##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2008
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to .
 Commission File No. 001-33893
 GREENHUNTER ENERGY, INC.
  Delaware
    
    20-4864036(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 1048 Texan Trail, Grapevine, Texas 76051
   Title of each class
    
    Name of each exchange on which registeredCommon Stock ($.001 par value)
    
    NYSE Amex
  o þ
 o þ
 þ o
 o
 
 Large accelerated filer o
Accelerated filer o
Non-accelerated
filer o
(Do not check if a smaller reporting company)
Smaller reporting
company þ
 o þ




---



##### 



TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    1Item 1A
    
    Risk Factors
    
    
    18Item 2.
    
    Properties
    
    
    36Item 3.
    
    Legal Proceedings
    
    
    37Item 4.
    
    Submission of Matters to a vote of Security Holders
    
    
    38PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    39Item 6.
    
    Selected Financial Data
    
    
    40Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    41Item 7A
    
    Quantitative and Qualitative Disclosures About Market Risks
    
    
    56Item 8
    
    Financial Statements and Supplementary Data
    
    
    56Item 9.
    
    Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    56Item 9A(T).
    
    Controls and Procedures
    
    
    56Item 9B.
    
    Other Information
    
    
    57PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    58Item 11.
    
    Executive Compensation
    
    
    61Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    63Item 13.
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    64Item 14.
    
    Principal Accounting Fees and Services
    
    
    65PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    66EX-31.1EX-31.2EX-32.1EX-32.2




---



##### Table of Contents



Part I
 
 Item 1. Business
 Some of the information contained in this Description of Business may contain forward-looking
statements. Such statements can be identified by the use of forward-looking words such as may,
will, anticipate, expect, estimate, continue or other such words. These types of
statements discuss future expectations or contain projections or estimates. When considering such
forward-looking statements, investors should consider the risk factors set forth in the Risk
Factors section of this report. These risk factors and other unidentified factors could cause
actual results to differ materially from those contained in any forward-looking statement.
 Website Access to Reports
 www.greenhunterenergy.com
 Incorporation and Organization
    Business
  1




---



##### Table of Contents



Biofuels
     
    
    Beneficial government initiatives and incentives.Initiatives and incentives at the
federal, state and local government levels enhance the economics and market demand for
biodiesel production. These initiatives include tax credits as well as mandates for
increased use of biodiesel and biodiesel blends.
    
    Environmental benefits.Biodiesel is biodegradable, nontoxic and essentially free
of sulfur and aromatics. Additionally, biodiesel reduces tailpipe exhaust emissions,
greenhouse gas emissions and sulfur dioxide emissions (acid rain) and minimizes black
smoke and smog-causing particulate matter.
    
    Easy integration into existing infrastructure.As discussed above, biodiesel can be
used in diesel engines with no modifications as B100 or mixed with petroleum diesel,
such as the B20 and B5 blends. A blended biodiesel may enhance petroleum diesel because
it has the ability to extend engine life and decrease operating expenses due to the
increase in engine lubricity.
 2




---



##### Table of Contents




    
    Increased energy security.U.S. domestic oil production has continuously declined
while demand has grown since the mid-1980s, increasing dramatically our nations import
requirements of crude oil from third world countries. Use of biodiesel, which can be
produced with a variety of feedstocks from both domestic and worldwide sources, can
help reduce dependence on imported oil. Many of these feedstocks are normally unfit for
human consumption.
    
    Imbalance of supply and demand.We believe that the biodiesel industry lacks
sufficient capacity for production of high quality B100 to meet anticipated demand for
biodiesel as well as current biodiesel specifications mandated by the U.S. government.
ASTM D-6751-08 requires a new Cold Soak Filtration test standard which will create
problems for biodiesel producers who use animal fats and palm oil feedstock and lack
distillation technologies that exist at our state-of-the-art refinery.
 Biodiesel basics
     Traditional Biodiesel Production Process
  3




---



##### Table of Contents



Triglycerides
  Transesterification
    4




---



##### Table of Contents



Glycerin
  Methanol
  Biodiesel Quality Standards
     
    
    ASTM D975-08a, Specification for Diesel Fuel Oils  used for on- and off-road diesel
applications; revised to include requirements for up to 5 percent biodiesel.
    
    ASTM D396-08b, Specification for Fuel Oils  used for home heating and boiler
applications; revised to include requirements for up to 5 percent biodiesel.
    
    ASTM D7467-08, Specification for Diesel Fuel Oil, Biodiesel Blend (B6 to 20)  a
completely new specification that covers finished fuel blends of between 6 (B6) and 20
(B20) percent biodiesel for on- and off-road diesel engine use.
 5




---



##### Table of Contents



Feedstocks
    6




---



##### Table of Contents



Government Initiatives
 Tax Incentives.
 Use Mandates.
 
    
    15 billion gallons of the ultimate 36 billion gallon requirement by 2022 will come
from conventional biofuels and includes biodiesel;
    
    21 billion gallons of the overall 36 billion gallons mandate are to be advanced
biofuels (defined as cellulosic ethanol, ethanol derived from sugar or starch, biogas,
biomass-based diesel, butanol or other alcohols and other fuel derived from cellulosic
biomass) by 2022;
    
    16 billion gallons of the advanced biofuels, under the same timeframe, are to
come from cellulosic biofuel; and
    
    1 billion gallons by 2012 are required to be from biomass-based diesel.
 Benefits of Biodiesel
  
    
    Biodiesel reduces by as much as 65% the emission of particulates, which are
small particles of solid combustion products. This can reduce cancer risks by up to 94%
according to testing sponsored by the Department of Energy.
    
    Biodiesel does produce the same or slightly more (up to 7% more) nitrogen oxide
(NOx) emissions than petrodiesel, but these emissions can be reduced through the use
of catalytic
 7




---



##### Table of Contents



converters. As biodiesel contains no nitrogen, the increase in NOx emissions may be due
to the higher cetane rating of biodiesel as well as higher oxygen content, which allows
it to convert nitrogen from the atmosphere into NOx more rapidly. Properly designed and
tuned engines may eliminate this increase.
 
    
    Biodiesel has higher cetane rating than petrodiesel, and therefore ignites more
rapidly when injected into the engine. It also has the highest energy content (B100) of
any alternative fuel in its pure form.
    
    Biodiesel is twice as biodegradable as petroleum oils and is non-toxic. Tests
sponsored by the United States Department of Agriculture confirm biodiesel is less
toxic than table salt and biodegrades as quickly as sugar.
    
    In the United States, biodiesel is the only alternative fuel to have
successfully completed the Health Effects Testing requirements (Tier I and Tier II) of
the Clean Air Act (1990).
  
    
    Today, diesel engines can run most biodiesel blends with no modifications.
    
    Biodiesel does not need investments into new infrastructure. It can use the
current distribution and retail infrastructure.
    
    Biodiesel can be blended in any percentage with petrodiesel .
    
    Biodiesel has the highest energy content (BTU) of any
alternative fuel .
    
    Harmful emissions (carbon monoxide, particulate matter and hydrocarbons) are
reduced by more than 50% compared with petrodiesel.
    
    Biodiesel is the only alternative fuel to pass Tier 1 and Tier 2 health effects
testing required by the Clean Air Act.
    
    Biodiesel has a positive energy balance.
  Market Acceptance of Biodiesel
   
    
    600 major fleets use biodiesel commercially.
    
    More than 1,250 retail filling stations offer biodiesel to the public.
    
    Our federal government has established a renewable fuel standard for biodiesel
use in the United States of 1 billion gallons by 2012.
    
    Currently there are 176 plants either with producing biodiesel or being
planned.
  
    
    Asia Pacific will overtake North America by 2010
    
    As economies mature, demand typically shifts from industrial use to
transportation sectors
    
    U.S. is gasoline focused regarding fuels whereas Asia is diesel-focused (gas
oil)
    
    Biodiesel will have far greater impact on road diesel balances than ethanol
will have on gasoline balances
 8




---



##### Table of Contents



GreenHunter BioFuels, Inc. (formerly Channel Refining Corporation) Acquisition
   
    
    Feedstock can be delivered by either barge, truck, rail or ship (across the Channel)
    
    Distribution of finished product can be either shipped by barge, delivered through an
on-site truck terminal or possibly loaded onto bulk rail transport
    
    An existing dock is capable of unloading 30 thousand barrels at any one time
   
    
    638 thousand barrels of product storage
    
    Adequate water and power supplies
    
    Sophisticated chemical processing instrumentation and controls
    
    Additional processing equipment for market inefficiencies
    
    Ample expansion area for increased production capacity
    
    Ample open acreage for additional storage capacity
 GreenHunter Strategy for the GreenHunter BioFuels Plant
  
    
    Converted the existing facility to a 105 million gallons per year (mmgy) biodiesel
refinery capable of utilizing multiple vegetable oil feedstocks and animal fats
    
    Installed tankage for 638 thousand barrels of bulk storage capacity to provide the
ability to acquire feedstock and sell finished product at opportune times, as well as to
run terminal services as a secondary business unit when we are not using the storage for
our own product
    
    Maintained an approximate $0.50 per installed capital cost per gallon. Management
believes the current market for competitors ranges from $1.10  $1.25 per installed gallon
 9




---



##### Table of Contents




    
    Maintained cost control by self-performing as the general contractor in this project;
construction of the refinery is complete with additional components substantially complete
    
    Produced biodiesel to ASTM specifications to allow us to take advantage of the
following federal/state tax incentives: Federal Biodiesel Excise Tax Credit of $1.00/gallon
for straight agri-biodiesel or $.01/percentage point of agri-biodiesel in a petroleum based
diesel blend
    
    Processed contaminated methanol into a commercial grade methanol product through use of
a 45,000 bbl/month (capacity) methanol processing tower located on the site. This tower is
unique in that methanol represents approximately 8-10% of the cost of goods sold in the
manufacturing and refining of biodiesel. We would only utilize approximately 20% of the
methanol towers total capacity. Therefore, it has the ability to contribute to lower
operating costs by allowing us to purchase contaminated methanol and re-process it to a
99.85% methanol which can be used in the refining process at 40-50% below the cost of pure
methanol. In addition, we will have additional methanol capacity to further process and
sell to other biodiesel producers or support additional company-owned refineries in the
future. Very few other biodiesel producers in the U.S. have their own on-site methanol
distillation tower
    Competitive Strengths
  
    
    We have substantially all of the necessary infrastructure in place
    
    The transportation infrastructure of barge, rail and truck provides maximum flexibility
to receive and ship products at the most economic cost
    
    The ability to be both a producer and a terminal operator/blender provides
opportunistic advantages for feedstock acquisition and finished product sales
    
    Our management team has substantial experience in the oil and gas industry and have
historically been the lower-cost producers during their prior careers
    
    The refinery location has transportation infrastructure that is unique in the biodiesel
industry:
 a.
    
    Ability to bring in by barge or ship all raw materials either domestically or
internationally,
 10




---



##### Table of Contents



b.
    
    Rail service for raw materials and finished product shipping on-site, andc.
    
    Major interstate within 5 miles.
  a.
    
    Located in one of the largest U.S. cities (Houston) which also has one of
the highest rates of diesel fuel use per capita in the United States;b.
    
    Provides the ability to ship finished product by barge to either domestic or
international destinations; andc.
    
