ITEM 1. BUSINESS
Overview
Company
(formerly Olivia Inc.)
is a Delaware corporation,
incorporated on August 2, 2011. As mentioned previously, the Company initially intended to be a world leader by setting the standard
for waste to bio-fuel technologies. The Company held, and still holds a license agreement for a portfolio of patents including
Gravity Pressure Vessels and supporting appurtenances (“
Licensed Technology
”).
The Company planned to design and execute agreements
to build, operate and maintain a bio-mass to energy facility on the Island of Malta, utilizing the Licensed Technology (“
Facility
”).
The Facility would combine technologies from the waste management industry and integrate the recycling of waste, control of carbon
dioxide and other emissions, with the profitable production of fuel grade Ethanol.
The Company has so far not been successful
in obtaining the full funding required to establish the Facility. Consequently, the Company is considering additional or alternative
ways of commercializing the Licensed Technologies as well as searching/researching for new investments opportunities, as discussed
below.
Our Corporate History and Background
The Company, through its merger (“
Merger
”)
with Bio-En Corp (“
BEC
”), entered into the development stage and devoted substantially all of its efforts to
the development of its business plan, whereby Company intended to be a world leader of setting the standard for waste to bio-fuel
technologies. The Company intended to plan, design, and execute agreements to build, operate and maintain a bio-mass to energy
facility on the island of Malta, which is contingent on sufficient capital funding. The Company’s fiscal year-end is
December 31.
Industry
The Company is a renewable energy company which
intends to offer profitable solutions to environmental problems by the integration and application of proven technologies and methods
that deal with waste materials and the processing of biomass to fuel grade ethanol or other biofuels. The Company focused on the
up-to-date use of established process engineering principles joined with specific patented technology available to it through a
license agreement entered into on March 23, 2014 between BEC and GeneSyst International, Inc. a Delaware corporation, the license
agreement assigned by BEC to Company, previously referred to as the Licensed Technology.
Plan of Operation
The Company received correspondence from Malta
Enterprise, the governing body in Malta overseeing projects for the government indicating the Company had been given a green light
to design, build and operate the Facility to convert municipal solid waste and other forms of cellulosic biomass to ethanol subject
to requirements established by Malta Enterprises and the government of Malta, as well as other intended governments. The Facility,
assuming the receipt/confirmation of the necessary funding, was initially expected to be fully operational within 18-24 months
of full funding.
The planned Facility was envisaged as a major
GREEN project, the Facility combining technologies from the waste management industry to be integrated into the Facility’s
overall waste recycling program, control of carbon dioxide and other emissions and the profitable production of fuel grade ethanol
and other Biofuels.
The Company planned to derive its revenue from
gate fees for MSW
(as defined below)
brought to the plant, the sale of ethanol or other biofuels, sale of carbon dioxide
and sale of excess electricity to Malta. No off-take contracts have been entered into as of this time. In addition to these traditional
sources of revenue, the Company expected to derive additional revenue from biofuels production subsidies.
Green Business Opportunity and Cellulosic
Feedstock
The past decade has seen soaring oil prices,
Middle East turmoil, government Biofuel incentives, clean-tech venture investments and maturing technologies, all these factors
contributing to the critical mass necessary to launch the Biofuel market in a meaningful way.
Ethanol is a significant source of liquid fuel
and its production from food grains is widespread. However, the use of the food grains in the production of ethanol along with
the cost for fuel is causing widespread increases in food prices and governments are now seeking alternative feedstock and fuel
sources to accommodate the increasing demand for clean fuels from sustainable sources other than food grains or fossil fuels.
The global market for ethanol will be open
to enormous opportunities and transitional challenges over the next ten years. A few issues hold the key to these growth opportunities.
If the promises of competitive, large-scale cellulosic ethanol production is realized, and if national import/export policies for
Biofuels are further liberalized, then the possibilities for ethanol to replace 20% of gasoline consumption in the USA, Europe,
China and India may be actualized by the year 2020.
Initial Business Strategy
The Company intended to take advantage of the
worldwide burgeoning demand for Biofuels, thus adding value to the Company and high returns for the Company’s investors by
integrating world-class technology matched to a project for the conversion of solid waste feedstock (“
MSW
”)
and other cellulosic feedstock into fuel grade ethanol and other Biofuel. The Company’s use of patented Gravity Pressure
Vessel (“
GPV
”) technology will demonstrate its leadership in setting the standard for best practicable waste
conversion to fungible Ethanol and other Biofuels for the world market in an environmentally friendly manner. The Company believes
that its Malta project, as a prototype would have been the future standard used to measure all projects of this type and would
likely lead to additional projects in other parts of the world. Additional locations for a prototype facility are now being sought.
Intellectual Property
As a first step in achieving its business plan,
the Company assumed the license agreement (the “License Agreement”) with GeneSyst International, Inc. (“
GeneSyst
”),
the exclusive licensing agent for a portfolio of patents including the GPV and supporting appurtenances. The license and patents
are issued by political boundary, with exclusive rights defined by the physical location of the Facility. There are no restrictions
on source of materials or marketing of products. Pursuant to the Merger, the Company assumed the rights and responsibilities under
the License Agreement.
The License Agreement calls for a fee of 3%
of income, but not less than $330,000.00 per year. After the initial payment, alternate one-time payment plans are available. Supporting
services are available by separate arrangement coincident with the License Agreement. As new patents are developed, they are automatically
added to the patent portfolio without additional charge.
The License Agreement runs for the life of
the most recently issued patent, which is twenty years from the original filing date. Quality control matters are built into the
License Agreement.
A list of granted
patents pertaining to the Company’s business is included in the License Agreement. The most applicable and flexible patent
being US 8496754, which patent has been approved in the EU awaiting publishing. Another which has several advantages has been disclosed
to the patent attorneys and in the application process.
For further patent detail please see United States Patent No. US
8,496,754 B2 Titmas Date of Patent: Jul.30, 2013
The foregoing descriptions of the terms of
the License Agreement are qualified in their entirety by reference to the provisions of the License Agreement filed as Exhibit
10.2 to this the Company’s 2016 10-K, which was filed on April 13, 2015 and which is incorporated by reference herein. The
License Agreement tis currently still valid and continuing.
Patent Technical Field and Description
The present invention is generally directed
toward a process whereby woody cellulosic material is converted to ethanol via acid hydrolysis of cellulosic material to sugars
that are subsequently fermented. The acid hydrolysis takes place in a GPV. In particular, the present invention is directed to
apparatus and methods for impregnating woody cellulosic material with an alkali to make it more amiable to treatment in the GPV.
In more particular embodiments, this invention is also directed toward employing ultrasound in a GPV to aid in the processing of
woody cellulosic material.
Production and Facility
The Company
plan,
based on the design of the Facility, was to produce 88.5 million liters (23.3 million gallons) of fuel grade Ethanol each year
which it would sell under contract to offshore users and spot purchasers. The production volume can be adjusted to accommodate
short-term increases in overall capacity.
