Final Prospectus dated May 11, 2001
`The securities offered by the present prospectus are offered only in Quebec; they may be lawfully offered for sale only by persons registered with
`la Commission des valeurs mobilières du Québec. No securities commission or similar authority in Canada has in any way passed upon the
`merits of the securities offered hereunder and any representation to the contrary is an offence.
`
`Initial Public Offering
`
`NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.
`
`Minimum Offering: $3,000,000 (3,000,000 units at the price of $1.00 per unit)
`Maximum Offering: $5,000,000 (5,000,000 units at the price of $1.00 per unit)
`
`Each unit comprises one common share and one half Series C warrant
`This prospectus qualifies the distribution by Neptune Technologies & Bioressources inc. (the “Company” or “Neptune”) of a minimum of
`3,000,000 units (the “Minimum Offering”) and a maximum of 5,000,000 units (the “Maximum Offering”) at the price of $1.00 per unit. Each
`unit comprises one common share (the “Common Share(s)”) and one half Series C warrant. Each whole Series C warrant (the “Series C
`Warrant(s)”) entitles the holder thereof to acquire one Common Share in the Company’s capital stock at the price of $1.50 per share at any time
`up to June 28, 2002. The Common Shares issued upon exercise of Series C Warrants shall be held in escrow for a period of 90 days following
`their issue date. The offering price for the units was determined following negotiations between Hampton Securities Limited (the “Agent”) and
`the Company.
`
`There is currently no market upon which the units offered pursuant to this distribution may be traded, and, consequently, subscribers
`may be unable to resell them. On May 3, 2001, the Canadian Venture Exchange Inc. (CDNX) has approved the listing of the Common Shares
`of the Company offered hereby subject to certain conditions that shall be met by the Company no later than July 18, 2001, including the
`distribution of the Common Shares pursuant hereto to a minimum number of public shareholders. The offering price for each Common Share,
`after giving effect to this offering, exceeds the net tangible book value per Common Share of the Company as at November 30, 2000, by
`$0.6432 ($0.7292 in the event of the Minimum Offering), thus representing a dilution of 64.32% (72.92% in the event of the Minimum
`Offering). See “Dilution.”
`
`In the opinion of legal counsel for the Company, the Common Shares included in the units offered pursuant hereto will not be precluded as
`investments pursuant to the terms of certain statutes. See “Eligibility for Investment.” An investment in the units carries a high degree of risk and
`should be viewed as speculative due to the nature of the Company’s activities and its current stage of development. See “Risk Factors.”
`
`Price: $1.00 per unit
`
`Per unit
`Minimum Offering
`Maximum Offering
`
`Offering price
`$1.00
`$3,000,000
`$5,000,000
`
`Agent's fee (1)
`$0.08
`$240,000
`$400,000
`
`Net proceeds to the Company (2)
`$0.92
`$2,760,000
`$4,600,000
`
`(1)(cid:3) As additional compensation, the Company has undertaken to grant to the Agent a non-transferable option (the “Compensation Option”) entitling it, within 12
`months following the final closing of this offering, to subscribe to a number of Common Shares equal to 8% of the number of units sold pursuant to this offering to
`clients directly solicited by the Agent, subject to a minimum of 4% of the total number of units subscribed to pursuant to this offering. The exercise price shall be
`$1.00 per Common Share. This prospectus also qualifies the distribution of the Compensation Option. See “Plan of Distribution”.
`(2)(cid:3) Before deducting the expenses of the offering estimated at $200,000 which will be paid directly from the net proceeds of the offering.
`
`The Agent conditionally offers the units, on a best efforts basis, subject to prior sale, if, as and when issued and delivered by the Company and
`accepted by the Agent, in compliance with the conditions set forth in the Agency Agreement referred to under “Plan of Distribution” and subject
`to the approval of certain legal matters by Boivin, O’Neil, general partnership, of Montreal for the Company and by Fasken Martineau
`DuMoulin, LLP of Montreal for the Agent.
`Subscriptions will be received subject to rejection or allotment in whole or in part, and the right is reserved to close the subscription books at any
`time without notice. The first closing date for this offering is expected to occur on or about June 6, 2001, but no later than July 11, 2001, if all
`the closing conditions have been met at this date. Additional closings may take place up to July 11, 2001. At each closing, the Common Shares
`and Series C Warrants included in the units will be separated and a certificate evidencing each of these securities shall be delivered to the
`subscribers within three days following each closing date.
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:20)
`
`Petition for Inter Partes Review
`Of U.S. Patent 8,278,351
`Exhibit
`ENZYMOTEC - 1011
`
`

