Alternative Construction Technologies: Green and Growing

Alternative Construction Technologies, Inc. (ACCY.OB) produces energy-efficient building solutions, from design through construction, using the Company’s patented building technology—the ACTech® panel system. As governments implement “green” mandates and corporations seek to reduce their carbon footprint, demand for ACCY’s building technology will strengthen. However, a correction in the housing market, a leading indicator of commercial construction, and the tightening of states’ fiscal budgets are discouraging vulnerabilities for any construction company, even a profitable and growing “green” company.

INVESTMENT HIGHLIGHTS

• 2007 revenue jumps 50% to $12.9 million. ACCY finished the year with four profitable quarters and diluted earnings per share of $0.14 on a record $12.96 million in revenue for the fiscal year ended December 31, 2007.
• Gross margin more than doubled to 33.7% in 2007. The Company used 2006 to implement strategies that drastically reduced the cost of goods as a percentage of revenue.
• ACCY’s business model is proven with its first profitable year. ACCY has experienced a remarkable turnaround in the last year. The Company reorganized in 2006 after a $2 million loss and has since been able to reduce expenses and improve their top line. The Company recorded its first profitable quarter since its restructuring during 1Q07, primarily due to a couple of strategic acquisitions in 2Q07 and 3Q07. Net income for the year ended December 30, 2007, soared over 100% to a record $1.6 million compared to a net loss of ($2.0) million in 2006.
• Joint venture to produce a solar panel is the right move. Solar 18 ACTech Panel, Inc., was formed in January 2008 as a joint venture between ACCY, a subsidiary, and Atlan International Holdings Corp., to create a solar panel utilizing the technology of the ACTech® Panel System. We think the Solar 18 ACTech Panel is a great endeavor that only adds to ACCY’s “green” credentials. The Solar 18 ACTech Panel is projected to be delivered in Q2 or Q3 of 2008.
• AMEX listing postponed into 2008. The Company’s AMEX application was submitted in 1Q07 and delayed pending new additions to the board of directors. This requirement was met and the application was resubmitted in late 4Q07. The Company has reserved the symbol “SIP” with the AMEX while they await application approval.

COMPANY BACKGROUND

Alternative Construction Technologies, Inc., is a manufacturer of structural insulated panels (SIPs) for use in commercial, institutional, modular, and residential construction projects. The Company’s patented construction technology, the ACTech® Panel System, is used in the design and erection of state of the art buildings as well as patented safe rooms. The environmentally friendly ACTech® panel offers increased rigidity, energy efficiencies, and reduced construction times over traditional wood- and brick-based building products.

In operation for over 14 years, ACCYhas a multidivisional corporate structure consisting of manufacturing, design and consulting, and building divisions. Alternative Construction Manufacturing produces the ACTech® panel at the Company’s 154,000 square foot manufacturing facility in Bolivar, Tennessee. Alternative Construction Industries offers complementary services including design and consulting as well as selling FEMA-compliant safe rooms (panic rooms). Alternative Construction Companies consists of three general contractors which perform the build out work.

ACCY built its first home, located in Florida, 14 years ago using SIPs. The Company originally outsourced SIP production, but in 1997 ACCY began doing its own manufacturing. ACCY’s products are currently used in structures in 16 countries and 22 states. The Company’s common shares commenced trading on April 3, 2007, and currently trade on the Nasdaq OTC Bulletin Board under the symbol “ACCY.OB.”

CONSTRUCTION INDUSTRY RECESSION

The construction industry is a $1.3 trillion per year industry in the United States, however, recent catastrophes in the housing and credit markets have threatened the industry’s robust growth. The United States Department of Labor reported construction employment decreased by 39,000 jobs in February 2008 and has fallen by 331,000 jobs since it hit its high in September 2006. This weakening economic indicator, supported by a report from McGraw-Hill Construction that expects a 3.1% decline in single-family housing starts, combined with a 1.6% decline in the non-residential sector in 2008, leads us to believe that 2008 will be another bad year for the residential sector with spillover from the mortgage crisis dragging down the commercial market.

