Business Overview

I Company No. 949536-X I I Company No. 949536-X I 6. BUSINESS OVERVIEW PRINCIPAL ACTIVITIES AND PRODUCTS We are a health supplement company principally involved in the following: (i) Manufacturing and sales of finished health supplement products as an ODM;
(ii) Manufacturing and sales of semi-finished formulated ingredients under our house brands;

(iii) Manufacturing and sales of finished health supplement products under our house brands; and (iv) Processing and sales of processed herbs. We currently have nine (9) semi-finished formulated ingredients, 75 finished functional food products and 48 finished herbal and non-herbal supplement products which are commercially available in the market. Finished herbal and non-herbal supplements must be registered with MOR and awarded with MAL certificates before they are allowed to be commercialised in the market. MAL certificates bear registration numbers for products which have been approved by the DCA for sale or use in Malaysia, based on safety evaluation tests. This requirement is not necessary for functional food products as these products are considered as food products. All 48 of our finished herbal and non-herbal supplements are registered with MOR and awarded with MAL certificates. Manufacturing and sales of semi-finished and finished health supplement products Semi-finisbed products Finisbed healtll supplement Ilroducts IProctS-~ed herbs IFormulated ingredients IBouse brands .~ IODM \======~:=======: •Mmuifarturingl!flu!Illth pocking) ofherbal planls, • Mam(ac/llrillg (~f hell/Iii• Liquid femllmlaiion and freeze• Processing (deaning. dlYlng alia supplememproi/urlsos emslIpplcmclll pmdllctsdlj~ng manufacluring process 10 ODM• Sold Wide/’ house bralld~’• Sold to otfrer third parly produce mediciuul mushroom • Sold ~r aDMcuslomm momljoclurers via OWII relail outletextracl, i.e, “mycelium “, insuppliers 01′ heaf/II supP/WelIt Ill/del’ their respectivepolHferjorm • Sold under !louse brands 10 bllJ/1dr powde~ or!on/mlat,<d mycelium powder willi OfJwl’ (letire ingredients. diSiribll/Ors.• Tltese producls may be myceliul/l
•Sold /lllder !IOl/Se bl'{/Ilds fQ other heallh supplemeut mcmuftlcmrers for Jil/tller processing or mami/ilctlll’ing

 

6.1.1 Manufacturing and Sales of Finished Health Supplement Products as an ODM We are involved in the manufacturing and sales of finished health supplement products as an ODM for our customers, which include other health supplement manufacturers and brand owners, and distribution companies. Our ODM health supplement manufacturing acbVlbes involve undertaking the entire product development process, from product formulation and sourcing of active ingredients, supplies and consumables, to manufacturing and/or product packing. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) We also assist our customers in registering their product with MOH and obtaining Halal certifications, if required. Our manufacturing processes and equipment used for fermentation of medicinal mushrooms and manufacturing of products have been inspected by JAKIM in the past, and we have not faced any difficulties in obtaining Halal certifications for our products, whenever we were required to by our ODM customers. Our production facilities have the capacity to pack our customers’ products in various packaging forms, depending on product suitability and customers’ requirements. Our product packaging forms include sachet, teabag, capsule, tablet and bottle forms. Currently, 39 herbal and non-herbal supplements and 39 functional food products, which have been developed by us for our ODM customers, are commercially available in the market.
6.1.2 Manufacturing and Sales of Semi-Finished Formulated Ingredients under Our House Brands We are involved in the manufacturing and sales of semi-finished formulated ingredients under our house brands. Our formulated ingredients are typically sold to other health supplement manufacturers and distributors as active ingredients to be further processed and manufactured into finished health supplement products. The semi-finished formulated ingredients which we manufacture and sell are herbal based formulated ingredients. As at the LPD, we manufacture formulated ingredients from medicinal mushrooms, tongkat ali, misai kucing and roselle. In order to manufacture medicinal mushroom based formulated ingredients, we utilise our proprietary liquid fermentation technology for fermentation of medicinal mushrooms to ensure proper growth of the strains and development of active compounds in the strains, as well as spray drying technology for the dehydration of the mycelium in its solid form (yield) into powder form. We currently have in store strains that have been isolated from six (6) types of medicinal mushrooms, i.e. C. sinensis, 1. rhinoceros. Grifola frondosa. Lentinula edodes, Cordyceps militaris and Ganoderma lucidum. As at the LPD, we have commercialised semi-finished formulated ingredient products from C. sinensis for our customers, whilst the fermentation processes for andJor formulations from other medicinal mushroom types are ongoing. We also extract active ingredients to produce semi-finished formulated ingredients from other herbs, namely tongkat ali, misai kucing and roselle. The extracted active ingredients will then be dehydrated into powder form using spray drying technology. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK­I Company No. 9495~ 6. BUSINESS OVERVIEW (Cont’d) Below is a list of formulated ingredients which have been commercialised and sold under our house brands as at the LPD: Product Type Description Product Name Medicinal mushroom based semi-finished formulated ingredients Mycelium powder Medicinal mushroom extract Cordyceps Powder Formulated mycelium powder Formulated medicinal Cordy-collagen I Powder mushroom extract with other Cordy-collagen 2 Powder active ingredients Cordy-HA I Powder Cordy-Mix I Powder Cordy Multi-Mushroom Other herb based semi-finished formulated ingredients Tongkat ali extract Tongkat ali extract in powder Tongkat Ali Ex form Misai kucing extract Misai kucing extract in Misai Kucing Ex powder form Roselle extract Roselle extract III powder Roselle Ex form

6.1.3 Manufacturing and Sales of Finished Health Supplement Products under Our House Brands We are involved in the manufacturing and sales of finished health supplement products under our house brands. Our house brands are sold either through third party retail pharmacies and other food and health retail outlets directly or vide distributors, or through our ‘Lifesprings” retail outlet. We have six (6) house brands i.e. Bexlim®, Nushine, Bioapotec®, Alphanex, Apotec and Bioa. Out of these six (6) house brands, we have two (2) registered trademarks (i.e. Bexlim® and Bioapotec®). Our finished house brand herbal and non-herbal supplement products offer a variety of health benefits, including for general health maintenance, improving blood circulation, enhancing vitality, relief of cough and sore throat, and general well-being for women. Our finished house brand herbal and non­herbal supplement products are as listed below: Brand/Product Name  MAL Registration No.  Brand/Product Name  MAL Registration No.  Alphanex products  Apotec products  Cordy Ginkgo Plus  MALl1050007T  B-Spirulina  MALlOO1l919T  Cordy Wolfberry Plus  MAL09103006T  Immu Activ-Plus  MALl1035023T  Cordyceps B-Care Plus  MALlO120074T  Total Woman Forte  MALl I03 5006T  Bio Ligno  MALl 21 05001T  Cordyceps Immu-Plus  MALlO120087T  B-Ligno Complex  MALl2105053T
I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Our functional food products are fortified food products with nutrients from herbal and non-herbal active ingredients such as apple cider, oat, dragon fruit and medicinal mushrooms. Our functional food products are as listed below: Brand/Product Name Brand/Product Narne Apotec products Bioapotec® products Dragon Fruit Tea Malaysia Herbal Treasure (Tea Box) Apple Cider with Honey Herbal Tea -Gusset bag (Tongkat Ali) Rooibos Tea Herbal Tea -Gusset bag (Kacip Fatimah) BGOat Herbal Tea -Gusset bag (Misai Kucing) Collagen 5500 Herbal Tea -Gusset bag (Hempedu Bumi) S-Green Food Herbal Tea -Gusset bag (Roselle) Chlorophyll Tongkat Ali Coffee Nutri Mushy Soup Tongkat Ali Teh Tarik (formerly known as Vegetable Soup Bag Mix Kacip Fatimah Coffee with 3 Medicinal Mushroom) Bexlim® products Kacip Fatimah Teh Tarik Bexlim® Day & Night Ling Zhi Coffee Bexlim® Cordyceps Plus Cordyceps Coffee
Pearl Collagen Tiger Milk Mushroom Chocolate Drink Bexlim® Kunyit tea Tiger Milk Mushroom Cereal Drink Bexlim® De-Glucose tea Roselle Whole Flower Bexlim® Dragon Fruit Enzyme Drink Dragon Fruit Tea Nushine products Nushine Anti Ageing Nanollagen
6.1.4 Processing and Sales of Processed Herbs We are also involved in the processing and sales of processed herbs to third party suppliers for onward sale to health supplement manufacturers and retailers, or directly to other health supplement manufacturers. Through the cultivation of herbal plants at our herb farm on Desaru Land, we are able to plant and/or harvest close to twenty (20) species of herbal plants. Our harvested herbal plants undergo processing, i.e. cleaning, drying and packing, to produce herbs in dried herb form. These processed herbs are then used in our manufacturing of finished and semi-finished health supplement products, and any excess processed herbs which are not used in our manufacturing process are sold to customers. As at the LPD, the herbal plants which we have planted, harvested and processed include turmeric, ginger, kacip fatimah, hempedu bumi, misai kucing, dukung anak and roselle. Our herb processing facility is located at our Semenyih plant. ICompany No. 949536-X I 16. BUSINESS OVERVIEW (Cont’d)