`

`SUBSCRIPTION PROCEDURES
`
`ELIGIBILITY FOR INVESTMENT
`
`PROSPECTUS SUMMARY
`
`PLAN OF DISTRIBUTION
`
`DETAILS OF THE OFFERING
`
`THE COMPANY
`
`KRILL
`Availability of Krill
`The Virtues of Krill
`Biological Properties of Krill Products
` Krill Oil
`Protein Concentrates
` Amino Acid Concentrates
`Krill Extraction Process
` Description
` Advantages of the Extraction Process
`Krill Markets
`License Agreement and Intellectuel Property Purchase Option
`Patent Applications
`
`SEAL
`Availability of the Seal
`The Virtues of the Extracted Seal Components
`Seal Markets
`Research Contract with the University
`Partnership Agreement with the Association Gaspésienne des
`Industries du Loup Marin
`Patent Application
`
`FISH
`
`ACTIVITIES OF THE COMPANY
`Premises
`Personnel
`Research Projects
` University Research
` Research Conducted with the Centre de Recherche
` industrielle du Québec
`Applied Research
` Research Protocols
`Strategy of the Company
`Products of the Company
`Markets for the Company's Products
` Nutraceutical Market
` Summary of the Major Trends in the Nutraceutical Market
` Opportunities for the Nutraceutical Market
` Geographical Features of the Nutraceutical Market
` Cosmetics Market
` Pharmaceutical Industry Market
` Specialized Animal Feed Market
`Procurement of Krill
`Distribution
`
`COMPETITION
`
`THE COMPANY'S COMPETITIVE ADVANTAGES
`
`PROTECTION OF INTELLECUTAL PROPERTY RIGHTS
`
`REGULATORY APPROVAL
`
`RESEARCH ADVISORY BOARD
`
`USE OF PROCEEDS
`
`Page
`31
`
`32
`
`35
`
`36
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`39
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`40
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`41
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`44
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`45
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`45
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`47
`47
`47
`47
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`48
`49
`49
`49
`50
`50
`50
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`51
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`52
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`52
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`53
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`53
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`53
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`53
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`54
`
`F-1
`
`C-1
`
`C-2
`
`C-3
`
`TABLE OF CONTENTS
`Page
`SELECTED FINANCIAL INFORMATION
`3
`
`MANAGEMENT'S DISCUSSION AND ANALYSIS
`OF FINANCIAL CONDITION AND RESULTS OF
`OPERATION
`
`DISCLOSURE IN MATTERS OF CORPORATE
`GOVERNANCE
`
`DIRECTORS AND OFFICERS
`
`OPTIONS
`
`INDEBTEDNESS OF DIRECTORS AND SENIOR
`OFFICERS
`
`DESCRIPTION OF SHARE CAPITAL
`
`CAPITALIZATION
`
`PRINCIPAL SHAREHOLDERS
`
`ESCROWED SHARES
`
`DIVIDEND POLICY
`
`DILUTION
`
`PRIOR ISSUES
`
`RISK FACTORS
`New Operation
`Uncertainty Related to Research
`Dependence on Strategic Partners
`No Guarantee of Development
`Intellectual Property Rights and Protection Conferred
`by Patents
`Lack of Income From Products - History of Prior Losses
`Capital Needs
`Key Personnel
`Manufacturing, Supplying and Marketing
`Regulations: No Guarantee of Product Approval
`Product Liability and Insurance
`Competition
`
`INTEREST OF MANAGEMENT AND OTHERS IN
`MATERIAL TRANSACTIONS
`
`PROMOTER
`
`MATERIAL CONTRACTS
`
`LEGAL MATTERS
`
`LITIGATION
`
`AUDITORS, CUSTODIAN, TRANSFER AGENT
`AND REGISTRAR
`
`STATUTORY RIGHTS
`
`GLOSSARY
`
`AUDITOR'S REPORT
`FINANCIAL STATEMENTS
`
`CERTIF ICATE OF THE COMPANY
`
`CERTIFICATE OF THE PROMOTER
`
`CERTIFICATE OF THE AGENT
`
`
`
`
`
`4
`
`5
`
`8
`
`9
`
`10
`
`10
`10
`11
`11
`11
`12
`12
`13
`12
`13
`13
`13
`15
`
`15
`15
`16
`16
`16
`
`16
`16
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`17
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`18
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`31
`
`2
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:21)
`
`

