Executive Summary

Introduction

Asta Ltd, a Northwest based biotechnology company, owns a proprietary process that transforms a huge stream of underutilized and non-marketable protein sources into valuable pasteurized “protein powder” (PPP).   Proteins are essential molecules that are woven into the fabric of life.  Proteins are required for the structure, function, and regulation of the body’s cells, tissues, and organs. Proteins are fundamental components of all living cells and include many substances, such as enzymes, hormones, and antibodies, muscles, skin, bones and the body as a whole.  Each protein has unique functions. Asta’s PPP exhibits unique characteristics which offer superior performance benefits.  Scientific research has confirmed these superior properties.

Besides this “protein powder” which is a key ingredient in five multi-billion dollar markets, other value-added products derived from Asta’s technology fill needs in the rapidly growing nutraceutical market. The total market in the categories where Asta’s products fit exceeds $180 billion annually. Asta’s sustainable competitive advantages lie in total raw material utilization, proprietary knowledge, a provisional patent filing, six additional planned patent filings, and a seasoned management team.

Jerry K. Babbitt, PhD, states “Considering my research collaborations and extensive industry worldwide contacts, I have never seen any product like PPP before, and I doubt if anyone has. The result is a very unique product that Asta has termed pasteurized polypeptide powder, or PPP. Because polypeptides comprise proteins, PPP could eventually be used to replace protein in animal feeds and in supplements for humans.”[1]

Babbitt, who has endorsed Asta’s products and process, has authored and co-authored 75 scientific journal manuscripts dealing with the chemical, biochemical, and microbiological changes in marine foods during handling, processing, and distribution.

Consider this

  • PPP is a key ingredient in five, multi-billion dollar global markets.
  • Asta’s products fit in categories that comprise a total annual market exceeding $180 billion.
  • Forecasted GM of 67% or greater
  • Proprietary knowledge
  • Unique product benefits and characteristics
  • One provisional patent filing and six additional planned filings
  • Total, sustainable raw material utilization
  • Seasoned management team

Competitive advantages

Asta’s mission

To develop and adopt innovative technologies and cost effective processes that transforms under utilized or non marketable raw materials into valuable nutrients that will positively affect the human food chain.

  • To augment aquaculture and livestock feed
  • For direct human consumption
  • To provide as an ingredient in organic fertilizers

Asta seeks investment funds to commence commercial operations. Asta has developed process technology and produced over 90,000 pounds of commercial product using our prototype processor that was sold to British Petroleum (BP) Nutrition at a gross margin in excess of 65%.

The revenue and profit potential for Asta is enormous.

Technology and products

Asta’s proprietary technology mixes food-grade enzymes (biological catalysts)[2] with quality animal proteins in a continuous, enzymatic hydrolysis process. The advanced hydrolyzing process (AHP) produces a shelf-stable pasteurized polypeptide powder (PPP) as its primary value-added product. The continuous, multi-step process is automated and precisely controlled to avoid nutrient and functional properties loss (denaturization).

This short-chain polypeptide powder is a foundational nutrient-ingredient for life; it is a part of microbes, mankind and everything in-between. It is less expensive to produce than whey protein, and because animal proteins are nutritionally complete proteins (possessing all essential amino acids); PPP is nutritionally superior to soy protein which lacks two essential amino acids.

Yield

Asta’s advanced hydrolyzing process (AHP) yields the following value-added products:

  • Pasteurized Polypeptide Powder (PPP) – a food ingredient for humans, companion pets, aquaculture feed, animal feed, and for use in organic fertilizer
  • Marine oils (Omega 3 oil )[3] – a nutraceutical for humans, companion pets, aquaculture feed, and animal feed
  • Shark cartilage  (used to produce chondroitin) [4] – a nutraceutical for humans and companion pets
  • Calcium hydroxylapatite (Ca10(PO4)6OH2) or Calcium Phosphate (CaPO4) (when fish is the raw material) – nutraceutical for humans, companion pets, aquaculture feed, and animal feed

Significant benefits

Comparisons

PPP compared to other sources of commonly available proteins:

  • Easier and more efficient absorption and metabolic conversion into usable protein
  • Enhanced nutritional value
  • Stability –  extended shelf life
  • Improved palatability
  • Easy dispersion in water – capability for flavor enhancement
  • Speed –  the process takes only one hour to complete
  • Environmental friendliness –  only pasteurized water is discarded
  • Viability –  the unique drying method reduces cost
  • Sustainability – the ultimate form of animal protein recycling

AHP technology

Markets and channels

Aquaculture: an immediate and growing market

Asta’s initial market is aquaculture, because it is a large market without major regulatory requirements. Aquaculture is a $70B per year global market, of which 50% ($35B) is for feed (6.5-7.0 million metric tons per year). This market is growing at a CAGR of 10%.

