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Eclectech, Inc.
Business
Plan
Eclectech, Inc. was
organized July 25, 2001 under the laws of the State of Washington. The Company
has been engaged in limited operations since inception. The Company intends
to market its proprietary microbial technology, knowledge, processes and
unique microbial culture developed over 15 years by its co-founder, Jerry
Finney, Sr. The Company has developed
proprietary products and technologies such as liquid protein fertilizer,
composting (biomass conversion and transformation), bioremediation, an
enhanced oil recovery system, a wastewater treatment system, and a
desalination system that make-up the framework of its environmental
solutions. The Company believes that
its microbial technologies provide natural solutions to many of today's
environmental problems. The microbes or bugs can be used to breakdown various
substances, including hydrocarbons, solvents and certain water and soil
contaminants when combined with engineered application solutions. While reorganizing from
its prior business operations, the Company has had no revenues during the current
fiscal year. The Company is in its early-stage of development, and is seeking
capital to test and validate its technology in field demonstrations, develop
commercial market opportunities, acquire technical and engineering staff, and
build a manufacturing facility. To date, the Company has
relied on related parties to fund its operating and capital requirements. The
founders have borrowed approximately $2,000,000 from the related parties, net
of loan fees during the past two years. The Company is planning to raise
additional capital through the issuance of stock in private placements or a
public offering. The Company intends to
participate in the SBA’s Small
Business Innovation Research (SBIR) program where participating federal
agencies such as the Department
of Defense (DoD), award funding for research and development to small
firms with commercial potential. The SBIR program allows the Company to effectively
prove the viability of its technology and minimize the risks normally
associated with investment in early-stage companies for its shareholders and
business partners. The DoD’s SBIR program is
the largest source of early-stage technology financing in the United States.
This year, the DoD will make over $500 million in SBIR awards to thousands of
small technology companies who will perform innovative R&D that serves a
DoD need and has the potential for commercialization in the marketplace. In
effect, the SBIR program allows outside investors to leverage their
investment dollars with the DoD matching up to $4 for every $1 of outside
investment. The Company’s Management
believes that its ability to
blend expertise and business
opportunities with technological innovation and investment dollars will lead
to commercialization of its products. Therefore, the Company intends to
invest considerable time and resources, technical expertise, strategic
capabilities and unique technologies to apply for, and work SBIR contracts
while developing commercial markets. The environmental industry is undergoing dynamic change as world nations
are forced to address global environmental and sustainable-development
issues. The environment threatens human health, undermines long-term economic
growth, and impairs critical ecological systems. These growing issues of
concern cross gender, culture, and class lines, entrenching the entire
political and ecological spectrum. The essence of these changes is realized
by the increasing plea for continued advancements in already sophisticated
technologies in an effort to meet the ever-increasing demands of domestic and
foreign environmental industry, thus creating highly competitive market
conditions. Government plays an integral role in prevailing market trends and
conditions. Since the mid-1980’s, the
US has experienced revolutionary changes in how it manages solid waste. Almost three-quarters of the nation’s
municipal landfills have closed, as regulations governing land disposal have
tightened. Many land disposal facilities
have been replaced by waste-to-energy plants, which increased their capacity
to manage waste tenfold during the 1980’s and ‘90s, and now manage 17% of the
nation’s municipal solid waste. In
the last ten years, recycling and composting have been the fastest growing
methods of waste management, accounting for 28% if waste management in 1997,
up from 10% in 1986. More than 9,300
local governments have begun curbside collection of recyclable materials, and
3,800 have composting programs for yard waste. In most areas of the country, the lead role in transforming solid
waste management has been played by state and local governments and the
private sector. State and local
governments generally decide how waste will be managed—whether by landfill,
incineration, recycling, composting, waste reduction, or a combination
thereof. States set standards for the
resulting facilities, and funding for waste management programs comes
overwhelmingly from state and local sources. Private waste management firms have also been active players, often
under contract or franchise agreements with local governments, or in response
to state mandates. Private firms
manage most of the commercial waste, which comprises about 40% of municipal
solid waste, and residential waste which comprises the remaining 60%. While state, local, and private initiatives have played the key role
in transforming waste management, the federal government has also played an
important role in municipal solid waste management in the last decade,
setting minimum national landfill standards under the Resource
Conservation and Recovery Act (RCRA), setting incinerator and
landfill emission standards under the Clean Air Act, and promoting recycling through the use of federal procurement
policy. Federal court rulings have also had a profound impact on industry
trends in waste management through a series of three Supreme Court decisions
since 1992, where federal courts held that shipments of waste are protected
under the interstate commerce clause of the Constitution. As a result, state
and local governments may not prohibit private landfills from accepting waste
from out-of-state, nor may they impose fees on waste disposal that
discriminate on the basis of origin. Interstate shipment of waste has become more common in recent years
due to local shortages of disposal capacity, particularly in the Northeast
and on the West Coast; a national trend toward larger regional disposal
facilities; regional differences in the cost of disposal; and the vertical
integration and consolidation of the waste management industry. Vertically integrated firms offer full
service waste management, from collection to transfer station to disposal,
etc. The Environmental Protection Agencies’ (EPA) Brownfield Economic Redevelopment Initiative among other state
voluntary cleanup programs, have facilitated the resurgence in the Land
Development marketplace by providing some relief, through various
governmental incentives, in reducing the high-risks often associated with
buying, selling, and remediation of contaminated “Brownfield” sites. In an effort to encourage private industry participation and buy-in
of its Brownfields Economic Redevelopment Initiative, which is funded through
the $1 billion Superfund budget and managed by the Environmental Protection
Agency, the EPA is offering two-year, $200,000 pilot grants. So far, it has made 29 awards and intends
to fund 21 more by the end of next year.
