MONTANA SYNERGY, LLP - Recently Updated Pages

Mentoring: Jim Miller and Kaila and Aaron

jimmiller5417 — Sat, 16 Jun 2007 15:57:26 CDT

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Industry Overview-power point

AaronCurtis — Fri, 13 Oct 2006 12:41:17 CDT

LRES 470 ORIGNAL PROPOSAL FOR STUDY OF ALGAE

jimmiller5417 — Fri, 29 Sep 2006 20:39:40 CDT

JAMES E. MILLER P. O. Box 1172, Belgrade, MT 59714 Email: jimmiller@yahoo.com 406-599-6391 August 8, 2006

Dr. Clifford Montagne
Land Resources and Environmental Science
Montana State University

Dear Dr. Montagne: Permission is requested for enrollment in LRES 470-01, independent study (23400), for the fall semester, 2006. Four credit units are requested. This senior project will be the examination of the science and resources necessary to produce algae for food and fuel in a controlled environment. Use of this living system will be based on the hydroponic production of one specie of alga primarily for food and a second specie for its oil content for biodiesel. The study will examine the science of algae production and transesterification of oil into biodiesel. The deliverables will be two fold: A professional paper in academic format, and a WikiWeb site which will serve as a research archive, publishing medium, interactive forum and a public outreach medium. See: http://montanasynergy.wetpaint.com/page/BUSINESS+PLAN+FOR+SPIRULINA+CULTURE+AND+PRODUCTION SCIENCE The biological and physical science will be applied in the selection of the best fit specie of algae for each end use, including considerations for yield, resistance to pathogens, nutrient requirement, carbon sequestration, ease of management and type and amount of inputs. The collection, transfer and distribution of sunlight will be accomplished by a sun tracker farm of parabolic dishes pointed sun, the light from which, after concentration, will be fed into fiber optic cables which transmit the energy to reverse parabolic troughs which reflect the sunlight onto the growing medium. One or more physicists will be consulted on the best means of creating this system. Carbon sequestration by injection of gaseous CO2 in the hydroponic bath will be studied and a method resolved. Harvest by a rotating, perforated vacuum cylinder will collect the mature algae. Water will be removed from the algae and recycled via a centrifuge and then dehydrated by a waste oil fired, forced air heater. ENVIRONMENTAL POLICY Environmental policy which favors use of renewable sources of food and energy will be applied so as to transfer the science to commercially viable markets. Potential funding with grant, loan and equity funds will be catalogued and preliminarily explored. The legal vehicle is Montana Synergy, LLP; the draft of a business plan is cited above. This WikiWeb, the World Wide Web and other computer resources will be the central intellectual repository. HOLISTIC TOOLS The project is to be approached and completed in accordance with the general holistic principals advocated by Alan Savory in Holistic Resource Management, 1988. The study will also benefit from what I learned through your course, LRES 421. My search for tools will build on these resources and my business and legal background. One outcome could well be my development of talent and experience to become a qualified candidate for post graduate work and attainment of a Certified Education certificate from Savory’s Holistic Management International [ http://www.holisticmanagement.org/new_site_05/CE/CE1_certif_educ.html ]. SYLLABUS The progression of the study to its conclusion will generally follow this course:

Survey of scientific literature relative to food and oil types of algae, their growth, yield,nutrient requirements, pathogens, biocontrol of pathogens, sources, required inputs, and hydroponic environments.
Selection of cultivars and design and pricing of growing structures, harvest methods, water and oil extraction, dehydration and processing of meal into flour.
Transesterification of algae oil and waste vegetable oils and animal fats into biodiesel. Specifically the selection of either ethanol versus methanol and the selection of sodium hydroxide versus potassium hydroxide. The design of the production plant including testing methodologies such as near infra-red spectrometry and titration techniques.
Selection of location considering cost, availability of water, nutrients, labor and transportation. Design of the plant, including the of growing facilities, harvest and processing machinery, source of carbon dioxide and means of sequestration,
Application for permits, including local building permits and environmental permits from State of Montana Department of Environmental Quality.
Completion of a paper including a business plan with financials: Capital cost, Startup expense, Operating Expense, General and Administrative Expense, Gross Sales and Revenue, Net operating profit, Net profit before taxes and after taxes, return on investment and cash flow. The plan will also set forth the marketing plan, administrative and management guidelines.
A prospectus directed toward funding the project and a preliminary assessment of the SEC and Montana security requirements for a limited, private stock or partnership offering.

All of the research and papers will be archived for public display and copying on the website. I will publish the website to the several search engines and cross-hyperlink with other suitable websites. I have taken the courses and conducted outside studies which have fully prepared me for this assignment. Sincerely yours, James E. Miller

Marketing Plan for algae for food by Kaila and Aaron

jimmiller5417 — Fri, 29 Sep 2006 20:28:11 CDT

Kaila Johnson Aaron Curtis Marketing 460 September 13, 2006

Marketing Proposal Montana Synergy, LLP

Montana Synergy is a developing company which focuses upon the creation of biobased products. They are currently emphasizing on biofood products, although they have ambitions to create biodiesel fuel as well. In correspondence with Montana Synergy we aim to identify the primary type of Spirulina product that would yield the largest targeted segment. Spirulina is a fast growing form of algae that can be harvested and used in many different forms. Montana Synergy’s strategy is to be engaged with the product from the growth of Spirulina, to the production of the various products, and to the end user. This strategy reinforces Montana Synergy’s goal of selling their products directly to consumers. Along with defining the product for the best target segment, we would like to propose the costs and benefits of maintaining a product through all phases of the supply chain.
In achieving our goal we plan on keeping close contact with Jim Miller, a key member of Montana Synergy. We have assigned Kaila Johnson to be the main liaison, whereupon we will be communicating with Montana Synergy through their Wikiwebsite. All of the communicated information will be shared amongst the group and any questions for the company will be the result of collaboration.
A Tentative Weekly Schedule to Obtain Goals:
Week of September 18th: -Collect sales data of potential Spirulina product types
Week of September 25th: -Analysis of sales data collected
Week of October 2nd: -Focus on consumer market indicated by sales data
Week of October 9th: -Competitive analysis of competition
Week of October 16th: -Continuation of competitive analysis

Week of October 23rd: -Defining end users and how to reach them
Week of October 30th: -Pros of maintaining a product from production to consumption
Week of November 6th: -Cons of maintaining a product from production to consumption
Week of November 13th: -Compile data and implement class concepts
Week of November 20th: -Start drafting of final paper
Week of November 27th: -Continuation of final paper
Week of December 4th: -Create the final Executive Summary
Week of December 11th: -Collection of references

RESEARCH NOTES: Use of CSA

jimmiller5417 — Fri, 29 Sep 2006 20:18:46 CDT

09/28/06
Kaila and Aaron:
[Fast readers: skim the bold/yellow targets]
Rural New York State has been a hotbed of community activism for many years. Chief among these movements are the community-based social movements, including community food programs. These movements have found a welcome home at Cornell University.
I have been subscribed to the Cornell list serve, CFAP-L, for many years and have learned much from the steady progress Cornell and its associate organizations have made at the community level. Available at: www.cfap.org.
I have attached a brochure of the publications of the Department of Sociology of Cornell. I encourage you to visit the website and subscribe to the CFAP-L listserve. The community, food, and agricultural programs and projects of New York (indeed all of New England) are much stronger and have done much more than we in the west are even aware of. This site acts as a clearinghouse for agriculture-based economic topics with links to other very informative websites and resources:www.NYAGDEV.net.
Of particular interest to you in crafting the algae for food marketing plan will be the publications relating to cultivation of farm, neighbor and community relations. As recommended: “[Growing Home] is a must-read for anyone concerned about farming, quality of life in their community, and access to wholesome, affordable food.”Order from: www.cfap.org.
Regards,
Jim Miller
cc: Cliff Montagne, Jakki Mohr

MARKETING AND SALES

jimmiller5417 — Fri, 29 Sep 2006 20:15:41 CDT

RESEARCH NOTES

09/28/06
Kaila and Aaron:
[Fast readers: skim the bold/yellow marked targets.]
Thanks for the lunch meeting on Monday last. The food at Giga Pizza was great. I had never had a “Calazone” except as a squid dish. The Buffalo sausage from Kalispell, along with the soft cheese and dressing, which filled the toasted empanada, was a great taste treat.
I hope the sheaf of marketing materials I gave you will help focus your marketing research on what works. We can market the slettuce through Home Grown Organics (HGO), a startup organic farming operation which is currently conducting field tests on asparagus and hazelnuts. Part of the marketing for spirulina will be through HGO's Community Supported Agriculture Cooperative (CSA).
CSA's have been around for quite a while and are popular interfaces between urban dwellers and rural farmers. Many organic farms have adopted the CSA model for direct marketing. As it turns out, foodstuffs are mostly about relationships, not product. Tidbits:

Do you know your farmer?
Where did this food product come from?
Was this foodstuff produced without toxic chemicals?
Were the chickens/beef cattle/dairy cattle, turkeys raised as pasture fed, free-ranging animals?
Were the animals humanely treated during their lives and at the end of their lives?
What is the nutritional value of this organic foodstuffs as compared to industrially produced foodstuff?
How can you, the seller, assure me that the foodstuffs have been handled properly from a health and safety viewpoint?
How will my purchase of a particular foodstuff help a local farmer and the local economy?
I'm willing to pay extra for organic foodstuffs raised ethically and holistically, but what assurances can you, the seller, give me of such?

Some of the materials from Co-America speak to these issues.
I have attached a series of articles which bear on CSA's. Please read the Hurricane Relief Trip Recap By Jody Osmund, Cedar Valley Sustainable Farm CSA. It nearly brought tears to my eyes. The other articles are good, too. CSAs are all about relationships, not fancy ads or powerful sales pitches. As an example, flour Spirulina can be marketed directly as part of the supplies needed to bake organic products. The slettuce idea could have many varieties which imitate leafy vegetables.
I developed a “How to do it” website for CSAs after studying them for a year. You should take a look and and probably cite: Cyber Gardens http://www.xsorbit3.com/users/cybergarden/index.cgi
I recently received in hard copy: Hilchey, D. and Henehan, B, Small-Scale Grower Cooperatives in the Northeast United States – A Study of Organizational Characteristics, Managers, Member and Director attitudes, and the Potential for Improving Regional Inter-cooperative Collaboration, United States Department of Agriculture, Rural Development-Cooperative Programs, RBS Research Report 210, August, 2006. This publication cost $4.00 and is not online. After reviewing it, my critique is:

It was not online and no plans to put it online.
The Cooperative Marketing Channels paragraph did not cover CSAs, nor did any part of the study discuss CSAs.
Sharing and networking through conferences was the means and only one mention of online collaboration was made.
There was no reference to sales through ecommerce
The literature citations failed to include any citations to websites.

