##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 (Mark one)
 þ
    
    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2008
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the Transition Period from
_________ to ________
 Commission File Number 001-33893
 GREENHUNTER ENERGY, INC.
  Delaware
    
    20-4864036(State or other jurisdiction of 
incorporation or organization)
    
    (IRS employer identification No.)
  (Address of principal executive offices)(Zip Code)
  (Registrants telephone number including area code)
  þ o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS  PART 1 - FINANCIAL STATEMENTSItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RisksItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Risk FactorsItem 3. Unregistered Sales of Equity Securities and Use of ProceedsItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. Exhibits and Reports on Form 8-KSIGNATURES    Table of Contents  
 PART 1  FINANCIAL STATEMENTS
 
 Item 1. Financial Statements
 GREENHUNTER ENERGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,113,512
    
    
    $
    18,750,394Restricted cash
    
    
    591,971
    
    
    
    Accounts receivable
    
    
    436,038
    
    
    
    118,709Inventory
    
    
    14,040,013
    
    
    
    23,947Prepaid expenses
    
    
    2,566,974
    
    
    
    513,712Total current assets
    
    
    26,748,508
    
    
    
    19,406,762FIXED ASSETS:Land and improvements
    
    
    5,394,866
    
    
    
    2,868,837Buildings
    
    
    3,283,081
    
    
    
    3,209,737Methanol distillation system
    
    
    2,252,292
    
    
    
    2,252,292Plant and other equipment
    
    
    10,898,840
    
    
    
    11,557,689Vehicles
    
    
    298,143
    
    
    
    Accumulated depreciation
    
    
    (337,032
    )
    
    
    (162,632
    )Construction in progress
    
    
    46,440,752
    
    
    
    12,942,109Net fixed assets
    
    
    68,230,942
    
    
    
    32,668,032OTHER ASSETS:Power purchase agreement
    
    
    1,652,704
    
    
    
    2,310,000Deferred financing costs
    
    
    4,052,988
    
    
    
    2,729,226Deposits and other noncurrent assets
    
    
    8,352,168
    
    
    
    2,383,265Total assets
    
    $
    109,037,310
    
    
    $
    59,497,285LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion of notes payable
    
    $
    1,111,636
    
    
    $
    Current portion of notes payable, nonrecourse
    
    
    6,494,200
    
    
    
    166,890Accounts payable
    
    
    1,381,458
    
    
    
    2,334,926Accrued liabilities
    
    
    5,693,051
    
    
    
    1,878,637Total current liabilities
    
    
    14,680,345
    
    
    
    4,380,453NOTES PAYABLE,net of unamortized discount of $0 and $282,453 respectively
    
    
    3,116,499
    
    
    
    4,750,054NOTES PAYABLE,nonrecourse
    
    
    34,124,672
    
    
    
    1,502,009CONVERTIBLE NOTE PAYABLE
    
    
    3,136,385
    
    
    
    3,136,38510% Series A REDEEMABLE DEBENTURES,net of unamortized discount of
$1,603,140 and $0, respectively
    
    
    19,431,008
    
    
    
    7,328,290COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $.001 par value, 10,000,000 authorized shares, Series A
8% convertible preferred, $1,000 par value, 12,500 issued and
outstanding
    
    
    12,500,000
    
    
    
    12,500,000Common
stock, $.001par value, 90,000,000 authorized shares, 19,897,600 and 19,759,173 issued, respectively
    
    
    19,898
    
    
    
    19,759Additional paid-in capital
    
    
    55,600,033
    
    
    
    43,771,708Accumulated deficit
    
    
    (33,493,676
    )
    
    
    (17,891,373
    )Unearned common stock in KSOP, at cost (4,200 and 0 shares, respectively)
    
    
    (77,854
    )
    
    
    Total stockholders equity
    
    
    34,548,401
    
    
    
    38,400,094Total liabilities and stockholders equity
    
    $
    109,037,310
    
    
    $
    59,497,285
 See accompanying notes to consolidated financial statements
 -1-