Residential

The United States housing bubble burst sometime around September 2005, and since then we have heard about the subprime credit crisis, foreclosures, and oversupply. Residential building has lost 137,000 jobs since September 2006; and, according to the Structural Insulated Panel Association [SIPA], single-family units built with SIPs decreased 16% in 2006 and SIP production growth dropped 6% compared with 2005. Despite a currently declining housing market, SIPA says homes built with SIPs are expected to increase to 5% over the next five years.

Only 2% of current homes are built with SIPs, and although residential construction was less than 25% of ACCY’s SIP business in 2007, the Company sees growth in 2008 in national and international markets.

During the Company’s 4Q07 earnings call we asked the CEO, Michael Hawkins, how the housing crash has affected the Company’s backlog, and he said:

Our model is to be a global business and not necessarily a national business. So when you look at the housing shortage, yes, while there may be a recession sitting in the United States, there are many, many Third World countries that are moving up and really are no longer Third World countries—that have huge needs for housing.

SIPs have been adopted into the International Residential Code and ACCY is actively marketing its products to developing countries where affordable housing is most needed. The U.N. reports that over 120 million houses will be needed worldwide by 2020. ACCY’s modular housing kits are well-suited for the housing needs among Third World and developing countries. ACCY’s SIPs have been used in construction in 14 different countries including Ukraine, Sri Lanka, and Mexico. Closer to home, over 300,000 homes are needed in the United States as a result of severe storms such as 2004’s hurricanes Charley, Rita, and Katrina.

Commercial

Rises in the nonresidential construction market have largely offset slumping residential sales, but we believe weakening demand and oversupply amid an economic recession will soon impact commercial construction. Construction costs continue to rise as financial conditions tighten, contributing to an oversupply of commercial properties. Reis Inc., a provider of real estate market performance information, says that 19 million square feet of office space was on the market in 4Q07, the most since 4Q00.

On February 20, 2008, Richard Berner, Managing Director, Co-head of Global Economics, and Chief U.S. Economist at Morgan Stanley, stated:

Although nonresidential or structures investment accounted for only 3.4% of (nominal) GDP, the 16% jump in real outlays contributed half a point to overall real GDP growth over the four quarters of 2007. Such a gain—the sharpest four-quarter rise since 1984—is unsustainable, and we think this economic asset is about to turn into a liability.

We expect commercial construction growth to drop from a 10% increase in 2007, which brought it to $83.1 billion, to a 1% to 2% increase in 2008. Lower construction employment, nearly flat industrial production growth, and large corporate losses will likely reduce or delay new commercial building starts for much of 2008.

Institutional

The institutional market has been the bread and butter for ACCY for the last several years. ACCY has over 1,500 buildings in service for the Florida State School Board. School districts have been a significant source of demand for modular classrooms using the ACTech® Panel, and ACCY expects growth in the educational market in 2008.

However, many states are cutting school district budgets in 2008 due to lower revenues being generated from sales taxes. In Florida’s Broward County, $53 million has been cut from the district’s budget for the 2008 academic year, with millions more anticipated to be cut in education in 2009 as Florida faces a $2 billion budget shortfall. Restrained spending will likely delay new construction projects.

INDUSTRY TRANSITION TO “GREEN” ALTERNATIVES

There is undeniable momentum for “green” building solutions that meet consumers’and corporations’need for renewable energy and reduced consumption. In the first three quarters of 2007, venture capital firms poured a record $2.6 billion into clean tech startups. Silicon Valley is betting that funding green startups will become very profitable. According to a February 11, 2008, BusinessWeek article, green building starts are projected to reach $12 billion in 2008, and the green economy could produce as many as 40 million jobs and $4.53 trillion in annual revenue by 2030.

In an economy where oil is above $90, there is a compelling case for saving energy. The push for clean energy seems to be making its way into both state and federal political agendas.

Government Regulation

The United States is learning that if it doesn’t lead the development of “green” technologies, we could trade oil dependence for reliance on alternative energy products built by other nations far ahead of us. However, there is no aggressive, sustained federal policy that mandates building with green technologies. The United States Green Building Report reveals that only 0.2%, an average of $193 million a year, of the federally funded budget is spent on green building. Even more troubling is that the construction industry only puts 0.6% of its sales back into research.

