The following interview was conducted by The Wall Street Transcript in April of 2001 with Mr. Gary Ackles, the CEO of Aquatic Cellulose International Corporation (AQCI) which later became Hollund Industrial Marine. The interview took place before the market and banking collapse, before financing for start-up companies dried up, before the housing market collapse, and before lumber prices collapsed. As one can see, the world was a different place back then, and one can only speculate on where Hollund would now be had conditions remained the same.
TWST: Can you give us a brief history of the company, and then explain what you're doing right now? Mr. Ackles: What we have done is a very unique project. We've actually developed a unique piece of technology, a robot, to recover inundated forests. Now what that has done for us is, it's allowed us to take a look at the inundated forests around the world, and believe me there are many, 40,000 inundated forests at the last count around the world that are behind dams and reservoirs, and so, with the development of the robot, we're able to go into these regions and are able to harvest this wood. And the wood is, of course, of high value. That's basically how Aquatic Cellulose got started.TWST: That's an amazing project. Are you the only ones; you said 'unique?'Mr. Ackles: Yes. We are the only ones. When I developed the technology, I realized there was a need to create a very consistent cycle time, and that's why the robot was created; so that we could actually go and harvest at a consistent rate which obviously allows you to evaluate your economic viability of the project. Yes, it's very unique. There's not another one like it in the world. We're quite excited; we're on the leading edge of this thing, and the world now is really finding that it is able to supply them with an environmentally friendly source of wood that is really catching on in the marketplace.TWST: So you're not chopping down any forests.Mr. Ackles: Exactly. What we say around here is that every tree we take from this resource is one less tree we cut from the rainforest.
TWST: Could you tell us about the specific qualities of this kind of wood? Mr. Ackles: The actual quality of the wood is, in most cases, of a higher quality. You'll find in Asia, and in Europe, they will actually submerge wood for sometimes up to five years before they'll use it for the building of fine furniture and some of the unique structures around the world, so inundated forests are in no way degraded wood. They are, in fact, a quality-enhanced product, which is also good for our marketplace. It also has a very unique acoustical quality, like the Stradivarius. He would actually only use submerged wood in the creation of his violins. We're finding a very strong support in the music industry for our wood.
TWST: How old can this wood be, in some cases? Mr. Ackles: We're looking at a project right now that has inundated trees that have been down for 100 years, and the wood is as good as the day it went down and, of course, better.
TWST: Is this all from the construction of dams? Mr. Ackles: All from the construction of dams, reservoirs, those sorts of things, exactly.TWST: What countries in particular are you interested in?Mr. Ackles: We've concentrated our efforts primarily in Brazil right now, the reason being, once the technology was created, I went to the world and said, 'Okay, who is interested in this unique technology? We have these abilities,' and Brazil was one of the first ones to come up to the plate and say, yes, we would very much like to see you in Brazil first. With the support of the Brazilian government, and a strong joint venture partner, we have been able to be very successful in Brazil, and we're planning on expanding into possibly two other areas in South America. We have a good project we're in the final details on in Central America, and of course we're looking at areas in Asia and in the United States. The volume of wood is so great around the world that we can basically pick and choose where we want to go, and we have the technology to do it, which is the key.
TWST: Could you tell us something about this robotic technology? Did you develop it yourself? Mr. Ackles: I developed the technology after looking at a project in the northern part of British Columbia. I have created many different types of technology, everything from projects in the Beaufort Sea for the offshore oil industry, to developing projects in the Middle East and Africa, and South America, for different types of underwater application. This was just the next step, to develop a type of robot that is able to work in a very hostile environment, and still have the robust capabilities to lift and move heavy objects, plus, also, have the dexterity to be able to work in very finite applications. We cover the full gamut.
TWST: How many robots have you got? Mr. Ackles: The one we're building now is going to be the fourth and right behind this one is the fifth, and on from there. We're quite excited. The robot is unique; it has a lot of capabilities even beyond the forest sector. But right now we're concentrating all our efforts in the forest sector. The actual robot reaches under the water, grabs onto the tree, and then cuts the tree off. It can cut these trees off in about 14 seconds. These are trees that are five feet across. It's a very quick recovery rate, which is so important when you're looking at cycle time, and you're looking at profitability.
TWST: How does it work in terms of the number of people you need on the site to do the work? Mr. Ackles: The only reason we need a second man is because you have to have a second man for safety. The machine is basically a fully functional machine, and one man needs to operate it, but, of course, on the water, you need a second man. But we also have support equipment. We have three support boats that work around and near the machine just strictly to clean the wood out from in front of it because, obviously, the harvester must work aggressively through the water. We have three other boats that are working around it vigorously, aggressively, removing the trees from in front of the harvester.