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##### Table of Contents



GREENHUNTER ENERGY, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUE:Product sales
    
    $
    186,375
    
    
    $
    554,254
    
    
    $
    316,152
    
    
    $
    554,254Terminal revenues
    
    
    281,733
    
    
    
    
    
    
    
    329,733
    
    
    
    Total revenue
    
    
    468,108
    
    
    
    554,254
    
    
    
    645,885
    
    
    
    554,254COSTS AND EXPENSES:Cost of sales and services
    
    
    1,038,294
    
    
    
    346,936
    
    
    
    1,189,799
    
    
    
    346,936Project costs
    
    
    119,902
    
    
    
    93,681
    
    
    
    194,234
    
    
    
    192,246Depreciation expense
    
    
    98,739
    
    
    
    40,641
    
    
    
    187,146
    
    
    
    48,673General and administrative (including stock
compensation expense of $2,422,933,
$6,170,984 ,$8,075,291, and $6,170,984,
respectively)
    
    
    5,849,201
    
    
    
    6,984,908
    
    
    
    13,666,182
    
    
    
    7,341,041Total costs and expenses
    
    
    7,106,136
    
    
    
    7,466,166
    
    
    
    15,237,361
    
    
    
    7,928,896OPERATING LOSS
    
    
    (6,638,028
    )
    
    
    (6,911,912
    )
    
    
    (14,591,476
    )
    
    
    (7,374,642
    )OTHER INCOME (EXPENSE):Interest and other income
    
    
    180,997
    
    
    
    95,930
    
    
    
    468,747
    
    
    
    108,997Interest, accretion and other expense
    
    
    (615,612
    )
    
    
    (109,116
    )
    
    
    (979,574
    )
    
    
    (180,397
    )Total other income (expense)
    
    
    (434,615
    )
    
    
    (13,186
    )
    
    
    (510,827
    )
    
    
    (71,400
    )Net loss
    
    
    (7,072,643
    )
    
    
    (6,925,098
    )
    
    
    (15,102,303
    )
    
    
    (7,446,042
    )Dividends on preferred stock
    
    
    (250,000
    )
    
    
    (956,712
    )
    
    
    (500,000
    )
    
    
    (1,157,671
    )Net loss to common stockholders
    
    $
    (7,322,643
    )
    
    $
    (7,881,810
    )
    
    $
    (15,602,303
    )
    
    $
    (8,603,713
    )Weighted average shares outstanding, basic
and diluted
    
    
    19,885,486
    
    
    
    17,268,736
    
    
    
    19,854,370
    
    
    
    16,180,718Net loss per share
    
    $
    (0.37
    )
    
    $
    (0.46
    )
    
    $
    (0.79
    )
    
    $
    (0.53
    )
 See accompanying notes to consolidated financial statements
 -2-




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GREENHUNTER ENERGY, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE PERIOD FROM DECEMBER 31, 2007 TO JUNE 30, 2008
 Additional
    
    
    
    
    
    
    UnearnedPreferred
    
    
    Common
    
    
    Paid in
    
    
    Accumulated
    
    
    Shares in
    
    
    TotalStock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    KSOP
    
    
    EquityBALANCE, December 31, 2007
    
    $
    12,500,000
    
    
    $
    19,759
    
    
    $
    43,771,708
    
    
    $
    (17,891,373
    )
    
    $
    
    
    
    $
    38,400,094Registration fees paid on common shares
    
    
    
    
    
    
    
    
    
    
    (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
Secured Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    1,677,622
    
    
    
    
    
    
    
    
    
    
    
    1,677,622Issue 13,250 shares pursuant to warrant exercises
    
    
    
    
    
    
    13
    
    
    
    99,362
    
    
    
    
    
    
    
    
    
    
    
    99,375Employer match of 5,512 shares to KSOP
    
    
    
    
    
    
    6
    
    
    
    104,226
    
    
    
    
    
    
    
    
    
    
    
    104,232Loan of 4,200 shares of common stock to KSOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,854
    )
    
    
    (77,854
    )Cash dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500,000
    )
    
    
    
    
    