6.2 PRINCIPAL MARKETS Our principal markets comprise local and overseas markets including, but not limited to, Indonesia and Australia. Our revenue breakdown by our principal markets for the past three (3) FYE 31 December 2011 to 2013 and FPE 30 September 2014 are as follows: Country <—————————FYE 31 December —————————-> FPE30 September 2014<——–2011 ——–> <——–2012 ——-> <——-2013 ——> RM’OOO % RM’OOO % RM’OOO % RM’OOO % Malaysia 10,289 70.71 10,803 56.51 16,194 65.91 8,897 47.41 Indonesia 4,041 27.77 6,313 33.02 7,243 29.48 7,625 40.63 Australia 1,891 9.89 9551\ 3.89 2,100 11.19 Others * 220 1.52 110 0.58 178 0.72 143 0.77 Total 14,550 100.00 19,117 100.00 24,570 100.00 18,765 100.00 Notes: * Includes Cambodia and Hong Kong. The decline in sales to Australia in FYE 2013 was mainly due to slower sales for our new house brand product, Nushine Nanollagen, which was introduced in FYE 2012, during which the distributor made a bulk purchase. However, sales to Australia increased by 118.17% to RM2.1 million for the FPE 30 September 2014 as compared to RMO.96 million in the precedingjinancial period mainly as a result of promotional activities carried out by the distributor to increase acceptance ofNushine Nanollagen.
6.3 PRODUCTION FACILITIES Our manufacturing activities are undertaken in both of our Bangi and Semenyih plants, which are recognised as GMP compliant by MOH. Our liquid fermentation facility is located at our Bangi plant. Our Bangi plant is also equipped with five (5) production lines catering to the product packaging forms of sachet (liquid and powder), teabag, capsule, tablet and bottle (liquid), as well as a R&D laboratory. We also currently operate three (3) production lines at our Semenyih plant to cater for three (3) different product packaging forms, i.e. sachet (liquid and powder), tablet and teabag. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ­I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Our material equipment for our manufacturing operations together with the respective manufacturing capacity, production output and utilisation rates for FPE 30 September 2014 for our Semenyih and Bangi plants are as follows: Equipment  Description  Actual Production  Manufacturing  Utilisation  Carrying Amount as  Output  Capacity  Rate  at 30 September 2014  unit  unit  %  RM’OOO
Bioreactor (fermentation)  Apparatus involved in the liquid fermentation of mediCinal mushrooms  3,415  6,825{l)  50.04  4,034  Sachet (liquid and powder)  Machinery involved in measuring, sieving, separating, filtering and filling of liquid and powdered mixes into sachets  4,345,789  6,739,200(2)  64.49  547  Bottle (liquid)  Machinery involved in the filling and capping of bottles  515,291  1,123,200(2)  45.88  279  Encapsulation (bottle and blister pack) Teabag Tablet GMP infrastructure  Machinery involved in the filling, counting and blister packing capsules Machinery involved in manufacturing products in teabag packaging forms Machinery involved in tableting, tablet hardness testing and tablet pressing Infrastructure required to be a GMP compliant factory such as a reverse osmosis water system, dehumidifier machines, ribbon mixer, incubator and others  3,393,820 662,370 5,617,590 -(5)  23,587,200(2) 5,616,000(2) 12,729,600(2)(4) (5)  14.39(3) 11.79(3) 44.13 -(5)  410 21 71 659  Total  6,021  Notes:  (1)  Based on five (5) days processing time per batch offermented medicinal mushroom.  (2)  Based on an eight (8) hour shift over a six (6) working day week.
48 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (3) Thelowerornilutilisationratewasdue todemandfortheseproductpackagingformsmainlyoccurring in the fourth quarter of the year. This is mainly due to seasonality of demand jOr our products which peak in the fourth quarter ofthe year mainly in conjunction with our customers’ year end and festive promotional activities as well as our requirement for our customers to order a minimum quantity, whereby our customers will keep stock until their inventory level is low which is generally in the second or third quarter ofthe year.
(4) includes one (1) additional production line for tablet packaging form which commenced operations in July 20i4.
(5) Not applicable as the GMP irifrastructure is ancillary to our manufacturing operations.

We had doubled our production capacity for our sachet (liquid and powder) and teabag product packaging forms when we commenced operations of our Bangi plant in end 2013. In addition, we had also doubled our production capacity for tablet packaging form when we commenced operations of an additional line in July 2014. This increase in production capacity was carried out amongst others, to meet our future growth. Thus, our capacity utilisation is expected to increase in line with this anticipated growth. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK­I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) 6.4  PRODUCTION PROCESSES  6.4.1  Finished Health Supplement Product Manufacturing  Our finished product manufacturing process is as illustrated below:
(\)Product formulation l • Procuring other supplies and consumables from suppliers
!Xail ………………………………… …………………………………
I ‘F~l __ ~……………………………………..
QC Preparation of active ingredients, …………………………………………………………………………………….~
supplies and consumables :F’.H ~ QC ….·..·..···········..····..··..·……·..1 Processing of active ingredients and ………………………………. …….~
consumables IF~,’ _~………………………………..
QC Filling into packaging fonn……………………………………….
‘Fail
QC ….························..············i<V Packing………~I
:Fail ..·····..····-..~l···············~-….··..·…..·..······..··I Storage Sourcing of key active ingredients  Sourcing and processing of herbs (2)  Formulation of medicinal mushrooms through liquid fermentation process (3) Procuring other active ingredients from suppliers
Delivery of finished products I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’tl) ————————~ Notes: (1) Not applicable for OEM manufacturing processes which do not require product formulation.
(2) Not applicable for products which do not utilise herbal plants as active ingredients.
(3) Not applicable for products which do not utilise medicinal mushrooms as active ingredients.

Product formulation Prior to commercialisation and manufacturing of our finished health supplement products, we will first develop the product formulation. Please refer to Section 6.4.2 of this Prospectus for further illustration of the product formulation process. Sourcing of key active ingredients Our key active ingredients are the main active compounds utilised in manufacturing our products. Once the product formulation has been developed, we will then source the required active ingredients from one of the below three (3) sources: (i) Sourcing and processing of herbs We source herbs from our herb farms should the manufacturing process require any of the herbal plants which we cultivate. Our herbal plants undergo processing (i.e. cleaning, drying and packing) at our Semenyih plant before its active ingredients are extracted and dehydrated into powder form. Please refer to Section 6.4.3 of this Prospectus for further illustration of the herbs processing process. (ii) Formulation of medicinal mushrooms through liquid fermentation process For our C. sinensis medicinal mushroom based products, we will undertake our liquid fermentation process to produce medicinal mushrooms which will be utilised in our manufacturing process. Please refer to Section 6.4.4 of this Prospectus for further illustration of the liquid fermentation process. (iii) Procuring other active ingredients from suppliers We also procure and source other active ingredients which we do not cultivate or manufacture such as fish collagen, silk peptide and hyaluronic acid from a pool of local suppliers. Our QC team will perform tests on samples of these active ingredients to ensure that they are suitable to be used in our manufacturing process. (Please refer to Section 6.7 of this Prospectus for further details on QC tests carried out on in-coming raw materials). Apart from that, our QC team will also ensure that the active ingredients sourced have no traces of heavy metal and are not contaminated through ensuring that the MSDS which accompany the active ingredients certifies that the active ingredients are within safety requirements. Should we find the active ingredients to be unsuitable, we will not utilise these active ingredients in our manufacturing process. This stage will not be applicable for our OEM customers who provide active ingredients to us for contract manufacturing. 16. BUSINESS OVERVIEW (Cont’f!) Procuring of other supplies and consumables from suppliers Our production team will also procure other supplies and consumables required in the product manufacturing and packaging. These include, but are not limited to, consumables such as coffee extract powder, black tea and isomalto-oligosaccharide, as well as packaging supplies such as Halal capsules and Polyethylene Terephthalate (PET) bottles. Our QC team will ensure that the supplies and consumables procured are suitable to be used in our manufacturing process, through performing tests on samples of these supplies and consumables. (Please refer to Section 6.7 of this Prospectus for further details on QC tests carried out on in-coming raw materials). Our QC team will ensure that a COA is produced detailing the results of tests performed on the supplies and consumables in order to ensure the supplies and consumables are within safety requirements. Supplies and consumables which fail any of the QC tests and checks will not be utilised in our manufacturing process. Preparation of active ingredients, supplies and consumables Once all active ingredients, supplies and consumables have been sourced, they are prepared for processing according to the product formulation specifications. QC is performed on a sampling basis to ensure that the exact quantities have been prepared according to the product formulation specifications. Processing of active ingredients and consumables The active ingredients and consumables will then be loaded into a mixer and processed as per the preparation form specifications until it becomes a homogenous compound. Our preparation form specifications provides detailed factors such as the processing time and speed as well as GMP standard factors, including hygiene control, humidity control and temperature control. This process is supervised by our QC team, and sample tests are also performed on each batch such as moisture and pH analysis of the compound. The production batches are reworked, if necessary, until they pass the QC tests. Filling into packaging form The homogenous compounds are packaged into various packaging forms, i.e. sachet, teabag, capsule, tablet and bottle in accordance with the required specifications. After this process, our QC team will also perform tests on samples of the finished products to ensure the packaging forms comply with the required specifications. Batches which do not comply will be reworked. (Please refer to Section 6.7 of this Prospectus for further details on QC tests carried out on in-process QC tests). Packing After the packaging process is completed, the processed products are placed in the bulk intermediate room, which is a buffer area to reduce risk of contamination, before undergoing packing. The processed products are then packed into their final packing forms, i.e. blister packs, bottles and boxes, in accordance with the desired specifications. Our QC team will examine samples of the finished products before being stored in our warehouse, and should any of these products fail the QC test, they will be sent for re-packing. (Please refer to Section 6.7 of this Prospectus for further details on QC tests carried out on final product testing) Storage All finished products are placed in our designated storage area prior to outbound delivery. Delivery of finished products Our finished products will be delivered to our own “LifeSprings” retail outlet, or to third party retail pharmacies, distributors or aDM/OEM customers as required. ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) 6.4.2 Product Formulation Process Our product formulation process, which is part of our R&D process, is a vital step for the manufacturing of our products as it ascertains the type and amount of active ingredients required as well as the suitable processing process. Our product formulation process involves the following:

Development of product specifications Our product formulations are both customer-driven and market-driven. Our customer-driven formulations are developed in accordance to specific customers’ requirements on health functions and other attributes (e.g. appearance, taste, scent, etc.). On the other hand, our market-driven formulations are a result of our R&D team’s research and knowledge on the potential of certain active ingredients and market knowledge on current trends and market demands. ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Selection of active ingredients and consumables Based on the product requirements, our R&D team will select the relevant active ingredients and consumables. Active ingredients will undergo an active compound analysis to determine the active compounds present. Active ingredients and consumables obtained from suppliers require a MSDS or COA detailing the results of tests conducted, and these test reports are inspected to ensure that the active ingredients and consumables do not have any traces of heavy metal and are not contaminated. In addition, active ingredients and consumables will undergo our internal QC tests to ensure that they meet all our quality and safety requirements in accordance with GMP guidelines. Any of these materials found to be not within our safety requirements will not be utilised in our product formulation process. Processing of active ingredients and consumables The key active ingredients and consumables will be placed into a mixer for processing under a controlled environment until the mixture becomes a homogeneous compound. Once the mixture becomes a homogenous compound, samples of the mixture will undergo the following QC tests: • Sensory test: Product formulations will undergo four (4) sensory tests, which comprises odour, sight, taste and touch;
• pH and dissolution test: All product formulations will undergo a QC test to ensure that it is at a pH suitable for consumption as well as high absorption rate.
• Heavy metal, microbiology and nutrition tests: All product formulations will go through QC tests for heavy metals, microbiology and nutrition content.
• Stability test: All product formulations will be tested for stability once the mixture becomes a homogenous compound.

