Remember that the information below is not meant to be in any way a complete analysis of the opportunity, but to give potential Investors an overview of some of the issues that may be important. Interested investors should examine further information. Also please refer to the terms and conditions in your subscription agreement.

1. Proposal Title/Headline

Bio-Actives from fruit - Restoring Natures Balance

2. Business Summary

The business will “attack” the very large global market for non-drug dietary supplements with a unique new range of health-giving compounds made from fruit by-products. It is a new business emerging from an existing R&D subsidiary of a large multi-national company, Ocean Spray Cranberries Inc of Massachusetts, USA (Yr 2000 revenue A$2.5bn). Ocean Spray will remain as a 10% shareholder and the products will be marketed, in conjunction with Ocean Spray, to leading nutraceutical (complementary medicine) companies who will distribute to consumers under their own individual brand names. Significant cardiovascular and other health benefits have already been established by our clinical science partner, KGK Synergize Inc, a Canadian-based world-recognised clinical researcher. An initial sales contract has already been obtained from Pharmanutrients Inc a Chicago-based nutraceutical group with an established brand and annual sales of over US$100m.The marketing theme will be to provide a new range of non-drug dietary supplements, made from everyday fruits, that will (a) have clinically proven health benefits and; (b) replace the important compounds which juice processing typically removes. The business strengths are: (a) novel, patented, processing technologies (b) established medical claims, (c) global distribution through well-recognised brands, (d) access to large quantities of raw materials, (e) a large, expanding, high-value, global market and (f) competent management with a successful track record. The commercially-sensitive activities will be conducted “in-house” but, for cost efficiency, all other manufacturing will be contracted out. Manufacturing will be mostly against firm orders New Capital of A$8m is required by Jan 2002 to meet capital costs of the first plant.This plant will be commissioned in late 2002 and sales will commence in Jan 2003.A pre-tax profit of A$4m will be achieved by Y/E 30/6/03, the 1st full year of manufacturing.

Updates

3. Estimate of Market Size and Growth Potential

4. Market Demand

The market for nutraceutical compounds includes dietary supplements, pharmaceuticals, functional foods, cosmetics and veterinary products. The dietary supplement market worldwide is very large – in USA alone, sales are estimated at between US$5.8bn and US$10.3bn (USFDA report of March 1999). Growth is estimated at around 10% p.a. However the market is entering a new phase where consumers are demanding more and better quality evidence of medical acceptance. Our products have been specifically developed to meet these requirements! Four major USA nutraceutical companies have shown serious interest in these products and one, Pharmanutrients Inc, has given an initial order plus an indication of “launch” quantities sufficient to achieve the forecast sales revenues.

5. Competitive Advantage

Volume of Scale
Secure Distribution
Intellectual Property

1. Our partnership with KGK Synergize, a world class clinical researcher, provides medical “credibility” for our products. 2. We hold Patents to unique technologies which enable us to deliver daily dosages in a much smaller tablet, capsule or other format. 3. We hold an initial sales contract with a leading nutraceutical group who have offered follow-up contracts sufficient to achieve forecast revenues. 4. We can restrict access to the use of raw material by competitors through the control of licences over CCE technology – which is needed to process the raw materials.

6. Market Distribution

The end-products will be marketed and distributed to consumers by global nutraceutical companies.Orders are in hand (or promised) by (USA) customers sufficient to reach targetted sales which, in year 1 will be 25% of plant capacity. More unique products, targeted at other specific disease conditions, are being developed and these will again be sold through contracts with established brand owners.

7. Management

Our business acumen derives from : (a) a Board comprising mature, experienced executives, including at least one from Ocean Spray (b) a CEO with a successful track record in business , (c) a technical Director with a successful track record in technical innovation (d) a clinical science partner, KGK Synergise, with a successful record in clinical science. Its principals are world-renowned scientists with considerable published work in this field e.g. “Flavonoids in the Living System”, Plenum Press, New York, 1998 and (e) a chief analytical chemist, who is a former senior chemist with Australian Government Analytical Laboratories (AGAL) with a successful 25 year track record.It is intended that, under the direction of this team, new staff will be recruited to manage and operate the manufacturing plant. This (new) team will be headed by a plant manager to be drawn from a related industry background.

