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Q3 Quiz Card Shipments
Did anyone ask about the Q3 shipments of Quiz Cards?? Short-term, that is very important IMO. That is what will drive Q3 numbers.
Excuse me, GWMAN.
In my post I said:
When a question was asked about where the jump in revenues in Q3 and Q4 was going to come from, Lee answered by saying “Quiz Cards” with no elaboration. (Remember this is not a small amount of money. They need about $5 million more in revenue in 2H09 beyond the $12 million annual revenue trajectory they are on with the promotions business.)
To be precise, I should have said:
When a question was asked about where the jump in revenues in Q3 and Q4 was going to come from, Lee answered by saying, “Coming from a new product which we’re shipping third quarter, [which is?] Quiz Card” with no elaboration.
Unfortunately, it was not more specific than that.
IR Conversation, Q3 and Q4 Revenue
In the cc Opening Remarks, Kevin talked about the Quiz Cards but only in relation to FMM-The Moscoe Group. He said that sales through them are not expected until 2010. He did not speak of the Quiz Cards in relation to Q3 and Q4.
When a question was asked about where the jump in revenues in Q3 and Q4 was going to come from, Lee answered by saying “Quiz Cards” with no elaboration. (Remember this is not a small amount of money. They need about $5 million more in revenue in 2H09 beyond the $12 million annual revenue trajectory they are on with the promotions business.)
According to IR, it’s important to understand that Kevin was asked to focus on 2010 and beyond (and to go after larger, enterprise-size, customers). That means 2009 is still Lee’s baby and it is essentially his responsibility to make 2009 numbers. So apparently there are some Q3 and Q4 Quiz Cards deals that were struck by Lee, mostly in Europe and the UK.
1. This helps to explain why Lee is still so active on the conference calls.
2. It may also explain, to some degree at least, why Kevin did not give details on Q3 and Q4 Quiz Card orders.
3. It does not explain, of course, why Lee didn’t give any details.
Anyway I’m still a bit confused, but Yvonne as always was able to shed some light on the subject, so I'm passing it on.
Outstanding Still the Same
As of 1:13 pm eastern time on August 21st, shares oustanding still 1,367,513,501 per TA.
EGMI Q2 2009 CC Transcript
Here is the transcript. Still nothing on seekingalpha.
I’ve bolded sections that pertain to (or may pertain to) 2H09 and also made two comments about it in brackets. Kevin and Lee confirmed quite a ramp over the next two quarters, yet gave virtually no info about it other than to say it is Quiz Cards.
EGMI Q2 2009 CC
August 6, 2009
Kevin Donovan, CEO
Lee Cole, Board Member, Former CEO
Yvonne Zappulla, IR Rep
YVONNE ZAPPULLA
[Introduction and Safe Harbor]
One final note before handing the call over to Kevin. On September 15th at 12 noon Eastern, Electronic Game Card will be holding its annual shareholder meeting in our offices at Grannus Financial located at 1120 Avenue of the Americas in Manhattan. All are welcome. Please call me and confirm your attendance.
KEVIN DONOVAN
Well thank you very much, Yvonne, and thank you all for joining us this afternoon. These are very exciting times for the company and our shareholders. It’s a true privilege for me to report to all of you today our achievements during our second quarter of this year and provide you with an update on our progress as we head into the second half of this year and beyond.
For the second quarter 2009 Electronic Game Card generated record revenues of $3.1 million, an increase of approximately 23% over the prior year second-quarter revenue of $2.5 million and 4% above first quarter 2009 revenues. Our revenue growth during the quarter was predominantly driven by our further penetration of the electronic game card into the promotional market, additional licensing revenue in the Native American gaming market, and trial orders of new lines introduced at the end of last year.
Electronic Game Card reported record comprehensive net income of $2 million, which equates to $.03 per diluted share. This is slightly above expectations and compares to a net income of $1.3 million or $.02 per diluted share during the same period last year and income of $1.7 million first quarter 2009.
As of June 30, 2009 Electronic Game Card had approximately 62.7 million shares of common stock outstanding with a weighted fully diluted share count totaling 68.4 million. It is important to note for the foreseeable future that we only intend to increase the share count to accommodate employee, executive management, and Board of Director stock options, and only at levels that are reasonable.
The gross profit generated for the three months ended June 30, 2009 was at the record level of $2.5 million, generating an 80% gross margin. Growing and maximizing gross profit dollars is our top focus. Please note that as future events unfold over the coming quarters throughout this year, some of our current contracted opportunities may greatly accelerate our revenues at margin percentage levels that, while still strong, could be less than 70% margins we have enjoyed from less robust revenues and volumes.
Conversely there are a number of potential license royalty relationships with well-established household brand names that naturally generate little cost against revenues. As these new business relationships become public we will update you with proper guidance. The company’s operating expenses during the second quarter totaled $639,000 or approximately 20% of revenue.
These increases were largely due to higher costs resulting from the strengthened management team now in place and a heightened marketing effort. As we manage our growing business going forward our current staffing levels are expected to slightly increase as our sales and marketing team increased activity in North America and the Pacific Rim. However, we do not anticipate expenses as a percentage of revenue to increase from the levels we have generated over the past quarter. In fact, we believe the ratio will actually fall going forward.
Your company and board of directors have been highly disciplined in managing expenses and will continue to do so under my direction.
6:20
Our balance sheet continues to strengthen. Cash equivalents and marketable securities on June 30, 2009 totaled $11 million, an increase of approximately $1 million from first quarter 2009 and an increase of $2 million from December 31, 2008. At quarter-end the company’s current ratio rose sharply to 17.2, up from 10.7 last quarter due to a $400,000 reduction in current liabilities and a $1.7 million increase in current assets. Overall, total liabilities declined by $522,000 during the quarter, down to $869,000 and the Series A Convertible Redeemable Preferred stock totaled $3.3 million at quarter-end, a decrease of $1.2 million from the prior first quarter.
Importantly, Stockholders Equity has risen for the tenth consecutive quarter to $18 million, an increase of $3.3 million in just a three-month period of time.
Looking forward, the second half of the year is shaping up to deliver an acceleration in revenues and earnings to put us on target of hitting our guidance of $17 million in revenues and $.14 earnings per share.
Looking forward into 2010 we have a number of initiatives already announced and others soon to be announced that will create significant momentum to add to our 2009 base.
But before reviewing our business lines and future initiatives, it is important to discuss our base of operations and infrastructure that will enable us to smoothly ramp up our revenue levels. So I’d like to share some of those with you right now.
9:20
Number one, additions to be the Board and executive ranks.
As we have mentioned in our conference call last quarter, Linden Boyne will be retiring from both the Board and as CFO of Electronic Game Card on September 1st. We are very grateful for his support and admirable service to this company over the past three and one-half years, and he was instrumental in working closely with former interim CEO and current Board member, Lee Cole. The early years were not so easy to financially turn around this company, but the hard work that both Linden and Lee have given all of us a very healthy financial base upon which to build this strong company. Thank you very much Linden and we wish you many, many happy days ahead.
We’ve had a number of months to find a replacement for Linden and we searched extensively. We received almost 2,000 applications. We met with extraordinary talent during the review process, but our first choice, I am pleased to announce, accepted our invitation to join our firm and we are in the final stage of completing the employment agreement, with a media announcement scheduled for next week. Our new CFO will hit the ground running on September 1st, officially joining our team in our main office located in Irvine, California. Over the next six months our internal hiring plans are modest. We made two to three admin and mid-level individuals as project and operations managers for specific new growth areas and management of evergreen accounts.
With Linden’s departure from the Board of Directors it is our plan to make one to two strategic additions to our Board of Directors during the second half of this year. We have already begun discussions and the interview process with respective candidates. Our criteria in our selection process is based upon adding exponential value through potential – from the relationship network and seasoned public market experience as we position and prepare your company to reach our future goal of becoming a successful NASDAQ-listed company.
Second, new headquarters in Irvine, California. During the next quarter we will be opening a very cost-effective office headquartered in Southern California. Going forward over the next six months we anticipate all future additions to staff will be working from this location. Keep in mind we embrace an outsourced business model and therefore plan to keep our operations cost-effective and lean.
Our website is also in the process of getting a new look. The new site is far more robust and will be a selling aid to attract new business. This new EGC site went live as of today and I would like to personally thank everyone who was involved from London to John Tarasco[?] here in Southern California
And this is only, however, phase one. As you all know my roots are based in branding and marketing, and as we have discussed in the past our name is too limiting to carry this company and our vision into the future. Therefore over the next two to four months we will be rebranding the company to CirQ, and it’s spelled with a capital Q, announced as CirQ. And with that, phase two of our website and new brand will be launched at www.cirq.com, c-i-r-q.com. The new CirQ brand will provide the company with a broader scope of recognition for our technology platforms and easier adaptability to the new business applications, market opportunities, and B2B partnerships.
12:20
Number Three, in beefing up our infrastructure and moving forward: enhanced manufacturing. This is a critical point as we discuss our infrastructure. As we attract new enterprise-level relationships, capacity and price have become even more critical. Over the past three months we have established relationships with three additional outsourced manufacturing partners, which have permitted us to materially lower our product cost and potentially triple our capacity to provide greater flexibility to accommodate both large-scale runs and short-term turn-around projects. One group is who we have worked closely with in the past. Another group was introduced to EGC by our partner, Sovereign Game Card. And the third group is vertically integrated with our own marketing services and channels and distribution. These relationships have given our firm the opportunity to expand our addressable market even further given the substantially lower cost of production.
On average, we can now produce a base-model EGC game card at 25% to 35% less expensive than in the past on relatively low production runs. With larger orders and potentially with less security features we will likely see even further reductions in cost. This development is highly material for the lottery market as well as certain mass consumer promotional opportunities.
With these meaningful structural moves in place, let me recap. New CFO, new headquarter office in Southern California with slight increase in staffing, new website, new brand, new partnerships, new lower pricing on EGC game cards, and expanded manufacturing capacity. We are fully prepared to handle our expected growth.
So here is what I see as the upcoming future in the opportunities in each of our three business segments.
Number one, promotions. The bulk of our revenues have come from the promotions vertical and this will continue to be an important revenue generator through our internal sales efforts combined with our global distribution network.
14:30
[My comment: I would have liked to have seen something here in the Quiz Card discussion about Q3 or Q4 shipments.]
A very exciting development is our new iQuiz gaming platform, which has natural synergies with sports, music, movies, other entertainment genres, and areas of popular culture and interest. We recently signed a distribution agreement with FMM - The Moscoe Group based in the Twin Cities, which happens to be my home town and the home to some of the largest retail organizations in the world. FMM is a high-level, value-added marketing machine which over the past fifty years represents Fortune 500 products into the largest of retailers. We believe the opportunities between our two companies is significant. If we modestly penetrate just 10% of the 19,000 locations generated from the six retailers for which FMM is responsible, we would easily achieve the Street’s expectations for next year. Over the last week I spent time with FMM - The Moscoe Group in coordinating the selling process this fall of our retail products to the designated buyers for planograms and other merchandizing and distribution efforts for late Q1 and Q2 2010.
15:45
Other progress updates in our second vertical market, gaming. This quarter we recognized revenues from our two licensed deals with Sovereign Game Card, our native American casinos-focused licensed distribution partner and Scientific Games which totaled $375,000, the quarterly guaranteed minimum. Sovereign has been working diligently on several key initiatives and turnkey promotional orders with tribes in the Southwest, Northwest, and Midwest regions of the United States.
Another important recent development is our 8K filing and announced relationship with China Lot Synergy, which is responsible for the welfare lottery in China. This is only one of the two legal lotteries in the People’s Republic of China and, as we know, effective this past July 1st the massive illegal lotteries in China have been outlawed thereby creating a massive opportunity to capture business for the legal lotteries.
16:48
The Chinese welfare lottery market currently sells approximately 9 billion scratch tickets annually. We executed our MOU and we are in negotiations to finalize our definitive agreement. During my recent visit with Lee Cole to China Lot Synergy at their office in Beijing we met with their Chairman, their CEO, COO, and several other senior-level executives in marketing, operations, and logistics. They are a first-class, highly-knowledgeable, and well-run organization. This partnership will provide EGC with new strategic relationships with G-TEC and IGT for alignment synergies of new lottery opportunities within additional territories within the region and other parts of the world.
While in China I also had the opportunity to meet with the China sports lottery equivalent to China Lot Synergy. The China sports lottery is the only other legal lottery in China and is approximately equal in size to the China welfare lottery. We also have a serious opportunity here to explore further.
China is a great country of great visibility in 2010 as they play host to the world once again during the Shanghai World Expo 2010 whereby China expects to draw 70+ million visitors during this Expo, the biggest number in World Expo’s history, to the Fair from May 1 to October 31 in 2010.
In addition we have been working on sectors such as national and state lotteries outside the United States and casino gaming projects in Las Vegas, Australian, and Asian markets, where Miss Anna Houssels, our Executive Vice President of Sales and Director, has long-established, successful relationships. We are currently in the bidding process with one large casino group as it pertains to the Players Loyalty Club and in discussions with a gaming technology company to cross-license, market, and distribute our ECG game cards as promotional vehicles.
19:30
And finally a quick update on EGC products and betting shops opportunities in Eastern Europe. As you might recall our Executive Chairman, the Lord Leonard Steinberg, maintains his Perpetual President role at the company he launched over 50 years ago and subsequently sold to Stanley Leisure plc, which controls 1,500 betting parlors throughout east and western Europe whereby the company’s management team continues to gain progress in these new areas. I’m headed over to Europe mid-month of August to attend meetings and review sessions on our work within the region.
The third and last vertical market, our area focus. This is a $2.2 billion global market and growing, which is education. To our knowledge there are no interactive learning system products at the affordable $10 to $12 MSRP retail price points. We’re confident we have a category buster here, as an on-the-go, entertainment-style game card product based upon our early responses from our European B2B network’s reaction to our Thomas & Friends branded education game card. I invite you to visit our website and test this product online for yourselves. It’s contained within the education section at electronicgamecard.com. Currently there are several gold standard brands in education publishing and education media in review of this new product offering at Electronic Game Card. We expect the first cards to be shipped only in the U.K. either later this year or first quarter 2010.
[My comment: Roth said they would ship this year, with U.S. shipments to begin in 2010. With Kevin's comment it's hard to know if Thomas is part of the 2H09 ramp or not.]
20:40
Other Milestones and Developments. We are a technology company. As such, expect to see increased IP patents and international regulatory approvals. We are firm believers in the power of utilizing strategic distribution partnerships and you can expect more deals. We are huge believers in our company’s future and have all bought stock in the open market and continue to do so. You may have noticed that there was significant insider buying on July 21st. The Lord Leonard Steinberg purchased an additional 1 million shares, bringing his total holdings up to approximately 9 million shares or 14.4% of the company’s outstanding shares.
Finally, I want to highlight a note from earlier in this discussion with Miss Yvonne Zappulla. On September 15th 2009 at 12 noon Eastern, Electronic Game Card will be holding its annual shareholder meeting. Like last year’s meeting, it will be held for your convenience in New York City at the Grannus Financial offices at 1120 Avenue of the Americas, 4th floor. I will be there, joined by Lord Steinberg, our new CFO, and our Board members. All are welcome so please give Yvonne a call if you plan to attend.
So therefore, to summarize, we’ve had a successful first half of 2009. Our current backlog momentum gives us confidence in our guidance moving forward through the remainder of 2009 and 2010. The new management team has hit the ground running and has focused initiatives to close in the areas of gaming, promotions, and education, any one of which could greatly add to the company’s progress and revenue enhancements to the current guidance of $17 to $18 million in 2009 and full year earnings per share guidance of $.14 fully diluted EPS.
With that, I will now open this call up for questions.
22:40
Q&A
TODD EILERS – ROTH CAPITAL PARTNERS
Q. Good afternoon, everyone. Kevin, could you tell us how much of your revenue in the quarter was recorded in U.S. Dollars vs. Pound Sterling and Euro. I know that foreign currency impact was an issue last quarter. I was just wondering how much of an issue it might have been this quarter.
LC. Kevin, do you want me to answer that one because I’m familiar with the European sales?
KD. Yes, if you’d like to do that. Please, Lee.
LC. It was about 30% U.S. Dollar and the rest was in Euros and Pounds.
Q. OK. That’s helpful. And then, Lee, could you also tell us how many game cards were sold in the quarter and then also how much recurring revenue was generated in the quarter, which would include the Sci Games and the Sovereign royalties.
LC It was about – it was just over 1.6 million in cards and it was just over $1 million in recurring revenue.
Q. OK. And then, let’s see, Kevin, I believe you mentioned maybe some sales from your new agreement with FMM - The Moscoe Group possibly late in the fourth quarter but most definitely in the first quarter of 2010. As far as your other deal that you signed with China Lot, the MOU – I guess assuming that you guys can sign a definitive agreement here in the near term, when would you expect to maybe start to ship units into that market?
KD. Thanks, Todd. Let me go back to clarify the question regarding FMM – Moscoe Group. It’s not hitting this year, it’s hitting in late Q1 and Q2 of 2010.
Q. OK. Sorry about that.
KD. And we don’t – that’s OK. And we don’t expect to see any revenues from China Lot Synergy in 2009, or we’re looking at 2010 with some unique opportunities you know if you kind of look at what’s happening in China, growth opportunities in 2010.
LC. I think it’s worth adding as well, Todd, that both of these opportunities are additional to when we spoke on the last conference call. These are incremental new revenues.
Q. Absolutely. On that subject, how is the pipeline with respect to new deals. I guess I mean you mentioned a lot of areas. What are your expectations here over the next quarter. I mean last quarter you said you’d like to sign two deals. What are your expectations I guess for this quarter or for the end of the year?
26
KD. Todd, if you notice in my dissertation I don’t want to lock it to the quarter. And last quarter when I had referenced it I think it actually hurt us in two deals, because of the negotiations process. So I don’t want to commit to a time frame in terms of this quarter. But I do have to admit that our pipeline is very full right now and we’re trying to be very strategic and not give up things and provide strength in terms of the negotiations. So I’d like to comment that we are expecting additional contracts yet this fall.
Q. OK. That’s fair. How about with respect to your agreement with Scientific Games, I believe that comes up or expires in March of next year, if I’m correct. Have you started to talk with them regarding restructuring that agreement? And just you know what are your general I guess comments or thoughts regarding the existing relationship and how maybe some of the things you would like to accomplish with maybe a new agreement I guess going forward without giving away too much of your strategy I guess?
KD. Sure. Well, I think it’s safe to say, Scientific Games is a great company and we don’t want to give away our strategy and at this point we’d like to reserve our comments. So I think unless Lee has anything to add I would like to reserve comments for a little bit later time.
LC. Yeah, I think Kevin’s exactly correct there. We’re very aware of the market and let’s just say we’re looking at ways where we can enhance value for our shareholders with the existing agreement.
Q. And then lastly, just a couple of items on the cash flow. Do you guys have a cash flow from operations number and possibly a capex number in the quarter?
KD. Ah, let’s see here. Cash flow, capex.
LC. There wasn’t much capital expenditure. I think that was minimal. I haven’t got it in front of me.
KD. ____ Lee.
LC. And the cash flows, the free cash flows was about $1 million.
Q. OK. Then maybe we can talk off-line. I’m just trying to get - it looks like you guys did just under $2 million in EBITDA. So I’m just trying to get the delta from that to the million dollars in cash that you ___.
KD. Be happy to do that Todd, afterwards.