Please refer to Section 6.7 of this Prospectus for further details on the above QC tests. These QC tests ensure that we achieve the optimal function and efficacy of the product as well as to obtain accurate biological reactions from the active ingredients and consumables. Thus, the entire formulation process will be repeated until the homogenous compound passes all the QC tests and meets the required product specifications. Final product formulation for manufacturing of products The final product formulation developed will be used by our production team to manufacture our semi­finished and finished health supplement products. This process is not applicable for OEM manufacturing processes as the product formulations are developed by the OEM customers themselves. I Company No. 949536-X I

6. BUSINESS OVERVIEW (Cont’d) 6.4.3 Herbs Processing Process We currently cultivate herbal plants such as turmeric, ginger, kacip fatimah, hempedu bumi, misai kucing, dukung anak and roselle in our herb farm on Desaru Land. We also source processed herbs from third party suppliers for herbs which we do not cultivate or those where our harvest is unable to cater for customers’ demands, in order to manufacture our semi-finished formulated ingredients. The processing of herbs involves the following: Cultivation of herbal plants ~
Harvesting of herbal plants ~ Washing and rinsing Sourcing ofprocessed •Drying
r—. h”b, ~:::;’l~;,d port, 1—1
Fail j Discard ……………………………………i ~

 

1~’;1_0 ~ Extracti on of active Packing and delivery of ingredi ents processed herbs
f-ll…………………………………………………….\ ,
….~.~~.~..J Packing Delivery of semi-finished formulated ingredients products to customers Semi-finished fOlmulated ingredients for our manufacturing of finished health supplement products Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Cultivation of herbal plants Our cultivation begins in nurseries located at our herb farm, where we raise the seedlings before planting in the farm. We practice inter-cropping by planting coconut trees to provide our herbal plants with the necessary shade and protection in order to produce high yields, as herbal plants thrive under shaded or covered conditions. In addition, our herbal plants are organically grown. Harvesting of herbal plants Different herbal plants have different maturity periods. As we cultivate a variety of different herbal plants, we harvest at different times of the year. We harvest our herbal plants only when they reach maturity. After harvesting, the herbs are sent for primary processing; i.e. washing and rinsing, drying and packing. Washing and rinsing The harvested herbs are cleaned by using water to remove the soil and dirt on the herbs. Drying The cleaned herbs are then sent to our Semenyih plant to undergo an oven drying process. After this stage, QC tests are conducted to ascertain amongst others, the content of active compounds within the processed herbs, as well as to ensure that there are no traces of heavy metals or contaminants. Herbs found with traces of heavy metals or contaminants will be discarded. Herbs which do not have any traces of heavy metals or contaminants but do not pass all other QC tests will be re-processed. Packing and delivery of processed herbs The processed herbs are then packed into bags for further processing into formulated ingredients as well as for delivery to our customers, who are typically distributors or herbal supplement manufacturing. Extraction of active ingredients We manufacture formulated ingredients from processed herbs from our farms or third party suppliers at our Semenyih plant. These processed herbs will be placed in an extraction machine to isolate the herbal active ingredients from the processed herbs. The active ingredients obtained from the extraction machine are in liquid form and contain active compounds i.e. biological components that have certain therapeutic properties to meet our product requirements. Before extracting active ingredients from processed herbs supplied by third party suppliers, we will inspect the herbs to ascertain amongst others, the content of active compounds within the processed herbs, as well as to ensure that there are no traces of heavy metals or bacteria. Spray drying Once the active ingredients are extracted, they are transferred to a spray dryer which dehydrates it and produces the ingredients in powder form After spray drying, we perform sample QC tests to ascertain that the spray drying process has been appropriately performed. Packing The resultant semi-finished formulated ingredients are then packed into food-grade aluminium containers before being delivered to our customers, or stored for use in our finished product manufacturing process. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) 6.4.4 Liquid Fermentation Process Our liquid fermentation process is a proprietary process. We have filed applications for patents for our liquid fermentation process with MyIPO and with the Taiwan Intellectual Property Office in 2012 and are awaiting the results of both applications as at the LPD. The liquid fermentation process involves the following: Preparation of medicinal mushroom strain and inoculum n;”oni • ..
~ai.10 .”,-,–,–,1 Liquid fermentation in a series of bioreactors D;,c”,d .·_·-······!·~~.–··-··_-·_·..··.1 Harvesting of biomass,
i.e. mycelium D;,c”d .–.!~10.–·—1 Freeze drying of mycelium Grinding of mycelium I
Processing of mycelium powder Packing I  Delivery of medicinal mushroom based semi-finished formulated ingredients to customers  Medicinal mushroom based semi­finished formulated ingredients for our manufacturing of finished health supplement products
I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Preparation of medicinal mushroom strain and inoculum At this stage, we will retrieve the medicinal mushroom strains from an incubator in our laboratory to undergo the activation process. This results in strain propagation, which is the process of cultivating and multiplying the medicinal mushroom strains into a larger population. During this process, the medicinal mushroom strains are monitored and checked for purity, as well as to ensure that they are growing at the appropriate rate. QC tests will be performed on a sample of the strains before this process to ensure the absence of contamination, and also after this process to determine if the inoculum is in good condition. Should any of these QC tests fail, the strain or inoculum is discarded and this process is repeated with a new strain. (Please refer to Section 6.7 of this Prospectus for further details on the QC tests). Following the propagation process, the inoculum is produced. Liquid fermentation in a series of bioreactors Before the liquid fermentation process begins, soft water i.e. water that is free from dissolved salts such as calcium, iron magnesium, etc. is processed, filtered and channelled into the bioreactors. The inoculum is then placed in the bioreactors together with the necessary medium to execute the fermentation at the appropriate lighting and temperature. Following the fermentation, the inoculum would have reached its growth stage with the desired level and combination of active compounds produced. During the fermentation process, the inoculum is monitored and inspected by our QC team to ensure that it is growing at the expected rate and samples are tested to ascertain its level of active compounds produced. After the fermentation process, our QC team will also perform tests on samples to ensure the absence of contamination. (Please refer to Section 6.7 of this Prospectus for further details on the QC tests). Should there be any contamination, the entire batch is discarded and the inoculum is once again prepared. Harvesting of biomass The biomass developed, compnsmg of mycelium (which is the vegetative part of the medicinal mushroom containing the active compounds), in the bioreactors are then filtered down to the press filter, where the latter would undergo liquid-solid separation to obtain the yield. Freeze drying of mycelium Following the liquid-solid separation process, the yield is transferred to a freeze dryer, which produces the yield in cake form. After this process, a sample yield will undergo QC tests to ensure amongst others, that there are no traces of heavy metals or bacteria (Please refer to Section 6.7 of this Prospectus for further details on the QC tests). The entire production batch will be discarded if it does not pass these QC tests. Grinding of mycelium The yield in cake form is further processed, by grinding, into powder form. The processed mycelium can either be packed and sold to our customers or further processed with other active ingredients. Processing of mycelium powder We further process part of the mycelium powder with other active ingredients, in accordance with our proprietary product formulation, for additional health benefits to meet customers’ or market requirements. Packing The resultant medicinal mushroom based semi-finished formulated ingredients are then packed into food-grade aluminium containers before being delivered to our customers, or stored for use in our finished product manufacturing process. 58 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont'{/) RESEARCH AND DEVELOPMENT We believe that R&D is an important factor towards maintammg sustainable business growth, improvements in earnings, maintaining competitiveness and expansion of our markets. Thus, we have in place a R&D team of six (6) personnel comprising a registered chemist, a registered phannacist, a professionally qualified food teclmologist and nutritionists. We have also established a SAB since December 2011 to provide advice and guidance on our R&D activities, with our SAB members sharing their experience, expertise and knowledge in their respective fields with our R&D team. Our SAB members are tasked to: (i) advise and comment on issues relating to our R&D activities;
(ii) provide expert opinion and advice to our R&D team; and

(iii) meet with other SAB members and/or our R&D team as and when required to discuss issues relating to our R&D activities. Our SAB also serve as a sounding board to our Board to assist in the development and strategies of our R&D activities. Our SAB members mainly comprise of experts known to us, whose areas of expertise are relevant to our R&D activities, as well as our research partners. To mitigate any potential conflict of interest as a result of their participation in our SAB, the respective research partners are required to abstain from deliberating on the assessment of their R&D activities during the SAB meetings. -THE REST OF THIS PAGE HAS BEENINTENTIONALLY LEFT BLANK­Company No. 949536-X 6. BUSINESS OVERVIEW (Cont’d) As at the LPD, our SAB members, their assigned committees and our R&D activities are as follows: Committee R&D Activities SAB Member Nationality SAB Date of Designation Appointment Product formulation and manufacturing process The development of health supplement products and formulated ingredients are customer-driven and market-driven, whereby the former is based on requests from our customers to develop product formulations with certain health functions and other attributes, while the latter refers to development of product formulations based on market demands and trends. This R&D initiative is guided by our R&D policy as outlined below: • Develop new product formulations which comply with QC in terms of safety, hygiene and effectiveness of the products;
• Conduct research on active ingredients in terms of safety and functions to find out their potential benefits and the possibility of them being utilised in the process of formulation development and output production;
• Create a suitable, effective and safe formulation according to the desired and expected results;
• Provide a thorough and complete processing of all active ingredients in order to ensure the homogeneity and equal quality of finished products are achieved;
• Ensure that the finished products produced are in accordance with the specification set and meet the standard requirements;
• Improve the measurement and evaluation of the range of sensory attributes of the finished products;
• Protect finished products from contamination and increase shelf life of the finished products; and
• Test the effectiveness of the finished products and gather information for product function improvement.

Dr Nik Ismail  Malaysian  Chairman  24.02.20l2  Bin Nik  Daud  Tan Sri Dr  Malaysian  Member  Ol.08.20l4  Syed  Jalaludin  Dr ManafBin  Malaysian  Member  24.02.2012  Mohamad  Radzi
60 ( Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Committee R&D Activities SAB Member Nationality SAB Date of Designation Appointment Product formulation and manufacturing process (Cont’d) Herbal pre-clinical and clinical trials Fermentation technology
We have currently, through this R&D initiative, commercialised nine (9) semi­finished formulated ingredients, 75 finished functional food products and 48 finished herbal and non-herbal supplement products. Undertaking of pre-clinical and clinical studies on two (2) “High-value herbal products” for diabetes and hormone replacement therapy as part of the NKEA project under the ETP driven by PEMANDU. Our continuous improvement of the liquid fermentation process is aimed at discovering new methods to further accelerate the growth of medicinal mushrooms as well as to enhance the production of active compounds. The optimisation of our liquid fermentation process involves the following: • Experimentation with different types of mediums to facilitate medicinal mushroom strain growth; and
• Experimentation with conditions in the bioreactor to promote accelerated growth.

As at the LPD, the fermentation technology for two (2) types of medicinal mushrooms, namely C. sinensis and 1. rhinocerus, have been developed and we are working closely with a research partner to develop the fermentation processes for four (4) other medicinal mushrooms, namely Grifola frondosa, Lentinula edodes, Cordyceps militaris and Ganoderma lucidum. Associate  Taiwanese  Member  01.01.2014  Professor  Lin Yu-Chin  Associate  Malaysian  Member  01.01.2014  Professor Dr.  Choo Chee  Yan  Ding Chun  Chinese  Member  24.02.2012  Hua
Please refer to Section 8.4.4 of this Prospectus for our SAB members’ proftles. 61 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’tI) Our SAB members regularly communicate with our R&D team. Over the last year, all three (3) committees under our SAB held a total ofmore than 20 meetings with our R&D team to discuss R&D developments under their respective areas. The process flow for our R&D activities involving both our R&D team and SAB is as follows: Projectinitiation and exploration phase undertaken by our R&D team Exploration of pl’Oject cOllCepts or ideas initiated by om’ R&D team together with OUl’ Chief Executive Offlcer,’ Managing Director Detenuining probable methods and solutions and the feasibility of project throngll sec.ondary research on literature reviews, botanicalcbaracterisation,qualitativeand quantitative.analysis ofphytochemicalcharactelistics CoHatingpreliminaryresearch analysis iIlto a projectproposal for presentation to SAB Design and definition phaseundertaken by ollrR&D learn  Defining and detennining operational requirements and identifying barriers and limitations to the proposed research objective Determiningrese..vchdesign, Le.: Resemdl to be conducted internally or through third party research pal’ll1elS (ifrequired upon recommendation by tbe S.4B)  +–j’ ll’  Equipment and suitable methods required to perfoml the study

Implementation phase (l) Product fonnulation Please refer to SectioIl6.4.2 ofthis Prospectus forprodllcl fommlationprocess. SAB ioprovide guidance to ourR&D team as mld when required.
(2) Feonetltalion tec1Ulology Our R&D tt!anl and third party research parll1ers to identity mld develop suitable mediuUl, optimal culture method and/or appropriate method for extraction to meet the research objectives. SAB io provide guidance to ourR&D team as and when required.
(3) Herbal pre-clinical and clinical trials O”r R&D team to oversee the pre-clinical and clinieal trial research activities caiTy out by our thinl party rese.arch pmtners. S.4B toprOvide guidance to onr R&D team as and when required.