    Provides the ability to economically access interstate pipelines to
transport finished product to major northeast U.S. markets.
 Sustainable Competitive Strategy
   Current Economic Conditions and Plant Status
   11




---



##### Table of Contents



Biomass
     Mesquite Lake Resource Recovery Plant Acquisition
     12




---



##### Table of Contents




    
    Mesquite Lake has executed an interconnect agreement with Imperial Irrigation
District
    
    The projects proximity to manure sourced from cattle yards in the Imperial Valley is
excellent
    
    The project qualifies for the Federal Production Tax Credit
    
    The facility should be able to use multiple biomass fuel sources at a large variance
of heat rates
    
    The project will provide base load renewable power as opposed to intermittent power
provided by other forms of renewable power projects
  
    
    The current day replacement costs for an 23.5 MW biomass facility is approximately $2.1
million per MW ($50 million). GreenHunter Energy has acquired and is in the process of
refurbishing the facility at a cost of $1.7 million per MW ($39.1 million)
    
    The electrical infrastructure of the plant is in excellent operational shape
    
    The power generation and distribution infrastructure of the plant is in very good
condition with a limited amount of overhaul needed
    
    The original construction cost of the plant in 1989 was $68 million
 GreenHunter Energy Strategy for the Mesquite Lake Plant
  
    
    Find an optimal biomass fuel mix that will maximize profitability of the plant
    
    Execute long term supply contracts with local biomass
producers
    
    Begin to produce our own biomass, investigate the possibility of planting a certain
type of tree that will ultimately make the facility a closed-loop biomass facility
    
    Evaluate the feasibility of building an energy campus that includes solar power,
wind, a biodiesel refinery and possibly an ethanol plant around the existing site location
 Competitive Strengths
  
    
    We acquired this asset for $2.6 million. The estimated cost to restart this facility is
$36.5 million, and a total cost (purchase price and a refurbishment) of $39.1 million,
which is approximately 58% of the original cost dating back to 1989
    
    We have a transmission interconnect in place
    
    We are currently negotiating a 15 to 20 year power purchase agreement with either a
regional or a major utility
    
    We estimate our fuel source cost to be 10-25% below industry standard
    
    This power plant is the only one of its kind in the US capable of utilizing 100% cow
manure to generate electricity
 13




---



##### Table of Contents



Wind Energy
   Wind Energy Basics
 wind turbine
 rotor
 lift drag
 wind plant wind farm
   Current GreenHunter Energy Wind Projects
  14




---



##### Table of Contents



Investment in MingYang
     
    
    During 2009 through 2012, Wind Energy has the preferential right to purchase any
turbines to be exported by MingYang to North America
    
    During 2009 through 2012, Wind Energy will have the right to purchase larger capacity
turbines if MingYang manufacturers such turbines
    
    MingYang will provide maintenance services through a services agreement between the two
companies
  Montana
 Kimmet Ranch Wind Project, Glacier County
 
    
    2,750 Acres under lease
    
    Potential for 10 MW
    
    Wind Strength: Measured monthly average of 18 MPH
 15




---



##### Table of Contents




    
    Meteorological tower installed December 2005 at 60 meter hub height.
    
    Interconnection with 115kV transmission line
 Valley County Wind Project, Valley County
 
    
    300 acres under lease
    
    Potential for 10 MW
    
    Wind Strength: Measured monthly average of 16 MPH
    
    3 Meteorological towers collecting wind data in four locations over a two year period
at hub heights of 40 meters and 60 meters
    
    Interconnection to 161 kV WAPA transmission line upgradeable to 230kV, or to Colstrip
lines jointly with coal project, or with upgrades to WAPA lines to the east into North
Dakota and Minnesota
 California
 Ocotillo Wind Project, Imperial County
 
    
    6,280 acres under lease with the Bureau of Land Management
    
    Seeking monitoring and testing ROW
    
    Potential for 150 MW
 Texas
 Hilltop Wind Project, Palo Pinto County
 
    
    1 Meteorological tower installed in June 2008 at 60 meter hub height
    
    1,200 acres under lease
    
    Potential for 36 MW
 Snow Hill
 
    
    1 Meteorological tower installed in June 2008 at 60 meter hub height
    
    Small tract leased for meteorological tower installation
    
    Potential for 80 MW
 Wyoming
 Wheatland Wind Project, Platt County
 
    
    1 Meteorological tower installed in October 2008
    
    Project would be located on federal Bureau of Land Management property
    
    Submitted application for ROW lease of property representing approximately 20,000
acres
    
    Potential for 300-400 MW
 China
 Haining City, Zheijang Province
 
    
    Potential for 100 to 200 MW
    
    2 Meteorological towers installed in August 2008
    
    Land would be leased from local government
 16




---



##### Table of Contents



Competition
  Solar Energy
     Geothermal Energy
    17




---



##### Table of Contents



Research and Development
  Employees
  
 Item 1A Risk Factors
 An investment in our securities involves many risks. You should carefully consider the following
risks and all of the other information contained in this prospectus before making an investment
decision. Additional risks related to us and our securities may be included in the applicable
prospectus supplement related to an offering and in our other filings with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, which we
refer to as the Exchange Act. In evaluating our company, the factors described below should be
considered carefully. The occurrence of one or more of these events could significantly and
adversely affect our business, prospects, financial condition, results of operations and cash
flows.
 Risks Associated with our Business
 We have a limited operating history, and our business may not be as successful as we envision.
   18




---



##### Table of Contents



We have yet to attain profitable operations and because we will need additional financing to fund
our activities, there is substantial doubt about our ability to continue as a going concern.
   Our lack of diversification beyond the renewable energy industry may increase our risk.
  We may not be able to effectively manage our acquisition and construction costs.
  We have significant debt that could adversely affect our financial health and prevent us from
fulfilling our obligations.
  
    
    make it more difficult for us to satisfy our obligations;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures and other general corporate expenditures;
    
    force us to sell assets or seek additional capital to service our indebtedness, which
we may be unable to do at all or on terms favorable to us;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
 19




---



##### Table of Contents




    
    place us at a disadvantage compared to our competitors that have less debt;
    
    and limit our ability to borrow additional funds.
 We are dependent upon our key personnel.
  We may not be able to meet our capital requirements.
    20




---



##### Table of Contents



Risks Related to Doing Business in China
  
    
    The legal environment in China is uncertain and our ability to legally protect our
investments could be limited (e.g. there could be a risk of expropriation of our revenue
and/or assets);
    
    The Chinese government exerts substantial influence over the manner in which we must
conduct our business activities;
    
    More restrictive rules on foreign investment could adversely affect our ability to
expand our operation in China;
    
    Future inflation in China may inhibit our activity to conduct business in China;
    
    We may have limited legal recourse under Chinese law if disputes arise under our
contracts with third parties;
    
    Fluctuations in currency-exchange rates may impact our profitability;
    
    Conducting business in China, may hinder our ability to collect on accounts receivables;
    
    Protecting and enforcing our intellectual property rights may be more difficult in China;
    
    Operating in China may require import and export licenses as well as payment of
possible tariffs; and
    
    Additional expenses and inherent risks, such as differences in language and cultural
approaches to the conduct of business, result from operating in geographically distant
locations.
 21




---



##### Table of Contents



Risks Related to the Renewable Energy Industry
 We have not currently identified specific future investments or acquisitions within the renewable
energy industry and thus cannot evaluate their associated merits or risks.
  The abundant competition and rapidly changing technology in the renewable energy industry may
impair our success.
  Changes to the currently favorable regulations and legislation within the renewable energy industry
may adversely impact our future revenues.
  22




---



##### Table of Contents



The pricing of renewable energy may fluctuate significantly due to the price of oil and gas.
  The pricing of renewable energy may fluctuate due to the level of production of renewable energy.
  Construction and development delays or cost over-runs may adversely affect our business.
  23




---



##### Table of Contents



We would be liable for violations of environmental laws related to our ownership or operation of
our facilities.
  Risks Related to the Biodiesel Industry
 The biodiesel industry is highly dependent on a mix of legislation and regulation (including tax
incentives) and any changes in legislation or regulation could harm our business, results of
operations and financial condition.
   24




---



##### Table of Contents



Our operations are subject to various regulatory schemes, including environmental regulations, and
failure to comply with such regulations could harm our business, results of operations and
financial condition.
   25




---



##### Table of Contents



Our results of operations, financial condition and business outlook are highly dependent on
commodity prices, which are subject to significant volatility and uncertainty, and the availability
of supplies.
     26




---



##### Table of Contents



Cold weather can cause biodiesel, particularly biodiesel produced from animal fats, oils and
greases, to gel sooner than petroleum-based diesel, which has resulted in price discounts for
biodiesel produced from animal fats, oils and greases.
   The U.S. biodiesel industry is highly dependent upon a myriad of federal and state legislation and
regulation and any changes in legislation or regulation could materially and adversely affect our
results of operations and financial position.
  27




---



##### Table of Contents



Competition due to advances in alternative fuels may lessen the demand for biodiesel and negatively
impact our profitability.
  Adverse public opinions concerning the biodiesel industry in general could harm our business.
  
    
    public perception of the food versus fuel debate;
    
    public perception that biodiesel is produced from waste vegetable oil or other
lower-quality feedstocks, thereby resulting in lower quality fuel;
    
    public perception that the use of biodiesel will require excessive engine
modifications, or that engines running biodiesel will not reliably start in cold
conditions;
    
    actual or perceived problems with biodiesel quality or performance; and
    
    concern that using biodiesel will void engine warranties.
  Risks Relating to the Wind Energy Industry
 One of our business segments depends on the availability of wind, which may not meet our
expectations if weather patterns vary greatly.
  28




---



##### Table of Contents




    
    the limited time period over which the site-specific wind data were collected;
    
    the potential lack of close correlation between site-specific wind data and the
longer-term regional wind data;
    
    inaccurate assumptions related to wake losses and wind shear;
    
    the limitations in the accuracy with which anemometers measure wind speed;
    
    the inherent variability of wind speeds;
    
    the lack of independent verification of the turbine power curve provided by the manufacturer;
    
    the potential impact of climatic factors, including icing and soiling of wind turbines;
    
    the potential impact of topographical variations, turbine placement and local
conditions, including vegetation;
    
    the power delivery schedule being subject to uncertainty;
    
    the inherent uncertainty associated with the use of models, in particular
future-oriented models; and
    
    the potential for electricity losses to occur before delivery.
  The inherent volatility in the market price of electricity could impact our profitability.
  29




---



##### Table of Contents



Any inability or delay in updating or obtaining required licenses and permits could hinder
development and adversely affect profitability.
  Our inability to enter interconnection agreements would restrict our ability to sell electricity.
  The wind energy industry is highly dependent on tax incentives.
   Risks Relating to the Biomass Industry
 The inherent volatility in the market price of electricity could impact our profitability.
  30




---



##### Table of Contents



Any inability or delay in updating or obtaining required licenses and permits could hinder
development and adversely affect profitability.
  Our inability to enter interconnection agreements would restrict our ability to sell electricity.
  The biomass energy industry is highly dependent on tax incentives.
 Production Tax Credit
    31




---



##### Table of Contents



Credit
for Producing Fuels from Nonconventional Sources
 Bonus Depreciation .
 No Assurance of Continued Tax Incentives
 Risks Relating to the Ownership of our Securities
 Our common stock only has been publicly traded since January 2, 2008, and the price of our common
stock has fluctuated substantially since then and may fluctuate substantially in the future.
  32