    
    (500,000
    )Stock compensation including the issuance of
1,667 shares
    
    
    
    
    
    
    2
    
    
    
    8,075,289
    
    
    
    
    
    
    
    
    
    
    
    8,075,291Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,102,303
    )
    
    
    
    
    
    
    (15,102,303
    )BALANCE,June 30, 2008
    
    $
    12,500,000
    
    
    $
    19,898
    
    
    $
    55,600,033
    
    
    $
    (33,493,676
    )
    
    $
    (77,854
    )
    
    $
    34,548,401
 See accompanying notes to consolidated financial statements
 -3-




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GREENHUNTER ENERGY, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months Ended June 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (15,102,303
    )
    
    $
    (7,446,042
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation expense
    
    
    187,146
    
    
    
    48,673Noncash stock compensation
    
    
    8,075,291
    
    
    
    6,170,984Amortization of deferred financing costs
    
    
    143,427
    
    
    
    Accretion of discount
    
    
    85,399
    
    
    
    15,993Gain on sale of assets
    
    
    (74,677
    )
    
    
    Changes in certain assets and liabilities, net of
acquisitionAccounts receivable
    
    
    (317,329
    )
    
    
    (171,178
    )Inventory
    
    
    (14,016,066
    )
    
    
    98,747Prepaid and other expense
    
    
    (2,336,743
    )
    
    
    (27,675
    )Accounts payable and accrued liabilities
    
    
    2,965,178
    
    
    
    490,185Net cash used in operating activities
    
    
    (20,390,677
    )
    
    
    (820,313
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets
    
    
    87,517
    
    
    
    40,000Change in restricted cash
    
    
    (591,971
    )
    
    
    Additions to fixed assets
    
    
    (34,947,945
    )
    
    
    (11,030,910
    )Increase in non-current deposits
    
    
    (5,325,218
    )
    
    
    (110
    )Net cash used in investing activities
    
    
    (40,777,617
    )
    
    
    (10,991,020
    )CASH FLOWS FROM FINANCING ACTIVITIES:Gross proceeds from stock and warrant issuance
    
    
    99,375
    
    
    
    20,000,000Loan common stock to KSOP
    
    
    (77,854
    )
    
    
    Commissions and fees paid on stock issuance
    
    
    (3,045
    )
    
    
    (377,974
    )Gross proceeds from redeemable debenture issuance
    
    
    13,705,858
    
    
    
    Borrowings under notes payable
    
    
    47,383,772
    
    
    
    Repayments of notes payable
    
    
    (7,363,182
    )
    
    
    (80,000
    )Payment of buyout obligation
    
    
    
    
    
    
    (180,000
    )Payment of advance from previous affiliate
    
    
    
    
    
    
    (35,459
    )Payment of deferred financing costs
    
    
    (1,713,512
    )
    
    
    (66,498
    )Preferred dividends paid in cash
    
    
    (500,000
    )
    
    
    (207,671
    )Net cash provided by financing activities
    
    
    51,531,412
    
    
    
    19,052,398(DECREASE) INCREASE IN CASH
    
    
    (9,636,882
    )
    
    
    7,241,065CASH, beginning of period
    
    
    18,750,394
    
    
    
    64,786CASH,end of period
    
    $
    9,113,512
    
    
    $
    7,305,851Cash paid for interest
    
    $
    812,521
    
    
    $
    21,840NONCASH TRANSACTIONS:KSOP company match in stock
    
    $
    104,233
    
    
    $
    Warrants issued on debentures
    
    $
    1,677,622
    
    
    $
    Notes payable exchanged for stock
    
    $
    1,874,989
    
    
    $
    Property acquired for stock
    
    $
    
    
    
    $
    3,465,000Property acquired for notes payable, net of discount
    
    $
    
    
    
    $
    1,639,738Power purchase agreement acquired for stock
    
    $
    
    
    
    $
    2,310,000Noncash preferred dividends
    
    $
    
    
    