 

62
I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’rl) Further details of the R&D activities which we are currently undertaking / will be undertaking are as follows: R&D Commencement Expected In-house R&D Activities External External R&D Activities DescripJioll Completion R&D Partner “High-value 2012 herbal product” for diabetes 2015 • Product formulation is fully-developed by our in­house R&D team. • Project management on pre-clinical study.
• Communication with MOA on the progress of the study.
• Review of final report from pre-clinical study; if pre­clinical study is successful, we will proceed to clinical study which is a prerequisite for the product to be registered as a botanical drug.

Essence Herbs Life Science Corporation (1)
• Preparatory phase, which includes secondary research on literature reviews, botanical characterisation, qualitative and quantitative analysis of phytochemical characteristics, extraction process optimisation, analytical procedures and methods validation, as well as stability tests.
• Pre-clinical study, which includes analysis on the product’s effect; dosage and administration tests; toxicity studies for single dose, repeated dose, genotoxicity and reproductive toxicology; as well as safety and pharmacology studies.
• There are two (2) phases of this study, i.e. pre­clinical study on mice and rats, and pre-clinical study performed on larger animals in Good Laboratory Practices (“GLP”) compliant laboratory.

63 II Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) R&D Commencement Expected In-house R&D Activities External External R&D Activities Description _ _ _ Completion R&D Partner “High-value herbal product” to be used as hormone replacement therapy  2012  2015  Development of natural polysaccharide based products with energy restoration and immune system benefits  2013  Development of new C. sinesis based product formulations  2014
2015 2015 2015 2015 • Product formulation IS fully-developed by our in­house R&D team.
• Project management of pre­clinical study.
• Communication with MOA on the progress of the study.
• Review of final report from pre-clinical study; if pre­clinical study is successful, we will proceed to clinical study which is a prerequisite for the product to be registered as a botanical drug.
• Undertaking active compound analysis to determine the content of polysaccharide.
• Development of new product formulation using polysaccharide as a key active compound.

Development of six (6) new product formulations using C. sinesis as a key active compound. UiTM (2) • Preparatory phase, which includes secondary research on literature reviews, botanical characterisation, qualitative and quantitative analysis of phytochemical characteristics, extraction process optimisation, analytical procedures and methods validation, as well as stability tests.
• Pre-clinical study on mice and rats in a laboratory.

Jai Research • Pre-clinical study on larger animals in a GLP­Foundation (3) compliant laboratory. 64 ICompany No. 949536-X I
6. BUSINESS OVERVIEW (Cont’d) R&D Commencement Expected In-house R&D Activities External External R&D Activities Description Completion R&D Partner Development of 2015 2016 Project management of the Essence Herbs • Development of mediums suitable for the the optimal research project Life Science fermentation. fermentation Corporation (I)
• Development of optimal culture method toprocess and achieve high yield while using low dosages ofappropriate active medium.ingredient extraction method • Development of the appropriate method for the for Grifola extraction of active ingredients in the medicinal frondosa, mushrooms. Lentinula edodes, Cordyceps • Undertaking product analysis to determine if militaris and the above methods and processes are viable. Ganoderma lucidum Notes: (1) Essence Herb Life Science Corporation (“EHLSC”) was founded by a group of researchers and professors, including Associate Professor Lin Yu-Chin who is currently undertaking, through EHLSC, pre-clinical trial for our health supplement product for the purpose of recognition as a “High-value herbal product” for diabetes at TransWorld University in Taiwan. EHLSC is a Taiwan-based company that is focused on amongst others, research and/or development ofnew botanical drugs.
We have not yet enter into an agreement with EHLSC for the development offermentation processes for our four (4) new medicinal mushrooms and establishment of optimum culture methods for these mushroom strains as this R&D engagement will only commence in 2015. However, the terms ofthe proposed agreement are expected to be similar with the existing agreement with EHLSC in relation to the pre-clinical trial for “High-value herbal product” for diabetes. Under this existing agreement, the copyright ofthe documents derivedfrom the R&D engagement is to be owned by EHLSC, whereas patent rights and other intellectual property rights as may be derived from the R&D engagement is to be owned by us. Notwithstanding the above, EHLSC shall not disclose any business and specialised technology or any information which might impair our interests.
(2) UiTMis an institution ofhigher learning in Malaysia. UiTM, through its Faculty ofPharmacy, carries out research analysis on traditional herbs for companies at its R&D facility.
(3) Jai Research Foundation an India-based company, was established in 1977 to prOvide contracl research servicesfor companies in areas such as physical-chemical testing, toxicology and mutagenicity studies and analytical and clinical chemistry testing at its GLP facility, with currently about 120 scientists in various fields such as toxicology, pathology and laboratory animal specialist.

65 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Our R&D activity on two (2) “High-value herbal products” for diabetes and as hormone replacement therapy is pursuant to the NKEA Agricultural Scheme Agreement with the Government dated 6 April 2012 (“NKEA Agreement”), whereby we were appointed and funded as an Anchor Company to undertake pre­clinical and clinical studies on two (2) of our herbal supplement products. The health functions of these two (2) products will be substantiated with the pre-clinical studies. At present, we are in the midst of pre-clinical studies for both projects, which are expected to be completed by end 2015. If the pre-clinical studies are successful, we will be able to submit registrations to the National Pharmaceutical Control Bureau (“NPCB”) of MOH for herbal beverages for diabetes and as hormone replacement therapy with ‘medium’ or ‘functional’ claims, where the products will be evaluated based on the results of the pre-clinical studies as well as other supporting documentation. Clinical studies on these products will commence thereafter and are expected to take place in 2016-17. If the clinical studies are successful, these products are expected to be registered and commercialised by 2018 as botanical drugs. Please refer to Section 7 of this Prospectus for an illustration of the health claims for health supplement products in Malaysia. As stipulated in the NKEA Agreement, we own the intellectual property rights for both of these potential botanical drugs. However, the Government may have the rights to use the intellectual property upon consultation with us. In addition, we also continuously do R&D on new product formulations to expand our product range, whereby we aim to develop thirty (30) new product formulations each year. Further, we also intend to attain the SAMM accreditation for our laboratory facility in Bangi, which would enable us to perform in-house biological and microbiological testing on samples which would be recognised by the relevant authorities. We plan to commence the upgrading of our laboratory facility in the second quarter of2015. To facilitate our R&D activities, we were awarded the following grants as at the LPD: Grant  Awarding  Date of  Grant  Description  Salient Terms  Grant  Amount  Party  Award  Period  Amount  Utilised as at  the LPD  Months  RM’OOO  RM’OOO  NKEA  Government  06.04.2012  24*  To carry out of pre- Please refer to Section 6.17(ii) of this Prospectus  20,000  5,634  Agricultural  clinical and clinical  for the salient terms of the NKEA Agreement.  Scheme  studies  on  two  (2)  “High-value  herbal  products”
66 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Grant  Awarding  Date of  Grant  Description  Salient Terms  Grant  Amount  Party  Award  Period  Amount  Utilised as at  theLPD  Months  RM’OOO  RM’OOO
CRDF  MTDC  14.06.2013  24  For  (i) BRSB shall, simultaneously with the  commercialisation  execution of the CRDF agreement, procure  of polysaccharide  all of its directors and/or shareholders and/or  extracted from Tiger  such other persons as may be identified by  Milk Mushroom  MTDC to execute a deed of guarantee and  indemnity in favour of MTDC to secure the  payment of the grant amount.  (ii) BRSB shall not take any of the following  actions except with prior written consent by  MTDC:  (a) Any alteration to the Memorandum &  Articles of Association of BRSB which  shall be prejudicial to the objective of  the CRDF agreement;  (b) A resolution for the voluntary winding  up of BRSB unless it shall been  insolvent or unless otherwise provided  for in the CRDF agreement;  (c) Any diversification of BRSB’s business  activities other than in the ordinary  course of business;  (d) Any change to BRSB’s shareholders and  their respective shareholding  composition within the grant period; and
2,753 2,213 67 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Grant  Awarding  Date of  Grant  Description  Salient Terms  Grant  Amount  Party  Award  Period  Amount  Utilised as at  theLPD  Months  RM’OOO  RM’OOO
CRDF  (e)  Any departure from the CRDF project  (cont’d)  or in the application submitted by BRSB  to MTDC.  (iii) In the event that the CRDF is discontinued  by  MTDC,  the  CRDF  agreement  shall  terminate,  the  balance  grant  amount  not  disbursed shall be deemed revoked and the  disbursed  amount  shall  become  due  and  payable by BRSB.  BCF  MBC  26.08.2013  j\  To  finance  the  (i)  Special Covenants  3,000″  expansion  of  production facilities  BRSB  shall  cause  and  procure  its  and working capital  shareholders  to  fund  any cash shortfall  or  requirement  for  cost overruns in connection with or arising  commercialisation  from the BCF project to  be undertaken by  of C. sinensis and its  BRSB and financed by MBC.  formulated products,  product registration,  (ii) Negative Covenants  marketing  and  promotion,  spray  BRSB covenants with MBC that it shall not  drying  facility  and  without the prior written consent of MBC, if  automated  liquid  given, may be subject to such conditions as  filling facility  MBC may at its sole discretion deems fit:  (a)  Add  to,  delete,  vary  or  amend  its  Memorandum  and  Articles  of  Association or constituent documents in  any manner which be inconsistent with  the provisions of the BCF agreement;
68 [Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont'{/) Grant  Awarding  Date of  Grant  Description  Salient Terms  Grant  Amount  Party  Award  Period  Amount  Utilised as at  the LPD  Months  RM’OOO  RM’OOO
BCF (conf’d)  (b)  Sell, transfer lease or otherwise dispose of all or a substantial part of its assets;  (c)  Reduce or make any alteration to its authorised or issued capital or permit any such act, whether by varying the amount, structure or value thereof; and  (d)  Permit any change of its controlling shareholder, ownership structure and/or management or in the case of a partnership, society or other unincorporated body, permit any change in their constitution or management.
Notes: * Grant period has been extended to an indefinite term as per a letterfrom the Government dated 25 February 2014. /\ Consistoftermloan ofuptoRM2millionandgrantup toRMImillion. Whilstthere isnospecifictenure forthegrant, thetermloan isforaperiod ofupto 72 months from the following: • the date the loan is fully utilised; or
• 12monthsfromthedate oftheFacilitiesAgreementon16July2014, whichever is earlier.