TWST: What would be the proportion of people who you might send out from where you are in relation to people from the area? Mr. Ackles: In this particular project in Brazil, we have two North Americans working there, and of course some of the other fellows, the robotic technician, he drops in from time to time, but primarily it's a couple of people, one running the water operation, one controlling the land-based operation, and the rest we hire locals, I think the ratio is probably 10 to one, at least.
TWST: So far you count Brazil very friendly to your activity? Mr. Ackles: They love it. We've actually been offered another project in Northern Brazil, also in the Amazon. There's another reservoir that the Brazilian government has offered us, and it's 900,000 acres, so there's huge volumes of wood that is just waiting to be harvested, and now, with the safe technology, it's unlimited, the amount of opportunities we have. There are massive amounts of resources, and there's really been no method around, there's been the odd diver that's gone down and gotten trees, but nothing that's been commercially viable. We're looking at this one project right now as having a reserve of $600 million worth of wood.
TWST: Could you give us some idea of where you'd like to be taking the company, both for the short term, and the long term? Mr. Ackles: For right now, what we're concentrating our efforts on is increasing the downstream infrastructure from the harvester. Right now, we're able to produce three times more wood off the water than our land infrastructure can handle, so what we're doing is we're upgrading our milling operations to be able to handle the additional trees, and we're going to be adding new mills into our plan over the course of the next six months to a year. Because we are sending down additional equipment, we have to make sure that downstream infrastructure can handle the load.
TWST: What kind of shape are you in for cash for now? Mr. Ackles: We have cash. We have investment bankers who have been supporting us over the last couple of years, and we're in good shape. We have the money we need. I do feel we're creating revenue, we're doing all the right things, and one thing that I'm focusing on: we are building infrastructure. We are putting our money back into the company. We are putting a foundation under this company that is going to be able to take it to the billion dollar company that it deserves to be.
TWST: When do you expect to become profitable? Mr. Ackles: We are very close. I would say we're going to find ourselves in this year becoming a profitable company.
TWST: Is it possible for you to be specific about your financial scenario for the next year or two? Mr. Ackles: Exactly how I expect it to unfold? I've covered that primarily with the growth we anticipate for our project, and the money we plan on putting into the project is going to be several hundred thousand dollars just in infrastructure building. That's where I see most of our energies going.
TWST: Let's go forward, to the year 2003. Where would you hope to be at that time? Mr. Ackles: If I had a crystal ball, I would say we will have two other countries under our belt, we will have over a dozen machines in the field, and I would see us being in a very strong financial position. As our customer base is growing and, believe me, it is growing daily, we have e-mails stacking up from people who want to buy wood as soon as it becomes available, and the only thing that would hold us back would be the customers who want to purchase the wood and, believe me, we see no shortcomings there at all.
TWST: Will joint ventures and partnerships be part of your future? Mr. Ackles: It surely will, yes. When I go to a country, in any project I've done, we first find favor with the host country government. That is, obviously, primary. We get good solid government support, and then we find a very strong joint venture partner, one that is politically connected, one that is strong financially, and then we go forward with a project. This is why, although the world is at our feet right now with recovering these inundated trees, we will move slowly to make sure that we have that government support, and that we have those strong venture partners, because anyone who thinks they can roll into a country and just kick the traces and say, okay, we're here, and we're going to show you how it's done, they will fail. Guaranteed. You must find a strong joint venture partner in the host country to succeed, and that's why it takes a little longer than just blowing the doors off.
TWST: Are you a little less vulnerable to recession than other businesses? Mr. Ackles: I would suppose we are. We're dealing in a country where everything that we harvest is exported. We have the market right now, in the United States, which is very receptive to our wood, and the people we sell the wood to have the money to buy the wood. We're not concerned with whether the economy is in decline, because it seems like this wood has an incredible following, and people who have money are buying this wood because they realize the environmentally friendly nature of it, and they love the wood. I think you're right. I think we may be a little bit recession-proof with this particular technology, and with the product.
TWST : Could you perhaps mention any difficulties that could arise, anything that might worry you? Mr. Ackles: Difficulties that could arise? Finding appropriate individuals who want to do international projects. I am looking for management right now within this company, because it is growing. I need to find people to assist me with this growth, so I guess finding appropriate management, executive staff, and young men who are prepared to move into the middle of the jungle, it's probably one of the things that are going to have to be dealt with on a daily basis.