The EPA estimates that there are about 450,000 brownfield sites. The brownfields issue is one of President Bush's and EPA Administrator
Christie Whitman's priorities. In his 2002 budget, President Bush proposed
increasing brownfields funding to $98 Million, which has provided over $250
million in Brownfields funding to states, tribes and local governments for
pilot projects, assessing the potential for additional projects, and towards
funding voluntary cleanup programs. The President FY 03 budget will double
the funds available through the EPA in FY 02 - from $98 million to $200
million - to help states and communities around the country clean up and
revitalize brownfields sites. Grantees report that EPA funding so far has supported over 2,600
property assessments and helped leverage more than $3.4 billion in cleanup and
economic redevelopment monies. This, in turn, has created more than 14,000
jobs. Administrator Christie Whitman has announced $2 million in grants to
provide environmental job training at brownfields sites in nine states and
Washington, DC. The EPA has also
selected over 129 revolving fund cleanup pilot projects (each funded up to a
million dollars over five years) to capitalize loan funds that in turn make
local cleanups possible. Other factors contribute to trends in the environmental marketplace. As the world population continues to
increase, along with attendant growth in food production, urbanization and
industrialization, limited resources of clean and easily available surface
and groundwater resources are being depleted. We are failing to keep up with water demands for the most basic
human needs and draining fossil groundwater reserves by destroying the
freshwater ecosystems that supply, restore and replenish the water supply. We
start the new century with a water crisis on all accounts. Throughout history, people have continually tried to treat salt water
so that it could be used for drinking and agriculture. Of all the globe’s water, 94 percent is
salt water from the oceans and 6 percent is fresh. Of the latter, about 27 percent is in glaciers and 72 percent
is underground. While this water is
important for transportation and fisheries, it is too salty to sustain human
life or farming. Desalination
technology provides the ability to produce fresh water by desalting brackish
water and seawater, thereby increasing the range of water resources available
for use. Liquid Protein
Fertilizer The Company has developed
a liquid organic fertilizer that outperforms competing commercial brands.
Numerous applications of the fertilizer have been used over the past three
years on over 500 different species of vegetation, covering approximately
1,500 acres. The crucial part of
plant’s roots receiving the required micronutrients is based on the soil
cation exchange capacity (CEC) for electrical conductivity (EC). Since
proteins operate on an energy pattern that enhances CEC, there is less energy
required of the root system to uptake and utilize this predigested protein,
which contains no oxygen radicals. In addition, the liquid protein fertilizer
delivers predigested nutrients to the vegetation, which enhances the innate
ability to absorb the necessary nutrients and micronutrients. Because the
technology utilizes an extra-cellular enzyme solution, it inherently promotes
a self-perpetuation process of enzyme activity in the soil that outpaces
other enzyme survival capabilities. The Company’s liquid based
organic fertilizer decreases maintenance requirements of mass irrigation
systems caused by the salt buildup common with chemical fertilizers. Results
from a facility comparing the use and benefits of the fertilizer on their
farm concluded that there was a material improvement in the flavor of their
produce, and also documented an increased harvest production with enhanced
structural integrity within their rootstock. Over the past several years,
the Company has provided its fertilizer to several agricultural facilities
for comparison with other products on the market. The result is that it
consistently outperformed competing fertilizer solutions, thoroughly
convincing the facilities of its superiority and value. The Company provided its
fertilizer for use in a pear orchard that had experienced 2-3 inches of
growth annually with other products and an average maturity of eight years
for their trees. The orchard experienced approximately three feet of growth
in approximately three months after applying the Company’s fertilizer.