It would appear that the authors were not Web-savvy. There were some good stats concerning cooperatives which redeems the publication somewhat.
I recently read about a farmer-sponsored CSA wherein the retail customer/members put in online, their specific order a week in advance, selected from a catalogue of available products. Thus the contents of the delivered foodstuffs exactly matched what the consumer order (or nearly so based on availability). The article reported a substantial drop in waste and reduction of haul-backs for those products which could be stored for future sales. Customer satisfaction also rose.
Cell Tech initially tried to sell through a Multi-Level Marketing program (MLM) which at the minimum is a variety of a pyramid scheme. You will note in the SEC 10-K filing that this marketing approach fell apart and left Cell Tech with virtually no marketing ability. Montana Synergy does not intend to sell through an MLM. If you are interested, I can explain the reasons for this policy in more detail. But please mention the Cell Tech experience with the MLM approach.
This Tuesday, I attended the 5th annual conference given by Montana Nonprofit Association, in Helena. Much of the discussion was about fund- and friend-raising and “marketing”, if you will. Nearly all of the presenters stressed how important establishing and retaining relationships were. As an example, it cost about $100 to attract the average long-term donor and about $2 to $10 per year to keep an existing donor. The main pitch was: find out what results are important for the individual, foundation or corporate donor. We should not rely upon how good a job the NPO does or how important that work is. As an example, corporate image locally is important to the corporations; then stress how the corporation's local image will be greatly enhanced by participating in a very specific cause, e.g., for Home Depot, guide the gift toward construction of a homeless persons' shelter in the immediate community.
Selling healthy foods should start with how important good health is to the buyer's state of mind (spirulina fed cows are happy cows which give happy milk), or immune system (spirulina has no toxic chemicals), or body mass (spirulina, added to a drink, is high in low-cal protein which can prevent weight gain and aid weight loss).
Organic Valley, one of the largest marketer of organic foods, has an online newsletter [ e-newsletter@alerts.organicvalley.com ] which, as an example of marketing “results”, promotes child health with this article (summary):
Dr. Greene: Brain Food for Your Kids (clickable)
What's on your child's plate today? Pediatrician Dr. Alan Greene explains why healthy breakfasts and lunches are key to helping kids succeed in school. Read the doctor's "homework" to give kids the nutritional edge they deserve. http://www.organicvalley.coop/culture/school_lunch/brain_food.html You have a good start on the marketing plan. Please keep me informed by uploading your research notes and drafts at all stages. I really look forward to collaboration via the Wikiweb for Montana Synergy: http://montanasynergy.wetpaint.com . I'll post this message and also email it to you.
Best regards,
Jim Miller
cc: Cliff Montagne, Jakki Mohr

Home

AaronCurtis — Wed, 13 Sep 2006 14:08:14 CDT

MONTANA SYNERGY, LLP, develops multi-million dollar protein and charbohydrate crops for human and animal use. Our current focus is the algae, spirulina. It grows 10 times faster than most plants and has 70% protien when dry.

Cell Tech

jimmiller5417 — Wed, 13 Sep 2006 12:43:07 CDT

EXCERPTS FROM THE SEC FILING BY CELL TECH;
Links:
SEC filing: CELL TECH INTERNATIONAL INC - EFLI Annual Report (10-K) ITEM 1. BUSINESS
http://www.metacrawler.com/info.metac/search/web/CELL%252BTECH%252BINTERNATIONAL/1/-/1/-/-/-/1/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/1/-/-/-/-/-/-/-/-/-/-/-/-/-/-/-/417/top/-/-/-/1
Cell Tech website: http://www.celltech.com/ Cell Tech Sued for False Advertising The suit below, filed in October 2001, charged Cell Tech International with falsely advertising its algae products. In February 2003, the judge agreed that ..... www.mlmwatch.org/04C/CT/suit.html