---



##### Table of Contents




    
    changing conditions in fuel markets;
    
    changes in financial estimates by securities analysts;
    
    changes in market valuations of comparable companies;
    
    additions or departures of key personnel;
    
    future sales of our stock;
    
    tax and other regulatory developments;
    
    our ability to develop and complete facilities, and to introduce and market the energy
created by such facilities to economically viable production volumes in a timely manner;
and
    
    other factors discussed in the Risk Factors section and elsewhere in this prospectus
and in any prospectus supplement.
  If we issue additional shares in the future, it will result in dilution to our existing
stockholders.
  We may issue shares of our capital stock or debt securities to complete a business combination or
acquire assets, which would dilute the equity interest of our stockholders and could cause a change
in control of our ownership.
  
    
    significantly dilute the equity interest of current stockholders in our Company;
 33




---



##### Table of Contents




    
    subordinate the rights of holders of common stock if preferred stock is issued with
rights senior to those afforded to holders of our common stock;
    
    cause a change in control if a substantial number of our shares of common stock are
issued, which may affect, among other things, our ability to use our net operating loss
carry forwards, if any, and possibly result in the resignation or removal of some or all
of our present officers and directors; and
    
    adversely affect prevailing market prices for our common stock.
  
    
    default and foreclosure on our assets if our operating revenues after a business
combination or asset purchase are insufficient to pay our debt obligations;
    
    acceleration of our obligations to repay the indebtedness, even if we have made all
principal and interest payments when due, if the debt security contains covenants that
require the maintenance of certain financial ratios or reserves, or change of control
provisions, and any such covenant is breached without a waiver or renegotiation of that
covenant;
    
    our immediate payment of all principal and accrued interest, if any, if the debt
security is payable on demand; and
    
    our inability to obtain additional financing, if necessary, if the debt security
contains covenants restricting our ability to obtain additional financing while such
security is outstanding.
 Our ability to successfully effect a business combination and to be successful afterwards will be
dependent upon the efforts of our key personnel, and others hired to manage the acquired business
and whom we would have only a limited ability to evaluate.
  Our officers and directors allocation of their time to other business interests could have a
negative impact.
  Because of our limited resources and the significant competition for business combination
opportunities, we may not be able to consummate attractive business combinations.
  34




---



##### Table of Contents



We may be unable to obtain additional financing, if required, to complete a business combination,
asset purchase or to fund the operations and growth of the target business, which could compel us
to restructure the transaction or abandon a particular business combination or asset purchase.
  We are subject to credit market risk.
  In the event we cannot comply with the requirements of the Sarbanes-Oxley Act of 2002 or we acquire
a business that is unable to satisfy regulatory requirements relating to internal controls, or if
our internal controls over financial reporting are not effective, our business and our stock price
could suffer.
  35




---



##### Table of Contents



Our outstanding options, warrants and convertible preferred stock may have an adverse effect on the
market price of common stock and make it more difficult to effect a business combination.
  We do not intend to pay dividends on our common stock and thus stockholders must look solely to
appreciation of our common stock to realize a gain on their investments.
  
 Item 2. Properties
   36




---



##### Table of Contents



Item 3. Legal Proceedings
 Orion Ethanol, Inc, a Nevada corporation, Plaintiff, vs . GreenHunter Energy, Inc. a Delaware
corporation, GreenHunter BioFuels, Inc. a Texas corporation, et al, Defendants, in the
United States District Court for the District of Kansas.
   Bioversel, Inc. f/k/a Bioversel Trading, Inc., Plaintiff, vs. GreenHunter BioFuels, Inc.,
Defendant, in the District Court of Harris County, Texas, 55 th Judicial District .
   Jacob Stern & Sons, Inc., Plaintiff vs. GreenHunter BioFuels, Inc., Defendant, in the District
Court of Harris County, Texas, 334 th Judicial District.
  37




---



##### Table of Contents



Item 4. Submission of Matters to a vote of Security Holders
  38




---



##### Table of Contents



Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  Average DailyTrading VolumeHigh
    
    Low
    
    (Shares)2008First Quarter
    
    $
    20.50
    
    
    $
    12.00
    
    
    
    3,640Second Quarter
    
    $
    25.45
    
    
    $
    11.81
    
    
    
    26,642Third Quarter
    
    $
    19.25
    
    
    $
    11.55
    
    
    
    39,256Fourth Quarter
    
    $
    14.30
    
    
    $
    3.28
    
    
    
    36,287
   Equity Compensation Plan InformationNumber of securitiesremaining available forfuture issuance underNumber of securities to
    
    Weighted-average
    
    equitybe issued upon exercise
    
    exercise price of
    
    compensation plansof outstanding options,
    
    outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved by
security holders
    
    
    477,500
    
    
    $
    19.58
    
    
    
    1,522,500Equity compensation plans not approved by
security holders
    
    
    5,152,000
    
    
    $
    9.06
    
    
    
    Total
    
    
    5,629,500
    
    
    $
    9.96
    
    
    
    1,522,500
 Recent Sales of Unregistered Securities
   39




---



##### Table of Contents



Item 6. Selected Financial Data
  For the years ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004Operating resultsRevenues
    
    $
    5,001,581
    
    
    $
    1,052,743
    
    
    $
    
    
    
    $
    
    
    
    $
    Cost of goods and services
    
    
    14,150,681
    
    
    
    758,799
    
    
    
    
    
    
    
    
    
    
    
    Hurricane repairs and losses
    
    
    5,631,158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Project costs
    
    
    779,198
    
    
    
    276,505
    
    
    
    1,016,931
    
    
    
    1,087,642
    
    
    
    715,706Selling, general and administrative
    
    
    22,382,367
    
    
    
    11,783,113
    
    
    
    676,881
    
    
    
    357,327
    
    
    
    223,054Loss on impairments
    
    
    21,768,886
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating loss
    
    
    (62,423,851
    )
    
    
    (11,884,301
    )
    
    
    (1,728,500
    )
    
    
    (1,454,482
    )
    
    
    (942,570
    )Loss from discontinued operations
    
    
    (532,682
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net lossbefore minority interest
    
    
    (65,790,379
    )
    
    
    (12,034,342
    )
    
    
    (1,760,195
    )
    
    
    (1,454,210
    )
    
    
    (942,570
    )Preferred dividends
    
    
    (16,188,219
    )
    
    
    (1,657,671
    )
    
    
    
    
    
    
    
    
    
    
    Net loss to common stockholders
    
    $
    (82,403,990
    )
    
    $
    (13,692,013
    )
    
    $
    (1,760,195
    )
    
    $
    (1,454,210
    )
    
    $
    (942,570
    )Net loss per common share
    
    $
    (3.04
    )
    
    $
    (0.80
    )
    
    $
    (0.12
    )
    
    $
    (0.10
    )
    
    $
    (0.06
    )Balance sheet (end of period)Cash and cash equivalents
    
    $
    676,636
    
    
    $
    18,750,394
    
    
    $
    64,786
    
    
    $
    36,461
    
    
    $
    13,305Property and equipment, net
    
    
    63,096,551
    
    
    
    32,668,032
    
    
    
    114,040
    
    
    
    109,451
    
    
    
    40,341Total assets
    
    
    93,738,970
    
    
    
    59,497,285
    
    
    
    698,308
    
    
    
    632,781
    
    
    
    101,506Long-term debt
    
    
    63,014,601
    
    
    
    16,716,738
    
    
    
    2,851,259
    
    
    
    
    
    
    
    Total liabilities
    
    
    94,033,070
    
    
    
    21,097,191
    
    
    
    3,333,505
    
    
    
    326,146
    
    
    
    291,661Preferred Stock
    
    
    23,075,000
    
    
    
    12,500,000
    
    
    
    
    
    
    
    
    
    
    
    Total stockholders equity (deficit)
    
    $
    (186,810
    )
    
    $
    38,400,094
    
    
    $
    (2,635,197
    )
    
    $
    (306,635
    )
    
    $
    (190,155
    )
 40




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis provides information which management believes is
relevant to an assessment and understanding of our financial condition and results of operations.
The discussion contains forward-looking statements that involve risks and uncertainties (see
Forward-Looking Statements above). Actual events or results may differ materially from those
indicated in such forward-looking statements. The discussion should be read in conjunction with the
financial statements and accompanying notes included herewith.
 Overview
   BioFuels
    41




---



##### Table of Contents



BioMass
  Wind Energy
    42




---



##### Table of Contents



Results of Operations
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007:
  BioFuels Revenues
  BioFuels Costs of Sales and Services
  Wind Energy Project Costs
  Biomass Project Costs
  Hurricane repairs and losses
  43




---



##### Table of Contents



Depreciation Expense
  Loss on Asset Impairments
  General and Administrative Expense
      Operating Loss
     44




---



##### Table of Contents



Interest and Other Revenues
  Interest, Accretion and Other Expense
  Discontinued Operations
  Net Loss
  Net Loss to Common Shareholders
   Results of Operations
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006:
  45




---



##### Table of Contents



Biofuels Revenues and Operating Costs
  Wind Energy Operating Costs
  Depreciation Expense
  General and Administrative Expense
  Operating Loss
  Other Income and Expense
  46




---



##### Table of Contents



Net Loss
  Liquidity and Capital Resources
 Cash Flow and Working Capital
  Operating Activities
   Financing Activities
  Notes Payable
  47




---



##### Table of Contents



Convertible Debt
  10% Series A Senior Secured Redeemable Debentures
  9% Series B Senior Secured Redeemable Debentures
  Nonrecourse Term Loan and Working Capital Loan
  Series A 8% Convertible Preferred Stock
   48




---



##### Table of Contents



Series B Convertible Preferred Stock
  Common Stock
      Common Stock Warrants
  Investing Activities and Future Requirements
 Capital Expenditures
  Forecast
  49




---



##### Table of Contents



BioFuels
  Biomass
  Wind Energy
  Obligations Under Material Contracts
  Consulting Agreement with Chateau
  Investment in MingYang
  Port Sutton
  Weaknesses and Uncertainties that May Affect our Financial Condition and Ability to Continue
as a Going Concern
  50




---



##### Table of Contents



51




---



##### Table of Contents



52




---



##### Table of Contents



Critical Accounting Policies and Other
   Project Costs
  Fair Value of Financial Instruments
  Revenue recognition
  Stock-Based Compensation
 Share-Based Payments
 53




---



##### Table of Contents



Impairments
  Asset Retirement Obligations
  Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
 Business Combinations
 54




---



##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133
 Contractual Obligations and Commercial Commitments
  Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsContractual Obligations:Fixed-rate long-term debt(a)
    
    $
    3,147,927
    
    
    $
    85,285
    
    
    $
    278,553
    
    
    $
    220,046
    
    
    $
    2,564,044Fixed-rate interest payments(a)
    
    
    1,395,677
    
    
    
    179,655
    
    
    
    494,188
    
    
    
    309,833
    
    
    
    412,000Nonrecourse Variable-rate long-term debt(b)
    
    
    48,973,591
    
    
    
    19,016,591
    
    
    
    21,359,207
    
    
    
    8,597,793
    
    
    
    10% Series A Secured Redeemable Debentures(c)
    
    
    29,769,820
    
    
    
    2,103,416
    
    
    
    13,544,591
    
    
    
    14,121,814
    
    
    
    Consulting agreement(e)
    
    
    1,274,000
    
    
    
    392,000
    
    
    
    882,000
    
    
    
    
    
    
    
    9% Series B Secured Redeemable Debentures(d)
    
    
    5,016,906
    
    
    
    323,092
    
    
    
    969,277
    
    
    
    3,724,537
    
    
    
    Total Contractual Obligations
    
    $
    89,577,921
    
    
    $
    22,100,039
    
    
    $
    37,527,816
    
    
    $
    26,924,023
    
    
    $
    2,976,044
 
 (a)
    
    Assumes 5.7% interest over the life of the note with principal
payments, amortized on 25 year schedule, beginning January 20, 2009 and the
remainder of the balance of the loan ballooning November 30, 2017.(b)
    
    Assumes quarterly payments beginning March 31, 2009 at 5.44%
interest.(c)
    
    Assumes 10% interest payments over their 5 year term.(d)
    
    Assumes 9% interest payments over their 5 year term.(e)
    
    Payments under consulting agreements have been suspended. Off-Balance Sheet Arrangements
  55




---



##### Table of Contents



Item 7A Quantitative and Qualitative Disclosures About Market Risks
  Commodity Price Risk
  Foreign Currency Exchange Risk
  Interest Rate Risk
  
 Item 8 Financial Statements and Supplementary Data
  
 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  56




---



##### Table of Contents



Changes in Internal Control over Financial Reporting.
  Managements Report on Internal Control over Financial Reporting.
     