Q. Thanks guys. That does it for me.
KD. Thanks so much, Todd.
MICHAEL WEISS – JOSLYNDA CAPITAL
Q. Hi, guys. Congratulations. A couple of questions. One, a follow up from last time. The investments, which is almost 8, $7.5 million. Any progress made during the quarter on monetizing any of that and any input on value above the 7.5 million, or is that what they’re worth?
LC. Yeah, I can answer that one, Kevin. As sort of the majority of these investments extend from our previous strategy and come back from over a year ago or more, obviously we’ve – I’ve been responsible for monetizing them and whereas we thought we could monetize all these investments by the end of 2010 we’re now confident of monetizing them by the middle of next year. So we’ve got no – and while we’ve got no visible improvement this quarter there’s certain things going on in the background which maybe come to fruition next quarter, hopefully by the fourth quarter, but we’re very confident of monetizing all these investments in the next twelve months. And we definitely do not see monetizing those investments at less than cost. So obviously we’re hopeful of creating incremental income but definitely not less than cost.
Q. Also you implemented ability to buy stock at the last quarter. Did the company buy back any stock?
KD. No.
LC. We bought back – we didn’t buy back that much stock because we implemented the policy to buy back stock – initially the Board had implemented it at, to buy at $.60 when the stock was $.40 and unfortunately – or fortunately, the stock ran away.
Q. Now, have you given out 2010’s guidance? Or you have not officially given that out yet?
LC/KD. No.
Q. How much of ’09 is already booked would you say?
LC. Just over 60%.
Q. OK. And those were my questions. Thank you.
KD. Thanks, Michael.
31
IAN CASSEL – INDIVIDUAL INVESTOR
Q. Great quarter, guys.
LD. Thanks, Ian.
Q. My question. I have two questions. The first one: it looks like you’re currently in a $12 million revenue rate. And also it looks like you’re basically on a $.03 per quarter rate. And I was wondering, with the second half of the year now upon us and expectations for 17 to 18 million in revenue and $.14 in earnings, where is that extra bump in revenue and earnings going to come from?
LC. Coming from a new product which we’re shipping third quarter, ___ Quiz Card.
Q. OK. And my next question really pertains to your cash position. Are there any thoughts on how to deploy that cash? Are you looking at acquisitions, primarily going to be used for a buyback? What were your thoughts in that regard?
LC. Acquisitions – where we are at the moment - acquisitions that can add incremental value, add new technologies, _____ increase the business incrementally, like we’re incentivized to do, is what I think the Board’s generally thinking. What do you think, Kevin?
KD. I agree. And Ian we’ve looked at some even last quarter for acquisition, and we didn’t get the deal we wanted so we backed away from it. So we’re looking at technologies, we’re looking at other unique distribution opportunities, and things that can accretively add value to our revenues.
Q. Thank you.
KD. Thank you, Ian.
33
SKIP DAVIDSON – R[?] PARTNERS
Q. Good afternoon, guys. First of all your balance sheet looks like Fort Knox. 22 million assets, a little over 800K in liabilities. Congratulations, that’s unbelievable.
KD. Thank you,, Skip.
Q. Kevin, you’ve given us what’s happening now but having opportunities to chat with you I can see something in your eyes about the future. And is the future of the company really game cards, what we’re talking about now, or is it something bigger, a la what is a CirQ? And what if we have this conference call at this time next year do you think the company will look like vis-à-vis where it is today?
KD. Great. Skip, thank you very much for your questions and assessment and obviously your investment as well. The electronic game card, and I really want to talk about the brand and the company and – it’s really just one platform. And I think when the creators started off in creating electronic game card I think they were just singly focused on the electronic game card. So we still have not scratched the surface [Laughter] of the depth of opportunities within the lottery, gaming, promotions, and that’s why one of the key things is here in the United States and in the Asia Pacific Rim. So game cards is one platform. Quiz cards is a second platform. The third platform is going into our EPlay cards for education, which you can see from the Thomas and Friends. So the game card expansion into these other platforms, which are natural progressions, gives us a wider portfolio.
So CirQ is based on circuitry and there’s also a sense of sophistication and technology associated with that brand. So when we look in the future, a year from now, we’ll be taking in additional technologies both in licensing and acquisition, we’ll be putting them into our pipeline, into our channel with a wide range of products, still controlled within maybe five to six overall. And this will access it from into the mobile phones, into on-line, into the three vertical key markets, and also into the gift card market.
36
So it is evolving. It’s a great story, it is a great company, there’s great colleagues, and I think this company is really based firmly in proprietary technologies and it is an evolving company.
Q. Thank you.
KD. Thank you.
STEVE MADDEN – MADDEN CAPITAL
Q. Hi, guys. Great quarter. Two questions. One was: based on a lot of these new enterprise type relationships that you’ve either announced or and are close to going to contract with or the others you’ve hinted about, meaning larger brands, etc., recurring-type larger-volume deals, can you explain how that business model overlaps with your current model vis-à-vis gross margins. I’d expect them to be a little lower, higher-volume-type deals.
LC. I think that can work one of two ways. It just depends effectively with our current business if we do licensing deals or direct sales. If we do a licensing deal, like the Sci Games agreement, or distributor agreement, then it’s basically all margin, you know, we don’t manufacture, we just take a royalty. But if we manufacture and then we’re going into higher margin – into higher volume mass market retailers then we’re going to take less margin. So I think over the next two quarters you’re going to see which way that goes but whichever way it goes, we’re still going to hit our earnings per share.
Q. Gotcha. So you’ll be able to be more specific on that, and…
LC. Yes, cause with a couple of the big wins that are out there that I know Kevin’s working on, it just depends on whether those wins are license deals or direct sale deals.
37:50
Q. Great. And I guess just pressing on guidance a little bit more. You do have a great ramp ahead of you the next several quarters, which you’ve indicated you can do to meet the guidance, which is fabulous. And then Roth’s got guidance out there basically doubling revenues next year to 27 million and earnings per share of $.20. I think they’re the only analyst that covers the company. Is there anything you can say related to that, whether you’re comfortable with those numbers or anything?
LC. I mean I think Kevin alluded to it in his talk about what just the Moscoe relationship, FMM relationship, does by getting us into the retailers that they’re involved with. That sees[?] a big ramp in revenues, those sorts of relationships. And actually getting from $.14 to $.20 isn’t that substantial when – with the stuff we’ve got in the pipeline.
Q. Yeah, that’s my sense is if you can – you said in getting just 10% of the clients from the Moscoe deal you could meet expectations. That seems pretty easy to do.
KD. That’s correct, Steve. And that doesn’t include lottery, promotions, and all the other distributors.
Q. So you think in that $.20 number, that doesn’t include, does that not include China Lot, anything from there?
LC. No. No.
Q. Wow. OK. Thanks, guys.
KD. Steve, thank you.
JORDAN BENSHIE - GRACIA PARTNERS [?]
Q. Hello, guys. Congratulations. Looks like you guys are doing a great job.
KD. Thank you, Jordan.
Q. I saw your website and I think it looks great. I think the direction it’s going, definitely more modern, and sort of an iPod-ish type deal. Is that the same sort of direction that you guys are going to continue going on for the CirQor is it going to take a different sort of graphic design direction when it goes there?
KD. CirQ will evolve broader, but we – the goal right now is to increase our value. The old website really didn’t accommodate sampling of the card as much as the new one does. And we will take on a different type of look but everything is getting more modernized and more in step with the generation of buyers and consumers.
Q. And when do you expect CirQ to make its grand entrance?
KD. Well, I’d like to accomplish that goal before the end of this year, which would put us at – as we look back let’s say in January of 2010, and we look back at the company’s success over the year – one year since mine and Miss Anna Houssels tenure, as well as what the entire team has done, I think we will have some great success stories and I’d like to conclude with an exclamation point of that brand before the end of this year.
Q. OK. Great. Is it possible for you guys to sort of give a breakdown, and if I need to do this offline that’s fine too, of the different sales percentages for gaming, lotteries, promotion, entertainment, sports, and education, or the main ones and the percentage of sales that those equated to and how you see it increase quarter over quarter specifically in each of those?
KD. Lee do you, I could, do you want to do it off-line or do you want…
LC. We can give you a broad brush, and we can give you more detail off-line, but broad brush it’s about 55% promotions, 20% education, and about 30% gaming.
Q. I’m sorry. You said 55% promotion, 20% education, and what was the last one?
LC. And then the rest – the remainder is gaming.
Q. Remainder is gaming, OK. So those other sections that you have on the website, the lotteries, entertainment, and sports, that’s sort of….
LC. _____ promotions, education, or gaming, depending on the cards.
Q. OK.
KD. Some cards, Jordan, can be used in duality for – in the gaming sector with a promotional value. Or they could be used – the card could be used in the lottery as a prize machine, a terminal prize machine for lotteries as well as promotions for sweepstakes.
LC. Yeah, and as the product’s been evolving we’ve sort of been re-categorizing some of the products as well.
Q. Right. OK. Last question. I think that there’s a conference, a growth conference or something towards the end of August in Southern California. Are you guys attending that or?
KD. I’m not aware of that. Is Yvonne – Yvonne, are you on the line? I don’t know if she is, probably not.
Q. OK. I can give her a call and ask her.
KD. If you could, or email me, that would be great.
Q. OK, wonderful. Thanks guys. You’re doing a great job.
KD. Jordan, thank you so much.
Q. OK. Bye-bye.
KD. Bye-bye.
ANDREW COHEN – TRICADIA
Q. Hey, guys. Great quarter. I’m actually on your website right now playing Thomas the Tank. It’s a lot of fun. Thomas and Friends, I’m sorry.
KD. You have a pre-schooler don’t you? Or actually..
Q. Eight months, so she’s not quite up to this right now. We’re working on Dada. But anyway, do you – are there more opportunities to do these Thomas and Friends type branded Quiz Cards or is the Thomas the Tank an exclusive deal for the technology?
KD. No, again, Andrew, and thanks for your question and observation. We’re about platforms. So the platforms can be customized and skinned…
Q. OK.
KD. …to IP. So brands, if you think about some of the most popular brands in the world that gravitate towards parents and kids across all lines, whether it’s sports or characters on television or comic books. Those are ways to get through to kids and education, and so we’re talking with a variety of those groups.
Q. So you could skin it however you wanted to skin it. I mean I haven’t – my daughter ______ will be into all those at some point but I haven’t heard of Thomas and Friends. I assume it’s a more of a UK type….”
KD. It’s actually global, I think its…
Q. Is it global? OK.
KD. …300 million books worldwide and it’s still popular. It’s a trusted brand. So if you think about the marketplace application for this, FMM-Moscoe, think about this being sold in the stores in the airports. So it’s a on-the-go, parents trust it, it’s a way to get the kids entertained and educated. So it’s a great impulse item at a very low cost, affordable price point.
Q. OK Great. And I know you guys have been working, as you mentioned on the call, with Lord Steinberg’s contacts in his betting parlors throughout Europe. I can understand how that agreement would take some time, getting all the approvals and what-not. But given that it’s his operation, once you get an approval, or state approval for that product, is it a relatively quick roll-out or is it still more along the lines of what we’re doing with FMM, you know in taking six months or so to roll it out.
KD. Yeah, I think it’s – Lee you can comment further – but I really think it’s probably beyond the green light from a – being ready to organize and produce and get installed into the marketplace, it could be four to six months.
LC. And it’s like – and because it’s across Europe you’ve got different regulatory bodies in each different country, so it’s a bit like dealing with different states.
Q. OK. But you think - you mentioned it’s beyond the green light, so we’ve gotten some approvals or…
LC. Yeah, they’re in trials.
KD. Right.
Q. OK. I see. And is that a - just sort of help me, just walk me through what you’re envisioning in terms of how – what the cards would be sold for, would it be sold like a Sovereign Game Card type thing or would it be by sport or what?
LC. No, it’s actually as a sort of – as a betting product…
KD. It’s ____ a terminal.
LC. Device.
Q. OK. I got it. So it would be just like any lottery-type scratch card that we have. And Lee I know last year you were – you’d been working on getting technology where you could get the cards down to a price where you could sell lottery cards of, say for 10, is it $10 lottery cards, retail price? Has that panned out? Is that what you’re thinking of for China Lot Synergy? Or are we still using the same technology that we’ve had?
LC. We’re still using the same technology but with Kevin and some other peoples’ new initiatives and with changes in technology, that technology, you know we’ve reduced – the price of the card is reduced so it’s got nearer to that price we were looking at but we’re still not at that price. That card in particular was going to be the next generation and was relying on a couple of new bits of technology which haven’t come to fruition yet.
Q. OK. But you’re comfortable that you can sell into China with the ______ technology?
KD. Absolutely. And Andrew there are selling strategies that we’re working with with China Lot Synergy based on the uniqueness of all the things that are affordable to them, the channels that they have and the bundling opportunities and right now there’s a certain level of prize package on scratch-and-win, so our interactive component brings a potential higher pool of monies to that, so there’re strategies that we’re working closely with them on.
Q. OK. Well, looking forward to everything. You guys are definitely on a great path so good luck and congrats.
KD. Thank you so much, Andrew. Appreciate your support.
RICK SHELBIN – GLG PARTNERS
Q. Good afternoon.
KD. Hi Rick How are you?
Q. Good, Kevin. How are you?
KD. Good, thanks.
Q. My question is with regard to China Lot Synergy and just how that relationship’s going to evolve over time. And what I mean by that is so can you just walk us through the schedule of what happens when over the next couple of months you sign the deal and then you – do you have a product to already bring to market or do you have to go through a pilot phase and develop some sort of products for that market? How does it work?
KD. Well, we already have a product. So it’s the marketing, the merchandising, and the components of the winnings, and the distribution model. So those are the components that we would be working through. I mean there’s already initial discussions but the finalization of those after the DA is completed. And Lee, do you want to add to that?
LC. Yeah, I mean the interesting thing is that they’re adding features that we haven’t used previously in our thinking of lottery distribution ____ a collectible feature and putting added value onto the card. That was something that came from the guys out there. So, yeah, so I – yeah, that’s just part of the process.
KD. Rick, are you still there? Lee.
LC. Yeah.
KD. We may have lost Rick.
LC. Yeah.
{Operator Instructions.]
CLOSING REMARKS
KD. Well, thank you very much, Latrice. Appreciate it. I would like to personally thank all of you for your interest and support for our company. We are in an enviable position. We have a company that has a solid financial base to address a multi-billion dollar market opportunity with a proprietary product platform that generates high margins with little competition. To this we have added an infrastructure of high-level outstanding executives, high-level joint venture partners, and distributors, and top-quality low-cost manufacturing partners with ample capacity to meet the extraordinary growth we intend to deliver. Looking forward to updating you on our next call when we review the third quarter of 2009.
And if you have any questions in the meantime, please don’t hesitate to contact Yvonne Zappulla through the usual phone number and e-mail address. And that is it. I’d like to thank all my colleagues here in the U.S. and in London and a special note of thanks to our retiring CFO, Mr. Linden Boyne. I want to personally thank each and every one of you from the company. Have a great day.
Thomas & Friends in the U.K.
ROTH: “Mgt also expects to ship Thomas & Friends Educational GameCards to international customers in 4Q with U.S. sales likely to follow in 1H10.”
I’m hoping/assuming that Todd Eilers is correct. Presumably he talked to the company after the cc and got this straightened out with our likeable but somewhat muddled CEO. It was a bit worrisome when Kevin indicated that they might miss the Christmas selling season in the UK (the only place where they currently have a Thomas license as far as I know).
KEVIN IN THE CC OPENING REMARKS (about minute 19:20): “The third and last vertical market, our area focus. This is a $2.2 billion global market and growing, which is education. To our knowledge there are no interactive learning system products at the affordable $10 to $12 MSRP retail price points. We’re confident we have a category buster here, as an on-the-go, entertainment-style game card product based upon our early responses from our European B2B network’s reaction to our Thomas & Friends branded education game card. I invite you to visit our website and test this product online for yourselves. It’s contained within the education section at electronicgamecard.com. Currently there are several gold standard brands in education publishing and education media in review of this new product offering at electronic game card. We expect the first cards to be shipped only in the U.K. either later this year or first quarter 2010.”
First impression
Yes, this is a future story. Yes, they may be paying less attention to the promotions business at this point. But with the improvement in the pound/dollar ratio, I was expecting at least $3.3 million in revenues even on an essentially flat quarter (from Q1).
I find this very disappointing.
Don’t forget, they still have not shown that they can sell anything other than promotions cards.
This is by far my largest investment, and I still believe they will sell millions of these things, but it is just a belief and I would like see the promotions business (currently the core business) a little stronger.
Just re-read my post and realize it might sound like I was making fun of the presentation, first saying it wasn’t clear and then saying I hoped to see marketing materials based on such a clear presentation.
In fact, I thought it was excellent and very clearly presented and I would like to see Wave put together some material based on this.
My own questions are based on the fact that I am not a tech expert and don’t know, for example, whether every machine can host virtualization and would therefore be threatened by an attack based on virtualization. And I also wonder about the place of Wave's software in this.
Thanks cslewis.
When I first listened to it, I thought he was saying that anyone who uses virtualization needs a TPM. I listened to it again and realized he was saying that anyone who uses a computer needs a TPM (I think). Hope we’ll see some dynamite marketing materials based on this clear presentation.
Re the ** in the last paragraph. I'm not clear whether the needed software he mentions is something that Wave does or whether Wave's software merely manages the TPM.
Virtualization is a powerful new technology. It can be used in the data center to give us greater flexibility and greater scaling with the systems that we already have. It can be used for clients to allow clients to access virtual machines in the cloud or hosted in the data center, to run multiple operating systems and applications and environments, for remote desktop. There is a lot of things you can do with virtualization.
But one thing we should keep in mind is that virtualization is actually a double-edged sword because it can be used by the bad guys against us. And then you end up in a matrix-type phenomenon, a world where you really don’t know what’s real and what’s not. You think that you’re running your operating system and your applications on the hardware. But maybe the bad guys have introduced a virtualization layer in there and they’re actually capturing your passwords, all of your confidential information. Maybe they’re shipping that off to some other nation, maybe they’re even changing the results of your computations. It’s a very dangerous world when you consider that virtualization can be used in that fashion.
And how can we detect that and prevent that? Unfortunately we can’t do it with software alone because software can always be fooled. Software doesn’t know whether it’s running in a virtual machine or on the physical hardware. That’s the great things about virtualization, it works with the software that you already have.
Unfortunately it’s not such a great thing when you’re trying to detect or prevent virtualization from some attacker. In that case what you need is security hardware. Client side or server side security hardware like the Trusted Platform Module. Now the good news is we all have those Trusted Platform Modules already. They have been included in our laptops for the last few years and they allow us to detect when the software is running actually on the hardware and when there’s a virtualization layer in between. The Trusted Platform Module is certified at the factory so that the software can detect when it’s talking directly to that Trusted Platform Module or whether it’s going through a virtualization layer.
Now the bad news about Trusted Platform Module is that it comes “off” by default. When you get your laptops or your servers from the factory, even if they have a TPM it comes “off” by default and you need to go and turn it on. And you need to have software that can take advantage of it in order to detect whether there is an extra virtualization layer that has been inserted **. So I would encourage you as you think about virtualization to think about good virtualization and bad virtualization and to make sure that you have the capability using Trusted Platform Module to detect that bad virtualization so that you don’t end up in that house of mirrors. It’s not a place you want to be.