During the first six months in 2006, there were 22 states that ordered utilities to obtain as much as 33% of their electricity from renewable sources over the next decade. The city of Pasadena, California, has been in the national spotlight for its proactive stance on the use of green building practices in the private sector. The city has passed an ordinance requiring all commercial construction over 25,000 square feet to follow Leadership in Energy and Environmental Design [LEED] guidelines.

Twenty-two states and Washington, D.C., currently enforce “Green Laws” that define the use of green building materials, and many other states are considering similar actions. Connecticut, Wisconsin, and Illinois have set up commissions to draft green building legislation and regulations. Nevada, New Mexico, Virginia, Maryland, and Washington, D.C., require state and/or state-funded buildings to be built to a green building standard and offer incentives for compliance. Washington, California, Arizona, Colorado, Maine, Massachusetts, Rhode Island, New Jersey, South Carolina, Michigan, and Florida require state-funded public and educational buildings to be built to “green” standards.

The chart below depicts the rise in cities with some green legislation enacted.

Source: American Institute of Architects

According to recent U.S. Department of Energy figures, buildings account for 40% of all energy and 71% of electricity consumed in the United States and also produce over 38% of the carbon dioxide emissions.

As a result, state governments, such as the State of Florida Office of the Governor, have passed Executive Orders to reduce greenhouse gas emissions. Florida Governor Charlie Christ signed the first-ever greenhouse gas emission reduction targets for Florida and is making significant improvements to the state building code that would require more energy-efficient homes. Legislation such as Florida’s Climate Action Team, instituted in May 2007, is being used to evaluate “green” energy products in all industrial buildings and state construction projects. As ACCY earns its “green product” stamp of approval from state and national governments, its growth opportunities for government contracts will increase significantly.

“Green” Hurdles

One problem preventing widespread adoption of “green” building is that people lack knowledge about green construction and its benefits. We believe it will take public awareness of the energy cost savings that come with green homes before appeal spreads beyond consumers concerned about global warming, pollution, and natural resources. Ratings standards such as Energy Star and the U.S. Green Building Council’s LEED point system help people evaluate costs and benefits, but many people remain unaware of special lending programs that enable green builders to get lower interest rates than traditional builders.

Cost has been another stumbling block to the green building movement ever since interest in solar homes, sod-topped buildings, and dome houses took root in the 1960s. Most homeowners like the idea of going green until they get the bill. Green materials and construction cost extra, making them a hard sell. Enermodal Engineering, a Canada-based consulting firm, estimates the premium at 5% to 10%, depending on how extensively a builder uses recycled materials and water- and energy-efficient products. When Specpan, an Indianapolis research firm, surveyed builders recently for Building Products magazine, the greatest number estimated a 10% to 19% cost increase when going green.

PRODUCT ADVANTAGES

Although building “green” has higher upfront costs, the reduced energy consumption yields significant savings on energy bills. ACCY’s proprietary and patented building solution can reduce monthly energy costs by 30%–50% on average. With 40% of domestic energy consumption coming from buildings, exceeding even energy consumption from transportation, ACCY’s ACTech® panel system helps reduce C02 emissions in a realistic and effective way.

The ACTech® panel offers better thermal performance than conventional building materials while being environmentally friendly. Seventy-three percent of the steel that is used in the 26 gauge galvanized steel top and bottom skins comes from a recycled material. The rigid Class 1 polyurethane foam insulating core is made from 20% recycled material and the entire SIP is certified under the state of California recycled program.

The demand for sustainable home and office construction has become a major market force. Businesses and homeowners in every state are vulnerable to tornadoes and severe weather that threaten to damage, destroy, and condemn buildings. ACCY’s ACTech® Panel possesses disaster-resistant strength and has tested stronger than conventional concrete block or wood frame construction. The panel has been through over $7 million in testing over the past eight years, including being tested by the Miami Hurricane Center. In hurricane projectile tests, the ACTech® Panel meets the most stringent wind, projectile, and uplift codes in the nation, levied in Miami-Dade County, Florida, and the 2006 Florida Building Code. The ACTech® Panel is also easier to construct with, saving labor cost and cutting construction time. The ACTech® panel system can reduce on-site construction time by 34%, thereby reducing labor costs, which represents a major benefit to builders.