Additional applications in lemon orchards produced stronger limbs, more fruit
and an enhanced growth cycle, surpassing historical norms for orchard
production with use of the Company’s fertilizer. The Company’s fertilizer
was tested against competing products in Arkansas where competing products
were applied 2-3 times each week against a single application of the
Company’s product over the same period. Findings included significant organic
spikes, healthier plant and root growth, and accelerated cycles of
production. A 150,000 square feet
greenhouse began application of the
Company’s fertilizer to a portion of
their operation and has gradually increased its use to the entire operation
over eighteen months. In their experience, it consistently surpassed other
products in terms of root system growth, stem and plant structural strength,
vibrancy of colors, and the production of lateral branching. Additionally,
use of the fertilizer for seed germination provided accelerated growth,
advanced rates of germination, and extensive root growth surpassing previous
experience at the greenhouse. Similar results from
research conducted by Sun Gro Analytical
Laboratories where the Company’s was compared with Daniels and Technigro. Their media analysis
revealed residual mineral supplies from both of these solutions after use,
whereas the Company’s product displayed almost no micronutrients in the
remaining soil-less mixture. As for tissue analysis, the Company’s fertilizer
produced a balanced performance of micro nutrient absorption, whereas the
other two brands provided differing levels of nutrient supply. In summary,
the collective research findings from all sources concluded that the
Company’s liquid protein fertilizer enhanced plant performance and provided
significant benefits over that of competing fertilizers. The
Company has developed a technology that provides a unique proprietary
microbial inoculation that significantly improves bioprocess performance and
biodegradation in various applications. The Company is introducing
thermophilic organisms that produce enzymes that are superior in conversion
and/or transformation of various organics such as sludges, contaminated
sediments and soils as well as inorganic gypsum. Compost
results from the controlled biological decomposition of organic material that
is sanitized through the generation of heat and processes to further reduce
pathogens, as defined by the U.S. EPA, and stabilized to the point that it is
beneficial to plant growth. Compost bears little physical resemblance to the
raw material from which it originated. Compost is an organic matter source
that has the unique ability to improve the chemical, physical, and biological
characteristics of soils or growing media. It contains plant nutrients, but is
not characterized as a fertilizer. The Company’s unique Biomass Conversion/Transformation process
provides a variety of benefits, such as: Most
composting processes used today to treat waste are slow to produce mulch or
soil conditioner, commonly referred to as humus. The humus produced contains
few nutrients and the process is not capable of biodegrading large pieces
efficiently. Typically, anything over two inches in diameter requires
shredding, which is labor and mechanically intensive. The end result is a
product with low economic value. Current processes typically require six to
twelve months, and many may take as much as twelve to twenty-four months to
achieve quality humus. The
Company’s technology differs from competing technologies in that it: 1) takes
less than ninety days to produce a marketable product, 2) requires less space
than that of other technologies, and 3) produces humus with a higher-retained
nutrient value than humus produced by competing technologies. In documenting the performance of the Company’s process, Lord Hill Composting plans to
provide the Company with a permitted and well-located facility in Monroe,
Washington. Their operations involve the composting of cattle, chicken and
horse wastes as well as construction and demolition waste. Land Recovery, Inc., located in Puyallup,
Washington provided five compost containers for the Company to use in
substantiating the benefits asscociated with using its biomass
conversion/transformation technology against other technologies previously
used in treating organic waste at their facility. To substantiate the consistency and quality of compost, the Company
intends to subject all laboratory work to the US Compost Council’s Seal of
Testing Assurance standards. The standard methods and protocols used by the
US Compost Council for sampling and analysis will provide validated test
results and promote the production and marketing of a quality compost that
has met a ‘core set of analytical standards’. Bioremediation The Company’s
bioremediation technology uses proprietary obligate aerobic microbes to break
down toxic substances into inert organic matter. This unique technology uses
highly stressed microbes to accelerate the breakdown process. The Company’s
Electro vectoring system is the installation process that allows these areas
to be treated without disturbing structures and their occupants. With electro
vectoring, tight soil and heavy clay can easily be penetrated and there is no
need to follow preferential paths. This process is highly efficient,
effective and leaves no residual secondary contaminants. The process is not
limited by pH levels, oxygen, temperature, depth, chlorination, or nitrogen
nutrients. The microbes thrive in anaerobic soils and propagate from stress, do not produce H2S, require no
pre-treatment or maintenance, and produce surfactants, which can be sold. Since 1994, increasing
pressure to create uses for contaminated and idle properties has provided the
resurgence in industrial redevelopment or "Brownfield" site
remediation programs. The term "Brownfield" comes from an
EPA-sponsored program that studies redevelopment of "abandoned, idled,
or underused industrial facilities where expansion or redevelopment is
complicated by real or perceived environmental contamination". The
existence of “Brownfield” sites and government efforts to facilitate their
cleanup has created an opportunity for full service remediation as well as
financial participation in the redevelopments. The Company is developing
a Brownfield Redevelopment program
that can quickly and cost-effectively return underutilized properties to
productive use. The cornerstone of this Program are the Company’s
bioremediation and biomass conversion/transformation technologies. Bioremediation
of contaminated soil and other media contaminated with chemical compounds is
an emerging technology that can cost-effectively treat many sites.