Minneapolis: Kevin, Moscoe, Target
Kevin is from the Minneapolis area.
The Moscoe Group is in Minneapolis.
Target started in Minneapolis and is still headquartered there.
This partnership may have come directly through Kevin and it may be all about Target. Moscoe's "core account" is Target.
This is an add for a position at The Moscoe Group:
http://www.stthomas.edu/careerdevelopment/joblistings/employer.asp?empID=13584
Category Management Analyst
Full-Time Job
The Moscoe Group is one of the most experienced and highly respected manufacturer's representative firms in the Twin Cities. Our core account is Target stores where we have connected suppliers for nearly half a century. We have an in-depth knowledge of a diverse portfolio of product categories that include Electronics, Small Electrics, Health & Beauty Aids, Home Decor, Pharmacy, Sporting Goods, Toys, Automotive Household Chemicals, Pet Supplies, Furniture, Stationery, Camping Equipment and Consumables. Our staff includes former Target Buyers, as well as employees who have worked for industry leaders like Clorox, Pillsbury, SC Johnson, Nordicware and Campbell's.
Position Detail:
The Category Management Analyst provides insights and recommendations to Target Buyers for the business the buyer manages. They work closely with Target Buyers, Business Analysts and Merchandise Specialists.
They download data into a template of reports on a weekly, monthly and annual basis. These reports analyze performance against last year, planned sales, market share, promotional activity, prototype and geography.
They are trained in and use JDA Space Planning systems to develop product presentations to the category, brand and item level. On an annual basis, they recommend additions, deletions and changes to the assortment and how it should be presented on the floor in the form of a Planogram. On a monthly basis, they coordinate and analyze implementation of revisions to the Planogram.
They provide ad hoc analysis determined by the Buyer or Category Captain that can study customer behavior, category alignment, promotion timing, shortage or any other of a number of topics.
They Execute competitive shops and provide thought leadership that aligns the business with Target's merchandising strategy
Why Jet Fuel First?
biofuel, thanks for the encouragement. It’s hard to know how to attack such an enormous subject, but some kind of focus or drilling down on one aspect might be interesting. Anyway, here’s a bit more on jet fuel.
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The blogger whose article appears below asked Solazyme and Aquaflow Bionomic why they chose to focus first on jet fuel rather than on gasoline for cars. (Aquaflow Bionomic is the New Zealand company that harvests wild algae which occurs naturally in effluent management systems. Solazyme is the company that grows algae in the dark in fermentation tanks.)
The chairman of Aquaflow Bionomic reportedly replied, "the markets for both (gasoline and aviation fuel) are gigantic... aviation fuel sells for twice the price of gasoline."
I tried to confirm this on the web. It does appear to be considerably more expensive, but not twice as expensive. For example,
http://tonto.eia.doe.gov/dnav/pet/pet_pri_refoth_dcu_nus_m.htm
(Solazyme's said, "We believe that in the medium to long term, the regular consumer should be moving into electric vehicles for going to and from work...the real impact is going to be on those kinds of vehicles that can't switch in the short term like trucks, tractors, and airplanes. These are all things that aren't going to be running on electric any time soon.")
http://www.celsias.com/article/talking-algae-biofuels-solazyme-and-aquaflow/
Posted on March 16, 2009
Talking Algae Biofuels with Solazyme and Aquaflow
[The filename of this picture is “fermentation tank.” The article doesn’t say if it’s one of Solazyme’s.]
As I've stated in several articles already (seen here, here, and here), algae biofuels are quickly coming to the forefront of peoples' attention. However, many are probably wondering why are the companies focusing on aviation fuel first? Because of the industry's laser like focus on creating aviation fuel while seemingly ignoring regular gasoline, I felt an explanation was needed. Therefore, I set out to find some answers and was able to interview both Barrie Leay, the chair of the Aquaflow Bionomic Corporation , and Dr. Tony Day, the VP of Research and Development at Solazyme .
The first and most obvious question I asked these two representatives is why were their respective companies starting with aviation fuel and not gasoline? You would think that they would want to start with the gasoline market which I thought was the largest and most lucrative liquid fuel market. However, it turns out that this isn't the case.
In an email interview, Mr. Leay answered this question by stating that though "the markets for both (gasoline and aviation fuel) are gigantic... aviation fuel sells for twice the price of gasoline." With both of these companies considered "startups", it only makes sense for them to start with the most lucrative market which, in this case, is aviation fuel. Starting anywhere else might mean they don't receive the capital to continue operations at all.
Solazyme's VP Tony Day also explained why their company is focusing on this fuel first: "We believe that in the medium to long term, the regular consumer should be moving into electric vehicles for going to and from work...the real impact is going to be on those kinds of vehicles that can't switch in the short term like trucks, tractors, and airplanes. These are all things that aren't going to be running on electric any time soon."
Airplanes, therefore, are going to need a liquid fuel, one that is both environmentally friendly and cost competitive, and that fuel could very well be algae-derived.
For those of you who might still be looking forward to the day that algae can power your car, don't fret. Day pointed out that even though Solazyme is currently focusing on producing a biodiesel that can be used in the larger transports, like airplanes, the algae they use could just as easily create gasoline for cars.
Another question I had is what are some inherent benefits that make algae a better source of aviation fuel than other biofuels like jatropha? Both of the companies' representatives came up with basically the same answer: algae is easier to grow.
"Algae is ubiquitous, it occurs everywhere, in sea water as well as fresh," Mr. Leay wrote. Dr. Day explained that with Solazyme's growth technology, it is easy to increase the scale of production without any negatives effects on the environment that are often seen with other biofuel crops.
Another question I asked Dr. Day had to do with the freezing point of algae-derived aviation fuel. One negative I have often heard about biofuels being used in airplanes is that some of these fuels have a higher chance of freezing in the pipes. This, as you can imagine, is very problematic.
Luckily, algae wouldn't have this problem. Dr. Day explained that the algae oil can have its freezing point manipulated during the hydrotreating process, a process often used to refine oil. This, therefore, eliminates the fear of the algae-derived aviation fuels freezing in the fuel tanks and pipes of the plane during flight.
Probably one of my biggest questions was what is it going to take for a plane to run on 100% algae biofuel? The answer to this question was quite heartening.
"Intrinsically, there is absolutely no reason why you couldn't run a plane on 100% algae derived jet fuel," Dr. Day stated. However, Mr. Leay from Aquaflow pointed out that "volume production" may still be one big issue that is keeping algae fuels off the commercial market. Dr. Day tends to agrees though he feels confident that Solazyme could successfully scale up their production right now if they chose to do so.
Even if either company had the ability to produce large scale amounts of algae oil right now, the fuel would still have to be subjected to multiple rigorous tests before a plane could run on 100% algae derived aviation fuel. Dr. Day explained that since these companies are looking to have their fuels used in planes, a lot of testing will need to be done beforehand.
Compared to testing a new fuel in a car, a plane doesn't have the ability to just pull over to the side of the road if the fuel somehow causes engine problems. Therefore, even though algae fuels like Solazyme have passed ASTM D1655 standards , additional test are required before full scale industry adoption. This testing process, according to Day, could take a couple years.
However, the good news is that both companies are being courted by aviation companies for their fuel. Therefore, while the fuel might not be ready tomorrow, it is definitely something that there is a high demand for on the market, ensuring its further development.
In conclusion, to use the words of Mr. Leay, all the algae biofuel companies need is just "a little more time." I hope he is right because I certainly can't wait for these fuels to enter the commercial market.
Jonathan Williams is a conservative blogger at www.BlatantReality.com and www.SCStatehouseBlog.com . He is also the founder and current president of the nonprofit organization Need by Need, Inc
poorme, a little research would have helped.
Your statement: ”Not exactly; I checked the patents office data and the patent is held by three people Gary being one of them. The patents are assigned to Honeywell but I do not know if that is exclusive.”
Those three men do not "hold" the patent. They are the inventors. The owner is the assignee, Honeywell.
We know Gary has expertise. The existence of the patents, owned by another company, apparently exclusively licensed to a third company, means that someone MIGHT be able to contest GBOE’s right to use the technology they are planning to use.
But patents tend to be very specific and it is often possible to get around them. So possibly Gary developed a similar but different method at EnviroPlastics which GBOE is planning to use, a somewhat altered method that is not covered by these patents.
I, for one, would like to be clear about it and not rely on assumptions.
As I said previously, if I find out anything I will post it.
+++++++++++++
http://www.freepatentsonline.com/help/item/Assignee.html
Assignee: The person or entity to whom the inventor assigns the patent rights. If a patent document shows no assignee, this means the ownership of the patent was retained by the inventor.
http://www.cosmeticsandtoiletries.com/research/patents/11623111.html
US law, unlike foreign law, requires a patent application to be in the name of the inventor. A company cannot be the inventive entity.
The assignee is the entity that has the property right to the patent. Patents are property. The inventor and the assignee may be one in the same but an employee will more than likely assign a patent to a company.
checkthisout, are these facts or a suppositions?
“…its Garys patent, licensed to them… Gary’s getting license fees from ECO2.”
If you click on the links of any of the patents in the iBox, you will see that each of them is assigned to (read “owned by”) Honeywell. They may be Gary’s inventions but Gary is not the owner of the patents.
If you have facts or links to back up your assertions, I would be happy to see them as I would like to get this straight.
If I get more clarity on the subject, I will post what I find out.
roger_wilco, thanks very much.
Re #2. ” Yes, the technology they are talking about is the non-water cleaning process of the plastics.”
I guess the question remains: how can GBOE use this technology when it is owned by Honeywell and licensed exclusively to ECO2?
I may need to contact the company, but if you do have any insight on this point, I would appreciate it.
Thanks for your time.
roger_wilco, a couple of questions if you have the time
I finally started to do some DD on the company, and I‘m hoping you might be able to shed some light on a couple of things.
1. FDA APPROVAL
From your post #551: ”Eco2 Plastics has been seeking a FDA approval so that they can convert plastic recycled wastes into food grade containers. The FDA approval process is what has held up Eco2 plastics all along."
Can you tell me if the FDA approval that Eco2 announced last November is something different from the FDA approval you are speaking about here? In other words, do they now have the approval they needed?
http://www.bio-medicine.org/medicine-news-1/ECO2-Plastics--Inc--Receives-Favorable-FDA-Opinion-Letter-Approving-the-Use-of-Its-Recycled-Plastic-Flake-in-Food-Packaging-Applications-30593-1/
2. PATENTS
I find that all of Mr. De Laurentiis' patents in the iBox were assigned to Honeywell, and I believe ECO2 has an exclusive license from Honeywell for these processes.
Do you know if GBOE is going to be able to use any of this technology? I do note that the GBOE press releases speak about a “patent-pending” technology that they are planning to use, but it sounds like the non-water processes that ECO2 has licensed are the underpinning of the whole thing. Perhaps that is not correct. Could you provide any clarity on this?
++++++++++++++
Overall, I find that Mr. De Laurentiis is well-respected, but so far I haven't been able to figure out some of these details.
Thanks very much.
Canada Consortium, Hybrid System
Here are a couple of articles about Canada’s I-CAN consortium and one of their projects, the Carbon Algae Recycling System. The first article was a footnote in Sapphire Energy’s opening remarks for the recent Senate hearing.
The initial goal here was to find a way to reduce carbon dioxide emissions, and now they’ve been at work for about a year and half on the algae project trying to figure out what kind of algae-growing system will work in Canada’s climate. They couldn’t use an open pond system because of the cold weather, and I guess they rejected the bioreactors they looked at. Their plans now call for a hybrid pond/bioreactor system whose main component is a covered pond which is 90 cm deep instead of 30 cm. This extra depth is in order to take up less space.
So because the ponds are both covered and unusually deep, they need a lighting system, and it will be interesting to see what they come up with. (I wonder if they evaluated Bionavitas Light Immersion Technology before they start re-inventing the wheel. It seems that a lot of these groups keep starting from scratch on everything.) The schematic from the CARS website shows solar collectors on top of the pond, but I don't know if that is current.
It sounds like they are just to the point of starting to build the first prototype so they have a long way to go.
Re Bionavitas lighting technology, msg#240: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=35843574
WEBSITES
Carbon Algae Recyling System
http://www.i-can.ca/cars-project
I-CAN
http://www.i-can.ca/
ARTICLES
The first article is concise and gives the basic story. The second article rambles a bit but it has a few additional, useful details.
http://www.bioenergymagazine.ca/article-print.jsp?article_id=377
Researchers use microalgae to develop a carbon recycling system
By Online Reporter
Web exclusive posted April 23, 2009 at 12:03 p.m. EST
Research networks and technology organizations have collaborated efforts on a project aimed at reducing greenhouse gas emissions by using microalgae to convert carbon dioxide into renewable fuels and bioproducts.
The Carbon Algae Recycling System project is designed by Innoventures Canada (I-CAN), a not-for-profit consortium of ten Canadian research corporations including the Alberta Research Council, Saskatchewan Research Council and Quebec’s Centre de Recherche Industrielle du Québec and Manitoba’s Industrial Technology Centre.
The objective of the project is to create a technically and economically-feasible algae conversion system suitable for Canadian weather conditions that can be integrated into large-final emitters such as power plants, refineries and other major carbon dioxide emitters. By providing an algae-based carbon management tool, I-CAN researchers can offer industries the opportunity to mitigate and convert carbon dioxied into value-added products such as biodiesel, ethanol and fertilizer.
The CARS project feeds low grade waste heat and industrial flue gas, directly into man-made ponds to heat and feed the growth of microalgae, which can be harvested and processed into biofuels and other bioproducts.
Stage one of the project, which was completed in 2008, focused on identifying the conditions in which algae strains thrived. Ninety-eight per cent of the world’s commercial algae facilities use an open pond system for producing algae, while the remaining 2 per cent use photobioreactors said Project Manager, Quinn Goretzky, “After looking at the option between open ponds and photobioreactors, we came up with a hybrid system,” added Cindy Jackson, lead engineer on the project.
CARS researchers are now developing a 90 centimeter-deep, in-ground, covered pond that is subject to an intense lighting system that is able to penetrate every layer of algae and capture approximately 233,000 tonnes of carbon dioxide per year. While traditional ponds are 30 cm deep, the covered pond system helps maintain a consistent temperature and environment and is able to achieve greater results by optimizing light conditions, lowering capital costs and reducing its overall environmental footprint. CARS researchers will tests its concepts at a bench scale level and then will progressively scale up from a small pond to a large pilot pond as the project develops, Jackson said.
The ultimate direction of the project is to produce a demonstration facility that can grow algae commercially year-round and is integrated with a large emitter, Goretzky said. “[We hope our research] takes the traditional industry base in Canada, reduces its carbon footprint, maintains jobs and adds a whole new industry base that is carbon neutral and environmentally friendly,” he said.
The next stage of the study will involve the engineering and construction of a lab-scale demonstration facility at an industrial site. The project is anticipated to be complete in 2012.
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http://www.albertaoilmagazine.com/?p=784&year=2009
World’s oldest organism turns carbon into biofuel
by Bill Sass
Quinn Goretzky is a man who wants to NOx your SOx off. He’s project manager for Innoventures Canada’s Carbon Algae Recycling System (CARS), a project that aims not only to remove carbon dioxide from flue gases by feeding it to algae, but also to make money doing it.
And CO2 may not be the only candidate to turn into a generator of tidy profits. Other noxious substances – like NOx (nitrogen oxide) and SOx (sulfur oxide) – could put money into a corporate bank account.
Innoventures Canada (I-CAN) is a consortium of 10 provincial research agencies and institutes, including the Alberta Research Council. The national organization’s sole purpose is to find effective ways to commercialize new technologies by applying them cheaper, better and faster.
It can be a risky business, Goretzky says. There’s no guarantee an innovation will actually pan out – the idea of I-CAN is to spread the risk around.
The CARS project was conceived about 18 months ago. “The board that came together for I-CAN asked themselves, ‘What’s a big project that could be taken on? What’s something that we could demonstrate that we could do and also address a pretty pressing issue of the day?’”
A few years ago, as today, a pressing issue was climate change and its relationship to carbon dioxide emissions. Although using CO2 for enhanced oil recovery is one way to give emissions reductions an economic upside, that market is well known to be limited by both industry demand and prices available for materials used as life-extending injections into old wells. Simply capturing the greenhouse gas and locking it away in an underground vault “is almost a pure cost function,” Goretzky says.
“But what if we turned the question upside down? Can you make money off of CO2 beyond these formats? Could you do it in such a way to get positive returns off it?”
A proposal was put together and three I-CAN members came together – the Alberta Research Council, Centre de Recherche Industrielle du Quebec and the Saskatchewan Research Council – to determine if it was feasible to grow algae commercially in Canada while at the same time consuming large amounts of CO2.
The result was a conceptual model worth further investigation, Goretzky reports.
The Alberta government thinks the idea is worth pursuing as well. The minister of Advanced Education and Technology, Doug Horner, notes Alberta is the lead funder for the project and is watching it with great interest.
So far, between $200,000 and $250,000 of public funds have been invested. “Down the road, if we see there’s some good potential in this, we’re not averse to looking at second-round financing through the various funds that we have,” Horner says.
The CARS project is another exploration direction in dealing with excess CO2 projection, the minister says. “Carbon sequestration is one part, but there’s no one silver bullet for greenhouse gas management and this is another piece of the puzzle.”
The new idea packs plenty of potential appeal to environmentalists because it represents a step beyond the CCS theme of tacking equipment onto industrial operations. “It’s speeding up Mother Nature’s processes of soaking up CO2 from the air through plants and photosynthesis. It’s also about creating biofuel,” Horner says.
The CARS project is also about efficiency. Algae create about 50 times more ethanol and biodiesel per acre as a feedstock than some oilseeds or corn or soy beans, Horner estimates.
“You’re going to burn that and create more emissions, but, the thing is, it’s renewable. There are interesting things coming out of the woodwork and this is one of those interesting things,” the minister says.
He’ll get no argument about that from Goretzky. “We have a concept here that we have demonstrated could be economical under certain conditions. We think it’s compelling enough to warrant going on to the next stage.”
That next stage involves a lot of laboratory bench-scale work on building small systems and gradually scaling them up to the point where a demonstration project can be built within three years. Now, the real science and engineering production begins – and the star of the show are the humble algae, which are just about the oldest species of life on the planet
CARS researchers will look for “the best algae Mother Nature can produce” and that can thrive in Canadian climates, Goretzky says. There are tens of millions of algae strains. CARS narrowed the number down to 21 candidates and “fully characterized” a short list of five.
“I’d like to say we scratched the surface of that work, but in all honesty, we’re maybe reaching towards the doorbell in terms of what has to be done before we go into the big algae house.”
No matter what strains are finally used, they all have the same three basic components – fatty acids, carbohydrates and proteins. The fatty acids have gotten most of the press so far – that’s the stuff that can be turned into biodiesel and other fuels.
“In building the CARS system, we realized you couldn’t go with a single value-added product at the other end. We’ve conceptualized two or more products,” Goretzky says.
“If you’re just going after biodiesel and 45 per cent of that algae was fatty acids, you still have that other 55 per cent of that algae. You might be producing piles of biodiesel, but you have this growing pile of algae carcasses with parts missing – which has been one of the concerns we’ve gotten from industry. Clearly, you have to come at this from the perspective of multiple products.”
The carbohydrates can become ethanol and the proteins are generally converted into a fertilizer or into animal feed. A range of biochemicals and nutrients, known as nutriceuticals, have that potential, he says.
