Impact Fusion (OTCMKTS: IFUS) is a cattle feed supplement supplier/manufacturer with disruptive technology that has reached a turning point in its development cycle. Before turning the page, you will learn that we can have our beef and our environment. The company always had great technology but lacked a killer app. The last prior innovation in cattle feed was the introduction of antibiotics, leading to superbugs within the herd. The IFUS disruptive innovation utilizes waste sugar cane (known as bagasse) processed with their proprietary absorption ingredient called Nutri-Mastic™. Their product is called Supreme Gold Plus, the highest-yielding and most nutritious cattle feed supplement on the market. Bagasse is already an FDA-approved feed, but absorption has prevented its mass adoption. IFUS is a revenue-producing company capable of producing hundreds of millions of revenue with its new killer app in the coming years. Various marketing, grant, and sales catalysts could soon provide value inflection points for the company with its meager $15 million market cap.
Changing Cattle Feed Forever – Nutri-Mastic
Nutri-Mastic™ is IFUS’s trade secret formula that enables the absorption of nutrients and improves the conversion of what the cattle eat into protein gain, so the cattle stay much healthier while dramatically lowering the methane production produced by cattle. The beef industry calls Residual Feed Intake (RFI) the measure of the efficiency of the feed intake and how the animal converts it into protein gain based on the breed. Since feed is the single biggest input into cattle over their lifetime, it’s one of the most important inputs to control. According to Beef Magazine “feed efficiency is always a primary determinant of profitability.” The company has produced a line of cattle feed known as Supreme Gold Plus.
Investors will be pleased to learn that the business model is highly profitable, with gross margins of up to 90%, and it’s good for the environment by lowering the cattle output of Ammonia, Carbon Dioxide, and Methane gas which is 25 times more potent than carbon dioxide in regards to global warming.
Production Issues Resolved after Hurricane Ida
As a result of substantial infrastructure degradation from the last cat 5 hurricane, the company’s timelines were unfortunately shifted forward a couple of months. The company is headquartered in Napoleonville, the heart of sugarcane country in Louisiana. The loss of power, lack of available drivers, trucks due to Hurricane Ida, and the ongoing state-wide damage clean-up efforts were the causes of the delay. Recent videos show restored power and the production line running. The current updates on Twitter show a fully operational manufacturing plant with equipment and new machinery.
Significance of USDA Grant
The company was actually invited to submit a USDA grant application for its product Supreme Gold Plus. The USDA officials apparently believe that Supreme Gold Plus is a product that can address the cattle feed shortage while simultaneously improving the animals’ health and reducing greenhouse gas emissions. The grant submission was made by October 25, 2022, titled “Carbon and Nitrogen Reduction on Beef Heifers Interpolated into Nutritional Effectiveness.” The study is essentially going to be used to quantify the benefits of Supreme Gold Plus with a controlled study in order to further back up customer claims, with third-party university data creating marketable claims based on the University Controlled studies. One of the ideas floating around is a tax benefit for ranchers that use the feed because of the significant reduction and practical elimination of methane in animals that consume the enhanced feed. If they receive the grant it’s a major value inflection point for the company because it will eventually allow the company to make many claims with respect to animal health and help quantify the reduction of methane emissions. Supreme Gold Plus would be a validated brand of feed supplement that addresses environmental impact and digestion. All investors need to imagine is a Senator in Washington DC armed with a study that shows that Supreme Gold, if mandated, could reduce the carbon footprint equivalent of tens of millions of vehicles.
Supreme Gold Plus
The company sells Supreme Gold Plus as a Bale or loose by the truckload. The other options are via rail or 40 ft containers. The bagasse is processed in the only facility in the world, where it is mixed with Nutri-Mastic and other ingredients and then compressed and bailed to make the final product. Ranchers love the product because the cattle convert more of what they eat to protein while using less water and less feed resulting in a greater body mass. The consequence of this increase in efficiency is a drastic reduction in methane, CO2, and ammonia emissions. With Supreme Gold Plus, ranchers get more protein conversion than regular cattle feed. While it might not be obvious, the less that comes in through the mouth means the less that comes out the back. This ultimately means the rancher will have less manure to process, and the cows will be much healthier breaking the ranchers’ dependency on antibiotics.