The Company plan was to build a Biofuels and
Ethanol production facility having an initial capacity to take in a mixture of raw materials amounting to 370,000 wet metric tons
of Biomass per year.
The planned Facility anticipated using MSW
and various forms of Biomass as the raw feedstock in the production process. The GenySyst process is a wet-based procedure and
requires a supply of water to initiate the operation of the process. This water supply can come from any non-salt water source,
direct potable water, rain water, final effluent from a sewage works, or from recovered process water from businesses or from sewage
sludge. Once initiated, the internal process water is continuously recycled. Water supply would be supplemented with make-up water
contained within new supplies of Biomass and sources of non-potable water.
All residual products and excess water produced
from the plant would be treated in a small waste water treatment processing plant located on or adjacent to the site. The waste
water treatment plant will be designed to produce water that is suitable for discharge into inland watercourses or for irrigation
purposes, as well as make-up water or used in the production of electricity from the Combined Heat and Power (“CHP”)
plant. Excess power not used at the Facility will be sold to the appropriate grid.
An Electrical Generation set would be installed
on site as part of the Facility. This will allow the Facility to operate independently of the local Electrical Grid. The Facility
may use residual heat and by-products, such as Methane and a CHP plant, to provide the power needed for the plant to operate. The
Facility will be a net producer of heat energy that can be converted to electricity and sold to local users.
All the Biomass contained within the process
facility, or any further materials produced during the production process would be non-toxic, and can be reused or incorporated
into construction materials and pavement foundations for roads.
Production
The quantity of Bio-fuel or Ethanol produced
would vary according to the type and source of Biomass. The estimated range is from 550 liters per dry metric ton from pure cotton,
400 to 450 liters per dry metric ton of recovered paper and wood, 300 to 350 liters per dry metric ton from green waste in parks
and gardens and food waste, to around 200 to 250 liters per metric ton from MSW.
The sources of Biomass proposed for the facility
include recovered paper, green waste from parks and gardens, MSW, as well as coastal sea weed and shore debris.
The Company planned Facility was based on MSW
and recovered paper, augmenting the feedstock with a blend of additional raw materials to increase bottom line revenues.
Integration of Technologies for Mitigation
and Production
The Bio-En Facility was designed to integrate
existing proven technologies with GeneSyst’s GPV technology to convert the cellulose content in Biomass into fuel grade Ethanol,
Biofuel and other byproducts that can be sold in the open market.
Proven Technologies and Key Components
The key components of a Mild Acid Hydrolysis
Facility needed to convert municipal and agricultural wastes to Ethanol and Biofuel have been in use and functioning for many years.
Two decades ago, a breakthrough occurred in the creation of a “continuous pressure cooker” that operated with extremely
high thermal and mechanical efficiency coupled with industry setting records for on-line availability. This is now known as the
GPV.
The key element in this technology is how the
GPV accepts and processes solid wastes in water. When the GPV technology was coupled with wastewater treatment technology, the
joining of these technologies supported a process that achieved rapid, high volume processing of waste products and various other
environmentally unfriendly raw materials into environmentally safe Biofuel at a low sustainable cost.
The incorporation of municipal waste and other
waste streams into the process economics results in a
negative
cost for feedstock. Company’s robust returns are a
result of the low cost of its feedstock, which in fact is not a cost (liability) but a source of revenue (asset), since the local
government would pay a tipping fee to get rid of its MSW. The use of MSW and other waste feedstock ensures economically viable
operations with or without tax incentives and meets the sustainability requirements which have been written into EU laws pertaining
to the sustainability of Biofuel production. The use of grains and other foodstuffs to make Biofuel has caused widespread increases
in the cost of food in Europe and is affecting the economics of everyday life.
Extrapolation of Known Procedures
Throughout this business summary predictions
have been made based upon generally accepted engineering procedures to predict performance of the facility as well as the economic
expectations to be derived from these practices. In order to be successful, it is necessary to build a facility that is more efficient
and more effective than previous technologies employed by others. To accomplish this with minimal risk, certain protocols have
been established by the Company’s engineers to insure that the plant to be designed and built will meet all requisite standards
discussed throughout the body of this plan. The Company’s engineers believe these extrapolations are limited, conservative
and reasonable in nature so as to result in a financially viable facility. However, some actual results may differ from projections
due to unforeseen developments.
Basis of the Technology
The process of turning Biomass (Celluloses)
to the Saccharides by Weak Acid Hydrolysis prior to making Ethanol has been used in the United States in the Pulp and Paper industry
for over 30 years, using small scale plants with heating under pressure in multiple batch tanks above ground. The GPV has been
used for twenty years to oxidize wet waste materials. During this time GPVs were also used for the conversion of waste streams
to commercial commodities, thus proving their viability and profitability.
Drivers Promoting Processing MSW to Ethanol
|
a.
|
Need for a clean, non-polluting process for the manufacture of fuel grade Ethanol
|
|
b.
|
The absolute amount of waste produced is rising
|
|
c.
|
Unchecked emission of greenhouse gases may lead to a rise in global temperature
|
|
d.
|
In less developed countries, waste production per capita is rising, probably at an even faster rate than the EU, as per-capita GNP and living standards increase
|
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e.
|
Developed countries are banning/limiting landfill and dumping of waste leading to an increased demand for waste processing and waste mitigation
|
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f.
|
Less developed countries have acknowledged the need for waste management
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g.
|
Release of toxic materials into water and air is prohibited in many countries
|
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h.
|
More countries are banning or limiting landfill and dumping of waste to protect the environment
|
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i.
|
Governments are increasingly enacting environmental taxation
|
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j.
|
Recycling of materials is fundamental in modern waste treatment and disposal
|
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k.
|
Oil, electricity and other energy prices are all rising
|
|
l.
|
Population is rising and land is getting increasingly expensive, particularly land used for growing feedstock for fuel
|
|
m.
|
Transportation costs are increasing - reflecting rising oil, land and labor prices
|
|
n.
|
Increasing demand for waste treatment in urban areas, coupled with ongoing health concerns requires innovative application of proven technologies/methods to treat waste economically
|
|
o.
|
The cost of food grain is rising due to their diversion to Biofuel production thus causing higher food prices and starvation
|
|
p.
|
Liquid energy in the form of Ethanol may have higher market value than other forms of energy conversion
|
Background of the GPV Technology
The GPV was invented and developed by James
Titmas, a professional engineer with 54 years of experience in water and waste treatment, and the founder of GeneSyst International
Inc.
The process of using the GPV in Weak Acid Hydrolysis
to convert celluloses to saccharides was discovered in the 1820’s and used by Henry Ford in the 1920-30’s to provide
the feed stock for producing fuel grade Ethanol.
The use of a GPV increases the efficiency of
converting celluloses to high value saccharides, and thus increases the resulting yield of Ethanol from Biomass and waste materials.