69 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) In addition, we have also incurred the following R&D expenditure for the past three (3) FYE 31 December 2011 to 2013 and FPE 30 September 2014: Description FYE31 FYE31 FYE31 FPE30 December December December September 2011 2012 2013 2014 RM’OOO RM’OOO RM’OOO RM’OOO R&D expenditure (I) 296 533 4,755(2) 2,730 % of revenue 2.03 2.79 19.44 14.55 Notes: (1) Includes R&D staffcosts but excludes R&D expenses reimbursable by grants.
(2) R&D expenditure increased significantly in FYE 31 December 2013 mainly due to our R&D on natural polysaccharide based products with energy restoration and immune system benefits, as well as formulation costs incurred in relation to the two (2) “High-value herbal products” under the NKEA Agreement.

6.6 TECHNOLOGY We utilise our proprietary liquid fermentation technology for the fermentation of medicinal mushrooms. Medicinal mushrooms typically take up to one (1) year to cultivate in its original host environment (in wild form) or approximately forty (40) days via the solid state fermentation method. Our proprietary liquid fermentation technology enables us to shorten the time taken to just five (5) days in a controlled water-based environment and the use of specially formulated mediums to accelerate the growth of medicinal mushrooms. We presently utilise our proprietary liquid fermentation technology to ferment two (2) types of medicinal mushrooms, namely C. sinensis and L. rhinocerus, and we are working closely with a research partner to develop fermentation processes for four (4) other medicinal mushrooms, namely Grifolafrondosa, Lentinula edodes, Cordyceps militaris and Ganoderma lucidum.· We have filed patent applications for the liquid fermentation process of C. sinensis with MyIPO and the Taiwan Intellectual Office in 2012. MyIPO and the Taiwan Intellectual Office had inspected the supporting documents for our patent applications in September 2013 and March 2014 respectively and we are awaiting the outcome of their decisions as at the LPD. We will similarly file patent applications for the fermentation process of other medicinal mushrooms upon successful completion of the relevant R&D activity.
6.7 QUALITY CONTROL AND ASSURANCE MANAGEMENT We ensure that our manufacturing processes comply with GMP requirements. To meet these requirements, QC procedures are incorporated within our manufacturing processes to ensure the quality and safety of our products. We adopt the following approaches at various stages of our sourcing and manufacturing processes to ensure that our quality standards are consistently upheld in accordance with GMP: (i) Quality objectives To become a world-class manufacturer and distributor of health supplements through our continual efforts to understand the needs and expectations of our customers and to deliver products and services that meet their requirements. ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (ii) Quality policy To control wastage at no more than 1% of total output and to aim to reduce this wastage level to 0.5%. (iii) Quality management systems As part of our continuous commitment to improve the quality of our products, our Semenyih and Bangi plants have been recognised as GMP compliant by MOR, which is a testament to our ability to comply with internationally recognised standards and practices. We have adopted a stringent internal quality management assurance policy to ensure that our products comply with GMP standards as well as meet the specifications and requirements of our customers. We adhere to the following quality assurance and control procedures: Quality Objective Quality Criteria Description Manufacturing processes In-coming material inspection In-process quality control Final product testing • Physical appearance
• Moisture analysis
• pH value test
• Brix value
• Physical appearance
• Moisture analysis
• pH value test
• Brix value
• Disintegration test
• Tablet hardness test
• Tablet friability test
• Uniformity of weight
• Physical appearance
• Vacuum leak test
• Uniformity of weight

• To determine colour and texture
• To predict the behaviour of active ingredients during processing, such as mixing, drying or packaging
• To measure the acidity present in active ingredients
• To determine sugar content of the compound
• To determine colour, taste and odour after mixing
• To determine water content in the homogenous compounds
• To determine the acidity/alkalinity that contribute to microbial stability
• To determine sugar content of the compound
• To determine whether tablets or capsule disintegrate within prescribed time
• To determine the resistance of tablets to stress
• To determine the resistance of tablets to capping, aberration or breakage under condition of handling, storage and transportation
• To assess the individual content of active ingredients in each capsule or tablet
• To ensure the quality of finished products in term of sealing, packaging and labelling
• To detect the defection of packaging or sealing such as hold, crack or bad seal
• To conform the weight of the finished product

I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Quality Objective Quality Criteria Description Product formulation processes In-coming material • Physical appearance • To determine colour and texture inspection • pH value test • To determine the acidity/alkalinity • Viscosity • To measure the internal resistance of active ingredient to flow
• Brix value • To determine sugar content of the compound
• Moisture analysis • To detect the moisture content of active ingredients

In-process quality • Sensory test • A sensory panel is established to evaluate control the acceptability of the sample in terms of appearance, taste, scent and texture • pH value test • To determine the acidity/alkalinity of sample
• Dissolution Test • To measure the solubility of sample
• Heavy metal test • To ensure no heavy metals (e.g. lead, arsenic, cadmium and mercury) are present
• Microbial test • To observe sample under microscope to ensure the absence of contamination from yeast, mould and other bacteria.
• Nutrition test • To determine the nutrition values (e.g. energy, fat, carbohydrate, protein, fibre content)
• Stability test • A product accelerated test to evaluate and determine the shelf life

Herbs processing processes In-process quality • Physical appearance • To determine colour and texture control (after drying) • Heavy metal test • To ensure no heavy metal (e.g. lead, arsenic, cadmium and mercury) present • Microbial test • To ensure the absence of contamination from bacteria In-process quality • Physical appearance • To determine colour and texture control (in-coming • Heavy metal test • To ensure no heavy metal (e.g. lead, processed herbs from arsenic, cadmium and mercury) present suppliers) • Microbial test • To ensure the absence of contamination from bacteria In-process quality • Physical appearance • To determine colour and texture control (after • Heavy metal test • To ensure no heavy metals (e.g. lead, extraction) arsenic, cadmium and mercury) are present • Microbial test • To ensure the absence of contamination from bacteria In-process quality • Physical appearance • To determine colour and texture control (after spray drying) I Company No. 949536-X I

 

6. BUSINESS OVERVIEW (Cont'(/) Quality Objective Quality Criteria Description Liquid fermentation processes In-process quality • Brix test • To determine sugar content of the control (after compound/medium preparation of • pH value test • To measure the acidity present inoculum) In-process quality • Microbial test • To ensure the absence of contamination control (after • Liquid centrifugation • Liquid centrifugation to measure the fermentation stage) growth of mycelium In-process quality • Physical appearance • To determine taste and colour control (after freeze • pH value test • To determine the acidity/alkalinity drying stage) • Brix test • To determine sugar content of the compound
• Moisture analysis • To detect the moisture content of active ingredients
• Microbial test • To ensure the absence of contamination from yeast, mould and other bacteria.
• Heavy metal test • To ensure no heavy metals (e.g. lead, arsenic, cadmium and mercury) are present
• Nutrition test • To determine the nutrition values (e.g. energy, fat, carbohydrate, protein, fibre content)

TYPES, SOURCES AND AVAILABILITY OF SUPPLIES We use active ingredients from herbal plants such as tongkat ali, kacip fatimah and hempedu bumi, as well as C. sinensis, L. rhinocerus, fish collagen, silk peptide, hyaluronic acid, natto kinase, psyllium husk, apple stem cell, pearl powder, grape seed extract and L-gluthatione. Some of the herbal plants are used in our manufacturing processes are sourced from our herb farms. As at the LPD, we have successfully harvested turmeric, ginger, misai kucing, kacip fatimah, hempedu bumi and roselle from our herb farm on Desaru Land, whilst other herbal plants such as tongkat ali, pecah beling and dukung anak are in various stages of growth. Our herbal plants undergo processing (i.e. cleaning, drying and packing) at our Semenyih plant to produce processed herbs before being utilised in the manufacturing of semi-fmished and finished herbal supplement products. Any excess processed herbs not used for further manufacturing are sold to our customers. We are also in the midst of preparing and clearing the Pasir Raja Land for further herb cultivation. (Please refer to Sections 6.16.2 and 6.17(v) of this Prospectus for further details of our herb farm on Pasir Raja Land and our future plans relating thereto). The cultivation of own herbal plants enables us to have better control over the supply and quality of our active ingredients. Our current practise is to use organic pesticides and fertilisers in our herb farm to minimise any health threats to our customers. We also endeavour to ensure that these plants are grown in an optimal environment to increase the effectiveness of nutrients extracted from the plants. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Further, we are also able to commercially ferment medicinal mushroom strains through our proprietary liquid fermentation technology, which enables us to produce C. sinensis and 1. rhinocerus in just five (5) days in a controlled environment while still preserving the quality of the yield. This eliminates inconsistencies and allows us to maintain the quality of our C. sinensis and 1. rhinocerus products. These C. sinensis and 1. rhinocerus strains are currently stored in UTM’s cell bank as UTM has the appropriate facilities to ensure that they are kept in a secure and controlled enviromuent. We also store strains of four (4) other medicinal mushrooms in UTM, i.e. Grifola frondosa, Lentinula edodes, Cordyceps militaris and Ganoderma lucidum for which we are undertaking R&D activities to develop the appropriate fermentation process. The medicinal mushroom strains that are stored in UTM have a life span of approximately twenty (20) years. Meanwhile, we source other active ingredients which we do not cultivate, or those where our internal harvest of processed herbs are currently unable to cater to external demand, as well as supplies and consumables from a pool of local suppliers. Our suppliers are mostly located in Malaysia, and these supplies are largely generic materials used in the manufacturing of food and pharmaceutical products, hence they are readily and easily available with no material price fluctuations or volatility in the past. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK­I Company No. 949536-X I
6. BUSINESS OVERVIEW (Cont’d) 6.9 MAJOR SUPPLIERS Our major suppliers who contributed more than 10% of our total purchases for at least one (1) of the past three (3) FYE 31 December 2011 to 2013 and FPE 30 September 2014 are as follows: Supplier Type of Supply <———————–FYE 31 December –.————-.—–> FPE30 Length of <——2011 ——> <——2012 ——> <——2013 —–> September2014 Business RelationshipRM’OOO % RM’OOO % RM’OOO % RM’OOO % as at the LPD Biovibes Sdn Bhd  Active ingredients  2,371  55.17  3,506  50.08  3,028  29.41  2,808  44.19  7 years  (Formerly known as Edarmax  Venture Sdn Bhd)  Essence Herbs Life Science  Medium  for  fermentation  178  2.54  – 1,183(1)  18.61  3 years  Corporation  purposes  Bioflow Lifescience Sdn Bhd  Active ingredients  204  4.75  156  2.23  2,079(2)  20.19  97  1.52  4 years  Agrifact Sdn Bhd  Medicinal mushrooms(3)  – – – 1,140  11.07  1,014  15.95  2 years  Notes:
(1) The higher purchases from Essence Herbs Life Science Corporation in 2014 was mainly due to increase in customers’ orders for C. Sinensis-based products.
(2) ThehigherpurchasesfromBioflowLifescienceSdnBhd in2013wasmainlydue toanincrease inpurchasesofcollagenandsilkpeptidefollowing anincreaseincustomers’ orders for collagen-based and silk peptide-based products.
(3) Comprise extracts ofcertain species ofmedicinal mushroom which we do not yetferment such as Lentinula edodes, Cordyceps militaris and Ganoderma lucidum.