8. Technology

1. An industrial chromotographic system to separate groups of individual bio-active compounds – Patent Application filed 4 Sep 2000. 2. Medical research – Global licence held covering “Compositions and Methods of Treatment of Neoplastic Diseases and Hyper Cholestoerolemia with Citrus Limonoids and Flavonoids and Tocotrienols”. 3. Fibre research – Patents entitled “Food Supplement (Nutritional Fibre)” held. 4. The Counter Current Extractor (CCE) - required for efficient recovery of soluble compounds from particulate fruits and vegetables. Global Patents held.

9. Product Development

The initial product range i.e. citrus flavonoid combination is fully developed from a clinical science perspective. The “manufacturing” process has been developed to the final “process-proving” stage, which will be completed prior to “commitment” of investors funds. The A$.5m in funding required for this process-proving stage will come from our existing cash resources with 50% recovery of eligible expenditure coming from Australian Government grant under its “Biotech Innovations Fund” program.

10. Scalability

The first plant, based primarily on the production of citrus flavonoids, will be set up in NSW Australia where the raw material, citrus peel residues from orange juice plants, is adequate to supply raw material producing 24,000kg p.a. (valued at A$24m) of end product. Beyond that, it is likely that additional, licensed plants, will be set up in California and/or Florida, USA.Additional plants will cost around A$8.5m each and take about 6 months to build. These will be either owned or licensed out, depending on which offer best returns to shareholders.

11. Intellectual Property in SME's Business

Multiple Patents
Trade secrets

1. Patents are either registered or are pending as above. 2. Operating knowhow will be protected under a “closed shop” regime. 3. Access by others to raw material controlled through licensing restrictions.

12. Barriers to Entry

The first “hurdle” for competitors is our (protected) medical research showing a clear superiority of medical benefit for our products. The second “hurdle” is the time and cost of developing a production method to match the efficiency of our (Patented) system. The third “hurdle” is our on-going development of new products.The fourth “hurdle” for competitors is the difficulty they would have in gaining access to CCEs and, thus, economic feed-stocks. These “hurdles” give us at least 2-3 years head-start on competitors.

13. Milestones

1. Build prototype and design of full-scale plant – by March 2002 – cost A$.5m 2. Identification and negotiation of site location – by Dec 2001 – minor cost 3. Finalise contracts for sale of plant output – by Dec 2001 – minor cost 4. Engage plant manager – by Dec 2001 – minor cost 5. Finalise plant construction contracts – by March 2002 – minor cost 6. Finalise drying & packaging contracts – by March 2002 – minor cost 7. Building fit-out – by 2/9/02 – cost A$.9m 8. Build and commission plant – by Sep 2002 – cost A$6.7m 9. Engage manufacturing staff – by June 2002 – minor cost 10. Start-up – by end Sep 2002 – Total cost A$9m

14. Risks

1. Process risk – substantially eliminated during the “process-proving” stage. 2. Mechanical breakdown – reduced through warranties & maintenance program. 3. Raw material seasonal variation and supply – substantially eliminated through geographic contracts and access to existing CCE systems at juice plants in both hemispheres. 4. Marketing risk – substantially eliminated through contracts with buyers. 5. Quality risk – QA program will ensure GMP and customer specifications will be met. 6. Regulatory risk – products manufactured within TGA, USDSHEA, and USFDA guidelines. 7. Currency risk – as sales will be in USD, a currency hedging policy will be adopted. 8. Financial risk – prudent corporate governance will be adopted.

15. Company Valuation

No

16. Abridged Profit & Loss

 

Note: Years 2001 & 2002 sales represent income (largely research fees & royalties) from existing business activities which will cease from end 2001. Sales for the new business will commence in Jan 2003 and “ramp up” to full capacity by F/Y 2005. There will be a transition period from end 2001 to Jan 2003 when the business will require funds for plant construction and working capital ahead of income flows.

17. Balance Sheet

18. Accumulated Sales since business started

Sales
$0

Years Established
0

19. Is the business solvent

yes

Solvency History

20. No. of Employees

6 to 10

21. Shareholding % to be issued to new investor for investing.

60

22. CAPstart Matching Product

  C1

23. Business Stage

Startup of business

24. Role the investor would play

Non Executive Director

25. Main Location

NSW