The GeneSyst system updates this conversion
process by using a shallow commercial water well chamber modified to be a sealed vacuum chamber in which hangs the GPV. After receipt
and initial shredding of cellulosic materials, the Biomass is mixed with water and impregnated with a mild alkali solution. The
processed Biomass then enters the outer annulus of the GPV passing downwards, pre-heating and accumulating pressure. In the reaction
chamber at the bottom of the GPV, Oxygen is used to destroy tramp organics that inhibit fermentation followed by the introduction
of a catalyst (dilute carbonic acid) to instigate the disassociation of the celluloses to saccharides (sugars). This oxidation
step is exothermic and after pre-heating, the temperature is trimmed to 455ºF (235
o
Celsius). With a small portion
of un-reacted nitrogen and thermal expansion, the density of the mixture is lowered to allow natural convection to move the fluids
through the GPV without pumping. The mixture, which is now sugar based, rises up the inner pipe after neutralization of its acid
in the reaction chambers. The mixture continues to rise driven upwards past the downward flowing colder feed mix, and as it does,
it allows its heat to pass through the wall of the inner heat exchanging pipe to the descending raw materials in the outer annulus
of the GPV. At the surface the sugar mixture is then cleaned using conventional water processing equipment and forwarded for conversion
to Ethanol or Biofuel ready for sale. All tanks and processing vessels are enclosed. The system is completely sealed to prevent
loss of product, odors and environmental contamination. Ethanol produced from Biomass waste eliminates the production of new Green
House Gases (GHG) arising from the waste. Ethanol is used up to an 85% concentration as a substitute for the refined fossil fuels
as an additive to gasoline. It offers a further reduction in the emission of GHG giving additional benefits to the environment.
The GHG emissions of landfill gasses are also dramatically reduced.
The Process Advantage
The process to extract the saccharides from
cellulosic material uses a combination of higher temperatures with acid conditions. The higher the temperature, the lesser the
amount of acid needed. This hydrolysis reaction process is nearly instantaneous and must be arrested before the acids decompose
the saccharides created from de-polymerization of the cellulosic materials. In the case of the GPV the acidic conditions are neutralized
to arrest the reaction and the heat energy is recovered.
The process described above is the specific
advantage made available by using a continuous plug flow GPV reaction chamber, combined with the advantages of no moving parts,
a tolerance for large size pieces and use of many types of raw materials, the internal recycling of pressure and heat energy all
combine to create high availability.
The process is continuous and not batching
which leads to increased productivity at lower costs.
Recap of the Gravity Pressure Vessel and
How It Works
|
a.
|
The GPV hangs freely in a 700 meter deep shaft
|
|
b.
|
The containment shaft consists of a steel tube fixed in a grout jacket
|
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c.
|
The shaft is brought under vacuum pressure, like a vacuum flask
|
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d.
|
The GPV is a closed outer tube with an open inner tube
|
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e.
|
Celluloses waste in water is pumped through the outer pipe down and through the inner pipe up
|
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f.
|
At the bottom of the pipe, celluloses converts to sugars in a low pH environment
|
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g.
|
The acid is neutralized with alkaline to retain the sugars
|
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h.
|
The up going stream heats the down going stream
|
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i.
|
It is an energy efficient sterile chemical flow process without moving parts and gas emissions
|
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j.
|
After the celluloses are cracked in the “reactor” chamber, the sugar dissolves and rises through the inner pipe to the closed sedimentation tanks on ground level
|
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k.
|
Here the remaining inorganic dense and lightweight particles are removed for beneficial reuse.
|
|
l.
|
The Saccharides are then stripped of other valuable organic byproducts and passed forward for fermentation to ethanol
|
Initial Project Description
The , as proposed and designed for Malta, was
intended to be a finance, design, construction and operational facility, targeted to make upwards of 88 Million liters per year
of the Bio-Ethanol. The source material to make this would be 270,000 dry metric tons equivalent per year of the Raw Material Biomass.
The ethanol produced at the facility would
be made using the process known as Dilute-Acid Hydrolysis in conjunction with GeneSyst’s patented GPV ™ along with
remainder of plant engineering and design obtained from the waste water (sewage) treatment industry and traditional fermentation
and distillation plant technology used in the Ethanol Industry.
The Company’s business implementation
strategy has been to identify a first class team to design and construct and operate the plant.. It would be using the appropriate
FIDIC (Fédération International Des Ingénieurs-Conseils) Conditions of Contract to ensure that any issues
are normalized under traditional working practices as used in the EU.
This facility would be developed according
to a Design and Construct contract where a portion of the design may not be fully developed until construction is about to start.
However, as soon as the financing is in place and mobilization of the designers and construction companies has occurred, this process
would be started. This whole procedure will be nurtured through a VM/VE (Value Management/Value Engineering) audit trail which
would be under constant review by the in-house staff and consultants for the Company.
All the confirmatory site investigations and
the residual planning assays need to be finalized before the actual construction begins. These investigations may be carried out
simultaneously with the need to assess and confirm the supply of the raw materials used to make the Biofuels, and confirmed by
the necessary laboratory testing which will be carried out in the local testing centers and University. At the same time, pre-orders
should be lodged with the longest lead time items including that for the drilling company that will be needed to drill the bore-holes
for the installation of the three GPVs. All boreholes should be drilled to the common depth of 610 meters (2000 feet) needed for
the process. The drilling of these boreholes and the installation of the steel-work would take approximately six (6) weeks. Two
major drilling companies have been asked for quotes for this part of the operation and early indications suggest that one will
be the most acceptable in terms of practice, record and price for this part of the work. Again, the lead time to obtain the fermentation
and concentration plant for the production of the Ethanol will also be required to be ordered early on and this should be organized
at the same time.
As soon as the first GPV is installed and operational,
the sections making up the overall plant needed for full commercial operation, complete with its pre-treatment settlement tanks
needed to prepare the Biomass, and its subsequent post GPV cleaning mechanical elements for cleaning the saccharides/sugars and
treatment plant items may be put on-line making the plant ready for full service and for training personnel in operations and maintenance.
This first train (unit) will also include the
final waste water (or residual effluent) treatment process plant, the anaerobic digestion facility, its CHP (Combined Heat and
Power) plant for creating electrical generation capacity and the residual water treatment component for discharging water for irrigation
purposes.
At the same time as this first unit is being
installed, the construction and fitting out of the additional GPV that form the main service units of the overall plant will be
carried to completion. Simultaneously with the development of the service units, the facilities for the processing and preparation
of the Biomass will be ongoing along with the facilities for post GPV cleaning of the saccharides/sugars) and treatment items for
fermentation and concentration of Biofuels and/or Ethanol.
Once the Ethanol has been prepared it can be
moved to its own on-site storage tanks so the locale and the EU Customs and Excise Authority can inspect and confirm the amount
and specifications of the fuel prior to its release and collection by Company’s own transportation fleet of HGV Class III
articulated tankers to ship the fuel to the storage depot for export. Additional storage tank for the Ethanol can be built to accommodate
this need.
