of sales from our nitrogen products manufacturing
segment in fiscal 2008 was $7,621,000 as compared to $6,723,000 in fiscal 2007,
respectively. The increase was caused by, and was consistent with, the increase in cost of
sales and the increase in depreciable assets.
 
    
    Depreciation expense within operating expenses was $1,184,000 in fiscal 2008 and $799,000
in fiscal 2007, respectively, and the increase was mostly attributable to the increase in
depreciable fixed assets which were primarily buildings, along with lab, computer and office
equipment in our alternative fuels segment.
 
    
    The total depreciation and amortization expense included in the statement of operations
was $8,805,000 in fiscal 2008, an increase from the fiscal 2007 results of 7,522,000.
 Research and Development.
 Loss on Impairment and Recovery of Payment to Vendor
 Income (Loss) from Operations
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Income (loss) from operations:Nitrogen products manufacturing
    
    $
    46,731
    
    
    $
    13,222Technical services
    
    
    (103,338
    )
    
    
    (107,807
    )Rental income
    
    
    131
    
    
    
    122Total loss from operations
    
    $
    (56,476
    )
    
    $
    (94,463
    )
  Nitrogen Products Manufacturing.
 Technical Services.
  38




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##### Table of Contents



Other Income (Expense)
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Other income (expense):Interest and dividend income
    
    $
    1,849
    
    
    $
    2,800Interest expense
    
    
    (5,442
    )
    
    
    (2,430
    )Loss on investments
    
    
    (3,011
    )
    
    
    Loss on disposal of fixed assets
    
    
    (5
    )
    
    
    (826
    )Other income
    
    
    120
    
    
    
    52Total other expense
    
    $
    (6,489
    )
    
    $
    (404
    )
 Interest and Dividend Income.
 Interest Expense.
 Loss on Investments
 Loss on Disposal of Fixed Assets.
 Net Income (Loss) from Continuing Operations
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Net income (loss) from continuing operations:Nitrogen products manufacturing
    
    $
    44,952
    
    
    $
    11,869Technical services
    
    
    (108,048
    )
    
    
    (106,858
    )Rental income
    
    
    131
    
    
    
    122Net loss from continuing operations before taxes
    
    $
    (62,965
    )
    
    $
    (94,867
    )Income tax expense
    
    
    (13
    )
    
    
    Total net loss from continuing operations
    
    $
    (62,978
    )
    
    $
    (94,867
    )
 Nitrogen Products Manufacturing.
 Technical Services.
 Total Net Loss from Continuing Operations.
  39




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##### Table of Contents



Discontinued Operations:
 Revenues and Net Income from Discontinued Operations
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)(Net of tax)Revenues
    
    $
    
    
    
    $
    1,179Cost of sales
    
    
    
    
    
    
    762Gross profit
    
    $
    
    
    
    $
    417Operating expenses
    
    
    
    
    
    
    192Net income from discontinued operations
    
    $
    
    
    
    $
    225Gain on sale of discontinued operations
    
    
    91
    
    
    
    2,925$
    91
    
    
    $
    3,150
  Gain on Sale of Discontinued Operations
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)(Net of tax)Gain on sale of PML
    
    $
    
    
    
    $
    2,721Earn-out on sale of REN
    
    
    91
    
    
    
    129Reversal of accrued liability for OKON
    
    
    
    
    
    
    75Total gain on sale of discontinued operations
    
    $
    91
    
    
    $
    2,925
 Gain on sale of discontinued operations.
 Sales price
    
    $
    5,398Less transaction costs
    
    
    (49
    )Net sales price to Rentech, after transaction costs
    
    $
    5,349Book value of Rentechs ownership in PML
    
    
    2,628Rentechs gain on sale of PML
    
    $
    2,721
 Earn-out on Sale of REN.
 Total Gain on Sale of Discontinued Operations.
  40




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##### Table of Contents



Net Loss Applicable to Common Stockholders
 For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Net loss
    
    $
    (62,887
    )
    
    $
    (91,717
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    Net loss applicable to common stockholders
    
    $
    (62,887
    )
    
    $
    (91,717
    )
   41




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##### Table of Contents



FISCAL YEAR 2007 COMPARED TO FISCAL YEAR 2006
 Continuing Operations:
 Revenues
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Revenues:Nitrogen products manufacturing
    
    $
    131,816
    
    
    $
    44,398Total product revenues
    
    $
    131,816
    
    
    $
    44,398Technical services
    
    $
    382
    
    
    $
    Rental income
    
    
    122
    
    
    
    119Total services revenues
    
    $
    504
    
    
    $
    119Total revenues
    
    $
    132,320
    
    
    $
    44,517
 Nitrogen products manufacturing.
  Technical Services.
 Rental Income.
 Cost of Sales
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Cost of sales:Nitrogen products manufacturing excluding inventory write down
    
    $
    115,262
    
    
    $
    44,077Write down of inventory to market
    
    
    644
    
    
    
    Total nitrogen products manufacturing
    
    $
    115,906
    
    
    $
    44,0777Technical services
    
    
    661
    
    
    
    Total cost of sales
    
    $
    116,567
    
    
    $
    44,077
 Nitrogen Products Manufacturing.
  42




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##### Table of Contents



Technical Services.
 Gross Profit
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Gross profit (loss):Nitrogen products manufacturing
    
    $
    15,909
    
    
    $
    321Technical services
    
    
    (278
    )
    
    
    Rental income
    
    
    122
    
    
    
    119Total gross profit
    
    $
    15,753
    
    
    $
    440
  Nitrogen Products Manufacturing.
 Technical Services.
 Operating Expenses
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Operating expenses:Selling, general and administrative
    
    $
    28,093
    
    
    $
    27,273Depreciation and amortization
    
    
    799
    
    
    
    532Research and development
    
    
    43,127
    
    
    
    12,054Loss on impairment
    
    
    38,197
    
    
    
    Total operating expenses
    
    $
    110,216
    
    
    $
    39,859
   43




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##### Table of Contents



Selling, General and Administrative Expenses.
     
    
    Salaries and benefits increased by $2,010,000. This increase was a result of hiring new
employees in various professional capacities related to the PDU, the East Dubuque Plant
conversion project, and other project development activities, as well as corporate
management.
 
    
    Recruitment expenses increased by $1,147,000 as a result of hiring these additional
personnel.
 
    
    Travel costs increased by $318,000 consistent with the Companys growth and expanded
geographic presence.
 
    
    Consulting expenses increased by $651,000 as the Company augmented its resources with
expertise in various technical disciplines.
 
    
    Information technology expense increased by $2,157,000 as the Company enhanced its data
and communication infrastructure.
 
    
    Professional fees including legal services and accounting fees for audit and tax services
increased by $326,000.
 
    
    Rent expense increased by $251,000 due to additional space required by the increased
headcount.
 
    
    Insurance expenses increased by $331,000 for the twelve months ended September 30, 2007
compared to the same period in 2006 primarily as a result of acquiring REMC and constructing
the PDU.
 
    
    Expenses associated with complying with our public company requirements decreased by
$394,000 due to reductions in the use of external resources previously utilized for
compliance.
 
    
    Project development expenses unrelated to REMC increased by $192,000 primarily due to
activity associated with the Natchez.
   44




---



##### Table of Contents



Depreciation and Amortization.
 Research and Development.
 Loss on Impairment
 Income (Loss) from Operations
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Income (loss) from operations:Nitrogen products manufacturing
    
    $
    13,222
    
    
    $
    (1,320
    )Technical services
    
    
    (107,807
    )
    
    
    (38,218
    )Rental income
    
    
    122
    
    
    
    119Total loss from operations
    
    $
    (94,463
    )
    
    $
    (39,419
    )
  Nitrogen Products Manufacturing.
 Technical Services.
 Other Income (Expense)
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Other income (expense):Interest and dividend income
    
    $
    2,800
    
    
    $
    2,027Interest expense
    
    
    (2,430
    )
    
    
    (2,402
    )Loss on investment
    
    
    
    
    
    
    (305
    )(Loss) gain on disposal of fixed assets
    
    
    (826
    )
    
    
    100Other income
    
    
    52
    
    
    
    87Total other expense
    
    $
    (404
    )
    
    $
    (493
    )
  45




---



##### Table of Contents



Interest and Dividend Income.
 Interest Expense.
 Loss on Investment.
 (Loss) Gain on Disposal of Fixed Assets.
 Net Income (Loss) from Continuing Operations
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Net income (loss) from continuing operations:Nitrogen products manufacturing
    
    $
    11,869
    
    
    $
    (1,482
    )Technical services
    
    
    (106,858
    )
    
    
    (38,549
    )Rental income
    
    
    122
    
    
    
    119Net loss from continuing operations before taxes
    
    $
    (94,867
    )
    
    $
    (39,912
    )Income tax benefit/(expense)
    
    
    
    
    
    
    Total net loss from continuing operations
    
    $
    (94,867
    )
    
    $
    (39,912
    )
 Nitrogen Products Manufacturing.
 Technical Services.
 Total Net Loss from Continuing Operations.
  46




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##### Table of Contents



Discontinued Operations:
 Revenues and Net Income from Discontinued Operations
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)(Net of tax)Revenues
    
    $
    1,179
    
    
    $
    8,292Cost of sales
    
    
    762
    
    
    
    6,005Gross profit
    
    $
    417
    
    
    $
    2,287Operating expenses
    
    
    192
    
    
    
    1,022Net income from discontinued operations
    
    $
    225
    
    
    $
    1,265Gain on sale of discontinued operations
    
    
    2,925
    
    
    
    $
    3,150
    
    
    $
    1,265
   Gain on Sale of Discontinued Operations
 For
the Years Ended September 30,2007
    
    
    2006(Thousands)(Net of tax)Gain on sale of PML
    
    $
    2,721
    
    
    $
    Earn-out on sale of REN
    
    
    129
    
    
    
    Reversal of accrued liability for OKON
    
    
    75
    
    
    
    Total gain on sale of discontinued operations
    
    $
    2,925
    
    
    $
    
 Gain on sale of discontinued operations.
 Sales price
    
    $
    5,398Less transaction costs
    
    
    (49
    )Net sales price to Rentech, after transaction costs
    
    $
    5,349Book value of Rentechs ownership in PML
    
    
    2,628Rentechs gain on sale of PML
    
    $
    2,721
 Earn-out on Sale of REN.
  47




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##### Table of Contents



Total Gain on Sale of Discontinued Operations.
 Net Loss Applicable to Common Stockholders
 For the Years EndedSeptember 30,2007
    
    
    2006(Thousands)Net loss
    
    $
    (91,717
    )
    
    $
    (38,647
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    (75
    )Net loss applicable to common stockholders
    
    $
    (91,717
    )
    
    $
    (38,722
    )
   48




---



##### Table of Contents



INFLATION
  ANALYSIS OF CASH FLOWS
  For the Years EndedSeptember 30,2008
    
    
    2007(Thousands)Net Cash (Used in) Provided by:Operating activities
    
    $
    (8,144
    )
    
    $
    (15,681
    )Investing activities
    
    
    (16,883
    )
    
    
    (39,823
    )Financing activities
    
    
    55,057
    
    
    
    62,630Net Increase in Cash
    
    $
    30,030
    
    
    $
    7,126
 Cash Flows From Operating Activities
 Net Loss.
 Depreciation.
 Amortization.
 Impairment of Assets.
 Recovery of Payment to Vendor.
 Utilization of Spare Parts.
 Bad Debt Expense.
 Loss on Disposal of Fixed Assets.
 Non-Cash Interest Expense.
  49




---



##### Table of Contents



Non-Cash Marketing Expense.
 Loss on Investments.
 Write-down of Inventory to Market.
 Options and Warrants for Common Stock Issued for Services
 Restricted Stock Units and Performance Share Awards Issued for Services
 Gain on Sale of Subsidiaries.
 Changes in Operating Assets and Liabilities.
 Accounts Receivable.
 Other Receivables.
 Inventories.
 Prepaid Expenses and Other Current Assets.
 Accounts Payable.
  50




