BEACON EQUITY RESEARCH

Analyst: Victor Sula, Ph.D.

Initial Report
August 4h, 2008

IBOT daily 8/01/2008

1.3

1.2

1.1

1.0

0.9

0.8

0.7

Industrial Biotechnology Corporation 0.6

2033 Main Street 0.5
Suite 400
volume
Sarasota, Florida 34237
400

Thousands
Phone: 941.925.2500 300

Fax: 941.925.2503 200

Web: www.industrialbiotechnology.com 100
Email: ir@industrialbiotechnology.com
0
June July

Market Data Company Introduction

Symbol IBOT
Industrial Biotechnology Corp. (IBOT) uses renewable feedstocks and
Exchanges OTC PK clean processes to manufacture sustainable, cost effective, and eco-
Current Price $1.09 friendly products.
Price Target $2.20
Rating Speculative Buy Industrial Biotechnology Corporation, provides products, services and
Outstanding Shares 38.375 Million
Market Cap. $41.83 Million
technologies using renewable resources as an alternative to petroleum
Average 3-m Volume 28,345 and traditional manufacturing methods. IBC production processes are
eco-efficient and apply and adhere to sustainable practices and stan-
dards. IBC accomplishes this with the ALCHEMx Production Plat-
Source: Yahoo Finance, Analyst estimates
forms™, which integrates technologies, sustainable manufacturing,
and distribution with supply chain partners to meet customer needs
and pricing requirements. IBC’s renewable resource provider and joint
venture projects partner is Cosan SA, the world’s largest sugarcane
processor. Sugarcane is considered the leading cost efficient, energy
balanced and environmentally sustainable fuel source, when compared
to fossil and other alternative fuels. IBC provides these cost competitive
environmentally responsible solutions to meet global trends and mar-
ket demand via operating subsidiaries:

- Renewable Fuels of America Corp. (RFAC) plans to import and

distribute Brazilian sugar cane ethanol. RFAC intends to take advan-
tage of available trade benefits and leverage existing ethanol distribu-
tion networks and infrastructure in the U.S. coastal areas.
 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

- Renewable Chemicals Corp. (RCC) plans to produce ethanol derivative chemicals as an alterna-
tive to petroleum-based compounds. Its renewable chemicals will be customized to meet the sustain-
ability and pricing requirements of customers in the consumer packaging, energy, agricultural, pesti-
cides, materials and polymer industries.

- IBC Technologies Inc. is the technology and intellectual property arm of IBOT. It develops tech-
nologies and processes for manufacturing chemicals more efficiently, at significantly lower costs, and
with substantially lower environmental impact than traditional methods.

Investment Highlights
A business model capitalizing on renewable energy momentum

IBOT will provide new biotechnologies for meeting global energy challenges. For example, the Company plans
to import and distribute Brazilian sugar cane ethanol for use as a fuel in the coastal regions of the United States.
In addition, the Company is developing ethanol derived chemicals for consumer packaging, energy, agricul-
tural, pesticides, materials and polymer applications. IBOT is in the process of commercializing its products and
establishing an ethanol distribution network and infrastructure in the U.S.

Partnership with Cosan SA – the world’s largest sugar cane processor

IBOT’s ethanol provider and joint venture partner is Cosan SA, the world’s largest sugar cane processor based
in Brazil. Cosan is also the second largest ethanol producer and the world’s largest sugar producer, with 2008
revenues estimated at $7 billion. Cosan operates 17 mills, two refineries, two port facilities and various ware-
houses in the central and southern regions of Brazil. Its owned mills have a crushing capacity of 36 million tons
and leased mills have a total crushing capacity of 4 million tons. In addition, Cosan has mapped available areas
in Brazil and has conducted feasibility studies with the intent of increasing its sugar cane ethanol production to
meet anticipated global market demand.

Sugar cane is a better biofuel source than corn

Most of the ethanol currently produced in the United States comes from corn. However, corn’s use in biofuels is
limited due to a constrained supply, alternative uses of corn as a food source and the debate over governmental
subsidies to corn farmers. Unlike corn, sugar cane is not a subsidized crop, is not a food source, and is produced
in sufficient quantities to meet demand. In addition, sugar cane is considered the most cost-efficient, energy-
balanced and environmentally sustainable fuel source when compared to fossil and other alternative fuels. Ad-
ditionally, the costs for converting an existing car to running on 85% sugar cane ethanol are only about $100.