Operations and Maintenance Contractor
|
a.
|
The Facility Operations and Maintenance (“
O&M
”) is currently integrated into the operating expense budget projections. However, it is envisioned that the O&M function will be organized as a separate Company Contractor under a separate contract expected with an EPC contractor.
|
|
b.
|
The Biomass to Ethanol Facility is not a complex type of plant and uses traditional and standard equipment that is generally used across a wide selection of water, waste water, chemical and food process industries. The O&M Contractor personnel will be trained people with experience from the necessary based chemical and waste water and process industries.
|
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c.
|
Selected personnel will be trained on site and through coordinated courses.
|
Plant Performance
The estimated quantity of Ethanol produced
from different sources of Biomass ranges from 132 liters of Ethanol per metric ton, to over 340 liters per metric ton from raw
materials rich in fiber such as wood, low lignin pulp and sugar beet residues. It is estimated, over 40 different kinds of fiber
sources may be available from population centers, many associated with negative cost sourcing, all of which are usable in GPV processing.
Negative cost sourcing refers to buyer cost factors. Buyer cost factors are response adjustments that occur when dealing with a
particular supplier. Buyer cost factors account for negative (and positive) aspects inherent in dealing with a particular supplier.
Such aspects could include the risk involved in dealing with a particular supplier because of supplier location, or possible supplier
past performance. For example, a new and untried supplier (or new manufacturing or shipping location for an incumbent supplier)
exposes the buying organization to a higher risk of supply disruption simply because the buying organization has no experience
of buying from the new supplier or location. Buyer cost factors are used in transformational bidding/quoting.
The overall process has the potential to use
a majority of the total volume of organic wastes from human activity. The process is believed to meet and exceed all public mandates
to recycle. The conversion process has no air emissions. The separation, fermentation and distillation processes are well known
and widely used.
Feedstock Compatible with the GeneSyst Technology
A blending of the waste streams in the processing
would allow for significant efficiencies along with administrative, environmental and social advantages.
Food Waste
|
Sewer Screenings
|
Septic Tank Waste
|
Restaurant waste
|
Magazine Paper
|
Dilute WWTP Sludge
|
Crop Processing
|
Garden Waste
|
Pulp and Paper Waste
|
Office paper
|
News Print
|
Cardboard
|
Crop Chaff
|
Scrap Wood
|
Landscaping Debris
|
Road Sweepings
|
Hospital Waste
|
Cotton Cloth
|
Tree clearing waste
|
Biofuel MFG waste
|
Feed lot Manure
|
Expired food and Drink
|
Competing Technologies
Gasification:
The GPV or “Titmas
Process” grew out of the need to meet the inherent failures of incineration and gasification
processes. The problems
arose from complications in recovery of first stage combustion energy (complex heat exchanger failures) incidence of toxic emissions
from chlorinated and toxic inclusions in the feed stocks, char and clinker interference with continuance ash extraction, low “on
line availability (less than 75%) failure to meet permit standards during start up and shut down protocols and an overall failure
to “scale up” beyond weekly batch operations larger than 100 tons per day. Despite the known technical failings of
gasification, promoters continue to garner investment of significant funds which will fail on observing the traditional problems
have not been resolved
Mechanical Heat and Pressure:
The generic family of processing materials, known as the “pump and tank” mechanical means of inducing higher temperatures
in fluids via pumping and heat exchangers includes: wet oxidation (Zimproet. Al.) pyrolysis, acid hydrolysis (both concentrated
and dilute). All have in common the use of heat to crack, decompose or make digestible complex organic debris – basically
similar to cooking foods for the same reasons. The most common practitioner of these arts was the Zimpro process which built over
200 commercial plants between 1960 and 1990. Of these it is understood that only 5 are still in operation by virtue of cannibalization
of parts from other units. Again, the problems revolve around “on line availability,” mechanical complexity, moving
parts, operator challenges and low yields. Attempts at strong acid hydrolysis in lieu of wet oxidation had the added complication
of acid destruction of containment vessels. Yields in all cases were low due to the time period to manipulate the combination of
the cellulose to sugar reaction (the combination of higher temperatures and acidic conditions) and complex mixtures of thick cellulosic
semi-solid pastes obligated by the costs of pumping and containment. The longer the reaction, the more sugars were destroyed before
extraction.
Enzymatic Conversions:
Rather
than solve the problems of acid hydrolysis researchers moved to the more academic fields of enzyme enhancements which to date have
turned out to require the use of expendable proteins for the saccharides conversion. Enzymes also held the promise of continuous
academic study which also had a peculiar advantage in the research fields. Lignin remains problematic and some attempts are at
hand to separate cellulose, hemi cellulose and lignin prior to further processing. Most of these are pursuing agricultural raw
materials. The same problems of the processing of incoming MSW remain the same, noting that many components of agri-wastes and
MSW share many characteristics and processing challenges in common. The real shortfall occurs from the seasonality of agricultural
cellulose sources and the costs to collect and transport adequate quantities of agricultural chaff.
Customers
At the present time the Company has not sought
out any customers because the facility is yet to be built.
Government Regulation
European Union
: The EU
maintains two complementary pieces of legislation relating to renewable fuels: the Renewable Energy Directive (RED) and the Fuel
Quality Directive (FQD). Together, these directives establish targets for the adoption of renewable fuels in EU member states by
2020. Transportation fuels are one category of fuels covered by these directives, and the targeted goals cover all renewable fuels
– that is, they are not limited to ethanol. The FQD is relevant to the present discussion in that it establishes a limit
of 10% for ethanol blending within EU member states, which are obligated to adopt national laws in conformance with the requirements
of the directive.
The European Commission’s
Renewable Energy Directive (RED) requires that by 2020 all transportation fuels in the EU must contain 10% Biofuel. Individual
EU states are free to incrementally build up to this target as they see fit, meaning that current mandated levels vary. Nevertheless,
the fines incurred by fuel producers for not meeting local requirements offer some measure of demand stability. Of course, given
that the mandates are dictated as percentages, declines in the consumption of the primary fuel for example, gasoline or diesel
– will also affect Biofuel demand.
The mandated requirements apply
to Biofuels across the board, but there are numerous other legislative changes that are set to affect specific products in different
ways. Biofuels produced from a raw material that is not part of the food chain, known as second-generation Biofuels, are set to
count double when tallying up the bio-content of a fuel blend. This will include Biodiesel, which is made from used cooking oil
and Ethanol produced from crude glycerin, which is itself a by-product of Biodiesel production. These changes add up to a positive
future for the product, which has yet to enjoy widespread usage.
Marketing Strategy and Sources of Revenue
The Company’s business model is based
on management’s belief that there is a significant market demand for fuel grade Ethanol and other Biofuels derived from sources
other than agricultural feedstock and which are fully sustainable without impacting the food supply chain. The Company believes
that its revenue model has the capability to provide substantial and predictable recurring revenue because it uses waste materials,
MSW and agricultural waste at no feedstock costs to the enterprise. In addition to the negative feedstock costs, the Company will
be receiving substantial gate fees for taking in the waste as well as other environmental cash credits from the EU. The Company
has developed a multi-faceted revenue model that is expected, over time, to provide recurring revenue from the following sources:
|
a.