 Item 9B. Other Information
  57




---



##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Name
    
    Age
    
    Positions and Offices HeldGary C. Evans
    
    
    51
    
    
    Chairman, President and Chief Executive OfficerRenato T. Bertani
    
    
    55
    
    
    DirectorRonald H. Walker
    
    
    71
    
    
    DirectorMorgan F. Johnston
    
    
    48
    
    
    Senior Vice President, General Counsel, and
SecretaryDavid S. Krueger
    
    
    59
    
    
    Vice President and Chief Financial Officer
 Gary C. Evans  Chairman, President and Chief Executive Officer
    Renato T. Bertani  Director
   58




---



##### Table of Contents



Ronald H. Walker  Director
      Morgan F. Johnston  Senior Vice President, General Counsel, and Secretary
  59




---



##### Table of Contents



David S. Krueger  Vice President and Chief Financial Officer
   Corporate Governance.
    60




---



##### Table of Contents



Code of Conduct and Ethics
  
    
    ethical handling of actual or apparent conflicts of interest;
 
    
    full fair and accurate and timely disclosure in filings with the Securities and Exchange
Commission and other public disclosures;
 
    
    compliance with the law and other regulations;
 
    
    protection of the Companys assets;
 
    
    insider trading policies; and
 
    
    prompt internal reporting of violations of the codes.
  
 Item 11. Executive Compensation
 Summary Compensation Table
  All OtherName and Principal
    
    
    
    
    
    Salary
    
    Bonus
    
    Stock Awards
    
    Option Awards
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Gary C. Evans 
    
    
    2008
    
    
    
    199,230
    
    
    
    200,000
    
    
    
    200,000
    
    
    
    3,236,640
    **
    
    
    12,000
    
    
    
    3,847,870President and CEO*
    
    
    2007
    
    
    
    151,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,166David S. Krueger 
    
    
    2008
    
    
    
    199,230
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    1,011,450
    **
    
    
    9,000
    
    
    
    1,519,680Vice President and
CFO
    
    
    2007
    
    
    
    143,910
    
    
    
    
    
    
    
    
    
    
    
    968,000
    
    
    
    
    
    
    
    143,910Morgan F. Johnston 
    
    
    2008
    
    
    
    199,230
    
    
    
    175,000
    
    
    
    175,000
    
    
    
    1,011,450
    **
    
    
    9,000
    
    
    
    1,569,680Sr. Vice President, General Counsel and Secretary *
    
    
    2007
    
    
    
    141,723
    
    
    
    
    
    
    
    
    
    
    
    880,000
    
    
    
    
    
    
    
    141,723
 
 *
    
    Mr. Evans and Mr. Johnston did not become employed by GreenHunter Energy, Inc. until March 1,
2007. Mr. Evans annual salary for 2007 was $200,000 and Mr. Johnstons annual salary for 2007
was $175,000. Mr. Evans Mr. Johnston and Mr. Krueger are the only current officers of
GreenHunter Energy, Inc. 61




---



##### Table of Contents



**
    
    Mr. Evans received a stock option grant for 880,000 shares, vesting both over time and
achieving specific performance goals at an
exercise price of $18.91 on February 13, 2008. As of December 31, 2008, 352,000 options have
been forfeited. Mr. Krueger received a stock option grant for 275,000 shares, vesting both
over time and achieving specific performance goals at an exercise price of $18.91 on February
13, 2008. As of December 31, 2008, 110,000 options have been forfeited. Mr. Johnston
received a stock option grant for 275,000 shares, vesting both over time and achieving
specific performance goals at an exercise price of $18.91 on February 13, 2008. As of
December 31, 2008, 110,000 options have been forfeited. Outstanding Equity Awards at Fiscal Year-End
  Number of
    
    Number ofSecurities
    
    Securitiesunderlying
    
    underlyingunexercised options
    
    unexercised options
    
    Exercise PriceName
    
    exercisable
    
    unexercisable
    
    ($/sh)
    
    Expiration DateGary C. Evans, CEO
    
    
    234,667
    
    
    
    293,334
    
    
    
    18.91
    
    
    February 13, 2018David S. Krueger , Vice President
    
    
    73,333
    
    
    
    91,667
    
    
    
    18.91
    
    
    February 13, 2018and CFO
    
    
    550,000
    
    
    
    
    
    
    
    5.00
    *
    
    May 5,  2017Morgan F. Johnston, Sr. Vice
    
    
    73,333
    
    
    
    91,667
    
    
    
    18.91
    
    
    February 13, 2018President, General Counsel and Secretary
    
    
    500,000
    
    
    
    
    
    
    
    5.00
    *
    
    May 5,  2017
 
 *
    
    There was no public market for our common shares on the date of grant of the option. Accordingly,
the amounts set out in this column are based upon the fair market value per common share as
estimated by us as at the date of grant of the option, which was $5.00. Director Compensation
  Fees Earned or Paidin Cash
    
    Stock Awards
    
    Option Awards
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)Renato T. Bertani
    
    
    57,750
    
    
    
    
    
    
    
    
    
    
    
    57,750Stuart W. Ray
    
    
    56,750
    
    
    
    
    
    
    
    
    
    
    
    56,750James R. Sasser
    
    
    46,857
    
    
    
    
    
    
    
    1,104,533
    *
    
    
    1,151,390Ronald H. Walker
    
    
    58,000
    
    
    
    
    
    
    
    
    
    
    
    58,000Robert Zahradnik
    
    
    55,500
    
    
    
    
    
    
    
    
    
    
    
    55,500
 
 *
    
    James R. Sasser received a stock option grant for 100,000 shares
vesting equally over a three year period at an exercise price of $10.00
on February 13, 2008.  62




---



##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Name of Beneficial
    
    Amount and Nature of
    
    Percent ofTitle of Class
    
    Owner
    
    Beneficial Ownership(1)
    
    Class(10)Common Stock
    
    Gary C. Evans
    
    
    16,904,079
    (2)
    
    
    74.0Common Stock
    
    Renato T. Bertani
    
    
    33,334
    (3)
    
    
    *Common Stock
    
    Ronald H. Walker
    
    
    33,334
    (4)
    
    
    *Common Stock
    
    Morgan F. Johnston
    
    
    577,726
    (5)
    
    
    2.6Common Stock
    
    David S. Krueger
    
    
    605,000
    (6)
    
    
    2.9Common Stock
    
    Investment Hunter, LLC
    
    
    16,669,412
    (7)
    
    
    74.0Common Stock
    
    West Coast Opportunity Fund, LLC
    
    
    2,082,234
    (8)
    
    
    9.9Common Stock
    
    Southern Ute Growth Fund
    
    
    1,875,000
    (9)
    
    
    8.7Common Stock
    
    All officers and directorsas a group (5 persons named above)
    
    
    18,587,480
    
    
    
    77.6
 
 1
    
    Beneficial Ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with respect to
securities. Each of the beneficial owners listed below has direct ownership of and sole voting
power and investment power with respect to the shares of GreenHunters common stock.2
    
    Consists of 15,154,011 shares and 1,515,401 common stock purchase warrants held directly by
Investment Hunter, LLC, and 234,667 common stock purchase options at an exercise price of
$18.91 per share. Gary C. Evans owns 100% of the capital stock of Investment Hunter, LLC.3
    
    Consists of 33,334 common stock purchase options at an exercise price of $7.50 per share.4
    
    Consists of 33,334 common stock purchase options at an exercise price of $10.00 per share.5
    
    Includes 500,000 common stock purchase options at an exercise price of $5.00 per share,
73,333 common stock purchase options at an exercise price of $18.91 per share and 399 common
stock purchase warrants at an exercise price of $27.50 per share.6
    
    Includes 550,000 common stock purchase options at an exercise price of $5.00 per share, 73,333
common stock purchase options at an exercise price of $18.91 per share and 442 common stock
purchase warrants at an exercise price of $27.50 per share.7
    
    Includes 1,515,401 common stock purchase warrants at an exercise price of $27.50 per share.8
    
    Consists of 541,500 shares of common stock and 1,540,734 shares of Common Stock through the
exercise or conversion of derivative securities within 60 days. Paul J. Orfalea, Lance W.
Helfert and R. Atticus Lowe have shared voting and investment control over the securities held
by West Coast Opportunity Fund, LLC.9
    
    Includes 625,000 common stock purchase warrants at an exercise price of $27.50 per share.10
    
    A total of 21,024,440 shares of GreenHunter Energys Common Stock are considered to be
outstanding pursuant to SEC Rule 13d-3(d)(1). For each Beneficial Owner above, any options
exercisable or securities convertible into common within 60 days have been included in the
denominator. 63




---



##### Table of Contents



Item 13. Certain Relationships and Related Transactions, and Director Independence
 Transactions with Related Persons .
       
    
    the nature of the relationships among the parties;
    
    the materiality of the transaction to the company;
    
    the related persons interest in the transaction; and
    
    the benefit of the transaction to the related person and to the company.
  64




---



##### Table of Contents



Item 14. Principal Accounting Fees and Services
 For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Audit (a)
    
    $
    177,382
    
    
    $
    74,501
    
    
    $
    15,000Tax preparation fees
    
    
    26,133
    
    
    
    10,576
    
    
    
    7,643All other fees (b)
    
    
    11,976
    
    
    
    45,078
    
    
    
    2,550TOTAL
    
    $
    215,491
    
    
    $
    130,155
    
    
    $
    25,193
 
 (a)
    
    Includes fees paid to Hein & Associates for our annual audit
and quarterly reviews and services in connection with our filing of
registration statements.(b)
    
    Includes fees paid to Hein & Associates for the review of
financial information filed in our Form 10 and the audit of the BioFuels
financial statements during 2007 and for consultation on accounting matters
during 2008.  65




---



##### Table of Contents



Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Index to Financial Statements
 PageAudited Consolidated Financial Statements of GreenHunter Energy, Inc.Independent Auditors Report
    