Product Testing and Endorsements

According to ACCY, the Company’s SIPs have undergone extensive testing by the following organizations:

• California State Recycled Waste Content Certification
• Omeg Point Laboratories
• Miami Fenestration Lab
• Air Quality Sciences
• Acoustical Testing Lab
• Texas Tech University
• Radco, Inc.
• HUD
• Florida Department of Community Affairs
• Georgia Department of Community Affairs
• McGrath Rent Corporation
• United States Environmental Protection Agency

Florida Power & Light’s [FPL] BuildSmart Program has certified three completed ACTech® Panel galvanized steel structural insulated panel homes under FPL’s energy conservation-minded program. BuildSmart homes are inspected and approved by FPL representatives who are accredited by the State of Florida Department of Community Affairs to rate energy efficiency. In September 2007, FPL announced it would commit $2.4 billion to energy-efficiency projects and install 300 megawatts of new solar energy projects through 2012.

COMPETITION

The SIPindustry is fragmented with no industry giant. There are 67 known SIPmanufacturers in the United States, many of them doing less than $2 million in annual sales.

ACCY competes with conventional “sticks and bricks’ builders and other SIP manufacturers on features, benefits, and reputation. ACCYhas good differentiation from conventional builders with a superior product that possesses many comparative advantages of use due to its wide range of attributes. The ACTech® panel solution utilizes an inherently better galvanized steel “skin” SIP system that is energy efficient, stronger, safer, faster to construct with, and more economical than conventional wood- and brick-based building products.

ACCY’s ACTech® panel also has the benefit of being disaster, fire, insect, moisture, mold, and mildew resistant. The ACTech® panel is not a wood-based SIP, like many competing SIPs, which makes the material unattractive to termites.

Barriers to Entry

ACCY’s product differentiation, patent protection, and manufacturing capacity create high barriers to entry. According to management, competitors cannot match the quality, strength, features, and benefits that ACCY’s SIP product can claim. Besides having distinct and compelling advantages over competing SIP products, the Company’s manufacturing process is also protected by multiple patents. ACCY has three patents filed, of which one patent is protected in 13 different countries and gives worldwide protection of the manufacturing process. ACCY has patent protection in China, Columbia, Poland, Russia, Canada, Brazil, Argentina, and the United States.

ACCY’s reputation as a leader in the production of structural insulated panel systems (SIPs) helps the Company enjoy incredible customer loyalty and retention rates. When working with designers and communities prior to construction, from conception to fulfillment, the Company “closes” almost 100% of its client proposals with a 95% return customer rate.

ACCY has the current capacity to produce approximately 7.5 million square feet of structural insulated panels per year. From this same facility and with two additional lines of equipment, ACCY has the ability to produce over 22.5 million square feet per year. This production capability translates to approximately $80 million and $250 million in sales, respectively.

RECENT NEWS AND DEVELOPMENTS

- On January 18, 2008, ACCY announced that it received official notification that the ACTech® Panel system, its “state of the art,” galvanized steel structural insulated panel building material; several of its application specific, turnkey, scalable, stackable, portable and versatile “green” modular buildings; and its construction contracting services division are now eligible to receive domestic and international contract awards through and from the General Services Administration (GSA) of the United States government. The GSA serves as a centralized procurement and property management agency for the United States federal government. The GSA manages more than one-fourth of the government’s total procurement dollars and influences the management of $500 billion in federal assets, including 8,600 government-owned or leased buildings and 208,000 vehicles. The GSA helps preserve our past and define our future as a steward of more than 425 historic properties. The GSA’s mission to provide superior workplaces, expert technology solutions, acquisition services, purchasing and E-Gov travel solutions, and management policies, all at best value, allows federal agencies to focus on their core missions.