`

`SUBSCRIPTION PROCEDURES
`
`Any prospective investor who wishes to subscribe to units shall:
`
`(a)(cid:3)
`
`(b)(cid:3)
`
`issue a cheque bearing the date of his subscription made payable to Fiduc ie Desjardins Inc. (the
`«Custodian») in the amount of the subscription; and
`
`return same to the Agent or to one of its authorized agents or to the Custodian.
`
`The Company reserves the right to reject or allot any subscription, in whole or in part, and to close the subscription
`books at any time without notice. If a subscription is rejected, the cheque shall be promptly returned to the investor,
`without interest or deduction.
`
`All subscriptions shall be deposited in trust with the Custodian until the distribution proceeds have reached the
`amount of the Minimum Offering. Cheques shall be cashed and the distribution proceeds shall be retained by the
`Custodian. Interest shall not be paid to the subscribers on the distribution proceeds thus retained by the Custodian. At
`the closing of the offering, the distribution proceeds shall be paid to the Company which shall then proceed with the
`issue of the units to the investors whose subscriptions have been accepted. All certificates evidencing Common
`Shares and Series C Warrants included in the units shall be delivered to each subscriber within three days following
`each closing date.
`
`The first closing date of this offering is scheduled to occur on or about June 6, 2001, if all conditions of the closing
`have been met at that date. Additional closings may be held thereafter until July 11, 2001. If the first closing date
`does not occur at the set date, namely on or about June 6, 2001, but no later than July 11, 2001, all cheques or cash
`received by the Agent, any of its agents or the Custodian shall be returned to each subscriber, without interest or
`deduction.
`
`3
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:22)
`
`

`

`ELIGIBILITY FOR INVESTMENT
`
`In the opinion of Boivin, O’Neil, general partnership, legal counsel to the Company, and Fasken Martineau
`DuMoulin, LLP, legal counsel to the Agent, subject to prudent investment standards and the general provisions and
`restrictions regarding investment set out in the statutes listed below (and, as applicable, the regulations passed
`pursuant to such statutes) and, in certain cases, subject to compliance with additional requirements regarding
`investment or lending policies, procedures or objectives, the Common Shares included in the units offered hereby
`will not be, on the issue date, precluded investments pursuant to the following statutes:
`
`Insurance Companies Act (Canada)
`
`Supplemental Pension Plans Act (Quebec)
`
`Pension Benefits Standards Act 1985
`(Canada)
`
`Trust and Loan Companies Act (Canada)
`
`An Act respecting trust companies and savings
`companies (Quebec) (except trust companies
`in respect of funds, other than deposits, which
`are administered for the benefit of third
`parties)
`
`An Act respecting insurance (Quebec)
`(in respect of insurers other than a guarantee
`fund)
`
`Furthermore, in the opinion of such counsel, the Common Shares, when listed on a prescribed stock exchange in
`Canada, and the Series C Warrants comprised in the units offered pursuant to this prospectus would constitute
`qualified investments under the Income Tax Act (Canada) and its regulations for trusts governed by registered
`retirement savings plans, registered retirement income funds and deferred profit-sharing plans (collectively “deferred
`income plans”) as well as for registered education savings plans . The Common Shares included in the units offered
`pursuant to this prospectus, if they were issued on the date hereof, would not constitute foreign property for the
`purposes of the provisions regarding the tax assessable under Part XI of the Income Tax Act (Canada) with respect to
`deferred income plans, registered investments or other tax-exempt entities, specifically most pension funds or
`pension plans.
`
`4
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:23)
`
`