According to Expert Market Research, the Global Cattle feed market is $63.95 billion. One of the newest trends driving the growth forward is the focus on animal welfare. The quality of the feed is related to the health of the animal. The same concept applies to humans, the person who eats twinkies non-stop is likely to have more health problems than the protein shake drinker. Antibiotics have been used to augment depleted immune systems in cattle from poor-quality feed. The major players in the global animal feed market are Archer Daniels Midland (NYSE: ADM) with a $50 billion market cap, Cargill, Evonik Industries AG (OTCMKTS: EVKIY) with a $10 billion market cap, Land O’Lakes Inc., New Hope Group Co. Ltd., Nutreco NV, and Perdue Farms Inc.
The company currently has 474 million shares issued and outstanding. There are 218 million shares held at DTC which represents 46% of the O/S. The other 54% is restricted and owned by management and long-term investor friends of management. There are $131K in Notes Payable that belongs to investors close to the company. The company has a clean balance sheet with no convertible debt. The structure is expected to remain the same with very little dilution from this point forward. It has very little operating capital but after some initial orders, the gross margins should allow the situation to improve rapidly. With the excess cash flow in the works, it’s expected the company will reinvest in the expansion of additional lines to expand revenues and grow them organically.
The current spot price of hay is as high as $200/ton but ranges from $40 – $300 per ton on a seasonal and regional availability basis. The round rolls of hay that most of us are familiar with, range in weight from 1000 – 1200 lbs per roll. When comparing the size of the square bale of compressed bagasse the two appear to be comparable, but the Supreme Gold Plus Bagasse bail weighs 2200 lbs, or 1 metric ton. When farmers buy hay, weight is a big factor in price because after all, they use this to feed their animals which are eventually sold by weight. When pricing, the variables buyers and sellers consider are the loss of dry matter in storage and the original yield. The Supreme Gold Plus does not spoil in storage and is not subject to these variables. In light of so many variables, assumptions need to be made to figure out any revenue model. The assumption will be $100/ton average selling price for Supreme Gold Plus. A typical 1-ton bale of Supreme Gold Plus Feed weighs much more than a typical bale of hay and is much smaller than a bale of hay, to reduce shipping costs, and it takes about 2.5 minutes to produce the bail or 1.5 mins to produce a loose ton of Supreme Gold Plus on the existing line. More lines can be added as needed using the existing buildings and property. Therefore 35 tons per hour is a reasonable assumption. Based on these assumptions is the following revenue model.
There is a lot of smart accumulation going on in the company ahead of the grant application award announcement. Some investors are expecting a win. Investors have gone so far as to set up DD rooms and public message boards in discord. This company is currently in an uptrend and on the precipice of breaking out. Supreme Gold Plus couldn’t have come out at a better time because the world is fighting inflation and is in dire need of cattle feed due to the prolonged drought. The company is essentially taking discarded sugar mill tailings, repurposing & processing them, and then shipping them out as cattle feed. The up to 90% gross margins and much lower market price even make shipping a viable option.
The company’s current market cap is trading at only 1X the expected sales of one line. The expansion of manufacturing or more supply shocks in the cattle feed business could drive rapid price appreciation of the stock, but for the most part, this is still a very undervalued asset. The USDA grant award would really legitimize the business and eventually allow them to charge a premium price for their product as demand expands. For ranchers, the decision to buy is a no-brainer because they get a lot more for less. Ranching is a business where only the bottom line counts and Supreme Gold is a game changer that increases the feed efficiency of their herd by orders of magnitudes. Early adopters are going to do extremely well and that message could spread virally and lead to a huge inflow of business for IFUS.
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