We choose to procure our active ingredients and supplies in bulk from the abovementioned suppliers to enable us to negotiate better prices and achieve cost savings from bulk purchases. However, we are not dependent on any of the above suppliers as we are able to procure active ingredients and supplies from other suppliers in Malaysia, if required. 75 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d)
6.10 MARKETING, DISTRIBUTION AND SALES STRATEGIES 6.10.1 Modes of Distribution and Sales We mainly generate sales through the following four (4) channels: (i) ODM customers and other health supplement manufacturers Sales to our ODM customers and semi-finished formulated ingredient customers (comprising health supplement manufacturers) are typically generated directly by our sales team, either through referrals from our past and existing customers or from directly contacting potential customers. Our participations in exhibitions and trade shows have also helped us to secure ODM and health supplement manufacturer customers. As at the LPD, we supply to more than twenty (20) ODM customers, including four (4) overseas ODM customers from China and Cambodia. We are the exclusive sole manufacturer of the finished health supplements products supplied to our ODM customers. Henceforth, our ODM customers are not able to contract other health supplement manufacturers to manufacture health supplement products with the same formulations as these product formulations are our proprietary information. (ii) Third party retail pharmacies For FPE 30 September 2014, our finished house brand products are sold directly to more than 100 third party retail pharmacies and other food and health retail outlets across Peninsular Malaysia. Among some of the retail pharmacies which carry our products include Health Lane Family Pharmacy Sdn Bhd, Natural Healthy Living Sdn Bhd, Alpro Pharmacy Sdn Bhd, Mylife Healthcare Sdn Bhd, Hai-O Medicine Sdn Bhd and Life Care Pharmacy Sdn Bhd. (iii) Distributors We also distribute our house brand products through non-exclusive distributors in the East Malaysia region, Indonesia and Australia as illustrated below: Geographical Location No. of Distributor East Malaysia 2 Indonesia 3 Australia I
(iv) “LifeSprings” retail outlet Our retail outlet, “LifeSprings”, provides an avenue for us to directly reach out to end-user customers to enhance our brand reputation and market standing. We commenced business at our first “LifeSprings” store located at Solaris Mont Kiara, Kuala Lumpur in June 2014. At our “LifeSprings” retail outlet, key display spaces are reserved for our house brand products allowing us to increase the visibility of our products and thus, boost revenue from our house brand products. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) 6.10.2 Marketing Strategies We understand the importance of building our brand recognition and market standing in order to boost our revenue not only from ODM contracts, but also our house brand products. As such, we constantly invest in various marketing strategies to raise our corporate profile. The sales and marketing strategies that we have initiated include the following: (i) Exhibitions and trade shows Exhibitions and trade shows are used as a promotional tool for communicating to the target market on our products and services. Through exhibitions and trade shows, we are able to launch new products, introduce existing products to new markets, build customer relations and establish contact with potential customers, while promoting our brands. Exhibitions and trade shows have been a key source ofdeveloping initial contact with our ODM customers. Over the years, we have participated in numerous exhibitions held in Malaysia and internationally, including United Arab Emirates, United Kingdom, China and us. Below is a list of some of the exhibitions that we have participated in from 2011 to 2014: Exhibition/Trade Show Organiser Location Year of Event 5th Presentation Herbal & Health Care Indonesia 2014 Nanjing International Consumer Goods Expo Bio-International Advisory Panel Meeting 2014 2nd Herbal World Global Exhibition and Conference International Trade Malaysia loth World Islamic Economic Forum (“WIEF”) China Guangdong 21 5t Century Maritime Silk Road International Expo National Innovation Conference And Exhibition (NICE) 2014 International  Media  Support  (IMS)  International  and
Ikatan Naturopatis Indonesia Jiangsu High Hope Convention & Exhibition Group MBC Gulf Natural Malaysia SdnBhd MATRADE WIEF Foundation The Economic and Conmlcrcial Counsellor’s Office of the Embassy of the People’s Republic of China in the Republic of Singapore Ministry of Science, Teclmology and Innovation (MOST!) Jakarta, Indonesia Nanjing, China New York, US Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Dubai, UAE Dongguan City, China Kuala Lumpur, Malaysia 2014 2014 2014 2014 2014 2014 2014 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Exhibition/Trade Show Organiser Location Year of Event Company No. 949536-X I The 21 st China Yangling Agricultural Hi-Tech Fair  Shaanxi Provincial People’s Government  Yangling, China  2014  5th Organisation of Islamic Cooperation (OIC) World BIZ “Business and Investment Zone” Exhibition and Conference  OIC International Business Centre  Kuala Lumpur, Malaysia  2014  Independent Entrepreneurs Team BUilding Convention (IETC) 2014  MLM Toper Malaysia SdnBhd  Kuala Lumpur, Malaysia  2014  “Majlis Perasmian Muzium Koperasi Malaysia dan Bicara Perdana Tokoh Koperasi”  MyAngkasa  Selangor, Malaysia  2014  BioMalaysia & Bioeconomy Asia Pacific 2014  MBC  Kuala Lumpur, Malaysia  2014  Malaysia Horticulture Agrotourism Show 2014  Agriculture, and (MAHA)  ,Malaysian Agricultural Research and Development Institute (MARDI) & Federal Agricultural Marketing Authority (“FAMA”)  Selangor, Malaysia  2014  Malaysian Carnival of Cooperatives’ Products and Services (MACCOPS) 2014  MyAngkasa  Selangor, Malaysia  2014  Malaysia Week 2014  MTDC  Cairo, Egypt  2014  BIO Convention  International  Biotechnology Industry Organisation  California, US  2014  Arab Health  Informa Life Sciences Exhibitions  Dubai, UAE  2014  Natural Product Expo West  New Hope Media  Natural  California, US  2014  Malaysia International Ralal Showcase  MIT!  Kuala Lumpur, Malaysia  2014  18th Investment Halal Food Festival  FAMA  Xi’an, China  2014  9th WIEF  WIEF Foundation  London, United Kingdom  2013  78

 