Why is aquaculture a growing trend in the seafood production sector?

  • By 2025, the world will require an additional 6.5 million metric tons of seafood to maintain the same percentage of seafood consumption that we consume in our diets today.
  • The ocean’s seafood harvest is declining.

Currently, fishmeal is the aquaculture feed ingredient of choice. However, studies done by British Petroleum (BP) Nutrition at their Trouw Research Center in Norway have demonstrated the superiority of Asta’s products.

Aquaculture feed formulations contain approximately 60% protein. Currently there are no formulations that are specifically designed for larvae nutritional requirements. Studies show that polypeptides are a superior source of food, especially for larvae and in general during the entire fish life cycle. Asta will offer PPP as an ingredient for larval feed. Asta considers the gap in food formulations specifically for larvae a marketing opportunity to promote the unique advantages of PPP.

In summary, aquaculture represents the best entry market for Asta.

  • It is a large and growing market
  • It doesn’t have significant regulatory oversight
  • There are no entrenched competitors who provide a formulated larval diet
  • It fits well into the core competencies of Asta’s management team/advisors experiences

Asta products play a key role in various growing markets that exceed a total of $180 billion.

Other growing markets

From a competitive positioning standpoint, PPP is superior to commonly available protein powders in the human nutrition market and to fishmeal frequently found in aquaculture feed, pet food and treats, animal feed, and organic fertilizer.

Asta believes that PPP’s significant benefits will create an entirely new market, in which PPP will become the preferred “protein” source in all five identified market segments.

Human food supplements

Thanks to the demand in the aquaculture and the growing human nutraceutical market, the price of fish oil rose by 20% in 2007. Aging populations in developed countries, eager to alter the aging experience, are increasing the demand for shark cartilage (chondroitin) and CaPO4.

Asta is confident that PPP will be a sought after supplement for human nutrition, because it contains all of the essential amino acids from which the human body builds proteins.

Asta will position PPP as a unique, superior protein source for a myriad of consumer products, including supplements, nutrition bars and protein powders.

Here is a shortlist of PPP’s advantages as a food source:

  • It is a complete protein base
  • Compared to amino acids or proteins, polypeptides are more efficiently utilized and digested within the body
  • It is in powder form, easily dispersible in liquid
  • It has a long shelf life

Companion Pets

Scientific knowledge strongly suggests that Asta’s PPP and Omega-3 oil will be used in a variety of ways in the pet food/treats markets due to its high degree of palatability and nutritional properties.

Animal feed

Feed for dairy cows contain as much as 70% protein, since high protein levels increase lactation.  As revenues grow, Asta intends to expand its marketing efforts into this area.

Organic fertilizer

CaPO4 can be used as an organic soil supplement and fertilizer – a market that the Scotts Miracle-Gro Company reports is growing between 15% and 20% per year.[5]

Aquaculture Human food supplements Companion

Pets

Animal feed Organic fertilizer
Market size $70 B $51 B $43 B $15.4 B $1.5 B
PPP √ √ √ √ √
CaPO4 √ √ √ √ √
Omega-3 oil √ √ √
Chondroitin √ √ √

Channels

To avoid expensive distribution costs in the early stages of our market development efforts, we will initially sell directly to packagers and formulators.

As Asta increases product production, we will develop these additional channels:

  • Packaged protein products (to be sold directly to food brokers) and nutraceutical products (to be sold through nutritional centers)
  • Direct online sales to protein and nutraceutical customers
  • Direct sales to organic fertilizer companies

These channels will significantly increase gross margins.

Operations

Source of raw materials

Marine species are an ideal raw material source for Asta, because they are a virtually perfect food.  Marine fish contain high-quality protein and omega-3 oil. Fish bones have the same ratio of calcium to phosphorus as human bone, which makes marine fish an excellent source of calcium for human supplements.

Primary source

Asta’s intends that the predominant source will be “fish in the round,” i.e. fish obtained directly from a fishing vessel.  At current prices, we can acquire non-marketable and underutilized species of fish at the rate of $.04 to $.06/lb. Many such species are in abundant supply.