Extensive distribution channels combining retail, catalog and online distribution

IBOT plans to begin importing and distributing sugar cane ethanol in the United States and anticipates reve-
nues in the fourth to first quarter of 2008-2009. By 2010, the Company expects to be generating revenues from

Industrial Biotechnology Corp. (IBOT) 2

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

the production and distribution of ethanol-based chemicals, particularly ethylene. Engineering and feasibility
studies are underway for a plant location with construction time of approximately 16-20 months. Increased
penetration of the ethanol market and the development of other ethanol-based chemicals are targeted in 2012.

$435 million in GROSS sales targeted by year-end 2010

IBOT’s RFAC subsidiary has identified several storage tank locations and ethanol distributors in the mid-At-
lantic and Southeastern United States, and is negotiating and finalizing distribution arrangements. By year-end
2010, IBOT expects to begin operating the first plant for producing sugar cane ethanol derivative chemicals for
consumer packaging applications.

IBOT targets 2009 sales approaching $260 million and 2010 sales in the $435 million range.

Proven management team

IBOT’s management team is comprised of top scientists, international lawyers, business leaders and biotechnol-
ogy specialists.

CEO Andy Badolato was the founder, president and director of MILCOM Technologies, a company that success-
fully licensed more than $1.6 billion of research and development from Lockheed Martin. MILCOM, a leader in
commercializing defense-related technologies, has launched 13 companies, raising an aggregate of more than
$600 million in venture capital.

Gurinder Shahi, IBOT’s chief technologist and chairman of its Scientific Advisory Board, is a leading expert on
technology innovation and change management in healthcare and life sciences. He played a key role in develop-
ing the International Vaccine Institute, the Asia-Pacific International Molecular Biology Network and the Global
BioBusiness Initiative. He has also been actively involved in numerous technology businesses, including Lynk
Biotechnologies (Asia) and Industrial Biotechnology Corp. (United States/Europe/Asia/Latin America).

Strong outlook for biofuels market

According to Clean Edge research, the global biofuels market will grow from $15.7 billion in 2005 to $52.5 bil-
lion by 2015. Emerging Markets Online indicates U.S. biodiesel consumption grew from 25 million gallons
in 2004 to 750 million gallons in 2007. The U.S. biodiesel market must grow significantly to reach levels com-
parable to its European counterparts. In Europe, biodiesel represents 2% of total on-road transportation fuel
consumption and is expected to reach 6% by 2010. In the United States, biodiesel accounted for less than 0.5%
of all petro-diesel on-road consumption in 2005 1.

1 http://www.emerging-markets.com/biodiesel/default.asp

Industrial Biotechnology Corp. (IBOT) 3

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

US Biodiesel Production and Capacity

3,500
3300
3,000

2,500

2,000
Production
1850
1,500 Capacity

1,000

500
585 650
450
0 225 75 250
75
2004 2005 2006 2007 2008

Source: Biodiesel 2020: A Global Market Survey, 2nd edition

Business Model

IBOT is developing new biotechnologies to meet global energy challenges. The Company makes use of bio-
logical feedstocks and processes to manufacture industrial products that are renewable, economically advanta-
geous and environmentally friendly.

IBOT is leveraging its ALCHEMx Production Platforms™ which integrate technologies, manufacturing, and
distribution to produce eco-efficient, cost-effective energy solutions. The Company has identified supply chain
partners and is assembling the infrastructure for producing and distributing fuels and chemical feedstock from
sustainable sources.

Industrial Biotechnology Corp. (IBOT) 4

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

IBOT’s business model

Industrial
Biotechnology
Corporation Sugarcane resource
supplier

Joint venture financing

and feedstock partner to
Renewable RCC plant projects
Renewable IBC
Chemicals RFAC ethanol supplier
Fuels of America Technologies Inc.
Corporation

Pending Gulf Coast Bio Technologies

Mid Atlantic Ethylene Plant and
USA in progress & Intellectual
Distributor engineering Property

Targeting Feasibility
Additional work underway Licensed
Coastal for second plant Technologies
Distributors

Future ethanol
biotech Acquired
refineries Technologies

Source: Company’s presentations

IBOT’s renewable resources provider and joint venture projects partner is Cosan SA, the world’s largest sugar
cane processor based in Brazil. IBOT plans to import and distribute Brazilian sugar cane ethanol for use as a
fuel in the United States. Sugar cane is considered the most cost-efficient fuel source and the Company plans to
capitalize on sugar cane’s competitive advantages to penetrate the U.S. biofuels market in USA coastal areas .
Sugar cane ethanol has a number of advantages:

Energy Produced - When the entire process is considered, from the planting of sugarcane to the use of ethanol as
a motor vehicle fuel, sugarcane ethanol produces 9.3 units of clean, renewable fuel for every unit of fossil energy
utilized. Ethanol produced from other feedstocks such as sugarbeets, cereals and corn, manages a 2-to-1 ratio
today. (UNICA 2008)

Environmental Impact

Cane ethanol reduces greenhouse gas emissions by up to 90% compared to gasoline, a reduction unmatched by
any other biofuel produced with existing technology and comparable to what is attained with second-generation
biofuels.