“It makes it very fascinating,” Goretzky says. “You have one of the world’s oldest organisms that have survived various environmental and climatic conditions and when you really work on it, you find there are all these potential benefits that can be derived from it.”
But there are challenges to be met before the money starts rolling in. They start with developing a pond system in which the algae can grow.
CARS is looking at a “covered pond” concept to compensate for the naturally cold Canadian climate. And the researchers want to make the pond smaller by digging it deeper.
“If you look at the footprint, based on the 2.3 million tonnes a year of CO2, in a pond 30 centimeters deep, which is what the traditional depth is for an open pond system, you’re talking about a pond that’s 1,200 hectares.” One hectare is an area the size of two Canadian Football League fields. “I don’t know that many people who want a pond that big in their neighborhood,” he says.
CARS wants to make the pond 90 centimeters deep, reducing the footprint to 400 hectares, and that means developing a lighting system that will promote algae growth beyond the 30 centimeters natural sunlight can penetrate. The 400 hectares is still pretty big, Goretzky says. “Obviously, we have to reduce the size of the footprint even more than that.”
Maintaining the optimum temperature in the pond may lead to another environmental plus. Besides unwanted gases, most large industries produce “low grade heat” that’s simply allowed to escape into the atmosphere. “If we could capture that heat and transfer it to our ponds, that could help us maintain a target temperature that could optimize the growth systems for our algae,” Goretzky says.
He also emphasizes that CARS is a recycling system, not a sequestration or disposal approach. “It extends the period of time it takes for that CO2 to be released. Rather than the CO2 going into the atmosphere, it goes into the algae. From the algae, it’s broken down and turned into something else. That something else, like biodiesel, at some point will be consumed by a vehicle and it will be released into the atmosphere.”
But using the algae means less use of non-renewable fossil fuel in some other area. “It’s more of a living system approach to industrial design, which finds a purpose for carbon and provides other benefits that come with it,” Goretzky says.
The CARS scheme also gets around the expense of collecting, pressurizing and transporting CO2 in a closed carbon capture system. The algae, or a collection of specific algae strains in a pond, can eat up the various flue gas components directly. And ponds could be built where the chimneys exist.
Commercialization of algae has been investigated since the 1930s. The last big research wave lasted from the late 1970s to the early ’90s, spurred by various “energy shocks.” Now, with computer advances, the work can be taken to new heights, particularly in relation to genetics. There is the potential in the near future to obtain a complete genetic map of algae and processors may be able to modify it to fit the flue gas.
“It’s very exciting,” Goretzky said. “You’re building something that changes the way the world looks at energy development.”
huppo, I also appreciated your post. Thank you for going to the trouble to explain the point of view of an investor who tries to see (and post) both the positives and the negatives.
As for Piranha Water being on the shelves: in the April Investment Nation Conference Room interview BW mentioned that they had inherited some bottles of the old version of Piranha Water when they bought the company and that these were being put on the shelves in Charlotte that very day. “And here in Charlotte it’s already going into – my understanding she put it in eight or ten stores today, so it’s going out. We have a limited supply of product that we received with the transaction, but we’re going to be producing more, actually immediately, probably next week.”
He also suggested that they would be sending some to New York. But apparently this interview was done prior to his decision to change to purified water, so I doubt that he made more Piranha Water immediately, and I doubt he sent any to New York. So it’s possible that some of the old bottles are still on the shelves in Charlotte.
So, my understanding is that both the packaging and the contents have changed, and none of that is yet on the shelves, which I believe is what you were referring to.
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This is that Q&A from the interview:
About minute 15:30
Jeff. The start time for distribution through the new [break] partners.
BW. They’re all – the start time?
Jeff. Yeah, for distributing.
BW. Oh, they’re already distributing. We – let’s start with New York. Last week we had a team, unfortunately not everybody was in the group photo, but that group was about five or six people short of the whole group. Some of them lived a little too far to commute for the photo. But we placed a tremendous amount of Potencia energy drink, which was 90% placement. We visited over 1,500 stores and our Potencia brand got on 90% of the shelves with a single purchase, a starter purchase.
And from my understanding that the Piranha Water and the Guppy Water, talking with the sales people and actually being with them, physically meeting – I shook more hands last week than I shook in my whole life. And coming from a NASCAR driver, I guess I wasn’t that famous, but these people really – were really open to the possibilities of bringing in our other products. So I would say that after next week’s meeting the truck will be rolling and it will be in their facility and they’re going to be placing it immediately.
And here in Charlotte it’s already going into – my understanding she put it in eight or ten stores today, so it’s going out. We have a limited supply of product that we received with the transaction, but we’re going to be producing more, actually immediately, probably next week.
This is today’s Origin Oil PR
OriginOil Files International Patent for Low-Energy, High Efficiency Algae Production
Filing Consolidates Inventions and Adds New Developments
On Tuesday June 2, 2009, 5:00 am EDT
LOS ANGELES--(BUSINESS WIRE)--OriginOil, Inc. (OTCBB: OOIL), the developer of a breakthrough technology to transform algae, the most promising source of renewable oil, into a true competitor to petroleum, announced the recent filing of its Patent Cooperation Treaty, or PCT application, entitled “Apparatus and methods for photosynthetic growth of microorganisms in a photobioreactor.” This filing consolidates previous OriginOil inventions and adds new developments since the original filings.
The invention addresses challenging problems in the culturing of microalgae, including high energy utilization, fouling of light emitting surfaces, and diurnal growth cycles. The proposed system provides efficient light utilization with comparatively low energy costs by providing light at closely spaced intervals within a photobioreactor so that light is provided throughout the photobioreactor rather than just at the surface and at the interfaces between culture medium and photobioreactor wall.
“This international filing consolidates our inventions in the area of algae production and oil extraction,” said OriginOil’s chief technology officer, Vikram Pattarkine, PhD. “The pace of development at OriginOil has been extremely rapid. With this filing, we have consolidated our intellectual property protection at the international level in a number of areas of innovation at OriginOil.”
The filing describes system and methods for enhancing mass production of microalgae, involving the use of light arrays configured to provide photosynthetically effective illumination from closely distributed lights spaced at strategic intervals to optimize contact between algae and light. Illumination and nutrient provision can be timed to disperse light and nutrients when the organism is in a receiving mode. A process flow system is also described, which can be scaled for the mass production of algae. The systems and methods are useful in applications such as energy production, fuels, foods, pharmaceuticals, plastics, and CO2 fixation. Also described are systems and methods for lysing (rupturing) cells and extracting their components, and for producing electricity with closed-loop CO2 recycling.
“This filing demonstrates that the OriginOil technology team is rapidly turning our inventions into proven technology,” said Riggs Eckelberry, the company’s CEO. “I applaud Dr. Vikram Pattarkine for the speedy progress of science and engineering at OriginOil.”
About OriginOil, Inc.
OriginOil, Inc. is developing a breakthrough technology that will transform algae, the most promising source of renewable oil, into a true competitor to petroleum. Much of the world's oil and gas is made up of ancient algae deposits. Today, our technology will produce "new oil" from algae, through a cost-effective, high-speed manufacturing process. This endless supply of new oil can be used for many products, such as diesel, gasoline, jet fuel, plastics and solvents, without the global warming effects of petroleum. Other oil-producing feedstock, such as corn and sugarcane, often destroy vital farmlands and rainforests, disrupt global food supplies and create new environmental problems. Our unique technology, based on algae, is targeted at fundamentally changing our source of oil without disrupting the environment or food supplies. To learn more about OriginOil™, please visit our website at www.originoil.com.
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[This is the link in the PR attached to the words “transform algae” in the first paragraph. It leads to Origin Oil’s explanation of its system on its website.]
http://www.originoil.com/technology/the-originoil-system.html
Transcription of May 29 Videos
I’ve also included the links from Wyatt Lee’s post.
Bebida Update 5/29/09 Part 1
http://www.youtube.com/watch?v=bqQfgHGDmaI&feature=channel
Bebida Update 5/29/09 Part 2
http://www.youtube.com/watch?v=vmL9vU8x7w4&feature=channel_page
PART I
Thank you for joining me. I’m Brian Weber, the CEO of Bebida Beverage Company.
This is our seventh week as the new ownership of Bebida Beverage and I wanted to bring you a little bit of an update _____ report card of what we’ve been doing with the company.
First, a lot of you already know we’ve already taken KOMA, which was going to be an energy drink, and we have turned it into a relaxation beverage. The relaxation beverage industry is fairly new. It’s a product that will calm your body, mind, and soul, and it will be an alternative to drinking a beer for those that aren’t alcohol drinkers. This product is a very new category and the other companies in the industry so far have had very, very huge success stories. We’re very excited about that. We have signed off on a flavor for this product and a blend that will make up the components to create this product.
We’ve also started the process of making Little KOMA, which will be a shot. It will be a countertop shot product, 2.5 oz. It will be available at your retailers on the counter at checkout. This will be one of the very first. I only know of one other product that is a relaxation shot. This product will help build the brand KOMA in all the retail locations we go to. As we put product in the coolers for sale on the beverages, this will also give people a speaking point when they’re checking out and an opportunity for the vendors and the retailers to discuss the products that have come into their store.
Also we have hired a company to do our co-packing for the KOMA brand. It will be available in the coming weeks in a 20 oz. bottle, as you see here, and in the future it will be available in a 16 oz. can. The bottle is for the purpose of time. The can process takes longer, as production schedules have to be filled and organized and the graphics take quite a bit longer to produce.
You can also look for an upcoming article in Zenith International’s Functional Drinks category that will be on the internet as well as their hard print copy newspaper and newsletter on the KOMA products. We’re very excited about that, as they sought us out to get the behind-the-scenes story of this new, exciting product.
Piranha Water has also undergone a bit of a change. We are now going to offer Piranha in a 20 oz. blue bottle, which is a bit more rigid than the 16.9 ounce and actually gives it a better look and feel. This will differentiate this product from all the other products on the market that seem to have a big – cornered by Nestle and some of the other bigger companies. Our 20 oz. bottle will give our distribution and distributor sales people an opportunity to differentiate our product when they’re selling it. They will be able to now say that this product has a better shelf appeal, this product has more quantity for the money. So now all of our distributors that are going to bring Piranha on are very excited that our product is actually taking a little bit different angle without going outside of the price points to get competitive in this market.
We have hired several co-packers over the last seven weeks. Our first production for Piranha Water will be on the 8th in North Carolina. It will be the first production. We’re very excited and hopefully we will be able to bring you a short video of that production as it occurs. This product will be manufactured in Charlotte and shipped throughout the Southeast to our distribution networks here as well as some product will be shipped to New York to be rolled out with the Potencia energy drink that’s continuing in Manhattan, Staten Island, the Bronx and will be available and for sale at the upcoming 116th Street Festival on June 13th. This will be its launch into the New York City market. And we are very excited about that and we hope and pray for a very hot day.
Guppy Water is still currently idle. We are definitely going to do something with Guppy Water but because of our extremely hectic schedule this product will probably not be available until August sometime. We’re currently waiting for the arrival of some samples of a fruit-flavored beverage that will not just be color in a bottle. We won’t put a product out there that’s not nutritionally safe and beneficial for kids. This product we have put a lot of thought in, we love the label, we love the item, but we just don’t have the time to do it as well at this moment. It will be available this year to all of our distribution partners. We’re excited about that as we look forward to offering it to school districts and other municipalities where it’s a safe alternative product for their beverage needs.
A lot of you have asked about Dan Hardy. Dan Hardy had a contract with the former ownership of Bebida Beverage Company. And after we got things settled in in the last seven weeks, we have just opened up a dialogue recently with Dan Hardy’s management and we’re excited to say that we have his contract proposals on my desk actually and I will be reviewing them over this week-end. And based on what I’ve read so far I think he’s a good fit for us to continue that relationship. It is not a done deal. However, I do think and feel very positive that we will renew the opportunity to do some work with Dan Hardy. We’re hopeful that we’ll be able to do more interaction with him at the coming[?] event in Germany as well as offer t-shirts, banners, bandannas and other items available to the shareholders and all of the people throughout the United States and Europe.
We’re also excited to announce that we’re continuing our relationship and making a formal announcement of Paul “The Headhunter” Buentello, who will be marketing and branding the Potencia brand products. So we have a lot of excitement in the mixed martial arts marketing that we’ll be doing the balance of this year and very excited about that.
A lot of you have asked about the websites. I’m very sorry that it has taken so long. However I didn’t have the passwords and user names from the former ownership. It had been an ongoing struggle and multiple e-mails and a lot of phone calls to the people who had control of those websites. We finally did obtain access to these websites but unfortunately it’s through the backdoor of the website, which doesn’t allow us the opportunity to make a lot of changes on them. There have been several changes where we have made contact changes. We will be making some additional changes, removing any of the former ownership’s names from those websites.
However, we have chosen to completely start over and build a Bebida Beverage website which will be the fulcrum point for all of the incoming other websites. Piranha beverages will dump into Bebida Beverage, KOMA drinks will dump into Bebida Beverage. We’ll have one website with a page dedicated to each product within the company portfolio. We’ll also has an online store to offer all the consumers out there and shareholders a complete line of Piranha polo shirts, Potencia items, Piranha hats, scarves, bandannas, and all the other items that are coming in and that we are looking at. If you have any suggestions, please send an e-mail to Bebida Beverages Promotions at gmail. We’re anxious to hear from you about any other items you would like to see with our brand on it.
So with the websites, I hopefully will sign off on the finished product within the next couple of weeks that will be from scratch. I hope that everybody enjoys them. We’ll also have a page on the website where we’ll link directly to an investors’ page where we’ll have an update information on investor relations as well as an update link to the pinksheets page where you can monitor the charts, etc. for the products. We’re also looking at other opportunities to do more marketing on the internet and tying our website into Dan Hardy and Paul Buentello and some of the other athletes that we’re working with, including Dillon Oliver, our NASCAR driver, and a new part of the family that we’ll be making an announcement, that’s a Motocross racer.
PART II
The Share Structure, which you’ve all been patiently waiting for.
The reason I hadn’t made a formal announcement is simple. Certain events and documents were still pending regarding the share structure. Before I discussed it I wanted to have a true, absolute understanding of the situation, where it is, where it was, and where it will be.
These are the facts. I am the CEO of Bebida Beverage Company, a Nevada corporation. I am the leader of the corporation and I am the leader of the shareholder base. When I took over this company I did it a bit hastily, and our team missed a couple of documents and the meaning to us of what they were. That I regret, very much so.
The share structure updates and the Nevada State website will be updated in the coming days to indicate a 7 billion share cap. That is what I’ve decided after reviewing and understanding where the company is and was. There are currently slightly more than 5 billion shares in the trading right now. I have decided to add 2 billion shares to that amount and make the cap 7 billion for the purpose of raising capital for the future if needed to grow this brand. I will not let this brand wither away because we don’t have the ability to raise capital, and we don’t want to go outside of the shareholder structure and my personal investment into this company.
There will be no reverse splits at this time or for the foreseeable future. I have decided that we will not be doing any reverse splits until I can enthusiastically offer to you, the shareholders, a two consecutive quarters of reporting audited financials. That will solidify the fact that we are an absolutely legitimate company with sales. If necessary at that time, and it’s a good business decision, we may consider a reverse split. At this time there is absolutely no reverse split on the horizon.
There may also be some buyback at some point in the coming months depending on how this cold drink season goes. In the fall there very well may be a buyback of some portion of shares. That I just cannot tell you yet as we don’t know what this next three months will bring us.
Our team has continued to determine what had transpired that raised the share volume has any legal ramifications for either us or the former ownership of this company. We will not make a conclusion until a final determination is reached. All indications so far indicate that what had transpired was absolutely legal. However, it could have been very well ethically repulsive.
On another note, me and my team have formed an additional Delaware corporation of Bebida Beverages Company. The sole purpose of doing that was to eliminate any possible chance that anybody from the history of the Bebida BBDA company could circumvent the BBDA that we all know and work hard for and ever take the opportunity away from us to continue to grow this brand and increase shareholder value. That company is in our desks in the office. It is locked up. It is the non-functioning corporation that we will hold tightly and that will eliminate the possibility of any other future possible intrusions into this company and the running of it.
Where do we go from here? I’ve been thinking about this for several weeks, as it appears that I bought into a little bit more than I bargained for. But after Daisy finally talked me off the ledge, several things still exist:
-- We have a strong and powerful brand in Piranha and KOMA and a lot of interest throughout the country and the world in these products.
-- We have a fantastic strong shareholder base in a company.
-- We’ve already made our investment as the new owners of this company.
-- We have distributors calling from all parts of the world and the country interested in bringing in our brands.
-- In the last seven weeks we have done more to legitimize, maximize, and sterilize this company for future growth and we continue to do just that. We’re going to grow this brand until we are all very successful.
So we will not dwell in the past, but focus on the future.
I have set a gross sales goal for Bebida Beverage Company of $2 million before the end of this year and $10 million in gross sales by the end of 2010.
Beverage industry financiers calculate the value of a beverage industry company at 3 times the value of the sales at the end of 36 months. That puts us in pretty good positioning for growth and expanded product lines for our portfolio, which also puts the shareholders in a very good position at this point, as I expect the share value to go up exponentially over the next 12 months. And I hope that you stay with us and join and be part of that growth.
Lastly, Africa. We recently announced the partnership of Potencia Beverages South Africa. This is a very exciting time for us at Potencia and the Piranha Water as well as KOMA. This group of connected business professionals in Africa have got the resources, the manpower, and the know-how to bring our product into that country more as a franchisee than as a distributor. They will handle all of the marketing, sales, and distribution partnerships contracts with all of the KOMA, Piranha and Bebida products, as well as Potencia.
I will be flying to Africa sometime in July to also make a partnership with a company there that can manufacture our Piranha Water, as it is not cost-effective to send water across the world. We will find a company in Africa that can produce the bottled water to our specifications and put it in the pipeline alongside the other brands in South Africa.
This is a country of 43 million people and we are very excited to have a company that has the confidence in the products that we offer, as we do here in the United States, and are as excited as we are to build the brand in that whole country. As Africa continues to move forward I suspect we will have brand sales in Africa of 500-700,000 this year, as it does take quite a bit of time for the products to cross the Atlantic and arrive in Africa. As you know there are special cans being manufactured for Africa, as it has different legal codes, legal names, and ingredients and so-forth on the packaging. So by the time the product actually reaches the country it’s going to be the latter part of August, beginning of September. But with that said I still expect to have sales in the 500 to 700,000 range this year.
As you can imagine there have been a lot of other things that have gone in this first seven weeks. We’ve been all over the country, zig-zagging, meeting with distributors, organizing marketing events and so forth. On Monday we have another massive rollout occurring in Manhattan, New York City with our Oak Beverage friends. That will be ending on the 8th, and then on the 13th of June we will have the big 1 million people festival, the 116th Street Festival, which will be 28 city blocks where we will be making our first offer of Piranha Water to the crowds of million. We’ll also have our NASCAR driver there, Dillon Oliver, signing autographs and hopefully one other surprise visitor that we will not announce at this time.
I want to close with this. Some of you will see everything I have said today as good news and some of you will see it differently. I see it like this: When so many of you shareholders bought shares into this company, you knew it was nothing more than a slot machine. Sometimes you win, sometimes you lose. You suspected that it was another pinksheet company that was a lot of paper, a propped-up management team, and perhaps some product. You were almost completely right.