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Sales of Ethanol and other Biofuels
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b.
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Sales of byproducts
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c.
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Gate fees
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d.
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EU Environmental subsidies
|
Markets
Biofuels have seen a spurt
in the United States and the EU, with the latter planning to increase its annual production to about 10% of its liquid fuels by
2020. The United States set an ambitious target to produce about 8 billion gallons annually by 2012 and about 40 billion gallons
by 2022. Though the energy companies are widening their portfolios to include Biofuels, the move is fraught by significant challenges
such as types of fuels to be used, regulations and regulatory approvals, increased usage of land for cultivating Biofuel crops
and diversion of food crops for fuel production which is resulting in the increase of food prices.
According to BCC Research,
the global market for liquid biofuels outside North America reached $41.7 billion in 2015 and is projected to reach $89.6 billion
in 2020, reflecting a five-year compound annual growth rate (CAGR) of 16.5%. Focusing on the key challenges that still impede
the realization of the billion-metric ton renewable fuels vision, this Memorandum integrates technological development and business
development rationales to highlight the key technological developments that are necessary to industrialize Biofuels on a global
scale. Technological issues addressed in this work include fermentation and downstream processing technologies, as compared to
current industrial practice and process economics. Business issues that provide the lens through which the technological review
is performed span the entire Biofuel value chain, from financial mechanisms to fund biotechnology start-ups in the Biofuel arena
up to large green field manufacturing projects, to raw material farming, collection and transport to the bioconversion plant, manufacturing,
product recovery, storage, and transport to the point of sale. Green Field manufacturing is form of foreign direct investment where
a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition
to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees.
Emphasis has been placed throughout the book on providing a global view that takes into account the intrinsic characteristics of
various Biofuels markets from Brazil, the EU, the US, or Japan, to emerging economies as agricultural development and Biofuel development
appear indissociably linked. Biofuels have emerged as a widely used renewable source of energy in the recent years. However, the
rising demand for Biofuels in developed as well as developing countries has put a lot of pressure on - such as corn, sorghum, and
soy, which are food crops. To ease off this pressure on food crops, scientists around the world are working on methods to convert
lignocelluloses from plant waste material into Biofuels, instead of utilizing more food crops.
Any types of Biomass derived
from plant such as cellulose, hemicellulose, and lignin are known as lingo-cellulosic Biomass. It is possible to categorize lingo
cellulosic Biomass into four categories: energy crops, wood residues, agricultural residues and municipal paper waste.
Lignocellulosic Biofuels have
the potential to provide a large portion of cheap fuel for transportation especially if the available conversion processes are
made cost effective. If technological hurdles are overcome, then a wide variety of lignocellulosic Biomass can be converted into
Biofuels.
Global cellulosic
ethanol is expected to increase from 14.25m gallons in 2012 to 412.25m gallons in 2020, with commercial production anticipated
to take off on a large scale thanks to major players adding substantial production capacity and new companies joining the market.
The US is expected to retain its market dominance until 2020.
Ethanol is the most
widely acclaimed alternative or additive for gasoline used for running vehicles, and the US ranked as number one producer of this
biofuel using natural waste feedstock, states new analysis.
Some EU countries
such as France and Italy have cellulosic ethanol production infrastructure, but a limited supply of biomass feedstock. Growth of
commercial production in these countries may feel the need to import feedstock from nearby countries or expand production to other
countries with ample feedstock availability. A few producers with upcoming commercial scale plants in the US have already started
signing agreements to procure agricultural residue and other kinds of cellulosic feedstock.
New Opportunities
With the inability to raise the necessary funds,
while the Company still finds value in the Licensed Technology, and usage, and the possibilities of identifying and securing alternative
locations to build a like-Facility in an alternative location, to maintain the Company’s viability, we have been forced to
reevaluate our business plans. As such, our principal business objective for the next 12 months and beyond will be to achieve long-term
growth potential through starting up a new business or a combination with a business in addition to immediate, short-term earnings.
We will not restrict our potential candidate target companies to any specific business, industry or geographical location and,
thus, may acquire any type of business.
The analysis of new business opportunities
has and will be undertaken by or under the supervision of our officers and directors. We have unrestricted flexibility in seeking,
analyzing and participating in potential business opportunities. In our efforts to analyze potential acquisition targets, we will
consider the following kinds of factors:
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Potential for growth, indicated by new technology, anticipated market expansion or new products;
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Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
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Strength and diversity of management, either in place or scheduled for recruitment;
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Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
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The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
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The extent to which the business opportunity can be advanced;
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The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
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Other relevant factors.
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In applying the foregoing criteria, no one
of which will be controlling, we will attempt to analyze all factors and circumstances and make a determination based upon reasonable
investigative measures and available data. Potentially available business opportunities may occur in many different industries,
and at various stages of development, all of which will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Due to our limited capital available for investigation, we may not discover or adequately
evaluate adverse facts about the opportunity to be acquired.
Form of Acquisition
The manner in which we participate in an opportunity
will depend upon the nature of the opportunity, the respective needs and desires of us and the promoters of the opportunity, and
our relative negotiating strength with such promoters. It is likely that we will require its participation in a business opportunity
through the issuance of our common stock or other securities. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining whether or not an Acquisition is a so-called "tax
free" reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986, as amended (the "
Code
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depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction
were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code,
all prior stockholders would, in such circumstances, retain 20% or less of the total issued and outstanding shares. Under other
circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less
than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution
to the equity of those who were our stockholders prior to such reorganization.
Our present stockholders may not be left with
control of a majority of our voting shares following the formation of a new business or a reorganization transaction. As part of
such a transaction, all or a majority of our directors and officers may resign and new directors may be appointed without any vote
by stockholders.
In the case of an acquisition, the transaction
may be accomplished upon our sole determination without any vote or approval by stockholders. In the case of a statutory merger
or consolidation directly involving us, it will likely be necessary to call a stockholders' meeting and obtain the approval of
the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and
additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting
stockholders. Most likely, we will seek to structure any such transaction so as not to require stockholder approval.
It is anticipated that the investigation of
specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other
instruments will require substantial time and attention and substantial cost for accountants, attorneys and others. If a decision
were made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the
failure to consummate that transaction may result in the loss to us of the related costs incurred.
Other than as discussed above, none of our
officers or our directors have not yet had any preliminary contact or discussions with any representative of any other entity regarding
a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its
early stages of development or growth, including entities without established records of sales or earnings. In that event, we will
be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging
growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level
of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be
no assurance that we will properly ascertain or assess all significant risks.
