I guess not everyone is as excited as those shareholders...here's the business editor of national NZ weekend paper the Sunday StarTimes(23 Nov) with his own take on Aquaflow:
Blenheim-based outfit Aquaflow Bionomic Corporation has been working for three years on developing algae as a fuel source. This month it issued a prospectus seeking to raise $20 million from a public share offer, and will take $30m if enough people want to buy.
That's a lot of money, so you'd expect the company to provide some detailed information to justify the investment.
No such luck.
This being an early stage company in a new industry there is, of course, a limit to how detailed directors can be. Nevertheless, the prospectus avoids providing some of the most basic information the company has available.
In essence, Aquaflow is trying to harvest algae growing naturally in sewage ponds near Blenheim and convert it to "biocrude", which, like crude oil, can be processed into a variety of fuels. The harvesting method is a key part of Aquaflow's technology, as is the conversion method, for which the company is seeking US patents.
So what is the harvesting method? No information is provided in the prospectus, not even a rough outline. We are told the company has harvested "tonnes" of algae from the sewage plant. How many tonnes, over what period, and how often can the harvest be repeated? No answer.
And is that a tonne of dried algae, or a tonne of water with 10% algae?
This would be helpful to know because the viability of the project will depend on how much algae you can produce from a given facility - particularly a naturally occurring source such as Aquaflow's.
Furthermore, how much biocrude - and therefore biodiesel - can you get from a tonne of algae? No answer.
If Aquaflow doesn't know it should say so, and if it does - even within a range - why not inform investors?...
...Another important aspect of algae's viability as fuel is the amount of energy you have to put in to get energy out in the form of bio-diesel. The Sunday Star-Times understands Aquaflow has had these energy balance calculations done by an external consultant, but, again, has chosen not to reveal this information to investors...
...Finally, financial rewards for investors appear distant, to say the least. No dividends are expected for five years and the company notes it "hopes to be able to generate income from production or sale of its technology in the future, however it is not clear at this stage when revenue streams will produce positive net cash flows".
Regrettably, it is also clear Aquaflow does not have enough cash to keep going for more than a few months without a cash injection from this share offer. In the six months from March it burned through $1.2m and in September was down to its last $413,905.
What this boils down to is a business that needs a bailout.
However, while Aquaflow's ideas have enormous appeal, investors would be wise to consider carefully whether the company deserves their money.
Despite the existence of venture capital funds created specially to invest in this sort of promising early stage technology, Aquaflow appears to have put little, if any effort into tapping that source of finance.
Chairman Barrie Leay told the Star- Times that although there were such funds available, "there are strings to that".
Rather than put up with strings, Leay seems to prefer to seek obligation-free money from idealistic mums and dads.
When a company's prospectus doesn't take investors seriously enough to give them the information they should have, you have to question whether its management know what they are doing.
This guy, Tim Hunter, is very conservative(opposed to wind farms in the S.I., opposed to measures to save Hector's dolphin etc), but nonetheless he raises some important points IMO.
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