---



##### Table of Contents



Accrued Retirement Payable
 Deferred Revenue.
 Accrued Interest Expense.
 Accrued Liabilities, Accrued Payroll and Other.
 Net Cash (Used) in Operating Activities.
 Cash Flows From Investing Activities
 Available for Sale Securities, Held for Sale.
 Purchases of Property, Plant and Equipment.
 Purchases for Construction in Progress.
 Deposits and Other Assets.
 Proceeds from Sale of Subsidiary.
 Other Items, net.
  51




---



##### Table of Contents



Net Cash (Used) in Investing Activities.
 Cash Flows From Financing Activities
 Proceeds from Term Loan.
 Proceeds from Line of Credit on Available for Sale Securities.
 Proceeds from Issuance of Common Stock and Warrants and Payment of Offering Costs.
 Proceeds from Options and Warrants Exercised.
 Payment of Debt Issuance Costs.
 Payments on Notes Payable for Financed Insurance Premiums
 Proceeds from Advance for Equity Investment.
 Proceeds from Grants.
 Payment of Financial Advisory Fees.
 Payments on Line of Credit, Net.
 Net Cash Provided by Financing Activities.
 Increase in Cash and Cash Equivalents
   52




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
          53




---



##### Table of Contents



CONTRACTUAL OBLIGATIONS
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(Thousands)Continuing OperationsLong-term convertible debt (1)
    
    $
    57,500
    
    
    $
    
    
    
    $
    
    
    
    $
    57,500
    
    
    $
    Term loan debt (2)
    
    
    53,000
    
    
    
    
    
    
    
    53,000
    
    
    
    
    
    
    
    Mortgage debt
    
    
    952
    
    
    
    23
    
    
    
    50
    
    
    
    57
    
    
    
    822Interest payments on debt
    
    
    23,352
    
    
    
    8,740
    
    
    
    9,407
    
    
    
    4,713
    
    
    
    492Natural gas (3)
    
    
    34,505
    
    
    
    34,505
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (4)
    
    
    9,132
    
    
    
    9,132
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (5)
    
    
    1,161
    
    
    
    802
    
    
    
    355
    
    
    
    3
    
    
    
    1Total
    
    $
    179,602
    
    
    $
    53,202
    
    
    $
    62,812
    
    
    $
    62,273
    
    
    $
    1,315
 
 (1)
    
    On April 18, 2006, the Company closed a public offering that included
$50,000,000 principal amount of Convertible Senior Notes Due 2013. The
Notes bear interest at the rate of 4.00% per year on the principal
amount of the Notes, payable in cash semi-annually in arrears on April
15 and October 15 of each year, beginning October 15, 2006. Holders
may convert their Notes into shares of the Companys common stock (or
cash or a combination of cash and shares of common stock, if we so
elect) at an initial conversion rate of 249.2522 shares of the
Companys common stock per $1,000 principal amount of Notes (which
represents a conversion price of approximately $4.0120 per share of
common stock), under the circumstances described in the Notes. On
April 24, 2006, the Companys underwriters exercised their
over-allotment option and purchased an additional $7,500,000 of
convertible senior notes. Including the over-allotment, the Company
offered a total of $57,500,000 in convertible senior notes. On the
balance sheet these notes are shown net of deferred financing charges
related to the beneficial conversion feature for a total of
$56,929,000 and $56,804,000 on September 30, 2008 and 2006,
respectively.(2)
    
    On June 13, 2008 Rentech and its subsidiary REMC executed a
$53,000,000 amended and restated credit agreement (the Senior Credit
Agreement) by and among REMC as the borrower, Rentech as the
guarantor and Credit Suisse, Cayman Islands Branch (Credit Suisse),
as administrative agent, collateral agent and a lender. The Senior
Credit Agreement consists solely of term loans that mature on May 29,
2010, with an option to extend the maturity date to May 29, 2011. The
term loans bear interest at the election of REMC of either: (a)(i) the
greater of LIBOR or 3%, plus (a)(ii) 9.0%; or (b)(i) the greater of
4%, the prime rate, as determined by Credit Suisse, or 0.5% in excess
of the federal funds effective rate, plus (b)(ii) 8.0%. Interest
payments are generally made on a quarterly basis. Rentech and certain
of its subsidiaries, including REMC, are obligated to make mandatory
prepayments of indebtedness under the Senior Credit Agreement from the
net proceeds of, among other things, certain debt offerings. REMC will
be obligated, upon the notice of a Lender within 30 days of certain
changes in control events such as material changes in the equity
ownership of Rentech or any of our subsidiaries, to prepay such
Lenders outstanding principal balance in full plus a prepayment
penalty of 1%. In addition, REMC must prepay indebtedness under the
Senior Credit Agreement in amounts equal to any distributions it makes
to its shareholders. We have the option to prepay all or any portion
of the indebtedness under the Senior Credit Agreement. Other than for
prepayments as a result of a change of control described above, both
mandatory and voluntary prepayments are subject to a penalty of 2% to
4% of the amount being repaid, such fee depending upon the date of
such payment. The Senior Credit Agreement contains customary
representations and warranties, covenants and events of default. The
obligations under the Senior Credit Agreement are secured by
substantially all of our assets and the assets of most of our
subsidiaries, including a pledge of the equity interests in most of
our subsidiaries. In addition, REMC granted Credit Suisse a mortgage
in its real property to secure its obligations under the Senior Credit
Agreement and related loan documents.(3)
    
    As of September 30, 2008 we had entered into multiple natural gas
supply contracts for various delivery dates through March 31, 2009.
Subsequent to September 30, 2008, we entered into additional contracts
of $2.1 million with delivery dates through December 31, 2008. Refer
to Note 13 to the Consolidated Financial Statements for more
information.(4)
    
    The amount presented represents certain open purchases orders with our
vendors. Not all of our open purchase orders are purchase obligations,
since some of the orders are not enforceable or legally binding on the
Company until the goods are received or the services are provided.(5)
    
    We have leased office space under two non-cancelable operating leases,
one of which expires October 31, 2009, the other expires in June 2010.
The first lease has a renewal option for an additional five years. We
also lease an industrial site used for the storage and maintenance of
construction equipment under a non-cancelable operating lease which
expires September 2009. In addition we have entered into various other
operating leases, which expire through March 2012.  54




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##### Table of Contents



Amount of Commitment Expiration per PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterOther Commercial Commitments
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    

4-5 Years
    
    
    5 Years(Thousands)Employment agreements
    
    $
    441
    
    
    $
    441
    
    
    $
    
    
    
    $
    
    
    
    $
    $
    441
    
    
    $
    441
    
    
    $
    
    
    
    $
    
    
    
    $
    
     OFF-BALANCE SHEET ARRANGEMENTS
  Recent Accounting Pronouncements From Financial Statement Disclosures
   55




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   Commodity Price Risk.
   56




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Quarterly Results.
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Thousands, Except Per Share Data)For the 2008 Fiscal YearRevenues
    
    $
    47,461
    
    
    $
    28,533
    
    
    $
    60,374
    
    
    $
    74,603Gross profit
    
    $
    10,278
    
    
    $
    7,917
    
    
    $
    17,567
    
    
    $
    14,784Loss from operations
    
    $
    (23,427
    )
    
    $
    (22,480
    )
    
    $
    (6,977
    )
    
    $
    (3,593
    )Net loss from continuing operations
    
    $
    (23,436
    )
    
    $
    (22,812
    )
    
    $
    (7,795
    )
    
    $
    (8,935
    )Net income from discontinued operations, net of tax (1)
    
    $
    23
    
    
    $
    16
    
    
    $
    22
    
    
    $
    30Net loss
    
    $
    (23,414
    )
    
    $
    (22,796
    )
    
    $
    (7,772
    )
    
    $
    (8,905
    )Dividends
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loss applicable to common stock
    
    $
    (23,414
    )
    
    $
    (22,796
    )
    
    $
    (7,772
    )
    
    $
    (8,905
    )Loss from continuing operations per share
    
    $
    (.142
    )
    
    $
    (.138
    )
    
    $
    (.047
    )
    
    $
    (.054
    )Loss from discontinued operations per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    .001Loss per common share
    
    $
    (.142
    )
    
    $
    (.138
    )
    
    $
    (.047
    )
    
    $
    (.053
    )For the 2007 Fiscal YearRevenues
    
    $
    35,430
    
    
    $
    16,905
    
    
    $
    50,399
    
    
    $
    29,586Gross profit
    
    $
    3,747
    
    
    $
    820
    
    
    $
    9,231
    
    
    $
    1,955Loss from operations
    
    $
    (11,483
    )
    
    $
    (17,296
    )
    
    $
    (6,941
    )
    
    $
    (58,743
    )Net loss from continuing operations
    
    $
    (11,639
    )
    
    $
    (17,178
    )
    
    $
    (6,989
    )
    
    $
    (59,061
    )Net income from discontinued operations, net of tax (1)
    
    $
    225
    
    
    $
    
    
    
    $
    
    
    
    $
    Net loss
    
    $
    (8,692
    )
    
    $
    (17,178
    )
    
    $
    (6,898
    )
    
    $
    (58,949
    )Dividends
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loss applicable to common Stock
    
    $
    (8,692
    )
    
    $
    (17,178
    )
    
    $
    (6,898
    )
    
    $
    (58,949
    )Loss from continuing operations per share
    
    $
    (.082
    )
    
    $
    (.121
    )
    
    $
    (.044
    )
    
    $
    (.361
    )Loss from discontinued operations per share
    
    $
    .021
    
    
    $
    
    
    
    $
    
    
    
    $
    .001Loss per common share
    
    $
    (.061
    )
    
    $
    (.121
    )
    
    $
    (.044
    )
    
    $
    (.360
    )
     57




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##### Table of Contents



ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control Over Financial Reporting. Internal
Control  Integrated Framework
    
    
    our preparation of purchase orders for equipment and services ordered for the PDU
required us to rely on methods other than the Oracle system to ensure that certain
payables and accruals were accurately stated, and did not allow for evidence of
approval of certain purchases in accordance with our internal policies;
    
    in some cases, we did not properly prepare purchase orders for goods or services for
the PDU, or appropriately enter such purchase orders into the Oracle system;
    
    there were some instances of lack of approval of vendor timesheets during the
construction of the PDU; and
    
    untimely responses to requests for comparison of actual expenses to budgeted
expenses.
  58




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##### Table of Contents



Changes in Internal Control over Financial Reporting.
  
    
    We have already implemented procedures ensuring approval of vendor timesheets,
improved processes to link work performed at the PDU to purchase orders and added
resources to conduct budget analyses.
    
    We are also implementing additional policies and procedures requiring the
preparation of purchase orders in connection with the procurement of goods and services
for the Company, and the timely response to requests for variance analysis from budget
and other information. Among these policies and procedures, we will inform vendors that
they are not permitted to render goods or services without an authorized purchase order
from us, and we will not honor any invoice for which an authorized purchase order has
not been provided.
    
    In addition, we will provide our employees with additional training with respect to
using our new Oracle system.
 
 ITEM 9B. OTHER INFORMATION
   59




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Code of Ethics
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial Statements. See Index to Financial Statements and Schedules at page F-1.(b)
    
    Exhibits Required by Item 601 of Regulation S-K. See Index to Exhibits.(c)
    
    Financial Statement Schedules. See Index to Financial Statements and Schedules at
page F-1.
  60




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SIGNATURES
  Rentech, Inc./s/  D. Hunt RamsbottomD. Hunt Ramsbottom,Chief Executive Officer and President   /s/ D. Hunt RamsbottomD. Hunt Ramsbottom,Chief Executive Officer, President and Director(principal executive officer)Date: December 15, 2008/s/ Dan J. CohrsDan J. Cohrs,Executive Vice President and Chief Financial Officer(principal financial officer and
principal accounting officer)Date: December 15, 2008/s/ Dennis L. YakobsonDennis L. Yakobson,Chairman and DirectorDate: December 15, 2008/s/ Michael S. BurkeMichael S. Burke,DirectorDate: December 15, 2008/s/ Michael F. RayMichael F. Ray,DirectorDate: December 15, 2008/s/ Edward M. SternEdward M. Stern,DirectorDate: December 15, 2008/s/ Ronald M. SegaRonald M. Sega,DirectorDate: December 15, 2008/s/ Halbert S. WashburnHalbert S. Washburn,DirectorDate: December 15, 2008
  61




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##### Table of Contents



RENTECH, INC. AND SUBSIDIARIES
Table of Contents
 PageReports of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Financial Statements:Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Operations
    
    
    F-5Consolidated Statements of Stockholders (Deficit) Equity and Comprehensive Loss
    
    
    F-6Consolidated Statements of Cash Flows
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
  62




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
 Ehrhardt Keefe Steiner & Hottman
 
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated
Framework
     F-2




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##### Table of Contents



Internal Control  Integrated Framework
  Ehrhardt Keefe Steiner & Hottman
 
  F-3




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##### Table of Contents



RENTECH, INC.
 