    
    F-1Balance Sheets at December 31, 2008 and 2007
    
    
    F-2Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    F-3Statements of Changes in Stockholders and Members Equity (Deficit) for the
years ended December 31, 2008, 2007 and 2006
    
    
    F-4Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    F-5Notes to Financial Statements
    
    
    F-6
 66




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      HEIN & ASSOCIATES LLP
 
 F-1




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
 DECEMBER 312008
    
    
    2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    676,636
    
    
    $
    18,750,394Restricted cash
    
    
    342,653
    
    
    
    Accounts receivable, net of allowance of $542,965 and 0, respectively
    
    
    4,475,670
    
    
    
    118,709Inventory
    
    
    6,137,780
    
    
    
    23,947Prepaid expenses and other current assets
    
    
    943,135
    
    
    
    513,712Assets held for sale  current
    
    
    53,555
    
    
    
    Total current assets
    
    
    12,629,429
    
    
    
    19,406,762FIXED ASSETS:Land and improvements
    
    
    5,394,866
    
    
    
    2,868,837Buildings
    
    
    3,100,621
    
    
    
    3,209,737Plant and other equipment
    
    
    45,521,460
    
    
    
    13,809,981Accumulated depreciation
    
    
    (2,855,250
    )
    
    
    (162,632
    )Construction in progress
    
    
    11,934,854
    
    
    
    12,942,109Net fixed assets
    
    
    63,096,551
    
    
    
    32,668,032OTHER ASSETS:Assets held for sale
    
    
    4,887,945
    
    
    
    Power purchase agreement
    
    
    
    
    
    
    2,310,000Deferred financing costs
    
    
    3,720,893
    
    
    
    2,729,226Other non-current assets
    
    
    9,404,152
    
    
    
    2,383,265Total assets
    
    $
    93,738,970
    
    
    $
    59,497,285LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Current portion of notes payable, nonrecourse
    
    
    6,761,417
    
    
    $
    166,890Current portion of notes payable
    
    
    507,102
    
    
    
    Accounts payable
    
    
    16,020,538
    
    
    
    2,334,926Dividends payable
    
    
    250,000
    
    
    
    Accrued liabilities
    
    
    5,254,965
    
    
    
    1,878,637Liabilities associated with assets held for sale
    
    
    2,224,447
    
    
    
    Total current liabilities
    
    
    31,018,469
    
    
    
    4,380,453NON-CURRENT LIABILITIES:Notes payable, net of discount of 0 and $282,453, respectively
    
    
    3,062,642
    
    
    
    4,750,054Notes payable, nonrecourse, less current portion
    
    
    36,738,583
    
    
    
    1,502,009Redeemable debentures, net of discount of $1,485,006 and 0, respectively
    
    
    23,139,057
    
    
    
    7,328,290Liabilities associated with assets held for sale, non-current
    
    
    74,319
    
    
    
    Subordinated convertible note payable to related party
    
    
    
    
    
    
    3,136,385Total long-term liabilities
    
    
    63,014,601
    
    
    
    16,716,738COMMITMENTS AND CONTINGENCIES (Note 12)MINORITY INTEREST
    
    
    (107,290
    )
    
    
    STOCKHOLDERS EQUITY:Series A 8% convertible preferred stock, $.001 par value, $1,000 stated
value, 12,500 issued and outstanding
    
    
    12,500,000
    
    
    
    12,500,000Series B convertible preferred stock, $.001 par value, $1,000 stated
value, 10,575 and 0 issued and outstanding, respectively
    
    
    10,575,000
    
    
    
    Common stock, $.001 par value, 90,000,000 authorized shares,
20,988,876 and 19,759,173 issued and outstanding, respectively
    
    
    20,989
    
    
    
    19,759Additional paid-in capital
    
    
    81,100,216
    
    
    
    43,771,708Treasury stock, at cost, 44,436 and 0 shares, respectively
    
    
    (678,538
    )
    
    
    Unearned common stock in KSOP, at cost, 15,200 and 0 shares, respectively
    
    
    (225,913
    )
    
    
    Accumulated deficit
    
    
    (103,478,564
    )
    
    
    (17,891,373
    )Total stockholders (deficit) equity
    
    
    (186,810
    )
    
    
    38,400,094Total liabilities and stockholders (deficit) equity
    
    $
    93,738,970
    
    
    $
    59,497,285
 F-2




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 YEARS ENDED DECEMBER 31,2008
    
    
    2007
    
    
    2006REVENUE:Product sales
    
    $
    4,628,108
    
    
    $
    957,174
    
    
    $
    Terminal revenues
    
    
    373,473
    
    
    
    
    
    
    
    Processing revenue
    
    
    
    
    
    
    95,569
    
    
    
    Total revenue
    
    
    5,001,581
    
    
    
    1,052,743
    
    
    
    COSTS AND EXPENSES:Cost of sales and services
    
    
    14,150,681
    
    
    
    758,799
    
    
    
    Hurricane repairs and losses
    
    
    5,631,158
    
    
    
    
    
    
    
    Project costs
    
    
    779,198
    
    
    
    276,505
    
    
    
    1,016,931Depreciation expense
    
    
    2,713,142
    
    
    
    118,627
    
    
    
    34,688General and administrative (including stock
option expense of $8,196,453 and $6,321,321,
respectively)
    
    
    22,382,367
    
    
    
    11,783,113
    
    
    
    676,881Loss on asset impairments
    
    
    21,768,886
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    67,425,432
    
    
    
    12,937,044
    
    
    
    1,728,500OPERATING LOSS FROM CONTINUING OPERATIONS
    
    
    (62,423,851
    )
    
    
    (11,884,301
    )
    
    
    (1,728,500
    )OTHER INCOME (EXPENSE):Interest and other income
    
    
    644,156
    
    
    
    373,027
    
    
    
    487Interest, accretion and other expense
    
    
    (4,010,684
    )
    
    
    (523,068
    )
    
    
    (32,182
    )Total other income (expense)
    
    
    (3,366,528
    )
    
    
    (150,041
    )
    
    
    (31,695
    )Net loss from continuing operations before
minority interest
    
    
    (65,790,379
    )
    
    
    (12,034,342
    )
    
    
    (1,760,195
    )Minority Interest
    
    
    107,290
    
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (65,683,089
    )
    
    
    (12,034,342
    )
    
    
    (1,760,195
    )Loss from discontinued operations, net of taxes
    
    
    (532,682
    )
    
    
    
    
    
    
    Net Loss
    
    
    (66,215,771
    )
    
    
    (12,034,342
    )
    
    
    (1,760,195
    )Preferred stock dividends
    
    
    (1,000,000
    )
    
    
    (707,671
    )
    
    
    Deemed preferred stock dividends
    
    
    (15,188,219
    )
    
    
    (950,000
    )
    
    
    Net loss to common stockholders
    
    $
    (82,403,990
    )
    
    $
    (13,692,013
    )
    
    $
    (1,760,195
    )Weighted average shares outstanding, basic and
diluted
    
    
    20,216,032
    
    
    
    17,082,684
    
    
    
    14,590,141Net loss per share from continuing operations
    
    $
    (4.05
    )
    
    $
    (0.80
    )
    
    $
    (0.12
    )Net loss per share from discontinued operations
    
    $
    (0.03
    )
    
    $
    
    
    
    $
    Net loss per share
    
    $
    (4.08
    )
    
    $
    (0.80
    )
    
    $
    (0.12
    )
 F-3




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    TotalSeries A
    
    
    Series B
    
    
    Common
    
    
    Paid in
    
    
    Member
    
    
    Accumulated
    
    
    Treasury
    
    
    Shares in
    
    
    EquityPreferred Stock
    
    
    Preferred Stock
    
    
    Stock
    
    
    Capital
    
    
    Contributions
    
    
    Deficit
    
    
    Stock
    
    
    KSOP
    
    
    (Deficit)BALANCE, January 1, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,745,800
    
    
    $
    (2,439,165
    )
    
    $
    
    
    
    $
    
    
    
    $
    306,635Members contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,948,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,948,000Buyout of members interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (309,125
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (309,125
    )Conversion of member equity to debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,820,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,820,000
    )Reverse merger
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    1,549,163
    
    
    
    (1,564,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (512
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,760,195
    )
    
    
    
    
    
    
    
    
    
    
    (1,760,195
    )BALANCE, December 31, 2006
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    1,549,163
    
    
    
    
    
    
    
    (4,199,360
    )
    
    
    
    
    
    
    
    
    
    
    (2,635,197
    )Issue 12,500 preferred shares in private placement
    
    
    12,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500,000Issue 450,000 common shares to acquire GreenHunter BioFuels, Inc.
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    2,078,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,079,000Issue 500,000 common shares to acquire power purchase agreement
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    2,309,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,310,000Issue 300,000 common shares for fees on biomass plant acquisition
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    1,385,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,386,000Issue 2,807,834 common stock warrants in private placement of
preferred and common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,717,308
    
    
    
    
    
    
    
    (950,000
    )
    
    
    
    
    
    
    
    
    
    
    2,767,308Issue 4,131,500 common stock options to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,321,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,321,321Issue 3,509,118 common shares in private placement
    
    
    
    
    
    
    
    
    
    
    3,509
    
    
    
    27,942,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,945,719Commission and fees paid on private placement of common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,532,044
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,532,044
    )Cash dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707,671
    )
    
    
    
    
    
    
    
    
    
    
    (707,671
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,034,342
    )
    
    
    
    
    
    
    
    
    
    
    (12,034,342
    )BALANCE,December 31, 2007
    
    
    12,500,000
    
    
    
    
    
    
    
    19,759
    
    
    
    43,771,708
    
    
    
    
    
    
    
    (17,891,373
    )
    
    
    
    
    
    
    
    
    
    
    38,400,094Registration fees on stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,045
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,045
    )Issue 117,998 shares for note payable exchange
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    1,874,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,874,989Issue 841,363 warrants on the 10% Series A Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,677,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,677,622Issue 89,747 warrants on the 9% Series B Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,610Issue 594,011 shares upon note conversion
    
    
    
    
    
    
    
    
    
    
    594
    
    
    
    3,135,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,136,375Issue 426,750 shares on warrant exercises
    
    
    
    
    
    
    
    
    
    
    427
    
    
    
    2,360,116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,360,543Issue 10,575 Series B Preferred Shares in private placement
    
    
    
    
    
    
    10,575,000
    
    
    
    
    
    
    
    14,564,550
    
    
    
    
    
    
    
    (14,589,550
    )
    
    
    
    
    
    
    
    
    
    
    10,550,000Issue 173,750 warrants for stock option exercise inducment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,599
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,599Employer match of 5,512 shares to KSOP
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    104,226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,232Issue 58,246 shares for Port Sutton lease option acquisition
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    366,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366,950Issue share-based payment for Port Sutton lease option acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    884,211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    884,211Issue 44,964 treasury shares for Wheatland acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (356,785
    )
    
    
    
    
    
    
    
    
    
    
    671,983
    
    
    
    
    
    
    
    315,198Loan of 15,200 shares to KSOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,913
    )
    
    
    (225,913
    )Purchase 89,400 shares for treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,350,521
    )
    
    
    
    
    
    
    (1,350,521
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    8,678,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,679,017Issue 2,470,004 warrants for stock dividend to common and preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,781,870
    