Industrial Biotechnology Corp. (IBOT) 5

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Sugarcane also captures more carbon when compared to crops such as corn or soybeans because it is a unique
semi-perennial crop only replanted every six years. In addition, sugarcane actually generates a carbon credit,
capturing significantly larger amounts of carbon than the quantities originally stocked on degraded pastures
- the expansion area of choice for sugarcane in Brazil. (UNICA 2008)

IBOT’s biofuel business benefits from rising oil prices, the depletion of carbon-based resources and increasing
environmental concerns. Oil prices are rising at an unprecedented rate, and greenhouse gases associated with
carbon-based fuels are causing environmental concerns and creating a “green” choices backlash.

Operating Subsidiaries
The Company has three operating subsidiaries:

- Renewable Fuels of America Corp.;

- Renewable Chemicals Corp.; and
- IBC Technologies Inc.

Renewable Fuels of America Corp.

RFAC plans to leverage available partnership agreements, trade benefits, and existing ethanol distribution net-
works and infrastructure in the U.S. mid-Atlantic coastal region to sell sugar cane ethanol. Due to the commod-
ity nature of alternative fuels and RFAC’s joint venture distribution business model, net margins are estimated
at an average of 1.5%

The Company’s joint venture partner, Cosan SA, is the world’s largest sugar cane ethanol provider. Cosan is
also the largest grower and processor of sugar cane, the second largest ethanol producer and the world’s lead-
ing sugar producer with 2008 sales estimated at $7 billion.

Cosan operates 17 mills, two refineries, two port facilities, and various warehouses in Brazil, and is mapping
new areas and conducting feasibility studies, considering soil, weather and export logistics in preparation for
expanding production capacity to meet anticipated U.S. sugar cane ethanol demand.

Industrial Biotechnology Corp. (IBOT) 6

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Most of the ethanol produced in the United States comes from corn, but this is not an optimal feedstock for sev-
eral reasons. The biggest drawbacks are the inability to increase corn production to levels needed to produce
ethanol economically, competitive uses for corn as a food source, and the debate over governmental subsidies
to corn farmers. Unlike corn, sugar cane is not a subsidized product, is not a food source and can be grown in
sufficient quantities to meet demand. The chart below compares sugar cane and corn as biofuel feedstocks.

Brazilian Sugar cane vs. U.S. corn

Brazilian Sugarcane U.S. Corn

Energy Efficient (Output/Input) 8.3x 1.3x – 1.8x

Self Sufficient, Revenue From Primarily Natural Gas (Commodity

Process Energy Cogeneration Exposure)

Planting Cycle 5 – 6 Years 1 Year

Mixed Between Proprietary, Majority Supplied by Independent

Supply Leased and Third Party Land Farmers

Higher Co2 absorption

Environmental Concerns Lower CO2 absorption per acre
per acre
Yes
Competing Food Demands No (Feedstock and Human
Consumption)

Integrated Operations/ No
Yes (Consecana Formula)
Captive Raw Material Supply (Subject to Corn Price Volatility)

Ethanol Prices 5-13-08 $1.78 / gallon

(1)
$3. 56/ gallon
(2)

(without subsidies or tariffs)

(1) no government subsidy or requirement, open market competitive pricing
(2) includes additional 96 cents per gallon US government subsidy

Source: Company’s presentations

Renewable Chemicals Corp.

Renewable Chemicals Corp. plans to produce ethanol derivative chemicals as an alternative to petroleum-
based compounds. Its renewable chemicals will be customized to meet the specific sustainability and pricing
requirements of the consumer packaging, energy, agricultural, pesticides, materials and polymer industries. A
wide range of derivative chemicals can be developed from ethanol.

Cosan SA is IBOT’s joint venture plant production partner and sugarcane ethanol supplier, participating with
IBOT on those ethanol chemical projects that are economically feasible. RCC plans to develop production plants
leveraging existing petrochemical infrastructure when possible via joint ventures.