`

`PROSPECTUS SUMMARY
`
`The summary below of the main features of the offering is presented subject to the more detailed information and
`the data and financial statements, including accompanying notes, found elsewhere in this document. In this
`prospectus, unless otherwise indicated, all dollar amounts are in Canadian dollars.
`
`Minimum Offering:
`
`Maximum Offering:
`
`Price:
`
`Use of Proceeds:
`
`The Offering
`
`$3,000,000 (3,000,000 units at a price of $1.00 per unit, each unit being comprised
`of one Common Share and one half Series C Warrant)
`
`$5,000,000 (5,000,000 units at a price of $1.00 per unit, each unit being comprised
`of one Common Share and one half Series C Warrant)
`
`$1.00 per unit
`
`The estimated net proceeds from this offering to be received by the Company after
`deducting the Agent's fee, namely $400,000 ($240,000 in the event of a Minimum
`Offering) and the estimated expenses of $200,000, will aggregate $4,400,000
`($2,560,000 in the event of the Minimum Offering). The following table details the
`approximate use of the net proceeds of the offering.
`
`RESEARCH
`
`Extraction processes
`Applied researches
`
`PATENTS & LICENSES
`
`WORKING CAPITAL
`
`Fixed assets
`Operating expenses
`
`Total
`
`Minimum
`Offering
`
`Maximum
`Offering
`
`
`
`$1,224,000
`$600,000
`$1,824,000
`
`$450,000
`
`$1,866,000
`$1,408,000
`$3,274,000
`
`$700,000
`
`$5,000
`$281,000
`
`$150,000
`$276,000
`
`$2,560,000
`
`$4,400,000
`
`5
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:24)
`
`

`

`Activities of the Company: Generally, and in close collaboration with researchers from universities and
`recognized research institutes, the Company devises and develops processes for
`extracting high value-added natural products from marine biomasses. The
`Company also conducts various research pr ojects to establish formulae and
`applications which, based on the natural products that interest the Company, can
`be used effectively to improve and increase the functionality of foods, the
`effectiveness of cosmetic care, the primary prevention of certain diseases, and
`generally enhance human and animal health. Coupled with these research efforts,
`the Company is implementing the commercial development of the various
`products resulting from its research and development activities. To this end, it
`negotiates strategic alliances with various players to ensure supply of raw
`materials and outlets for its products.
`
`Selected Financial
`Information:
`
`The following table summarizes the results of the operations of the Company for
`the initial eight-month period ended May 31, 1999, for the twelve-month period
`ended May 31, 2000 and for the six -month periods respectively ended November
`30, 1999 and 2000, and the financial information derived from the balance sheets
`as of May 31, 1999, May 31, 2000 and November 30, 2000.
`
`Data from the Earnings Statement
`
`Six-month Periods Ended
`
`Fiscal Years Ended
`
`Research expenses
`
`Total operating expenses
`
`Net loss
`
`Net loss per share
`
`Weighted average number of Common
`Shares outstanding
`
`Data from the Balance Sheet
`
`Cash and short-term investments
`
`Current assets
`
`Current liabilities
`
`Shareholders’ equity (deficiency)
`
`Total assets
`
`November 30, 2000
`
`November 30, 1999
`
`(unaudited)
`$351,852
`
`$460,418
`
`$428,428
`
`$0.042
`
`(unaudited)
`$58,665
`
`$59,076
`
`$59,076
`
`$0.010
`
`10,100,000
`
`5,974,317
`
`As at
` November 30, 2000
`(unaudited)
`
`$1,139,452
`
`$1,201,142
`
`$213,534
`
`$987,608
`
`$1,201,142
`
`May 31, 2000
`(12 months)
`(audited)
`$154,725
`
`May 31, 1999
`(8 months)
`(audited)
`$121,815
`
`$181,785
`
`$181,785
`
`$0.026
`
`7,039,726
`
`$128,233
`
`$128,233
`
`$0.025
`
`5,100,000
`
`As at
`May 31, 2000
`(audited)
`
`As at
`May 31, 1999
`(audited)
`
`$1,523,364
`
`$1,540,112
`
`$124,076
`
`$1,416,036
`
`$1,540,112
`
`$667
`
`$667
`
`$128,846
`
`($128,179)
`
`$667
`
`See “Management’s Discussion and Analysis of Financial Condition and Results of Operation”
`
`6
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:25)
`
`