TEM 1. BUSINESSOVERVIEW We are a natural and nutritional products company and we develop and distribute a wide range of products made with Aphanizomenon flos-aquae (trade name Super Blue Green(R)) Algae ("SBGA") and other nutrients and ingredients through a network of independent distributors ("Distributors"). We currently offer twenty-two different products intended to appeal to health-conscious consumers. We divide our products into five product lines including Daily Health Maintenance, Digestive Health, Defensive Health, Powdered Drinks and Snacks, and Animal and Plant Food. We harvest SBGA and manufacture several of our products at our modern production facilities in Klamath Falls, Oregon. We market our products through independent Distributors located in all fifty states, the District of Columbia, Guam, Puerto Rico, American Samoa, the Virgin Islands, Federated States of Micronesia, Marshall Islands, Northern Mariana Islands, Palau and Canada. We encourage our Distributors to recruit interested people as new Distributors for our products. We place these recruits beneath the recruiting Distributor in the "network" and we refer to them as the distributor's "downline" or "network." Distributors earn commissions on sales by their organizations as well as retail profits on the sales they generate directly. We assist Distributors in establishing their own businesses and provide support programs such as a comprehensive, information-packed website (www.celltech.com), audio and videotapes for training, empowerment teams, seminars and an annual convention called the August Celebration. HISTORY AND ORGANIZATION Unless otherwise specifically stated, references to "we" and "us" in this Form 10-K/A (the "Report") refer: (a) for periods prior to our reorganization, to the historical operations of HumaScan and (b) for periods following our reorganization, to the operations of Cell Tech International Incorporated, including its wholly owned subsidiaries The New Earth Company, Inc. ("NEC") and The New Algae Company, Inc. ("NAC"). NEC is now an inactive corporation. We were formed under the name "HumaScan Inc." in 1994 to manufacture and market in the United States and Canada a device called the BreastAlert(TM) Differential Temperature Sensor, a non-invasive, easy to use, adjunctive test for use as part of a breast disease monitoring program (the "BreastAlert Device"). We commenced shipments of the BreastAlert(TM) Device in December 1997. In November 1998, we announced that we were in the process of evaluating various strategic alternatives, as we did not have adequate resources for the completion of clinical trials and marketing of the BreastAlert Device. Before the end of 1998, because of the lack of adequate financing, we terminated all employees and suspended all operations, focusing substantially all of our efforts on obtaining new financing and/or restructuring the business. The Board of Directors then entered into consulting agreements with three former key employees to negotiate settlement agreements with Scantek Medical, Inc. ("Scantek") to terminate the license agreement and negotiate settlements with other creditors, and explore the possibilities for restructuring and/or reorganizing the business. In March 1999, we concluded a settlement agreement with Scantek that terminated the license for the technology used in the BreastAlert Device. We transferred certain assets related to the licensed business to Scantek and we issued additional shares of common stock to Scantek and an affiliated company as consideration for release of all obligations concerning the license agreement and equipment supply agreements. We also received a cash payment from Scantek, which we applied to some of our other outstanding obligations. On July 16, 1999, we entered into an Agreement and Plan of Reorganization with Daryl J. Kollman and Marta C. Carpenter (formerly known as Marta C. Kollman). The agreement provided for the exchange of all the outstanding shares of NEC and NAC for shares of our common stock and preferred stock that together represented, on August 6, 1999, approximately 92% of our outstanding common stock (including the common stock issuable upon conversion of the preferred stock). We completed the reorganization on August 6, 1999. On August 10, 1999, we changed our name to Cell Tech International Incorporated. Marta C. Carpenter and Daryl J. Kollman formed Cell Tech, Inc. and NEC in 1982 and 1988, respectively, to develop and distribute products made from a unique natural strain of blue green algae growing in massive quantities in Upper Klamath Lake in southern Oregon - the algae we now call SBGA. In 1990, Ms. Carpenter and Mr. Kollman formed NAC, acquired the assets of Cell Tech, Inc. and began doing business under the trade name Cell Tech. Through 1999, NAC housed the sales organization, and provided the research and development and administrative functions of our business, while NEC handled the harvesting and manufacturing of our products. Beginning in 2000, NAC took over these functions and NEC became inactive. EXECUTIVE OFFICES Our principal executive offices are located at 565 Century Court, Klamath Falls, Oregon 97601, and our telephone number at that address is (541) 882-5406. Our internet address is www.celltech.com, however, the information on our website does not constitute part of this Annual Report on Form 10-K/A and is not incorporated herein. You may obtain, free of charge, our annual, quarterly and current reports, and any amendments thereto on the Securities and Exchange Commission's website at www.sec.gov. INDUSTRY OVERVIEW The Natural Foods Merchandiser reports that the natural foods and nutrition industry topped $64 billion in 2002. The Nutrition Business Journal has predicted that the nutritional products industry will continue to grow at 4% to 6% annually through 2004. The Natural Foods Merchandiser has also reported that overall sales of natural foods and nutritional products grew approximately 7% in 2002. Most of this growth was in the functional foods sector (including nutrition bars and drinks) and the sports nutrition sector. The growth of traditional supplements, including herbals, continued to decline in 2002. The primary distribution channels in the nutritional supplements industry consist of mass-market retailers (including mass merchandisers, drug stores, supermarkets, discount and convenience stores), health and natural food stores, direct sales and mail order organizations, practitioners and the Internet. Natural foods retail is the largest of these channels, accounting for almost 50% of total sales, according to The Natural Foods Merchandiser. The Mass-market retail channel includes food stores, drugstores and mass merchandisers. Direct selling accounted for about 15% of sales during 2002. The Nutrition Business Journal also reported that the potential for natural and healthier products to penetrate mainstream product categories looks promising--and is still largely untapped. Dietary supplements sales of $16.7 billion are less than 10% of over-the-counter medicine and prescription drug sales. Natural and organic food sales of $11.8 billion represent barely 2% of the U.S. food industry (only 1.5% when food service is included). Functional foods sales at $17.2 billion, even when broadly defined as manufactured foods with any ingredient added specifically for health purposes, still account for only 3.5% of the U.S. food industry. Natural personal care products, even more loosely and broadly defined than natural food, had sales of $3.6 billion in 2000 and are just 10% of total health & beauty care spending. The $50 billion nutrition industry accounted for just 7% of the $680 billion food, medicine, health and personal care products market in the United States in 2000. Due to the greater fragmentation that exists in the international nutritional supplement market compared to the domestic market, industry data is not readily available. However, many of the demographic and other trends and events present in the domestic market are also present in the international market. GROWTH STRATEGY In the last several years, widely publicized reports and medical research findings, indicating a correlation between the consumption of nutrients and the reduced incidence of certain diseases, have heightened the public awareness of the positive effects of nutritional supplements on health. The United States government and universities generally have increased sponsorship of research relating to nutritional supplements. For example, Congress has established an Office of Alternative Medicine and an Office of Dietary Supplements within the National Institutes of Health to foster research into alternative medical treatment modalities and the role of dietary supplements in maintaining health and preventing disease, respectively. However, questions about the efficacy and safety of nutritional supplement may have and may continue to affect sales of such supplements. The recent controversies over the efficacy of St. John's Wort and Kava, and the recent concerns about the safety of Ephedra illustrate this point. However, we believe that the aging of the United States population, together with a corresponding increased focus on preventative health care measures, will continue to result in increased demand for certain nutritional supplement products despite negative publicity of the type described above. The United States Bureau of the Census, projects the 35-and-older age group of consumers, which represents a large majority of the regular users of vitamin and mineral supplements, to grow significantly faster than the general United States population through 2010. Our growth strategy is to capitalize on the increased interest in nutritional supplements described above by increasing product sales through existing distribution channels in the U.S. and Canada and by expanding into new markets. In particular, we believe that we may realize our growth by achieving the following: o We will introduce new products complementary to our current product lines. Our product development strategy is to expand our existing product lines to complement our current products. We have introduced five new products; the BG Bar, NaturaLight(TM) (for healthy weight management), ImmuSun(TM) (for immune system support), Contain(TM) (for the relief of occasional heartburn) and OsteoSun(TM) (for healthy bone support) and we are actively working on introducing additional products. o We intend to introduce alternative distribution channels through infomercials. Our ability to establish distribution through infomercials will be dependent upon our ability to increase our working capital in order to pay for the costs associated with infomercials. Our product distribution strategy is to provide complementary marketing methods for our Distributors (as defined below). o We have introduced a revised compensation plan and other promotion and recognition programs to provide additional incentives to our Distributors. Our ability to increase sales is significantly dependent on our ability to attract, motivate and retain Distributors. We utilize an innovative marketing program that we believe is competitive with programs offered by many other network marketing companies. This program provides financial incentives, including several forms of commission (bonus), optional Distributor training and support, no sign-up costs, inventory requirements, and low monthly purchase requirements. We intend to reach potential new Distributors through increased advertising, teleconferencing and regional sales and training meetings. Successful management of Distributors supports the marketing of products as well as the recruitment of new Distributors. o We intend to tackle international markets by entering into marketing distribution agreements for Europe and Asia. We believe that growth potential exists in international markets and will seek to enter into international distribution agreements. o We intend to engage government relations personnel to assist our international expansion. We will engage government relations personnel throughout the world who will take a systematic, proactive approach to working with government and licensing agencies in new markets to ensure that our products and distribution model comply with all local laws and regulations. We will utilize outside market consultants and work with private organizations throughout the world to prepare for introducing our products in diverse markets. o We intend to seek to enter into agreements and joint ventures with strategic partners. We believe that opportunities exist with various strategic partners that may improve our ability to market and distribute our products, enter into new markets and provide our Distributors with new products that complement our existing product lines. PRODUCT OVERVIEW Our product line consists primarily of consumable products that we target to consumers interested in natural alternatives for health and nutrition. In developing our product line, we have emphasized quality, purity, potency, and safety. We offer a line of approximately twenty-two products that we divide into five categories, including Daily Health Maintenance, Digestive Health, Defensive Health, Powdered Drinks and Snacks, and Animal and Plant Food, as further described below the chart. The following chart lists our products and the categories targeted by each, as of March 31, 2003 <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> Daily Health Digestive Defensive Powered Drinks Animal and Maintenance Health Health and Snacks Plant Food -------------- ----------- ----------- ----------------- ------------ Super Blue Green(R)Alpha Sun(R) x X Super Blue Green(R)Omega Sun(R) x X Acidolphilus x Bifudus x Spectrabiotic(R) x Internal Cleansing System x Super Blue Green(R)Enzyme x SBG Anytime X X X Super Q10 X x x Super Sprouts & Algae X x X Alpha Gold Promoting Physical Well-being X x Omega Gold Enhancing Mental Well-being X x Super Sun Smoothies x Mazama Mix X Cell Tech Essentials X X X Super Blue Green(R)Animal Food X NaturaLight(TM) X X OsteoSun(TM) X ImmuSun(TM) X Contain(TM) X BG Bar X X X X PLANeT Food(R) X </TABLE> DAILY HEALTH MAINTENANCE o SUPER BLUE GREEN(R) ALPHA SUN(R). Super Blue Green(R)Alpha Sun(R) is whole, complete algae. Because its cell walls contain a high percentage of floridan starch, it provides natural sugars critical to the health and vitality of tissues and cells. Super Blue Green(R) Alpha Sun(R) also contains high concentrations of easily assimilated vital minerals. It is available in capsules and tablets. o SUPER BLUE GREEN(R) OMEGA SUN(R). Super Blue Green(R) Omega Sun(R) is the heart of the algae with the cell wall carefully removed through a special separation process. This super-concentrated food contains a higher overall amino acid content than Super Blue Green(R) Alpha Sun(R). It is a source of raw materials for building the neuro-peptides associated with brain activity. It is available in capsules and tablets. o CELL TECH ESSENTIALS. Cell Tech Essentials, named for our most essential products, is a repackaging of such products. It attains a new level of convenience and effectiveness and a new level of value. Each bag contains 30 packets and each packet contains the following capsules: one Super Blue Green(R) Alpha Sun(R), one Super Blue Green(R) Omega Sun(R), one Acidophilus, one Bifidus, and two Super Blue Green(R) Enzymes. o NATURALIGHT(TM). NaturaLight(TM) is a herbal supplement designed to work with the metabolism to help users reach their weight loss goals. Formulated with enzymes, botanicals, and other complementary ingredients, this product works with user's metabolisms to help them reach their weight loss goals. We believe that consumers can use this herbal supplement exclusively, or use it in concert with any other weight loss program. We believe that, combined with proper diet and exercise, NaturaLight(TM) can help reduce cravings, increase energy, and improve mental clarity and attitude. The goal of this new product is to help the body reduce fat and lose weight while maintaining lean muscle mass. It is available in capsules. o SBGANYTIME. SBGAnytime supplies Super Blue Green(R) Algae in a convenient chewable form, providing support to body and mind any time. It's designed for people on the go, young (and not-so-young) finicky eaters, and those who have difficulty swallowing capsules and tablets. Each wafer contains a 150 mg mix of Super Blue Green(R) Alpha Sun(R) and Super Blue Green(R) Omega Sun(R) Algae, orange juice, honey, and other natural sweeteners. o BG BAR. BG Bar is a food bar made with quality organic ingredients, fortified with sprouted grains, greens, and Super Blue Green(R) Algae. It has an almond butter texture with minced almonds on top. We believe that consumers will find it attractive and a useful source of nutrition. Each bar weighs 56 grams. DIGESTIVE HEALTH o ACIDOPHILUS. Acidophilus (Lactobacillus acidophilus) is the first of our probiotic products and operates in the small intestine. Without proper cleansing, the small intestine can fill with wastes and harmful by-products that impair natural digestive functions. Our Acidophilus helps process food quickly and eliminate waste. It is a single-strain beneficial bacterium called DDS-1a Acidophilus, which helps keep harmful bacteria out by colonizing the walls of the small intestine and by secreting substances that prevent the growth of unfriendly bacteria. Each capsule is carefully micro blended with 85 milligrams of Super Blue Green(R) Omega Sun(R) Algae. o BIFIDUS. Bifidus (Bifidobacterium bifidum) is the second of our probiotic products. While Acidophilus serves the small intestine, Bifidus is for the large intestine. The large intestine absorbs the water from food and passes the remaining waste out of the body. A good intestinal flora in the large intestine can help prevent gas, bloating and diarrhea. Our Bifidus helps repopulate the large intestine with friendly bacteria, restoring the healthful environment it needs to do its job well. Each capsule is micro blended with 85 milligrams of Super Blue Green(R) Omega Sun(R) Algae. o SPECTRABIOTIC(R). Spectrabiotic(R) is designed to complement Acidophilus and Bifidus in providing a complete system for building and maintaining healthy intestinal flora. In the Spectrabiotic(R) formula, eight key "good bacteria" are micro blended with 85 milligrams of Super Blue Green(R) Omega Sun(R) Algae, providing the entire digestive tract with probiotic support, especially when combined with a regular program of Acidophilus and Bifidus. Spectrabiotic(R) also contains Jerusalem artichoke, acerola, and rose hips. o INTERNAL CLEANSING SYSTEM. The New Seasons Cleansing System is a two-product program that is designed to assist the body's natural elimination systems. The Herbal Formula supports the processes that remove toxins from the tissues of the body; then the Fiber Formula helps the body eliminate those toxins. o SUPER BLUE GREEN(R) ENZYMES. Our Super Blue Green(R) Enzymes contains a full range of food enzymes to help break down all types of foods, including fats, carbohydrates, protein and fiber. Super Blue Green(R) Enzymes is micro blended with 25 milligrams of Super Blue Green(R) Alpha Sun(R), adding specific vitamins and minerals many enzymes need for optimum functioning. o SUPER SPROUTS & ALGAE. Super Sprouts & Algae is a unique product combining the nutritional benefits of three "superfoods" from three natural environments -- land, lake and sea: a super concentration of custom-grown wheat sprouts; Super Blue Green(R) Alpha Sun(R) Algae; and Super Red Beta Algae (Dunaleilla salina), a strain of marine algae. These three superfoods together supply the body with antioxidant nutrition to neutralize the effects of highly unstable, reactive molecules known as free radicals. Two tablets of Super Sprouts & Algae provide over 100% of the RDA for vitamin A. Each tablet contains 540 milligrams of wheat sprouts, 60 milligrams of Super Blue Green(R) Alpha Sun(R) Algae and 25 milligrams of Super Red Beta Algae. o SUPER Q10. Super Q10 contains Super Blue Green(R) Alpha Sun(R) and a special enzyme enhancer called coenzyme Q10. This nutrient has been shown to be beneficial for functioning of the heart, muscles, and the nervous and immune systems. It is especially important in helping the mitochondria, or powerhouses of cells, to generate energy. Super Q10 is a synergistic combination of pure premium coenzyme Q10 with 85 milligrams of Super Blue Green(R) Alpha Sun(R) Algae and is a way to assist cells in converting nutrients into energy. DEFENSIVE HEALTH o ALPHA GOLD PROMOTING PHYSICAL WELL-BEING. Alpha Gold contains a carefully chosen group of ingredients, each with documented health benefits, that works synergistically with Super Blue Green(R) Algae to facilitate overall good health. Alpha Gold contains bee pollen to increase stamina, vitality and athletic performance; noni to help stimulate the immune system; turmeric to help protect against environmental contaminants; and gluten-free sprouted wheat grass juice, which contributes a variety of assimilative enzymes. This product is available in capsules or powder. o OMEGA GOLD ENHANCING MENTAL WELL-BEING. In addition to the ingredients found in Alpha Gold, Omega Gold also contains ginkgo biloba, which increases circulation to the brain and has effects upon memory, clarity and mental alertness. We add Siberian ginseng to stimulate both mental and physical performance. This product is available in capsules or powder. o IMMUSUN(TM). A natural part of the human diet for thousands of years, the complex carbohydrate WGP(TM) beta glucan used in ImmuSun(TM) has been shown to fortify the immune system. o CONTAIN(TM). For occasional heartburn, consumers now have a healthy choice. Contain(TM) is formulated with a superior combination of alginate (from seaweed), Super Blue Green(R) Algae, enzymes, and other soothing natural ingredients. o OSTEOSUN(TM). A new, natural, unique and scientifically proven non-calcium dietary supplement, formulated to promote bone health.1 POWDERED DRINKS AND SNACKS o SUPER SUN SMOOTHIES. Super Sun Smoothies are all-vegetable powder shake mixes. We make Super Sun Smoothies with premium ingredients that are dairy free and contain no preservatives, yeast artificial flavorings or colorings. They also provide the "superfood" benefits of 500 milligrams of Super Blue Green(R) Alpha Sun(R) and 500 milligrams of Super Blue Green(R) Omega Sun(R) Algae blended into every scoop. o MAZAMA MIX. Mazama Mix is a nutrient-rich green drink derived from all-natural whole food sources. It contains minerals and trace minerals that we believe are essential for the proper functioning of the body. We designed this product to help enhance overall health, vitality and energy levels. _________ 1The Food and Drug Administration has not evaluated the statements we make regarding any of our products. We do not intend any of our products to diagnose, treat, cure, or prevent any disease. 