Industrial Biotechnology Corp. (IBOT) 7

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

IBOT’s chemical opportunities

Polyethylenes LDPE, HDPE, LLDPE

Polystyrene

ABS, SAN
Ethylbenzene Styrene
SBR

Unsaturated
Polyesters
(Mono)
Sugar Ethylene
Ethylene Glycol
Polyesters

Cane MEA

Ethanol Ethylene Oxide Ethanolamines DEA

TEA
Glycol Ethers

Ethylene Vinyl Chloride PVC

Dichloride Monomer
Vinyl Acetate
Acetadehyde Acetic Acid
Monomer
Acrylate
Ethyl Acrylate
Elastomers
Solvents
Glycol Ethers
Ethyl Amines

Ethyl Acetate Solvents

Solvents

Source: Company’s presentations

During the 1950s and 1960s, ethanol was used to produce commodity chemicals in Brazil, India and Australia.
After a period of decline in the early 1970s, the ethanol-based industry staged a comeback due to escalating oil
prices, geopolitical considerations and the need to reduce dependence on foreign oil. Rising petroleum prices,
ethanol efficiency improvements and environmental advantages are driving a shift back to ethanol as a chemical
feedstock source.

Technological progress has led to significant productivity improvements

and cost reductions in ethanol production. With oil prices at $130 per barrel, ethanol has emerged as a viable
alternative that meets environmental concerns and is sustainable and eco-efficient.

Ethylene

Ethylene is the precursor chemical needed to make renewable high-density and low-density polyethylene used
in consumer packaging. Ethylene made from surgarcane ethanol has the ‘Same properties, processing, and

Industrial Biotechnology Corp. (IBOT) 8

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

performance as polyethylene made from natural gas or oil feedstocks –because the polyethylene molecules are
the same (American Chemistry Council) .In the 1930s and 1940s, ethanol dehydration was an important source
of ethylene for the chemical and polymer industries in the United States and UK. IBOT in conjunction with
Cosan are in planning stages to develop an ethylene-from-sugarcane ethanol plant in the U.S. coastal areas. Fea-
sability studies and engineering are in progress. Demand for renewable packaging is strong;

“There has also been growing demand from retail giants like Wal-Mart Stores Inc., newly sensitive to
environmental pressure, for packaging made from renewable plastic. While the fledgling biochemicals
market is meager, some adherents figure it could be a $150 billion industry if optimistic projections --
that they will replace 10% of the petroleum used to make chemicals globally by 2020 -- pan out.” (Wall
Street Journal)

Sugarcane Converted to
Ethanol Coastal US Polyethylene
ethylene

Renewable, Sustainable
Consumer Packaging

Source: Company’s presentations

Additionally:

Wal-Mart CEO Lee Scott laid out three environmental goals for the company: “to be supplied 10 percent by
renewable energy, to create zero waste; and to sell products that sustain not only company resources, but the
environment…It is probably the most significant initiative that is transforming the whole packaging industry..
Companies like P&G and Unilever have to look at their packaging in order to get the incentives at Wal-Mart.”
(ADWEEK)

Several other companies have already announced plans to install ethylene-from-ethanol plants:

1. Braskem is constructing at least two ethylene-from-ethanol plants: the first plant, scheduled to start-up
in 2010, set to be located in Bahia or Rio Grande do Sul, will have a capacity of 200,000 tons per year of polyeth-
ylene; the second plant is planned for a 2013 start-up in Sao Paulo.
2. Dow and Crystalsev have announced a joint venture to produce 350,000 tons per year of LLDPE (Dowlex)
from ethanol-via-ethylene by 2011.
3. Solvay Indupa is planning to use sugar cane ethanol to produce 60,000 tons per year of ethylene as a raw
material for PVC; start-up is scheduled for late 2010.
4. China: Songyuan Ji’an Biochemical is planning a 300,000 ton per year ethanol-based ethylene plant in
Jilin Province.

IBC Technologies Inc.

This business is the technology and intellectual property arm for IBOT. It focuses on new approaches for bio-
logically manufacturing chemicals more efficiently, at significantly lower costs, and with substantially lower
environmental impact than traditional methods.

Industrial Biotechnology Corp. (IBOT) 9

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

IBC Technologies targets the development of:

- Biofuels from alternative crops that result in lower ethanol production costs;
- Conversion technologies - the ability to take ethanol and ethylene and convert it into propylene and
other higher olefins;
- Downstream technologies - the conversion of ethanol and ethylene to other products;
- Lignocelluloses and biomass for making ethanol and other products;
- New second generation fuel molecules made from renewable sources;
- Renewable energy technologies, including more efficient and higher yielding bio-ethanol, biodiesel,
biogas and biopetroleum generation technologies; and
- Renewable chemical technologies (including proprietary processes for generating high value
chemicals from bio-based feedstock).

Industry Outlook

Clean energy markets

While oil and natural gas prices remain high and nuclear and coal-based energy remain dogged by environ-
mental and safety concerns, clean energy is becoming increasingly competitive with its “dirtier” counterparts.