 Consolidated Balance Sheets
 (Stated in Thousands, Except Per Share Data)
 As of September 30,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    63,722
    
    
    $
    33,692Restricted cash, short-term
    
    
    152
    
    
    
    104Available for sale securities (Note 5)
    
    
    
    
    
    
    22,259Accounts receivable, net of $692 (2008) and $126 (2007) allowance for doubtful accounts (Notes 6 and 18)
    
    
    70,614
    
    
    
    36,213Inventories (Note 7)
    
    
    29,491
    
    
    
    13,611Prepaid expenses and other current assets
    
    
    2,399
    
    
    
    4,197Other receivables, net
    
    
    43
    
    
    
    2,508Total current assets
    
    
    166,421
    
    
    
    112,584Property, plant and equipment, net of accumulated depreciation of $20,760 (2008) and $12,227 (2007) (Note 8)
    
    
    56,312
    
    
    
    59,002Construction in progress(Note 8)
    
    
    19,548
    
    
    
    4,192Other assetsOther assets and deposits (Note 11)
    
    
    8,309
    
    
    
    6,923Available for sale securities, non-current (Note 5)
    
    
    6,000
    
    
    
    Licensed technology and technology rights, net of accumulated amortization of $3,719 (2008) and $3,509
(2007) (Note 2)
    
    
    
    
    
    
    210Restricted cash, long-term
    
    
    50
    
    
    
    152Total other assets
    
    
    14,359
    
    
    
    7,285Total assets
    
    $
    256,640
    
    
    $
    183,063LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilitiesAccounts payable
    
    $
    8,256
    
    
    $
    11,299Accrued payroll and benefits
    
    
    5,305
    
    
    
    4,478Accrued liabilities
    
    
    10,057
    
    
    
    10,476Line of credit on available for sale securities (Notes 5 and 12)
    
    
    4,758
    
    
    
    Deferred revenue (Note 2)
    
    
    120,709
    
    
    
    46,982Accrued interest
    
    
    1,834
    
    
    
    1,061Accrued retirement payable (Note 13)
    
    
    
    
    
    
    125Convertible notes payable to related parties (Note 19)
    
    
    
    
    
    
    181Current portion of long-term debt (Note 10)
    
    
    23
    
    
    
    21Total current liabilities
    
    
    150,942
    
    
    
    74,623Long-term liabilitiesLong-term debt, net of current portion (Note 10)
    
    
    930
    
    
    
    951Term loan, long-term (Note 10)
    
    
    53,000
    
    
    
    Long-term convertible debt to stockholders (Note 11)
    
    
    56,929
    
    
    
    56,804Advance for equity investment (Note 13)
    
    
    7,892
    
    
    
    7,892Other long-term liabilities
    
    
    36
    
    
    
    81Total long-term liabilities
    
    
    118,787
    
    
    
    65,728Total liabilities
    
    
    269,729
    
    
    
    140,351Commitments and contingencies(Notes 2, 12 and 13)Stockholders (deficit) equity(Note 14)Preferred stock  $10 par value; 1,000 shares authorized; 90 series A convertible preferred shares
authorized and issued; no shares outstanding and $0 liquidation preference (2008 and 2007)
    
    
    
    
    
    
    Series C participating cumulative preferred stock  $10 par value; 500 shares authorized; no shares
issued and outstanding
    
    
    
    
    
    
    Common stock  $.01 par value; 250,000 shares authorized; 166,688 (2008) and 163,805 (2007) shares
issued and outstanding
    
    
    1,667
    
    
    
    1,638Additional paid-in capital
    
    
    241,110
    
    
    
    233,447Note receivable on sale of common stock
    
    
    (606
    )
    
    
    Accumulated deficit
    
    
    (255,260
    )
    
    
    (192,373
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    Total stockholders (deficit) equity
    
    
    (13,089
    )
    
    
    42,712Total liabilities and stockholders (deficit) equity
    
    $
    256,640
    
    
    $
    183,063
   F-4




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##### Table of Contents



RENTECH, INC.
 
 Consolidated Statements of Operations
 (Stated in Thousands, Except Per Share Data)
 For the Years Ended September 30,2008
    
    
    2007
    
    
    2006Revenues(Note 17)Product sales
    
    $
    210,293
    
    
    $
    131,816
    
    
    $
    44,398Service revenues
    
    
    678
    
    
    
    504
    
    
    
    119Total revenues
    
    
    210,971
    
    
    
    132,320
    
    
    
    44,517Cost of salesProduct sales
    
    
    151,667
    
    
    
    115,262
    
    
    
    44,077Write down of inventory to market (Note 7)
    
    
    8,650
    
    
    
    644
    
    
    
    Service revenues
    
    
    108
    
    
    
    661
    
    
    
    Total cost of sales
    
    
    160,425
    
    
    
    116,567
    
    
    
    44,077Gross profit
    
    
    50,546
    
    
    
    15,753
    
    
    
    440Operating expensesSelling, general and administrative expense
    
    
    33,352
    
    
    
    28,093
    
    
    
    27,273Depreciation and amortization
    
    
    1,184
    
    
    
    799
    
    
    
    532Research and development
    
    
    64,477
    
    
    
    43,127
    
    
    
    12,054Loss on impairment (Note 8)
    
    
    9,482
    
    
    
    38,197
    
    
    
    Recovery of payment to vendor (Note 8)
    
    
    (1,473
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    107,022
    
    
    
    110,216
    
    
    
    39,859Operating loss
    
    
    (56,476
    )
    
    
    (94,463
    )
    
    
    (39,419
    )Other income (expenses)Interest and dividend income
    
    
    1,849
    
    
    
    2,800
    
    
    
    2,027Interest expense
    
    
    (5,442
    )
    
    
    (2,430
    )
    
    
    (2,402
    )Loss on investments (Notes 5 and 9)
    
    
    (3,011
    )
    
    
    
    
    
    
    (305
    )(Loss)/gain on disposal of assets
    
    
    (5
    )
    
    
    (826
    )
    
    
    100Other income
    
    
    120
    
    
    
    52
    
    
    
    87Total other expense
    
    
    (6,489
    )
    
    
    (404
    )
    
    
    (493
    )Net loss from continuing operations before income taxes
    
    
    (62,965
    )
    
    
    (94,867
    )
    
    
    (39,912
    )Income tax expense (Note 16)
    
    
    (13
    )
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (62,978
    )
    
    
    (94,867
    )
    
    
    (39,912
    )Discontinued operations (Note 4):Net income from discontinued operations net of tax of $11 (2007) and $49 (2006)
    
    
    
    
    
    
    225
    
    
    
    1,265Gain on sale of discontinued operations, net of tax of $0 (2008, 2007 and 2006)
    
    
    91
    
    
    
    2,925
    
    
    
    91
    
    
    
    3,150
    
    
    
    1,265Net loss
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,647
    )Cash dividends paid to preferred stockholders
    
    
    
    
    
    
    
    
    
    
    (75
    )Net loss applicable to common stockholders
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,722
    )Basic and diluted (loss) income per common share:Continuing operations, including dividends
    
    $
    (.381
    )
    
    $
    (.627
    )
    
    $
    (.314
    )Discontinued operations
    
    
    .001
    
    
    
    .021
    
    
    
    .010Basic and diluted loss per common share
    
    $
    (.380
    )
    
    $
    (.606
    )
    
    $
    (.304
    )Basic and diluted weighted-average number of common shares outstanding
    
    
    165,480
    
    
    
    151,356
    
    
    
    127,174
   F-5




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##### Table of Contents



RENTECH, INC.
 
 Consolidated Statements of Stockholders (Deficit) Equity and Comprehensive Loss
 (Stated in Thousands)
 AccumulatedConvertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalSeries A
    
    
    Series C
    
    
    Common Stock
    
    
    Paid-in
    
    
    Notes
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Receivable
    
    
    Deficit
    
    
    Income (Loss)
    
    
    (Deficit) EquityBalance, September 30, 2005
    
    
    59
    
    
    $
    590
    
    
    
    
    
    
    
    
    
    
    
    110,121
    
    
    $
    1,101
    
    
    $
    94,589
    
    
    $
    
    
    
    $
    (62,009
    )
    
    $
    
    
    
    $
    34,271Common stock issued for
cash net of offering costs
of $4,372 (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,400
    
    
    
    184
    
    
    
    58,004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,188Common stock issued for
cash on options and
warrants exercised
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,394
    
    
    
    54
    
    
    
    6,967
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,021Common stock issued for
conversion of convertible
notes (Notes 11 and 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,157
    
    
    
    32
    
    
    
    2,944
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,976Beneficial conversion
feature of convertible
notes (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875Common stock issued for
options exercised using
deferred compensation and
retirement payable
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    426
    
    
    
    4
    
    
    
    389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393Stock based compensation
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,015Restricted stock units
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,570Restricted stock units
settled in shares
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock converted
into common stock
(Note 14)
    
    
    (59
    )
    
    
    (590
    )
    
    
    
    
    
    
    
    
    
    
    4,259
    
    
    
    43
    
    
    
    547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends paid on
preferred stock (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,647
    )
    
    
    
    
    
    
    (38,647
    )Other comprehensive income:Unrealized loss on
marketable securities, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Balance, September 30, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    141,775
    
    
    $
    1,418
    
    
    $
    175,825
    
    
    $
    
    
    
    $
    (100,656
    )
    
    $
    (2
    )
    
    $
    76,585Common stock issued for
cash net of offering costs
of $3,202 (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,092
    
    
    
    201
    
    
    
    51,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,649Common stock issued for
cash on options and
warrants exercised
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526
    
    
    
    15
    
    
    
    1,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,907Stock based compensation
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834Restricted stock units
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,132Restricted stock units
surrendered for
withholding taxes payable
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (680
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (680
    )Restricted stock units
settled in shares
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,717
    )
    
    
    
    
    
    
    (91,717
    )Other comprehensive income:Unrealized gain on
marketable securities, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Balance, September 30, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    163,805
    
    
    $
    1,638
    
    
    $
    233,447
    
    
    $
    
    
    
    $
    (192,373
    )
    
    $
    
    
    
    $
    42,712Common stock issued for
cash and notes receivable
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    4
    
    
    
    604
    
    
    
    (606
    )
    
    
    
    
    
    
    
    
    
    
    2Common stock issued for
cash on options and
warrants exercised
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,377
    
    
    
    14
    
    
    
    1,597
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,611Common stock issued for
conversion of note payable
(Note 14 and 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    3
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189Stock based compensation
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869Restricted stock units
issued for services
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,871Restricted stock units
surrendered for
withholding taxes payable
(Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (456
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (456
    )Restricted stock units
settled in shares
(Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    758
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,887
    )
    
    
    
    
    
    
    (62,887
    )Balance, September 30, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    166,688
    
    
    $
    1,667
    
    
    $
    241,110
    
    
    $
    (606
    )
    
    $
    (255,260
    )
    
    $
    
    
    
    $
    (13,089
    )
   F-6




---



##### Table of Contents



RENTECH, INC.
 