6 <PAGE> ANIMAL AND PLANT FOOD o SUPER BLUE GREEN(R) ANIMAL FOOD. Super Blue Green(R) Animal Food is a blend of coarse-grade Super Blue Green(R) Alpha Sun(R) and Super Blue Green(R) Omega Sun(R) Algae, providing the fundamental building blocks for strengthening the immune system of animals. The broad spectrum of organic minerals, vitamins, amino acids, enzymes and the supply of beta carotene and chlorophyll found in Super Blue Green(R) Algae is readily absorbed by animals. Super Blue Green(R) Animal Food is sprinkled over the pets' food. o PLANeT FOOD(R). We designed PLANeT FOOD(R) to add trace minerals and other components to soils. It is a mixture of volcanic rock dust from Colorado and algae from Klamath Lake for use on potted plants, lawns, gardens, and trees and for composting. DISTRIBUTORS AND OUR NETWORK MARKETING SYSTEM We distribute our products through a network marketing system of Distributors. Distributors are independent contractors who purchase products directly from us for resale to retail consumers. Distributors may elect to work on a full-time or a part-time basis. We believe that our network marketing system is well suited to marketing our nutritional supplements and other products because ongoing personal contact between retail consumers and Distributors, most of whom use our products, strengthen sales of such products. Currently, we have Distributors in all fifty states, the District of Columbia, Guam, Puerto Rico, American Samoa, Virgin Islands and Canada. Each Distributor has the opportunity to sponsor additional Distributors, which can enhance the original Distributor's income, as described below. Each new sponsored Distributor, as well as his or her own "downline" groups, becomes a member of the Distributor's network or "downline." COMMISSION SYSTEM We currently offer two categories of membership. We call the first category a "Distributor" and the other a "Preferred Customer." Distributors are interested in receiving commissions for their own purchases as well as for purchases made by members enrolled in their "downline." A Preferred Customer is a customer who is interested in consuming our products, but is not interested in the business opportunity we offer to our Distributors. Many Preferred Customers eventually become Distributors. Both categories of membership purchase our products at wholesale prices. We compensate our Distributors through a Distributor commission system that encourages both retail selling and sales organization management. Distributors may derive income from several sources. First, Distributors may receive revenues by purchasing our products at wholesale prices and selling them to customers at retail prices. Second, Distributors earn the right to receive bonuses (commissions) based upon purchases by members of their "downline" or sales marketing organization. Each new Distributor that a Distributor sponsors becomes a member of his selling organization or "downline." We refer to the Distributors that a Distributor directly sponsors as his "first generation" or "first level." In June 2002, we revised our commission system to better suit our long-term growth objectives of attracting new Distributors and appropriately rewarding the Distributors that work to increase their business with us. Our goal was to redistribute our commission expense to those Distributors who demonstrate to us that they are actively contributing to our growth. We believe we have designed a commission system that is suited to achieve these goals as is demonstrated by the decrease in commission expense from 47.8% of revenue in 2001 to 44.6% of revenue in 2002. The changes to our system that took effect in June 2002, are as follows: o We reduced the personal volume percentage paid to Members to 5% from 10%. This change did not affect titles above Member. Once a Member reaches the title of Representative, the commission on personal volume is 15% and 5% on any volume of Members in the Representative's network. o We reduced generation 4, 5, and 6 payout percentages to 3%, 2%, and 1% from 4%, 3%, and 2%, respectively. We did not affect the titles of Amethyst, Ruby and Sapphire by this change. The first level is "Member" and the highest level is "Executive." Distributors may attain "Member" status by purchasing any product from us. There are two intermediary levels between Member and Executive: Representative and Leader. A Distributor achieves higher levels in the bonus structure primarily through increased purchases by Distributors sponsored directly by them (their first level) and in their personal group. The requirements for a Distributor to reach the first "Executive" level are monthly personal purchases of at least $100 and monthly group volume of $500. For each "Executive" level attained thereafter, the Distributor must maintain monthly personal purchases of at least $100 and monthly group volume of at least $500. The program is such that each month a Distributor must qualify at that level for us to pay at that level. The advantage to this is that the Distributors must remain active in purchasing and sponsoring to retain their bonuses, but if they do not qualify in a certain month, we only reduce their income that one month. The Distributor commission system includes three kinds of bonuses, as described below: o STANDARD BONUS. The standard bonus is available to any Distributor who has an "active" status with us. Distributors may attain the title of "Assistant Leader" by purchasing a minimum of $50 of products in a month. We base the percentages used to determine the bonus and the number of levels in the organization the Distributor receives bonuses upon on the individual's title with us. The standard bonus grants rebates to the Distributor as he consumes and sells our products to others. o EXECUTIVE GENERATION BONUS. A second form of bonus is available to those who have Executives in their downline. Based on the number of "Executives" they have at each level, and assuming certain minimum personal purchases each month, Distributors receive a percentage of such Executives' standard bonus as an additional bonus. o BLUE-GREEN DIAMOND BONUS. Finally, those Executives attaining the highest levels in our structure are eligible to receive an additional bonus called the "Blue-Green Diamond Bonus" which is a percentage of the gross commissionable sales volume for the year. We believe that the opportunity of Distributors to earn bonuses contributes significantly to our ability to retain our productive Distributors. The Distributor commission system encourages promotion to higher commission levels by enabling Distributors to earn commissions on a deeper sales base (i.e., more levels of their organization). We believe this will encourage sponsoring growth (depth) in an organization and not just acquiring customers personally. To become a Distributor, a person must simply sign an agreement to comply with our policies and procedures. No investment is necessary to become a Distributor. We consider, as of February 28, 2003, approximately 37,000 of our Distributors to be "active," that is, an individual Distributor who has ordered at least $50 of our products during the preceding six-month period. TRAINING We support opportunity meetings in various key cities and participate in motivational and training events in various market areas, designed to inform prospective and existing Distributors about our product line and selling techniques. Distributors give presentations relating to their experiences with our products and the methods by which they have developed their own organization of Distributors. We offer motivation to participants in the form of recognition, promotions, excursions and tours, which we intend to foster an atmosphere of excitement throughout the Distributor organization. Prospective Distributors are educated about the structure, dynamics and benefits of our network marketing system. We continually develop marketing strategies and programs to motivate Distributors. We design these programs to increase Distributors' monthly product sales and the recruiting of new Distributors. DISTRIBUTOR SUPPORT As part of our program to maintain constant communication with our Distributor network, we offer the following support programs to our Distributors: o ASSOCIATIONS/TEAMS/ADVISORY BOARD. Several associations and teams support Distributors' efforts, including the Leadership Alliance, an association of those Distributors having reached the top levels of our Marketing Plan, which was formed in order to allow interaction among the Network's "top level" group for discussion of business issues, development of solutions and methods to improve the sales success and growth of downlines and the Network as a whole. In addition, the Field Advisory Board is an advisory team representing the entire field organization and brings issues, recommendations, and other ideas to us for discussion. The Field Advisory Board participates in bi-monthly teleconferences with our marketing and operations executives. o AUGUST CELEBRATION. For the past thirteen years, we have sponsored and held the August Celebration, which is our annual convention. o ORDERING SUPPORT. We offer a variety of methods to order product and support materials, including toll-free telephone operator access, "Order Express" (a toll-free automated telephone system that Distributors can call 24 hours a day to place orders or to access their records), and our website at http://www.celltech.com. o INFORMATION SUPPORT. Distributors may learn more about our products, our history, distributor organization building, management techniques and related matters through our website. In addition, we produce color catalogues and brochures for our Distributors and produce a monthly publication called "Networker's Edge" focused on business building. We also maintain our ATG Technologies Voice Mail System, which includes options for broadcasting messages to our Distributors via temporary, permanent and super groups. A direct access telephone line allows Distributors to access our most recent announcements sent through the ATG Technologies System to our Network. Finally, a 24-hour toll-free "Fax-on-Demand" system provides Distributors with news bulletins, product literature and articles of interest via facsimile. RESEARCH AND DEVELOPMENT We spent approximately $193,310 on research and development in 2002, $190,884 in 2001 and $456,098 in 2000. We continually seek to identify, develop and introduce innovative, effective and safe products. We have introduced sixteen new products since 1997. Management believes that our ability to introduce new products increases our Distributors' product visibility and competitiveness in the marketplace. We also continuously evaluate "existing" products for viability and it is our policy to discontinue products that are not selling satisfactorily. We derive new product ideas from a number of sources, including trade publications, scientific and health journals, management, independent consultants, and our sponsored university research projects. We maintain our own quality assurance/quality control staff, consisting of two full time employees as of March 31, 2002 and December 31, 2001, but rely upon independent research, consultants and others for ingredient research, development and formulation services. When we identify a new product concept or when we must reformulate an existing product for introduction into a new or existing market, we generally submit the new product concept or reformulation to our suppliers for technological development and implementation. In addition, prior to introducing products into our markets, our scientific consultants, legal counsel and other representatives investigate product formulation matters as they relate to regulatory compliance and other issues. In 2002, we began formulating and testing three new products, ImmuSun(TM), Contain(TM) and OsteoSun(TM), designed to compliment our existing product line and began selling them to our Distributors in June 2002, October 2002 and February 2003, respectively. IMMUSUN(TM). ImmuSun(TM), an all-natural supplement, contains the active ingredient WGP(TM) beta glucan, a patented form of the complex carbohydrate beta glucan, which is found in the cell walls of baker's yeast (Saccharomyces cerevisiae). Scientists discovered the immune-boosting properties of beta glucan in the 1960s. Since then, they have documented its potential as an immunity booster in numerous studies conducted at such prestigious research institutions as Massachusetts Institute of Technology, Harvard University, and Johns Hopkins University. These studies have proven WGP(TM) beta glucan's ability to activate macrophages, a type of white blood cell that is the body's first line of defense. Macrophages circulate throughout the body engulfing and digesting foreign antigens, thus triggering a cascading effect that mobilizes the body's arsenal of defenses. The result is a stronger immune system. CONTAIN(TM). Contain(TM)'s orange-flavored chewable tablets are made with a superior combination of alginate (from seaweed), Super Blue Green(R) Algae, enzymes, and other soothing natural ingredients that join forces to help "contain" stomach acid. Upon contact with gastric juices, the proprietary blend of plant extracts and other natural ingredients creates a temporary gel barrier that helps keep gastric contents from seeping into the esophagus. Meanwhile, the enzymes in the formulation work in the stomach to aid in the efficient breakdown of food, helping to minimize occasional indigestion at the outset. Contain(TM) differs from similar products on the market because it is formulated with enzymes to help reduce indigestion and also Contain(TM) includes Super Blue Green(R) Omega Sun(R) algae for added nutritional value. Contain(TM) acts only mildly to neutralize stomach acid--rather, it relieves symptoms of occasional heartburn naturally, by forming a protective buffer to help keep stomach acid where it belongs. Contain(TM) offers an ideal combination of beneficial ingredients that can help alleviate the stressful effects of occasional heartburn. OSTEOSUN(TM). Calcium alone is often not enough to maintain bone health. Studies have shown that OsteoSun(TM) can significantly increase bone mineral density. OsteoSun(TM)'s ingredients include a patented formulation of red yeast rice, a natural food product that - in this formulation only - the International Bone Laboratories have certified as "bone active." This is the only certified formulation of this natural product for bone health. OsteoSun(TM) also contains Super Blue Green(R) Omega Sun(R) algae, which, in addition to all its other benefits, aids the assimilation of red yeast rice and other helpful nutrients. We are currently developing additional products, including new antioxidants, weight management, and energy products. In addition to the introduction of single products, we are also focusing on promoting groups of products to be taken in conjunction with each other to address the specific needs an individual may have (such as weight loss, stress or daily wellness). PRODUCT WARRANTIES AND RETURNS Our product warranties and policy regarding returns of products are similar to those of other companies in our industry. Any consumer, who is not satisfied with any of our products, may return it to the Distributor from whom they purchased it from within 90 days of their purchase. The Distributor is required to refund the purchase price to the consumer. The Distributor may then return the unused portion of the product to us for an exchange of equal value. If a Distributor requests a refund in lieu of an exchange, we will issue a check or credit the appropriate amount to the Distributor's credit card. We warrant all of our products against defect. RAW MATERIALS AND SUPPLIERS Our primary raw material is Aphanizomenon flos-aquae, which we harvest from Upper Klamath Lake using modern technology. Upper Klamath Lake produces approximately 200 million pounds of SBGA each year. When we need to harvest, we typically harvest algae once or twice a year, timing our harvests to coincide with the greatest density of algae. In 2001, for the first time ever, we began harvesting on Upper Klamath Lake by the use of a unique (patent pending) on-lake harvester. Because of this method of harvesting, we can gather Aphanizomenon flos-aquae directly from the lake. This development of our harvesting techniques made harvesting possible in a drought year when the availability of water in the canals was nonexistent or questionable, because of the nationally reported water crisis in the Klamath Basin. We believe that harvesting directly from Upper Klamath Lake is both cost-effective and provides us with excellent yields, utilizing the new harvester that we conceived, designed and built. We have applied for a design patent on our harvester, as we believe that the technology utilized with this new harvest system is effective, special and unique. Processing of SBGA is a complex process including the following: o SCREENING. We filter fresh algae out of the water with fine mesh screens. o PRIMARY SEPARATION. Primary separators remove everything suspended in the lake water, which concentrates the algae by removing virtually all extracellular water. o FREEZING. We quickly freeze the algae, converting it into slabs at a temperature of -30(Degree) Fahrenheit. o DRYING. We gently remove all cellular water in a low temperature environment, converting the algae into a dry, stable medium that retains vital nutrients. o POWDERING AND BOTTLING. We sift and grind the algae to a fine powder, which we can encapsulate or tabletize and seal to retain freshness and viability. In years when there has been no harvest, we rely on our inventory of frozen and