    $
    200,959
 See accompanying notes to consolidated financial statements
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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
 Note 1. Organization and Nature of Operations
    Nature of Operations
    -5-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
   Note 2. 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
 -6-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133
 Note 3. Liquidity and Continued Operations
  Note 4. Acquisitions
 BioFuels
 Business
Combinations
  Total Purchase Price:Fair value of 450,000 shares of GreenHunter common stock
    
    $
    2,079,000Fair value of 117,998 shares of GreenHunter common stock
exchanged for notes payable originally issued at acquisition
    
    
    1,875,000Cash consideration
    
    
    6,772,342Total
    
    $
    10,726,342Net 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
    
    $
    
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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 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
   BioPower
    Land
    
    $
    2,526,029Machinery and Equipment
    
    
    98,582Power Purchase Agreement
    
    
    1,652,704Permits and Fees
    
    
    643,685Total Purchase Price
    
    $
    4,921,000
 Wind Energy
  -8-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
    Note 5. Inventories
  Finished goods
    
    $
    634,636Work in process
    
    $
    610,108Raw materials
    
    $
    12,795,269Total Inventories
    
    $
    14,010,013
 Note 6. Notes Payable
  Long-Term Debt:Note payable due November 31, 2017, 4.4%
at June 30, 2008
    
    $
    3,157,507Note payable due March 15, 2009, 3.84%
at June 30, 2008
    
    
    1,070,628Non-recourse construction loan facility, 6.46%
at June 30, 2008
    
    
    32,471,002Working capital line of credit, 6.46% at June 30, 2008
    
    
    8,147,87110% Subordinated convertible note due December 31, 2009
    
    
    3,136,38510% Series A Senior Secured Redeemable Debentures
    
    
    19,431,00867,414,401Less current portion
    
    
    (7,605,836
    )Total Long-Term Debt
    
    $
    59,808,565
 -9-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 Notes Payable
   Notes Payable  Nonrecourse
  Subordinated Convertible Note Payable to Related Party
  10% Series A Senior Secured Redeemable Debentures
  -10-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
  8% Series B Senior Secured Redeemable Debentures
  Note 7. Income or Loss Per Common Share
   Note 8. Stockholders Equity
  Preferred
    
    CommonStock
    
    Stock
    
    KSOP
    
    WarrantsDecember 31, 2007
    
    
    12,500
    
    
    
    19,759,173
    
    
    
    
    
    
    
    2,807,834Issue 117,998 shares for note payable exchange
    
    
    
    
    
    
    117,998
    
    
    
    
    
    
    
    Employer match of 5,512 shares to KSOP
    
    
    
    
    
    
    5,512
    
    
    
    
    
    
    
    Issue 841,363 warrants on the 10% Series A
Secured Redeemable Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    841,363Issue 13,250 shares pursuant to warrant exercises
    
    
    
    
    
    
    13,250
    
    
    
    
    
    
    
    (13,250
    )Issue 1,667 shares as stock compensation
    
    
    
    
    
    
    1,667
    
    
    
    
    
    
    
    Loan 1,200 shares to KSOP
    
    
    
    
    
    
    
    
    
    
    4,200
    
    
    
    June 30, 2008
    
    
    12,500
    
    
    
    19,897,600
    
    
    
    4,200
    
    
    
    3,635,947
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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 Preferred Stock
  Common Stock
    Warrants
  Treasury Stock
  -12-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 KSOP
  Note 9. Stock-Based Compensation
 Share-based Payment,
   Number of options issued
    
    3,129,500Weighted average stock price
    
    $19.11Weighted average exercise price
    
    $18.53Weighted average expected life (a)
    
    5.51 yearsWeighted average expected volatility (b)
    
    29.5%Weighted average risk free interest rate
    
    2.9%Weighted average dividend yield
    
    Weighted average fair value of each stock option
    
    $6.62
 
 (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. -13-




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GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
  Number
    
    
    Weighted
    
    
    Aggregateof
    
    
    average
    
    
    Intrinsic Value*Shares
    
    
    Exercise Price
    
    
    ($000s)Outstanding
 Beginning of
Year
    
    
    4,031,500
    
    
    $
    5.60
    
    
    