Under Executive Order 13423: “Strengthening Federal Environmental, Energy, and Transportation Management” announced in January 2007, certain goals were set for federal agencies including an energy reduction of 3% annually through 2015 or 30% over the next seven years. The progress is measured and monitored by the President and the Office of Management and Budget. Additionally, 19 federal agencies have signed a Memorandum of Understanding establishing a set of standards for creating, operating, and maintaining high-performance and sustainable government buildings. Pursuant to Section 1331 of the Energy Policy Act of 2005, an Energy-Efficient Commercial Buildings Tax Deduction was created and is now being considered for possible extension and increase. Twenty-three states have adopted similar policies or mandates.

“As far as we know,” stated A.J. Francel, ACCY’s COO, “there is no building material on the market with as many features and benefits or economic advantages as the ACTech® Panel system at any cost. It is for this reason we feel we are best positioned to serve government needs and answer the call of these mandates and policies, whether they come from federal, state, or commercial enterprise, or [are] just demanded by value-oriented and environmentally conscious consumers."

The Company further added that the listing will include other subordinated schedules of access to government-related contracts beneath the GSA. These schedules are typically more specific to an individual agency, department, or organization. For example, the Department of Defense’s Defense Logistics Agency will also include the ACTech® Panel system. The World Health Organization and the Veterans Administration will also have listings. The ACTech® Panel system can be delivered in a kit for site-built applications or pre-built and delivered complete for modular or pre-engineered applications. The ACTech® Panel system will also be included under a new GSA Kitting Program. Kitting is a program that offers the end user a turn-key product in combination with other technologies such as solar, for example. The kit must include two or more products.

- On January 2, 2008, ACCY and Alternative Construction Consulting Services, Inc., a subsidiary of ACCY, announced that on November 10, 2007, the two companies entered into a joint venture agreement with Atlan International Holdings Corp. (ATLAN), for the development of a solar panel. Solar 18 ACTech Panel, Inc., was formed on January 2, 2008, to facilitate the future activities of the joint venture.

Michael W. Hawkins, CEO and Chairman of Alternative Construction Technologies, commented on the recent developments:

The ACTech® Panel is the most energy-efficiency [sic] SIP in the market today. With the inclusion of the Solar 18 technology, not only will we be able to conserve energy, but we will be able to produce solar energy to further reduce the economic impact of the housing carbon footprint, the largest use of energy in the world. The resulting product will be more desirable to our customers as we continue our efforts to maximize the ‘green’impact for the sake of our environment.

Henry Val, ATLAN CEO, stated:

We are simply following in the footsteps of industrial giants such as GE, ExxonMobil, BP, Shell, Sharp, Siemens, and others who have made significant investments in wind, solar, bio-fuel, and hydrogen alternatives. Escalating energy prices, political instability in the Middle East, concerns about the impacts of global warming, and clear public support for energy alternatives have all contributed to renewable energy becoming one of the most rapidly growing sectors of the global economy. Completing this transaction will allow Atlan to concentrate its efforts on the execution of our business plan.

- On November 7, 2007, ACCY entered into a joint venture agreement with Atlan International Holdings Corp. to manufacture a solar panel. Solar 18 ACTech Panel, Inc., was formed on January 2, 2008. Their product, Solar 18 ACTech panel, consists of a thin layer of cover glass that is placed on top of the photovoltaic cell to protect it. The cover glass is then attached to a substrate, an expensive layer of cement that is designed to conduct heat, to prevent the panel from overheating; the solar panel should then be placed above the ground to let the airflow cool the device. This form of assemblage would reduce costs due to inexpensive raw materials since a-Si solar cells are thinner than crystalline cells. This innovative panel facilitates ACCY’s entrance into the solar industry which is expected to grow to $25 billion by 2010. The panel is expected to be delivered in the 2nd or 3rd quarter of 2008. The Company received a $2 million fee for establishing the right of development of a solar panel utilizing the technology of the ACTech® Panel System.

- On November 5, 2007, ACCY announced using the ACTech Panel® System in the World Headquarters for National Semi-Trailer Corporation in Orlando. The office structure features approximately 8,000 square feet with vaulted ceilings in its lobby and a multimedia board room. The World Headquarters will feature modular, green, and energy efficient design concepts. The project is to be completed January 2008. Michael W. Hawkins, CEO and Chairman, stated:

This project only serves to solidify ACCY’s position within the marketplace and bolsters our position as the industry leader.