Wind power, for example, is now one of the least expensive and most easily deployed energy sources. Ethanol
has gained favor for vehicle use in both the United States and abroad. Biodiesel, made from a wide range of ani-
mal and vegetable oils, is priced within striking distance of petroleum-based diesel. Even solar, still relatively
expensive without subsidies, competes favorably in some locations and is often the cheapest power choice in
remote regions.

Clean energy markets trends, $ billion

60
2005
51.1 52.2
48.5
50 2015

40

30

20 15.1
15.7
18.8 11.2
10

1.2
0
Wind Energy Solar Energy Biofuels other

Source: http://www.cleanedge.com/reports-trends2006.php

Industrial Biotechnology Corp. (IBOT) 10

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Benefiting from strong federal support and multi-billion dollar investments in research and development, glob-
al clean-energy markets are expected to bloom over the next decade. According to Clean Edge research, biofu-
els (global manufacturing and wholesale pricing of ethanol and biodiesel) will grow from $15.7 billion in 2005
to $52.5 billion by 2015. Wind power (new installation capital costs) will expand from $11.8 billion in 2005 to
$48.5 billion in 2015. Solar photovoltaics (including modules, system components, and installation) will grow
from an $11.2 billion industry in 2005 to $51.1 billion by 2015. The fuel cell and distributed hydrogen market
will grow from $1.2 billion last year to $15.1 billion by 20152.

In total, these four clean energy technologies, which generated revenues of $40 billion in 2005, will grow four-
fold in 10 years to $167 billion.

According to Emerging Markets Online, the global market for biodiesel is poised for explosive growth. Europe
currently represents 90% of global biodiesel consumption and production; however, the United States is in-
creasing production at a faster rate than Europe.

Emerging Markets Online predicts biodiesel could represent as much as 20% of all on-road diesel used in
Brazil, Europe, China and India by 2020. This prospect may be realized faster than anticipated if governments
continue to aggressively pursue clean energy targets, enact investor-friendly tax incentives for biodiesel pro-
duction and blending, and help promote research and development of new biodiesel feedstocks such as algae
biodiesel.

According to Emerging Markets Online, U.S. biodiesel consumption grew from 25 million gallons in 2004 to
300 million gallons in 2006, and was estimated at 750 million gallons in 2007. The U.S. biodiesel market must
grow significantly to reach European levels. In Europe, biodiesel represents 2% of total on-road transportation
fuel consumption and is expected to reach 6% by 2010. In the United States, biodiesel sales recently amounted
to less than 0.5% of all petro-diesel on-road consumption3.

Prices for renewable energy stocks rose in the second half of 2007 after the U.S. Senate passed a revised energy
bill designed to reduce dependence on imported oil by imposing the biggest increase in fuel-efficiency stan-
dards in 32 years. The energy bill mandated a six-fold increase in renewable fuel usage as a blend with gasoline
to 36 billion gallons annually by 2022.

2 http://www.cleanedge.com/reports-trends2006.php
3 http://www.emerging-markets.com/biodiesel/default.asp

Industrial Biotechnology Corp. (IBOT) 11

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

U.S. energy consumption by energy source, 2002-2006, (Quadrillion Btu)

Energy Source 2002 2003 2004 2005 2006

Total 97.93 98.28 100.41 100.76 99.96
Fossil Fuels 83.99 84.39 86.19 86.45 85.31
Coal 21.90 22.32 22.47 22.79 22.51
Coal Coke Net Imports 0.06 0.05 0.14 0.04 0.06
Natural Gas 23.63 22.97 22.99 22.89 22.52
Petroleum 38.40 39.05 40.59 40.74 40.22
Electricity Net Imports 0.07 0.02 0.04 0.08 0.06
Nuclear Electric Power 8.14 7.96 8.22 8.16 8.21
Renewable Energy 5.89 6.15 6.26 6.40 6.84
Biomass 2.71 2.82 3.02 3.11 3.28
Biofuels 0.31 0.41 0.51 0.59 0.76
Waste 0.40 0.40 0.39 0.40 0.40
Wood Derived Fuels 2.00 2.00 2.12 2.12 2.11
Geothermal Energy 0.33 0.33 0.34 0.34 0.35
Hydroelectric Conventional 2.69 2.83 2.69 2.70 2.89
Solar/ PV Energy 0.06 0.06 0.06 0.07 0.07
Wind Energy 0.11 0.12 0.14 0.18 0.26

Source: www.eia.doe.gov.