freeze-dried SBGA. As of December 31, 2002, we had 900,157 pounds of frozen algae inventory for use in capsules and tablets and 1,660,511 pounds of frozen algae for use with vendor products. We had not harvested algae since 1998 due to excess inventory in relation to sales; however, in July 2001, we commenced harvesting SBGA and in 2002, we expanded our harvesting capacity ten-fold. We believe that our present rate of inventory consumption only partially reflects the demand that we anticipate as we implement our growth strategy. Although the availability of new algae that we may harvest from Upper Klamath Lake may change from year to year, we believe that our existing inventory is adequate for several years. From time to time, a toxic species of algae called Microcystis aeruginosa blooms in Upper Klamath Lake and can contaminate a portion of our harvest of SBGA with microcystin, a toxin. We have worked with state and federal agencies to establish prudent safety precautions, and test each batch of algae we harvest for microcystin levels before releasing it for production. We believe our harvest methods help us to minimize the amount of Microcystis aeruginosa in the harvested material, thus increasing the total amount of algae that we can release for production. We encapsulate and bottle algae in-house. We also purchase vitamins, nutritional supplements and other products and ingredients from parties that manufacture such products to our specifications and standards. During 2002, 2001 and 2000, one vendor supplied approximately 45%, 55% and 27%, respectively, of the products that we purchased. This vendor was our source of enzymes and probiotics. We place significant emphasis on quality control with all of our products. All nutritional supplements, raw materials and finished products are subject to sample testing, weight testing and purity testing by independent laboratories. In the event of loss of any of our sources of supply, we believe that suitable replacement sources of similar products and product ingredients exist and are available to us. TRADEMARKS AND SERVICE MARKS We package most products under our "private label." At December 31, 2002, we have six trademarks registered with the United States Patent and Trademark Office and one trademark application pending, and three trademarks registered and one application pending with the Canadian Intellectual Property Office of Trade Marks. In addition, we have registered trademarks in eleven foreign countries (and one application pending in a twelfth) for the mark "PLANeT Food." While we believe customer identification with our name and brand is important, we feel that our primary competitive edge arises from our Distributor network and our strategic location, which allows us to process algae immediately after its harvest, and not from any proprietary technology. We do not have a registered trademark for the name "Cell Tech." As of the date of this Annual Report on Form 10-K/A, no other person has claimed infringement based on our use of the name "Cell Tech," but there can be no assurance that it would not make such a claim in the future. A British company in a different business than ours has a United States trademark registration for the name "Cell Tech" and it has not objected to our use of the name. COMPETITION The nutritional supplements industry is large and intensely competitive. We compete with other companies that manufacture and market retail nutritional products to health-conscious consumers, including General Nutrition Companies, Inc., Solgar Vitamin and Herb Company, Inc., Twinlab Corporation and Weider Nutrition International, Inc. Many of our competitors in this market have longer operating histories, greater name recognition and financial resources than us. In addition, consumers can purchase nutritional supplements in a wide variety of distribution channels. While we believe that many consumers appreciate the convenience of ordering products from home through a sales person, the buying habits of many consumers accustomed to purchasing products through traditional retail channels are difficult to change. We offered our products, on a limited test basis, via infomercials in May 2001 and suspended them in July 2001 due to a lack of financial resources. We intend to resume airing infomercials when we have adequate financial resources. Our product offerings in each product category are also relatively small compared to the wide variety of products offered by many other nutritional product companies. Several companies harvest algae from the Upper Klamath Lake. However, we are the largest harvester and the supply of algae is substantially more than the total amount harvested by all companies. We also have access to Upper Klamath Lake that is in close proximity to our freezer facility. We also compete in the nutritional supplements market and for new Distributors with other retail, multi-level marketing and direct selling companies in the nutritional supplements industry by emphasizing the proprietary nature, value, and the quality of our products and the convenience of our distribution system. We also compete with other direct selling organizations, many of which have longer operating histories and greater name recognition and financial resources than us. They include Amway Corporation, Nu Skin Enterprises, Inc., Body Wise International, Inc., Herbalife International, Inc., Mannatech Incorporated, Rexall Showcase International, and Forever Living Products, Inc. We compete for new Distributors based on our compensation plan and our proprietary and quality products. We believe that many more direct selling organizations will enter the market place as this channel of distribution expands over the next several years. We also compete for the commitment of our Distributors. Given that the pool of individuals interested in direct selling tends to be limited in each market, the potential pool of Distributors for our products is reduced to the extent other network marketing companies successfully recruit these individuals into their businesses. PRODUCT REGULATION Several governmental agencies regulate certain aspects of our products, including formulation, manufacturing, packaging, storing, labeling, advertising, distribution, and sales. These agencies include the Food and Drug Administration ("FDA"), the Federal Trade Commission ("FTC"), the Consumer Products Safety Commission, the Department of Agriculture, the Environmental Protection Agency, and the Postal Service. In addition, various state and local agencies can regulate us in areas where we manufacture, distribute and sell our products. The FDA regulates the formulation, manufacture, packaging, storage, labeling, promotion, distribution, and sale of foods, dietary supplements, and over-the-counter drugs, including those we distribute. With respect to the preparation, packaging and storage of our supplements, FDA regulations require that our suppliers and we meet relevant good manufacturing practice regulations. The Dietary Supplement Health and Education Act of 1994 ("DSHEA") revised certain provisions of the Federal Food, Drug and Cosmetic Act ("FFDCA") concerning the composition and labeling of dietary supplements. We believe that DSHEA is generally favorable to the dietary supplement industry. The legislation creates a new statutory class of "dietary supplements," which includes vitamins, minerals, herbs, and amino acids. DSHEA applies with certain limitations to dietary ingredients that were on the market before October 15, 1994. With respect to dietary supplements that contain dietary ingredients not on the market before October 15, 1994, DSHEA requires further evidence. This evidence must show that the supplement contains only those ingredients that have been in the food supply or other evidence of use or safety. Manufacturers of dietary supplements must make a "statement of nutritional support," which is a statement describing certain types of product performance characteristics. In making such a statement, we must have substantiation that the statement is truthful and not misleading and must make a disclaimer within the statement. Finally, we must notify the FDA of the statement no later than 30 days after we make it. In January 2000, the FDA published a final rule that defines the types of statements companies can make concerning the effect of a dietary supplement on the structure or function of the body pursuant to the DSHEA. Under the DSHEA, dietary supplement labeling may bear "structure/function" claims, which are claims that the products affect the structure or function of the body, without prior FDA review. Without prior FDA review, a product may not bear a claim that it can prevent, treat, cure, mitigate or diagnose disease (a disease claim). The new final rule describes how the FDA will distinguish disease claims from structure/function claims. In February 2001, the FDA issued a notice requesting comments on the types of information that should be included in guidance on applying the regulations on statements made for dietary supplements concerning the effect of a dietary supplement on the structure or function of the body. To date, the FDA has not issued a guidance document, and we have continued our ongoing efforts to ensure that our dietary supplement product labeling complies with the requirements of the "Structure/Function" final rule, which became effective in February of 2000. FFDCA classifies the majority of our products as "dietary supplements." The FDA issued regulations governing the labeling and marketing of dietary supplement products in September 1997. These regulations covered several issues. First, they covered the identification of dietary supplements, as well as their nutrition and ingredient labeling. Second, they covered the use of terminology for nutrient content claims, health content claims, and statements of nutritional support. Third, they covered the labeling requirements for dietary supplements that claim to be "high potency" and "antioxidant." Fourth, they covered notification procedures for statements on dietary supplements. Finally, the regulations covered the pre-market notification procedures for new dietary ingredients in dietary supplements. The notification procedures became effective in October 1997. The labeling requirements became effective in March 1999 and we revised our product labels to reflect the new requirements. We continue to secure substantiation of our product performance claims and to notify the FDA of certain types of performance claims made for our products. Our substantiation program involves compiling and reviewing scientific literature, including our own university research that is pertinent to the ingredients contained in our products. Dietary supplements are subject to the Nutrition, Labeling and Education Act ("NLEA"), as well as the associated regulations. These regulate health claims, ingredient labeling, and nutrient content claims, which characterize the level of a nutrient in the product. NLEA prohibits the use of any health claim for dietary supplements unless significant scientific agreement supports the claim and the FDA pre-approves it. STATE REGULATION As a result of certain conditions, a toxic strain of algae called Microcystis aeruginosa occasionally blooms in Klamath Lake and can contaminate a portion of our harvest of blue-green algae with microcystin, a toxin. In 1994, we began to test the algae harvested at this facility for possible contamination. We have regularly measured, at various levels, the existence of Microcystis aeruginosa. In the absence of established regulatory criteria for determining an acceptable level of microcystin (the actual toxin), we sponsored an assessment of risk and set our own standards for determining whether a particular batch of algae is acceptable for human consumption. Algae that does not meet our standards and that we cannot use in alternative non-human consumable products is isolated and not used in production. On October 23, 1997, the Oregon Department of Agriculture issued an Administrative Rule on the sale of blue-green algae, which stated, "the agency has decided to adopt the 1 microgram per gram (1 ppm) level of microcystin in blue-green algae." This ruling may have an impact on our ability to process and distribute the raw algae harvested and finished goods produced. Such ruling may also decrease the amount of salable inventory and therefore, may have an adverse impact on our ability to realize the carrying value of our inventories. We have recognized that an impairment of our inventory may exist and therefore have recorded our best estimate of the effect by establishing a reserve for $4,000,000 at December 31, 2002, for the possible effects of inventories, which may become unsaleable under this Rule. The Oregon Department of Agriculture has taken no regulatory actions against our products under this Rule to date. FOREIGN MARKETS In Canada, both national and provincial law regulates our network marketing system. Under Canada's Federal Competition Act, we must make sure that any representations relating to Distributor compensation made to prospective distributors constitute fair, reasonable and timely disclosure and that it meets other legal requirements of the Federal Competition Act. After a review of our revised compensation plan, we will submit it to the appropriate Canadian authorities. All Canadian provinces and territories, other than Ontario have legislation requiring that we register, or become licensed as a direct seller, within that province. They design the licensing to maintain the standards of the direct selling industry and to protect the consumer. Some provinces require licenses for both our Distributors and us. We are in the process of obtaining all of the required provincial or territorial direct sellers' licenses. In 1999, Health Canada issued a warning about the safety of blue green algae products due to concerns about microcystin. While we believe our products are safe and comply with Canadian rules, the adverse publicity from the Health Canada warning adversely affected our sales in Canada. Such warning may occur in the future and could have an adverse affect on our business. REGULATION OF ADVERTISING We are unable to make any claim that any of our nutritional supplements will diagnose, cure, mitigate, treat, or prevent disease. DSHEA, however, permits substantiated, truthful, and non-misleading statements of nutritional support to be made in labeling, such as statements describing general well-being resulting from consumption of a dietary ingredient or the role of a nutrient or dietary ingredient in affecting or maintaining a structure or a function of the body. The FDA recently issued a proposed rule concerning these issues. The FTC similarly requires the substantiation of any claims. The FTC exercises jurisdiction over the marketing practices and advertising of all our products. In years past, the FTC has instituted enforcement actions against several dietary supplement companies for false and misleading marketing practices. This has resulted in consent decrees and monetary payments by the companies involved. We have not been the subject of FTC enforcement action with respect to our advertising. However, there is no assurance that the FTC will not subject us to inquiry in the future. Through our manuals, seminars and other training materials and programs, we attempt to educate our Distributors as to the scope of permissible and impermissible activities in each market. We also investigate allegations of Distributor misconduct. However, our Distributors generally are independent contractors, and we are unable to monitor directly all of their activities. Consequently, we cannot be sure that our Distributors comply with applicable regulations. Misconduct by Distributors could have a material adverse effect on us in a particular market or in general. We are unable to predict the nature of any future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. However, they could require: (1) the reformulation of some products we may not able to reformulate; (2) imposition of additional record keeping requirements; (3) expanded documentation of the properties of some products; (4) expanded or different labeling; and (5) additional scientific substantiation regarding product ingredients, safety or usefulness. NETWORK MARKETING SYSTEM REGULATION Our Distributor commission system constitutes a network marketing system. A number of federal and state statutes and regulations apply to this system, including those administered by the FTC. The legal requirements that apply to network marketing organizations ensure the ultimate sale of products to consumers. Further, they ensure that advancement within the organizations be based on the sales of products, rather than from the recruitment of additional Distributors, investment in the organization, or non-retail sale criteria. Where required by law, we must obtain regulatory approval of our network marketing system. If such approval is not required, the favorable opinion of local counsel will suffice. Finally, in addition to these regulations, the FTC regulates trade practices related to network marketing systems. EMPLOYEES At February 28, 2003, we employed approximately 85 persons, of which 4 were part-time. These numbers do not include our Distributors, who are generally independent contractors rather than our employees. None of our employees are represented by a labor union and we have never experienced any business interruption as a result of any labor disputes. We believe that our relationship with our employees is good. INDUSTRY SEGMENTS AND EXPORT SALES We have no assets outside of the United States. Our business consists of one industry segment and we group it into two geographic areas: United States and Canada. The following table (dollars in thousands), summarizes the product sales revenues from customers in each of the two geographic regions: <TABLE> <CAPTION> <S> <C> <C> <C> (DOLLARS IN THOUSANDS) 2001 2001 2000 ---- ---- ---- United States $26,696 94.3% $28,310 94.3% $36,796 94.4% Canada $1,498 5.7% $1,702 5.7% $2,181 5.6% ------ ---- ------ ---- ------ ---- Total $26,194 100.0% $30.012 100.0% $38,977 100.0% ======= ====== ======= ====== ======= ====== </TABLE> We believe that our profit margin on export sales is not significantly different from that realized on sales in the United States. We consummate all foreign product sales transactions in U.S. dollars. ITEM 2. PROPERTIES. Currently, our headquarters and all of our operating facilities are located in Klamath Falls, Oregon. We lease approximately 250,000 square feet of office, processing, freezer and storage space directly from our principal stockholders or their affiliates. Most of these leases are year-to-year, although we do rent some space on a month-to-month basis and one lease will expire in 2005. We believe that we lease the space from our shareholders and their affiliate at below or at fair market rates. We also lease an additional 21 acres from an independent third party, on which we have built our algae processing and storage facility. Our lease with the independent third party will terminate in 2020, at which time we have the option to renew for an additional 25 years. At the termination of such lease, ownership of the facility will revert to the lessor. We believe that the above-described properties will provide sufficient space to meet our currently planned future needs and that comparable space is readily available to meet any unforeseen circumstances. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. We lease approximately 250,000 square feet of office, processing, freezer and storage space directly from Marta C. Carpenter and Daryl Kollman, our principal shareholders, or their affiliate, Klamath Cold Storage, Inc. Most of these leases are year-to-year, although we do rent some space on a month-to-month basis and one lease will expires in 2005. We believe that the space we lease from Ms. Carpenter and Mr. Kollman and Klamath Cold Storage, Inc and the rent we pay to them is at below or at fair market values. Rental payments to Ms. Carpenter and Mr. Kollman or Klamath Cold Storage, Inc in 2002 were $740,097. We currently owe Ms. Carpenter and Mr. Kollman or Klamath Cold Storage, Inc $531,146 in accrued rental payments and we show it on our balance sheet as a related party payable.