We anticipate that the selection of a business
combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made
in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited
additional capital that we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits
of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional
equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing
incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint
ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries
and at various stages of development, all of which will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
Employees
We presently have no employees apart from our
management. We have several consultants who currently provide services to us. Some of them are compensated for their services
through the issuance of our shares to them, which may result in further dilution to our stockholders. We may hire additional
employees, consultants, and recruit senior executive members as officers and directors, which employees may be instrumental in
forming a new business or we may acquire another business with a full management team already on board.
ITEM 1A. RISK FACTORS
In addition to the other information in this
Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors:
An investment in our common stock involves
a high degree of risk. You should carefully consider the risks described below, together with all of the other information included
in this Report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition
or results of operations could suffer. In that case, the trading price of our shares of common stock could decline, and you may
lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward Looking Statements”
above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements
in the context of this Report.
Risks Related to Our Company and the
Biofuel Industry
We have no trading history and may never
achieve profitability and the failure to raise additional capital could place our continued viability in question.
In particular we must raise additional capital
from external sources to carry out our business plan. If we are unable to generate the required additional capital, our ability
to meet our financial obligations and to implement our business plan may be adversely affected. We currently have no commitments
to obtain additional capital, and there can be no assurance that financing will be available in amounts or on terms acceptable
to us, if at all. If we are not successful in raising additional working capital to support our operations and implement
our business plan, we may be forced to curtail our operations, take additional measures to reduce costs, modify our business plan,
and consider strategic alternatives that could include a sale of our business or filing for bankruptcy protection.
We are a development stage green field
company with a limited history and a small employee base, which makes an investment in us highly speculative.
Our business plan for the production and marketing
of fuel grade ethanol, carbon dioxide, electricity and other associated products has been based primarily upon the construction
and operation of a future facility in Malta. We have not produced or sold any products to date. Accordingly, we have a limited
operating history from which you can evaluate our business and prospects. In addition, our prospects must be considered
in light of the inherent risks, expenses and difficulties encountered by companies in the early stages of development, particularly
companies in rapidly evolving markets, such as the bioenergy market, where supply and demand may change significantly in a short
amount of time. Some of these risks relate to our potential inability to:
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Effectively manage our business and operations;
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Recruit and retain key personnel;
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Manage rapid growth in personnel and operations;
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Raise capital to implement our business plan or address unforeseen capital requirements;
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Overcome competitive disadvantages against larger and more established companies; and
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Successfully address the other risks described throughout this prospectus.
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If we cannot successfully address these risks,
our business and our results of operations and financial position would suffer.
We may not be able to secure additional
necessary funding on favorable terms, or at all, in order to sustain our current operations, execute on our business plan and market
our products.
We must seek additional capital to support
our ongoing operations, including to complete construction the Malta facility or an alternative site. We may raise these additional
funds from public and private debt or equity offerings, borrowings under bank or lease lines of credit, or other sources. Any additional
financing may not be available on a timely basis, on terms acceptable to us, or at all. Such financing may be dilutive to shareholders
or may require us to grant a lender a security interest in our assets, which could be detrimental to our shareholders if we are
unable to repay our obligations. The amount of money we will need may depend on many factors, including:
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An increase in the cost of constructing or commencing operation the relevant facility;
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A material increase in the cost of the biomass and other materials we need for our operations;
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A decrease in the price we receive as gate fees for the intake of waste materials;
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A decrease in the price we receive for our fuel grade ethanol and other products, which would reduce our revenues; and
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An increase in the cost of operating the relevant facility.
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If adequate funds are not available, we may
incur further delays in completing our facility or be required to curtail or cease our operations altogether. Any of these results
would materially harm our business, financial condition and results of operations.
Additional delays due to, among other
things, labor or material shortages, permitting or zoning issues, or opposition from local groups may hinder our ability to commence
operations at the Malta facility, which would harm our business, financial condition and results of operations.
We may experience delays in the construction
of the Malta facility for any number of reasons, including compliance with permitting and zoning requirements, opposition from
local groups, shortages of labor or material, defects in materials or workmanship, changes in interest rates or the credit market,
or policy changes at the Malta Government or European Community level. There can be no assurance that we will be able
to raise the additional required capital, complete construction and operate the Malta facility at full design capacity.
If our timetable for construction and the commencement of operations at the Malta facility is delayed, this will impact our ability
to generate revenue and achieve profitability, which would have an adverse material effect on our business, our financial condition
and our results of operations.
Significant increases in the cost of
constructing the Malta facility may further delay or cause us to abandon construction of the Malta facility, which would materially
impact our ability to achieve profitability and the value of your shares.
There can be no assurance that the final cost
of constructing the Malta facility and commencing operations will not be significantly higher than budgeted. Many events
and conditions, including economic factors, site conditions, design modifications and set-up delays or overruns, could also lead
to significant increases in project costs. Furthermore, we need to obtain and comply with a number of permitting requirements,
many of which can be costly and time consuming. As a condition to granting necessary permits, regulators may make additional
demands that increase the costs of constructing and operating the plant. If any of these events occurs, we could be
forced to seek additional debt or equity financing beyond what we currently expect to need, which may not be immediately available,
may not be available on favorable terms, or may not be available at all. If additional capital is required, we may
experience additional significant construction delays, or fail to achieve profitability, any of which would have a material adverse
effect on our business, our financial condition and our results of operations, and significantly diminish or eliminate the value
of your shares.
We may materially modify our business
plan for any number of reasons, which may cause us to incur additional costs or further delay the expansion of our production capacity,
which would harm our business, financial condition and results of operations.
We may modify our business plan in any number
of ways, including decreasing the design capacity of the Malta facility or abandoning the Hal Far Estate site for an alternative
location. Any material modification to our business plan may result in higher than anticipated construction and start-up costs
at the Malta facility, require us to abandon the Malta facility with or without the ability to recoup acquisition, design and construction
costs incurred to date; may cause significant delays before we are able to increase our current production capacity, cause our
planned production to be significantly below our current estimates, or result in higher than anticipated operating costs, any of
which could have an adverse material effect on our business, our financial condition and our results of operations.
We operate in an intensely competitive
industry and we may not be able to compete effectively.
The market for the manufacture, marketing and
sale of alternative fuels is highly competitive. Competition could be intense and result in increases in the costs of raw materials,
plant construction and operating expenses, as well as make it more difficult to attract and retain qualified engineers, chemists
and other employees whose services could be key to our operations as they develop. Larger companies that are already engaged in
this business may have access to greater financial and other resources, making it difficult to compete with them in recruiting
and retaining qualified employees, in acquiring attractive locations for the construction and operation of future production facilities,
and selling our products at competitive prices.
New plants under construction or decreases
in the demand for biofuels may result in excess production capacity in our industry.
We expect that the number of biofuel producers
and the amount of biofuels produced will likely continue to increase in the near future, which may lead to excess biofuel production
capacity. In a manufacturing industry with excess capacity, producers have an incentive to manufacture additional products
for so long as the price exceeds the marginal cost of production (i.e., the cost of producing only the next unit, without regard
for interest, overhead or fixed costs). This incentive can result in the reduction of the market price of biofuel to a level that
is inadequate to generate sufficient cash flow to cover costs. Excess capacity may also result from decreases in the
demand for biofuel, which could result from a number of factors, including increased governmental regulation, the elimination or
modification of governmental incentives, the development of other technologies or products that compete with biofuel, or reduced
fuel consumption generally. Excess capacity in the biofuel industry or the reduction of the market price for biofuel could have
an adverse effect on our results of operations, cash flows and financial position.