Petroleum market

Oil prices have doubled in the last year and risen 40% since the beginning of 2008, boosted by expectations that
supply will struggle to meet demand from newly industrializing countries such as China and India. In addi-
tion to supply/demand fundamentals, there are a series of geopolitical factors also contributing to skyrocketing
oil prices, including regional tensions in Nigeria, Iraq and Iran. Oil prices closed near a record $150 a barrel
in July 2008, reacting to continued weakness in the U.S. dollar and an emergency shutdown of a North Sea oil
production platform.
NYMEX Crude Oil Futures Close (Front Month)

$160

$140
$128.88
$ / barrel

$120

$100

$80

$60
07/02/2007 08/30/2007 10/30/2007 12/31/2007 03/03/2008 05/01/2008 07/01/2008
08/01/2007 10/01/2007 11/29/2007 01/31/2008 04/02/2008 06/02/2008
July 2nd, 2007 - July 18, 2008 Close

http://www.wtrg.com/daily/crudeoilprice.html

Industrial Biotechnology Corp. (IBOT) 12

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Oil seed crop prices

Biodiesel refiners are challenged by rising commodity and vegetable oil prices. The raw material alone can cost
more than $4 a gallon, which is slightly more than the wholesale price of refined diesel. Without a federal sub-
sidy (the federal government gives subsidies of 50 cents per gallon for used oil and animal fat and $1 a gallon
for fresh oil), most biodiesel manufacturers would lose money.

Soybean oil weekly price chart

07/18/2008 C=62.09 -2.39 O=64.00 H=64.10 L=61.75 Mov Avg 3 lines

70

65

60

55

50

45

40

35

30

25

RSI 54.77 20.00 80.00

60.00

Volume 390586.00 Open Interest 264007.00

300000.

J O 2007 A J O 2008 A J

Source: http://futures.tradingcharts.com/chart/SO/W?1196190901

Another important issue for biodiesel companies is reducing capital costs. Plant costs can range between 80
cents and $1.25 per gallon of installed capacity, which further reduces the competitiveness of biodiesel.

Rising soybean oil prices are dampening the prospects of the biodiesel industry. Because of high soybean oil
prices, construction has stopped on the North Prairie Productions biodiesel plant. Higher soybean oil prices
make the end-product too expensive relative to regular diesel. The going rate for soybean oil has more than
doubled since planning for this new plant began.

Industrial Biotechnology Corp. (IBOT) 13

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Despite these concerns, large companies are attracted to the biodiesel market by rising demand and
increasingly stringent emissions requirements which raise refining costs for conventional diesel fuel.
IBOT could be a major beneficiary of current trends. Ethanol derived from sugar cane would be cheap-
er to produce and address vegetable oil and corn cost and supply issues.

Financial Record
The Company is in an early development stage and has yet to report revenues. IBOT anticipates to commence
revenues from alternative fuel distribution in 4th -1st quarter of 2008-2009 upon finalizing distribution and
storage logistics in targeted USA coastal areas.

Incomes statement, $

2007 Q1 2008

Total Expenses, including 4,622,867 40,600

Licensing Rights 3,585,984 0
Research and Development 237,260 0
Professional Fees 307,118 10,830
Salaries and Benefits 472,451 18,555
Travel 105,974 9,001
Other General and Administrative expenses 348,244 2,214
Other Expense/(Income) -434,164 -

Net income/(loss) -4,622,867 -40,600

Net loss per common share -0.30 0.00

Source: Company 10-K and 10-Q

The Company will likely require additional equity and/or debt financing to fund its growth plans. Cash and
equivalents totalled $2.5 million at the end of the 2008 first quarter.
Balance sheet, $

31-Dec-07 31-Mar-08

Cash and equivalents 23,667 2,520,909

Total current assets 204,983 2,712,324
Fixed assets 9,302 9,302
Total assets 214,285 2,721,626

Current liabilities 462,947 488,111

Long term liabilities, including 659,209 3,182,150
Debt 71,262 2,569,039
Shareholders’ equity, including -444,924 -460,525
Accumulated deficit -7,600,975 -7,641,575

Source: Company 10-K and 10-Q

Industrial Biotechnology Corp. (IBOT) 14

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Valuation
Outlook

The Company’s early-development stage and lack of revenues make it difficult to assess its future financial
prospects. However, based on our understanding of IBOT’s business model and our discussions with manage-
ment, we believe the Company has a good chance of becoming a rising star in the Industrial Biotechnology
renewable chemicals Sector and alternative fuels market.