    
    
    
    
    
    
    (3,781,870
    )
    
    
    
    
    
    
    
    
    
    
    Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,215,771
    )
    
    
    
    
    
    
    
    
    
    
    (66,215,771
    )BALANCE,December 31, 2008
    
    $
    12,500,000
    
    
    $
    10,575,000
    
    
    $
    20,989
    
    
    $
    81,100,216
    
    
    $
    
    
    
    $
    (103,478,564
    )
    
    $
    (678,538
    )
    
    $
    (225,913
    )
    
    $
    (186,810
    )
 F-4




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 years ended december 312008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (66,215,771
    )
    
    $
    (12,034,342
    )
    
    $
    (1,760,195
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation expense
    
    
    2,713,142
    
    
    
    118,627
    
    
    
    34,688Noncash stock compensation
    
    
    8,196,453
    
    
    
    6,321,321
    
    
    
    Amortization of deferred financing costs
    
    
    706,062
    
    
    
    
    
    
    
    Hurricane property losses
    
    
    3,351,299
    
    
    
    
    
    
    
    Loss on asset impairments
    
    
    22,068,886Minority interest
    
    
    (107,290
    )
    
    
    
    
    
    
    Gain on sale of assets
    
    
    (99,923
    )
    
    
    
    
    
    
    Accretion of discount on notes payable
    
    
    255,143
    
    
    
    77,809
    
    
    
    Changes in certain assets and liabilities, net of acquisition effect:Accounts receivable
    
    
    (4,365,299
    )
    
    
    (54,153
    )
    
    
    Inventory
    
    
    (8,417,217
    )
    
    
    129,615
    
    
    
    Prepaid expenses
    
    
    (1,095,799
    )
    
    
    (252,511
    )
    
    
    (46,299
    )Accounts payable
    
    
    14,997,453
    
    
    
    1,571,373
    
    
    
    176Accrued liabilities
    
    
    (1,086,453
    )
    
    
    1,878,635
    
    
    
    31,259Net cash used in operating activities
    
    
    (29,099,314
    )
    
    
    (2,243,626
    )
    
    
    (1,740,371
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from asset sales
    
    
    112,763
    
    
    
    40,000
    
    
    
    Acquisition of CRC, net of cash acquired
    
    
    
    
    
    
    (6,648,071
    )
    
    
    Acquisition of Mesquite Lake
    
    
    
    
    
    
    (1,426,566
    )
    
    
    Acquisition of Telogia
    
    
    (2,500,000
    )Change in restricted cash
    
    
    (342,653
    )Other additions to property
    
    
    (52,905,892
    )
    
    
    (19,256,314
    )
    
    
    (59,304
    )Increase in other assets
    
    
    (1,682,308
    )
    
    
    (1,543,375
    )
    
    
    Net cash used in investing activities
    
    
    (57,318,090
    )
    
    
    (28,834,326
    )
    
    
    (59,304
    )CASH FLOWS FROM FINANCING ACTIVITIES:Gross proceeds from stock and warrant issuances
    
    
    2,568,126
    
    
    
    42,713,016
    
    
    
    Commissions and fees paid on stock issuances
    
    
    (3,045
    )
    
    
    (1,532,033
    )
    
    
    Gross proceeds from redeemable debenture issuances
    
    
    17,295,773
    
    
    
    7,328,290
    
    
    
    Net proceeds from preferred stock issuance
    
    
    10,550,000
    
    
    
    
    
    
    
    Loan KSOP shares
    
    
    (225,913
    )
    
    
    
    
    
    
    Purchase treasury shares
    
    
    (1,350,521
    )
    
    
    
    
    
    
    Increase in notes payable
    
    
    50,673,639
    
    
    
    4,826,406
    
    
    
    Payment of notes payable
    
    
    (8,444,137
    )
    
    
    (205,000
    )
    
    
    Payment of buyout obligation
    
    
    
    
    
    
    (180,000
    )
    
    
    (120,000
    )Increase in convertible notes payable
    
    
    
    
    
    
    285,126
    
    
    
    Payment of advance from previous affiliate
    
    
    
    
    
    
    (35,459
    )
    
    
    Payment of deferred financing costs
    
    
    (1,970,276
    )
    
    
    (2,729,115
    )
    
    
    Preferred dividends paid in cash
    
    
    (750,000
    )
    
    
    (707,671
    )
    
    
    Member contributions
    
    
    
    
    
    
    
    
    
    
    1,948,000Net cash provided by financing activities
    
    
    68,343,646
    
    
    
    49,763,560
    
    
    
    1,828,000DECREASE IN CASH
    
    
    (18,073,758
    )
    
    
    18,685,608
    
    
    
    28,325CASH, beginning of period
    
    
    18,750,394
    
    
    
    64,786
    
    
    
    36,461CASH,end of period
    
    $
    676,636
    
    
    $
    18,750,394
    
    
    $
    64,786Cash paid for interest
    
    $
    4,513,302
    
    
    $
    199,514
    
    
    $
    NONCASH TRANSACTIONS:KSOP company match in stock
    
    $
    104,232
    
    
    $
    
    
    
    $
    Lease option acquisitioned for stock
    
    $
    366,950
    
    
    $
    
    
    
    $
    Membership interest acquired for treasury shares
    
    $
    315,198
    
    
    $
    
    
    
    $
    Non-cash common dividends
    
    $
    3,183,350
    
    
    $
    
    
    
    $
    Property acquired for stock
    
    $
    
    
    
    $
    3,465,000
    
    
    $
    Property acquired for notes payable, net of discount
    
    $
    
    
    
    $
    1,639,738
    
    
    $
    Power purchase agreement acquired for stock
    
    $
    
    
    
    $
    2,310,000
    
    
    $
    Noncash preferred dividends
    
    $
    15,188,219
    
    
    $
    950,000
    
    
    $
    Commissions paid in common stock
    
    $
    
    
    
    $
    500,000
    
    
    $
    Liability related to buyout of member interest
    
    $
    
    
    
    $
    
    
    
    $
    180,000Bonus paid in stock
    
    
    482,564
    
    
    
    
    
    
    
    Conversion of member equity to debt
    
    $
    
    
    
    $
    
    
    
    $
    2,820,000
 F-5




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. Organization And Nature Of Operations
   Current Plan of Operations and Ability to Operate as a Going Concern
      F-6




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Nature of Operations
       F-7




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 2. Principles of Consolidation and Basis of Presentation
  Note 3. Summary of Significant Accounting Policies
 Use of Estimates
   Reclassifications
  Cash and Cash Equivalents
  Restricted Cash
  F-8




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Accounts Receivable
  Inventories
  Property, Plant and Equipment
  Automobiles
    
    5 yearsComputer and office equipment
    
    5 to 7 yearsPlant equipment
    
    7 to 30 yearsLand improvements
    
    15 yearsBuildings
    
    31 years
   Deferred Financing Costs
  F-9




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other Non-Current Assets
  2008
    
    2007Investment in Ming Yang, at cost
    
    $
    7,016
    
    
    $
    Deposit and acquisition costs related to Ming Yang
    
    
    
    
    
    
    1,690Deposit related to power purchase agreement
    
    
    
    
    
    
    300Transmission service deposits
    
    
    222
    
    
    
    393Wheatland right of way
    
    
    735
    
    
    
    Port Sutton lease option
    
    
    1,431
    
    
    
    Total
    
    $
    9,404
    
    
    $
    2,383
  Minority Interest
  Consolidation of Variable Interest Entity
    F-10




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Impairments
  Asset Retirement Obligations
 Accounting for Asset
Retirement Obligations
 Repairs and Maintenance
  Revenue recognition
  Stock-Based Compensation
 Share-Based Payments
 F-11




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Income Taxes
 Accounting for Income Taxes, Accounting for Uncertainty in Income Taxes
   Income or Loss Per Common Share
   F-12




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Recently Issued Accounting Standards
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133
 F-13




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock
 Note 5. Discontinued Operations
   Cash
    
    $
    1,482Trade accounts receivable
    
    
    8,353Prepaid insurance
    
    
    40,220Prepaid permits and fees
    
    
    3,500Total current assets associated with assets held for sale
    
    $
    53,555Plant and equipment held for sale
    
    $
    4,887,945Accounts payable
    
    $
    1,311,841Current portion of capital leases
    
    
    82,316Accrued liabilities
    
    
    830,290Total current liabilities associated with assets held for sale
    
    $
    2,224,447Capital lease
    
    $
    74,319Total non-current liabilities associated with assets held for sale
    
    $
    74,319
  Sales and other revenues from discontinued operations
    
    $
    Operating expenses from discontinued operations
    
    
    (536,545
    )Other income from discontinued operations
    
    
    3,863Net loss from discontinued operations
    
    $
    (532,682
    )
  F-14




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6. Acquisitions and Divestitures
 BioFuels
 Business Combinations
  Total Purchase Price:Fair value of 450,000 shares of GreenHunter common stock
    
    $
    2,079,000Cash consideration
    
    
    6,772,342Fair value of 117,998 shares of GreenHunter
common stock exchanged for notes payable
originally issued at acquisition
    
    
    1,875,000Total
    
    $
    10,726,342Net Preliminary Purchase Price Allocation:Net purchase price
    
    $
    10,726,342Historical net assets acquired
    
    
    (419,146
    )Excess purchase price
    
    
    10,307,196Adjustment of land to fair market value
    
    
    (1,656,924
    )Adjustment of inventory to fair market value
    
    
    (136,361
    )Adjustment of equipment and infrastructure to fair market value
    
    
    (8,452,341
    )Amortization of discount on notes payable to
interest expense
    
    
    (61,570
    )Excess purchase price
    
    $
    Historical net assets acquired were as follows:Current assets
    
    $
    162,746Property, plant and equipment, net
    
    
    981,915Current liabilities
    
    
    (576,765
    )Liabilities owed to GreenHunter
    
    
    (148,750
    )Historical net assets acquired
    
    $
    419,146
  F-15




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Port Sutton Acquisition
    Biomass
 Mesquite Lake
    Land
    
    $
    2,526,029Machinery and Equipment
    
    
    98,582Power Purchase Agreement
    
    
    1,652,704Permits and Fees
    
    
    643,685Total Purchase Price
    
    $
    4,921,000
 F-16




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Telogia
 Business Combinations.
  Total Purchase Price:Cash consideration
    
    $
    1,900,000Debt assumed in transaction
    
    
    170,459Cancellation of seller promissory note
    
    
    600,000Total
    
    $
    2,670,459Net Purchase Price Allocation:Net purchase price
    
    $
    2,670,459Land, Property, and Equipment
    
    
    (2,670,459
    )Excess purchase price
    
    $
    
 Wind Energy
 Ming Yang
   F-17




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Wheatland Wind Acquisition
  Pro Forma Financial Information
  
 Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2006Total operating revenues
    
    $
    1,597,637
    
    
    $
    1,866,936Operating costs and expenses
    
    
    7,519,711
    
    
    
    4,095,495Employee stock option expense
    
    
    6,321,321
    
    
    
    Total operating costs and expenses
    
    
    13,841,032
    
    
    
    4,095,495Operating loss
    
    
    (12,243,395
    )
    
    
    (2,228,559
    )Other income and (expense)
    
    
    (121,116
    )
    
    
    (247,567
    )Net loss
    
    
    (12,364,511
    )
    