Bioremediation is defined by the American Academy of Microbiology as “the use
of living organisms to reduce or eliminate environmental hazards resulting
from accumulations of toxic chemicals and other hazardous wastes”. The
objective of a bioremediation program is to immobilize contaminants
(reactants) or to transform them to chemical products no longer hazardous to
human health and the environment. Bioremediation has proven to be an important
remediation technology because it: harnesses naturally-occurring
biogeochemical processes; destroys or immobilizes contaminants rather than
transferring them from one environmental media to another; and, conserves
limited financial resources due to shortened cleanup times and/or lower
capital expenditures relative to many other remediation technologies. Enhanced Oil
Recovery System The Enhanced Oil Recovery (EOR) System is an integrated process that
is based on the microbial and enzymatic technology developed over the past
fifteen years. This technology has proven to be highly successful in the
treatment of paraffin and asphaltine buildup in oil and gas wells. The
accumulation of paraffin and asphaltine in the well bore casing and flow
lines restrict the flow of hydrocarbons, thus creating mechanical problems in
producing the oil and gas. The microbes, when given water and nutrients,
produce an enzyme that separates long chain hydrocarbons into lighter
fractions while also separating the water molecule into hydrogen and oxygen.
With reduced viscosity of the oil stream and increased formation pressure,
total production by value of produced gas is increased. An additional application
of the microbial and enzymatic technology is the treatment of oil and gas
wells that have a hydrogen sulfide problem. Hydrogen sulfide gas is created
by sulfur-reducing bacteria that have been introduced into the wells during
operation. This gas is problematic in that it is poisonous and at the same
time causes corrosion, resulting in mechanical problems within the well. The
microbial and enzymatic treatments kill the sulfur-reducing bacteria,
eliminating all related problems. The microbes continue to live in the well
as long as treatments continue, preventing the sulfur-reducing bacteria from
returning to a problematic status. The Company’s founders,
under separate agreement, have licensed the Enhanced Oil Recovery system to
companies in Oklahoma and in the Permian Basin in West Texas for treatment of
oil wells. Back-Washable Organic
Filter System for Waste Water Treatment The Company utilizes a
water pump and Back-Washable Organic Filter system that uses a black-walnut
shell activator filter media with a back-washable feature. Application of the
filter system indicates a potential cost savings of up to 75%, reduced power needs by as much as 90% and
a smaller footprint. Use of this filter system indicates other benefits such
as a decrease in maintenance requirements over conventional systems and a
decrease in its treatment cycle. Conventional systems typically require a
minimum of 72 hours compared to the Company’s system that completes the
treatment cycle in approximately 30 minutes. The Company’s system
generates substantially less solid waste than other methods used today.
Electrical/power needs of wastewater treatment systems for municipal
operations may be significantly reduced, and the need for chlorine may be
reduced by as much as 75%, along with the elimination of various gases which
might cause numerous problems in the plant. A demonstration project
using the Company’s organic filter system reported numerous benefits such as
cost-reduction, reduction in power needs and in square footage requirements,
a substantial decrease in maintenance, lower treatment cycles, (72 hours vs.
30 minutes), less solid waste generated, elimination of various gases, and a
substantially better water quality as well. Municipal authorities have
expressed a high level of interest in the subsequent resulting benefits that
the Company’s system provided as compared to that of their traditional
system. Data from other water treatment centers also indicate that sufficient
removal of organic material would occur after only a single run through the
system. The water quality after one run through the Company’s system equals
the water quality run through three times through the conventional system.
The Company presently has the ability to conduct additional field
demonstrations using a larger apparatus, providing better opportunity for a
more detailed case study. Desalination The Company is developing
a unique process for desalination designed to produce clean, fresh potable
water from polluted water, industrial contaminated water, and ocean waters.
