The Bios Group
 

This is a brief overview of the Bios Group business opportunity. It was written to conform to specific rfp requirements early last fall. Many of the operational details have evolved substantially since their creation in August 1997. To learn about the changes, please send for biosinfo@ovgs.com
 

Overview

The Bios Group is a unique social investment opportunity, which promises both environmental and social benefits internationally on the basis of 10 years of successful research and development (R&D) by the partners. The core technology is an elegant improvement in process chemistry that enables a new level of flexibility and efficiency in various industrial products. The Bios Group’s advances are especially important to the distillation of ethanol, or grain alcohol.

Initially, The Bios Group will serve the industrial products market to generate near-term revenue, leading with the Capture I Scrubber, which opens a portion of the distilleries market not serviceable with existing technology. For medium and small-scale distilleries, Capture I is the first to enable compliance with Environmental Protection Agency (EPA) regulations.

During a second phase of operations, The Bios Group will establish closed-loop Renewable Fuel Farms that integrate agriculture and distillation processes for profitable, autonomous and scalable production of ethanol. In collaboration with Texas A&M, the company is pursuing the cassava tuber as a dedicated energy crop for its high starch content (ideal for distillation) and ability to grow in depleted soils (cheap land).

As an oxygenate and octane-booster, ethanol can be mixed directly with gasoline up to 20 percent without engine modification. In the U.S., the oxygenate market is driven by the increasing pollution-control efforts of the Environmental Protection Agency (EPA). In developing nations, ethanol’s value is in displacing up to 20 percent of petroleum imports, while small-scale Renewable Fuel Farms jump start local economies.

The Bios Group’s industrial ecology model of the Fuel Farm offers one of the first opportunities to make ethanol:

– Profitably,
– Autonomously,
– On a small scale,
– From a dedicated energy crop, and
– Truly renewable. Industrial Products
 
Scrubbers are machines that can remove a valuable (or unwanted) component, often in low concentration, from a vapor stream – a billion dollar business in the U.S. today. The Bios Group’s first industrial product is the Capture I Scrubber, which is designed to recover the nearly one percent of alcohol (product) that normally escapes from the fermentation vents of wine, beer and liquor plants, as well as industrial fuel producers. In addition to its obvious contributions to gross revenue of these plants, Capture I reduces EPA-regulated organic emissions. For medium and small-scale distilleries – the majority of the market – Capture I is the first scrubber flexible enough to accommodate their variable flows and operate economically in their vents.

The Bios Group has a standing request for demonstration of the Capture I at a potato processing plant of J. R. Simplot in Idaho, one of the largest potato processors in the U.S. With initial funding, Bios will develop the Capture I Mobile Demonstration Unit to meet this request and to use as a sales tool and roving data center nationwide. The company intends to use the Mobile Unit to secure orders for the Capture I, then leverage demonstrated market interest for higher licensing fees and royalties from industrial engineering firm partners.

In addition to recovering valuable components from exhaust vapor, as with the Capture I Scrubber for ethanol, more scrubber opportunities exist to cleanse gases for safe use (e.g., the removal of noxious components from natural gas), and to reduce emission of various pollutants (e.g., in the smoke stacks of coal-fired power plants).
 
The Bios Group will also pursue applications of its core technology to develop improved condensers, evaporators and distillation apparatus, used throughout distilleries, and in many other applications.
 

Renewable Fuel Farming

The novelty of the Renewable Fuel Farm lies in The Bios Group’s integration of advances in process, crop and land, which enable the Farm to operate as a self-sufficient, autonomous system:
 

The Bios Group believes the integrated cassava-to-ethanol scheme makes Fuel Farming economically attractive and sustainable for the first time. Previous barriers to profitable Fuel Farming included the high energy requirements of distillation processes and lack of a stable, dedicated energy crop. Please see the attached illustration for another view of Fuel Farming.

With a second round of financing, The Bios Group will establish a pilot Renewable Fuel Farm in south Texas, where various strains of cassava are currently under investigation by partners at Texas A&M. A portion of the company’s first round of financing will support development of a full business plan for the Fuel Farming venture, which will address the U.S. ethanol (oxygenate) market and international economic development needs.
 

Why Ethanol. . .

Ethanol is the only motor fuel additive that does not contribute to global warming. According to the EPA, ethanol-blended fuels reduce carbon monoxide emissions by 25 to 30 percent. Pure ethanol is a cleaner-burning alternative fuel that releases to the environment only what the crop took in to grow. Brazil has been an early adopter of ethanol as a primary motor fuel, with about 70 percent of its cars running on pure ethanol.

The U.S. currently produces approximately 1.3 billion gallons of ethanol per year for use as an oxygenate in “gasohol,” a mixture that releases fewer pollutants to the environment. The federal government mandates the use of oxygenates in many areas of the country during the winter months, and significant problems have come to light with the petroleum-based MTBE oxygenate that competes with ethanol. As attention to environmental issues continues to increase, so will the domestic ethanol market.

Also, as an alternative fuel in the U.S., ethanol enjoys important tax incentives that were recently extended by Congress. Although they help, these subsidies are not what makes Fuel Farming economically attractive. The Bios Group’s integrated approach to the Fuel Farm, including technology improvements, are behind the profitability of this venture. It is also important to remember how many subsidies the petroleum industry enjoys – not to mention support like the recent Gulf War.

Internationally, particularly in developing nations, ethanol is a balance of payments asset that offsets expensive petroleum imports without requiring huge investments in infrastructure. Again, ethanol can be combined with gasoline up to 20 percent without engine modification. In areas that will be starting from scratch, where dependence on fossil fuels has not yet been engrained, ethanol will give developing economies a head start with cheaper, cleaner fuel and a valuable commodity. In many regions of the tropics and sub-tropics, cassava is the only crop that can be grown, and The Bios Group aims to create sustainable economies wherever this tenacious crop will grow.

 
Business Strategies

The Bios Group’s business plan provides a two-tiered opportunity. First, applications of the core technology will be licensed out for up-front fees and ongoing royalties to complement cash from investors and support ongoing operations. The industrial products market is mature, and The Bios Group has exciting intellectual property improvements to offer. It does not make sense to invest in the sales, marketing and manufacturing infrastructure necessary to compete directly in such a market when licensing arrangements can be negotiated and launched early.
 

The second, Fuel Farming venture is a global growth opportunity with significant promise in developing nations. This business will be capital intensive, as land, crop and technology are required to build Fuel Farms and a service organization must be established for support.
 

Funding Opportunity

One of the distinct advantages of the Bios business opportunity is the extensive research and development already completed by the partners over the last 10 years. The Bios principals have taken the technology as far as possible without outside financing, which has preserved value and minimized risk. The Bios Group offers a clean slate to investors and a clearly defined set of near-term milestones and long-term objectives.

Specifically, the company is seeking a first round of financing of $700,000, which will be used over 12 months primarily to:

– Commercialize the Capture I Scrubber;
– Complete the next round of theoretical analysis on Fuel Farm Configurations, and confirm technology valuation;
– Review U.S. patent protection, broaden to include recent enhancements, and pursue international coverage;
– Establish and review accounting policies;
– Put on payroll six full-time equivalents; and
– Develop a formal business plan and pursue a second round of financing in support of Renewable Fuel Farming venture  The Bios Group anticipates the second round of financing in support of Fuel Farming will be between $7 million and $10 million. Additional private financing may be necessary, although the company intends to pursue a public offering of securities as a third round. Revenue projections and detailed financials are included in the business plan.

For more information, please contact:

Peter Christy
tel: 510.526.1678
fax: 510.558.9252 September 1997

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