    Granted
    
    
    3,129,500
    
    
    $
    18.53
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    539,000
    
    
    
    18.78
    
    
    
    Outstanding  End of Period
    
    
    6,622,000
    
    
    $
    10.64
    
    
    $
    20,009,980Exercisable  End of Period
    
    
    3,971,000
    
    
    $
    6.64
    
    
    $
    27,860,250
 
 *
    
    The Aggregate Intrinsic Value was calculated using the June 30, 2008 stock
price of $13.66.  Number of
    
    Weighted Average
    
    Number ofOptions
    
    Remaining Contractual
    
    ExercisableExercise Price
    
    Outstanding
    
    Life (Years)
    
    Options$5.00
    
    
    3,500,000
    
    
    
    8.87
    
    
    
    3,500,000$7.50
    
    
    100,000
    
    
    
    9.26
    
    
    
    $10.00
    
    
    615,000
    
    
    
    9.42
    
    
    
    $12.00
    
    
    16,500
    
    
    
    9.50
    
    
    
    $12.50
    
    
    10,000
    
    
    
    9.41
    
    
    
    $16.70
    
    
    1,500
    
    
    
    9.60
    
    
    
    $17.76
    
    
    100,000
    
    
    
    9.62
    
    
    
    20,000$18.00
    
    
    50,000
    
    
    
    9.70
    
    
    
    $18.75
    
    
    15,000
    
    
    
    9.97
    
    
    
    $18.91
    
    
    1,769,000
    
    
    
    9.62
    
    
    
    451,000$19.75
    
    
    40,000
    
    
    
    9.80
    
    
    
    $20.02
    
    
    25,000
    
    
    
    9.96
    
    
    
    $20.64
    
    
    300,000
    
    
    
    9.93
    
    
    
    $21.88
    
    
    15,000
    
    
    
    9.93
    
    
    
    $22.75
    
    
    65,000
    
    
    
    9.87
    
    
    
    
 Note 10. Related Party Transactions
    -14-




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##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 Note 11. Segment Data
       For the Three Months Ended June 30, 2008UnallocatedCorporate
    
    
    BioPower
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    468,108
    
    
    $
    468,108Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    119,902
    
    
    
    1,038,294
    
    
    
    1,158,196Depreciation expense
    
    
    42,813
    
    
    
    
    
    
    
    10,942
    
    
    
    44,984
    
    
    
    98,739General and administrative
    
    
    4,198,603
    
    
    
    183,763
    
    
    
    301,212
    
    
    
    1,165,623
    
    
    
    5,849,201Operating income (loss)
    
    
    (4,241,416
    )
    
    
    (183,763
    )
    
    
    (432,056
    )
    
    
    (1,780,793
    )
    
    
    (6,638,028
    )Other income and expense
    
    
    (522,613
    )
    
    
    
    
    
    
    (3,727
    )
    
    
    91,725
    
    
    
    (434,615
    )Net Income (Loss)
    
    $
    (4,764,029
    )
    
    $
    (183,763
    )
    
    $
    (435,783
    )
    
    $
    (1,689,068
    )
    
    $
    (7,072,643
    )Total Assets
    
    $
    23,817,787
    
    
    $
    7,336,027
    
    
    $
    703,740
    
    
    $
    77,179,756
    
    
    $
    109,037,310Capital Expenditures
    
    $
    99,440
    
    
    $
    1,206,003
    
    
    $
    121,631
    
    
    $
    20,244,321
    
    
    $
    21,671,394
 -15-




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##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
 For the Three Months Ended June 30, 2007UnallocatedCorporate
    
    
    BioPower
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    554,254
    
    
    $
    554,254Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    93,681
    
    
    
    346,936
    
    
    
    440,617Depreciation expense
    
    
    600
    
    
    
    
    
    
    
    8,032
    
    
    
    32,010
    
    
    
    40,642General and administrative
    
    
    6,731,282
    
    
    
    
    
    
    
    27,991
    
    
    
    225,634
    
    
    
    6,984,907Operating loss
    
    
    (6,731,882
    )
    