IBOT has formed a strategic alliance with Cosan SA, to provide ethanol for the Company’s Renewable Fuels
of America Inc. and Renewable Chemicals Corp. subsidiaries. RFAC has identified storage tank locations and
ethanol distributors and plans to commence shipments of sugar cane ethanol into the U.S. market in 4th-1st
quarter 2008 -2009. We will conservatively assume the Company will start generating revenue in 2009

IBOT plans to:

1. Import and distribute ethanol in the United States

2. Commence manufacturing of ethanol-based chemicals for consumer packaging during 2010 -2011.
3. Increase its penetration of the ethanol market and develop other ethanol-based chemicals beginning
in 2012.

IBOT’s business plan

- Ethanol – Ethylene plant

- Ethanol importation and
distribution for fuel
- Joint venture with a
chemical company for an
Ethanol – Ethylene Plant
2008–2009
commences production
- Increased ethanol fuels
2012+
market penetration
- Consumer packaging hits
store shelves
- Increased ethanol fuels
2010–2011 market penetration
- Additional chemical plants
Increased uses for biore-
newable ethylene
- Further leverage the
renewable marketplace
- Other C2-derivative
chemicals

“Quickly generate cash flow, build “Building the future” ramp up ethanol
industrial relationship” identify fuel distribution, establish multiple
ethanol chemical opportunities ethanol chemical plants

Source: Company’s presentations

Industrial Biotechnology Corp. (IBOT) 15

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Based on our discussions with management, we forecast revenues and net income as follows:

Revenue and net income forecast, $ thousands

2009 2010 2011 2012 2013 2014

Revenues 321,840 490,565 713,549 847,339 981,130 1,070,323

RFAC - - 280,398 344,739 665,696 1,010,435
BRCC 321,840 490,565 993,947 1,192,078 1,646,826 2,080,758

Cost of Sales 319,017 486,262 707,290 839,906 972,523 1,060,934
RFAC - - 256,643 308,336 597,066 905,402
BRCC 319,017 486,262 963,933 1,148,242 1,569,589 1,966,336

Gross Margin 2,823 4,303 6,259 7,433 8,607 9,389
RFAC - - 23,755 36,403 68,630 105,033
BRCC 2,823 4,303 30,014 43,836 77,237 114,422

Net income 1,412 2,797 4,068 4,831 5,595 6,103
RFAC - - 21,030 25,855 49,927 75,783
BRCC 1,412 2,797 25,098 30,687 55,522 81,885

Source: Analyst estimates

RFAC - Renewable Fuels of America
BRCC - Renewable Chemicals Corp.

Renewable Fuels of America is likely to report solid revenues mainly due to the commodity aspect of ethanol
and fuels business and low margins estimated at 1.5% average. The revenue projections for 2009 assume com-
mercialization of 10 million gallons of ethanol per month which is not an important amount but are represent-
ing high revenue due to the high price of ethanol. Meanwhile the margins are low in the range of 1.5%.

The Renewable Chemicals Corp. is likely to produce revenue beginning with 2011. The chemical side is dif-
ferent due to its uniqueness and the time to market advantage at present. The margins are higher in the range
of 10-20% and IBOT is projecting an 18% carry or equity in the plant after dilution for funds required for the
plant.

Peer comparison

For valuation purposes, we compared IBOT with other ethanol producers and distributors in the United States.
The peer companies trade at 14 times forward P/E multiples and 0.20-0.30 time forward P/S multiples. We be-
lieve IBOT should be valued at similar multiples.

Unlike competitors, IBOT is not constrained by limited corn and soybean production and high prices. IBOT fo-
cuses on ethanol from sugar cane. Brazil by itself could create enough sugar plantations to supply U.S. ethanol
demand without damaging its rain forests or constraining sugar supplies.

Industrial Biotechnology Corp. (IBOT) 16

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Comparative analysis

Company name Ticker Mrkt. Cap. P/E P/S

Price, $
7/21/2008 Symbol $ Mn
2008 2009 2008 2009
Pacific Ethanol Inc. PEIX 2.32 102 n/m n/m 0.118 0.090
Verasun Energy Corp. VSE 6.81 1080 61.91 14.19 0.28 0.20
Aventine Renewable Energy AVR 6.62 278 17.42 14.09 0.11 0.07
Archer-Daniels-Midland Co. ADM 29.41 18940 10.04 9.90 0.30 0.27

Median 17.42 14.09 0.28 0.20

Source: Yahoo Finance

Applying our 2009 revenue forecast to the peer group’s 0.3 times forward P/S multiple, we derive a 2.20 target
price for IBOT shares. Our valuation model assumes 37 million fully diluted shares outstanding and 20% dilu-
tion resulting from future equity sales. Accordingly, we are initiating coverage of IBOT with a Speculative Buy
rating and a 2.20 price target.