Now I want to tell you that it’s going to be okay. There’s been enough fear in the stock market for a long time. You shouldn’t fear the game, but you should be very skeptical and fear some of the players. But I’m telling you this: You don’t need to fear me. I am not the one you should fear because I will walk alongside you and talk to you and continue to grow this brand and sales until we are all successful. I will remain accessible and approachable and do the very best of my ability to protect my interest as well as the interest of the shareholder.
Thank you for joining me and have a great day.
Personal Finance Recommends Wave
In the May 27 “Personal Finance” issue in a section on technology stocks titled “Cyber Cops on the Beat” Wave is recommended under $1 per share. I believe the May 27 issue comes out on-line a couple of days earlier.
They also recommend McAfee, Versar, and Unisys.
I could hardly believe my eyes, as Personal Finance generally focuses on large companies or income-producing investments, though they do sometimes throw in a small company. It’s a little discouraging, though, that they don’t seem to have it quite right. I don’t think the TPM or data-at-rest encryption helps when data is in transit.
You have to wonder how they can recommend something that they don't seem to understand. Maybe it’s the idea of hardware-based security that caught their attention.
“Mobile computing, an increasingly popular solution for business people, adds another layer of cyber security challenges. Keeping data secure while it’s being transferred across a wireless network or from an Ethernet port in a hotel room is a dilemma that’s finally being taken seriously.
“Wave Systems (NSDQ: WAVX) is a leading provider of client and server software for hardware-based digital security, enabling organizations to know who’s connecting to their critical IT infrastructure, protect corporate data, and strengthen the boundaries of their networks.
“Wave’s core products are based around the Trusted Platform Module (TPM), the industry-standard hardware security chip. TPM provides a broad range of security features, but because it functions independently of the operating system, it can serve as a “root of trust,” verifying the integrity of the machine and user. This comes in handy when the VP of personnel leaves his or her computer in a cab or the CIO is conversing over an open WiFi network.
“Wave is partnered with virtually everyone who’s anyone in the business, which is crucial in this highly competitive environment. Buy Wave Systems below 1.”
Government. An article from last November.
This is the first article I’ve read about government policy on renewable fuels. It’s one of the many threads to follow in the algae story. I’ve posted it because it seems to be a clear and concise description of the situation. Presumably there have been developments over the past 6 months, but this seems to set the stage pretty well and might serve as a starting point for following the thread forward.
It’s from U.S. News. I found it from a link on the Algenol site. The Algenol CEO is quoted in the article.
http://www.usnews.com/articles/news/national/2008/11/21/obama-under-pressure-over-role-of-ethanol-in-energy-policy_print.htm
Obama Under Pressure Over Role of Ethanol in Energy Policy
Environmental groups are unhappy with his support of corn-based ethanol during the campaign
By Kent Garber
Posted November 21, 2008
Environmentalists agree with President-elect Barack Obama on many points, but his policy on ethanol isn't one of them.
In the ongoing debate over the future of the country's energy policy, biofuels occupy a unique and precarious position: reviled in some quarters, championed in others. Ethanol producers have enjoyed meteoric rises in the amount of ethanol they can make and sell, but they also have been accused of harming the environment, prompting food riots abroad, and throwing away government money on unsustainable endeavors.
Environmentalists are asking Congress and the next administration for a far-reaching overhaul of the current biofuel policy.
They want sharp cutbacks on ethanol subsidies, tougher environmental regulations, more investment in advanced biofuels research, a new appreciation of scientific data, and acknowledgment of the ripple effects that biofuel production can have around the world. Some of these requests will conflict with energy policies likely to be set forth by Obama, who strongly supported ethanol subsidies when he was in the Senate.
This is not to say there is no room for compromise. Much of the desire to change the status quo rests upon the use of corn as the primary—virtually the only—source of commercially available ethanol. In the campaign, Obama and his advisers, while reiterating his support for corn-based ethanol, stressed that the future of biofuels lies not with corn but with nonfood alternatives like grasses, husks, and waste products. Those biofuel sources, they argued, are more energy-efficient and have a smaller impact on the environment and food prices. Congress said the same thing when it approved a giant tax credit for cellulosic ethanol earlier this year.
But since celluosic ethanol has yet to reach large-scale commercial production, the present situation presents some difficult choices for the next administration. What should the government do about corn ethanol subsidies? What can it do to get advanced biofuels developed more quickly? And do the benefits of ethanol, corn or otherwise, outweigh the costs?
For environmentalists, the answer to the funding issue is straightforward: Cut the subsidies. According to the Energy Information Administration, ethanol receives more than three quarters of all federal subsidies for renewable fuels, a category that includes wind and solar power. Many see such expenditures as not only a waste but also as an insidious danger. "We don't want to see any investments in what we consider to be false solutions, such as biofuels that can increase global warming pollution," says Shawnee Hoover, legislative director for Friends of the Earth.
Such a move would save several billion dollars annually. But it also would likely undercut, if not cripple, an industry that already is struggling financially and employs thousands of people. One alternative, some in the industry say, would be to reduce the handouts for corn ethanol (one such reduction took place earlier this year) and instead help companies working on more advanced biofuels. "All we are asking is that policy be technology neutral—that lawmakers don't advantage one party," says Paul Woods, CEO of Algenol Biofuels, which has developed technology to produce ethanol from algae. "Right now, we have no support at all, which is ridiculous."
Another dispute is playing out between environmentalists and the industry over the question of measuring the impact of biofuels on the environment. By law, biofuels have to be cleaner, in terms of greenhouse gas emissions, than gasoline. Last year, Congress instructed the Environmental Protection Agency to prepare guidelines to make sure that the rule was being followed. (The EPA's response is due soon.)
But determining what counts or doesn't count under such measurements isn't an easy task. Because land is often cleared to grow crops for fuel, many say biofuel production "leads to substantial releases of soil- and plant-carbon" that should be counted as emissions, as several prominent environmental groups wrote in a letter to the EPA last month. Biofuel proponents disagree, arguing that current models are unreliable and immature. The outcome of this debate, both sides say, could have a profound impact on the future of biofuel policy in the United States.
Environmentalists are asking that Congress or the EPA put in place protections for water, soil, and wildlife habitat to guard against overzealous or reckless production. "You really need best-practice performance standards for all biofuels, which means looking not only at the impact on food prices but also at the impact on biodiversity,” says Carter Roberts, president of the World Wildlife Fund. "We've seen perverse outcomes with biofuels, like the destruction of some of our richest rain forests in the world."
Sapphire Energy at Senate Hearing
There's an Origin Oil press release on the OOIL board saying that OOIL was mentioned by the President of Sapphire Energy (Cynthia Warner) in her opening statement at a hearing of the Senate Committee on Environment & Public Works on May 19th. The hearing was on the subject of “Business Opportunities and Climate Policy.” (She also mentioned Algenol, Solazyme, General Dynamics, LiveFuels, and Aurora Biofuels.)
This led me to the hearing, which is interesting enough to look into.
At the beginning of the hearing the Senators were given only two minutes to speak, but their whole opening statements (which I have not read) are available at the link below. There were three Democrats and two Republicans who spoke, so if anyone is interested in positions on both sides of alternative energy policies, the whole statements might be informative (if you can stand it).
Five Senators spoke. Boxer, Bond, Udall, Vonovich, and Lautenberg. Senator Udall is from New Mexico, which is where Sapphire Energy has some operations (as does CEHMM). Neither he nor Ms. Warner mentioned the Permian sea in the Southeastern part of the state as the source of the brackish water they are talking about.
Udall: “Let me say welcome to all of our witnesses. And a special welcome to Cynthia Warner, the President of Sapphire Energy. And I’d also like to thank the Chair for inviting Sapphire to testify. I know that Sapphire is based in California but I think you do much of your work in New Mexico. And this is an area that I will say we’re very interested in in New Mexico in terms of renewable energy and using some of the lands that we have in New Mexico that has the ability to produce renewable energy. You talk about desert lands, you talk about a hot climate and salty and brackish water. We have it all. We have it in a pretty significant quantity in certain parts of our state. So we really look forward to working closely with you in developing this resource because it’s something that I think is not only important for New Mexico, it’s important for the nation. So, welcome here and I would yield back any time ….”
OOIL PR on OOIL board:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=38008245
So below is Ms. Warner’s opening statement. The link below has the opening statements of the various participants and also a webcast of the hearing. I haven’t listened to the whole thing yet or read the other statements.
Also some of the reports in the footnotes might be useful.
http://epw.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=37159346-802a-23ad-4ea2-afa619aa8c43
STATEMENT OF
CYNTHIA J. WARNER, PRESIDENT, SAPPHIRE ENERGY
BEFORE THE
SENATE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
HEARING ON “BUSINESS OPPORTUNITIES AND CLIMATE POLICY”
May 19, 2009
Madam Chairman, Ranking Member Inhofe, and Members of the Committee:
Good morning. Thank you for the opportunity to testify at this important hearing. My name is Cynthia Warner. I am the President of Sapphire Energy, an algae-based energy company established in California in 2007.
Sapphire Energy was founded with one mission in mind: to change the world by developing a domestic, renewable source of energy that benefits the environment and hastens America’s energy independence. Thanks to a supportive syndicate of respected investors, including The Wellcome Trust (the world’s largest biomedical research charity), Cascade Investment (an investment holding company owned by Bill Gates), Venrock (the venture capital arm of the Rockefeller family), ARCH Venture Partners, and other like-minded investors, Sapphire is well on its way to fulfilling this mission. Using algae as a feedstock, Sapphire has developed a breakthrough technology that produces fungible, drop-in transportation fuels – including 91-octane gasoline, 89 cetane diesel, and jet fuel - out of sunlight and carbon dioxide (CO2).
Sapphire Energy is headquartered in San Diego, and we have established a growing presence in New Mexico. We currently have 107 employees who carry out our mission in both states, and, as I will explain in my testimony today, we expect to employ many more in the near future.
The Sapphire Business Model
Sapphire Energy’s goal is ambitious. It is to become the world’s leading producer of renewable fuels and petrochemical products. To accomplish this we brought together a team of people who, as entrepreneurs, scientists, and concerned citizens, hold several shared beliefs. We believe that climate change is a threat to our environment and that dependence on imported oil is a threat to our national security. We believe that existing alternatives to imported transportation fuels are too slow to commercialize, too expensive to produce, and have their own harmful environmental trade-offs. We believe that, through the application of vision and technology, we have found a better way to achieve energy independence and minimize greenhouse gas emissions.
To focus our efforts, we established four benchmarks to guide our work.
• First, to produce “drop in” transportation fuels that have equivalent or better energy density than the petroleum fuels we currently use and are also compatible with the existing energy infrastructure, including the existing network of refineries, pipelines, and terminals and the existing fleet of cars, trucks, and jets. Americans have spent more than seven trillion dollars developing our transportation fuel infrastructure. The most economically practical renewable fuel, therefore, is a “drop in” transportation fuel that does not require us to recreate this infrastructure.
• Second, to produce fuels that can be grown on marginal desert lands, and in brackish or salt water. We did not want to produce energy crops that compete with food crops for agricultural land; nor did we want to divert precious fresh water resources.
• Third, to produce fuels that have a low carbon impact. We wanted to produce alternative fuels with a life cycle carbon impact that is roughly 2/3 less than that of petroleum-based fuels, and significantly lower than other conventional biofuels.
• Fourth, to produce fuels that are scalable in the near term and cost competitive in the long term. We wanted to be able to produce over one million barrels a day of a renewable crude-oil equivalent, within the next fifteen years. We also recognized the need for this alternative to be competitive with current and future crude oil prices, anticipating that over time, our alternative would become more competitive as crude oil’s prices increase, and ours decrease.
I am here today to tell you that we are well on our way to meeting each and every one of these four benchmarks. After two years of dedicated research and development, fueled by the Department of Energy’s conclusions regarding algae’s suitability as an ideal energy crop, we have developed an algae-based fuel that is renewable, produced in the United States, has a low carbon footprint, has no adverse environmental side effects, is price-competitive, and fits seamlessly into our existing energy infrastructure. Let me be clear. I am not talking about an inferior substitute for gasoline, diesel, and jet fuel. Rather, I am talking about a renewable, domestically produced, and environmentally sustainable fuel that is chemically identical – and in many ways superior – to gasoline, diesel, and jet fuel. That product is our algae-based “Green Crude.”
The Technology of Algae-Based Fuel
Algae is uniquely suited to serve as the foundation for a new generation of renewable and low carbon transportation fuels. Algae is one of nature’s most prolific and efficient photosynthetic organisms; in fact, it is the source, millions of years ago, of all of the earth’s crude oil. Nearly all of algae’s biomass is concentrated in the chloroplast—the engine that turns sunlight and CO2 into organic carbon, so that algae does not “waste” time or energy making stalks, roots, leaves, or fruits. This efficiency leads to very high yields of oil. For example, while palm oil can yield 554 gallons of oil per acre, algae can yield 5,107 gallons per acre—increasing oil output by a factor of ten. Further, algae has a short growing cycle and does not require arable land or potable water—it can be grown quickly in brackish or salt water in the desert.
Drawing on years of algae discoveries in the academic and governmental realm, and building on that research with our high throughput biological experimentation with additional tens of thousands of strains, we have successfully developed algal feedstocks that turn sunlight and CO2 into drop-in transportation fuels that are, in many aspects, superior to petroleum fuels we use today. For example, our green fuels are very low in sulfur, have no benzene, result in superior diesel fuels with high cetane levels, and are higher in energy density than traditional petroleum-based fuels. These elements of superiority will command a higher premium for green crude and make us more cost competitive.
Furthermore, the environmental benefits of our algal fuels are exceptional. Carbon dioxide plays a critical role in the cultivation of algae. In other words, algae consumes enormous amounts of CO2, drawn from both industrial and atmospheric sources, in its growth process. For example, the amount of algae it takes to extract one gallon of Green Crude consumes between 29 and 33lbs (13-15 kg) of CO2. The environmental benefits of using algae as a feedstock are thus exceptional; algae-based green crude provides a “two for one” benefit from the use of fossil fuel, by using the CO2 emitted by a facility (such as a coal-fired electric utility) as a feedstock for the production of green crude. Using algae to beneficially reuse CO2 results in green electric power and a low carbon, drop-in hydrocarbon fuel.
Our green crude’s environmental superiority was recently confirmed by the results of a life cycle analysis conducted by Life Cycle Associates, a well-respected company that has conducted numerous life cycle analyses for the California Air Resources Board. The company determined that Sapphire’s algae-based fuels emit approximately two-thirds less CO2 than petroleum-based fuels at scale. When compared with conventional biofuels, such as corn ethanol and soy biodiesel, our green crude has significantly less than half their carbon impact, while delivering far greater energy density than either alternative.
Putting all of this together, we agree with the assessment of a team of scientists from Utah State University, who said, in a report released last week,
Growing algae, the most productive of all photosynthetic life, and converting it into plastics, fuels, and or secondary feedstocks, could significantly help mitigate greenhouse gas emissions, reduce energy price shocks, reclaim wastewater, conserve fresh water (in some scenarios), lower food prices, reduce the transfer of U.S. wealth to other nations, and spur regional economic development.1
Most exciting, from Sapphire’s “the fuel producer’s” perspective, is the fact that our future customers – those who consume large amounts of fuel on a daily basis - are thrilled at algae’s potential. Fred Smith, CEO of FedEx, was recently quoted as follows:
“Did you know that algae, which is a prolific eater of carbon dioxide, can double in mass quickly, sometimes in four to six hours? …
“Algae has 30 times the amount of oil inside its molecular structure than cellulose ethanol does. That gives it big potential for the production of jet fuel. In fact, you could produce enough jet fuel for the entire world in a land mass about the size of West Virginia, as compared to other biofuels, which would take a land mass the size of the United States. Amazing what you can do with a little pond scum!
“Over the past year, there have been four successful demonstration flights with biofuels made from jatropha and algae, so this is not pie-in-the-sky thinking.”3
These are just a few of the many quotes from those in academia, the government, and industry, who are excited about algae’s ability to hasten America’s energy independence, and improve our environment.
Government officials are excited about algae’s promise as well. Just last week, Jonathan Trent, the lead researcher at NASA's Ames Research Center, proclaimed that “[a]lgae are the best source of biofuels on the planet that we know about.”2
The Practical Prospects for Algae-Based Fuel
As Fred Smith noted, algae-based fuel is not some science fiction fantasy, or a theory that works on a blackboard or in a laboratory but has little practical application. To the contrary, algae-based fuel can have a profound impact on our economy in the near future.
One year ago, Sapphire successfully produced 91-octane gasoline that fully conforms to ASTM certification standards. Five months ago, we participated in a test flight with a Boeing 737-800 twin-engine aircraft. One engine used conventional fuel, the other a mix of algae-and jatropha based fuel. The flight was a success, with the algae-based jet fuel meeting all performance standards and burning approximately 4% more efficiently – thus saving 100 gallons of biofuel – as compared with the petroleum-based fuel. This incredible fuel savings was due to the higher energy density of the algae-based fuel. The test pilot said that the biofueled engine’s performance was “textbook.” This and other tests show that algae-based fuel works well in existing vehicles and planes.
In terms of production, we currently operate a 100-acre R&D facility in Las Cruces, New Mexico, and will soon open an additional 300-acres of processing capacity in rural New Mexico. We will continue to expand as production increases. We plan to meet ambitious milestones, producing one million gallons of fuel per year by 2012, 135 million gallons by 2018, and 1 billion gallons by 2025. We believe that it is realistic to expect that, by 2050, Sapphire’s algae-based fuel can replace more than 25% of conventional petroleum, which would reduce CO2 emissions by 3.6 billion metric tons.
And I’m just talking about the output from one company – my company - Sapphire Energy. I haven’t even begun to touch upon the 90 plus algae-based fuel companies that have sprung up in the past two or three years. Noteworthy companies like Algenol – a Florida based company with operations in Baltimore, Maryland – are developing other types of algae-based fuels, such as algae-based ethanol, as well as valuable co-products, such as plastics and animal feed. Solazyme, General Dynamics, LiveFuels, Aurora Biofuels, and OriginOil, are just a few of the many other prominent names in the algae-based fuel industry. Most are producing transportation fuels or developing fascinating algae-based biological carbon capture and beneficial reuse applications. As an industry, we’re growing at an extraordinary rate.
We’re also creating jobs - thousands of green collar jobs - all across the country. In San Diego alone, research on algae-based fuel employs about 272 scientists, and provides nearly $16.5 million in payroll and $33 million in economic activity for the region, according to a recent San Diego Association of Governments assessment.4 Add to that jobs and spending related to service industries, and algae is responsible for 513 jobs, $25.4 million in wages and $63.5 million in economic output in the region.5
In December 2008, President-elect Obama’s transition team asked the Algal Biomass Organization (ABO), one of the algae industry’s associations, to estimate the number of jobs that could be created over the next three to four years. The ABO estimated that approximately 11,700 direct jobs will be created, with an additional 30,000 jobs from indirect sources. Clearly, the algae industry already is having a significant impact on green collar job creation and is stimulating the economy. And Congress could further boost these numbers by adopting carefully tailored climate change policies that account for algae’s unique role in beneficially reusing CO2.
The Relationship to Climate Policy
Sapphire’s commercial success is closely tied to the important work that this Committee has undertaken on climate policy. Our business model works best if this country is on a path towards reducing the emission of greenhouse gases and is doing so in the most economically efficient and environmentally sustainable way. Accordingly, we support legislation to establish a cap and trade system, and we have been working with this Committee and with others to assure that cap and trade legislation provides a proper carbon accounting for algae-based fuel.