16. BUSINESS OVERVIEW (Cont’Q) Exhibition/Trade Show Organiser Location Year of Event Natural Product Expo West Malaysia International Halal Showcase Natural & Organic Product Europe Vitafoods Asia Bioeconomy  Investor  Forum  Specialised  Marketing  Mission  in  conjunction  with  the  Kazakhstan
International Health Expo Malaysia International Food and Beverage Trade Fair Natural Product Expo West Middle East Natural and Organic Product Expo Incoming Buying Mission Intrade Malaysia BioMalaysia 2012 Conference Exhibition BioMalaysia 2011 Conference Exhibition Incoming Buying Mission Intrade Malaysia Malaysia International Halal Showcase Malaysia Export Exhibition Centre KLMCC Exhibition SME Exhibition New Hope Natural Media MITI Diversified Communications United Kingdom Informa Life Sciences Exhibitions MBC MATRADE Expomal International SdnBhd New Hope Natural Media Global Links Dubai LLC Qube Integrated Malaysia Sdn Bhd MBC MBC Qube Integrated Malaysia Sdn Bhd MITI MATRADE Kuala Lumpur Malay Chamber of Commerce (KLMCC) SME Corporation Malaysia 79 California, US Kuala Lumpur, Malaysia London, United Kingdom Hong Kong, China Kuala Lumpur, Malaysia Almaty, Kazakhstan Kuala Lumpur, Malaysia California, US Dubai, UAE Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia 2013 2013 2013 2013 2013 2012 2012 2012 2012 2012 2012 2011 2011 2011 2011 2011 2011 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’tl) (ii) Media advertising We undertake advertising and promotional activities through various mediums such as newspapers, magazines and radio. We also utilise out-of-home media in advertising our products, where our products are featured in strategically located advertising billboards. To date, we have placed more than twenty (20) billboard advertisements in various strategic locations, including Sungai Buloh, Bangi and Subang in Selangor, Sungkai in Perak and Johor Bahru in Johor. (iii) Awareness programmes and health forums We have also been featured in several news programmes, as well as conduct awareness programmes and health forums on healthy living to promote the uses and health benefits of our health supplement products. (iv) Corporate and brand websites We have established our corporate website at www.bioa.net which provides information on us, including our products and services. In addition, we have also established websites for our house brands, “Bexlim®” and “Nushine” at w\vw.bexlim.com and nushine.net. The current widespread use of the internet as a source of information enables us to cross geographical borders and facilitates access from any part of the world and thus, enhance our potential market reach and exposure. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ­, Company No. 949536-X I
6. BUSINESS OVERVIEW (Cont’d) 6.11 MAJOR CUSTOMERS Our major customers who contributed more than 10% of our total revenue for at least one (1) of the past three (3) FYE December 20llto 2013 and FPE 30 September 2014 are as follows: Customer Type of <—————————–FYE 31 December —————————–> FPE30 Length of Customer <———2011 ———> <——–2012 ———> <——–2013 ——–> September 2014 Business RelationshipRM’OOO % RM’OOO % RM’OOO % RM’OOO % as at the LPD Code Link Sdn Bhd Brand owner 1,156 7.94 1,738 9.09 1,890 7.69 2,820 15.03 6 years Bcorp International Sdn Bhd Brand owner 1,352 9.29 1,470 7.69 2,735 11.13 1,190 6.34 5 years PT Alfa Sehat Indonesia Distributor 3,096 12.60 2,398 12.78 2 years PT Setia Jaya Makmur Brand owner 1,018 6.99 2,575 13.47 1,670 6.8 1,880 10.02 7 years PT Youth Spring Distributor 950 4.97 1,095 4.46 1,364 7.27 3 years PT Bioa1pha Makrnur Distributor 2,340 16.08 1,477 7.72 1,497 6.09 1,108 5.90 6 years We have a diversified customer base consisting of health supplement manufacturers and brand owners, distributors and third party retail pharmacies. While some of these customers may contribute more than 10% of our total revenue, we have a wide customer base and thus, are not dependent on any ofour customers. -THE REST OF THIS PAGE HAS BEENINTENTIONALLYLEFTBLANK ­81 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d)
6.12 COMPETITIVE STRENGTHS AND ADVANTAGES (i) Our manufacturing facilities are GMP compliant and we are able to produce Halal certified products Our Bangi and Semenyih plants are recognised as GMP compliant facilities by MOR. With GMP compliant facilities, we are able to ensure that our products meet the required standards of quality, efficacy and safety. Further, our manufacturing processes and equipment used for fermentation of medicinal mushrooms and manufacturing of products have been inspected by JAKIM in the past, which have enabled us to obtain Halal certifications for those products which we have applied for such certifications. The abovementioned certifications are internationally recognised and provide us with the capability to expand our product range, as well as penetrate into markets beyond Malaysia such as countries in the North American, Asian and Middle East regions. (ii) Wide range of products across the supply chain We have a wide range of products across the herbal supplements supply chain, namely processed herbs, medicinal mushroom based and herbal based semi-finished formulated ingredients, and finished health supplement products. We currently have nine (9) semi-fmished formulated ingredients, 75 finished functional food products and 48 finished herbal and non-herbal supplement products which are commercially available in the market. All of our finished herbal and non-herbal supplement products are registered with MOH and awarded with MAL certificates. At present, we are in the midst of undertaking multiple R&D initiatives, which include developing “High-value herbal products”, polysaccharide based products, and other new C. sinensis based product formulations. Please refer to Section 6.5 of this Prospectus for further details of our R&D activities. We are committed to produce quality health supplement products for our customers. As such, we have in place QC procedures to ensure that amongst others, our manufacturing processes meet the required standards of quality, from active ingredients used in our manufacturing processes to our finished products. We have commercially fermented C. sinensis and L. rhinocerus through our proprietary liquid fermentation technology, which enable us to reduce inconsistencies in the quality of our C. sinensis and L. rhinocerus products. Moving forward, we intend to commercialise fermentation of four (4) other types of medicinal mushrooms, namely Grifola frondosa, Lentinula edodes, Cordyceps militaris and Ganoderma lucidum. We also cultivate our own herbs, where we ensure that we do not utilise non-organic fe11ilizers and pesticides in our herb farm. This allows us to be certain that our herbal materials utilised in our manufacturing processes are within safety requirements, and do not contain hard metal or chemical compounds. For herbal materials which we do not cultivate or have not harvested, we ensure these materials do not contain any traces of heavy metals and are not contaminated through inspection of the COA that accompanies these materials. ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (iii) Cost competitiveness and consistency of supply of raw materials through our proprietary liquid fermentation facility and herb farms We own and operate a proprietary liquid fennentation technology for the fennentation of medicinal mushrooms. As at the LPD, we are able to fennent two (2) types of medicinal mushrooms, i.e. C. sinensis and L. rhinocerus. In addition, we also cultivate our own herbal plants in our herb fann on Desaru Land, from which we have harvested herbs such as tunneric, ginger, kacip fatimah, hempedu bumi, misai kucing, dukung anak and roselle. Medicinal mushrooms and herbal plant extracts are key active ingredients for many of our products. Medicinal mushrooms are generally costly. For instance, C. sinensis is a plant that grows primarily in the highlands of China, Tibet and Nepal and thus, procuring this active ingredient from its primary source would be costly. Meanwhile, though L. rhinocerus can be found in nearer countries in Southeast Asia, the supply of L. rhinocerus is limited resulting in it being costly. While herbal plants can be sourced in Malaysia, some of these herbs may be tainted with heavy metals and/or are contaminated. Thus, through our proprietary liquid fennentation technology and herb fanns, we are able to procure a regular supply of quality medicinal mushrooms and herbal plants at a cheaper cost. (iv) Experienced management team We have been operating our business for close to a decade, and we are led by an experienced management team. Our founder and Managing Director/Chief Executive Officer, William Hon, has more than ten (10) years of experience in the life sciences industry. Together with our Operations Director, Ho Tze Hiung, they have been instrumental in the growth and establishment of our Group as a manufacturer of semi-finished and finished health supplement products. Both our Managing Director/Chief Executive Officer and Operations Director are supported by our six (6) key management, comprising staff with diverse backgrounds and experiences. Their different expertise, experience and ability to collaborate as a team have contributed positively to our operations and will enable us to continue to grow our business and expand our presence internationally. (v) We have a diversified customer base and a multi-channel distribution platform Through our portfolio of products across the herbal supplements supply chain, we are able to reach out to a diversified customer base, thereby mitigating concentration risks when it comes to generating income. The different types of customers that we currently supply to includes the following: (a) Health supplement manufacturers Our formulated ingredients are targeted at other health supplement product manufacturers for further processing, and some of our finished health supplement products are contract manufactured, on an ODM basis, for other health supplement product manufacturers. (b) Health supplement brand owners Some of our finished health supplement products are also contract manufactured, on an ODM basis, for other health supplement brand owners. ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (c) Distributors
Our house brand products are sold to distributors who either sell directly to end consumers, or to other third party retail pharmacies and/or food and health retail outlets.
(d) Retail outlets and pharmacies

We also sell directly to third party retail outlets and phannacies as well as through our retail outlet, “LifeSprings”. (vi) We have experience and technical know-how in the health supplement industry to develop product formulations to suit market needs and to enhance our manufacturing processes We commenced operations in the health supplement industry since 2005, and have been developing product fonnulations and processes since 2008. With close to a decade of operations in the industry, we have gained substantial experience and technical know-how in the industry. Through our capacity as an ODM manufacturer for other brand owners, retailers and manufacturers, we have garnered considerable knowledge on market demands and needs. This knowledge has accorded us with the insight to develop commercially viable product fonnulations for the markets in which we operate in. We also have our own laboratory facility and a R&D team, comprising a registered chemist, a registered pharmacist, a professionally qualified food technologist and nutritionists, to facilitate our development of product formulations as well as to optimise our manufacturing processes. Through our R&D activities, we have developed nine (9) semi-finished fonnulated ingredients, 75 finished functional food products and 48 finished herbal and non-herbal supplement products which are currently commercially available in the market. In addition, we have also established our proprietary liquid fermentation technology for two (2) types of medicinal mushrooms used in the manufacturing ofour products. We have also established a SAB, consisting of local and international experts in various fields such as biotechnology, life sciences, food and herbal technology processes, fermentation and healthcare and, which provides a valuable platform for our R&D team to fonnulate, execute and implement our R&D strategies. We intend to continuously do R&D on new product fonnulations to increase our product range, whereby we aim to develop thirty (30) new product fonnulations each year. Our commitment to R&D will enable us to capture opportunities for development of new product fonnulations to meet market trends and consumer preferences.

6.13 OTHER FACTORS AFFECTING OUR BUSINESS 6.13.1 Seasonality Demands for our products are seasonal, which consistently peak in the fourth quarter of the calendar year mainly as a result of increased orders by customers in conjunction with their year end and festive promotional activities. Thus, our revenues are generally higher in the fourth quarter of the year as compared to other periods. Please refer to Section 12.5.1 of this Prospectus for an illustration of our demand trend analysis. j Company No. 949536-X I 16. BUSINESS OVERVIEW (Cont’d)
6.13.2 Dependency on Industrial, Commercial and Financial Contracts We are not dependent on any material contracts or agreements, including commercial and financial contracts, which are material to our business or profitability.
6.13.3 Business Interruptions We did not experience any material interruptions to our business, which had a significant effect on our operations during the past twelve (12) months prior to the date of this Prospectus.
6.13.4 Regulatory Requirements and Environmental Issues Save as disclosed in Section 6.16 of this Prospectus, we are in compliance with all regulatory requirements and have not experienced any environmental issues which may materially affect our operations and utilisation of assets as at the LPD. -THE RESTOFTHISPAGE HASBEENINTENTIONALLYLEFTBLANK­I Company No. 949536-X ,

6. BUSINESS OVERVIEW (Cont’r!) 6.14 APPROVAL, MAJOR LICENCES, PERMITS AND REGISTRATIONS As at the LPD, we hold the following major licences, permits and registrations for our business operations:
Company Issuer I Date of Date of Type of Licence! Permit / Registration Salient Conditions Status of Authority_Issuance Expiry _ _ _ _ _ _ _ _ _ _ Compliance I Company No. 949536-X I BlSB  Majlis  09.12.2014  31.12.2015  Business licence for the premises  Nil  Not  Perbandaran  (effective  situated at No. B-I0-06, 6th Floor, 3 Two  applicable  Petaling Jaya  from  Square, 46300 Petaling Jaya  01.01.2015)  (License No.: L950000131534)  MOR  01.01.2015  31.12.2015  Manufacturer’s licence (Licence No.:  The company is allowed to  Met  MALLP20141589) authorising the  manufacture only the registered  company to manufacture the following  products as approved by the DCA.  products:  • B-Spirulina  • Botanical Green  • Camerlyn Cordyceps Sinensis  • Cordy Ginkgo Plus  • Cordy Man-Plus  • Cordy Wolfberry Plus  • Cordy-Fern  • Cordyceps B-Care Plus  • Codyceps lmmu Plus  • Cordyceps Pro-Complex  • Cordyceps Sinensis Plus  • Femin Gold  • Femin Plus  • Greentox  • L-Gurd  • Labisia Femin Plus  86
6. BUSINESS OVERVIEW (Cont’d) Company  Issuer 1 Authority  Date of Issuance  Date of Expiry  Type of Licence! Permit 1Registration  Salient Conditions  Status of COI!1pliance  •  Natural C Capsule 400mg  •  Prune-Ex Plus  •  S V-Turn  •  T-Max Tongkat Ali with Maca Plus  •  V-Kids  MIT!  31.12.2009 (effective from 04.06.2009)  Manufacturing licence (Licence No.: A 017437) for the place of manufacturing at No. 190, 191, 192 and 193, Jalan Vilaraya 1/5, Vilaraya Industrial Park 1, Pekan Batu 23, Jalan Sungai Lalang, 43500 Semeyih for the product: (a) (b) “pharmaceutical and food supplements in the form of tablet, capsule, liquid and powder”; and “dragon fruit tea”  (i) (ii) (iii)  The address stated in the licence must be approved by the State Government and Department ofEnvironment. MIT! must be informed of the sale of shares in the company. The company is required to train Malaysian citizens accordingly to facilitate the transfer of expertise and technology to all levels of employees.  Met  (iv)  The company must undertake its projects in accordance with the rules and regulations in Malaysia.  Royal Malaysia Customs  27.05.2011 (effective from 24.05.2011)  Licence granted under Sales Tax Act 1972 (Licence No.: WlO-CJ 110000541 2011) for soft drinks(l)  Nil  Not applicable
87
II Company No. 949536-X , 6. BUSINESS OVERVIEW (Cont’tl) Company Issuer / Date of Date of Type of Licence/ Permit / Registration Salient Conditions Status of Authority Issuance Expiry Compliance MITI  27.11.2014 (effective from 23.07.2014)  Manufacturing licence (Licence No.: A 019718) for the place of manufacturing at 10 and 12, Jalan P/9A, Seksyen 13, 46350 Bandar Bam Bangi, Selangor Darul Ehsan for the product:  (a)  “pharmaceutical supplements in tablet, capsule, powder”; and and food the form of liquid and  (b)  “tea”
(i) This license has to be Met displayed in the place of manufacturing. This license need not be renewed and is in force unless and until revoked pursuant to Industrial Co­ordination Act 1975.
(ii) MIDA must be informed of the change of registered address of the company.