Secondary source

Asta’s secondary raw material source is projected to be residuals from seafood processing plants.  Many plants will not have the raw material base to support our requirements, so these co-locations will be carefully evaluated and managed. Nonetheless, using seafood processing residuals is environmentally friendly and cost effective.

Processing facilities

Asta has developed a prototype 600lb/hr-input processor that has produced 93,000 pounds of PPP. After funding, Asta will reinstall the processor in a suitable facility. During construction of a larger processor, Asta will use the original processor to provide samples to potential customers. Longer term, the original processor is planned to be used for future process innovation and new product development.

Asta will locate processors near sources of raw materials.  A processor can be constructed using off-the-shelf parts. Each processing facility will be approximately 15,000 sq ft, and we project that multiple processors can be located in the same facility without a significant increase of facility size.

Because the processor is automated, manpower requirements are minimal. Current efficiency level of the processor is 31% yield of sellable products. The remaining 69% returns to the environment as pasteurized water, resulting in few, if any, environmental issues.

Asta’s proprietary process reduces discarded food residuals that are a source environmental pollution.

Financial Projections

The company is seeking an investment of $17M, which is projected to be sufficient to reach sustainable profitability. Asta anticipates achieving sustainable profitably in Q3 of Year 2 of operations.

Based on conservative financial estimates, here are Asta’s projections:

Pre ops Year one Year three Year five
Revenue $0 $6.0M $241.5M $525.3M
GM $ $(110)K $3.8M $226.7M $496.9M
Op Ex $3.9M $7.0M $25.2M $46.8M
IBT $(4.0)M $(3.3)M $201.5M $450.1M

The company believes these forecasts are achievable due to the following factors:

  • Strong and growing worldwide demand for the products
  • High market value and price
  • Low COGS, stemming from the use of underutilized and non-marketable raw materials
  • Highly automated manufacturing process

Use of Funds:

Asta is seeking $17 million in total funding, which Asta expects to invest as follows:

  • Pre Ops is expected to be $5M (Milestone I)
    • $4.3 M for cash used in operations (includes $561K as a contingency fund)
    • $565K  for capital acquisitions

During the pre-ops period, Asta is scheduled to complete the following tasks:

  • Negotiate contracts with raw material sources
  • Lease a food-grade facility, including  time for tenant improvements
  • Order and install AHP processor upgrade components, building-in time to acquire permits
  • Commence initial production
  • Market the products
  • Operational to sustainable profitability:  forecasted to be $12 M (Milestone II)
    • $7.3 M cash used in operations (includes $2.3M as a contingency fund)
    • $4.4M for capital acquisition
    • $86.7K loan repayment for $2.4M used for capital acquisitions

Intellectual Property

Asta’s proprietary knowledge incorporates the manufacturing process, which features unique enzymatic and drying methods. Asta has filed for one patent, which is pending, and has identified six additional, related patents to file upon funding.

Here is the significance of the first two patent filings:

  • Patent filing #1 – Refines and enhances processing efficiencies, and reduces operating costs
  • Patent filing #2 – Improves PPP product quality and increases revenue relative to the base patent

The additional five patent ideas relate to specific areas of the advanced hydrolyzing process.

The company has also trademarked its corporate byline, “Providing Protein and Nutrients for Life…”  Asta will use this trademark to assist in developing corporate branding.

In the field of enzymatic hydrolysis, Asta believes that its IP will give the company a sustainable, competitive advantage for the next 20 years:

  • Seven identified patents
  • Trade secrets
  • Collected broad knowledge and experience

Risk

An investment in Asta involves few if any technological risks. Asta has processed 93,000 pounds (46.5 tons) of PPP from a functioning 600 lb/hr-input AHP that is currently in storage.

Risks are as follows:

  • Ability to secure raw materials: The proforma financial plan includes raw material acquisition costs to buy fish in the round (directly off a fishing vessel) at a nominal market rate. Currently fish can be purchased from fishing vessels for $0.04 to $0.06/lb.
  • Quality manufacturing: Customers demand products from trusted, quality manufacturers.  Asta will mitigate this risk by adhering to all GMP/FDA/USDA standards, providing onsite QA equipment and technicians at each facility, and hiring an experienced sales and marketing team. Working in regulated businesses is a core competency of the management team.
  • Competition: Asta’s IP (patents, trademarks, and trade secrets) and time-to-market will result in sustainable competitive advantages.

