In the spring of 2011, AlgaeBio’s parent company, Algae Biosciences Corporation (TSX.V:ABV), successfully completed an equity financing of $5.75 million. With this funding in place, the company set out to achieve one principal goal — to establish full commercial-scale production of ultra-pure, vegetable-based omega-3 fatty acid oils, through the expansion and equipping of its plant facilities near Holbrook, Arizona. Once available, the production from the expanded plant is slated for immediate shipment to existing customers in the nutraceutical and food additive industries.
Prior to breaking ground last summer, AlgaeBio’s management decided to seek additional qualified bids for facilities construction, and to review the design and fabrication of the company’s proprietary bioreactors. As a result of this “final review” process, the company has realized significant benefits, including savings of more than $300,000 on the anticipated capital costs of the bioreactors. As well, we have identified design amendments that are expected to result in significant reduction in anticipated operating and maintenance costs. These design amendments have also allowed us to locate several additional bioreactors in the available plant space.
The construction and retrofitting of AlgaeBio’s production facilities are now nearing completion. We expect that the majority of the peripheral processing equipment will be installed in the plant by late March. The arrival and installation of the first 200 of our proprietary bioreactors is expected to occur in mid-March, with final installation and operation of all 1,500 plus bioreactors anticipated around the end of April.
With these targeted dates for completion of the $5-million expansion to the company’s production facilities, AlgaeBio expects to reach full commercial production of omega-3 fatty acid oils during the second quarter of 2012.
Also during this 10-month period, AlgaeBio has created substantial visibility in the nutraceutical and food ingredient markets, An aggressive communications campaign targeted at mainstream and industry media has resulted in fast and broad recognition of our corporate brand, and to heightened interest in AlgaeBio’s products and opportunities.
AlgaeBio currently has a long-term sale/purchase agreement with a nutraceutical manufacturer/distributor for all of the omega-3-related nutraceutical and food ingredient products that we can generate. Notwithstanding this exclusive contract, AlgaeBio has directly received — completely independent of inquiries fielded by our primary customer — scores of substantial product-purchase inquiries from around the world. The volume and nature of these inquiries has affirmed the broad market appeal of the company’s higher quality, custom-blended, vegetable-based omega-3 oils.
Also of particular interest, during the past months we have been approached by a number of major multi-national corporations that have expressed interest in exploring strategic partnerships and joint-venture relationships. We have held in-depth exploratory discussions with several of these potential industry partners, each of which presents unique expertise in either process manufacturing management and control or a complementary market focus and strength. These discussions continue to proceed, although there is no certainty that they will lead to any beneficial arrangements being negotiated. However, AlgaeBio is actively examining strategic relationships that may allow the company to expand its production capacity, its product portfolio, or its market penetration rapidly and profitably.
Since inception, AlgaeBio has been accessing some key Intellectual Property by way of a license agreement with International IP Holdings LLC. In the license agreement AlgaeBio negotiated an option to purchase International IP Holdings LLC or the specific IP under license. AlgaeBio recently served notice of its intent to acquire International IP Holdings LLC, and is currently in the process of negotiating the final details of that acquisition. It is anticipated that, upon successful completion of the proposed acquisition, all of AlgaeBio’s IP ownership and protection will be centralized in a wholly owned subsidiary company (a press release will be issued at that time).
During the past several months, AlgaeBio has also prepared and filed an initial comprehensive patent application surrounding the company’s Algae BioMax™ system, which efficiently delivers algae-infused nutrients to crops through standard irrigation systems. Algae BioMax™ remains an exciting downstream opportunity for AlgaeBio, and a strategy for moving to commercialization is in place. However, in the short to medium term, management will focus solely on the company’s core business — the production of ultra-pure, omega-3 fatty acid oils.
We are nearing our goal of completing the initial stage of expansion to AlgaeBio’s production facilities. We will soon commence a new capital-raising program to finance the completion of our second phase of plant and productivity expansion. This phase will result in the construction and equipping of an outdoor covered production pond, or “raceway.” This raceway is the first of six that will be built and inoculated from the 1,500-bioreactor plant. Each outdoor covered raceway dramatically boosts the total plant production output capability, and reduces the per-kilogram cost of production. Each pond is inoculated once a month from one day’s production from AlgaeBio’s 1,500 bioreactors. With six ponds requiring a total of six days’ worth of bioreactor production, the remaining 24 days of production is still available for commercial sale, as is the full production from the raceways themselves.
We are moving rapidly toward full commercial production of our ultra-pure algal oils, and, over time, transforming AlgaeBio into a leader in the global microalgae industry. It is with some pride that we note New Hope 360, a respected media outlet in the nutraceuticals and functional foods space, recently included AlgaeBio on its Future of Healthy Living: Five Brands to Watch in 2012 list. We believe that our vision, products, and the company we keep promote a future for AlgaeBio that looks bright and promising indeed.
ABOUT ALGAE BIOSCIENCES INCORPORATED: AlgaeBio is an Arizona biotechnology company that researches, develops, and manufactures ultra-pure products from micro and macro algae such as nutraceuticals, food additives, and pharmaceuticals. With access to near-perfect algae growing conditions, exclusive aquaculture access to a pristine brine water supply, and advanced proprietary technology, AlgaeBio produces superior human and animal consumable products, as well as offering advanced algae-based products and technologies for distribution into the agribusiness, biofuel, and aquaculture markets. AlgaeBio owns and operates large-scale production facilities near Holbrook, Ariz., and is a wholly owned subsidiary of Algae Biosciences Corporation.
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