`

`Dividend Policy:
`
`The Company has no plans to declare dividends on its Common Shares in the
`foreseeable future, even if it realizes benefits, preferring instead to retain its future
`profits to finance its growth. See “Dividend Policy”.
`
`Dilution:
`
`Risk Factors:
`
`The offering price per Common Share (namely, $1.00) exceeds the net tangible
`book value per Common Share of the Company as at November 30, 2000, by
`$0.6432 ($0.7292 in the event of the Minimum Offering), representing a dilution
`factor of 64.32% (72.92% in the event of the Minimum Offering). See “Dilution.”
`
`The outlook for companies in the nutraceutical industry is generally deemed
`uncertain, given the emerging nature of the industry and, accordingly, investments
`in the units offered by the Company pursuant to this prospectus are highly
`speculative. Investors intending to subscribe to units offered by the Company
`ought to consider the following risk factors: (i) startup operation, (ii) uncertainty
`related to research, (iii) dependence on strategic partners, (iv) successful
`development not guaranteed, (v) dubious protection of the intellectual property
`rights, (vi) absence of income from products -- history of prior losses, (vii) capital
`needs, (viii) possibility of losing key personnel, (ix) lack of experience in
`manufacturing and marketing, (x) no guarantee of product regulatory approval, (xi)
`product liability, and (xii) competition. See “Risk Factors”.
`
`7
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:26)
`
`

`

`PLAN OF DISTRIBUTION
`
`Pursuant to the terms of an agency agreement entered into on May 11, 2001, between the Company and the
`Agent (the “Agency Agreement “), the Agent has agreed, on a best efforts basis, to offer for sale, if, as and
`when issued by the Company, a minimum of 3,000,000 units and a maximum of 5,000,000 units at the price of
`$1.00 per unit (the “Offering price”). Pursuant to the Agency Agreement, the Agent is not required to
`subscribe to the units. The closing of this offering is expected to occur on or about June 6, 2001, but no later
`than July 11, 2001, if the Minimum Offering is subscribed for and if all the conditions set out in the Agency
`Agreement are met. Additional closings may occur thereafter until July 11, 2001.
`
`As consideration for the services rendered pursuant to this offering, the Company has agreed to pay the Agent
`a fee of $0.08 per unit sold. The Agent’s fee shall be paid out of the proceeds of the distribution of the units.
`As additional compensation, the Company has undertaken to grant the Agent a non-transferable Compensation
`Option entitling it, within 12 months following the final closing of this offering, to subscribe to a number of
`Common Shares equal to 8% of the number of units sold pursuant to this offering to clients directly solicited
`by the Agent, subject to a minimum of 4% of the aggregate number of units subscribed to pursuant to this
`offering. The exercise price shall be $1.00 per Common Share. This prospectus also qualifies the distribution
`of the Compensation Option.
`
`The Company reserves the right to accept or reject any subscription, in whole or in part. Although the Agent has
`agreed to sell the units on a best efforts basis, it is not required to take up the unsold units. The Agent has the
`right to terminate the Agency Agreement at its own discretion, upon the occurrence of certain conditions set out
`in the Agency Agreement.
`
`8
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:27)
`
`