 Consolidated Statements of Cash Flows
 (Stated in Thousands, Except Per Share Data)
 For the Years Ended September 30,2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet loss
    
    $
    (62,887
    )
    
    $
    (91,717
    )
    
    $
    (38,647
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation
    
    
    9,364
    
    
    
    8,051
    
    
    
    3,711Amortization
    
    
    210
    
    
    
    258
    
    
    
    258Impairment of assets (Note 8)
    
    
    9,482
    
    
    
    38,197
    
    
    
    Recovery of payment to vendor
    
    
    (1,473
    )
    
    
    
    
    
    
    Utilization of spare parts
    
    
    1,000
    
    
    
    1,120
    
    
    
    Bad debt expense
    
    
    571
    
    
    
    
    
    
    
    Loss on disposal of fixed assets
    
    
    5
    
    
    
    826
    
    
    
    84Non-cash interest expense
    
    
    1,348
    
    
    
    748
    
    
    
    937Non-cash marketing expense
    
    
    380
    
    
    
    
    
    
    
    Loss on investments (Notes 5 and 9)
    
    
    3,011
    
    
    
    
    
    
    
    305Write-off of acquisition costs, debt issue costs and offering costs
    
    
    
    
    
    
    
    
    
    
    355Write-down of inventory to market
    
    
    8,650
    
    
    
    644
    
    
    
    Options for common stock issued for services
    
    
    1,055
    
    
    
    1,834
    
    
    
    1,610Warrants for common stock issued for services
    
    
    814
    
    
    
    
    
    
    
    8,405Restricted stock units issued for services
    
    
    3,871
    
    
    
    3,132
    
    
    
    1,570Gain on sale of subsidiaries
    
    
    (91
    )
    
    
    (2,793
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (34,972
    )
    
    
    (30,817
    )
    
    
    (5,492
    )Other receivables and receivable from related party
    
    
    2,465
    
    
    
    (54
    )
    
    
    254Inventories
    
    
    (24,530
    )
    
    
    (1,839
    )
    
    
    789Prepaid expenses and other assets
    
    
    3,685
    
    
    
    (1,440
    )
    
    
    (700
    )Accounts payable
    
    
    (4,016
    )
    
    
    6,581
    
    
    
    3,726Accrued retirement payable
    
    
    (125
    )
    
    
    (531
    )
    
    
    (906
    )Deferred revenue
    
    
    73,727
    
    
    
    42,541
    
    
    
    4,857Accrued interest expense
    
    
    773
    
    
    
    8
    
    
    
    1,062Accrued liabilities, accrued payroll and other
    
    
    (461
    )
    
    
    9,570
    
    
    
    2,210Net cash used in operating activities
    
    
    (8,144
    )
    
    
    (15,681
    )
    
    
    (15,612
    )Cash flows from investing activitiesPurchases of available for sale securities
    
    
    (513
    )
    
    
    (36,486
    )
    
    
    (30,285
    )Proceeds from sales of available for sale securities
    
    
    13,762
    
    
    
    44,512
    
    
    
    Purchases of property, plant and equipment
    
    
    (7,684
    )
    
    
    (11,487
    )
    
    
    (1,271
    )Purchases for construction in progress
    
    
    (23,305
    )
    
    
    (39,568
    )
    
    
    (3,927
    )Deposits and other assets
    
    
    707
    
    
    
    (2,374
    )
    
    
    Proceeds from sale of subsidiary
    
    
    
    
    
    
    5,398
    
    
    
    Acquisition of REMC (Note 3)
    
    
    
    
    
    
    
    
    
    
    (70,773
    )Acquisition of RETC, net of cash received (Note 3)
    
    
    
    
    
    
    
    
    
    
    (1,345
    )Other items
    
    
    150
    
    
    
    182
    
    
    
    75Net cash used in investing activities
    
    
    (16,883
    )
    
    
    (39,823
    )
    
    
    (107,526
    )
   F-7




---



##### Table of Contents



RENTECH, INC.
Consolidated Statements of Cash Flows  Continued  (Stated in Thousands, Except Per Share Data)
 For the Years Ended September 30,2008
    
    
    2007
    
    
    2006Cash flows from financing activitiesProceeds from term loan, net
    
    
    49,903
    
    
    
    
    
    
    
    Proceeds from line of credit on available for sale securities, net
    
    
    4,758
    
    
    
    
    
    
    
    Proceeds from issuance of common stock and warrants
    
    
    2
    
    
    
    54,851
    
    
    
    62,560Payments of offering costs
    
    
    
    
    
    
    (3,202
    )
    
    
    (4,372
    )Proceeds from options and warrants exercised
    
    
    1,611
    
    
    
    1,907
    
    
    
    7,021Payment of debt issuance costs
    
    
    (453
    )
    
    
    
    
    
    
    (4,371
    )Payments on notes payable for financed insurance premiums
    
    
    (745
    )
    
    
    
    
    
    
    Proceeds from advance for equity investment, net
    
    
    
    
    
    
    7,892
    
    
    
    Proceeds from grant and interest earned on grant proceeds
    
    
    
    
    
    
    2,265
    
    
    
    Payments of financial advisory fees
    
    
    
    
    
    
    (1,044
    )
    
    
    (1,750
    )Receipt of stock subscription receivable
    
    
    
    
    
    
    
    
    
    
    12,255Proceeds from issuance of convertible debt
    
    
    
    
    
    
    
    
    
    
    57,500Payments on line of credit, net
    
    
    
    
    
    
    
    
    
    
    (499
    )Payment of dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    (75
    )Payments on long-term debt and notes payable
    
    
    (19
    )
    
    
    (39
    )
    
    
    (3,286
    )Net cash provided by financing activities
    
    
    55,057
    
    
    
    62,630
    
    
    
    124,983Increase in cash
    
    
    30,030
    
    
    
    7,126
    
    
    
    1,845Cash and cash equivalents, beginning of year
    
    
    33,692
    
    
    
    26,566
    
    
    
    24,721Cash and cash equivalents, end of year
    
    $
    63,722
    
    
    $
    33,692
    
    
    $
    26,566
  For the Years Ended September 30,2008
    
    
    2007
    
    
    2006Cash payments of interestFrom continuing operations,
net of capitalized interest of $596 (2008), $698 (2007) and $30 (2006)
    
    $
    3,894
    
    
    $
    1,660
    
    
    $
    596From discontinued operations
    
    
    
    
    
    
    2
    
    
    
    39Total cash payments of interest
    
    $
    3,894
    
    
    $
    1,662
    
    
    $
    635Cash payments of income taxes from continuing operations
    
    $
    32
    
    
    $
    
    
    
    $
    
  For the Years Ended September 30,2008
    
    
    2007
    
    
    2006Payment of loan fees through reduction of proceeds
    
    $
    3,097
    
    
    $
    
    
    
    $
    Purchase of insurance policies financed with notes payable
    
    
    1,719
    
    
    
    
    
    
    
    1,928Issuance of common stock for notes receivable
    
    
    606
    
    
    
    
    
    
    
    Restricted stock units surrendered for withholding taxes payable
    
    
    456
    
    
    
    680
    
    
    
    Issuance of common stock for debt conversion
    
    
    189
    
    
    
    
    
    
    
    Inventory transfers under product exchange agreement, net
    
    
    
    
    
    
    2,427
    
    
    
    Receivable on disposal of fixed asset
    
    
    
    
    
    
    81
    
    
    
    Mark available for sale securities to market
    
    
    
    
    
    
    2
    
    
    
    (2
    )Issuance of common stock from conversion of preferred stock
    
    
    
    
    
    
    
    
    
    
    5,900Issuance of common stock for conversion of convertible notes payable
    
    
    
    
    
    
    
    
    
    
    2,976Beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    875Issuance of common stock for option exercised using deferred
compensation and retirement payable
    
    
    
    
    
    
    
    
    
    
    393Purchase of property, plant and equipment financed with a note payable
    
    
    
    
    
    
    
    
    
    
    52
   F-8




---



##### Table of Contents



RENTECH, INC.
 
 Notes to Consolidated Financial Statements
 Note 1  Description of Business
 Description of Business
        Principles of Consolidation
   F-9




---



##### Table of Contents



Reclassifications and Presentation
  Seasonality
    Significant Customers
   Unionized Employees
  Note 2  Summary of Certain Significant Accounting Policies
 Use of Estimates
   F-10




---



##### Table of Contents



Market Risk
   Fair Value of Financial Instruments
    Revenue Recognition
     Deferred Revenue
   F-11




---



##### Table of Contents



Cost of Sales
  Natural Gas
  Inventories
   Spare Parts
  Cash and Cash Equivalents
  Restricted Cash
   F-12




---



##### Table of Contents



Available for Sale Securities
  Accounts Receivable
  Allowance for Doubtful Accounts
  Property, Plant and Equipment
  Type of Asset
    
    Estimated Useful LifeBuilding and building improvements
    
    15-40 yearsMachinery and equipment
    
    5-10 yearsFurniture, fixtures and office equipment
    
    7-10 yearsComputer equipment and software
    
    3-7 yearsVehicles
    
    3-5 yearsSpare parts
    
    Useful life of the spare parts or the related equipmentLeasehold improvements
    
    Useful life or remaining lease term whichever is shorterAmmonia catalyst
    
    3-10 yearsPlatinum catalyst
    
    Based on units of production
   F-13




---



##### Table of Contents



Construction in Progress
   Long-Lived Assets
  Software Capitalization
   Grants
  Licensed Technology and Technology Rights
   Assets Held for Sale
   F-14




---



##### Table of Contents



Advance for Equity Investment
  Stock Based Compensation
  Leases
  Advertising Costs
  Research and Development Expenses
     F-15




---



##### Table of Contents



Income Taxes
   Comprehensive Loss
  Net Loss Per Common Share
   As of September 30,2008
    
    
    2007
    
    
    2006(Shares, in millions)Stock options
    
    
    3.8
    
    
    
    3.9
    
    
    
    4.4Stock warrants
    
    
    11.3
    
    
    
    14.5
    
    
    
    11.2Restricted stock units
    
    
    2.8
    
    
    
    1.6
    
    
    
    1.6Convertible debt
    
    
    14.3
    
    
    
    14.7
    
    
    
    14.732.2
    
    
    
    34.7
    
    
    
    31.9
 Recent Accounting Pronouncements
    F-16




---



##### Table of Contents



F-17




---



##### Table of Contents



Note 3  Business Acquisitions
 Rentech Energy Midwest Corporation
  As ofApril 26, 2006(Thousands)Current assets
    
    $
    16,348Property, plant and equipment
    
    
    54,510Other assets
    
    
    1,703Current liabilities
    
    
    (1,788
    )Total purchase price
    
    $
    70,773
 Rentech Energy Technology Center, LLC
  Note 4  Discontinued Operations
      F-18




---



##### Table of Contents



Sales price
    
    $
    5,398Less transaction costs
    
    
    (49
    )Net sales price to Rentech, Inc., after transaction costs
    
    $
    5,349Book value of Rentechs ownership in PML
    
    
    2,628Rentechs gain on sale of PML
    
    $
    2,721
  For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Revenue from discontinued operationsOKON
    
    $
    
    
    
    $
    
    
    
    $
    REN
    
    
    
    
    
    
    
    
    
    
    PML
    
    
    
    
    
    
    1,179
    
    
    
    8,292Total revenue
    
    $
    
    
    
    $
    1,179
    
    
    $
    8,292Net income from discontinued operationsOKON
    
    $
    
    
    
    $
    
    
    
    $
    REN
    
    
    
    
    
    
    
    
    
    
    PML
    
    
    
    
    
    
    225
    
    
    
    1,265Total income from discontinued operations
    
    $
    
    
    
    $
    225
    
    
    $
    1,265Gain on sale of subsidiariesOKON
    
    $
    
    
    
    $
    75
    
    
    $
    REN
    
    
    91
    
    
    
    129
    
    
    
    PML
    
    
    
    
    
    
    2,721
    
    
    
    Total gain on sale of subsidiaries
    
    $
    91
    
    
    $
    2,925
    
    
    $
    
 Note 5  Available for Sale Securities
     F-19




---



##### Table of Contents



As of September 30, 2008
    
    
    As of September 30, 2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(Thousands)Cash investments
    
    $
    
    
    
    $
    
    
    
    $
    5
    
    
    $
    5Money market investments
    
    
    
    
    
    
    
    
    
    
    11,732
    
    
    
    11,732Auction rate securities (1)
    
    
    6,000
    
    
    
    6,000
    
    
    
    10,522
    
    
    
    10,522Debt securities of governments and agencies
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Corporate commercial paper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available for sale securities
    
    $
    6,000
    
    
    $
    6,000
    
    
    $
    22,257
    
    
    $
    22,259
 
 (1)
    
