Company Overview
Green Star Products Inc. (GSPI) is an environmentally friendly company involved in the production of renewable clean-burning biodiesel and other products, including lubricants, additives and devices that reduce emissions and improve fuel economy in vehicles, machinery and power plants.
The Company was one of the early pioneers to begin researching alternative energy resources in the 1990s. Following an extensive Research & Development program, GSPI has advanced a number of proprietary technologies which are now in the revenue-producing stage. The Company is 100% vertically integrated designing and manufacturing its own biofuel processing equipment in-house.
In 2007, GSPI announced the development of an innovative processing system for converting algae-to-biodiesel, offering a potential solution to Global Warming and rising oil and gas prices. In November of last year, the Company announced an agreement to build the first algae-to-biodiesel facility in the Midwest. The advantages of algae as a feedstock include its ability to harmful consume CO2 gases while producing up to 100 times more oil per cultivated area than traditional oilseed crops.
The Company focuses on project-level joint venture relationships where it supplies the engineering, manufacturing, construction and operations technology and expertise. Through these intellectual property licensing agreements, GSPI shares in the ownership and profit distribution from each project. The joint venture partners supply project funding and, in some cases, local infrastructure and support. This joint-venture strategy allows GSPI to expand its business rapidly without requiring large capital expenditures.
Business Update
Rather than selling its plants or reactors, the Company forms joint ventures with customers that become operating partners for a facility. GSPI has already had more than 50 offers for joint ventures to place biodiesel plants and algae farms at various locations worldwide. The Company has been very selective in choosing its joint venture partners and maintains business and research relationships on five continents.
After fabrication and construction of a facility, GSPI retains an on-going revenue stream from its joint-venture participation. In 2007, GSPI generated revenues of $2,485,000 and earnings of $455,000.
The Company generates revenues from fabricating and installing the bio-refinery complex, engineering services, participating interests in joint ventures and exclusive licensing arrangements. Revenue is also generated from manufacturing and sales of biofuels, high-tech lubricants and other green products, and fees from royalties and engineering services.
Investment Highlights
Business Model
GSPI was a development-stage technology company for many years researching and developing alternative feedstock such as algae for biodiesel and cellulose for ethanol production. The Company is now a commercial entity and is 100% vertically integrated. It has designed and manufactured biodiesel processing equipment at its own manufacturing facility and provides full operational and training support for a biodiesel processing facility, or to GSPI’s joint venture partners. American Bio-Fuels, GSPI’s LLC partner, established its first operating biodiesel plant in 2003. The plant was successfully operated until 2006, reaching a maximum capacity of 10 million gallons per year. During the period of operation, the Company successfully proved its proprietary technology and continuous reactor waterless processing system and used this plant as a platform for future biodiesel processing plants.
A business model capitalizing on technology leadership
GSPI licensed “Continuous Flow Biodiesel Production Process” provides the following advantages:
- Construction time is reduced to 14-16 weeks vs. industry’ average of 14-18 months
- Capital costs reduced at least 40% compared to biodiesel industry standards
- Plants require 30 to 40% less energy (increased efficiency) to run motors and pumps. Additional capacity can be added at minimal cost;
- Minimum plant management and operations staff required because plant is automated
- Proven technology –An industrial-sized plant in California has been producing biodiesel for over three years.
- The plant requires no wastewater permit, which could take up to one year to obtain, and requires minimal air quality permits.
Simultaneously, the Company developed a next generation lubricant additive, TVT 24-7. As a result, the Company was active in two separate businesses; alternative renewable fuels and advanced lubricants. In 2005, the Company sold NRG Resources the exclusive distribution rights to its TVT lubricant in exchange for 500,000 shares of NRG Resources common stock. GSPI currently holds 1,375,000 shares of NRG Resources common stock. Green Star continues to jointly manufacture the TVT 24-7 product line with NRG and shares in a 25% net profits distribution from sales.
Algae feedstock could potentially supply several billion gallons of biodiesel
In March 2007, the Company, along with its Consortium partner Biotech Research, Inc. (BTR), announced that its seven-member research team had developed a patent-pending algae processing technology that allows algae to be used as a feedstock for biodiesel production. GSPI’s management notes five important advantages of algae as a feedstock:
- Algae produce 100 times more oil per acre than traditional food oilseed crops
- Algae consumes CO2, the major Global Warming gas, and produce oxygen
- Algae require only sunshine and non-drinkable (salt or brackish) water
- Algae doesn’t compete with food crops for either agricultural land or fresh water
- Algae can reproduce itself and its oil every 6-8 hours
A report by the US Department of Energy (DOE) concluded that 200,000 hectares of algae farms (less than 0.1% of climatically suitable land areas in the US) could produce one quad of fuel (a quad is quadrillion BTUs of heat from biodiesel fuel). In fact, algal biodiesel could easily supply several “quads” of biodiesel—substantially more than existing oilseed crops could provide, resulting in billions of gallons of biodiesel.
Algae farms may replace food crops as a feedstock for the biodiesel industry in the near future. Algae technology offers the opportunity to utilize land and water resources that are today unsuited for any other crop use and will reduce the present high cost of agricultural crops (corn, soybeans, wheat, etc.).
Algae-to-biodiesel conversion technology enters demonstration stage
GSPI and BTR have established a demonstration facility in Montana and already completed Phase I and II investigations of a proprietary Hybrid Algae Production System (HAPS). The Company has been successful in controlling all the important variables in algae production, i.e. water temperature in large systems, salinity (salt content), evaporation, pH (acidity-alkalinity) and, most importantly, construction costs. The demonstration facility provides GSPI with a wealth of field information and construction techniques for building and operating an algae-to-biodiesel facility.