The production of biofuel requires that
we purchase significant amounts of raw materials, such as biomass waste, paper waste and other materials that we may be unable
to procure.
Our biofuel production requires significant
amounts of biomass waste. We will be required to purchase significant amounts of raw materials, such as biomass waste, paper waste
and other materials. Such raw materials may be unavailable which could significantly reduce our ability to produce biofuels.
Our business is highly sensitive to the
gate fees we receive and the prices we pay for biomass waste, and any future price adjustments could increase our operating costs
and may adversely affect our operating results.
Negative consumer perceptions of biofuel
may impair or prevent the acceptance of biofuel in the marketplace, which could harm our business.
The biofuel industry is relatively new and
general public acceptance of biofuel is uncertain. Public acceptance of biofuel as a reliable, high-quality alternative transport
fuel may be limited or slower than anticipated. Even if our production processes consistently produce biofuel that complies with
applicable standards, actual or perceived problems with quality control in the industry generally may lead to a lack of consumer
confidence in biofuel and harm our ability to successfully market biofuel. Quality control issues in biofuel that is produced by
other industry participants could result in a decrease in demand or mandates for biofuel, with a resulting decrease in our revenue.
Furthermore, any negative media reports, whether substantiated or not, may adversely affect the demand for our biofuel, which in
turn could decrease our sales, harm our business and adversely affect our financial condition.
Deterioration in European, United States
and global credit and financial markets may have a material adverse impact on our liquidity, financial position and ability to
operate our business.
The recent unprecedented deterioration in the
European, United States and global credit and financial markets could negatively impact our ability to obtain financing to construct
and operate our Malta facility.
We may be adversely affected by environmental,
health and safety laws, regulations and liabilities.
Our Malta facility and any alternative location
production business is subject to various environmental laws and regulations, including those relating to the discharge of materials
into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and
the health and safety of our employees. In addition, some of these laws and regulations require our facilities to operate under
permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution
control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and
regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations
and/or facility shutdowns. In addition, we have made, and expect to make, significant capital expenditures on an ongoing basis
to comply with increasingly stringent environmental laws, regulations and permits.
In addition, new laws, new interpretations
of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make additional
significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased
future investments for environmental controls at our production facilities. Present and future environmental laws and regulations
(and interpretations thereof) applicable to our operations, more vigorous enforcement policies and discovery of currently unknown
conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial
position.
European biofuel industries are highly
dependent upon a myriad of legislation and regulation and any changes in legislation or regulation could materially and adversely
affect our results of operations and financial position.
There are a number of European and Maltese
laws, regulations and programs that have led to an increase in the supply and demand for biofuels, some of which provide significant
economic incentives to biofuel producers and users. These laws, regulations and programs are constantly changing.
The passage of new European and Maltese energy legislation, or the revocation or amendment of existing laws, regulations or programs
related to biofuel and renewable fuels, could have a significant adverse effect on the biofuel industry in general and our business
specifically. We cannot assure you that any of the laws, regulations or programs from which our business benefits will continue
in the future or that these laws, regulations or programs will benefit us or benefit us more than our competitors.
The elimination or reduction of government subsidies and tax incentives could cause the cost of biofuel to increase to the point
where it is not feasible to economically produce and market biofuel, which could require us to abandon our business plan and cease
operations.
Our competitive position, financial position
and results of operations may be adversely affected by technological advances.
The development and implementation of new technologies
could result in the processes and procedures that we intend to use at our Malta facility becoming less efficient or obsolete, allow
our competitors to produce biofuel at a lower cost than us, or cause the biofuel we produce to be of a lesser quality than the
biofuel produced by our competitors. Also, any advance in biofuel process technology could make our Malta facility
less competitive, less efficient or obsolete, any of which could lower the revenue we would otherwise earn from our product sales.
We do not predict when new technologies may become available, the rate of acceptance of new technologies by our competitors or
the costs associated with new technologies. In addition, advances in the development of alternatives to biofuel could
significantly reduce demand or eliminate the need for biofuel. Any advances in technology which require significant
capital expenditures to remain competitive or which reduce demand or prices for biofuel would have a material adverse effect on
our results of operations and financial position.
Defects in the construction or performance
of the Malta facility could result in a reduction in our revenues and profitability and in the value of your shares.
Although we intend to engage third party companies
to construct our Malta facility, we do not believe we will receive any warranties with respect to materials and workmanship or
assurances that the project will be capable of operating at its full design capacity. Defects in the construction or performance
of the plant could occur and there is no assurance that we, our sub-contractors or anyone else that we contract with to construct
the project would be able to correct all problems that arise. If defects delay the construction or hinder the continued
operation of the Malta facility, our business, financial condition and results of operations could be adversely affected.
Our directors and officers have limited
experience in the construction and operation of a waste biomass to biofuel facility.
Our directors and officers have limited experience
in raising large amounts of project finance related equity and debt capital, or building and operating waste biomass to biofuel
facilities. Although we expect to hire additional personnel and enter into agreements with contractors and consultants
to assist us in constructing and operating the facility, there is no assurance that we will be able to hire employees or sign agreements
satisfactory to us. If our directors and officers are unable or find it difficult to manage our development and operations
successfully, our ability to succeed as a business and the value of your shares will be adversely affected.
Our management will be subject to greater
demands and we will incur increased costs as a result of being a public company, which could affect our profitability and operating
results. Our accounting, internal audit and other management systems and resources may not be adequately prepared for these
demands.
We are a public reporting company in the United
States subject to the information and reporting requirements of the Securities Exchange Act of 1934 and the compliance obligations
of the Sarbanes-Oxley Act of 2002. As a public reporting company, we will incur significant legal, accounting, investor relations
and other expenses. These significant expenses could affect our profitability and our results of operations.
Section 404 of the Sarbanes-Oxley Act requires
annual management assessment of the effectiveness of our internal controls over financial reporting and a report by our independent
auditors addressing these assessments. These reporting and other obligations will place significant demands on our management,
administrative, operational, internal audit and accounting resources. We anticipate that we will need to upgrade our systems; implement
additional financial and management controls, reporting systems and procedures; implement an internal audit function; and hire
additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective
fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could
be impaired. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating
results and stock price.
We are dependent upon our officers for
management and direction, and the loss of any of these persons could adversely affect our operations and results.
We are dependent upon our officers for the
successful management of our operations and execution of our business plan. We do not have employment agreements with our officers
or other key personnel. The loss of any of our officers could delay or prevent the achievement of our business objectives,
which could have a material adverse effect upon our results of operations and financial position.