    
    (2,476,126
    )Dividends on preferred stock
    
    
    (1,949,671
    )
    
    
    (1,950,000
    )Net loss to common stockholders
    
    $
    (14,314,182
    )
    
    $
    (4,426,126
    )Net loss per common share, basic and diluted
    
    $
    (0.77
    )
    
    $
    (0.25
    )
 F-18




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7. Inventories
  Finished goods
    
    $
    3,262,873Work in process
    
    
    520,571Raw materials
    
    
    2,354,336$
    6,137,780
  Finished goods
    
    $
    4,135,036Work in process
    
    
    218,105Raw materials
    
    
    196,121$
    4,549,262
 NOTE 8. NOTES PAYABLE
  2008
    
    
    2007Note payable due November 31, 2017, 5.7%
    
    $
    3,147,927
    
    
    $
    3,157,507Note payable due March 15, 2009, 3.84%
    
    
    421,817
    
    
    
    Notes payable, net of unamortized discount
of $282,453, due December 31, 2013
    
    
    
    
    
    
    1,592,54710% Subordinated convertible note due
December 31, 2009
    
    
    
    
    
    
    3,136,385Non-recourse construction facility, 4.47%
at December 31, 2008
    
    
    33,500,000
    
    
    
    1,668,899Working capital line of credit, 4.47% at
December 31, 2008
    
    
    10,000,000
    
    
    
    10% Series A Senior Secured Redeemable
Debentures, net of $1,435,378 discount
    
    
    19,598,770
    
    
    
    7,328,2909% Series B Senior Secured Redeemable
Debentures, net of $49,628 discount
    
    
    3,540,287
    
    
    
    70,208,801
    
    
    
    16,883,628Less: current portion
    
    
    (7,268,519
    )
    
    
    (166,890
    )Total Long-Term Debt
    
    $
    62,940,282
    
    
    $
    16,716,738
 F-19




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2009
    
    $
    7,268,5192010
    
    
    2,092,8942011
    
    
    2,105,2412012
    
    
    9,441,491Thereafter
    
    
    50,785,662$
    71,693,807
 Notes Payable
      F-20




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Notes Payable  Nonrecourse
  Subordinated Convertible Note Payable to Related Party
  10% Series A Senior Secured Redeemable Debentures
   F-21




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9% Series B Senior Secured Redeemable Debentures
  NOTE 9. INCOME TAXES
    2008
    
    2007
    
    2006(in thousands)Statutory tax expense (benefit)
    
    $
    (22,513
    )
    
    $
    (4,092
    )
    
    $
    (598
    )Change in valuation allowance
    
    
    21,753
    
    
    
    4,076
    
    
    
    Interest expense disallowed for tax
    
    
    745
    
    
    
    
    
    
    
    Miscellaneous
    
    
    15
    
    
    
    16
    
    
    
    Effect of non-tax paying entity
    
    
    
    
    
    
    
    
    
    
    598Total Tax Expense
    
    $
    
    
    
    $
    
    
    
    $
    
 F-22




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    2007(in thousands)Deferred tax assets:Domestic net operating loss
    
    $
    15,802
    
    
    $
    2,005Foreign net operating loss
    
    
    61
    
    
    
    Stock options
    
    
    3,954
    
    
    
    2,149Property, equipment & project costs
    
    
    4,605
    
    
    
    Deferred tax liability:Property, equipment & project costs
    
    
    
    
    
    
    (1,485
    )Net deferred tax assets
    
    
    24,422
    
    
    
    2,669Less valuation allowances
    
    
    (24,422
    )
    
    
    (2,669
    )Net deferred tax
    
    $
    
    
    
    $
    
 Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109
     F-23




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10. Stockholders Equity
  Preferred
    
    
    Common
    
    
    TreasuryStock
    
    
    Stock
    
    
    Stock
    
    
    KSOP
    
    
    WarrantsIssue common shares for Reverse Merger
    
    
    
    
    
    
    15,000,055
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2006
    
    
    
    
    
    
    15,000,055
    
    
    
    
    
    
    
    
    
    
    
    Issue preferred shares in private placement
    
    
    12,500Issue common shares to acquire GreenHunter
BioFuels, Inc.
    
    
    
    
    
    
    450,000Issue common shares to acquire power purchase
agreement
    
    
    
    
    
    
    500,000Issue common shares for fees on biomass plant
acquisition
    
    
    
    
    
    
    300,000Issue common shares in private placement
    
    
    
    
    
    
    3,448,168Issue common shares for commissions on investments
and private
placements of common stock
    
    
    
    
    
    
    60,950Issue common stock warrants in private placement
of preferred and
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,807,834December 31, 2007
    
    
    12,500
    
    
    
    19,759,173
    
    
    
    
    
    
    
    
    
    
    
    2,807,834Issue 117,998 shares for note payable exchange
    
    
    
    
    
    
    117,998Issue 841,363 warrants on the 10% Series A
Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    841,363Issue 89,747 warrants on the 9% Series B
Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,747Issue 594,011 shares upon note conversion
    
    
    
    
    
    
    594,011Issue 173,750 shares on warrant exercises
    
    
    
    
    
    
    173,750
    
    
    
    
    
    
    
    
    
    
    
    (173,750
    )Issue 253,000 on option exercises
    
    
    
    
    
    
    253,000Cancellation of 1,410,000 warrants surrendered
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,410,000
    )Issue 1,410,000 warrants on series B preferred
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,410,000Issue 10,575 Series B Preferred Shares in private
placement
    
    
    10,575Issue 173,750 warrants for stock option exercise
inducement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,750Employer match of 5,512 shares to KSOP
    
    
    
    
    
    
    5,512Issue 58,246 shares for Port Sutton lease option
acquisition
    
    
    
    
    
    
    58,246Issue 27,186 shares for executive compensation
    
    
    
    
    
    
    27,186Issue 44,964 treasury shares for Wheatland
acquisition
    
    
    
    
    
    
    
    
    
    
    (44,964
    )Loan of 15,200 shares to KSOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,200Purchase 89,400 shares for treasury
    
    
    
    
    
    
    
    
    
    
    89,400Issue 2,470,004 warrants for stock dividend to
common and preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,470,004December 31, 2008
    
    
    23,075
    
    
    
    20,988,876
    
    
    
    44,436
    
    
    
    15,200
    
    
    
    6,208,948
 Preferred Stock
 Series A Preferred
    F-24




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Series B Preferred
    Common Stock
     F-25




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         Common Stock Warrants
   F-26




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Risk Free Interest Rate
    
    
    4.01
    %Expected Life (a)
    
    2 yearsExpected volatility (b)
    
    
    52
    %Dividend yield
    
    
    Weighted average fair value of each warrant
    
    $
    0.76
 
 (a)
    
    The warrants have a life of five years, but we expect to be able to force the
exercise of the warrants in two years.(b)
    
    The expected volatility of our common stock was estimated using an average of
volatilities of publicly traded companies in similar renewable energy businesses.   Risk Free Interest Rate
    
    
    3.2
    %Expected Life
    
    3 yearsExpected volatility (a)
    
    
    58
    %Dividend yield
    
    
    Weighted average fair value of each warrant
    
    $
    2.72
 
 (a)
    
    The expected volatility of our common stock was estimated using an average of
volatilities of publicly traded companies in similar renewable energy businesses.  F-27




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Risk-Free Interest Rate
    
    
    1.63
    %Expected Life
    
    3 yearsExpected Volatility(a)
    
    
    54.21
    %Dividend Yield
    
    
    Weighted-average fair value per warrant
    
    $
    0.59
 
 (a)
    
    The expected volatility of our common stock was estimated leased on an average of
volatilities of publicly traded companies in similar renewable energy businesses.  2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Number of
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Warrants
    
    
    PriceOutstanding  Beginning
of Year
    
    
    2,807,834
    
    
    $
    10.52
    
    
    
    
    
    
    $Granted
    
    
    4,984,864
    
    
    
    26.28
    
    
    
    2,807,834
    
    
    
    10.52Exercised
    
    
    (173,750
    )
    
    
    7.50
    
    
    
    
    
    
    
    Cancelled
    
    
    (1,410,000
    )
    
    
    7.50
    
    
    
    
    
    
    
    Outstanding  End of Year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercisable  End of Year
    
    
    6,208,948
    
    
    $
    23.94
    
    
    
    2,807,834
    
    
    $
    10.52
 Note 11. Stock-Based Compensation
 Share-based Payment
 F-28




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        F-29




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2008
    
    2007Number of options issued
    
    
    3,290,000
    
    
    
    4,031,500Weighted average stock price
    
    $
    18.99
    
    
    $
    5.38Weighted average exercise price
    
    $
    18.44
    
    
    $
    5.60Weighted average expected life
of options (a)
    
    
    5.53
    
    
    
    5.13Weighted average expected
volatility (b)
    
    
    30.1
    %
    
    
    37.7
    %Weighted average risk-free
interest rate
    
    
    2.9
    %
    
    
    4.76
    %Expected annual dividend per
share
    
    $
    
    
    
    $
    Weighted average fair value of
each option
    
    $
    6.65
    
    
    $
    2.17
 
 (a)
    
    As determined by the simplified method under Staff Accounting Bulletin 107. The options have a life of ten years.(b)
    
    The expected volatility of our common stock was estimated using an average of volatilities of publicly traded companies in similar
energy businesses.The following is a summary of stock option activity during the years ended December 31, 2008 and 2007. There were no stock options
issued prior to January 1, 2007. 2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Aggregate
    
    
    
    
    
    
    Average
    
    
    AggregateExercise
    
    
    Intrinsic
    
    
    
    
    
    
    Exercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    Value*
    
    
    Shares
    
    
    Price
    
    
    Value*Outstanding  Beginning of Year
    
    
    4,031,500
    
    
    $
    5.60
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    3,290,000
    
    
    $
    18.44
    
    
    
    
    
    
    
    4,031,500
    
    
    $
    5.60Exercised
    
    
    (253,000
    )
    
    $
    5.00
    
    
    $
    2,719,900
    
    
    
    Cancelled
    
    
    (1,439,000
    )
    
    $
    18.34
    
    
    
    
    
    
    
    Outstanding  End of Year
    
    
    5,629,500
    
    
    $
    9.88
    
    
    $
    
    
    
    
    4,031,500
    
    
    $
    5.60
    
    
    $
    20,318,760Exercisable  End of Year
    
    
    3,906,498
    
    
    $
    7.00
    
    
    $
    
    
    
    
    3,500,000
    
    
    $
    5.00
    
    
    $
    20,302,160
 
 *
    
    The Aggregate Intrinsic Value was calculated using the December 31, 2008 and 2007 closing stock price of $4.92 and $10.64,
respectively. There was no intrinsic value at December 31, 2008.  Weighted AverageNumber of
    
    RemainingNumber of Options
    
    Exercisable
    
    Contractual LifeExercise Price
    
    Outstanding
    
    Options
    
    (Years)$5.00
    
    
    3,247,000
    
    
    
    3,247,000
    
    
    
    8.37$7.50
    
    
    100,000
    
    
    
    33,333
    
    
    
    8.75$10.00
    
    
    515,000
    
    
    
    106,665
    
    
    
    8.92$10.12
    
    
    45,500
    
    
    
    
    
    
    
    9.78$12.00
    
    
    16,500
    
    
    
    500
    
    
    