    As of September 30, 2008, the scheduled maturity dates for the underlying securities ranged
from January 2025 to December 2050.   F-20




---



##### Table of Contents



Note 6  Accounts Receivable
  As of September 30,2008
    
    
    2007(Thousands)Receivables on prepaid contract sales for nitrogen products
    
    $
    57,901
    
    
    $
    24,522Trade receivables from nitrogen products
    
    
    12,528
    
    
    
    11,351Trade receivables from development of alternative fuels
    
    
    877
    
    
    
    466Total accounts receivable, gross
    
    
    71,306
    
    
    
    36,339Allowance for doubtful accounts on trade accounts receivable
    
    
    (692
    )
    
    
    (126
    )Total accounts receivable, net
    
    $
    70,614
    
    
    $
    36,213
  Note 7  Inventories
  As of September 30,2008
    
    
    2007(Thousands)Finished goods
    
    $
    17,260
    
    
    $
    12,422Raw materials
    
    
    12,231
    
    
    
    1,189$
    29,491
    
    
    $
    13,611
  Note 8  Property, Plant and Equipment
  As of September 30,2008
    
    
    2007(Thousands)Land
    
    $
    1,904
    
    
    $
    1,853Buildings and building improvements
    
    
    10,902
    
    
    
    9,746Machinery and equipment
    
    
    59,388
    
    
    
    57,124Furniture, fixtures and office equipment
    
    
    1,316
    
    
    
    1,001Computer equipment and software
    
    
    3,074
    
    
    
    1,038Vehicles
    
    
    47
    
    
    
    24Leasehold improvements
    
    
    441
    
    
    
    44377,072
    
    
    
    71,229Less accumulated depreciation
    
    
    (20,760
    )
    
    
    (12,227
    )Total depreciable property, plant and equipment, net
    
    $
    56,312
    
    
    $
    59,002
  F-21




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##### Table of Contents



As of September 30,2008
    
    
    2007(Thousands)Construction in progress for projects under development
    
    $
    15,462
    
    
    $
    1,555Capitalized interest costs related to projects under development
    
    
    596
    
    
    
    698Construction in progress for machinery and equipment
    
    
    3,490
    
    
    
    823Construction in progress for information technology initiatives
    
    
    
    
    
    
    1,116Total construction in progress, net
    
    $
    19,548
    
    
    $
    4,192
   As ofJune 2, 2008(Thousands)Current assets
    
    $
    Land
    
    
    2,955Construction in progress
    
    
    7,192Current liabilities
    
    
    (40
    )Total purchase price
    
    $
    10,107
    Note 9  Investment in Advanced Technology Company
   F-22




---



##### Table of Contents



Note 10  Debt
       As of September 30,2008
    
    
    2007(Thousands)Term loans under the Senior Credit Agreement
    
    $
    53,000
    
    
    $
    Less current portion
    
    
    (
    )
    
    
    (
    )Term loans, long term portion
    
    $
    53,000
    
    
    $
    Mortgage dated February 8, 1999; monthly
principal and interest payments of $7 with
interest of 6.5%; unpaid principal and accrued
interest due March 1, 2029; collateralized by
land and building
    
    $
    953
    
    
    $
    972Less current portion
    
    
    (23
    )
    
    
    (21
    )Mortgage debt, long term portion
    
    $
    930
    
    
    $
    951Total debt
    
    $
    53,953
    
    
    $
    972Less current portion
    
    
    (23
    )
    
    
    (21
    )Total debt, long term portion
    
    $
    53,930
    
    
    $
    951
  F-23




---



##### Table of Contents



For the Years Ending September 30,2009
    
    $
    232010
    
    
    53,0242011
    
    
    262012
    
    
    282013
    
    
    30Thereafter
    
    
    822$
    53,953
  F-24




---



##### Table of Contents



Note 11  Convertible Debt
        F-25




---



##### Table of Contents



As of September 30,2008
    
    
    2007(Thousands)Convertible senior notes
    
    $
    57,500
    
    
    $
    57,500Less Unamortized deferred financing charges
    
    
    (571
    )
    
    
    (696
    )Long-term convertible debt to stockholders
    
    $
    56,929
    
    
    $
    56,804Prepaid debt issuance costs on convertible senior notes
    
    $
    2,435
    
    
    $
    2,970
  Note 12  Lines of Credit
     F-26




---



##### Table of Contents



Note 13  Commitments and Contingencies
 Employment Agreements
  Natural Gas Agreements
  As ofSeptember 30,
    
    
    September 30,2008
    
    
    2007(Thousands)MMBTUs under fixed priced contracts
    
    
    3,036
    
    
    
    1,038MMBTUs under index priced contracts
    
    
    
    
    
    
    211Total MMBTUs under contracts
    
    
    3,036
    
    
    
    1,249Commitments to purchase natural gas
    
    $
    34,505
    
    
    $
    7,922Weighted average rate per MMBTU based
on the fixed rates and the indexes
applicable to each contract
    
    $
    11.37
    
    
    $
    6.34
  Development Cost Sharing and Equity Option Agreement
    F-27




---



##### Table of Contents



Operating Leases
      For the Years Ending September 30,2009
    
    $
    8022010
    
    
    3552011
    
    
    32012
    
    
    12013
    
    
    Thereafter
    
    
    $
    1,161
   For the Years Ending September 30,2009
    
    $
    882010
    
    
    522011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    $
    140
  F-28




---



##### Table of Contents



Retirement Payable
    Retirement Plans
  Litigation
   F-29




---



##### Table of Contents



Note 14  Stockholders Equity
 Rights Agreement
  Preferred Stock
    Common Stock
     F-30




---



##### Table of Contents



Long-Term Incentive Equity Awards
  
    
    Under the absolute share price target award, zero to 100 percent of the performance stock
vests on April 1, 2011, with the final vesting amount depending on the Companys volume
weighted average stock price falling within a share price target range. The Companys share
price must be greater than $2.00 per share for any shares to vest, and the amount of shares
that vests increases pro-rata for a price greater than $2.00 up to a maximum vesting at
$4.00.
 
    
    Under the total shareholder return award, zero to 100 percent of the performance stock
vests on April 1, 2011, with the final vesting amount depending on the Companys total
shareholder return ranking relative to the total shareholder return for 12 identified
companies in a peer group. The Companys ranking must be greater than the 25th percentile
for any shares to vest, and the amount of shares that vests increases pro-rata for a ranking
greater than the 25th percentile up to a maximum vesting at the 75th percentile.
 
    
    Both performance share awards are subject to the recipients continued employment with
the Company, with vesting in a change of control and upon certain terminations without
cause.
   F-31




---



##### Table of Contents



Type of Award
    
    Number of AwardsTime-vested awards
    
    
    968,000Absolute share price target awards
    
    
    457,000Total shareholder return awards
    
    
    457,000Management stock purchase plan awards
    
    
    150,000Company matching of management stock purchase plan awards
    
    
    150,000Total
    
    
    2,182,000
  F-32




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##### Table of Contents



Note 15  Accounting for Stock Based Compensation
   For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Compensation expense
    
    $
    4,495
    
    
    $
    4,031
    
    
    $
    8,683Board compensation expense
    
    
    307
    
    
    
    433
    
    
    
    217Consulting expense
    
    
    938
    
    
    
    502
    
    
    
    2,685Total expense
    
    $
    5,740
    
    
    $
    4,966
    
    
    $
    11,585Compensation expense under FAS 123(R)
    
    $
    4,802
    
    
    $
    4,464
    
    
    $
    8,900Reduction to both basic and diluted earnings per share from compensation expense
    
    $
    0.029
    
    
    $
    0.029
    
    
    $
    0.070
  For the Years Ended September 30,2008

    
    2007

    
    2006Risk-free interest rate
    

    1.77% - 3.54%

    

    3.97% - 5.08%

    

    4.39% - 5.05%Expected volatility
    

    53.0% - 68.0%

    

    55.0% - 58.0%

    

    58.0% - 61.0%Expected life (in years)
    

    1.00 - 8.00

    

    0.50 - 6.50

    
    2.50 - 4.50Dividend yield
    
    0.0%
    
    0.0%
    
    0.0%Forfeiture rate
    
    0.0% - 20.0%
    
    0.0%
    
    0.0%
   F-33




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##### Table of Contents



Stock Options
    Shares
    
    
    Shares
    
    
    Shares AvailableReserved
    
    
    Outstanding
    
    
    for IssuanceAs of
    
    
    As of
    
    
    As ofSeptember 30,
    
    
    September 30,
    
    
    September 30,Name of Plan
    
    2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Thousands of shares)1994 Stock Option Plan
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    1996 Stock Option Plan
    
    
    500
    
    
    
    45
    
    
    
    69
    
    
    
    
    
    
    
    1998 Stock Option Plan
    
    
    500
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    282001 Stock Option Plan
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    22003 Stock Option Plan
    
    
    500
    
    
    
    15
    
    
    
    85
    
    
    
    
    
    
    
    2005 Stock Option Plan
    
    
    1,000
    
    
    
    266
    
    
    
    351
    
    
    
    5
    
    
    
    2006 Incentive Award Plan:Stock options
    
    
    8,000
    
    
    
    2,900
    
    
    
    2,775
    
    
    
    803
    
    
    
    3,653Restricted stock units
    
    
    
    
    
    
    2,672
    
    
    
    1,177
    
    
    
    
    
    
    
    11,000
    
    
    
    5,898
    
    
    
    4,543
    
    
    
    810
    
    
    
    3,683Restricted stock units not from a plan
    
    
    
    
    
    
    125
    
    
    
    466
    
    
    
    
    
    
    
    Options authorized by the Board of Directors,
for specific agreements
    
    
    660
    
    
    
    500
    
    
    
    500
    
    
    
    
    
    
    
    Options authorized by the Board of Directors,
not from a plan
    
    
    6,218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,878
    
    
    
    6,523
    
    
    
    5,509
    
    
    
    810
    
    
    
    3,683
  Black-Fiscal
    
    
    
    
    
    
    Vesting
    
    Exercise
    
    
    Number
    
    
    ScholesYear
    
    
    Grantee
    
    Purpose
    
    Period
    
    Price
    
    
    of Shares
    
    
    Value(Thousands)2006
    
    
    Certain employees
    
    Employment inducement
    
    Immediate
    
    $
    3.35-$4.48
    
    
    
    306
    
    
    $
    4562006
    
    
    Employees
    
    Annual employee grant
    
    3 years
    
    $
    4.15
    
    
    
    1,075
    
    
    
    2,6392006
    
    
    A consultant
    
    Project development support
    
    2 years
    
    $
    4.15
    
    
    
    50
    
    
    
    1212006
    
    
    A director
    
    Board service inducement
    
    Immediate
    
    $
    3.74
    
    
    
    20
    
    
    
    672006
    
    
    Directors
    
    Board compensation
    
    1 years
    
    $
    3.35
    
    
    
    90
    
    
    
    1342006
    
    
    Former CEO and COO
    
    Retirement package
    
    Immediate
    
    $
    2.53
    
    
    
    775
    *
    
    
    8921,5412007
    
    
    Employees
    
    Annual employee grant
    
    3 years
    
    $
    2.22-$4.53
    
    
    
    461
    
    
    $
    9582007
    
    
    Two directors
    
    Board service inducement
    
    Immediate
    
    $
    2.68-$3.76
    
    
    
    40
    
    
    
    642007
    
    
    Former CEO and COO
    
    Extension to term of previous grant
    
    Immediate
    
    $
    2.53
    
    
    
    830
    *
    
    
    2892007
    
    
    Directors
    
    Board compensation
    
    1 year
    
    $
    2.68
    
    
    
    90
    
    
    
    1002007
    
    
    A consultant
    
    Administrative support
    
    Immediate
    
    $
    4.30
    
    
    
    40
    
    
    
    642007
    
    
    A consultant
    
    Administrative support
    
    1 year
    
    $
    3.81
    
    
    
    30
    
    
    
    446612008
    
    
    A director
    
    Board service inducement
    
    Immediate
    
    $
    1.76
    
    
    
    20
    
    
    $
    132008
    
    
    A consultant
    
    Administrative support
    
    8 month
    
    $
    1.33
    
    
    