Competition for qualified personnel in
the biofuel industry is intense and we may be unable to hire and retain qualified managers and other key personnel.
Prior to commencement of commercial operations
at our facility in Malta or any alternative location, we will need to hire additional employees to manage and operate the plant.
Competition to attract and retain qualified employees is intense in the biofuel industry, and we expect that competition will continue
or increase as a result of significant growth in the number of companies producing biofuel and other alternative fuels.
If we are unable to attract and retain key personnel, we may be unable to successfully execute our business plan and our financial
condition and results of operation may be adversely affected.
It may be more difficult for us to retain
or attract officers and directors due to the Sarbanes-Oxley Act of 2002.
The Sarbanes-Oxley Act of 2002 was enacted
in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals
of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures
pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic
reports with the SEC under the Securities Exchange Act of 1934. The enactment of the Sarbanes-Oxley Act of 2002 has led to
a series of rules and regulations by the SEC that significantly increases the responsibilities and potential liabilities of directors
and executive officers. Because of the perceived increased personal risk associated with acting as an executive officer
or director of a public company, we may be unable, or it may be significantly more expensive, to attract and retain qualified executive
officers and directors.
Our directors and officers devote time
to other ventures, which may adversely impact the time they can devote to our company and its operations.
Some of our officers and directors also serve
as officers and/or directors of other companies, and they devote only that portion of their time, which, in their judgment and
experience, is reasonably required for the management and operation of our company and our business. Executive management
may have conflicts of interest in allocating management time, services and functions among our company and any current and future
ventures in which they are engaged. If our officers and directors are unable to devote adequate time to manage our operations
successfully, our potential to succeed as a business and the value of your shares may be adversely affected.
Our ability
to operate depends on obtaining adequate financing to build and operate the Facility, and our ability to grow and compete in the
future will be adversely affected if adequate capital is not available to us or not available on terms favorable to us.
The ability of our business to grow and compete
depends on the availability of adequate capital, which in turn depends in large part on our cash flow from operations and the availability
of equity and debt financing. We cannot assure you that our cash flow from operations will be sufficient or that we will be able
to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy. We estimated that we will need
a minimum of $80-90 million to successfully implement our business plans of establishing the facility in Malta. As a result, we
cannot assure you that adequate capital will be available to finance the building and operation of the Facility, take advantage
of business opportunities or respond to competitive pressures, any of which could harm our business.
Our future success is dependent, in part,
on the performance and continued service of our Chief Executive Officer.
We are presently dependent to a great extent
upon the experience, abilities and continued services of Serena B. Potash, our Chief Executive Officer. The loss of services of
any of the management staff could have a material adverse effect on our business, financial condition or results of operation.
We do not intend on taking out key man insurance on Ms. Potash after the Closing Date.
The market price of our Common stock may be particularly volatile
and you may be unable to sell your common stock at or above your purchase price, which may result in substantial losses to you.
If a public market for our common stock develops, it is likely to
be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. Fluctuations in share price could be based on
various factors in addition to those otherwise described in this prospectus, including:
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Our operating performance and the performance of our competitors;
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The public’s reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission;
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Changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry;
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Variations in general economic conditions;
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The number of shares to be publicly traded after this offering;
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Actions of our existing shareholders, including sales of common stock by our directors and executive officers;
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The arrival or departure of key personnel; and
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Other developments affecting us, our industry or our competitors.
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Many of these factors are beyond our control and may decrease the
market price of our common stock, regardless of our operating performance and financial condition.
The market price of our common stock may decline if a substantial
number of shares of our common stock are sold at once or in large blocks.
There is presently no public market for our common stock.
If a public market for our shares develops in the future, many of our shareholders may, subject only to the volume, manner of sale
and notice requirements of Rule 144 of the Securities Act of 1933 in the case of some shareholders, desire to sell their shares.
Sales of a substantial number of these shares in the public market, or the perception that these sales could occur, could cause
the market price of our common stock to decline. In addition, the sale of these shares could impair our ability to raise capital
through the sale of additional equity securities.
Future issuance
of our Common Stock could dilute the interests of existing shareholders.
We may issue additional
shares of our Common Stock in the future. The issuance of a substantial amount of Common Stock could have the effect of substantially
diluting the interests of our shareholders. In addition, the sale of a substantial amount of Common Stock in the public market,
either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such Common Stock
as consideration or by investors who acquired such Common Stock in a private placement could have an adverse effect on the market
price of our Common Stock.
We have no plans to pay dividends.
To date, we have paid no cash dividends on
our common shares. For the foreseeable future, earnings generated from our operations will be retained for use in our business
and not to pay dividends.
The application
of the Securities and Exchange Commission’s “penny stock” rules to our Common Stock could limit trading activity
in the market, and our shareholders may find it more difficult to sell their stock.
It is expected our
Common Stock will be trading at less than $5.00 per share and is therefore subject to the SEC penny stock rules. Penny stocks generally
are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements
showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement
to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary
market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market
price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our Common Stock and
may affect your ability to resell our Common Stock.
We will have
broad discretion over the use of the net proceeds to the company and may not use them effectively.
Our management will
have broad discretion to use the net proceeds to the company for a variety of purposes, including, further development of
our products and operations, working capital and general corporate purposes. We may spend or invest these proceeds in a way
with which our shareholders disagree. Failure by our management to effectively use these funds could harm our business and financial
condition. Until the net proceeds are used, they may be placed in investments that do not yield a favorable return to our investors,
do not produce significant income or lose value.
If we are unable to establish appropriate internal
financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement
of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose
confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
Effective internal controls are necessary for
us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial
reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal
financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles.
As a public company, we will have significant
additional requirements for enhanced financial reporting and internal controls. We will be required to document and test our internal
control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual
management assessments of the effectiveness of our internal controls over financial reporting. The process of designing and implementing
effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the
economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate
to satisfy our reporting obligations as a public company.
We cannot assure you that we will not, in the
future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures
we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls
over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal
financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement
of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose
confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
Lack of experience as officers of publicly-traded
companies of our management team may hinder our ability to comply with Sarbanes-Oxley Act.
It may be time consuming, difficult and costly
for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need
to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement
appropriate internal controls and reporting procedures.
We will incur increased costs as a public
company which may affect our profitability.
As a public company, we will incur significant
legal, accounting and other expenses that we did not incur as a private company. We are subject to the SEC’s rules and regulations
relating to public disclosure. SEC disclosures generally involve a substantial expenditure of financial resources. Compliance with
these rules and regulations will significantly increase our legal and financial compliance costs and some activities will
become more time-consuming and costly. Management may need to increase compensation for senior executive officers, engage additional
senior financial officers who are able to adopt financial reporting and control procedures, allocate a budget for an investor and
public relations program, and increase our financial and accounting staff in order to meet the demands and financial reporting
requirements as a public reporting company. Such additional personnel, public relations, reporting and compliance costs may negatively
impact our financial results.