The Company expects to produce clean water from down-hole enhanced oil
recovery once the system is completed. This unique process
requires no heat, moderate liquid pressure, and is extremely energy efficient,
using one-fourth of the energy required by
other systems. The technology uses a one-step process and is able to
remove 1% – 10% suspended solids. It also eliminates the need for
distillation, and is designed to produce down-line metal, salt, and hydrogen
gas products. Small
Business Innovation Research Program
Company Management
believes that the government’s Small
Business Innovation Research (SBIR) program provides an enormous opportunity
to test, demonstrate and implement its technologies. The SBIR program has had
a measurable effect on technology firms. Of the 198 technology firms that
responded to a recent study, 34% of the firms had submitted proposals for a
Phase I SBIR, and of those, 24% received a Phase I Award. To qualify for SBIR funds,
a company must be ‘for profit’, American owned, independently operated, and
smaller than 500 employees. Ten government departments and agencies publish
solicitations twice a year listing areas that agency scientists and engineers
have targeted for research. To apply, entrepreneurs submit a Phase I proposal
of no more than 25 pages. If the proposal is accepted, the entrepreneur is
given up to $100,000 and six months to develop a feasibility study. If Phase
I is successful, the company can apply for a Phase II grant, which provides
up to $750,000 for development of a prototype over two years. The program was
deemed so successful that a second program was unveiled, the Small Business Technology Transfer
(STTR) program, which funds up to $600,000 for the commercialization of
technologies developed cooperatively by small businesses and research
institutions. Under these programs, the government is granted a five-year
royalty-free license to use the technology and the company owns all patents. In a push to partner with
the venture community, and to ensure that the technologies developed become
commercial, the Pentagon introduced a "Fast Track" program in
October 1995. Companies that can secure venture funding before Phase II have
significantly better odds of receiving Defense Department money, and the
reputedly slow administrative process is expedited. For the venture
community, the Defense Department will supply up to $4 for every $1 of
outside money until the $750,000 limit is reached. For example, at the
highest matching rate, a third-party investment of $187,500 would be matched
with $750,000 by the DoD. Those corresponding funds, argues Mr. Baron, are
well spent. "VC approval is better than anything the company could write
in a proposal," he says. In its first year, the Fast-Track program doled
out more than $47 million. Under Fast Track, SBIR
projects that attract outside investors—such as venture capital firms, large
companies, and “angel” investors—receive a significantly higher chance of
Phase II award than non-Fast Track projects. Consistent with DoD policy, this
process should prevent any significant gaps in funding between Phase I and Phase
II. The DoD’s Fast Track
policy is intended to encourage and support firms to focus on
commercialization of their SBIR technologies, and to leverage their SBIR
funds to obtain additional, outside funding. Companies have an incentive and opportunity
to focus on building strategic partners for investment and marketing right
from Phase I. SBIR projects that attract outside investors in Phase II, and
thereby qualify for the Fast Track, will (1) receive interim funding of
$30,000 to $50,000 between Phase I and Phase II; (2) be evaluated for Phase
II award under a separate, expedited process; and (3) be selected for Phase
II award provided they meet or exceed a threshold of “technically sufficient”
and have substantially met their Phase I technical goals (and assuming other
program factors are met). Whatever the investment
arrangement, the total amount of outside matching funds must be transferred
from the investor to the small company within 45 days after the company has
been notified by the DoD that it has been selected for a Phase II award. The total United States
environmental services industry generates revenues of $180-$200 billion per
year. The general domestic market trend in bioenergy technologies over the
past twenty years indicates a trend towards developments in systems,
policies, public interest, and support for bioenergy and biobased products. The
international market for environmental products and services is large and
expanding. According to Trade & Commerce authorities, “by the end of this
decade the world market is expected to exceed $400 billion per year”.