BUSINESS PLAN FOR SPIRULINA CULTURE AND PRODUCTION

jimmiller5417 — Tue, 08 Aug 2006 14:16:55 CDT

MONTANA SYNERGY, LLP
BUSINESS PLAN FOR SPIRULINA CULTURE AND PRODUCTION

OVERVIEW

Spirulina algae grows ten time faster than standard plants, and has 70% protein by dry weight. While it makes sense to grow Spirulina in the lower latitudes, it is possible to grow Spirulina in Montana year round in growing pans inside buildings. The target buildings are the hangers at the Glasgow, MT, airport which will provide wind, rain and snow protection. Pans 10' wide and as nearly as long as the hanger, stacked 4 high, and provided with grow lights, will produce the Spirulina. The stack of pans will be so constructed as to provide a controlled environment similar to a greenhouse, but at a much smaller cost. Heat and electricity will be provided by biofuels, namely ethanol and biodiesel. Sales of Spirulina will be in to several markets: Spirulina flower can be combined with hard durham flower for making pasta and breads. Spirulina flower and a binder can be pressed in the form of a lettuce leaf, dyed green, and sold as “slettuce.” It has many markets in the food and cosmetic industry. It can also be made into biodiesel, biolubricants and other industrial products.

2. SCIENCE
See article by Pia Mauates at endnote No.

3. PRODUCTION

3.1 Main production plantform
Production is based on water, minerals, heat and sunlight. The production facilities will be house in any building, an old mine tunnel – anything which provides protection against rain, snow and wind and is affordable. The candidate buildings are the hangers and other empty buildings of the airport in Glasgow, MT. Boeing did have a test facility at the airport but closed it Heating the entire hanger is simply too expensive. Ownership is unknown, probably the local county or a government sponsored economic development corporation. Rent would have to be $1.00 per year until production begins, then rent would be based a small percent of adjusted gross revenue, say 1%. Production will be in shallow pans 10' wide, 6” high and 100+ long. The pans will be 10 feet wide with sides about six inches. Pans will be built in 24 foot sections, then assembled in the hanger. Pans can be built at Fort Peck or any Indian reservation. When assembled, each pan will be joined to the next (butt joint). Then PEX tubing will be stapled to the bottom of the pan, then the entire pan fiberglassed. Pans should be at least 100 feet long and longer if the hanger permits.

The PEX radiant heating system and an Econo Heat, Inc., water boiler will provide for heating the water in the pan to support the growth of algae. The water level can be as low as 2” and as high at 4” or we will need a higher side wall on the pan. Water will be circulated by pump and nutirents added in liquid form. My guess is that ground, dehydrated fish guts, and ground dehydrated kelp, reconstituted with water, would make a good source of nutrients. Local sources might included compost tea made from vermiculture castings and well rotten compost. Pans will be in layers.

The first layer rests on the slab floor which presumable is dead level. Foam/concrete walls will be build along the sides of the pans. The first pan rests on the slab. The second pan rests on TJI trusses, the ends of which rest on 4” ledge of a 16” foam/concrete course. The third pan rests on TJI trusses, the ends of which rest on a 4” ledge of a 12” foam/concrete course. The fourth pan rests on TJI trusses, the ends of which rest on 4” of an 8” foam course. The remaining 4” supports a 4” foam/concrete course on top of which rests TJI trusses which span not only the 10' pan but a 4 to 6” walkway between the pan walls, allowing for access to the pans inside the climate controlled “greenhouse”. Walls also cap the ends of the entire set of pans and provide for a 6 foot walkway around the ends of the pan structures.

The TJI trusses will be set at two foot on center along the courses, with blocking as appropriate. Before fiberglassing the pans, the OSB pans will be screwed or stapled to the TJI. The exterior walls of the pan will rest (or nearly so) against the adjacent foam/concrete wall. Grow lights, consisting of 8' florescent tube holders, will be attached to the bottom of every other TJI, thus providing growing light. The lights are on as needed. Each stack of these pans is called a “Pan Pod”.

Several Pans make a Pan Pod. The hot water power will be provided by a boiler which uses waste motor oil and similar oils (See:http://www.econoheat.com/boilers.htm

There are five manufacturers which offer these types of products under 500,000 BTU and many more manufactures of larger units, which burn No. 6 fuel oil and higher. Biodiesel and/or ethanol or a mix of both, can be used as fuel for these units. Insulation of the pan pods is by air layers. Each Pan Pod or group of Pan Pods will be house under several layers of 6 mil polysheeting.

The initial layer will drape over the top of the upper set of TJI trusses, over the lateral and distal aisles, and be held next to the concrete slab by 2 x 2 wood laterals around which the polysheet is wrapped. As successive layers of polysheets are installed, the 2 x 2's are simply stacked along the pan walls and attached to the walls. Each sheet provides an air and vapor barrier by using a compressor to fill the air gaps between the sheets. The air holds the sheets apart and provides for some insulation. Multiples layers of polysheeting will increase the insulation effect to reach R11 to R19.

The walls are foam concrete. Foam forms come in all sizes and shapes. The cheapest and quickest is an interlocking block. The block at the bottom of the course is 16” x 16”, has a 2” or so wall and is hollow. Inside each hollow is a 3/8” rebar set 9” in a drilled hole in the slab, filled with Simpson's epoxy concrete filler glue. These rebars extend to the full height of the wall. Each course has a lateral steel welded “ladder” for additional stability, which is installed between the blocks. As each course is finished, the next level of blocks is laid which allows for a 4” ledge on the inside. The butt ends of the TJI's rest on these ledges. When all of the foam blocks are in place, all of the cells are filled with concrete, thus creating a very strong, well insulated structural wall which can take the weight of the TJI's and the water. The cord of the TJI will probably calculate out to be about 11” which together with the engineered wood flanges, will make the TJI's about 12”. The bottom of the TJI's will be about 1.5 to 2 feet above the pan, giving a net height of each pan assembly of about three feet. Height is no problem in the hangers.

Electricity will be provided by diesel electric gensets. If such a genset is not already on the airport, then the local government can most likely obtain large gensets from the Federal government surplus property program for free, then lease it to Montana Synergy.

The rent would be a percent of the adjusted gross revenue, say 1%. These genset will burn biodiesel. Jerry Spencer is associated with a company which is developing the use of enzymes to produce ethanol from ag waste, such as any cellulose or lingin. Research grants are being offered for this research. Montana Synergy will need ethanol to produce biodiesel and can use it as fuel in the boiler, along with used motor oil.

3.2 ALTERNATIVE PRODUCTION - Warm weather
An alternative system is the use unused fish ponds or any pond for that matter during the warm months. New ponds can be dug and lined with shotcrete, then a 60 mil pond liner. The same harvesting system could be used with modification for the shape of the ponds.

3.3 YEAR AROUND PRODUCTION – Solar energy
It is a given that during about half of the year, solar energy (ET) would not be sufficient to create a mode of full production, even for outdoor ponds. Indoor pans normally would not get any ET. The solution is to collect solar energy outdoors, then transmit it to the indoor growing pans, then distribute the solar energy evenly across the surface of the growing medium in the pans. Short days and cloud cover, of course, would reduce the availability of solar energy for collection. Notwithstanding, any solar energy collected and distributed will save on fuel to run the generators. The solution is to build a solar energy system using parabolic reflectors which concentrate the ET into the ends of fiber optic cables. The cables then carry the ET to the collecting pans. At this point the ET is distributed as evenly as possible across the surface of the pans. The design proceeds as follows:

Pick an area on the airport which is close to the hanger(s) and not shaded by any structure. Distance is a function of the cost of the cable, not the transmission losses. Collectors consist of 3' or so dish parabolic pans made out of any cheap material, e.g., fiberglass, plastic or aluminum. To the inside is glued a sheet of mylar which is highly reflective. At the point of greatest concentration of ET, fiber optic cables receive the sunlight over the diameter of the bunched fiber optic strands. Fiber optic cables should be available in considerable quantities from companies which installed the nationwide series of fiber optic systems. The ET entering the fiber optic cables is carried to the growing pans inside the hanger. These cable strands are teased apart and directed upwards toward a linear parabolic reflector. These reflectors and made from fiberglass and are 10' long. They nest between the TJI trusses. To the convex side which faces the growing medium, is glued the highly reflective mylar sheet. By aiming the teased apart strands of fiber optics to the reflective surface, the sunlight is reflected downwards and thus spread evenly across the surface of the growing medium. The “reverse” parabola surface (back side) thus “de-concentrates” the ET. The collector pans are on a double gimble system. The main frame orients the pans at ninety degrees to the Sun's rays. As the sun passes east to west, the sun tracker system operates a rack and pinion system to maintain the collector pans at 90 degrees to the solar radiation. At sundown, the system automatically repositions itself toward the eastern horizon. Strong winds could be a problem. Two solutions: Build very stout “snow fence” around the solar collector enclosures. A system could be engineered such that when an override signal is given, the pans rotate so that the open face is toward the ground and the main frame lowers the entire assembly to the ground. The convex shape would cause lift as the wind passes over the backside of the pans. The solution is to fix a wind spoiler next to what would become the invert of the pans when lowered because of wind. This spoiler would be a counter-airfoil and would run along the length of the pan. The fiber optic system could add four hours of sunlight. There exists very large, unused excess capacity of high grade fiber optic networks in the U.S. It is possible for sunlight harvested on the east coast to be transmitted to the west coast and vice versa, thus adding the four hours of sunlight because of time zone differences. Also bad weather in the area of the growing grounds could be off-set by good weather in the area where the collectors are built. Just imagine, the Chicago Board of Trade could start trading in sunlight photons.