    50
    
    
    
    342008
    
    
    Directors
    
    Board compensation
    
    1 year
    
    $
    1.39
    
    
    
    90
    
    
    
    682008
    
    
    Employees
    
    Annual employee grant
    
    3 years
    
    $
    1.52
    
    
    
    195
    
    
    
    1152008
    
    
    A consultant
    
    Administrative support
    
    3 years
    
    $
    1.52
    
    
    
    40
    
    
    
    37395
 
 *
    
    Approval for the transaction occurred in the year shown, but the
shares were granted in a prior year.  F-34




---



##### Table of Contents



For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Compensation expense
    
    $
    842
    
    
    $
    1,147
    
    
    $
    1,506Board compensation expense
    
    
    89
    
    
    
    185
    
    
    
    96Consulting expense
    
    
    124
    
    
    
    502
    
    
    
    8Total expense
    
    $
    1,055
    
    
    $
    1,834
    
    
    $
    1,610Compensation expense under FAS 123(R)
    
    $
    931
    
    
    $
    1,332
    
    
    $
    1,602Reduction to both basic and diluted earnings per share from compensation expense
    
    $
    0.006
    
    
    $
    0.009
    
    
    $
    0.013
  WeightedAverage
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    ValueOutstanding at September 30, 2005
    
    
    4,661,000
    
    
    $
    1.35Granted
    
    
    1,541,000
    
    
    
    4.09Exercised
    
    
    (1,714,000
    )
    
    
    0.98Canceled / Expired
    
    
    (118,000
    )
    
    
    0.90Outstanding at September 30, 2006
    
    
    4,370,000
    
    
    
    2.47Granted
    
    
    661,000
    
    
    
    3.53Exercised
    
    
    (959,000
    )
    
    
    1.12Canceled / Expired
    
    
    (206,000
    )
    
    
    4.02Outstanding at September 30, 2007
    
    
    3,866,000
    
    
    
    2.91Granted
    
    
    395,000
    
    
    
    1.48Exercised
    
    
    (235,000
    )
    
    
    1.20Canceled / Expired
    
    
    (300,000
    )
    
    
    3.49Outstanding at September 30, 2008
    
    
    3,726,000
    
    
    
    2.82
    
    
    $
    124,000Shares expected to vest after September 30, 2008
    
    
    752,000
    
    
    $
    2.69
    
    
    $
    0Options exercisable at September 30, 2008
    
    
    2,974,000
    
    
    $
    2.85
    
    
    $
    124,000Options exercisable at September 30, 2007
    
    
    2,684,000
    
    
    $
    2.51Options exercisable at September 30, 2006
    
    
    3,159,500
    
    
    $
    1.86Weighted average fair value of options granted during fiscal 2008
    
    
    
    
    
    $
    0.83Weighted average fair value of options granted during fiscal 2007
    
    
    
    
    
    $
    1.86Weighted average fair value of options granted during fiscal 2006
    
    
    
    
    
    $
    1.89
    F-35




---



##### Table of Contents



Outstanding
    
    
    ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual Life
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    in Years
    
    Price
    
    
    Exercisable
    
    
    Price$0.70-$0.94
    
    
    275,000
    
    
    
    0.80
    
    
    $
    0.94
    
    
    
    275,000
    
    
    $
    0.94$1.06-$1.14
    
    
    75,000
    
    
    
    1.03
    
    
    
    1.12
    
    
    
    75,000
    
    
    
    1.12$1.33-$1.76
    
    
    635,000
    
    
    
    5.20
    
    
    
    1.49
    
    
    
    270,000
    
    
    
    1.52$1.85
    
    
    171,000
    
    
    
    1.82
    
    
    
    1.85
    
    
    
    171,000
    
    
    
    1.85$2.22-$2.68
    
    
    1,030,000
    
    
    
    1.71
    
    
    
    2.52
    
    
    
    970,000
    
    
    
    2.54$3.35-$3.81
    
    
    183,000
    
    
    
    4.79
    
    
    
    3.63
    
    
    
    150,000
    
    
    
    3.60$4.00-$4.53
    
    
    1,357,000
    
    
    
    6.03
    
    
    
    4.16
    
    
    
    1,063,000
    
    
    
    4.15$0.70-$4.53
    
    
    3,726,000
    
    
    
    3.96
    
    
    $
    2.82
    
    
    
    2,974,000
    
    
    $
    2.85
  F-36




---



##### Table of Contents



Warrants
        F-37




---



##### Table of Contents



For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Compensation expense
    
    $
    
    
    
    $
    
    
    
    $
    5,728Board compensation expense
    
    
    
    
    
    
    
    
    
    
    Consulting expense
    
    
    814
    
    
    
    
    
    
    
    2,677Total expense
    
    $
    814
    
    
    $
    
    
    
    $
    8,405Compensation expense under FAS 123(R)
    
    $
    
    
    
    $
    
    
    
    $
    5,728Reduction to both basic and diluted earnings per share from compensation expense
    
    $
    
    
    
    $
    
    
    
    $
    0.045
  WeightedNumber of
    
    
    AverageShares
    
    
    Exercise PriceOutstanding at September 30, 2005
    
    
    12,112,000
    
    
    $
    1.44Granted
    
    
    3,153,000
    (1)
    
    
    2.00Exercised
    
    
    (4,106,000
    )
    
    
    1.39Canceled / Expired
    
    
    
    
    
    
    Outstanding at September 30, 2006
    
    
    11,159,000
    
    
    $
    1.61Granted
    
    
    4,018,000
    
    
    
    3.28Exercised
    
    
    (625,000
    )
    
    
    1.55Canceled / Expired
    
    
    
    
    
    
    Outstanding at September 30, 2007
    
    
    14,552,000
    
    
    $
    2.08Granted
    
    
    
    
    
    
    Exercised
    
    
    (1,142,000
    )
    
    
    1.16Canceled / Expired
    
    
    (2,067,000
    )
    
    
    1.60Outstanding at September 30, 2008
    
    
    11,343,000
    
    
    $
    2.30Warrants exercisable at September 30, 2008
    
    
    11,343,000
    
    
    $
    2.30Warrants exercisable at September 30, 2007
    
    
    14,552,000
    
    
    $
    2.08Warrants exercisable at September 30, 2006
    
    
    11,159,000
    
    
    $
    1.61Weighted average fair value of warrants granted during fiscal 2008
    
    
    
    
    
    $
    Weighted average fair value of warrants granted during fiscal 2007
    
    
    
    
    
    $
    0.87Weighted average fair value of warrants granted during fiscal 2006
    
    
    
    
    
    $
    2.69
  F-38




---



##### Table of Contents



Outstanding
    
    
    ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual Life
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    in Years
    
    Price
    
    
    Exercisable
    
    
    Price$0.57
    
    
    1,250,000
    
    
    
    4.50
    
    
    $
    0.57
    
    
    
    1,250,000
    
    
    $
    0.57$1.14
    
    
    50,000
    
    
    
    .96
    
    
    
    1.14
    
    
    
    50,000
    
    
    
    1.14$1.82
    
    
    2,083,000
    (1)
    
    
    1.84
    
    
    
    1.82
    
    
    
    2,083,000
    
    
    
    1.82$2.00
    
    
    2,942,000
    
    
    
    1.52
    
    
    
    2.00
    
    
    
    2,942,000
    
    
    
    2.00$2.41
    
    
    1,000,000
    
    
    
    5.28
    
    
    
    2.41
    
    
    
    1,000,000
    
    
    
    2.41$3.28
    
    
    4,018,000
    
    
    
    3.57
    
    
    
    3.28
    
    
    
    4,018,000
    
    
    
    3.28$0.57 - $3.28
    
    
    11,343,000
    
    
    
    2.96
    
    
    $
    2.30
    
    
    
    11,343,000
    
    
    $
    2.30
 
 (1)
    
    Composed of 2,083,000 shares underlying the warrants issued to East
Cliff Advisors, LLC that were accounted for under SFAS 123(R). The
aggregate intrinsic value of these shares was $0 as of September 30,
2008.  F-39




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##### Table of Contents



Restricted Stock Units and Performance Share Awards
      Fiscal
    
    
    
    
    
    
    Vesting
    
    Number
    
    
    FairYear
    
    
    Grantee
    
    Purpose
    
    Period
    
    of Shares
    
    
    Value(Thousands)2006
    
    
    Members of senior management
    
    Employment inducement
    
    3 years
    
    
    1,860
    
    
    $
    7,1352006
    
    
    Directors
    
    Board compensation package
    
    1 year
    
    
    72
    
    
    
    2411,9322007
    
    
    Members of senior management
    
    Employment inducement
    
    3 years
    
    
    575
    
    
    $
    1,8132007
    
    
    Directors
    
    Board compensation package
    
    1 year
    
    
    90
    
    
    
    2356652008
    
    
    Certain management employees
    
    Time-vested awards
    
    33 months
    
    
    968
    
    
    $
    1,5772008
    
    
    Members of senior management
    
    Management stock purchase plan awards
    
    Immediate
    
    
    150
    
    
    
    2452008
    
    
    Members of senior management
    
    Management stock purchase plan awards
    
    3 years
    
    
    150
    
    
    
    2442008
    
    
    Members of senior management
    
    Absolute share price target awards
    
    Share Price
    
    
    457
    
    
    
    373
    (1)2008
    
    
    Members of senior management
    
    Total shareholder return awards
    
    Share Price
    
    
    457
    
    
    
    7452008
    
    
    Directors
    
    Board compensation package
    
    1 year
    
    
    173
    
    
    
    2402,355
 
 (1)
    
    The fair value for the absolute share price target awards was reduced by 50% due to
uncertainty regarding future share price performance.  For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Compensation expense
    
    $
    3,653
    
    
    $
    2,884
    
    
    $
    1,449Board compensation expense
    
    
    218
    
    
    
    248
    
    
    
    121Consulting expense
    
    
    
    
    
    
    
    
    
    
    Total expense
    
    $
    3,871
    
    
    $
    3,132
    
    
    $
    1,570Compensation expense under FAS 123(R)
    
    $
    3,871
    
    
    $
    3,132
    
    
    $
    1,570Reduction to both basic and diluted earnings per share from compensation expense
    
    $
    0.023
    
    
    $
    0.021
    
    
    $
    0.012
  F-40




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##### Table of Contents



WeightedAverage
    
    
    AggregateNumber of
    
    
    Grant Date
    
    
    IntrinsicShares
    
    
    Fair Value
    
    
    ValueOutstanding at September 30, 2005
    
    
    
    
    
    
    Granted
    
    
    1,932,000
    
    
    $
    4.65Vested and Settled in Shares
    
    
    (18,000
    )
    
    
    3.35Canceled / Expired
    
    
    (325,000
    )
    
    
    4.95Outstanding at September 30, 2006
    
    
    1,589,000
    
    
    
    4.60Granted
    
    
    665,000
    
    
    
    3.08Vested and Settled in Shares
    
    
    (412,000
    )
    
    
    4.25Vested and Surrendered for Withholding Taxes Payable
    
    
    (199,000
    )
    
    
    4.67Canceled / Expired
    
    
    
    
    
    
    Outstanding at September 30, 2007
    
    
    1,643,000
    
    
    
    4.07Granted
    
    
    2,355,000
    
    
    
    1.61Vested and Settled in Shares
    
    
    (758,000
    )
    
    
    3.26Vested and Surrendered for Withholding Taxes Payable
    
    
    (305,000
    )
    
    
    4.28Canceled / Expired
    
    
    (138,000
    )
    
    
    3.88Outstanding at September 30, 2008
    
    
    2,797,000
    
    
    
    2.21
    
    
    $
    3,720,000RSUs vested at September 30, 2008
    
    
    1,188,000RSUs vested at September 30, 2007
    
    
    448,000RSUs vested at September 30, 2006
    
    
    18,000
    F-41




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##### Table of Contents



Note 16  Income Taxes
      As of September 30,2008
    
    
    2007(Thousands)Net operating loss carryforwards
    
    $
    46,866
    
    
    $
    38,125Capital loss carryforward
    
    
    
    
    
    
    1,017Accruals for financial statement purposes not allowed for income taxes  cash basis
    