Investment Risks

Inherent Business risks

IBOT is pursuing an aggressive growth strategy in the renewable energy sector. While the Company has pro-
vided an optimistic outlook concerning future revenues and profitability, there is no assurance it will be able to
maintain this growth pace or capitalize on its ethanol from sugar cane distribution operations. Opportunities
will be limited if its expansion is not made on economically favorable terms.

Additional capital required to continue operations

The Company will require external financing to complete the development of its distribution network and ac-
quire the initial inventory of ethanol to commence commercialization. If the Company fails to obtain sufficient
funds, implementation of its business plan could stall, affecting our valuation model.

History of losses

Its history of losses, negative operating cash flows, lack of revenues and 7.6 million stockholders’ equity deficit
are causes for concern. In addition, the Company has relied on debt financing in the past.

Industrial Biotechnology Corp. (IBOT) 17

 Analyst: Victor Sula, Ph.D.
Initial Report
August 4th, 2008

Management
Andy Badolato Andy Badolato has 22 years experience in venture capital, technology transfer, M&A transac-
Chairman, tions, mezzanine and public equity financings.Mr. Badolato has been a co- founder and/or early
Chief Executive Officer stage investor in more than 23 companies that together have raised more than 1.0 billion in
private equity and obtained a market capitalization of more than 29 billion. He was the founder,
president and a director of MILCOM Technologies, successfully licensing more than 1.6 billion
of research and development from Lockheed Martin. MILCOM has launched 13 companies that
together have attracted more than 600 million in venture capital.

Mr. Badolato was former vice president of corporate finance for St. James, the founder and
initial seed round investor of Inktomi, a company that obtained a 20 billion market valuation.
Mr. Badolato was also president and a director of SinoFresh HealthCare Inc., a developer and
marketer of therapies for inflammatory and infectious diseases of the upper respiratory system.
Mr. Badolato successfully launched its lead product, SinoFresh™ Nasal, Oral & Sinus Care,
through a national distribution contract that made it available in more than 20,000 retail outlets
nationwide.

Mr. Badolato is a co-founder of Industrial Biotechnology Corp. He is also a managing director

of White Knights & Vultures LLC., a venture capital hedge fund. Mr. Badolato graduated from
St. Thomas of Villanova University in Miami, Florida, with a degree in business.

David L. West David West has seven years public accounting experience at KMPG, formerly serving as CFO
Director, of Bentley Pharmaceuticals Inc., International Diversified Industries Inc. and Progress Telecom
Chief Financial Officer LLC, (formerly known as Progress Telecommunications Corp.). He also worked at Lewis, Birch
& Ricardo, PA. as a forensic accountant. He is a CPA and holds an MBA from Louisiana State
University. Mr. West is fully knowledgeable and compliance certified with Sarbanes Oxley re-
quirements and procedures.

Tom Hentschell Tom Hentschell has 24 years of operations, sales, marketing and business development experi-
Vice President ence. He has worked at Infinium Labs, Iprint Technologies, and at Xerox Corp., where he was
Operations instrumental in launching the channels division, securing contracts with Merck, Baxter, United
Healthcare, and Blue Cross & Blue Shield.Mr. Hentschell graduated from Loyola University of
New Orleans, with a degree in business.

Ron Doran Ron Doran has extensive sales and marketing experience in Asian market product development,
Vice President Sales distribution, outsourcing and manufacturing channels. Mr. Doran has also served as a merchant
banker and has overseen development, financing, and strategic relationships for various health-
care and technology companies, including Uniphyd Corp., Milcom and Terranex. Mr. Doran is
a co-founder of Industrial Biotechnology Corp.

Craig McClure Craig McClure has 20 years experience in investment management, retail brokerage and ven-
Vice President ture capital. He worked at Wachovia Securities, Aegon NV Brokerage, and LaSalle St. Securities
Investor and Public Rela- as a registered representative and branch manager. He has experience in both public and private
tions capital transactions and has worked with a large number of clients and on many market transac-
tions. Mr. McClure attended State University of New York at Potsdam.

Harvey Hendler Harvey Hendler specializes in strategic business planning and operations. His corporate clients
Strategic Planning have included: Dow, Ciba, GlaxoSmithKline, InfoMedics, Monsanto, Pfizer, Roche, Millennium
Chemicals, FMC Corp. and International Paper.Mr. Hendler has a Master of Science in manage-
ment from the New Jersey Institute of Technology.

Industrial Biotechnology Corp. (IBOT) 18

 Analyst: Victor Sula, PhD
Initial Report
August 4th, 2008

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We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or com-
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To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information
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I, Victor Sula, PhD, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securi-
ties included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the
performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Fi-
nancial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity
and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy
of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of
Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Industrial Biotechnology Corp. (IBOT) 19