MANAGEMENT

ACCY is lead by an experienced and capable CEO and maintains an impressive management team and advisory board.

Michael Hawkins – Chairman, CEO

Michael W. Hawkins is the Founder and Chief Executive Officer of Alternative Construction Company, Inc. Mr. Hawkins has an administrative and financial background, and, before moving into his senior administrative post, he worked as a human resource manager, office manager, budget analyst, and financial advisor. He served his country as a member of the United States Air Force during Operation Desert Shield and Operation Desert Storm. Michael W. Hawkins has held a senior level post with several Nano Cap companies managing a portfolio in excess of $250 million market capitalization. From 1998 to 2000, he served as Chief Financial Officer of Florida Tan, where he raised $15 million in equity capital. From 1997 to 1998, he was Technical Manager for Norrell Services, where he served in the capacity of Human Resource Manager for Boeing Corporation under the Delta IV Rocket Program. Additionally, Mr. Hawkins provided financial oversight for sixteen non-appropriated fund activities consisting of bowling centers, sports facilities, restaurants, clubs, resource recovery and recycling centers, clothing outlets, ticket and tour offices, and marinas. Mr. Hawkins holds a Bachelor of Science in Computer Studies and Business Management from the University of Maryland University College, Adelphi.

A.J. Francel – Chief Operating Officer

Mr. Francel has a financial, administrative, sales, and communications background. He also has sales, operations, and manufacturing experience in the field of alternative materials and environmentally friendly and socially responsible products. He has served as a senior advisor at an advisory and intermediary firm, where he analyzed businesses to determine value and/or remedy efficiency and costing issues. Mr. Francel was bonded and licensed in the U.S. Securities and Insurance Industries for twelve years as a retail and institutional broker. He has held Series 7, Series 63, Life and Health, and Fixed and Variable Annuity licenses and has served at various capacities within the industry. Mr. Francel resigned from A.G. Edwards & Sons in 1997. Since then, Mr. Francel helped to successfully grow an environmentally friendly alternative material company to an $850 million dollar market cap. Mr. Francel has served as an employee or a consultant to several companies providing investor relations, public relations, media relations, funding and sales, and marketing expertise. He has considerable experience with the environmentally friendly, organic, sustainable, and United Nations communities. His experience with, and relationships in, the United Nations, federal and state governments, and business are invaluable resources and are helping to position the Company globally and politically.

John S Wittler, CPA – Chief Financial Officer

Mr. Wittler brings over 26 years of financial management, audit, and consulting experience to the company. For the past three and a half years, Mr. Wittler was a senior manager with the international consulting firm Control Solutions International, where he managed and performed engagements for Sarbanes-Oxley 404 compliance, internal audits and quality assessment reviews for medium and large publicly held companies. From 1999 through 2002, Mr. Wittler was a project management consultant for UPS Supply Chain Solutions, where he was responsible for the design and implementation of global, integrated financial systems. Prior to 1999, Mr. Wittler served as CFO or controller for several logistics, telecommunications, and manufacturing companies and was Audit Manager with Ernst & Young. He holds a B.S. in Accounting from Ball State University.

Thomas Amon, Esq. – Director

Mr. Amon is also a director of Encore Networks, Inc., in Dulles, Virginia, a provider of high end-to-end VPN solutions over satellite and terrestrial median; as well as Venro Petroleum Corp., of New York, New York, and Houston, Texas, a multi-faceted provider of petroleum products and services; Sonic Mountain, Inc., a webcast provider of podcast software and services located in New York, New York, and San Francisco, California; and Accelerated Building Concepts Corporation (ABCC.OB) in Orlando, California, a designer and builder of sustainable structures and building systems.

Willis Kilpatrick, Jr. R.P.H. – Director

Mr. Kilpatrick is currently the managing member of South Residential Enterprises, LLC, a Delaware Limited Liability company where he has overseen multi-million dollar residential development projects in Mississippi. He is a licensed Pharmacist working with the Indian Reservation hospitals in and around Philadelphia, Mississippi. He has served as a consultant and board member for several publicly traded and privately held companies. He is a graduate from the University of Mississippi.