Agreement to build 100-acre commercial algae facility
In November 2007, GSPI signed a contract with Biotech Research Inc. (BTR) to start initial preparation and materials acquisition for the field construction of a 100-acre commercial algae facility. The construction of the facility will begin in March 2008.
The 100-acre algae facility will be constructed adjacent to an existing biodiesel plant and will use the CO2 emitted from the biodiesel plant’s boilers to feed the algae-growing facility, thus reducing harmful emissions. GSPI will construct the algae production facility and operate it for 18 months. It will share ongoing royalties with BTR from sales of algae oil and high protein meal.
The algae oil produced from this facility will be converted into biodiesel at an adjacent biodiesel plant. BTR has formulated business plans to build several 1,000-acre algae facilities, each in conjunction with a GSPI biodiesel processing facility. Both BTR and GSPI agreed to build GSPI’s biodiesel production plants in other locations across the US. GSPI is currently negotiating with financial institutions to fund these plans.
Biodiesel reactor to Odessa, Washington PDA
GSPI was awarded a contract to build a biodiesel refinery for the Odessa Public Development Authority in August 2007. In September 2007, GSPI delivered a high-speed biodiesel reactor and control module. The Company will deliver the reminder of the equipment for this plant by year-end 2007. The Biodiesel Processing Plant is expected to begin processing biodiesel by the end of the first quarter of 2008. In addition, the plant is expected to begin operating a crushing line to refine oil from local oilseed crops by the end of the second quarter of 2008.
Its initial production capacity will be 8 million gallons of biodiesel per year. However, GSPI has already incorporated some of the equipment and engineering into the facility to expand capacity to 16 million gallons a year and accommodate increased production of canola and other feed stocks in the years ahead. The Company has announced plans to build additional biofuel plants in Idaho and on the east coast in the near future.
Products and Services
Bio-refinery construction
GSPI designs bio-refineries that produce ethanol from low cost agricultural waste products (i.e. wood chips, switch-grass, rice stalks, municipal waste, etc.). The Company has proprietary process patents for the production of biodiesel and integrates its proprietary continuous flow waterless biodiesel process with low cost feedstock provided by local farmers.
GSPI’s current plans include commercial scale biofuel production through a joint venture with Pure Energy Corporation. The Company also has commitments to build several plants. GSPI and its consortium partners are in the process of applying for government grants and loan guarantee programs covering alternative energy programs. GSPI's consortium programs include cellulosic ethanol, algae-to-biofuel, advanced biodiesel processes engineering, and other waste-to-energy and greenhouse gas reduction technologies.
The selection criteria for government funding of clean energy projects includes the technology’s ability to reduce green house gas emissions and other air pollutants; the speed at which the technology can be commercialized; potential cost saving for consumers; and prospect for loan repayment and the potential for long-term commercial success.
Biodiesel technology
In 2006, after announcing that the Company was developing its own biodiesel plants, GSPI unveiled its proprietary continuous flow biodiesel reactor. These reactors can be used to produce large quantities of biodiesel at smaller plants and produce more efficiently and economically than traditional batch processes. Biodiesel conversion is reduced to just a few minutes with high quality fuel results.
In the year following the unveiling of its novel reactor, GSPI introduced improved design concepts for the reactor, including new proprietary flow control mechanisms and other back and front-end biodiesel plant improvements.
GSPI is currently working on integrating its high-tech biodiesel plant technology with an oilseed crusher plant, supported by farm cooperative feedstock contracts for a biodiesel facility in Odessa, Washington.
Algae technology
The Company announced a new formula to increase the growth rates of certain strains of microalgae with a product called Montana Micronutrient Booster (MMB). GSPI has been making this MMB formula available to researchers on five continents. Samples are being supplied to research facilities which agree to share their growth research data. This data will be made available on GSPI’s Web site. The Company has also introduced its Agri-2000 and Agri-3000 growth boosters for terrestrial plants.
Initial results from tests of the growth formula have been supplied by Dr. John Lednicky, principal scientist at the Midwest Research Institute (MRI). Dr. Lednicky's results from tests of the MMB growth formula were consistent with results achieved in tests performed at the University of Baja California in Ensenada, Mexico, indicating that the sample grew more algae mass. Dr. Lednicky tested the MMB natural growth formula on two algae strains, one freshwater and one saltwater, and found that both test strains grew 200% faster in algae biomass compared to their respective controls. Dr. Lednicky's tests also indicated that the increase in biomass included cells that lived longer and were larger in size.
In January and May 2008, the Company released news regarding its wet algae stripping technology (important for both cellulosic ethanol and biodiesel production) and a report on its HAPS algae production system. The nine-month long HAPS algae production system trial demonstrated the feasibility of the HAPS system for commercial farming microalgae.
At present, GSPI is focused on improving and expanding its algae research facilities. Lab operations have been slowing down to prepare for the transfer installation of equipment, personnel and algae cultures to the Company’s new facility in Utah.
Lubricant additive
In 2005, GSPI formed a joint venture with NRG Resources Inc. for TVT 24-7 Lubricant Products. NRG has the exclusive worldwide distribution rights for the TVT line of products. GSPI receives 25% of net profits on sales and owns 1,375,000 shares of NRG stock (approximately 2% of NRG stock).
GSPI recently filled a large order for the TVT 24-7 product line involving 15 40-foot ocean shipping container loads (equivalent to more than 1,000 barrels) for customers in Asia. The order shipped in May 2008 and arrived in Asia three weeks later.