    
    
    
    
    
    (129,704
    )
    
    
    (50,326
    )
    
    
    (6,911,912
    )Other income and expense
    
    
    (14,694
    )
    
    
    
    
    
    
    
    
    
    
    1,508
    
    
    
    (13,186
    )Net Loss
    
    $
    (6,746,576
    )
    
    $
    
    
    
    $
    (129,704
    )
    
    $
    (48,818
    )
    
    $
    (6,925,098
    )Total Assets
    
    $
    7,364,733
    
    
    $
    5,131,608
    
    
    $
    605,073
    
    
    $
    13,938,414
    
    
    $
    27,039,828Capital Expenditures
    
    $
    1,236
    
    
    $
    1,426,566
    
    
    $
    
    
    
    $
    9,595,711
    
    
    $
    11,023,513
 For the Six Months Ended June 30, 2008UnallocatedCorporate
    
    
    BioPower
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    645,885
    
    
    $
    645,885Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    194,234
    
    
    
    1,189,799
    
    
    
    1,384,033Depreciation expense
    
    
    80,961
    
    
    
    
    
    
    
    20,506
    
    
    
    85,679
    
    
    
    187,146General and administrative
    
    
    10,958,663
    
    
    
    307,550
    
    
    
    554,625
    
    
    
    1,845,344
    
    
    
    13,666,182Operating income (loss)
    
    
    (11,039,624
    )
    
    
    (307,550
    )
    
    
    (769,365
    )
    
    
    (2,474,937
    )
    
    
    (14,591,476
    )Other income and expense
    
    
    (650,669
    )
    
    
    
    
    
    
    (2,840
    )
    
    
    142,682
    
    
    
    (510,827
    )Net Income (Loss)
    
    $
    (11,690,293
    )
    
    $
    (307,550
    )
    
    $
    (772,205
    )
    
    $
    (2,332,255
    )
    
    $
    (15,102,303
    )Total Assets
    
    $
    23,817,787
    
    
    $
    7,336,027
    
    
    $
    703,740
    
    
    $
    77,179,756
    
    
    $
    109,037,310Capital Expenditures
    
    $
    463,713
    
    
    $
    1,214,448
    
    
    $
    160,764
    
    
    $
    33,109,021
    
    
    $
    34,947,945
 For the Six Months Ended June 30, 2007UnallocatedCorporate
    
    
    BioPower
    
    
    Wind Energy
    
    
    BioFuels
    
    
    TOTALTotal Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    554,254
    
    
    $
    554,254Total Operating Costs
    
    
    
    
    
    
    
    
    
    
    192,246
    
    
    
    346,936
    
    
    
    539,182Depreciation expense
    
    
    600
    
    
    
    
    
    
    
    16,064
    
    
    
    32,010
    
    
    
    48,674General and administrative
    
    
    6,908,771
    
    
    
    
    
    
    
    206,635
    
    
    
    225,634
    
    
    
    7,341,040Operating loss
    
    
    (6,909,371
    )
    
    
    
    
    
    
    (414,945
    )
    
    
    (50,326
    )
    
    
    (7,374,642
    )Other income and expense
    
    
    (72,908
    )
    
    
    
    
    
    
    
    
    
    
    1,508
    
    
    
    (71,400
    )Net Loss
    
    $
    (6,982,279
    )
    
    $
    
    
    
    $
    (414,945
    )
    
    $
    (48,818
    )
    
    $
    (7,446,042
    )Total Assets
    
    $
    7,364,733
    
    
    $
    5,131,608
    
    
    $
    605,073
    
    
    $
    13,938,414
    
    
    $
    27,039,828Capital Expenditures
    
    $
    8,633
    
    
    $
    1,426,566
    
    
    $
    
    
    
    $
    9,595,711
    
    
    $
    11,030,910
 Note 12. Commitments and Contingencies
 et al,
 -16-




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##### Table of Contents



GREENHUNTER ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)  FOR THE SIX MONTHS ENDED JUNE 30, 2008
   Note 13. Subsequent Events
  -17-