Revenues from overseas sales are expected to be well in excess of domestic
sales, even though a slower penetration rate is assumed in foreign markets. The
EPA’s Brownfields Program has been one of its most successful public
partnerships. The program has leveraged more than $3.73 billion in public and
private investments and helped create more than 17,000 jobs in cleanup,
construction, and redevelopment of brownfields from inception through the
third quarter of FY 2001. The agency has been aggressive in the clean up of
hazardous waste sites and seeks to return abandoned or underutilized industrial
and commercial properties to productive use. In FY 2001 the EPA’s Superfund
Program achieved 47 construction completions. The EPA’s programs have cleaned
up two million cubic yards of solid hazardous waste and 68,000 gallons of
liquid based waste. Additionally, EPA programs cleaned up 302 sites and
removed 19,074 leaking underground storage tanks. The EPA's survey of
drinking-water utilities indicates that communities nationwide will need to
spend around $12.1 billion "in the immediate future" to protect
drinking water supplies. The agency estimates that over the next two decades,
some $137 billion will need to be spent to build new wastewater-treatment
plants or to improve existing ones. Roughly 55,000 community water systems in
the U.S. will need to spend some $330 billion over the next two decades to
improve their water infrastructure. Public municipalities are becoming aware
that considerable savings can be obtained by outsourcing the operations,
management, and maintenance of their water-treatment facilities to private
water-specialty firms. There remain approximately 24,000
government-owned-and-operated water authorities in the U.S. serving almost
80% of U.S. citizens. The Company intends to
pre-qualify as a non-exclusive environmental industry solutions provider with
Global Clean Technologies (Global), a related-party, Washington non-profit
organization. Global has applied for status as a private or voluntary
organization (PVO) with the United
States Agency for International Development (USAID) to represent the entire
environmental industry to developing nations. The Company intends to
take advantage of Global’s essential role as a PVO, and utilize it as a
medium to initiate grant applications to test and demonstrate emerging
technologies for consideration in future projects. U. S. legislation requires
that USAID projects thoroughly examine environmental issues, and incorporate,
as appropriate, findings during the strategic planning phase that includes
industry-specific involvement from Global as a member organization. Global will act as a
facilitator between domestic environmental companies and developing nations
to provide environmental solutions to USAID projects. Environmental impact
studies are an element of every project and will allow the Company an
opportunity to participate in meeting the demands of these projects as its
technology is tested, proven, commercialized, and generally becomes able to
meet USAID’s due-diligence requirements. Supplier pre-qualification
is a mandatory pre-requisite for participation in USAID projects. As a
pre-qualified supplier, the Company’s technology and services will allow it
to become a significant environmental industry contributor to international
markets. The Company intends to
aggressively engage Brownfield
Redevelopment Program partners among landowners and real estate
developers as part of a remediation and development collaborative. The Brownfields
Revitalization And Environmental Restoration Act Of 2001 funding for
remediation authorizes grants of up to $1 million to eligible entities to
capitalize revolving loan funds to clean up brownfields. Grants of up to
$200,000 per site are available to eligible entities or non-profit
organizations to clean up brownfields owned by the grant recipient with 20%
matching funds. The acquisition and integration
of additional technologies will
augment the Company’s technologies into vertical environmental
solutions and provide the means to develop a market niche for customers with
known negative environmental impact. COMPETITION The environmental industry provides companies with a multitude of
challenges, a wealth of opportunity for financial success, and a guarantee of
noteworthy competition; however, the Company’s Management believes that its
technology and business strategies will alow it to become an industry leader
in the commercial marketplace. While the United States
can generate a long list of advantages in environmental technologies, there
is strong foreign competition for that market. Japan’s domestic environmental
standards are strict. Japanese environmental companies will provide
competition for environmental work in the developing Asian countries. Domestic environmental
service providers also face significant competition from countries of the
European Community. The European community projects environmental
expenditures to range from four percent for Germany to eight percent for
Portugal. While Germany provides the toughest competition and is the gateway
to environmental remediation in Eastern Europe. Despite market competitiveness and vast availability of technologies,
competition in USAID’s international projects will be limited to competing
pre-qualified suppliers. Company management understands and anticipates that
it will operate in an increasingly competitive global environment. Directors and Officers The Board of Directors of
the Company is currently composed of nine members. The Board of Directors is
elected annually at the Company's general meeting of stockholders. The Board
of Directors is responsible for the management of the Company's business. The
Board's primary function is to supervise the general affairs of the Company.
Set forth below is the name and principal occupation of each of the Company's
Directors. The investment and financing
policies of the Company and its policies with respect to all other
activities, including its growth, debt, capitalization, dividends and
operating policies, will be determined by the Board of Directors of the
Company. Although the Board of Directors has no present intention to do so,
these policies may be amended or revised at any time and from time to time at
the discretion of the Board of Directors without a vote of the Stockholders
of the Company. The following table sets forth the current directors and executive
officers and key managers of the Company. Each officer holds his respective
position at the discretion of the Board of Directors. George Krkljus, President & CEO See: http://www.industrialtelesis.com Jerry Finney, Sr., Co-founder & Director Jerry Finney, Sr. is an
inventor and entrepreneur who has focused fifteen years on developing
technologies that manufacture marketable products out of waste with zero
toxic residue. Mr. Finney has invented and successfully applied technologies
utilizing proprietary bacterial cultures for effectively treating waste and
pollutants including sewage sludge, oil field pits, animal manure,
gasoline/diesel, creosote, etc. His technologies produce an absolutely safe
soil enhancer/fertilizer out of waste oil. Mr. Finney and the
development of his technologies was key to the inception and success of
several environmental cleanup companies such as BioConverters, Inc., Environmental Protection Company
and Bio Inotech. John Pacey, Jr., Consultant & Director Mr. Pacey contributes
management skills and technical expertise gathered over his 46-year career in
the solid waste industry. After receiving his B.S. in civil engineering
(1954) from the University of Washington and a M.S. degree in geotechnical
civil engineering (1956) from the Massachusetts Institute of Technology, Mr.