Let me be more specific. As previously noted, CO2 will be one of our principal feedstocks. Therefore, the price of securing enough industrial-source CO2 to keep our algae growing at a steady rate is one of the primary factors determining the price of our algae-based fuels. Currently, CO2 costs an exorbitant amount – somewhere in the range of $130 per metric ton. This is particularly ironic, given the fact that so many industrial entities are desperately seeking methods to dispose of their CO2 emissions!
We ask that this Committee adopt legislation that would allow the beneficial reuse of CO2, through a medium like algae, to be added to the list of Congressionally-approved ways in which industrial emitters, like coal fired power-plants, can off-load their CO2. This will incentivize emitters to capture their CO2 and sell it to us as a substantially lower price, so that we can turn that CO2 into renewable fuel. It will also allow algae-based fuels to become truly competitive with a petroleum industry that has received decades of governmental incentives and support. This simple legislative action would make all the difference to our nascent algae industry and would give us the boost we need to help America become truly energy independent.
Conclusion
Madam Chairman, Sapphire Energy believes that the business opportunity presented by climate policy can be transformative. By getting ahead of the curve, we can produce a new generation of transportation fuels for the world, that are low-carbon, produced right here in the United States, and that generate renewed economic growth and new green-collar jobs.
We look forward to working with this Committee to turn this opportunity into reality. Thank you again for the opportunity to testify, and I would be happy to answer any questions.
1 Utah State University, “Algae‐Based Carbon Recycling,” May, 2008, page 6. This study was released in conjunction with Jeff Muhs’ testimony before the Senate Energy and Water Appropriations subcommitte’s hearing on the Beneficial Reuse of Carbon Dioxide.
2 Jonathan Trent, “NASA Bags Algae, Wastewater, in Bid for Aviation Fuel,” GreenWire, May 12, 2009.
3 Fred Smith, “Keeping America Competitive: The View from the Commerce Street,” TownHall Los Angeles, Feb. 10, 2009.
4“New Center to Focus on Algae, Biofuels,” San Diego Union Tribune, April 29, 2009.
5 Id.
Video of Admiral Inman in April 2008
This is a video of Admiral Inman at the Univeristy of Texas in April 2008 answering two questions at the end of a presentation. From the youtube description: “On Monday, April 1, 2008 Admiral Bobby R. Inman spoke at the University of Texas-Pan American on issues related to, terrorism, Middle Eastern politics, and cyber security.”
Look at NITE. Ready to buy at such a low best bid (.83), but got himself totally out of the way (at $1.00) on the ask (vs. best ask of .87). Guess he's waiting for things to settle down, and I guess he does know what he’s doing.
I find myself going back and forth on this company.
My DD has definitely been sloppy, so I keep being surprised by things I read but did not pay attention to.
I thought, for example, that I was investing in a company getting ready to set up a factory in Wisconsin based on the expertise of its founder, financed by a bond supported by the city - and that it would grow from there. I read, but did not digest the following, brought to my attention again by your post:
“The Company, headquartered in Seattle, is prepared to move forward on several fronts to further develop its plastics recycling business, beginning with testing of its newly designed separation process, recently developed to increase the capabilities and output of the company's ASR (auto shredder residue) cleaning process. Additionally, the company announced it is pursuing a number of joint venture prospects, including the market expansion of its cleaned plastic product stream into feedstock for the hybrid energy field, as well as investigating the potential acquisition of another energy-product derivative recycling process. PCT expects that the successful acquisition of these new ventures would result in combined revenues of up to $17 million during its first eighteen to twenty-four months in operation.”
I sure hope they get the stock price up before they issue shares to pay for these things.
kmikesara, thanks. Good work. eom
FWIW, this is from the Roth presentation in February.
Promotions. Promotions vertical market currently represents the majority of our revenues to date. And I kind of started talking about where this market can go for us based on our laser-sharp focus and strategies with QSRs, in the sports industry from my previous network across all teams that are looking for a low-cost, high-value item within the stadiums as well as within collectability, as well as something to do that’s interactive to gain points and also gain additional prizes.
Within the sports, we will be addressing the NFL in New York with their head of technology and innovations for consumer products. Major League Baseball, the NBA, NASCAR to your own personalized driver and the points. All of these sports are statistics-driven, large following of fan-based driven, and they will be skinned in and around those teams as we draw from licenses and their distribution channels. As well as in the European soccer market, there are several teams that are trying to go out in the market, gain additional market share, and provide a value of extended play patterns. So we’re talking with those groups as well.
Thanks, ambulance.
I sold about 10% of my holdings in the mid-fifties and another 10% at $1.02 because this is retirement money and EGMI is by far the biggest position in my portfolio.
But I still think they can sell millions of these things - and have fun doing it. One of the statements I particularly liked in the cc was this from Kevin Donovan: “And I would like to leave you with this final thought. Our mission on a daily basis is to maximize shareholder value. We definitely have the energy, we’re extremely interested in everything we’re doing with our platforms and with our partners, as well as growing our talent to precisely do that.”
I do think Kevin Donovan is a bit of an odd duck (but then, so am I). It’s hard not to like him though (and his contacts).
On the negative side, I would very much like to see a contract come through beyond Sovereign and Thomas.
-- I hope Sovereign is a capable group, but all I have to go on is their website, which is still incomplete, with sentences written in something other than standard English.
-- The Thomas cards look great, which is very encouraging, but the Thomas arrangement is a license where we do all the selling, although the fact we can use channels already established is very important.
-- My impression from past cc’s was that the soccer contract was in the bag, so I feel a bit misled about that.
I also don’t like to hear changes in projections with no acknowledgement of the change. (EGMI is no worse than other companies in this regard, of course. Apparently few people remember their own recent statements.) For example:
Q408 CC:
Q. Okay. And then, should we expect your tribal agreement with Sovereign, should we expect that to contribute in the first quarter, is that correct?
LC. It will come through ______ slightly in the first quarter, but we really expect it to start really kicking in in Q2.
Q109 CC:
Q. OK. And then last question, related to the Sovereign tribal opportunity. Obviously you guys get the minimum royalty fees that they kicked in this quarter. Can you maybe talk about how that business is performing and should we anticipate you guys maybe getting a little upside above and beyond the minimum royalty payments for this year?
KD. I think currently the key is the minimum, and anything above that is gravy. They are actively marketing and selling to several tribes in various regions throughout the U.S. and so we’re really working very closely with them.
LC. And, Todd, I think the important thing is when you’ve got new business like Sovereign is building, it does take a while to do focus groups, trials, and get it out there. But this is the foundation, if not for this year but real incremental revenue next year.
+++++++++++++++++++
And no, I haven’t spoken recently to IR.
Best wishes.
Thanks, theindustriesdriver.
I thought I understood based on stervc’s posts #294 and #429, but the information in your post #590 has muddied the waters a bit. I'm going to go ahead and post this (somewhat muddy) understanding, and tackle it again later (maybe).
Any input would be welcome.
MY UNDERSTANDING
The State of Wisconsin currently has authority to have $200 million of bonds issued under this Federal program (the “volume cap allocation”). The State allocates portions of this amount to cities within Wisconsin.
The cities issue bonds on behalf of companies, though the companies must find the investors. The city then loans the proceeds to the company, the loan being secured by the facilities and equipment (per post #590).
But the company, not the city, is responsible for interest payment and principal repayment to investors. Even though the bonds are issued by the city, the city does not guarantee payment.
*******************************************
-- Since the city issued the bonds, does the city act as middleman, receiving payment from the company and sending it to investors?
-- Since the loan from the city to the company is secured by the facilities, if the company defaults perhaps the city would perform some kind of seizing and disposition of assets in an attempt to repay investors?
*******************************************
The benefits of the program are
1. Since the interest is federally tax-free, investors may be willing to take a lower interest rate.
2. Since the “city technically owns title to the facility” (post #294), the company gets tax breaks. (The facility will be given to the company in 20 years or so - this may simply mean that once the loan to the city is repaid, the facility is no longer encumbered.)
3. I assume there is a sense of safety for investors in that they assume that the city has done DD on the company, even though there is no guarantee of payment from the city or state. So it should be easier for a small company to find investors than would otherwise be the case.
*****************************
AMOUNT AVAILABLE
And there is $20 available for GBOE (if they can find the investors.) (per post #429)
I’m no longer clear about this $20 million.
Originally I thought they could raise $20 million by issuing bonds backed by the State. Some on the board seem to be implying that the State will loan them $20 million directly.
Now I’m not even sure of the amount. The comment about it in today’s PR makes it sound like the whole program is for $20 million, not that GBOE will have access to the full $20 million.
“PCT has already announced its involvement with the State of Wisconsin and the City of Fond du Lac in a $20,000,000 municipal bond program geared toward business development and job creation within the state.”
Does anyone have clarity on this?
It may be time to remove GeoBio Energy from the list.
It looks like it was reversed merged into by a company called EnviroPlastics, will be renamed Plastics Conversion Technologies, and will be focused on plastic recycling activities going forward.
It's also moved from the bulletin board to the pinksheets.
http://finance.yahoo.com/news/GeoBio-Energy-and-pz-14897171.html
stervc, thanks for the effort.
Just out of curiosity, do they have the loan under the name of Plastics Conversion Technologies? (Or GeoBio or EnviroPlastics?)
TIA.
[edit] I just looked at message #385, so I guess it's EnviroPlastics?
EGMI Q1 2009 CC Transcript
May 14, 2009
Kevin Donovan, CEO
Lee Cole, Former Interim CEO, Current Board Member
Yvonne Zappulla, IR Representative
KEVIN DONOVAN
Well, thank you very much Yvonne. And thank you all for joining us this morning. Those of you who do know Yvonne Zappulla, I’m sure you can support my compliments to Yvonne for doing an outstanding job of balancing both the company and also the IR daily activities. And she just does an amazing job.
I want to thank all of you again for spending your time with us today because these are very, very exciting times for the company and our shareholders. It is truly a privilege for me to report to all of you today our achievements during our first quarter of this year.
And for the first quarter of 2009 Electronic Game Card generated revenues of $3 million, an increase of approximately 29% over the prior year first quarter revenue of $2.3 million, and 5% above fourth quarter 2008 of $2.8 million. The first quarter increase was diluted by a 40% increase in the value of the U.S. Dollar over the British Pound Sterling.
Our revenue growth during the quarter was predominantly driven by our further penetration of Electronic Game Card into the promotional market, additional licensing revenue in the Native American gaming market, and interest in the new lines introduced. Electronic Game Card reported comprehensive net income of $1.7 million, which equates to $.03 cents per diluted share. This was slightly above expectations and compares to a net income of $1.3 million or $.02 per diluted share during the same period last year, and income of 1.4 million excluding the $419,000 investment sale for the fourth quarter 2008. Importantly, first quarter 2009 income from operations totaled $1.8 million. This is a record level for the company compared to operating income of 1.4 million for the first quarter and 1.5 million for the fourth quarter of 2008.
As of March 31, 2009, Electronic Game Card had approximately 60 million shares of common stock outstanding with a weighted fully diluted share count totaling 67.8 million. The aggregate proceeds if all options and warrants were to be exercised would generate over $5 million into the company. It is important to note for the foreseeable future we intend to increase the share count only to accommodate key executive management and Board of Director stock options, and only at levels that are reasonable.
The gross profit generated for the three months ended March 31, 2009 was at the record level of $2.3 million, and generating a 76% gross margin. Growing and maximizing gross profit dollars is our top focus. As events unfold over the coming quarters throughout this year, some of our current contracted opportunities will greatly accelerate our revenues at margin percentage levels that will still be very strong. Could be less than 70% of margins if we have enjoyed from less robust revenues and volumes. [?]
Conversely there are a number of potential license royalty relationships with well-established household brand names that naturally generate little cost against revenues. As these new business relationships become public we will update you with proper guidance.
The company’s operating expenses during the first quarter totaled $530,000 or less than 18% of revenue. As we manage our growing business going forward absolute costs will increase as we continue to build upon our internal talent and broaden geography to reach an even greater client base. However, we do not anticipate expenses as a percentage of revenue to increase from levels we have generated over the past quarter. Your company and Board of Directors have been very highly disciplined in managing expenses and will continue to do so under my direction.
Our balance sheet continues to strengthen. Cash and equivalents on March 31st 2009 were $9.7 million, an increase of approximately 4 million from first quarter 2008 and an increase of 1.4 million from December 31, 2008. At quarter-end the company’s current assets totaled 12.8 million and current liabilities were 1.2 million, representing a 10.7 current ratio. The Series A Convertible Redeemable Preferred stock totaled 4.5 million at quarter end. And importantly Stockholders Equity has risen for the ninth consecutive quarter to $14.6 million, an increase of 1.3 million in a three-month period.
One year ago we established our fully diluted earnings guidance of $.14 per share for 2009. Today, given the current global economic environment, we reiterate our confidence in achieving our earnings per share goal based on our current contracted backlog and despite approximately 10% increase in our fully diluted share count and essentially a doubling of our overall quarterly expenses as we prepare the company for our next level of growth. We intend to add to that goal with all the hard work and extensive network this new execute management team brings to Electronic Game Card.
Now, most importantly, the upcoming second quarter of 2009 is shaping up in line with our plan to deliver record revenue and earnings.
Now let me pause a moment and discuss our business model. Particularly in context to this year’s expectations. Electronic Game Card is both a consumer goods technology development and marketing licensing company of innovative technology focused on maximizing net profit dollar distribution per unit. The business model developed over the past 24 months has been flexible and responsive, designed to grow revenue, leveraging the core technology platform, through both direct sales with unique vertical market price points reflecting cost variations in packaging, logistics, and security, as well as through distributors and manufacturer/licensor relationships within specific geographies, and the distinct vertical markets such as gaming, promotions, and education. Contract pricing for distributor and manufacturer/licensor takes into account the ultimate retail price reflecting perceived value of a newly-introduced product as well as costs through the delivery process.
As we look forward to leveraging our existing network relationships with new opportunities in numerous potential markets, within each of these markets, as critical mass is established and as controlled technology enhancements are added to create further product feature uniqueness, we will have opportunities over time to further increase the profitability per card.
Now let me shift the conference call focus from the figures to short-term milestones going forward. So our opportunities in each of our three business segments.
First, gaming. In the past this area only reflected $125,000 per quarter we received from Scientific Games. Now beginning this first quarter 2009 we added $250,000 per quarter guaranteed license minimum from Sovereign Game Card who is our Native American casinos-focused licensed distributor partner. In addition we have been working on sectors such as national and state lotteries outside of the United States and casino gaming projects in the European, Las Vegas, Australian, and Asian markets, where Miss Anna Houssels, our Executive Vice President of Sales and Director, has long-established successful relationships entry [?] of EGC products into betting shop opportunities in Eastern Europe.
Now as you might recall, our Executive Chairman, the Lord Leonard Steinberg, maintains his Perpetual President role at the company he launched 50 years ago and subsequently sold, Stanley Leisure plc, which controls 1,500 betting shops and parlors throughout East and Western Europe, whereby the company’s management team continues to gain progress in these new areas and territories such as Romania, Poland, and others.
11:35
Now our second key business segment, promotions. The bulk of our current and future internal sales efforts and distributor relationships for interactive entertainment technology are focused on this promotion vertical market, which includes hotels, casinos, resorts, marketing and promotional firms, quick-service and casual restaurant chains, consumer packaged goods companies, large-scale mass-market retailers, toy manufacturers, video game publishers, trading card companies, popular entertainment and sports properties and brands. Now specifically these areas of promotions focus on redemption or product launch programs, self-liquidating promotions, increasing foot traffic in the retailers, in the restaurants, and continuity programs for collectability, as well as loyalty rewards-driven motivators for areas such as players’ clubs and slots programs
Now our new iQuiz card, which focuses on trivia, is a new platform which has natural synergies with sports and entertainment genres while appealing to large-scale fan bases. So we’re hooking into those large-scale fan bases with this promotional platform. We have multiple opportunities in this dynamic promotional marketing area as our credit-card-sized platform allows for B2B clients to easily customize their promotion, their brand message, thus re-skinning the graphic formats on each card to the new clients.
There is a clear, wide-ranging enthusiasm from the field which we’re receiving for the new iQuiz cards, and entities are actively considering our iQuiz cards at this current moment.
13:42
Our third segment, education. This is a $2.2 billion global market and growing. To our knowledge, there are no products at the affordable $10 retail price and under, and we’re confident we have a new category-buster as an on-the-go, mobile-style, and mobile-type entertainment game card for parents and their children. And a product that is not connected to the internet and not connected to any mobile phones or carriers. And early responses from our European business-to-business network and based on the reaction of Thomas and Friends, which is an enormous global brand, our Electronic Education Game Card has tremendous possibilities. Currently there are several gold standard brands in education publishing and education media who are currently in review of this new product offering of EGC. We expect the first cards to be shipped in time for this Christmas and holiday season in the U.K. market.
Now let me talk about distribution partnerships. When looking forward to future milestones it is important to understand that we intend to maintain an outsourced business model. While we continue to work with an internal sales effort, we are firm believers in the power of utilizing strategic distribution partnerships. We are in active discussions today with several regional and channel partners, and it is our goal to announce a new relationship before the end of this current quarter.
Increased IP, patents, and regulatory approvals. Given that we are a technology company, continued IP development will be key to building our value, and thus we will continue to be aggressive in protecting our technology. We are in the process of filing more patents by expanding our protection of our current technology and surrounding our new product lines as well.
Additions to the Board and executive ranks. Now that we have firmly established our business model within our three business segments of gaming, promotions, and education, and we’ve delivered nine successful consecutive quarters through a very difficult time in our economy while maintaining strong profitability, and have identified new markets of focus, we are in a unique position to make one to two strategic additions to our Board of Directors, who by our criteria and our selection process is based upon adding exponential value through potential new business revenue from their relationship network and seasoned public market experience as we position and prepare your company, Electronic Game Card, to reach our future goal of becoming a successful Nasdaq-listed company.
In addition, our CFO, Linden Boyne, who served the company extremely well over all these years, will be retiring in the second half of this year, and therefore we are in the active process of reviewing applicants for CFO. I and the Board have already met with some incredible talent to be the new CFO.
Insider buying. You may have noticed that there has been a significant insider buying just before our window closed in anticipation of reporting this quarter. The Lord Leonard Steinberg purchased two million shares in the open market, bringing his holdings up to 13.9% of the outstanding shares. All executives in our company own EGC stock, of which most was purchased in the open market. When appropriate we plan to continue that tradition.
In addition our Series A shareholders have formally approved the company’s 5% share repurchase, and when it strategically makes sense we now have the flexibility to act.
So therefore to summarize, we’ve had a successful 2008 and Q1 2009. Our current backlog momentum gives us confidence in our guidance moving forward throughout 2009. The new executive management team has hit the ground running and has focused initiatives to close in the areas of gaming, promotions, and education, any one of which could greatly add to the company’s progress and revenue enhancements to the current guidance of 17 to 18 million in 2009 full-year earnings, per share guidance of $.14 fully diluted EPS.
Now with that, I will now open this call up for questions. Operator.
19:30
Q&A
[Operator instructions.]
TODD EILERS – ROTH CAPITAL PARTNERS
Q. Hi guys, thanks for taking my question. Kevin, can you maybe talk a little bit - lets see, how many, can you tell us how many game cards total you guys sold in the quarter and also what your backlog is at this point?
LC. You want me to…?
KD. What I’d like to do is – Lee would you like to field that question from Todd? And Todd, good morning, thanks very much for joining the call.
Q. Thank you.
LC. We’ve got – we were just south of 1.6 million game cards for the quarter, but we’ve got a very healthy backlog. We’ve got at least 60% of this year’s business already contracted.
Q. OK. And then can you maybe give us the mix or the breakdown of how much of your revenue was sales vs. recurring revenue, also including in that recurring revenue obviously the Sci Games and the Sovereign…
LC. Yes, exactly. Well basically, what we call recurring revenue is the Sci Games, The Sovereign and other licensing contracts. And currently that’s probably somewhere around 65/35 and that could increase on the licensing side because as Kevin says, you know, that’s very profitable business for us.
Q. You said 65% sales, 35% licensing royalty?
LC. Yes, approx. Yeah, yeah. Give or take a point.
Q. And then, let’s see, you guys obviously have a lot of new opportunities you’re looking at. As far as going into Q2 can we expect any of these initiatives, whether it be the Quiz Cards or the Thomas & Friends educational card or on the gaming side, whether it’s selling into the betting shops or signing a large enterprise deal with a casino operator. Can we expect any of these to start contributing in Q2 and just how should we look at that going forward?
LC. I think Q2 you’re not really going to see it kicking in. I mean, remember Kevin and Anna only joined us the beginning of February. I think Kevin can talk to this about some of the opportunities which they’re working on which are very significant which you’re probably going to see more in Q3, Q4. Kevin?
KD. Yeah, in terms of being launched and activated, but being announced we’re targeting, Todd, at least two to be able to announce in the second quarter.
Q. OK. OK, that’s helpful. And I guess the other question is with regards to some cash flow numbers. In the press release I think you guys indicated you generated 2 million in free cash but if I look at the cash and investments it looks like it sequentially went up by about a million. Can you maybe tell me what you guys spent the other million on? Where that went.
LC. Yes. A good part of it was the buyback of the preferred.
KD. Trafelet.
LC. Yeah, which was about $800,000. And the rest was a follow-on investment in one of our investments.
Q. OK. And then just to follow on that, going forward over the next couple of quarters, do you anticipate monetizing any of those investments or making any, I guess, any more significant investments?
LC. No, I think the Board’s policy going forward – I mean previously going back historically with the company, we made these investments in synergistic technologies, but the Board has changed policy and we will be monetizing the investments, and in future we’ll be looking to make acquisitions or do licensing deals.
Q. OK. And then last question, related to the Sovereign tribal opportunity. Obviously you guys get the minimum royalty fees that they kicked in this quarter. Can you maybe talk about how that business is performing and should we anticipate you guys maybe getting a little upside above and beyond the minimum royalty payments for this year?
KD. I think currently the key is the minimum, and anything above that is gravy. They are actively marketing and selling to several tribes in various regions throughout the U.S. and so we’re really working very closely with them.
LC. And, Todd, I think the important thing is when you’ve got new business like Sovereign is building, it does take a while to do focus groups, trials, and get it out there. But this is the foundation, if not for this year but real incremental revenue next year.
Q. OK. That’s helpful. Thanks guys, appreciate it.
25:00
MICHAEL WEISS – JOSLYNDA CAPITAL
Q. Hi, I was going to ask a little bit if you could – further on the investments, which are actually a fairly large number on your balance sheet, do you have any time frame or is anything close, I know we want…
LC. Yeah, Michael, we – the Board has stipulated they want to be out of all but one of the investments in the next 12 months. So we’ve got one very strategic investment in PrizeMobile, which I imagine we’ll hold on to, but the others, which are in different technologies, we’ll be looking to monetize in the next 12 months and be out of all of them and turn it into cash.
Q. OK. Second thing was how much are your future infrastructure and hiring plans, is that, are you expecting a big number, and in essence have you really raised guidance but kept it flat because of additional expenses and additional shares outstanding?
LC. I think we always budgeted for additional expenses as the company ramps, and you’ll see more expenses next year but not until we’ve got the revenues. Kevin do you want to….
KD. Yeah, Michael, I think it’s as needed as it centers around projects and reoccurring promotional programs. There’s no need to add additional cost just for adding add additional cost. So we’re keeping it extremely tight.
Q. And I’m sorry I missed the answer to the prior question. What was the percent of backlog – what’s the percentage this year that’s already booked?
LC. Six-zero. 60.
Q. 60%. Thank you very much.
LC/KD. Thanks, Michael.
STEVE MAIDEN – MAIDEN CAPITAL
Q. Hi guys. Good quarter. I had a question, just one question. When you might be thinking about putting out your 2010 guidance. And you know there’s – Roth has numbers out there, I wondered if you could comment on them? They were estimating 21.9 in revenues and $.18 cents in earnings. Do you think that’s achievable? Can you make any comments?
LC. Yeah, I mean we definitely think that’s achievable. And you know we’re waiting to see if some of these large orders which are incremental to our current guidance shape up and when we think they’re going to kick in. So that’s why we’re being prudent about putting next year’s numbers out there because we’re hoping to beat it.
Q. So you’re likely to put out next year’s guidance once you are able to hopefully announce one of these game-changing type deals?
LC. Yeah, I think that’s a good summary, don’t you, Kevin?
KD. I totally agree.
Q. And did I hear you, Kevin, say that you’re hoping to announce as many as two of these in Q2, meaning by the end of June?
KD. In terms of strategic relationships and opportunities bringing new revenue to the company.
Q. That would be fabulous. All right, guys. Thanks a lot.
KD. Thanks very much.
28:30
STEVE GITTEMORE[?] – VERTIS[?] CAPITAL
Q. Yeah, hi. It’s Steve Gittemore[?] from Vertis[?] Capital. I just want to go back to that 14 – I’m sorry, to the – I guess it’s 14 million of investment assets. Do I have that right? But I mean it’s the $1,880,000 that you guys booked this quarter. The – how are you – let me see, I’m sorry it’s 7.4 million, right, up from 6.5. OK, so we added a million dollars at cost from quarter-over-quarter. How are you treating – you said you bought back $800,000 of the Preferred. How does that work? I mean are you guys holding that? Are you going to get dividends on it or you’re going to convert it into stock and then it becomes reduction of an investment, it becomes a contribution to shareholders capital. Could you just walk me through the accounting on that? I guess my question, my ultimate question, is why wouldn’t that have just been retired?
LC. The Preferred was retired. I think the increasing investments wasn’t yet – the investments have increased due to a small investment of around $500,000 and the other was a gain in the investments.
Q. Well. OK. So well now I’m having trouble with the cash then because I thought you said – and my own analysis suggests that the investments obviously went up by something close to $900,000 and you said that you bought back $800,000 of Preferred so I thought that was that. But….
LC. No, if you – $800,000 of Preferred, $500,000 of investments is approximately 1.2, 1.3. I haven’t got the numbers in front of me, but that’s how it works out
Q. OK. But on the repurchase of the Preferred – oh, this is kind of – OK, so the Preferred is still shown on your balance sheet as 4.46 million as it was at 12/31 and then it’s still the same number on…
LC. Yeah, there was an anomaly there, because actually – we actually purchased the Preferred after year-end. So we purchased it in Q1, but the holders of the Preferred converted to common stock prior to year-end. That make sense?
Q. Well, maybe, yeah. So wouldn’t – but then the cash usage wouldn’t….
LC. We didn’t pay for it. I mean they converted Preferred to common stock by year-end, so effectively we purchased common, not Preferred. But they were a Preferred holder, we’d agreed to buy their Preferred, but by the time we got our permission from our Preferred shareholders to purchase it it was in the middle of January. And prior to them agreeing to sell it to us in mid-December and us getting permission they had converted it at the end of December to common.
Q. So then why – then your deal would have been off, right?
LC. No.
Q. Why buy it back at that point?
LC. Because we bought it back at a very advantageous price and we had permission to buy it back. Otherwise it would have been 3 million shares hitting the market.
Q. OK.
LC. OK?
Q. Yeah, I think, OK, I see. OK. But just then – but I’m still trying to understand why the investments went up by 900.
LC. Because there was a $500,000 invested and then there was a gain in one of the investments.
Q. Oh, so you booked a gain.
LC. Yeah, yeah, yeah.
Q, And did that run through in the income statement?
LC. Yeah.
Q. Oh, I see and then that could have – where would I have found that on the income statement, I’m looking at it right now.
LC. When you get the Q, you’ll see it in the Q. You don’t see it. I mean…
Q. So, well it has to hit something on here, right? Is it in revenue is where you have it?
LC. I haven’t got it in front of me. When the Q gets published, it’s very clear.
Q. “It’s very clear.” OK. Because that would be – I would think that something like Other Comprehensive Income, but that’s too small looks like.
LC. Yeah.
Q. Ah, no, no. It is a…. Ah, no… small…. OK. Ummmm…..
LC. And it’s miniscule in the scheme of things, but it’s definitely mentioned in the Q. I haven’t got it in front of me unfortunately.
Q OK. And I know a number of prior callers have asked about the guidance for the year. Right now you’re on – I’m more concerned on the revenue side. Is there anything – so right now we’re on track for maybe 12 million in revenue if you just annualize this first quarter. Is that way under what you guys are expecting? Or is that?
LC. No. That’s in line with guidance. I mean we were expecting a ramp-up at the back end of the year as new products come into play. And you know we’re very – we’ve stuck with this guidance for a while.
Q. OK. And you don’t think we’ll be – there’s no seasonality here that would have us slip back in a sense, right? Every quarter should be about at least 3 million do you think or could there be a slip back in Q2?
LC. No, there won’t be a slip back cause we ramp up towards the back end of the year. There is some seasonality for October[?] as people get ready for the holiday season.
Q. Great. Love the way you guys are growing cash. I thought you had a good quarter. Thank you. Thank you very much.
LC. Thanks for your questions.
JACK CUMMINGS – PRIVATE INVESTOR
Q. I think most of my questions have been answered. I think you all are doing a great job. I do – where is headquarters now? You operating out of California or New York or London or what?
KD. Jack, the primary office right now in terms of where we have our largest amount of our employees are currently in London. We’re building out the Southern California office, which includes myself, Anna Houssels, our EVP of Sales and Director, and then also the new CFO that we’re bringing on board and transferring the duties, the daily duties and operations in accounting and HR, and all the bookkeeping we’ll be transfer to California. And that will occur in August of this year when Linden retires. But we’re building out the team in Southern California and gaining greater exposure for our U.S. operations and supporting Europe with London.
LC. Yeah, the key to growth has always been really expanding in the U.S., which we’ve never done previously, so moving the HQ to California and aggressively attacking the U.S. market is key.
Q. OK. Thank you very much. You all are doing a great job.
KD. Jack, thank you so much. Have a great day.
Q. You, too.
KD. Thank you, sir.
CRAIG PETROVSKY – BRIARCLIFF CAPITAL
Q. Hi guys, how you doing? Nice quarter.
KD. Thank you, Craig.
Q. Just a real quick question on the 5% share repurchase program that you spoke of earlier in the call. Should I assume that’s based off the shares outstanding at this current point so we’re talking roughly around three million shares as being authorized?
LC. Right.
KD. That’s correct.
Q. Thank you.
KD. Thanks, Craig.
LEON FRANKEL – TRIAGE MANAGEMENT
Q. Good morning. Very good quarter. You answer almost all the questions. My specific question was about the dilution of share repurchase because your having so much cash on you ______ money, so shrinking the share base is a pretty good idea.
KD. Thank you so much.
GLENN DAVIS – PAULSON INVESTMENT
Q. Yes, good morning, gentlemen. I apologize, I’ve been bouncing back and forth so if this has been answered already, excuse me. But with regard to your currency exposure, what are some strategies there that you might employ because of the international nature of the business?
LC. To date, we haven’t been hedging, but as our business grows we will definitely look into hedging.
Q. OK What percent of the business is outside the United States right now?
LC. At the moment it’s about 90%. No it’s not, it’s more like 80% because of the licensing.
DAVID WATSON – Private Investor
Q. Two quick questions. One is around the Sci Games relationship. I know you get the license. What is Sci Games really doing to grow that market, if anything, in your eyes?
LC. Kevin, do you want me to… {Laughter.]
KD. [Laughter.] Great question, David. Umm, uh, we’re….
LC. I mean we think Sci Games have got their own products and you know you could look at Sci Games’ license as a way – it could be viewed as one of two ways. It could be viewed that it was just – when it was done it was probably a way to keep – it could be viewed that it was a way to keep our product out of the market. But when it was done the company was in a very different place and it just affects the U.S. lottery market for us.
KD. Yeah, temporarily. But David what is in our control is what we’re focused on in terms of opening up the other new markets in Europe and Asia and Australia. Tremendous opportunities there as it pertains to state and national lotteries. And so we’re focused on what we can control. We can’t control what Sci Games is going to do and what they’re not going to do. So we’re just truly focused on our day-to-day operations and looking at this market. We have a great terminal. This format has really opened the eyes of key influencers in the market. And so we’re confident in our product and we’re confident in our sales efforts.
Q. Second question, a much broader brush question which is, I think when you were named CEO you talked about you could see growing this to $100 million. You’ve been on board now a couple of months. How do you feel about that statement and sort of what time frame are you thinking?
KD. Great question and thanks very much for bringing it forward. Our target is a five-year $110 million target . And that reaches 50 million from the gaming market over five years, 50 million from the promotional market over five years, and 10 million from the education market. And our Board and our executive management team is working very, very diligently for our first year and working through the next four years to hit those targets.
Q. So, but, I’m sorry, so when you say $110 million is that cumulative or is that run rate? Five years from now you’ll be at a $110 million run rate.
LC. 110 million run rate.
KD. Run rate.
Q. I think I’ll have to stock up on some shares. Great. Thanks guys,
KD. Thank you so much, David.
CONSTANCE N. – PRIVATE INVESTOR
Q. Hi, thanks for taking my question. I just wanted to clarify one thing if I could. When you said you hoped to announce two contracts by the end of June, did you mean that you hope to close those contracts or that they’ve been closed and you hope it will be the time to publicize them within the next six weeks?
KD. Thank you very much, Constance. Our goal is to close the contracts before the end of June.
Q. OK. And one other thing. Is there any detail that you could give us on the sports cards? I know that I think as far away as a year ago it sounded like the contract with the soccer – soccer organization in Europe was almost closed at that point. Could you give us any insight on what’s going on with the sports?
LC. Yeah, I can answer that one, Kevin.
KD. Maybe you can answer the soccer, the European football.
LC. And then I’ll pass it back.
KD. I’ll talk about the U.S.
LC. Perfect. Yeah, we were discussing last summer with the U.K. soccer league, but unfortunately nothing actually came of that. With such a lean organization we can only pursue so many prospects. That’s why it’s great that we’ve now got more infrastructure and Kevin and Anna. And I think Kevin’s really made some leeway in the sports since he’s been there. Kevin?
KD. Yeah, thanks Lee. And Constance, great question. As it pertains to the U.S. we have some tremendous large fan-base sports properties. And we’re currently under review with two major sports properties because of the new platform with the iQuiz card. So you can only imagine with these sports, it’s statistics-based so the fan bases – whether it’s on a particular team or athlete or key events within sports, that they’re really prompting and asking those questions. And it’s a great parent and child type activity ______ in the stadiums as a stadium promotion or from a retail merchandize as an impulse item. And so we’re working diligently to try to close some portion of either one of the sports properties opportunities. And we’re just very, very fortunate to gain the type of exposure that we have for our product in a very quick period of time.
LC. And we’re developing additional product which is relevant for those markets as well. And we haven’t really touched upon on the call is that we’ve – Kevin’s leadership, we’re diversifying into some other very interesting areas which are synergistic with current customer base and our current technology.
Q. You’re saying a different sports – a different card besides the Quiz Cards?
LC. Yes, different functionality on the card.
Q. OK. Great. Yes, I’ve been wondering what the sports cards would actually look like, what there would be on them.
KD. Well, if you can imagine on the front as – on the front of the card, as the iQuiz card, it has a player and a league type of imagery. And then you have the questions and then you have the option of pushing A, B, or C as a multiple choice answer. Then on the back are the player’s stats similar to a traditional trading card but this is as an interactive entertainment platform. So, Constance, do you have a particular favorite sport or one that you follow in the industry?
Q. Baseball.
KD. Baseball!
Q. In New York.
KD. Do you have a favorite team?
Q. The Mets.
KD. All right. How do you like Johan Santana?
Q. He’s a wonderful player, wonderful spirit aside from his talent.
KD. He certainly is. I’m a big Twins fan and grew up in Minnesota. And so we were very sorry to see him leave and he’s such a great gentleman as well.
Q. Yes, yes. We were lucky to get him.
KD. Well, enjoy the Mets and thanks very much for your questions, Constance, and your support for the company.
Q. OK. Thank you very much.
KD. Have a great day.
CLOSING REMARKS
KD. Great. Thank you very much operator, and thank you everyone for your great questions, all of your time and attention today. I personally thank you for your trust, support, financial resources, and taking time out of your busy day to attend our call. We’ve outlined a number of short and intermediate catalysts which we believe will have meaning to our stock as we leverage our unique products in our key verticals of promotion, education, and gaming.
And I would like to leave you with this final thought. Our mission on a daily basis is to maximize shareholder value. We definitely have the energy, we’re extremely interested in everything we’re doing with our platforms and with our partners, as well as growing our talent to precisely do that. We’re looking forward to updating you on our next call when we review the second quarter of 2009. And if you have any questions whatsoever in the meantime, please don’t hesitate to contact Yvonne Zappulla through the usual phone number and e-mail address.
And that is it. I’d like to thank all of my colleagues on the Board and management team and IR and the London office and I would like to personally thank each and every one of you from the company. Thank you very much and have a great day.
Utah State University Report
This is the report mentioned in the article. I haven’t read it yet, but it looks pretty comprehensive and also readable.
http://www.utah.gov/ustar/documents/63.pdf
Below is the list of contributors.
Jeff Muhs Utah State University
Sridhar Viamajala Utah State University
Barbara Heydorn SRI International
Mark Edwards Arizona State University
Quiang Hu Arizona State University
Ray Hobbs Arizona Public Service
Mark Allen Algal Biomass Organization
D. Barton Smith Oak Ridge National Laboratory
Tim Fenk Sapphire Energy
Dave Bayless Ohio University
Keith Cooksey Montana State University
Tanya Kuritz Oak Ridge National Laboratory
Mark Crocker University of Kentucky
Sam Morton University of Kentucky
Jim Sears A2BE Carbon Capture
Dave Daggett Boeing
Dave Hazlebeck General Atomics
Jeff Hassenia Diversified Energy Corporation
This is Jeff Muhs bio:
http://www.innovationutah.com/research/biofuel/jeffmuhs.html
Oil Extraction
EXTRACTION AS A BOTTLENECK & USE OF CHEMICALS A PROBLEM
This was interesting in the United Environment & Energy article:
“Other refining or fuel companies, such as Illinois-headquartered UOP and San Diego-based Sapphire Energy, are also aiming at producing oil and fuel alternatives from algae but have struggled to get adequate supplies of it. Wen says his company has a "stable supplier" of algae oil that he also refused to identify for competitive reasons. He adds that said supplier was not U.S.-based as environmental regulations in this country hamper use of the toxic solvents necessary to extract oil from the algae. "Algae growth is not a big problem, people know how to grow it," he says. "The big barrier is extraction."
From Biofuels Digest, commenting on Origin Oil’s new extraction method:
http://biofuelsdigest.com/blog2/2009/04/20/originoil-announces-breakthrough-one-step-process-to-extract-oil-from-algae-without-dewatering-clears-barrier-to-algae-commercialization/
“The dewatering of algae and extraction of algal oil has been rated by many sources as the most perplexing barrier preventing the rapid expansion of commercial algal fuels.”
From Origin Oil’s Desmet PR:
”In contrast, the OriginOil Single Step Extraction technology does not require a petrochemical solvent, such as hexane, which is known to require an extensive permitting process before implementation, thus allowing for a more cost-effective production of algal oil."
SOLUTIONS
So we’ve got
1. Origin Oil’s new method.
"The company’s technology combines electromagnetism and pH modification to break down cell walls, releasing algal oil within the cells. The oil rises to the top for skimming and refining, while the remaining biomass settles to the bottom for further processing as fuel and other valuable products."
As a sidelight, here’s a brief video of Gov. Schwarzenegger and an OOIL exec:
http://katynally.wordpress.com/2009/04/20/origin-oil/
2. We have this comment in an article on Aurora Biofuels:
http://biofuelsdigest.com/blog2/2009/03/12/aurora-biofuels-in-florida-the-panther-roars-as-a-little-seen-algae-producer-targets-130-algae-fuel-at-the-gate/
“The cost of fuel is in the feedstock,” Walsh adds. “About 80 percent of it. That’s where you have to focus. With algae, you have to get a good dominant species, and no GMO,” and confirmed that Aurora has made breakthroughs in extracting oil from algae without passing through a drying stage, bypassing the most expensive and energy-intensive part of the algae production process.”
It doesn’t say that they do it without chemicals, so that would be interesting to find out.
3. CEHMM using SRS in Dexter, Michigan:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=37496964&txt2find=extraction
“The algae was grown in New Mexico in outdoor, oval-shaped, “raceway” type ponds and extraction of the oils was done in Dexter Michigan by SRS, a company who is at the forefront of commercial extraction technology....The raw oils extracted from CEHMM’s algae show incredible purity and viability for fuel production.”
Does the purity imply that SRS doesn't use chemicals? Not necessarily, so it's something to find out.
4. This is from an April 7 biofuel post concerning a nanotechnology extraction method in Iowa that doesn’t even harm the algae.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=36875725&txt2find=extraction
“The so-called "nanofarming" technology uses sponge-like mesoporous nanoparticles to extract oil from the algae. The process doesn't harm the algae like other methods being developed, which helps reduce both production costs and the production cycle.”
5. I wonder what else is out there.
GERS: I wish I’d been paying attention.
GreenShift (GERS) is up from .004 to .01 today because its patent on its method to extract more oil from an ethanol production by-product, distillers grain, was approved.
http://finance.yahoo.com/news/GreenShift-Receives-Notice-of-bw-15147307.html?.v=1
As I understand it, this patent doesn’t have anything to do with algae, and I think the algae bioreactor the company licensed from Ohio University may be on the back burner. I’m not clear at this point where algae comes into their plans.
They have an interesting business model around supporting ethanol producers by building corn oil extraction facilities at the ethanol producers’ plants (free to the ethanol producer) and then buying the oil for use in GreenShift's own biodiesel facilities at a price which guarantees a profit. They can also sell the oil. Last December they announced an arrangement to received $38 million to build 12 facilities at ethanol producers' plants and increase their own biodiesel capacity, but it fell through. You can see that it is a capital intensive business model.
Financially, they may be on the brink at this point, so it will be interesting to see if this helps.
We also would need to get clear more clarify on the algae aspect of their business.
Green Plains Renewable Energy PR
As explained in the PR in post #102, Green Plains Renewable Energy [GPRE] is an ethanol company which formed a small joint venture to experiment with algae production. The joint venture is called BioProcessAlgae LLC. This is explained in more detail in the excerpts at the end of this post from a March 26 presentation.
The four BioProcessAlgae joint venture partners are GPRE, CLARCOR, BioprocessH2O, and NTR plc.
CLARCOR, Inc. [NYSE: CLC]
“CLARCOR is a global provider of filtration products” located in Tennessee. Q12009 sales were $214 million.
NTR plc
NTR is located in Dublin. Per their website: “NTR is an Irish public limited company. Its shares are not listed on any stock exchange, but may be traded via the company's stockbrokers.” Last October, NTR merged its North American ethanol operations with GPRE. This is how GPRE got as big as it is and why NTR is now GPRE’s biggest shareholder. “As a result of the merger, Green Plains triples its operating capacity…”
BioProcessH2O LLC
Located in Rhode Island. Develops wastewater treatment systems. Here I guess is where the “bioreactor” expertise comes from: “Our objective is to simplify wastewater treatment. Our specialty is identifying complete solutions, including Membrane Bioreactor (MBR) systems for water reuse or high-concentrate wastewater streams that can be segregated and treated at a lower cost than a facility designed to treat total flow at all times.”
Today’s GPRE PR is about the finalization of a $2.1 million grant from the Iowa Power Fund for BioProcessAlgae to build pilot bioreactor units at one of GPRE’s ethanol plants:
Green Plains Renewable Energy, Inc. and BioProcessAlgae LLC Complete $2.1 Million Grant Funding for Algae Pilot Project
OMAHA, NE--(MARKET WIRE)--May 4, 2009 10:14 AM-- Green Plains Renewable Energy, Inc. (NasdaqGM:GPRE - News) and BioProcessAlgae LLC have executed a grant award agreement with the Iowa Office of Energy Independence for a $2.1 million research and development grant from the Iowa Power Fund to build an algae pilot project at Green Plains' ethanol plant in Shenandoah, Iowa.
"Algae has the potential to become an important carbon sequestration solution, biofuel feedstock and feed product," said Todd Becker, President and Chief Executive Officer of Green Plains. "If the pilot project is successful, BioProcessAlgae will move to expand the photobioreactor system to full commercial scale. We believe that this pilot project will be one of the first operational installations of a photobioreactor system at an industrial plant in the United Sates utilizing emerging technology out of the laboratory."
The Iowa Power Fund grant provides matching funds to install a series of photobioreactor units at Green Plains' Shenandoah ethanol plant. Water, heat and carbon dioxide will be recycled from the ethanol manufacturing process to support continuous algae production. The grant provides funding through the end of the first quarter of calendar year 2010 with installation of the pilot project expected in the third quarter of 2009.
"BioProcessAlgae and its technology partners have made significant progress in the engineering, design and development of photobioreactor systems for algae production," said Kevin Lynch, Chief Executive Officer of BioProcessAlgae. "The project will give us the opportunity to test our systems on a larger scale. This is a very important step toward system commercialization of algae technology."
"The Shenandoah algae project is an opportunity to help the environment, the ethanol industry and the Iowa economy," Becker stated. "Green Plains is committed to the advancement of next generation technologies and we appreciate the vision and assistance of Iowa Governor Chet Culver and the Iowa Office of Energy Independence in the development of this project."
BioProcessAlgae LLC is a joint venture between Green Plains, NTR plc (a significant shareholder of Green Plains), CLARCOR Inc. and BioProcessH20.
About Green Plains
Green Plains Renewable Energy, Inc. is based in Omaha, Nebraska. Green Plains is a vertically-integrated, low-cost ethanol producer operating four ethanol plants in Iowa, Indiana and Tennessee with a combined expected operating capacity of 330 million gallons of ethanol per year. Green Plains also operates an independent third-party ethanol marketing service, with marketing capacity of 305 million gallons of ethanol per year. Green Plains owns 51% of Blendstar, LLC, a Houston-based biofuel terminal operator with 6 facilities in 5 states. Green Plains' Agribusiness segment operates grain storage facilities and complementary agronomy, feed, and fuel businesses. Green Plains has grain storage capacity of approximately 22 million bushels.
About BioProcessAlgae
BioProcessAlgae LLC is a joint venture between Green Plains, CLARCOR Inc. (NYSE:CLC - News), BioProcessH2O LLC and NTR plc. BioProcessAlgae was created to commercialize advanced photobioreactor technologies for continuous production of algal biomass.
EXCERPT FROM GPRE's presentation at Wall Street Analyst Forum's 20th Annual Institutional Investor Conference
March 26, 2009 9:10 am ET
The transcript is on seekingalpha:
http://seekingalpha.com/article/128076-green-plains-renewable-energy-inc-wall-street-analyst-forum-s-20th-annual-institutional-investor-conference-transcript
EARLY IN PRESENTATION:
So who is Green Plains Renewable Energy? We are a leader in ethanol production, and marketing with a combined volume of 635 million gallons per year. That represents approximately 6% of the total US ethanol demand for this year. We have 330 million gallons of production capacity, 305 million gallons of third party marketing contracts. We continue to look to build each of our pieces of the platform, or we're going to look to expand ethanol production as well as in our marketing services.
What we're trying to do is build a vertically integrated ethanol platform that ranges all the way from the farm, where we provide agronomy services, all the way through to the blender, where we provide terminal services. And we're going to walk through each of those pieces of our platform today.
LATER IN PRESENTATION:
And this is – this is our biotech – or this is our investment in next generation. We have a small investment in an algae production company that’s working on commercializing photobioreactor technology for continuous algae production. We have a 25.5% interest in that company.
As you look at our partners, it’s a pretty impressive list. It’s CLARCOR, which is the $1.6 billion New York Stock Exchange-listed company; bioprocessH2O, which is a filtration company partially owned by CLARCOR; and, NTR plc, which is our largest shareholder. The four of us got together. We funded the enterprise. We believe our technology has a lot of potential. And our goal is to roll out a pilot project at our Green Plains Shenandoah plant in spring 2009. So hopefully, by July – June, July of this year, we will have a working photobioreactor producing algae at an ethanol plant.
If you think about what – what it takes to grow algae, it takes CO2, it takes warm water, it takes waste, it takes heat, and it takes sunlight. And we have most of those things in our ethanol plant. Light, the sunshine, we’re okay. We have the CO2. Then we produce a very clean CO2 at the ethanol plant. The thing about ethanol, ethanol is actually a closed-loop process. The CO2 that we emit in the atmosphere is used to grow the corn, the corn is grown, and then we use the corn then to make ethanol. That's why it's considered closed-loop.
What we can do actually now is to capture that CO2 into the algae production process, run it through the bioreactor. We produce a lot of very clean, warm water in the process of ethanol. We have large water cleaning systems at our plants. So we produce a lot of very warm water. We run that through the algae. We produce a lot of waste heat. We run that through the production. And then with the sunlight and the technology that we think we have, we’ll be able to grow algae in large scale photobioreactors. So we’ll see how that goes.
Again, we’re not going to spend a lot of money on R&D. We are not an R&D company. We don’t plan on being an R&D company. But we do have a little bit of our money invested into this company. We received a grant from the state of Iowa for $2.3 million, which is a matching grant. So we’re fully funded through our startup phase here on our pilot project.
biofuel, Public Companies in iBox
I thought it might be a help to identify in the iBox which companies are currently public. I checked Yahoo Finance for each name and went to each site. Maybe everyone else on the board already knows which are public, but for newcomers it would be a help I think.
Biocentric Energy – [Pinksheets: BEHL]
GeoBioEnergy – [OTCBB: GBOE]
Global Green Solutions– [OTCBB: GGRN]
Green Plains Renewable Energy – [NASDAQ GM: GPRE]
GreenShift – [OTCBB: GERS]
Green Star Products – [Pinksheets: GSPI]
OriginOil – [OTCBB: OOIL]
Neptune Industries – [broken link] [OCTBB: NPDI]
PetroAlgae – [OTCBB: PALG]
PetroSun – [Pinksheets: PSUD]
Valcent Products – [OCTBB: VCTPF]
The rest are private, as far as I can tell.
Also, I believe Inventure and Inventure Chemical are the same company.
Thanks and regards.
CEHMM: not-for-profit in New Mexico
I’ve just begun to look into algae. Thanks for this board.
I stumbled on this not-for-profit research organization located at Carlsbad, New Mexico, which is in New Mexico’s piece of the southwest’s Permian Basin. I don't think it's been mentioned on the board so far. It’s called Center of Excellence for Hazardous Materials Management (CEHMM). In spite of the name, it looks like their main project is their Algae Biodiesel Project.
This is a link to their site:
http://www.cehmm.org/
Sorry this post is so long, but I wanted to give enough detail to place them in the picture.
GOALS
I haven’t absorbed all the details, but they use a saltwater microalgae (with a very high oil content) so they can use the salt groundwater. Their hope, I gather, is to guide New Mexico to a leading place in algae cultivation.
Their plan apparently is to develop a full system and license the technology if they’re successful. March 7, 2008 article: “The Center for Hazardous Materials has so far invested about $5 million in the research. Lynn expects the technology to be commercially viable within two years, at which point it will be licensed to private partners.” April 2009: “A fully integrated, commercial scale system that places no burden on our domestic water supplies and can be run entirely on renewable energy is our goal. This means embedding wind, solar, and wastewaters into our strategic plan for the future.” (I don't know if this includes the processing into biodiesel, but their ambitious goals seem to point in that direction.)
A video from last summer/fall (from the home page, click on “Algae Biofuel”) talks about a goal of $80 per barrel.
Articles tracing their work so far can be found under “CEHMM News Articles” from the home page. Some of the articles are from Biodiesel Magazine and some are from local magazines and newspapers. I’ve skimmed most of them but haven’t yet read them carefully.
FUNDING
They work with New Mexico State University and are funded by federal earmarks (their term) and also through the state of New Mexico’s Energy and Innovation Fund. A State Representative is on the center’s BOD and apparently New Mexico Senator Jeff Bingaman is a supporter of alternative energy. (I note from a previous post that New Mexico's Senator Udall just got Sapphire some federal money for a New Mexico project):
http://www.cehmm.org/2007/10/what-senate-shift-could-mean-for-carlsbad/
From an October, 2007 article when Sen. Pete Domenici was retiring: “It probably goes without saying the Bingaman brings a different set of priorities to the table than Domenici. Bingaman is unlikely, for example, to ever be as much of a supporter of Global Nuclear Energy Partnership efforts as Domenici has been. However, Bingaman is just as likely to continue to be a strong supporter of Carlsbad’s efforts in biodiesel research.”
LATEST REPORT
[This is their latest information release, from April 2009, currently on the home page:]
New Algae Technology Brightens Future of Renewable Fuels
Dateline: April 2009
CEHMM has developed breakthrough technology for growing algae and producing oil from it. Algae oil is considered by many to be the most promising renewable source of oil that can be used to produce large quantities of biofuels without impacting the production of traditional food crops.
The new technology delivers large amounts of concentrated algae that gets over half of its dry weight from oil. Until now, the amount of oil that could be extracted from algae has been much lower. The algae was grown in New Mexico in outdoor, oval-shaped, “raceway” type ponds and extraction of the oils was done in Dexter Michigan by SRS, a company who is at the forefront of commercial extraction technology.
The first demonstration was conducted on 2000 gallons of concentrate and has since been repeated in order to validate the original results. The raw oils extracted from CEHMM’s algae show incredible purity and viability for fuel production. Industry specialists have long speculated that in order for algae biofuels to become commercially viable, a strain would have to be developed that yielded at least 25% oil. CEHMM is consistently growing algae with twice that oil content.
“Of course we’re excited about this,” stated Douglas Lynn, Executive Director for CEHMM, “At first we were being cautiously optimistic, but now we can predict our lipid (oil) levels and repeat those actions that stimulate lipid production in a procedural, scientifically sound manner.” By doing this CEHMM has abandoned many of the traditional aspects of algal cultivation and has discovered some new and innovative means for raising and harvesting these microorganisms. “Once we get to commercial demonstration with consistent yields, we’ll start looking at integrating water and energy conservation strategies into our project design. A fully integrated, commercial scale system that places no burden on our domestic water supplies and can be run entirely on renewable energy is our goal. This means embedding wind, solar, and wastewaters into our strategic plan for the future.” Lynn said.
Lynn credited his staff with the groundbreaking accomplishment and added, “Our partnership with New Mexico State University has been a critical component to this success story, and now we’re beginning to develop some lines of technological development with Sandia National Laboratories and Los Alamos National Laboratory. I couldn’t be more fortunate than to be a member of this team.”
2007 BLOG REPORT FROM VEGETABLEOILROADTRIP.COM
[This is a couple of years old but it is useful because it gives a third-party view with a few colorful details and also gives a brief overview of algae production steps (good for neophytes like me).]
http://blog.vegetableoilroadtrip.com/2007/05/algae-in-desert-cehmm.html
Thursday, May 17, 2007
Algae in the desert: CEHMM
About a week and a half ago, we visited the wonderful folks at CEHMM, shot an hour and a half of video, saw their research, and generally had a good time. Here are my notes:
We drove into Carlsbad, New Mexico, a little mining and oil town in southeastern New Mexico surrounded by high desert. This humble location is home to one of the world's few algae-based biofuels research organizations.
CEHMM (pronounced "chem" - the Center of Excellence for Hazardous Materials Management) is a research organization whose primary aim is to protect human and environmental health while advancing economic development of the area. If they are successful in their algae work, they will certainly have achieved this goal.
Producing biodiesel from algae requires 4 basic steps:
-- Growing the algae
-- Harvesting (separating water from algae)
-- Extracting the oil from the algae
-- Processing the oil into biodiesel
1. Growing
Growing algae is the easy part - algae requires sunlight, water, nutrients, carbon dioxide, and some way to protect the purity and health of the algae.
30 miles north of Carlsbad, in Artesia, NM, on the grounds of New Mexico State University's agricultural research station, reside CEHMM's test ponds. To protect their algae, they are using saltwater algae in a brine - the brine water protects the algae from intruders and keeps the strain fairly pure.
Here is a photo of test pond #1: the paddle wheel both agitates and aerates the algae - providing it with atmospheric CO2.
And here is a photo of the soon to be completed 1/8 acre test pond:
2. Harvesting
These algae ponds reach about 1 gram of (useful) biomass per liter of (useless) water. Getting rid of the water is a difficult step. There are many methods of harvesting algae (see this Wikipedia article on algaculture for other ideas), CEHMM is using a proprietary technology that involves membranes (think: very fine mesh filters that don't clog) to create a very concentrated mixture of water and algae.
3. Extracting
If harvesting is difficult, extracting is extremely difficult. This step is again proprietary (darn NDAs), and I was only given hand-waving explanations of how CEHMM accomplishes this bit. They are apparently looking at two competing technologies - one is able to produce biodiesel directly from the harvested algae by melting cell membranes, etc. I have no idea what other products are made in this process.
Another process they are looking at involves separating the oil from the cell membranes (which can then be composted, used as fertilizer, fed to animals, etc).
4. Processing
If CEHMM chooses to go with the second of the two extraction methods, they will have to process the resulting oil into biodiesel. In a retired gas station in Carlsbad, NM CEHMM has a small scale biodiesel production facility. Here is where they experiment with biodiesel production techniques (and fill up the local fire department with the resulting fuel).
Here is Terry showing off the second ever batch of biodiesel produced from algae. "A group in New Zealand beat us by a week."
I can't wait to see the fruits of CEHMM's research, it is my hope that in the not too distant future, many of us will be driving around on algae-produced biodiesel.
It's not unusual for them to do it this way:
Q4 2008
PR and CC on March 16th after close
Q3 2008
PR released after market close on November 11th
CC 10:00 a.m. on the 12th
Q2 2008
PR released after market close on August 7th
CC 10:00 a.m. on the 8th