    
    4,397
    
    
    
    3,220Basis difference in prepaid expenses
    
    
    (725
    )
    
    
    (96
    )Basis difference relating to licensed technology
    
    
    783
    
    
    
    734Basis difference in property, plant and equipment
    
    
    13,543
    
    
    
    (5,034
    )Basis difference in technology rights
    
    
    28
    
    
    
    36Basis difference in retirement payables
    
    
    
    
    
    
    46Basis difference in reserve for REN earn-out
    
    
    239
    
    
    
    267Basis difference in deferred rent liability
    
    
    27
    
    
    
    33Basis difference in other reserves
    
    
    48
    
    
    
    Basis difference in other reserves for notes receivable
    
    
    214
    
    
    
    Research and development credit
    
    
    42
    
    
    
    2,191PDU expenses
    
    
    
    
    
    
    12,154Stock option exercises FAS 123(R)
    
    
    4,939
    
    
    
    6,149Stock option exercises
    
    
    
    
    
    
    (1,735
    )Beneficial conversions of debt
    
    
    (210
    )
    
    
    (258
    )Basis difference in Sand Creek Energy
    
    
    7
    
    
    
    7Basis difference in Petroleum Mud Logging
    
    
    
    
    
    
    (147
    )Section 481a adjustments
    
    
    (921
    )
    
    
    Capitalized interest
    
    
    637
    
    
    
    Impairment of available for sale securities
    
    
    1,109
    
    
    
    Impairment of other assets
    
    
    76
    
    
    
    Impairment of land and land purchase option
    
    
    63
    
    
    
    476Impairment of construction in progress
    
    
    16,875
    
    
    
    13,715Other items
    
    
    23
    
    
    
    1888,060
    
    
    
    70,918Valuation allowance
    
    
    (88,060
    )
    
    
    (70,918
    )$
    
    
    
    $
    
  F-42




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##### Table of Contents



For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)Federal income tax benefit calculated at the Federal statutory rate
    
    $
    (21,382
    )
    
    $
    (32,180
    )
    
    $
    (14,748
    )State income tax benefit net of Federal benefit
    
    
    (2,320
    )
    
    
    (2,913
    )
    
    
    (1,219
    )Permanent true ups, other
    
    
    2,925
    
    
    
    125
    
    
    
    356FIN 48
    
    
    3,565
    
    
    
    
    
    
    
    Research and development credit
    
    
    83
    
    
    
    1,073
    
    
    
    840Change in valuation allowance
    
    
    17,142
    
    
    
    33,906
    
    
    
    14,820Income tax expenseFrom
continuing operations
    
    $
    13
    
    
    $
    
    
    
    $
    From
discontinued operations
    
    
    
    
    
    
    11
    
    
    
    49
   Reconciliation of Unrecognized Tax Liability For the Year Ending September 30, 2008Balance at October 1, 2007
    
    $
    1,556Additions based on tax positions related to current year
    
    
    3,565Additions for tax positions of prior years
    
    
    339Reductions for tax positions of prior years
    
    
    Settlements
    
    
    Balance at September 30, 2008
    
    $
    5,460
    F-43




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##### Table of Contents



Note 17  Segment Information
  
    
    Nitrogen products manufacturing  The Company manufactures a variety of nitrogen
fertilizer products.
 
    
    Alternative fuels  The Company develops and markets processes for conversion of
low-value, carbon-bearing solids or gases into valuable hydrocarbons.
   For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)RevenuesNitrogen products manufacturing
    
    $
    210,293
    
    
    $
    131,816
    
    
    $
    44,398Alternative fuels
    
    
    678
    
    
    
    504
    
    
    
    119Total Revenues
    
    $
    210,971
    
    
    $
    132,320
    
    
    $
    44,517Operating income (loss)Nitrogen products manufacturing
    
    $
    46,731
    
    
    $
    13,222
    
    
    $
    (1,320
    )Alternative fuels
    
    
    (103,207
    )
    
    
    (107,685
    )
    
    
    (38,099
    )Total Operating Loss
    
    $
    (56,476
    )
    
    $
    (94,463
    )
    
    $
    (39,419
    )Depreciation and amortizationNitrogen products manufacturing
    
    $
    8,472
    
    
    $
    6,791
    
    
    $
    2,435Alternative fuels
    
    
    1,102
    
    
    
    731
    
    
    
    516Total Depreciation and Amortization
    
    $
    9,574
    
    
    $
    7,522
    
    
    $
    2,951Interest expenseNitrogen products manufacturing
    
    $
    2,747
    
    
    $
    93
    
    
    $
    249Alternative fuels
    
    
    2,695
    
    
    
    2,337
    
    
    
    2,153Total Interest Expense
    
    $
    5,442
    
    
    $
    2,430
    
    
    $
    2,402Significant non-cash transactions (1)Nitrogen products manufacturing
    
    $
    8,650
    
    
    $
    1,925
    
    
    $
    Alternative fuels
    
    
    19,185
    
    
    
    41,881
    
    
    
    12,890Total significant non-cash transactions
    
    $
    27,835
    
    
    $
    43,806
    
    
    $
    12,890Expenditures for additions of long-lived assetsNitrogen products manufacturing
    
    $
    7,252
    
    
    $
    7,250
    
    
    $
    2,815Alternative fuels
    
    
    23,737
    
    
    
    41,518
    
    
    
    2,129Total Expenditures for Additions or Long Lived Assets
    
    $
    30,989
    
    
    $
    48,768
    
    
    $
    4,944Total assetsNitrogen products manufacturing
    
    $
    210,548
    
    
    $
    132,788
    
    
    $
    81,274Alternative fuels
    
    
    46,092
    
    
    
    50,275
    
    
    
    66,208Total Assets
    
    $
    256,640
    
    
    $
    183,063
    
    
    $
    147,482
 
 (1)
    
    Significant non-cash transactions include loss on impairment, write down of inventory to
market, loss on investments, compensation and consulting expenses under SFAS 123(R), abandoned
debt issue costs, non-cash marketing expense and bad debt expense. Depreciation and
amortization is separately disclosed in the table.  F-44




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##### Table of Contents



For the Years Ended September 30,2008
    
    
    2007
    
    
    2006(Thousands)RevenuesNitrogen products manufacturing
    
    $
    210,293
    
    
    $
    131,816
    
    
    $
    44,398Alternative fuels (1)
    
    
    678
    
    
    
    504
    
    
    
    119Total revenues
    
    $
    210,971
    
    
    $
    132,320
    
    
    $
    44,517
 
 (1)
    
    The amounts presented exclude an inter-segment management fee of $2,500,000, $2,500,000 and
$625,000 for fiscal 2008, 2007 and 2006, respectively. Note 18  Valuation and Qualifying Accounts
 Balance
    
    
    
    
    
    
    
    
    
    
    Balanceat Beginning
    
    
    Charged to
    
    
    Deductions and
    
    
    at Endof Period
    
    
    Expense
    
    
    Write-Offs
    
    
    of Period(Thousands)Year Ended September 30, 2008Allowance for doubtful accounts
    
    $
    126
    
    
    $
    566
    
    
    $
    
    
    
    $
    692Deferred tax valuation account
    
    $
    70,918
    
    
    $
    17,142
    
    
    $
    
    
    
    $
    88,060Reserve for REN earn-out (1)(2)
    
    $
    870
    
    
    $
    (91
    )
    
    $
    
    
    
    $
    779Year Ended September 30, 2007Allowance for doubtful accounts, from continuing operations
    
    $
    126
    
    
    $
    
    
    
    $
    
    
    
    $
    126Allowance for doubtful accounts, from discontinued operations
    
    
    10
    
    
    
    
    
    
    
    (10
    )
    
    
    Allowance for doubtful accounts
    
    $
    136
    
    
    $
    
    
    
    $
    (10
    )
    
    $
    126Deferred tax valuation account
    
    $
    35,995
    
    
    $
    34,923
    
    
    $
    
    
    
    $
    70,918Reserve for REN earn-out (1)(2)
    
    $
    1,000
    
    
    $
    (128
    )
    
    $
    (2
    )
    
    $
    870Year Ended September 30, 2006Allowance for doubtful accounts, from continuing operations
    
    $
    126
    
    
    $
    
    
    
    $
    
    
    
    $
    126Allowance for doubtful accounts, from discontinued operations
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Allowance for doubtful accounts
    
    $
    136
    
    
    $
    
    
    
    $
    
    
    
    $
    136Deferred tax valuation account
    
    $
    21,175
    
    
    $
    14,820
    
    
    $
    
    
    
    $
    35,995Reserve for REN earn-out (1)
    
    $
    1,000
    
    
    $
    
    
    
    $
    
    
    
    $
    1,000
 
 (1)
    
    The Company recorded a reserve of $1,000,000 against the earn-out
receivable due to uncertainty surrounding the estimation of
collections related to the Companys sale of REN. Refer to Note 4 to
the Consolidated Financial Statements for more information.(2)
    
    During fiscal 2008 and 2007, the Company received earn-out payments
from REN which were recognized as miscellaneous income along with
corresponding reductions to the earn-out receivable and the reserve. Note 19  Related Party Transactions
   F-45




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##### Table of Contents



Note 20  Subsequent Events
    F-46




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##### Table of Contents



EXHIBIT INDEX
 2.1
    
    
    Stock Purchase Agreement, dated March 8, 2005, by and between Rentech, Inc. and Zinsser Co.,
Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed March 10,
2005).2.2
    
    
    Stock Purchase Agreement, dated November 5, 2005, by and between Rentech Development Corporation
and Royster-Clark, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K
filed November 9, 2005).2.3
    
    
    First Amendment to the Stock Purchase Agreement dated November 5, 2005, by and between Rentech
Development Corporation and Royster-Clark, Inc. (incorporated by reference to Exhibit 2.2 to
Registration Statement on Form S-3 filed March 20, 2006).2.4
    
    
    Second Amendment to the Stock Purchase Agreement dated November 5, 2005, by and between Rentech
Development Corporation and Royster-Clark Nitrogen, Inc. (incorporated by reference to
Exhibit 2.1 to Current Report on Form 8-K filed March 14, 2006).2.5
    
    
    Third Amendment to the Stock Purchase Agreement dated November 5, 2005, by and between Rentech
Development Corporation and Royster-Clark Nitrogen, Inc. (incorporated by reference to
Exhibit 2.2 to Current Report on Form 8-K filed March 14, 2006).2.6
    
    
    Purchase and Sale Agreement, dated September 16, 2005, by and between Rentech Development
Corporation and RFC-Sand Creek Development, LLC (incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed September 22, 2005).2.7
    
    
    Equity Purchase Agreement dated November 15, 2006 by and between Rentech, Inc. and PML
Exploration Services, LLC (incorporated by reference to Exhibit 2.1 to Current Report on
Form 8-K filed November 16, 2006).3.1
    
    
    Amended and Restated Articles of Incorporation, dated April 29, 2005 (incorporated by reference
to Exhibit 3(i) to Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2005,
filed May 9, 2005).3.2
    
    
    Articles of Amendment to Amended and Restated Articles of Incorporation of Rentech, Inc.
(incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q, for the quarterly
period ended March 31, 2008, filed May 9, 2008.3.3
    
    
    Bylaws dated November 30, 2004 (incorporated by reference to Exhibit 3(ii) to Annual Report on
Form 10-K for the year ended September 30, 2004 filed December 9, 2004).4.1
    
    
    Registration Rights Agreements for December 2004 Short-Term Loan with C. David Callaham
(incorporated by reference to Exhibits 10.4 and 10.7 to Current Report on Form 8-K filed
December 16, 2004).4.2
    
    
    Registration Rights Agreement for December 2004 Short-Term Loan by and between Rentech, Inc. and
Geduld Revocable Trust, (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K
filed December 7, 2004).4.3
    
    
    Registration Rights Agreement for December 2004 Short-Term Loan by and between Rentech, Inc. and
Geduld Capital Management LLC (incorporated by reference to Exhibit 10.6 to Current Report on
Form 8-K filed December 7, 2004).4.4
    
    
    Registration Rights Agreement for December 2004 Short-Term Loan by and between Rentech, Inc. and
Daniel Kern (incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed
December 7, 2004).4.5
    
    
    Form of Registration Rights Agreement (incorporated by reference to Exhibit 4 to Form S-3/A
Amendment Two to Registration Statement No. 333-85682 filed October 28, 2002).4.6
    
    
    Form of Non-statutory Stock Option Agreement (incorporated by reference to Exhibit 4 to
Form S-3/A Amendment Two to Registration Statement No. 333-85682 filed October 28, 2002).4.7
    
    
    Stock Option Agreement, dated December 10, 2004, by and between Rentech, Inc. and Royster-Clark
Inc. (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed December 16,
2004).4.8
    
    
    Stock Purchase Warrant, dated September 17, 2004, by and between Rentech, Inc. and Mitchell
Technology Investments (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K
filed September 23, 2004).4.9
    
    
    Registration Rights Agreement, dated September 17, 2004, by and between Rentech, Inc. and
Mitchell Technology Investments (incorporated by reference to Exhibit 10.3 to Current Report on
Form 8-K filed September 23, 2004).