TWST: With your operation eventually becoming so far flung, and with a continuous need to develop customers, as you say, you've got people, will the Internet be important to you? Mr. Ackles: We have a 50 page Website that discusses our company and its products. We are in the process, now, of starting our amazonline.com site that will be selling wood, and will be selling products that will be created with our wood, so the Internet plays a very, very strong role in what we're up to.
TWST: As time goes by, what will be the principle things that will affect your operating margins? Mr. Ackles: Two things; fuel costs, and labor affect our market. Fuel costs down there right now have more than doubled. The real has declined probably 50% since we started that project which is, in fact, a positive thing for us, because all our expenses are accumulated in reals, so in this particular case, this is very good for us, and that's all I can really see being concerns.
TWST: Is it very important to you to go to the site yourself in each case, and spend time at that particular site that you're developing? Mr. Ackles: I'm doing that, and I'll probably do that for the foreseeable future. I want to make sure that every site, and every partner, and every project, is set up to the way I've set up many other projects, internationally, and I can see myself having a personal contact with each project for the foreseeable future.
TWST: You said that one difficulty you could have is in personnel, getting the right people who are willing to go to the right places. Mr. Ackles: That's right. That's something that is an ongoing challenge. We get a lot of resumes. We put out advertising for our position here a couple of weeks ago; we got a couple hundred applicants but, in reality, out of that couple of hundred, you may only have five or six who are even worth interviewing. Everybody and their dog wants to, 'Oh, yeah, put me in the middle of the jungle,' to play Indiana Jones, but the reality of it is, it's not a pretty world out there, and you've got to know that when you interview these people, you've got to know that after they've gotten over the romance of the jungle, are they still going to be there? So there's a lot to be evaluated when you're looking at finding individuals.
TWST: When you say the jungle, in other words, is Brazil going to be your main opportunity, as time goes by, for the foreseeable future? Mr. Ackles: There are a lot more jungles than Brazil. Central America has huge jungles. Asian projects are all jungles, and the reason we choose jungles is because it's all hardwood, and it's all beautiful hardwood, so the value of the wood is higher. We've got Macaranduba, Jatoba, Ipe, all those very unique species, lots of mahogany, you have to go to the jungles to find this. The nice thing about this; these are beautiful jungles, they are virgin rainforests that have gone down, and they're exactly as they were when they went down. These are the middle of the jungles, and beautiful wood, and this is why it's such a great way to harvest trees. It's a fantastic way to harvest trees, because you literally pluck the trees out of the jungle from the surface.
TWST: Have you been in touch with the environmentalists on this, and have you started to get the moral support from the Sierra Club and people like that? Mr. Ackles: We have had support from all environmental sectors. They absolutely love the project. They know that every tree we cut down, as I said earlier, is one less tree they take from the rainforest. They contact us. We talk to them. They absolutely love what we're doing.
TWST: What should long-term investors focus on when reading your reports? Mr. Ackles: Long-term investors should look at what we're actually doing building the foundations for this company, which I do believe will be a billion dollar company someday. We are building the foundation for that by getting good management, by creating good, strong international relationships with countries. These are the things that are going to build this thing into the company that it deserves to be. I think if they keep their eye on the growth of this company based strictly on the price of the stock, they're going to be very misled. The real true value in this company is in the management and in its commitment to seeing growth.
TWST: Would you like to comment on your stock valuation? Mr. Ackles: It's gone down, like every other stock in the market right now. We used to find ourselves fretting over that pretty regularly, and finally I've said, really guys, we've got a company to build here. Let's build this company, and when the revenue is there, and the foundation is there, the investors will be there, and they'll know we're building a future. Yes, the stock price is down, it's very dismal right now, but it will recover, and we find ourselves now going several days without even concerning ourselves with it, because we're very busy building a company, here.
TWST: Could you crystallize everything you've said, by presenting the two or three or four best reasons why the long-term investor should consider your company? Mr. Ackles: You should consider this company because of the commitment to growth. We can all believe that there is an incredible market for our product. We have a very unique technology that is now renowned worldwide for its capabilities. We have so much growth that is yet to happen that anything they look at within this company now, our Website, our filings, look around at the industry and evaluate the numbers, they'll realize that the growth in this company is yet to come, and believe me, it is happening daily.
TWST: Thank you.
http://www.twst.com/interview/8963