Pacey pioneered the evolution of landfill gas and bioreactor process
technology. He serves as an expert witness, in both the USA and abroad.
Authoring more than 50 papers on the subject of landfill gas and bioreactor
landfills. Mr. Pacey provides immense stability to the understanding and
implementation for the Company’s unique solutions for the effective treatment
of environmental organic waste. Mr. Pacey is a United
States Representative for the CISA International
Waste Management and Landfill Symposium Group in Sardinia, Italy. He was
Division Leader of the SWANA LFG Division
and past chairman of the LFG Energy and Recovery and End Use Committee. He is
currently Bioreactor Committee Chairman for the SWANA Landfill Division. He
is one of the original members of the SWANA LFG Division and its precursor
group and has won a Lifetime Achievement Award from this most prestigious
organization. Mr. Pacey has been invited
to participate in numerous technical government and EPA workshops here and
abroad. He was invited to participate as an expert panelist on landfill gas
at the White House Conference on Greenhouse Gas Control in 1995. He has
represented SWANA and ISWA at conferences in England and Italy, inspected
landfill gas recovery projects in England, Germany and Switzerland. Mr. Pacey
has reviewed, evaluated and made recommendations on various landfill projects
in other countries such as Argentina, Mexico, Australia to name a few. Mr. Pacey’s respected
background provides the technical knowledge, expertise and credibility
necessary for the Company to become a recognized and respected leader in the
environmental industry. Compensation The following information is
furnished as to the current annual rate being paid by the Company with
respect to each executive officer or director whose annual rate of
compensation exceeds $60,000 and as to all officers and directors as a group:
These salaries are
generally at levels below current market value. They reflect the commitment
of the founders and management team, and take into account compensation
through negotiated incentive plans. Remuneration of the founders has been
deferred until further rounds of funding are secured. At a later stage
corresponding to full commercial operations, management’s salaries will have
to be readjusted to reflect market value. Shareholders
The following table sets forth information with respect to all
persons owning the Company's equity securities as of the date hereof: The Company intends to
significantly expand its operations during the next several years through
SBIR programs, development of sales and marketing capabilities, manufacturing
partnerships, distribution channels, contracts with emerging technology
companies, strategic alliances, DoD contracts, and USAID projects. There can be no assurance that the Company will
have available sources of funds necessary to achieve rapid or sustained
growth, or that the Company will be able to successfully match its production
capacity to the demand for its services in a timely manner. The Company intends to obtain
a commitment letter from outside investors towards the end of Phase I SBIR
projects in order to qualify for the governments Fast Track programs. This
commitment could be another company, a venture capital firm, an “angel”
investor, or a non-SBIR government program, stating that the outside investor
will match both interim and Phase II funding, contingent upon the small
company’s selection for Phase II award from the DoD. The outside matching
funds may be used to support additional R&D on the project or for other
activities that further the development and/or commercialization of the
technology such as marketing. Many creative partnering
arrangements are possible under Fast Track. For example, a small company that
is reluctant to accept outside equity investment could accept an advance
purchase order from an outside party for products resulting from the SBIR
technology, and thereby qualify for Fast Track. The Company’s success
will, largely, depend on its ability to test and demonstrate its emerging technology
and successfully market those technologies. Its success will also depend on
the development and marketing of new services. Due to a variety of factors,
including, but without limitation, to the inherent uncertainties of service
acceptability, the Company’s ability to continue to develop new services at
commercially acceptable prices for it’s intended markets and it’s ability to
avoid service obsolescence in it’s product line. There can be no assurance
that the Company will be able to implement successfully it’s business plan or
that the Company will be profitable in the future. Successful management of
rapid growth will require the Company to continue to implement and improve
its financial, accounting and management information systems and to hire,
train, motivate and manage it’s employees, including middle management, sales
and marketing employees. A failure to manage the Company’s growth effectively
would have a material adverse effect on the Company’s business, financial
condition and results of operations, and its ability to execute its business
strategy. Growth & Expansion The Company seeks controlled growth and
diversification in developing a mix of vertical technologies and related
services. Management has identified several areas of interest for expansion
including additional work in the areas of desalination and wastewater
treatment, redevelopment of brownfield properties, infrastructure management,
technical services and total-project life-cycle management capability. These include: The Company will allocate the investment capital for the purposes
shown below. 1. Operating costs, general and administrative 2. Plant and Equipment 3. Inventory 4. Research and Development 5. Recruiting and Professional services 6. Miscellaneous Total Use of Proceeds The Company believes that
it will have sufficient working capital for its operations over the next