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##### Table of Contents



4.10
    
    
    Subscription Agreement, dated April 8, 2005, by and among Rentech, Inc. and Mercator Momentum
Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd., Pentagon Special Purpose
Fund, Ltd. and M.A.G. CAPITAL, LLC, for Placement of Preferred Stock (incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K filed April 14, 2005).4.11
    
    
    Form of Stock Purchase Warrants, dated April 8, 2005, by and among Rentech, Inc. and Mercator
Momentum Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd., Pentagon Special
Purpose Fund, Ltd. and M.A.G. CAPITAL, LLC, for Placement of Preferred Stock (incorporated by
reference to Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6 to Current Report on Form 8-K filed
April 14, 2005).4.12
    
    
    Registration Rights Agreement, dated April 8, 2005, by and among Rentech, Inc. and Mercator
Momentum Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd., Pentagon Special
Purpose Fund, Ltd. and M.A.G. CAPITAL, LLC, for Placement of Preferred Stock (incorporated by
reference to Exhibit 10.7 to Current Report on Form 8-K filed April 14, 2005).4.13
    
    
    Warrant to Purchase 1,000,000 Shares of Common Stock by and between Rentech, Inc. and DKRW
Advanced Fuels LLC, dated January 12, 2006 (incorporated by reference to Exhibit 2.1 to Current
Report on Form 8-K filed January 19, 2006).4.14
    
    
    Stock Purchase Warrants (incorporated by reference to Exhibits 10.1 through 10.16 to Current
Report on Form 8-K filed May 20, 2005).4.15
    
    
    Indenture dated April 18, 2006, by and between Rentech, Inc. and Wells Fargo Bank, National
Association, as Trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K
filed April 18, 2006).4.16
    
    
    Officers Certificate to Indenture dated April 18, 2006 to Indenture (incorporated by reference
to Exhibit 4.3 to Current Report on Form 8-K filed April 18, 2006).4.17
    
    
    Form of 4.00% Convertible Senior Note Due 2013 (incorporated by reference to Exhibit 4.4 to
Current Report on Form 8-K filed April 18, 2006).4.18
    
    
    Form of Subscription Agreement (incorporated by reference to exhibit 10.2 to Current Report on
Form 8-K filed April 20, 2007).4.19
    
    
    Form of Warrant to purchase shares of Common Stock (incorporated by reference to exhibit 10.3 to
Current Report on Form 8-K filed April 20, 2007).10.1
    *
    
    Term sheet for Dennis L. Yakobson retirement benefits (incorporated by reference to Exhibit 10.1
to Current Report on Form 8-K filed October 6, 2005).10.2
    *
    
    Term sheet for Ronald C. Butz retirement benefits (incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K filed October 6, 2005).10.3
    *
    
    Management and Consulting Agreement, dated July 29, 2005, by and between Rentech, Inc. and
Management Resource Center, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on
Form 8-K filed August, 11, 2005).10.4
    *
    
    1994 Stock Option Plan (incorporated by reference to the exhibits to Form S-18 on Form SB-2,
post-effective Amendment No. 5 to Registration Statement No. 33-37150-D).10.5
    *
    
    1996 Stock Option Plan (incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K
dated December 18, 1996).10.6
    *
    
    1998 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Form S-8). Registration
Statement No. 333-95537.10.7
    *
    
    2001 Stock Option Plan (incorporated by reference to Exhibit 10.5 to Annual Report on Form 10-K
for the year ended September 30, 2002 filed December 24, 2002).10.8
    *
    
    2003 Stock Option Plan (incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K
for the year ended September 30, 2002 filed December 24, 2002).10.9
    
    
    License Agreement, dated October 8, 1998, by and between Rentech, Inc. and Texaco Natural Gas,
Inc. (incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-KSB, No. 000-19260,
for the year ended September 30, 1998, filed January 13, 1999).




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##### Table of Contents



10.10
    
    
    Convertible Promissory Note, dated May 20, 2005, to Michael Ray (incorporated by reference to
Exhibit 10.17 to Current Report on Form 8-K filed May 20, 2005).10.11
    
    
    Convertible Promissory Note, dated May 20, 2005, to David Zimel (incorporated by reference to
Exhibit 10.18 to Current Report on Form 8-K filed May 20, 2005).10.12
    *
    
    1990 Stock Option Plan (incorporated by reference to the exhibits to Form S-18 Registration
Statement No. 33-37150).10.13
    *
    
    2005 Stock Option Plan (incorporated by reference to Exhibit 10.34 to Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 2004 filed February 9, 2005).10.14
    **
    
    Master License Agreement by and among Rentech, Inc. and DKRW Energy LLC and DKRW Advanced Fuels
LLC, dated January 12, 2006 (incorporated by reference to Exhibit 10.1 to Current Report on
Form 8-K filed January 19, 2006).10.15
    
    
    License Agreement by and between Rentech, Inc. and Medicine Bow Fuel & Power, LLC, dated
January 12, 2006 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed
January 19, 2006).**10.16
    
    
    Amendment to Site License Agreement with Medicine Bow Fuel & Power, LLC, dated October 26, 2007
(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 1,
2007).10.17
    
    
    Omnibus Amendment by and among Rentech, Inc. and Medicine Bow Fuel & Power, LLC and DKRW
Advanced Fuels LLC, dated December 7, 2007 (incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed December 13, 2007).10.18
    
    
    Project Development Participation Agreement by and between Rentech, Inc. and DKRW Advanced Fuels
LLC, dated January 12, 2006 (incorporated by reference to Exhibit 10.3 to Current Report on
Form 8-K filed January 19, 2006).10.19
    *
    
    Employment Agreement by and between Rentech, Inc. and D. Hunt Ramsbottom, Jr. dated January 20,
2006 (incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed January 26,
2006).10.20
    *
    
    Employment Agreement by and between Rentech, Inc. and Douglas M. Miller dated January 20, 2006
(incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K filed January 26,
2006).10.21
    *
    
    Employment Agreement by and between Rentech, Inc. and Dan J. Cohrs, dated October 22, 2008.10.22
    *
    

Employment
Agreement by and between Rentech, Inc. and Richard T. Penning, dated
January 22, 2007 (incorporated by reference to Exhibit 10.24 to
Annual Report on Form 10-K filed December 14, 2007).10.23
    *
    
    Compensation Plan for Outside Directors (incorporated by reference to Item 1.01 to Current
Report on Form 8-K filed April 19, 2006).10.24
    
    
    Lease Agreement dated as of April 21, 2006 with Center West (incorporated by reference to
Exhibit 99.1 to Current Report on Form 8-K filed April 21, 2006).10.25
    
    
    Rider to the Lease Agreement dated as of April 21, 2006 by and between Rentech, Inc. and Center
West (incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K filed April 21,
2006).10.26
    
    
    Financing Agreement dated as of April 26, 2006 by and between Rentech Energy Midwest Corporation
and The CIT Group/Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed May 2, 2006).10.27
    *
    
    Employment Agreement by and between Rentech, Inc. and I. Merrick Kerr dated May 15, 2006
(incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed May 17, 2006).10.28
    *
    
    Form of Stock Option Grant Notice and Stock Option Agreement under 2006 Incentive Award Plan
(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 20, 2006).10.29
    *
    
    Amended and Restated Rentech, Inc. 2006 Incentive Award Plan (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed March 29, 2007).10.30
    
    
    Commitment Letter by and among Rentech, Inc., Rentech Development Corporation. M.A.G Capital,
LLC and Pentagon Bernini Fund, Ltd. Dated November 15, 2005 (incorporated by reference to
exhibit 10.1 to Current Report on Form 8-K filed November 16, 2005).10.31
    
    
    Placement Agent Agreement, dated April 19, 2007 by and between Rentech, Inc. and Credit Suisse
Securities (USA) LLC (incorporated by reference to exhibit 10.1 to Current Report on Form 8-K
filed April 20, 2007).




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##### Table of Contents



10.32
    **
    
    Development Cost Sharing and Equity Option Agreement, dated May 25, 2007 by and between Rentech,
Inc. and Peabody Venture Fund, LLC (incorporated by reference to exhibit 10.1 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007 and filed on August 9, 2007).10.33
    **
    
    Coal Supply Agreement, dated May 25, 2007 by and between Rentech, Inc. and COALSALES LLC
(incorporated by reference to exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2007 and filed on August 9, 2007).10.34
    
    
    Line of Credit Agreement between Rentech, Inc. and Lehman Brothers, Inc. dated May 7, 2008
(incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q, for the quarterly
period ended March 31, 2008, filed May 9, 2008).10.35
    
    
    Credit Agreement, dated May 30, 2008, by and among Rentech Energy Midwest Corporation, as the
borrower, Rentech, Inc. and Credit Suisse, Cayman Islands Branch, individually and as
Administrative Agent and Collateral Agent (incorporated by reference to exhibit 10.1 to Current
Report on Form 8-K filed June 5, 2008).10.36
    
    
    Amended and Restated Credit Agreement, dated June 13, 2008, by and among Rentech Energy Midwest
Corporation, as the borrower, Rentech, Inc. and Credit Suisse, Cayman Islands Branch,
individually and as Administrative Agent and Collateral Agent (incorporated by reference to
exhibit 10.1 to Current Report on Form 8-K filed June 19, 2008).10.37
    
    
    Guarantee and Collateral Agreement, dated May 30, 2008, by and among Rentech Energy Midwest
Corporation, Rentech, Inc., the subsidiaries of Rentech, Inc. listed therein and Credit Suisse,
Cayman Islands Branch, as Collateral Agent (incorporated by reference to exhibit 10.2 to Current
Report on Form 8-K filed June 5, 2008).10.38
    
    
    Reaffirmation and Amendment Agreement, dated June 13, 2008, by and among Rentech Energy Midwest
Corporation, Rentech, Inc., the subsidiaries of Rentech, Inc. listed therein and Credit Suisse,
Cayman Islands Branch, as Collateral Agent (incorporated by reference to exhibit 10.3 to Current
Report on Form 8-K filed June 19, 2008).10.39
    
    
    Intellectual Property Security Agreement, date May 30, 2008, by and among Rentech Energy Midwest
Corporation, Rentech, Inc., the subsidiaries listed therein and Credit Suisse, Cayman Islands
Branch, as Administrative Agent and Collateral Agent (incorporated by reference to exhibit 10.3
to Current Report on Form 8-K filed June 5, 2008).10.40
    
    
    Form of Absolute Share Price Target Performance Share Award Agreement (incorporated by reference
to exhibit 10.1 to Current Report on Form 8-K filed
July 23, 2008).*10.41
    
    
    Form of Total Shareholder Return Performance Share Award Agreement (incorporated by reference to
exhibit 10.2 to Current Report on Form 8-K filed July 23, 2008).*12.1
    
    
    Computation of Ratio of Earnings to Fixed Charges.14
    
    

Code of Ethics.21
    
    
    Subsidiaries of Rentech, Inc.23
    
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14 or Rule 15d-14(a).31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14 or Rule 15d-14(a).32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract or compensatory plan or arrangement.**
    
    Certain portions of this Exhibit have been omitted and filed
separately under an application for confidential treatment.