Management Team

Dennis B. Hurt, 60:  President and CEO.  Mr. Hurt has 25 years of senior management experience in high technology and bioscience companies. His experience includes the following: President and CEO of two start-up companies; General manager for Nellcor Europe, B.V – turning around a losing European operation into 12% IBT and helping Nellcor, Inc. grow from a start-up to $200 million; Director of International Operations for Protocol Systems, Inc.; VP sales and marketing for Serveron, Inc. Mr. Hurt has extensive global operations experience. He has led or participated in funding efforts for start-up companies that have resulted in contracts of $37 million.  Mr. Hurt holds a BA in Botany from Miami University, Oxford, Ohio.

Roger W. Law, 54: Founder, Chairman, and CTO.  Mr. Law has 31 years of experience in continuous enzymatic hydrolysis of animal proteins, specifically marine fish. Founder – Advanced Hydrolyzing Systems, Inc. 1983. Stock and Bond Broker – Dean Witter Reynolds. 1985-1988. COO – Advanced Hydrolyzing Systems, Inc. 1988-1992. Founder, -ase Trading & Technology, LLC. 1993-1995; Founder – Asta Ltd. 1995-current. Mr. Law earned a Bachelor of Science in Food Science and Technology from Oregon State University, Corvallis, OR 1982.

Jeffrey L. Robins, 63: COO. Mr. Robins has 20 years of senior operations and 10 years of engineering leadership experience. He served as Wafer Fabrication Operations Senior Director at Fujitsu Microelectronics, where he had responsibility for two wafer fabrication plants from ramp up to full production and ultimately P&L responsibility for a $450 million operation and a staff of 500+ employees. He was Wafer Fabrication Director of Operations at International Rectifier and VP Operations at TSCO Co., Inc. where he was a member of the executive staff. He is a past president of the Oregon Semiconductor Association. Mr. Robins holds a B.S. in Pharmacy from Idaho State University, a B.S. in Political Science from Weber State University and an Engineering Management Certificate from Idaho State University.

Duncan Law, 90, Advisor. Retired professor emeritus, Food Science and Technology, Oregon State University, Seafoods Laboratory, Astoria, Oregon. Prof. Law has 40+ years of experience specializing in seafood processing technology, microbiology, chemistry, nutrition of salmonids, fish protein concentrate for human nutrition, enzymatic hydrolysis of fish proteins, and the inspiration behind the AHP.

Jerry K. Babbitt, PhD, 68, Advisor. (Retired).  Dr. Babbitt served for 21 years as the laboratory director, supervisory research chemist, NMFS Resource Enhancement & Utilization Technologies Laboratory, Kodiak, AK. Dr. Babbitt has authored or co-authored 75 manuscripts published in peer-review scientific journals dealing with the chemical, biochemical and microbiological changes in marine foods during handling, processing, and distribution.  Dr. Babbitt received the NOAA Technology Transfer Award in recognition of research contributions leading to the development of a decanter surimi process to increase utilization of fishery resources.

Asta has identified additional senior managers to join the company to fill management team gaps as needed.

Conclusion

Asta’s revenue and profit potential is enormous. Asta already has made and sold product and is seeking funds to begin commercial operations.  The markets for Asta’s products are growing at an annual double-digit rate.

Asta’s proprietary, continuous enzymatic hydrolysis process transforms raw materials into polypeptides with superior bioavailability. The company creates numerous products for many market segments.  Asta is poised to improve global aquaculture, human and companion pet nutrition, animal feed and organic fertilizer formulations; positively impact the availability of the world’s protein supply; and capitalize on the burgeoning nutraceutical market.

Asta believes that few technology risks are associated with this investment. The company is led by experienced entrepreneurs and supported by an entire suite of seven planned patents.

Asta is a socially responsible biotechnology company that applies innovative, environmentally sound science to produce superior, value-added products while dramatically reducing waste and enhancing resource conversion efficiencies.


[1] Dr. Jerry K. Babbitt served for 21 years as laboratory director and supervisory research chemist at National Marine Fisheries Service Resource Enhancement & Utilization Technologies Laboratory, Kodiak, AK.

[2] http://www.biology-online.org/dictionary/Enzymatic_hydrolysis

[3] Note:  Marine oils are recovered only in raw materials derived from fish

[4] Note:  Shark cartilage, a nutraceutical associated w/good joint health:  recovered only in raw materials containing shark

[5] Organic fertilizer companies see growing market, Converted Organics, March 21, 2007

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