`

`DETAILS OF THE OFFERING
`
`The offering consists of a minimum of 3,000,000 units and a maximum of 5,000,000 units at the price of $1.00 per
`unit, each unit being comprised of one Common Share and one half Series C Warrant. At the closing of this offering,
`the Common Shares and Series C Warrants included in the units will be separated and certificates evidencing each of
`these securities will be issued within three days following each closing date.
`
`Warrants
`
`The following is a summary only and shall be read in conjunction with the provisions of the Series C Warrant
`Agreement mentioned hereafter.
`
`The Series C Warrants offered hereby will be issued in registered form and governed by the Series C Warrants
`Agreement to be entered into between the Company and Fiducie Desjardins Inc., the later acting as agent for the
`Series C Warrants (the “Series C Warrants Agent”) on the closing date of this offering.
`
`Each Series C Warrant will entitle its holder to acquire one Common Share of the Company at a price of $1.50, at
`any time, before 5:00 p.m. (Montreal time) on June 28, 2002, after which date the Series C Warrant will become null
`and void.
`
`Upon the exercise of the Series C Warrants, the Series C Warrant Agent will remit the exercise price to the Company
`and will retain the Common Shares issued upon the exercise of the Series C Warrants for a period of ninety days.
`Thereafter, the Series C Warrant Agent will deliver the Common Shares to the Series C Warrant holder.
`
`The Series C Warrants Agreement contains provisions providing for adjustments to the exercise price and to the
`number of Common Shares that may be issued upon exercise of a Series C Warrant following some occurrences,
`namely: the issuance of Common Shares as extraordinary dividends (as specified in the Series C Warrant Agreement)
`on the Common Shares; stock splits, consolidations or some reclassifications of the Common Shares; the issue to all
`holders of the Common Shares of rights, options or warrants (expiring within 45 days following the record date used
`to determine the shareholders entitled to receive them) in view of the subscription to Common Shares at less than
`95% of the current market price (as specified in the Series C Warrants Agreement); or the distribution, by way of
`payment of a dividend to all holders of the Common Shares of shares other than the Common Shares or debt
`instruments, assets, or rights, options or warrants (other than those aforementioned) in view of subscribing to
`Common Shares or to acquire assets of the Company. Also, as long as cumulative adjustments do not equal 1% or
`more of the exercise price or of the number of Common Shares that may be purchased upon the exercise of the Series
`C Warrants, no adjustment with respect to the Series C Warrants shall be required; however, any similar adjustment
`will be postponed and taken into account, should any subsequent adjustment be required.
`
`Fraction of Common Share will not be issued upon the exercise of the Series C Warrants. Instead of receiving such
`fraction of share, the holder will receive payment in cash based on the closing pric e of the Common Shares on the
`day preceding the sending of the exercise notice. The holders of Series C Warrants will not be entitled to vote nor
`will they hold any other rights conferred upon holders of Common Shares or other class of shares of the Company.
`
`9
`
`(cid:19)(cid:19)(cid:19)(cid:19)(cid:19)(cid:28)
`
`