three years based on projected operations and investment capital. However, in
the event that the Company’s plans change or its assumptions and estimates
change or prove to be inaccurate, or the sales of Company services do not
meet the Company’s expectations in any given period, or acquisition costs
increase significantly, the Company may have to sell equity or debt securities
or obtain expanded credit facilities. In the event such financing is needed
in the future, there can be no assurance that such financing will be
available to the Company, or, if available, that it will be in amounts and on
terms acceptable to the Company. Intellectual Property and Proprietary Rights The Company regards its
products and technology as proprietary and relies, in part, on a combination
of trademark, trade secret and confidential information laws and employee and
third-party non-disclosure agreements and other methods to protect its
proprietary rights. Generally, however, the Company believes that its ability
to compete in the environmental industry depends primarily on its engineering
and technological process, rather than on patent protection. The Company
intends to obtain a Federal registration for its trademarks. The Company does
not currently hold any patents for itself or its products. The Company will
enter into non-disclosure agreements with its employees and will enter into
non-disclosure agreements with its consultants, subcontractors, manufacturers
and distributors. The Company believes that
its proposed services, trademarks and other proprietary rights do not
infringe on the proprietary rights of third parties. Management has not
received, nor is knowledgeable of, claims from third parties that its
products or name infringe on any proprietary rights of other parties. Personnel The Company is dependent upon
its executive officers for its various activities. The Company does not
maintain "key person" life insurance policies on any of its
personnel nor does it have employment agreements with any of its personnel.
In addition, the Company's future success will depend in part upon its
ability to attract and retain additional qualified personnel. The success of the Company
is highly dependent upon the management of the Company, as is any business
dependent upon the ability of those responsible for making the important
business decisions. The Company will seek to hire and retain qualified
managers with business experience and abilities commensurate with the needs
of the Company. Dealings with the Company The Company’s Principals
currently maintain control of the Company’s Board of Directors. Consequently,
they will be in a position to significantly influence their own compensation
and to significantly influence dealings, if any, by the Company with other
entities with which Company Principals are also involved. The Company has not
adopted any policies with respect to the Company’s entering into business
relationships with affiliated parties. Although the Company’s Principals
intend to act fairly and in full compliance with their fiduciary
responsibilities and obligations, there can be no assurance that the Company
will not, as a result of a conflict of interest, sometimes enter into
arrangements under terms less beneficial to the Company than it could have
obtained had it been dealing with unrelated persons. Antidilution Provisions The conversion rate of the
Common Stock shall be subject to adjustment to prevent dilution of a certain
shareholder, Jerry Finney, Sr., in the event of (i) any subdivision,
combination or reclassification of the Company's outstanding Common Stock,
(ii) the payment of a stock dividend to holders of Common Stock or to holders
of any other series of stock convertible into Common Stock, or (iii) any
future issuances of Common Stock or Common Stock equivalents. Insurance
The Company intends to
maintain different types of insurance, including comprehensive liability and
property coverage. The Company does not carry an errors and omissions policy,
but limited errors and omissions coverage will be provided under a
comprehensive liability policy. Assumptions The projections contained
herein are based upon numerous assumptions, the most significant of which
relate to the market penetration of and costs associated with the Company's
product. Some of the assumptions may not materialize and unanticipated events
and circumstances may occur. For these reasons, actual results achieved
during these periods may vary from the projections, and the variations may be
material. Absence of Dividends The Company has never declared
nor paid dividends on its Common Stock. The Company currently intends to
retain its earnings for future growth and, does not anticipate paying any
cash dividends in the foreseeable future. Any future determination as to the
payment of dividends will be at the discretion of the Company’s Board of
Directors and will depend, among other things, on the Company’s financial
condition, results of operations, capital requirements and such other factors
as the Board of Directors deems relevant. Use of Proceeds All potential revenue will
be applied to working capital, general corporate purposes, and the
development and marketing of products and services. Thereafter, the net
proceeds will be used for demonstration projects, purchase related equipment
and hire additional personnel. Restrictions on Transfer and Lack of Liquidity The shares of the Company
are “restricted securities”, as that term is defined under Rule 144
promulgated under the Securities Act. The Company is a private company and
there is no public market for its securities, and there can be no assurance
that any such market will develop in the future. Legal
Proceedings
The Company is not currently
a party to any litigation nor is any litigation, to the knowledge of the
Company, pending or threatened.
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