(iii) The .company is required to comply with conditions imposed by the Department of Environment and BPFK. (v) The address stated in the licence must be approved by the State Government and Department ofEnvironment.
(vi) MITI must be informed of the sale ofshares in the company.

(vii) The company is required to train Malaysian citizens accordingly to facilitate the transfer of expertise and technology to all levels of employees. (viii) The company must undertake its projects in accordance with the rules and regulations in Malaysia. 89 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Company  Issuer! Authority  Date of Issuance  Date of Expiry  Type of Licence! Permit / Registration  Salient Conditions  Status of Compliance  BRSB  MBC  30.06.2008  BioNexus certificate (Certificate No.: BNX-I00578)  The company must conduct only the Qualifying Activities specified in the Letter of Award. Qualifying Activities means:  Met  (i)  Research, development, cultivation, extraction and processing of Cordyceps to be used as biological active compounds for the formulation ofhealth supplement products.  (ii)  In addition to the attached Terms and Conditions, the company must fully comply with the following conditions:  (a)  The company must invest at least 3% of its annual  revenue  in  research  and  development;  (b)  The company must employ at least 60% knowledge workers of its total  workforce; and  (c)  The company must undertake continuous  research and development to improve its Cordyceps production technology as well as developing new range health products based on identified active  components obtained from Cordyceps as proposed.  90
I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Company  Issuer I Authority _  Date of Issuance  Date of Expiry  Type of Licencel Permit I Registration Salient Conditions Status of Compliance  MIT!  25.07.2014 (effective from 24.07.2014)  Manufacturing license (License No.: (i) A019723) for the place of manufacturing at Lot. 10, Jalan P/9A, Seksyen 13, 46350 Bandar Barn Bangi, Selangor Darnl Ehsan for the product “Cordyceps Powder” (ii) (iii) (iv) (v) (vi) (vii) This license has to be Met displayed in the place of manufacturing. This license need not be renewed and is in force unless and until revoked pursuant to Industrial Co-ordination Act 1975; MIDA must be informed of the change of registered address ofthe company; The company is required to comply with conditions imposed by the Department ofEnvironment and BPFK; The address stated in the licence must be approved by the State Government and Department of Environment; MIT! must be informed of the sale of shares in the company; The company is required to train Malaysian citizens accordingly to facilitate the transfer of expertise and technology to all levels of employees; and The company must undertake its projects in accordance with the rules and regulations in Malaysia.
91 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Company  Issuer I Authority  Date of Issuance  Date of Expiry  Type of Licencel Permit I Registration  Salient Conditions  _ _  _  _  Status of Compliance  Majlis Perbandaran Kajang  – 31.12.2015  Business license for place of business at 192A, Jln V/Raya 1/5, V/Raya Ind. Park I, Bt. 23, 43500 Semenyih, Sel. (Serial No.: 201500015165)  This license has to be displayed at premises at all times and to renewed before the date of expiry  the be  Met  Alphacare  Dewan Bandaraya Kuala Lumpur  03.09.2014  03.09.2015  Business license for the premises situated at No.2, Ground Floor, Jalan Solaris 5, Solaris Mont Kiara, Off Jalan Duta Kiara, 50480 Kuala Lumpur  This license has to be displayed at the premises at all times and to be renewed before the date of expiry  Met  Hiong Len Teng (2)  Pharmacy Board of Malaysia  18.07.2014 (effective from 01.01.2015)  31.12.2015  Annual retention registered pharmacist  certificate  for  Nil  Not applicable  Pharmaceutical Services Division of MOH  18.12.2014 (effective from 01.01.2015)  31.12.2015  Pharmacist’s Poisons License (Type A license) granted to pharmacist with the business address of Alphacare Sdn Bhd (Lifesprings Lifestyle & Wellness Pharmacy) No.2, Ground Floor, Jalan Solaris 5 Mont’ Kiara off Jalan Duta Kiara to import, store and deal generally in all poisons by retail only  Nil  Not applicable  Notes:
(1) The soft drinks referred to are Bexlim Cordyceps Plus, Bexlim Mengkudu Tea, Bexlim Dragon Fruit Tea, Cordyceps Sinensis, Premia Spirulina-Ex, Bexlim Pearl Collagen, Honey and B-Kopi.
(2) Hiong Len Teng is the pharmacistfor our “Lifesprings” retail outlet.

92 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) In addition, we have obtained Halal certificates for the following products: Certificate No.  Issuer / Authority  Date of Issuance  Date of Expiry  Type of Product  _  _  _  Salient _Conditions  Status Compliance  of  JAKIM/ (S)/ (22.00)/ 492/2/1121-07/2013  JAKIM  01.02.2014  31.01.2016  •  DAMSO Sabah Snake Grass Tea  Nil  Not applicable  A18357  JAKIM  01.06.2013  31.05.2015  • Misai Kucing Organic Herbal Tea (3G)  Nil  Not applicable  JAKIM! (S)/ (22.00)/ 492/2/1032-07/2010  JAKIM  16.08.2013  15.08.2015  •  Spirulina-Ex  Nil  Not applicable  6.15  INTELLECTUAL PROPERTY RIGHTS  As at the LPD, we are the proprietary owner of the following trademarks registered under the Trade Marks Act 1976:
Trademark  Registration No.  Registration Date /  Country  of  Authority /  Description  (Expiry Date)  Registration  Regulatory  Guidelines
05018797 09.112005/ Malaysia MyIPO Health food and supplements in powder and liquid (09.11.2015) fonn in class 5. 05018798* 09.11.2005 / Malaysia MyIPO Health food and supplements in powder and liquid (09.11.2015) fonn in class 5. 2011002166 07.02.2011/ Malaysia MyIPO Health food and supplements in powder, liquid,IVitromax (07.02.2021) teabag, tablet and capsule fonn in class 5. l­
93 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Trademark  Registration No.  Registration Date /  Country  of  Authority /  Description  (Expiry Date)  Registration  Regulatory  Guidelines
201200392 10.01.2012/ Malaysia MyIPO Retail stores services, marketing, and related of heartIBioapotec I (10.01.2022) food, supplement, herbs, cosmetic, medical devices and other health related products all included in class 201101067 16.06.2011/ 35. (16.06.2021) Nutritional food supplements contain vitamins, minerals and herbs in form of capsules, tablets, powders and liquids, all included in class 5. 2012009935 12.06.2012/ Malaysia MyIPO Healthcare products (medicinal), food supplements for __E_N1_ (12.06.2022) medical purposes, herb preparation for medicinal purposes; all included in class 5 Note: * The registered proprietor ofBexlim® is ourfounder, William Hon, who had authorised the usage of “Bexlim®” to BISB and BDSB products on I8 November 2005 and 17 July 2008 respectively. On 26 August 2014, William Hon has assigned unto BISB all the property, right, title and interest in “Bexlim®” and an application for change of registered proprietor of “Bexlim®” has been submitted to MyiPO on even date, with the outcome pending to date. -THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ­94 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) We have also filed with MyIPO the following trademark registration applications under the Trade Marks Act 1976 and Trade Marks Regulations 1977: Com~ ~p~lic~tion Date  Description  Application No.  Class  Status  BISB  18.04.2014  Apotec  2014004390  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 3  Pending  BISB  18.04.2014  Apotec  2014004392  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 5  Pending  BISB  18.04.2014  Apotec  2014004391  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 10  Pending  BISB  18.04.2014  Aurora  2014004394  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 3  Pending  BISB  18.04.2014  Aurora  2014004395  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 5  Pending  BISB  18.04.2014  Aurora  2014004396  Selling, marketing, trading of health food, supplement, herbs, cosmetic, medical devices and other health related products in class 10  Pending  BDSB  22.11.2011  Alphanex  2011020594  Selling, marketing, trading of health food, supplements, herbs, cosmetics, medical devices and other health related products; all included in class 5  Pending  BDSB 22.11.2011 Nushine 2011020595 Selling, marketing, trading of health food, supplements, herbs, cosmetics,· medical devices and other related health products; all included in class 5 In addition, we have filed with MyIPO and Taiwan Intellectual Property Office in 2012 the following patent:  Pending
Company  Application I!ate  Application No.  Description  Status  BRSB  12.03.2012  PI 2012001117 (Malaysia)  Culture method and liquid culture medium of C. sinensis.  Pending  25.06.2012  101122709 (Taiwan)  Culture method and liquid culture medium of C. sinensis  Pending
95 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cant’e/) 6.16  PROPERTY  6.16.1  Own and Leased Properties  As at the LPD, we own the following property:
Registered  Location  Description and Existing Use  Date of  Built-Up Areal  Tenure  Carrying Amount  owner  Certificate of  Land Area  as at 30  Fitness  September 2014  Sq. ft.  RM’OOO
BISB No.1 0, la1an P/9A Section 13 Bandar Bam Bangi Selangor Note: Industrial land with the following 30.04.2012 8,137 111,000 99 years expiring 3,970 buildings erected thereon: on 20.08.2105 • a semi-detached two (2)-storey building annexed with an open shed* for our manufacturing facility;
• two (2) utility cabins* for our restroom and surau; and
• a guardhouse*.

* We had, on 22 January 2015 obtained a temporary permitjor the open shed, utility cabins and guardhouse from the Building Control Department ojMajlis Perbandaran Kajang (“MPKr),jora period up to 31 December 2015, whereby renewal ofthe saidpermit is on a yearly basis. As at the LPD, we have leased the following properties for our operations: Tenant  Landlord  Location  Description and Existing Use  Built-Up Areal Land Area  Rental RM  Rental! Lease Period  BDSB  Dewina LSG Sdn Bhd  No. 12, Jalan P/9A Kawasan Perindustrian Bangi, 43650 Bandar Bam Bangi, Selangor  Industrial land with a semi-detached one (I) Yo-storey building for our manufacturing facility (I)  5,600 sq. ft. I 11,000 sq. ft.  8,000 per month  01.02.2014 to 31.01.2016
ICompany No. 949536-X  I  6.  BUSINESS OVERVIEW (Cont’tl)  Tenant  Landlord  Location  Description and Existing Use  Built.Up Areal Land Area  Rental RM  Rental! Lease Period
BISB  Wong Oon Chien and Choong Yoke Lan  No. 190, Jalan Villaraya liS, Villaraya Four (4) units of adjoining double Industrial Park 1, Pekan Batu 23, Jalan storey shop lots for our manufacturing Sungai Lalang, 43500 Semenyih, facility Selangor  3,300 sq. ft. / (2)  1,500 per month  01.01.2014 to 31.12.2015  Tan Eng Sin and Choong Yoke Chin  No. 191, Jalan Villaraya lI5, Villaraya Industrial Park I, Pekan Batu 23, Jalan Sungai Lalang, 43500 Semenyih, Selangor  3,300 sq. ft. / (2)  1,500 per month  01.01.2014 to 31.12.2015  Great Centre Sdn. Bhd  No. 192, