I am curious for opinions here not as to the likelihood of making money in investment (anyone can see that's extremely unlikely), but as to their particular technological plans and whether there is good or bad in them. I have copied and pasted part of the quarterly starting with a description of the basic plan. I have got rid of a few drier sections dealing with financing and such, though they were interesting as far as getting some overview of how farfetched their success would be (always a good idea to read such things lest one get too enthusiastic about an investment that is a long-shot).
I like the part also about burning manure for some of the energy to make the ethanol. http://biz.yahoo.com/e/040217/hrid.ob10qsb.html Form 10QSB for HYBRID FUELS INC -------------------------------------------------------------------------------- 17-Feb-2004 Quarterly Report [...] The Company's intended business is to sell and build farm scale facilities that integrate beef operations with the production of ethanol. In these facilities, grain, corn or other feedstock is fermented and then distilled to make the ethanol. Left over from the ethanol production process is a high protein mash, called "distillers grain" and water, called "stillage water". These contain nutrients and are therefore used as feed and water for livestock. By using the distillers grain and stillage water on site the animals receive the benefit of the nutrients in these byproducts. In addition, the facilities do not incur the costs of drying the distillers grain and transporting it as would be necessary if it was to be used at another site. A further benefit is that no costs are incurred to dispose of the stillage water. Rather than it being something that is costly to be disposed of, it becomes a valuable feed product. The manure and used bedding straw are cleaned up frequently, thus removing the media in which disease would otherwise grow. They are burned in a gasifier and the heat produced is used in the fermentation and distillation processes. From discussions with the gasifier manufacturer, management believes that sufficient heat will be left over to operate a greenhouse, if the operator so desires. The ethanol is intended to be mixed with a proprietary emulsifier and diesel. When this emulsion was tested at The British Columbia Institute of Technology in June, 1996, in an unaltered diesel engine, it reduced the particulate (black smoke) emissions by over 62% and the NOx emissions by over 22%, without any loss of power. For a more detailed description of the entire process, plus sources of information and references, the reader is referred to the Company's Form 10-KSB for the year ended June 30, 2003, as amended and filed with the SEC. Although there are no operating facilities at the moment, the Company is expecting to have the first facility operating early in 2004, as described below. The Company intends to sell these facilities (except the column and spinner which we intend to lease) to farm operators, preferably those who grow or have access to sufficient grain to supply the facility. Management believes this would be approximately 40,000 bushels of barley (or other suitable grain) per year for a facility that would feed 200 head of cattle on a continuous rotating basis. [...] After the end of the quarter, the foundation, concrete slabs and approximately 75% of the ethanol facility's exterior were completed at Oyama, BC, Canada on approximately six acres of farmland. This location was chosen because it provides the company with good site control and supervisory ability that is important to the completion of the first facility. An operating facility includes the barn and a second building housing the ethanol making equipment, plus the bio-furnace or gasifier, "Greener Pastures" grass growing system, and the right to use the proprietary information and technology. The cost of building a facility is anticipated to be approximately $350,000. Approximately $220,000 of this cost is for foundations and flooring, buildings, the gasifier, the ethanol making equipment, tanks and machinery. Soft costs, for such items as permits, engineering and other professional fees, survey and layout, site preparation, delivery of buildings and materials, rentals, small tools and miscellaneous, are estimated at $60,000. We estimate we will spend approximately $70,000 for construction labor and supervision. Each facility is expected to accommodate 200 head of cattle. As we near the end of testing the first facility, we plan to begin the finishing operation for the cattle with an initial group of 20 to 25 head. The finishing operation is designed to function on a staggered basis, so that every two weeks (initially) we will bring in an additional 20 to 25 cattle. We will sell the cattle on the same staggered basis as they complete the finishing process. As we gain experience with the facility, we intend to bring cattle in 40 to 50 at a time on three to five week intervals to take maximum advantage of the size of the trucks used to transport the cattle. The cattle will begin the finishing operation in quieting pens where they spend approximately two weeks being transitioned from their prior diet to the wet distillers grains diet. After completing the diet transition, the cattle are moved into the barn, where, on average, they will spend approximately 100 days being fed the finishing diet. At the end of the finishing operation, our plans for this demonstration facility call for the cattle to be sold at auction. As one group of cattle is sold, another takes its place, as both the finishing operation and our staggered acquisition scheme are scheduled to take approximately three to four months. As a result of using this staggered acquisition scheme, we will not run the facility at full capacity until approximately four months have passed from the facility becoming operational. As a result the cattle we begin selling during the fourth month, which will generate our initial revenues, will bear a disproportionate amount of fixed costs compared to cattle sold beginning in the eighth month. We believe, however, that at the end of the fourth month, when we sell the first group of finished cattle, we will be able to prepare pro forma information that will demonstrate the financial fundamentals of the facility for purposes of demonstrating cash flows to prospective financiers and prospective purchasers of future facilities. We plan to add, on average, between 400 and 500 pounds per head during the finishing operation. The weight per head when we acquire the cattle will vary, principally due to the time of year when the cattle are acquired (most calves are born in the spring and are ready to begin being sold as feeder cattle seven months to a year later). One of our fundamental assumptions is that the facility will have the potential to break even if we sell finished cattle at prices per pound that are less than the prices per pound at which we purchase them. Generally in the cattle industry, feeder cattle sell at a higher price per pound than finished cattle. The increase in weight during the finishing operation provides the potential for generating a profit or at least breaking even when selling finished cattle at a lower price per pound. For example, assume we purchase a 600-pound animal for $0.90 per pound, or $540, that we finish it to 1000 pounds and sell at $0.85 per pound, or $850. The $310 difference between our purchase price and the sale price would have to cover the consumables purchased to prepare wet distillers grains for the animal and a pro rata share of the facility's operating costs, including debt service. At this time we do not have financial data to support the breakeven pricing spread for the facility. Developing this relationship between the facility's cost structure and tolerable price differentials will provide critical information for prospective financiers of future facilities. We expect that as sale prices move close to or exceed purchase prices, the facility's cattle finishing operation will make a profit. Cattle prices are volatile, however, so there is a distinct risk that sale prices for finished cattle could be below the pricing threshold, resulting in a loss on cattle finishing. The greater the price spread, the more important ethanol sales become to the overall profitability of the facility. Farmers with integrated operations who grow their own consumables could have greater price flexibility on the cattle finishing operation if their cost of producing the consumables is less than the market price for consumables. We do not plan to have an integrated operation at the first facility, so we will have to pay market prices for our consumables. We do not plan to sell the ethanol produced by the first facility during at least the first two to three months of its operation. We have discussed with a local owner of a sawmill and trucking company giving him the ethanol for this two-to-three-month period, with a view toward charging him in the future once he has determined that he can use the ethanol economically without harm to his equipment. Once the facility is at full capacity, we project that the facility will produce approximately 240 US gallons of ethanol per day, which could be sold at market prices slightly below the price of the diesel fuel with which it will be blended. The price of ethanol will vary, usually in tandem with the price of diesel. Assuming a price of $0.70 per gallon for ethanol, monthly sales of ethanol would be approximately $5,000. Once we have operated the facility for four months, we believe that the actual financial results for the finishing operation and ethanol sales will provide us with a basis to prepare pro forma financial information projecting the economic feasibility of the facility. By establishing the economic feasibility of the facility, we will then be able to implement our business plan, which is based on identifying third parties who will work with us to construct and operate their own facilities. If our assumptions prove wrong or we encounter unforeseen obstacles, our ability to demonstrate the facility's economic feasibility may be delayed, or, in the worst case, we may not be able to establish the economic feasibility of the facility and may have to abandon the business and liquidate the company. Plan of Operation Assuming Establishment of Facility Feasibility The discussion in this section assumes that we will succeed both in raising $500,000 to $1 million that will be used to place the first facility in service and in demonstrating the economic feasibility of the facility. Once these milestones are achieved, we intend to enter into contracts with others who will build, own and operate additional facilities, while we earn revenues from a variety of sources related to the facilities. We plan to earn revenue from: 1. operating the demonstration facility; 2. profit on the sale of subsequent facilities; 3. the lease of the column and spinner to each operator; 4. the royalties and service fees that each operator will pay; 5. the purchase of the ethanol mixture from the operator at a percentage of wholesale value that will permit us to earn a profit from the sale of the ethanol to distributors or end-users; 6. an incentive from premiums from marketing the finished animals. Once we have a proven demonstration facility, we intend that our subsidiary, Hybrid Fuels (Canada) Inc., will operate it and earn revenue from the sale of cattle and ethanol. We intend to license our technology and provide our expertise to third parties that want to construct facilities. We expect to earn a profit and recognize revenue on the sale of each facility. The sale price of each facility is expected to be sufficient to cover the costs the Company will incur to sell, plan and supervise the construction of the facility and train the operator. Our plan is that earnings from the sale of the facilities will be sufficient to cover all of the operating costs we will incur in qualifying candidates, training operators, supervising construction and start-up, etc., until royalties are received. To date, we have received applications from more than 50 farmers who have expressed interest in constructing a facility. We are currently developing a screening process to select suitable candidates, and we expect to assist them in obtaining financing for facility construction. Once we have demonstrated our demonstration facility's economic feasibility for purposes of obtaining financing of subsequent facilities, we expect to have selected four candidates for training as operators. After candidates have been selected and have qualified for financing, we plan to train them and assist in constructing the facility. We intend to lease to the operators, on a permanent basis, the separation column, which is used to distill the ethanol, and the spinner, which is used to separate the mash from the water after the fermentation process. These two items are integral parts of the facilities, and leasing them is designed to protect the secrecy of these most vital pieces of the technology. The lease payments will generate revenue for us and will be payable monthly in amounts yet to be finalized. We plan to charge a royalty for the use of the trade secrets and proprietary information. The royalty, which is expected to be $2500US per month, per facility, based on the projected benefits of the use of trade secrets to the operator, will begin when each facility begins operation. Incentives in the form of reduced royalties may be offered to the first 10 to 20 operators who make early commitments to purchase facilities. We also expect to charge each operator service fees to cover the cost of ongoing training, service, technical support, and quality control. It is expected that these fees would be in the $150 to $250 per month range. We expect to enter into contracts with our operators to act as their marketing arm for the beef and fuel. We expect this arrangement to generate revenue for us and give us control over greater quantities of both products than any individual operator would have. We believe this arrangement will provide us with the ability to make better deals with, and provide more secure delivery to, distributors and other purchasers. We believe that operators will appreciate being relieved of these marketing responsibilities, particularly if beef sales at premium prices generate greater revenue for them. We expect revenue for Hybrid to come from the resale of the fuel and from a portion of any premium that the Company can obtain from the sale of the beef. Based on the results of the test trials at the Dalum facility, we believe we will be able to generate premium prices for the beef because of its high quality and it is free of added hormones. At the Dalum facility, the purchaser of the 123 heifers agreed to pick up subsequent lots at the facility and pay a premium of $0.10 per pound for all of the beef that could be produced using our process. We do not have commitments from any buyers to purchase the beef at premium prices at this time. We believe that ultimately the best way to obtain the best premium is to control the processing, marketing and distribution of the finished beef. To that end we continue to search for financing to purchase the packing facility known as Blue Mountain Packers, near Salmon Arm, B.C. This purchase is not likely to happen before our next fiscal year end, but it remains part of our long-term plan. No commitment will be made to purchase the packing facility until sufficient money is committed to pay the purchase price and cover operating expenses until positive cash flow is achieved. We have had preliminary discussions with CIBC, Scotiabank, Leaseline, Dominion Leasing and a Swiss broker with connections to several European "ECO" funds, all of whom have expressed interest in providing financing for facilities. We have been told that our project should qualify for "ECO" fund financing once we can demonstrate its' economic viability. Once the first facility is operating the plan is for the Swiss broker to arrange to have the appropriate representatives of these "ECO" funds inspect the facility and if it qualifies, to use them as a source of financing for facility construction, thereby permitting us to expand our operations. ------------------------ Yahoo! Groups Sponsor ---------------------~--> Yahoo! Domains - Claim yours for only $14.70 http://us.click.yahoo.com/Z1wmxD/DREIAA/yQLSAA/FGYolB/TM ---------------------------------------------------------------------~-> Biofuel at Journey to Forever: http://journeytoforever.org/biofuel.html Biofuels list archives: http://infoarchive.net/sgroup/biofuel/ Please do NOT send Unsubscribe messages to the list address. To unsubscribe, send an email to: [EMAIL PROTECTED] Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/biofuel/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! 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