Jerry Paul – Director

Mr. Paul, a nuclear engineer and attorney, formerly served as the elected representative of Florida’s 71st district in the Florida House of Representatives where he served as Deputy Majority Whip, chaired the House Subcommittee on Environment Regulation, and chaired the House Subcommittee on Environmental Appropriations. He is well-recognized both in Florida and Washington as a leading voice on energy policy and governments’role in energy transformation.

Mr. Paul formerly served as America’s Chief Operating Officer and Deputy Administrator of the U.S. National Nuclear Security Administration [NNSA]. Appointed by President Bush in February 2004 and confirmed by the U.S. Senate, he was responsible for coordinating all activities of the NNSAat three national laboratories and five production facilities in the United States along with foreign offices in Moscow, Tokyo, and Beijing and serving as the senior official at the U.S. Department of Energy mission at the International Atomic Energy Agency (IAEA) United Nations (U.N.) offices in Vienna, Austria from 2004–2006.

Todd N. Tkachuk – Director & Audit Committee Chairman

Mr. Tkachuk was a co-founder of Peabody’s Coffee, Inc. During his tenure he served as the company’s Chief Executive Officer and Chief Financial Officer, which owned and operated multiple retail locations and developed a USDA-certified product that was distributed to more than 1,000 supermarkets. Mr. Tkachuk spearheaded a share exchange merger and was responsible for all SEC reporting and compliance activities. Recently, Mr. Tkachuk has acted as a private consultant in the areas of public company reorganizations, finance, and operations. Mr. Tkachuk holds a B.A. in Business Management from Western Washington University (1984).

Bob Williamson – Plant and Production Manager

Mr. Williamson’s history spans thirty four years of diversified, high-level experience in plant management, manufacturing design, production, and personnel management. Over thirty-two years of that experience is with the largest and most profitable U.S. producer of passenger and freight elevators. His work experience was solidified in a manufacturing environment of “mass customization” and automated production methods to meet diverse customer specifications while minimizing costs. The work performed included the use of a broad range of materials, systems, and production processes—including electronic, electrical, hydraulics, and the fabrication of sheet and structural steel. Over the course of his career he has held several management positions in engineering and production departments. Engineering positions included manufacturing engineering, plant engineering, test engineering (electrical/electronics), and contract design engineering. Production positions included “focused” factory group management, plant management with P&L, and design production. Accomplishments include bringing several production factions from chronic past due status to on-time performance, the development of computer-based office automation and information systems, turning a manufacturing plant from chronic losses to profitability, significant cycle time reductions in both front-office and factory floor operations, and significant productivity gains in both front office and factory floor operations.

RISKS

In our view these are some principal risks underlying the stock:

Liquidity Risk: ACCY is a speculative stock that trades on the OTC Bulletin Board with a small trading float and low trading volume, which may contribute to large spreads and high volatility in its price, which could result in substantial losses for investors purchasing ACCY.

Reliance on Few Customers as a Percentage of Revenue: ACCY may be adversely affected by its dependence on a limited number of high volume customers. For 2007, three customers represented approximately 54.5% of ACCY’s revenues. Those same three customers represented approximately 57.8% of the total accounts receivable balance at December 30, 2007. For the year ended December 30, 2006, two customers represented approximately 77.3% of revenue. The loss of these primary customers may be difficult to compensate for and may adversely affect revenue, earnings, and the price of ACCY stock. Dependence on Key Management Personnel: ACCY’s growth and development to date has been largely dependent on the active participation and leadership of its senior management team. The continued success of the business may be dependent upon the continued employment of the senior management team.

Inability to Raise Capital: If the Company is unable to raise equity capital or negotiate favorable terms with its current convertible debt holders it may be unable to achieve its 2008 objectives. ACCYhas pledged all of its assets to the current convertible debt holders and because of this have subsequently restricted the Company’s ability to secure additional financing. Typical manufacturing companies rely heavily on debt to finance growth through inventory financing, purchase order financing, equipment financing, and factoring of receivables which is currently unavailable to the Company. The Company will require additional capital to meet its projections. In the event the Company is unable to successfully raise the necessary capital, it may fail to reach targeted sales or overextend the Company’s obligations or ability to pay. There is no guarantee that the Company will succeed in obtaining additional financing.