`

`THE COMPANY
`
`Neptune was incorporated on October 9, 1998, under Part 1A of the Companies Act (Quebec).
`On May 30, 2000, the Company filed articles of amendment in order to proceed with the restructuring of its
`capital stock and to convert its then issued and outstanding shares into newly-created classes of shares. On
`May 31, 2000, the Company filed new articles of amendment to create Series A Preferred Shares.
`On August 29, 2000, the Company converted all its issued and outstanding Class A Shares into Class B
`Subordinate Shares. On September 25, 2000, the Company further amended its share capital to eliminate its
`Class A Shares and convert its Class B Subordinate Shares into Common Shares. In addition, on
`February 28, 2001, the Board of Directors of the Company changed the address of its head office.
`On May 11, 2001, the Company amended its articles of incorporation to repeal the restrictions with respect to
`closed companies. The Company’s head office and executive offices are located at 500 Saint-Martin
`Boulevard West, Suite 550, Laval, Quebec, H7M 3Y2. See “Activities of the Company – Premises”.
`
`Mission and Objectives
`
`The Company’s mission consists in developing, marketing and exploiting innovative high-yield technological
`processes in the production of value-added natural products, such as Omega-3-type oils, protein concentrates,
`amino acids concentrates and other marine biomass extracts which the Company intends to market for
`innovative applications in the fields of nutraceuticals, cosmetics and pharmaceuticals.
`
`In the pharmaceutical field, the Company intends to supply pharmaceutical companies with innovative
`functional ingredients that may improve the efficiency of some medications. However, the Company does not
`currently anticipate becoming itself involved in the development and certification of pharmaceutical products.
`
`The first marine biomasses which have become the focus of the Company’s interest are krill and seal.
`
`KRILL
`
`Krill is a generic term of Norwegian origin designating the set of 85 species of deep and cold water pelagic
`marine planktonic crustaceans (zooplanktonic) (source: Stephen Nicol, “Time to Krill?”, Australian Antarctic
`Division, 1995, pages 2-3).
`
`Krill looks like a miniature shrimp. The smallest species of krill, found in the Pacific Ocean, measures
`approximately 1 cm. The larger Antarctic krill can grow up to 6 cm. Krill is the most abundant animal biomass
`on the planet and is found in schools that can sometimes cover several square kilometres of ocean (source:
`Stephen Nicol, “Time to Krill?”, Australian Antarctic Division, 1995, pages 2-3).
`
`Availability of Krill
`
`There are two primary ocean regions where krill is fished: the Antarctic Ocean (Antarctic krill) and the North
`Pacific Ocean (Pacific krill, mainly off the coasts of Japan and Canada). The total quantity of krill in these two
`oceans is conservatively estimated to be around 500,000,000 metric tonnes (mt) (source: World Health
`Organization (“WHO”), “Nutritional Value of Antarctic Krill”, 1995, Bulletin 73). From these two oceans, a
`total of some 150,000 mt of krill is harvested annually on average (source: Commission for the Conservation of
`Antarctic Marine Living Resources, “Understanding CCAMLR’s Approach to Management”, May 15, 2000).
`Of that total, 90,000 mt originate from the Antarctic and 60,000 mt from the Pacific (source: Yoshinari Endo,
`“Fishery Biology of Euphausia pacifica in the Japanese Waters”, Fisheries Centre Workshop, November 1995,
`University of British Colombia). These catches represent less than 0.1% of the existing resource. These average
`values are based on the period from 1981 to 1994 and represent the total catches within the authorized quotas
`(source: Stephen Nicol, “Ecosystem Management and the Antarctic Krill”, American Scientist, 1993, 81
`(No. 1), pages 44-45). The main countries that fish for krill are Japan and Ukraine. The above data support the
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`following facts: the resource is abundant, accessible and there is a potential for long-term exploitation
`(source: WHO, “Nutritional Value of Antarctic Krill”, 1995, Bulletin 73, page 551).
`
`The Virtues of Krill
`
`In the opinion of the Company, the virtues of krill are being increasingly recognized by the world scientific
`community. Because the krill used by the Company feeds on phytoplankton, namely diatoms, its lipid content is
`a major source of polyunsaturated fatty acids, mainly docosahexanoic acid (DHA) and eicosapentanoic acid
`(EPA), two types of Omega-3 fatty acids. Krill also contains proteins offering the complete range of amino
`acids. It also contains powerful antioxidants (liposoluble A and E vitamins and provitamins, beta-carotene,
`trans-retinols, astaxanthin and canthaxantin pigments). Krill contains phospholipids, amino acids and minerals