4. HARVESTING
Each pan will have at one end, a rotating cylinder which spans the 10' width of the pan. It has a perforated inner and outer shell with a poly filter between the shells. This drum sits in the pan water with the bottom of the drum just above the bottom of the pan. A pump draws water into the center of the drum and discharges the water to the pan below or above. Each pan has a drum, which are at opposing ends so that water from one pan is discharged into the “far end” of the neighbor pan, but in reality is just above or below its neighbor, thus avoiding long runs of pipe. As the drum rotates, the suction inside the drum draws algae against the outside of the drum wall which is perforated and hangs on the outside because of the polyfilter which is against the inside wall of the outer drum wall. This drum can turn slowly on a continuous basis as the algae will have grown more closest to the drum or at least become more concentrated.
Scientists will have to work out how this happens.

The algae which is in the vacuum system now becomes a slurry which is transported to a centrifuge. Most of the water is removed. One production line then uses this damp algae concentrate to make the slettuce. The remainder is conveyed to a continuous flow oven, which removes the rest of the water. Then the cake is ground in to flour and bagged or boxed. Cake which is not of food grade can be fed to animals and used to grow market mushrooms. It would make an excellent product to sell to certified organic farmers. With as many large hangers and other WWII buildings at the airport this location make great sense because the buildings are so old, they are probable not to code for human habitation, but would be legal for agricultural use. We can get the use of these buildings on the cheap. Thus associated ag production of mushrooms, poultry, organic fertilizers, worms and other value added ag products can be anticipated.

5. PRODUCTS
In addition to slettuce, the Spirulina flower can be used to make pasta and different food products. A pasta plant can be installed in the hanger in a building within the hanger. Again, the hanger provides structural protection against rain, snow and wind. The pasta plant only has to conserve heat in its building, which can be built strong enough to allow for polysheeting – another type of greenhouse. I read where some Dakota farmers has formed a cooperative to make pasta, but is went out of business. Thus that plant might be available at very low cost. They produced pasta as a commodity. The Montana Synergy plan is to sell directly to the consumer by catalogue and e-commerce through our website. We will also sell to food cooperatives, use community supported agricultural groups (CSA's) and attend farmer's markets with our slettuce and pasta. Our products will be high in omega 3's, high in protein and will provide for carbohydrates and fiber. Thus, our operation will aid the local grain farmers by using the durham wheats. We could eventually include a seed oil crushing plant so as to process local seed oil grains, create additional flower for retail or animal feed and vegetable oil for production of biodiesel. The cake feed would increase the meat and egg production in the local areas.

6. SALES
Montana Synergy should strive to sell direct to the consumer, rather than treating our products as just another commodity. The end users of the flours are bakeries sold in bulk containers, and flour packaged for consumers and sold by mail, e-commerce, CSA's, farmers' markets. Years ago, Olympia Bread sold door-to-door by having bread trucks drive through residential neighborhoods and announced their presence by a distinctive bell. This old method of sales, might be just the right type to renew. The concept is a traveling deli with plenty of foods and pre-prepared meals and main courses, all frozen or in some cases, dried. During the shopping time (11:00 to about 5:00 p.m), the traveling deli could be parked in the parking lot of a shopping center, with permission of the shopping center owner, or in a church or school parking lot.

Outside of these hours, the van would travel the residential streets. There are plenty of students, retired folks and low income persons who would benefit from driving the deli van. They would get paid in food and cash. Montana Synergy could also be formed is a communitarian intentional community, where all of the workers are owners and all of the owners are workers. I have diligently studied this subject and have many papers on how to organize and manage a self-sufficient, sustainable, rural, intentional community.

7. CAPITAL
There are grant and loan funds available for the pilot project and the startup. Green Oxy Fuels, LLP, has applied for a $10,000 loan from the Montana Department of Environmental Quality Alternative Energy Revolving Loan Program. This application is based on the purchase of a small biodiesel refinery and a diesel generator. The objective is to produce electricity using biodiesel from waste vegetable oil from MSU's kitchen fryers, which supplants use of commercial electricity and propane for a one-bedroom, one bath mobile home which I have been building for the past 1.25 years. The maximum loan for this program is $40,000. There are several other sources for funding alternative energy and more are announced every quarter. The budget for this project is available on request. In addition to government and foundation grants and loans, a standard stock subscription to create a cooperative would seem to be a successful way to raise capital.

8. ORGANIZATION
Montana Synergy, LLP, will be formed as a Montana Limited Liability partnership. Membership will have two parts. The “personal” membership would cost $100.00 which would carry the right to vote for the partners constituting the governing council of partners. A second class, “capital” membership, would be based on capital contributions and would provide for one vote from every $5,000 of capital contributed. The capital would receive a share of the net profits proportional to the amount each holder has to the total of all capital contributed. The amount of capital membership is merely a bookkeeping entry and would be subject to Federal and State securities laws. The two classes would have rights defined in the partnership agreement.

9. SCHEDULE
The schedule would be to form the LLP among a group of early investors, including one or two scientists, five or six entrepreneurs, a couple of farmers, one or two residential consumers and one or two industrial consumers. During the early stages, the entrepreneurs have to have control over the course and direction of the enterprise.

When the pilot plant is in operation and the marketing plan has been proven to be successful, then the major plant can be financed by the second wave of investors, most of which are likely to be a mix of grain farmers, animal meat and egg producers, CSA members and industrial consumers, such as bakeries. We should avoid banks and other lenders.
Jim Miller is the in-house lawyer (not licensed in Montana, but in California). We will have to hire a licensed Montana securities attorney when the time comes, to issue the opinion and do the securities work. I will do the due diligence and draft all documents, under that attorney's supervision.

The formation of Montana Synergy and its initial memberships can be accomplished in about 60-90 days. During this time applications for loans and grants can be prepared and submitted. At the end of December, when I graduate, I can relocate to Glasgow, provided we have satisfactorily formed Montana Synergy and concluded the necessary agreements and grants or loans for the pilot project.

Respectfully submitted,

James E. Miller, J.D.
P. O. Box 1172, Belgrade, MT 59714 jimmiller5417@yahoo.com
July 11, 2006.

MONTANA BIOBASED PRODUCTS - Standards and Avilability

jimmiller5417 — Tue, 08 Aug 2006 11:34:02 CDT

See Comment at the bottom of the Home Page

Biodiesel Testing -- A Boon or a Barrier?

jimmiller5417 — Mon, 07 Aug 2006 14:53:18 CDT

BIODIESEL TESTING:
--A boon or a barrier?
By Jim Miller
August 9, 2006

The specification for biodiesel varies from refinery to refinery, but all of them pass the ASTM D 6751 battery of tests. The problem is all of those tests are for petrodiesel, not for biodiesel. This undifferentiated test has led State of California, via the California Air Quality Resources Board to accommodate home-brew biodiesel producers to produced and sell “demonstration” biodiesel under the specified conditions, thus avoiding the ASTM testing. The large, multi-million dollar companies can afford to produce batches of 20,000 gallons or more of biodiesel and thus the cost of the tests is a small percentage.

In the home brew industry, the cost of the tests if run by a commercial lab completely stops the home brew industry. This is not a trivial issue. In my discussions of this point with Dr. Charles Peterson during June, 2003, he stated that the home brewers should create a cooperative testing lab. That would be like herding 100 cats down an alley. During 2003, I joined several biodiesel discussion boards and tried to interest home brewers in establishing a co-op. I got some rather disgusting suggestions as to what I could do with my idea. The idea of a cooperative lab is thus still born.

The only hope is to find a suitable and affordable near infra-red testing equipment. Even this is a chicken and egg problem. Until we have biodiesel production which is of sufficient volume to sell to the public, there is no need for any ASTM or other testing. The costs will probably be in the $15,000 to $20,000 range for the NIR instruments. I understand that ASTM has formed a committee to study this issue and will, hopefully, come up with a test specification which is specific to biodiesel. No telling when this could happen. Even if such tests is published, it would still take time for the test to be adopted by all of the government agencies which get involved in biodiesel production and use.

Again the chicken and egg. Until there is a strong base of biodiesel producers, including small plants such as I advocate, governments will typically drag their heels. The question is How Does One Begin to Begin? The solution is to encourage home brewers, small producers and other stakeholders to produce and use the production for themselves. When this layer of biodiesel producers has populated the cities and towns and rural areas, then we can take the next step, which is to have several different organizations (e.g. ISO) specify what constitutes good biodiesel and the protocol for testing such.

There is no reason why ASTM should be the exclusive author of testing protocols. There is no reason why a government agency, e.g. MT DEQ could not publish a complete testing protocol rather than simply adopt the ASTM panel of tests. It costs $30 to buy each test protocol from ASTM. ($30 x 14 = $420) The buyer is required to adhere to a very strict intellectual property contract, which basically is a very severe non-disclosure document. Basically, all levels of government have combined to grant a monopoly to ASTM on the testing issue. ASTM is sitting in the cat bird seat, reaping the profits and keeping the home brewer at bay with the high cost of not only buying the test protocols but in creating the $100,000 lab necessary to run the about 14 of the panel of tests.

When I ran the pH test as part of my Chem Engineering lab course, ( Test for Relative Acidity, ASTM D 664-04e1), I discussed the level of difficulty with Dr. Dallas Johnson, then the head of the Chemistry Department of MSU. He chuckled at my situation. He said that the ASTM test I was running was designed for use by analytical chemists with advance degrees and years of experience in running lab tests. I also discussed some of these issue with the creator of the MicroLab instrumentation which I was using. He also stated that the MicroLab instrumentation was intended for general purpose chem lab work, and was not specialized for biodiesel testing.

For instance, in doing the titration, I was to add one-half of a ML of reactant until I reached the end point. The glass titration equipment available to me did not allow for such a small increment and I used 5 ml per dose. The effect of this change was to blur the end point so that my pH range increased. Since the scale is exponential, this change creating a problem in finding the true end point. The end point scales to the numeric pH. So the lesson learned is that a novice chemist such as myself simply does not have the background to do each of the included ASTM tests. Even using one of the chem labs under the supervison of Dr. Duffy, Dr. Johnson and with the help of the creator of MicroLab, I was barely able to complete the test. Home brew producers simply do not have access I had to MSU chem lab and staff and cannot be expected to test each batch.

Fuelmeister makes 40 gallon batches. Running the battery of tests specified by D6751 is simply not feasible. Neither is incurring the $500 to $850 expense per batch.

So the solution is to do nothing, and allow the mega-million/billion dollar corporations to become the exclusive suppliers of biodiesel. The consequences are large factories and huge transportation costs (using mostly fossil fuel). They can set prices at or above petrodiesel prices. The consumer thus would have no way to fight big oil. Given that Montana has long distances to haul stuff, but has great ag potential for growing oil seed crops, we need to prevent the oligopolies from getting a strangle hold on biodiesel.

The best way is to have biofuel plants in every town, city and ecovillage in Montana which uses local WVO and second and third presses from oil seed presses. I understand that Montana has only one oil seed pressing plant, near Sunburst. This lack of pressing facilities is sad.