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with our consolidated
financial statements and the notes associated with them contained in our Form 10-K for the year
ended December 31, 2007 and with the financial statements and accompanying notes included herein.
The discussion should not be construed to imply that the results contained herein will necessarily
continue into the future or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best present assessment
by our management. 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.
 Overview
   BioFuels
   - 18 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
   BioPower
  Wind Energy
    - 19 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
   Results of Operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007:
  Biofuels Revenues and Operating Costs
   Wind Energy Operating Costs
  - 20 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 Depreciation Expense
  General and Administrative Expense
       Operating Loss
  - 21 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
     Other Income and Expense
  Net Loss
  Preferred Dividends and Net Loss to Common Shareholders
   Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007:
  - 22 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 Biofuels Revenues and Operating Costs
   Wind Energy Operating Costs
  Depreciation Expense
  General and Administrative Expense
   - 23 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
     Operating Loss
      Other Income and Expense
  - 24 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 Net Loss
  Preferred Dividends and Net Loss to Common Shareholders
   Liquidity and Capital Resources
 Cash Flow and Working Capital
  Operating Activities
  Investing Activities
  Financing Activities
 Convertible Debt
  - 25 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
  10% Series A Senior Secured Redeemable Debentures
  Nonrecourse Term Loan and Working Capital Loan
   Prospective Sources of Bank Financing and Other Capital Resources
  Other Debt and Equity Transactions Not Affecting Cash
 Common Stock Issued for Notes Payable
  Other Common Stock Transactions
  - 26 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 Employee Stock Options
  Debenture Warrants Issued to Debenture Holders
  Capital Requirements
 Capital Expenditures Forecast
  BioFuels
  - 27 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 BioPower
  Wind Energy and MingYang Investment
  Risks and Uncertainties that May Affect our Financial Condition
      - 28 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
    Critical Accounting Policies and Other
    Recent Accounting Pronouncements
 Fair Value Measurements
 - 29 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
  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
 Off-Balance Sheet Arrangements
  - 30 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risks
  Commodity Price Risk
  Foreign Currency Exchange Risk
   Interest Rate Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  - 31 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Orion Ethanol, Inc, a Nevada corporation, Plaintiff, vs GreenHunter Energy, Inc. a Delaware
corporation, GreenHunter BioFuels, Inc. a Texas corporation, Gary C. Evans, et al, Defendants,
  
 Item 2. Risk Factors
  
 Item 3. Unregistered Sales of Equity Securities and Use of Proceeds
    - 32 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 
 Item 4. Submission of Matters to a Vote of Security Holders
   Gary C. Evans
 Michael K. Studer
 Renato T. Bertani
 Stuart W. Ray
 James R. Sasser
 Ronald H. Walker
 Robert J. Zahradnik
 - 33 -




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GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
  
  
  
 
 Item 5. Other Information
  - 34 -




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##### Table of Contents



GREENHUNTER ENERGY, INC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
 
 Item 6. Exhibits and Reports on Form 8-K
 ExhibitNumber
    
    Exhibit Title3.1*
    
    Certificate of Incorporation3.2*
    
    Amendment to the Certificate of Incorporation3.3*
    
    Bylaws4.1*
    
    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 investors10.1*
    
    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*
    
    Form of Power Purchase Agreement with Southern California Edison, dated December 21, 2006.10.11***
    
    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 time10.12**
    
    Subscription and Equity Transfer Agreement between GreenHunter Energy, Inc. and MingYang Wind
Power Technology Co. LTD. et al., dated November 28, 200710.13**
    
    Master Turbine Supply Agreement between GreenHunter Energy, Inc. and MingYang Wind Power
Technology Co. LTD. et al., dated November 28, 2007*
    
    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
 - 35 -




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##### Table of Contents



SIGNATURES
  GreenHunter Energy, Inc.Date: August 14, 2008
    By:
    /s/ Gary C. EvansGary C. EvansChairman, President and Chief Executive OfficerDate: August 14, 2008
    By:
    /s/ David S. KruegerDavid S. KruegerVice President, and Chief Financial Officer - 36 -