`providing numerous benefits in terms of the absorption and digestion of nutrients essential to human and animal
`growth (source: Specialty Marine Products Ltd., “Hatchery feed”, page 1).
`
`The organic components that can be obtained from krill are part of the categories of substances actively sought
`after by the nutraceutical, cosmetics and pharmaceutical industries (source: Molyneaux, M. & C.M. Lee, “Food
`Technology”, The U.S. Market for Marine Nutraceutical Products, June 1998, 52:6, pages 56-57).
`
`A major additional advantage lies in the fact that the Omega-3 polyunsaturated fatty acids contained in the krill
`oil concentrate are not oxidized. The absence of oxidation results from the high natural content of powerful
`antioxidants in krill oil, namely vitamins A and E, beta-carotene, trans-retinols, astaxanthin and canthaxantin.
`
`Krill oil may also have interesting features for transdermal applications (source: Medscape Medline Abstract,
`“Influence of Cholesterol on Liposome Fluidity by EPR. Relationship with Percutaneous Absorption”, J.
`Control Release, July 31, 2000, 68(1) pages 85-95).
`
`Biological Properties of Krill Products
`
`Fish oils, more specifically the Omega-3 polyunsaturated fatty acids, have captivated the attention of the
`medical community since the 1950s. With the exception of grapes, flax seeds and soy beans, these types of
`Omega-3 polyunsaturated fatty acids are rarely present in land plants.Instead, land plants produce Omega-6
`fatty acids. It has been shown that Omega-3 polyunsaturated fatty acids have a beneficial effect on patients with
`cardiovascular diseases, arthritis, asthma and inflammatory conditions associated with immune system diseases
`(source: Rafael Ariza-A, Marilu Mestanza-Pereita and Mario H. Cardiel, “Omega-3 Fatty Acids in Rheumatoid
`Arthritis: An Overview”, Seminar in Arthritis and Rheumatism, Vol. 27, No. 6 (June), 1998, pages 366-370;
`Knud Landmark, “The Beneficial Effects of Omega-3 Fatty Acids on Coronary Heart Disease”, Omacor
`CVD/LIPIDS Dialog, December 1998, Publication 8; Medscape Medline Abstract, “Prevention of Asthma”,
`July 1996, Document 1 of 200; Biochem, Biophys. Res. Commun., “Decreased Pro-Inflammatory Cytokines
`and Increased Antioxidant Enzyme Gene Expression by Omega-3 Lipids in Murine lupus nephritis”, (USA),
`1994, 200/2 pages 893-898).
`
`Krill Oil
`
`Krill oil's high natural content of Omega-3 polyunsaturated essential fatty acids (EPA/DHA) takes on greater
`significance following recognition by the scientific community of the importance of Omega-3 fatty acids in the
`primary prevention of cardiovascular disease (Knud Landmark, “The Beneficial Effects of Omega-3 Fatty Acids
`on Coronary Heart Disease”, Omacor CVD/LIPIDS Dialog, December 1998, Publication 8). Omega-3
`polyunsaturated fatty acids are globally lacking in North American and European diets, in children as well as in
`adults. An imbalance between Omega-3 polyunsaturated fatty acids and Omega-6 polyunsaturated fatty acids
`can cause a variety of cardiovascular diseases, hypertension, inflammatory and auto-immune disorders, and
`certain mental illnesses. A supplemental intake of Omega-3 polyunsaturated fatty acids reduces the
`concentration of triglycerides in the plasma, reduces the possibility of platelet aggregation and lowers blood
`pressure.
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`The Company’s krill oil contains powerful natural carotenoids (vitamin A, beta-carotene, trans-retinols,
`astaxanthin and canthaxantin) and a liposoluble vitamin (vitamin E), which have numerous known antioxidant
`properties. Oxidation is one of the major factors contributing to the deterioration of the quality of marine oils.
`For that matter, in vitro and in vivo studies have shown that the oxidizing damage caused by low-density
`lipoproteins (LDL) significantly increases the formation of atheromatous plaques (source: Ylo-Herttuala,
`“Macrophages and Oxidized Low Density Lipoproteins in the Pathogenesis of Atherosclerosis”, Ann. Med.,
`23(5) pages 561-567). These damages promote the atherogenic process. The Company’s krill oil concentrate is
`of extremely high quality as it does not oxidize during the Neptune OceanExtractTM process (see “Krill
`Extraction Process”), which increases its biological effects and absorption by the human body. Specifically, the
`antioxidant power of astaxanthin in repressing oxygen is approximately 80 times more effective than vitamin E
`and 10 times more effective than beta-carotene (source: “Astaxanthin As An Antioxidant: A Summary”,
`Technical Report, Aquasearch inc., revised March 20, 2000, page 1). Carotenoids can play various roles,
`including the harnessing of free radicals and the prevention of lipid peroxidation. Most studies suggest that
`carotenoids are involved in the primary prevention of arteriosclerosis (source: EB Rimm and MJ Stampfer,
`“The Role of Antioxidants in Preventive Cardiology”, Curr. Opin. Cardiol., March 1997, 12(2), pages 188-194).
`Moreover,