Gov. Schweitzer has touted biodiesel, yet his words seem to lie on the hard, baked ground and have not sprouted any biodiesel "plants". The loan will change this situation. As part of the deal, I am quite willing use the website for Montana Synergy to offer to the public, free of charge, all of the technology, designs and marketing ideas I will have developed. By using a WikiWeb site, anyone with a browser can upload their comments, articles and hyper links to other resources. They can edit what I or anyone else write and publish on the website. All articles will be royalty free and can be used and copied by anyone on a 7/24/365 basis. Montana Synergy's current WikiWeb is at: http://montanasynergy.wetpaint.com/page/BUSINESS+PLAN+FOR+SPIRULINA+CULTURE+AND+PRODUCTION

This approach is to kick-start the home brew and small producer industry in Montana, with the hope it will propagate itself to other parts of the nation. I am willing to be the pioneer, in the spirit of early Montana pioneers who braved the forces of nature to make Montana what it is today. This loan is only for Layer One. I am in the process of designing Layer Two which focuses on the use of algae for food and fuel.

Best regards,
Jim Miller, Managing Partner
Montana Synergy, LLP
P. O. Box 1172 Belgrade, MT 59714
jimmiller5417@yahoo.com

The Biodiesel-Electric Project

jimmiller5417 — Fri, 14 Jul 2006 15:52:34 CDT

WHAT: The Green Biodiesel-Electric Project will virtually eliminate reliance on commercial electrical power sources for residential, farm, ranch, commercial and light industrial use. It, will almost totally eliminate reliance on propane and/or electrical power for space and water heating and will provide fuel for diesel power equipment and vehicles. This model can be replicated by most farms and ranches and for many homeowners. Power from NorthWestern Energy will be switched off at the main electrical service, but left connected as a potential backup. The main breaker will be locked in the off position and access to the customer panel will be padlocked.

HOW: Green Oxy Fuels, LLP, will purchase from a private party, a complete Fuelmeister biodiesel batch biodiesel production plant capable of processing 40 gallons per batch. Up to three batches per week is projected. The system recycles waste vegetable fryer oil from restaurants and institutions. Green Oxy Fuels has permission from MSU – Bozeman, Food Service Division to collect all of the used fryer oil from its five kitchens on campus, which will yield approximately 120 gallons per week. The chemistry is based on transesterification of the long chain oil molecules into short chain esters and drops out the glycerol (gum). The raw biodiesel is then water washed which removes any remaining traces of catalyst, particulate matter and some of the alcohol.

This resulting biodiesel will then be used to fuel a small diesel electrical generator to supply all current needs of the house, including power needed for the Fuelmeister. This source of power eliminates the need for propane for cooking, space heating and water heating. The biodiesel will also provide fuel for diesel engines of biodiesel fuel customers. In the applicant's case, it will allow for the sale of the 1993 Toyota and the 1987 F250 which are gas and allow the applicant to re engine the 1985 F250 diesel with a newer, more powerful diesel engine. Biodiesel produced in excess of the applicant's needs will be sold to help service the loan and save on the use of fossil fuels. Such excess biodiesel will be sold for off-road use (red dyed) as B99 (untested). The primary customers will be contractors, farmers and ranchers for use in their off-road diesel machines and equipment.

The Science of Spirulina

jimmiller5417 — Fri, 14 Jul 2006 15:17:54 CDT

INCREDIENTS - By Pia Mauates

( MEAT PROCESSING GLOBAL – WWW.MEATNEWS.COM MAY/JUNE 2006, p 26 )

From ancient regional traditions to new food product trends worldwide, algae are becoming the culinary trendsetters.

On the dining tables in Japan and France, aquatic algae are consumed in tonnes. Whether stewed or fried, whether in the form of soup or noodles, or as a flavoring mix on the side, in recent years, algae have clearly advanced to the status of culinary trendsetters. Viewed from a worldwide perspective, the use of algae as a leguminous food makes for the biggest share of this market in terms of both value and volume. This segment does, in fact, account for about two thirds of the total production, with Asiatic countries, where direct algoid food consumption is high, ranking on top.

This is a statistical fact which comes as little surprise, because people in that region have not only known algae for many thousands of years, but they have also come to really appreciate them thanks to the many nutritious and sensory qualities they bring to food preparation. Consumption of algae as a direct food has been a relatively unimportant factor in the western industrialised countries for a long period of time, but recent years have seen a distinct rise in consumer preference in this respect as well. In a more general context, however, it should be noted that, in this part of the world, algae have found frequent use as a food ingredient ever since the sixties, even though most often as a direct result of their techno-functional capabilities.

Immense diversity in type and kind

Algae are among the oldest organisms existing on our planet and can justifiably be classified as the bio-ancestral forerunners of life on earth. Among many other places of discovery, petrified remnants have been found in Wales, their age estimated at some 540 million years. Algae generally can be found in both salt and fresh water, with huge intra-groupal differences known to exist.

Take the monocellular microalgae for example, which are microscopically small, while their seaweed/macroalgae counterparts can be up to 50 metres in length. To the human eye, individual types mainly differ in terms of their colourants which, in turn, explains their botanical classification into blue, green, brown and red algae. Their diversity is nothing but gorgeous with some 30,000 to 40,000 different species and/or subspecies estimated to exist. Algae are so-called photosynthetic organisms, which produce their organic molecules from minerals, water, and carbon dioxide. This means that they also produce large amounts of oxygen as a result. As the first link in oxygen production on earth, cyanobacteria (blue or blue-green algae), therefore, also constitute the first link to animal life.

Human health sourced from the sea

Given their existence as aquatic organisms, algae draw a huge mineral wealth from the sea which, in turn, holds a great diversity, including mineral substances such as sodium, calcium, magnesium, potassium or phosphorus, together with such trace elements as iodine, iron, zinc, copper, selenium, fluorine or manganese. In short, no other products of nature are as rich in minerals, trace elements, amino acids and vitamins as algae. Red, brown and green algae come with an average of 30 to 36 per cent mineral content in their dry matter, in which far more than 80 different elements can be scientifically identified. In food processing and manufacturing, algae's protein content is of particular technological importance, too. In this context it must not be forgotten, however, that different species bring highly different protein quantities to the processing job: while the protein concentration of brown algae is only in a range from 5 to 11 per cent, some of their red counterparts offer a content of between 30 to 40 per cent, with the quality of protein delivered comparable to that of such highly proteinaceous plants as soybeans. Spirulina (a freshwater microalga) for example, with its high protein content of about 70 per cent in the dry matter, is, among other applications, particularly popular as a valuable supplemental additive in human food manufacturing.

First reports of algae being used as a human food originate from China, dating back to the year 2500 Be. But it was only in the 17th century that these marine plant species were cultivated in Japan to a larger extent. Returning to earlier times, these marine plants were also known in ancient Greece, even though their use was mostly as a medicinal remedy against helminthiasis (Le. infestation with parasitic worms). More into the medieval era, algoid foods were used to feed the poorest for a long time in several European regions. And in dire times of need, people living in coastal regions again and again cultivated algae as a livestock feed, placing rocks in inter-tidal areas to chiefly grow the fucus species. In addition, and dating back to the 16th century, people would routinely collect algae during the ebb tide interval, drying them to be used as fertilizer on the fields, a process, which in essence, is still proving its practical worth in this day and age.

Back to the human food chain, some 3 to 3.6 million tonnes of algae are currently harvested annually worldwide, with species coming from Europe and America being further processed into the most varied algae-based products. Demand for these types of substances has, in fact, shown a 25 per cent year-on-year increase, currently reaching a level of far more than 350,000 tonnes per annum. Over and above the more classical preparation into a leguminous foodstuff or a seasoning ingredient, algae have also established themselves as a base material for different additives being used in today's food industry.

In bio-technological detail, the polysaccharide algin or alginic acid (E-400), formed in the cellular walls, is the structure-building element of brown algae. The intracellular gel matrix gives the alga both its flexibility and its firmness. Algin is typically obtained as a by-product, when the wet process is employed to recover iodine from marine algae. But for use in and by the food industry, it is also directly extracted from brown algae, with its salts generally referred to as alginates which, in turn, are primarily used as thickening and! or gelling agents. Apart from sodium alginate (E-401), potassium alginate (E-402), ammonium alginate (E-403), calcium alginate (E-404) and propylene-glycol alginate (E-405) are the alginic acid salts most often used in food manufacture.

The viscosity of alginate solutions is primarily a dependent function of the molecular weight and the respective gegenion (a compensating ion), while its increase is first and foremost brought about by the presence and concentration of polyvalent cations (e.g. calcium) and the concentration in which they occur. It follows that viscosity can be readily adjusted to the specific level desired in any given case; and with calcium ions added in an accurately targeted manner, or by slightly acidifying sodium alginate solutions, gels, fibers and filmy sheets can be produced. In and by themselves, alginates are highly effective inspissating (thickening), stabilising and gelling agents. Used in concentrations between 0.25 and 0.5 per cent, they work to improve the stability of salad sauces, gravies, soups, bakery product fillings, and various types of convenience foods as well. Agar-agar is yet another polysaccharide or, more precisely, a galactose polymer capable of forming gelatin.

Produced from the cellular walls of some red algae or seaweed species, its use extends to numerous fields, with that of agar-based bacterial substrates one of the most widely known applications. As for use in the food industry, agar-agar's almost total indigestibility, its stabilising effects plus an ability to form heat-resistant gels are seen as the most significant properties.

More specifically, it is frequently employed in making sherbets and ice creams, most often in a 0.1 per cent dosage in combination with carob bean gum or gelatin. Dosages in the 0.1 to 1.0 per cent range are typical when agar is used with yogurt, cheese, sweets and bakery products; and finally, agar-agar is also employed to assist with preventing bread products from becoming stale too quickly.

Carrageenan, a complex mixture of different polysaccharides, is also obtained from red algae by extraction with hot water under slightly alkaline conditions, with drying or precipitation the subsequent step. When fractional precipitation of potassium ions is employed as an additional processing step, carrageenan can then be separated into various fractions which, comprising different monosaccharide building blocks, also differ in their solubility. Among those commercially used are the lambda-, kappa- and iotatype carrageenans, with the inherent properties most conducive to a given application determined by the specific type. As such, and in the presence of potassium and calcium ions, the kappa- and iota-types unfold their gelling activities, with kappa-carrageenans leading up to stiff and thermoreversible gels tending to produce synerisis, i.e. the separation of liquid from gel as a result of contraction. By adding water-soluble hydrocolloids, the structure of such gels can be materially improved.

By contrast, synerisis is not encountered in the presence of iota-type carrageenans which are relatively weak in their gelling ability at that, while those of the lambda-type are not capable of forming gels at all. As for the use of carrageenan in today's food processing practice, cooked ham manufacturing is clearly the single most important field of application.

In which connection, those of the kappa-type are particularly appropriate because of their solid gel structure which, after cooling, makes for good, firm-cutting sliceability and strong binding in the finished product. Looking somewhat further down the line, aquaculture is certainly in for a very promising future. For one thing, microalgae's productivity is beyond comparison: with their growth rate 10 times that of geophytes (soil-borne plants), their use potential in such diverse segments as human health and the environment is nothing but enormous.

For another, a great number of companies in various fields of industry have already discovered microalgae for their own business terrain: those tiny little fingerlings can be used to clean our air and water, to supplement human food, or to serve as a highly valuable cosmetic personal care product. Added to this is the fact that algae can even be employed as a future source of energy: reports have it that photosynthetic microalgae may, for example, be instrumental in converting biohydrogen to a form of energy that can be used in everyday practice.

But some of those innovative developments are likely not to materialize soon, because efficient mass production of algoid substances is currently still lacking. While this is so, the food industry could already be in for a virtual algae boom even before regular mass production gets underway. The reason for this is that these monocellular organisms contain tryptophane, a substance used by the human body to produce serotonin - the hormone of happiness, that is - and so a real reason to get algae mass production up to speed. MPG

May/June - www.meatness.com