    8.99$13.66
    
    
    12,000
    
    
    
    3,000
    
    
    
    9.50$17.76
    
    
    100,000
    
    
    
    40,000
    
    
    
    9.11$18.00
    
    
    50,000
    
    
    
    
    
    
    
    9.19$18.75
    
    
    15,000
    
    
    
    
    
    
    
    9.47$18.91
    
    
    1,123,500
    
    
    
    451,000
    
    
    
    9.12$19.75
    
    
    40,000
    
    
    
    
    
    
    
    9.30$20.02
    
    
    25,000
    
    
    
    
    
    
    
    9.46$20.64
    
    
    275,000
    
    
    
    25,000
    
    
    
    9.43$22.75
    
    
    65,000
    
    
    
    
    
    
    
    9.36
 F-30




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 12. Commitments and Contingencies
   et al,
    F-31




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Note 13. Related Party Transactions
     Note 14. Quarterly Financial Data
  2008First
    
    Second
    
    Third
    
    Fourth
    
    Total YearSales
    
    $
    177,777
    
    
    $
    468,108
    
    
    $
    331,487
    
    
    $
    4,024,209
    
    
    $
    5,001,581Operating loss
    
    $
    ( 7,953,449
    )
    
    $
    ( 6,638,030
    )
    
    $
    ( 10,647,264
    )
    
    $
    ( 37,185,108
    )
    
    $
    ( 62,423,851
    )Net loss to common
stockholders
    
    $
    ( 8,279,660
    )
    
    $
    ( 7,322,647
    )
    
    $
    ( 26,663,596
    )
    
    $
    ( 40,138,087
    )
    
    $
    ( 82,403,990
    )Net loss per share
    
    $
    (0.42
    )
    
    $
    (0.37
    )
    
    $
    (1.32
    )
    
    $
    (1.92
    )
    
    $
    (4.08
    )Weighted average shares
    
    
    19,823,254
    
    
    
    19,885,486
    
    
    
    20,202,531
    
    
    
    20,906,545
    
    
    
    20,216,032
 2007First
    
    Second
    
    Third
    
    Fourth
    
    Total YearSales
    
    $
    
    
    
    $
    554,254
    
    
    $
    157,773
    
    
    $
    340,716
    
    
    $
    1,052,743Operating loss
    
    $
    (462,729
    )
    
    $
    ( 6,911,193
    )
    
    $
    (98,546
    )
    
    $
    (4,411,833
    )
    
    $
    ( 11,884,301
    )Net loss to common
stockholders
    
    $
    (721,902
    )
    
    $
    ( 7,881,811
    )
    
    $
    (1,284,500
    )
    
    $
    (3,803,800
    )
    
    $
    ( 13,692,013
    )Net loss per share
    
    $
    (0.05
    )
    
    $
    (0.46
    )
    
    $
    (0.07
    )
    
    $
    (0.21
    )
    
    $
    (0.80
    )Weighted average shares
    
    
    15,111,166
    
    
    
    17,268,736
    
    
    
    17,750,055
    
    
    
    18,159,940
    
    
    
    17,082,684
 F-32




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 15. Segment Data
       2008UnallocatedCorporate
    
    
    Biomass
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,001,581
    
    
    
    5,001,581Total Operating Costs
    
    
    558,165
    
    
    
    237,527
    
    
    
    541,671
    
    
    
    19,223,674
    
    
    
    20,561,037Depreciation expense
    
    
    175,851
    
    
    
    
    
    
    
    61,754
    
    
    
    2,475,537
    
    
    
    2,713,142Loss on asset impairments
    
    
    
    
    
    
    2,629,256
    
    
    
    
    
    
    
    19,139,630
    
    
    
    21,768,886Selling, general and
administrative
    
    
    15,928,198
    
    
    
    623,657
    
    
    
    1,179,599
    
    
    
    4,650,913
    
    
    
    22,382,367Operating income (loss)
    
    
    (16,662,214
    )
    
    
    (3,490,440
    )
    
    
    (1,783,024
    )
    
    
    (40,488,173
    )
    
    
    (62,423,851
    )Other income and expense
    
    
    (1,993,633
    )
    
    
    5,175
    
    
    
    29,835
    
    
    
    (1,407,905
    )
    
    
    (3,366,528
    )Net Income (Loss) from
continuing operations
    
    $
    (18,655,847
    )
    
    $
    (3,485,265
    )
    
    $
    (1,753,189
    )
    
    $
    (41,896,078
    )
    
    
    (65,790,379
    )Total Assets
    
    $
    15,993,774
    
    
    $
    20,683,684
    
    
    $
    1,393,779
    
    
    $
    55,667,733
    
    
    
    93,738,970Capital Expenditures
    
    $
    552,521
    
    
    $
    17,221,513
    
    
    $
    326,775
    
    
    $
    37,305,082
    
    
    
    55,405,892
 F-33




---



##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2007UnallocatedCorporate
    
    
    Biomass
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,052,743
    
    
    
    1,052,743Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    276,505
    
    
    
    758,799
    
    
    
    1,035,304Depreciation expense
    
    
    11,535
    
    
    
    
    
    
    
    32,128
    
    
    
    74,964
    
    
    
    118,627Selling, general and
administrative
    
    
    10,655,019
    
    
    
    98,000
    
    
    
    388,761
    
    
    
    641,333
    
    
    
    11,783,113Operating income (loss)
    
    
    (10,666,554
    )
    
    
    (98,000
    )
    
    
    (697,394
    )
    
    
    (422,353
    )
    
    
    (11,884,301
    )Other income and expense
    
    
    (120,374
    )
    
    
    
    
    
    
    53,498
    
    
    
    (83,165
    )
    
    
    (150,041
    )Net Income (Loss) from
continuing operations
    
    $
    (10,786,928
    )
    
    $
    (98,000
    )
    
    $
    (643,896
    )
    
    $
    (505,518
    )
    
    
    (12,034,342
    )Total Assets
    
    $
    27,126,618
    
    
    $
    5,103,566
    
    
    $
    593,264
    
    
    $
    26,673,837
    
    
    
    59,497,285Capital Expenditures
    
    $
    4,796,448
    
    
    $
    1,426,566
    
    
    $
    5,431
    
    
    $
    21,102,506
    
    
    
    27,330,951
 2006UnallocatedCorporate
    
    
    Biomass
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    1,016,931
    
    
    
    
    
    
    
    1,016,931Depreciation expense
    
    
    
    
    
    
    
    
    
    
    34,688
    
    
    
    
    
    
    
    34,688Selling, general and
administrative
    
    
    
    
    
    
    
    
    
    
    676,881
    
    
    
    
    
    
    
    676,881Operating income (loss)
    
    
    
    
    
    
    
    
    
    
    (1,728,500
    )
    
    
    
    
    
    
    (1,728,500
    )Other income and expense
    
    
    
    
    
    
    
    
    
    
    (31,695
    )
    
    
    
    
    
    
    (31,695
    )Net Income (Loss) from
continuing operations
    
    $
    
    
    
    $
    
    
    
    $
    (1,760,195
    )
    
    $
    
    
    
    
    (1,760,195
    )Total Assets
    
    $
    
    
    
    $
    
    
    
    $
    698,308
    
    
    $
    
    
    
    
    698,308Capital Expenditures
    
    $
    
    
    
    $
    
    
    
    $
    59,304
    
    
    $
    
    
    
    
    59,304
 Note 16. concentration of credit risk
  Note 17. Subsequent Events
   F-34




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Title3.1*
    
    Certificate of Incorporation3.2*
    
    Amendment to the Certificate of Incorporation3.3*
    
    Bylaws4.1****
    
    Amended and Restated Certificate of Designations of 2007 Series A 8% Convertible Preferred Stock4.2****
    
    Form of Warrant Agreement by and between GreenHunter Energy, Inc. and West Coast Opportunity Fund, LLC4.3*
    
    Form of Warrant Agreement by and between GreenHunter Energy, Inc. and certain accredited investors4.4****
    
    Certificate of Designations of 2008 Series B Convertible Preferred Stock10.1*
    
    Stock Purchase Agreement dated February 2007 among Channel Refining Corporation, GreenHunter Energy,
Inc. and certain selling shareholders10.2*
    
    Amendment No. 1 to Stock Purchase Agreement dated February 2007 among Channel Refining Corporation,
GreenHunter Energy, Inc. and certain selling shareholders10.3*
    
    Purchase and Sale Agreement, dated May 14, 2007 between GreenHunter Energy, Inc. and Chateau Energy,
Inc. regarding acquisition of power purchase agreement10.4*
    
    Purchase and Sale Agreement, dated May 14, 2007 between GreenHunter Energy, Inc. and Chateau Energy,
Inc. regarding acquisition of Mesquite Lake Resource Recovery Facility10.5*
    
    Consulting Agreement dated May 14, 2007 between GreenHunter Energy, Inc. and Chateau Energy, Inc.10.6*
    
    Registration rights agreement, dated March 9, 2007 between GreenHunter Energy, Inc. and certain
institutional investors10.7*
    
    Registration rights agreement, dated April 13, 2007 between GreenHunter Energy, Inc. and certain
selling shareholders10.8*
    
    Investor rights agreement, dated May 14, 2007 between GreenHunter Energy, Inc. and Chateau Energy, Inc.10.9*
    
    Form of subordinated promissory note of GreenHunter BioFuels, Inc.10.10***
    
    Second Amended and Restated Credit Agreement dated as of March 7, 2008 among GreenHunter BioFuels
Inc., WestLB AG New York Branch as the administrative agent, WestLB New York Branch as the LC Issuing
Bank and the Lenders Party to the Amended and Restated Credit Agreement from time to time10.11**
    
    Subscription and Equity Transfer Agreement between GreenHunter Energy, Inc. and MingYang Wind Power
Technology Co. LTD. et al., dated November 28, 200710.12**
    
    Master Turbine Supply Agreement between GreenHunter Energy, Inc. and MingYang Wind Power Technology
Co. LTD. et al., dated November 28, 200731.1 
    
    Certifications of the Chief Executive Officer.31.2 
    
    Certifications of the Chief Financial Officer.32.1 
    
    Certifications of the Chief Executive Officer provided pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 
    
    Certifications of the Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference to the Companys Form 10, dated October 19, 2007**
    
    Incorporated by reference to the Companys Form 10-K, dated March 31, 2008***
    
    Incorporated by reference to the Companys Form 10-Q, dated May 15, 2008****
    
    Incorporated by reference to the Companys Form 8-K, dated August 21, 2008
    
    Filed herewith




---



##### Table of Contents



SIGNATURES
  GreenHunter Energy, Inc.Date: April 15, 2009
    By:
    /s/ Gary C. EvansChief Executive Officer  Signature
    
    Title
    
    Date/s/ Gary C. Evans

Gary C. Evans
    
    Chairman, President and
Chief Executive Officer
    
    April 15, 2009/s/ Morgan F. Johnston

Morgan F. Johnston
    
    Sr. Vice President, General Counsel
and Secretary
    
    April 15, 2009/s/ David S. Krueger

David S. Krueger
    
    Vice President and 
Chief Financial Officer
    
    April 15, 2009/s/ Renato T. Bertani

Renato T. Bertani
    
    Director
    
    April 15, 2009//s/ Ronald H. Walker

Ronald H. Walker
    
    Director
    
    April 15, 2009