Temporary Loss of Equipment: With only one manufacturing facility and one production line, the Company could lose substantial revenue due to down time if the equipment is damaged and/or the plant suffers from a natural disaster. ACCY relies on one production line to manufacture its products. While a supply of most replacement parts is maintained and regularly scheduled maintenance conducted, the Company has the risk of shutting down if a key processing line component fails. Replacing the entire proprietary equipment line could take six to nine months, or longer, in design, assembly, and to have operational. The Company protects its patented process of continuous line manufacturing and as such will not allow a subcontractor to manufacture the ACTech® Panel unless it was in a plant designed and built by the Company.

Reliance on Third Parties: The Company relies partially on outside consultants for architectural and engineering services that may put the Company at further risk and liability. ACCY requires its professional consultants to provide certification and license documentation to include named insurance from claims. As the Company is the contracted entity, it faces additional liability that it may have to defend in the event of a faulty design.

4Q07 FINANCIAL RESULTS

Revenue increased 53.4% to $3.9 million in 4Q07 compared to $2.5 million in the same quarter of 2006 due to the Company’s transition from a product supplier to a systems provider. COGS fell 54% year-over-year and 20% sequentially in the fourth quarter due in part to the inclusion of multiple raw material providers of steel and polyurethane foam lowering input costs. Gross margin increased to 44% contributing to diluted earnings per share of $0.07 for the three months ended December 31, 2007.

VALUATION

We believe ACCY’s future revenue growth rate will be much higher than the average growth rate in the general building materials industry during the next 12 months. We have projected ACCY’s revenue to more than triple in the next two years with gross margin weakening slightly. Raw materials, steel and foam, account for 87% of cost and we have projected a rise in COGS as a percentage in revenue in 2009 from expected increases in steel prices which could force ACCY into the spot steel market. Net profit margin is expected to decrease slightly in 2008 and improve in 2009.

Using our earnings projection of $5.17 million for 2009 and 12.6 million fully diluted shares outstanding, we are estimating that the Company’s 2009 earnings will be $0.41 on a per share basis. At a recent price of $4.20 ACCYtrades at a price/earnings (P/E) multiple of 30, and for valuation purposes we assumed that the market will give this stock a more sustainable P/E of 25 at the end of 2009, which is a premium compared to the industry average P/E of 21. We project a price of 25 times our projected 2009 EPS of $0.41 , or $10.25, for ACCY at the end of 2009.

For calculating our 12-month price target, we discount back one year our $10.25 projected price using a risk-adjusted annual discount rate of 0.1046 that combines the current risk-free two-year Treasury Note yield of 1.84% and a 15% risk factor. The result is $9.30 as the projected price of ACCY at the end of 2008.

INVESTMENT CONCLUSION

For the last two and a half years, ACCYhas focused on revenue generation and growth as well as diversifying its markets. By and large the Company has accomplished these goals. The Company’s reorganization in 2006 and acquisition plan that was implemented in 2007 have proved fruitful, turning a $2 million loss in 2006 into a $1.6 million profit in 2007.

While we believe the depressed housing market will affect nonresidential construction in 2008, ACCY’s management sees some opportunities in the year ahead. Steve Rechtsteiner, ACCY’s Construction Subsidiary Manager stated:

While residential building has slowed, green building and affordable housing seems to be robust. Even our custom and commercial contract opportunities continue to increase, and we look forward to many more closings.

Although our revenue projections are a little more conservative than the Company’s published guidance of $26 million with an anticipated 12%–20% net profit margin for 2008, we believe ACCY has earned their “green” credentials and will continue to outperform its peers.

We have revised our “Buy” rating to a “Speculative Buy” rating and are issuing a 12 month price target of $9.30.

Disclosure: This report was prepared for informational purposes only and was paid for by the company portrayed in the report. This report is not a recommendation of a solicitation to purchase or sell any security, nor does it constitute investment advice.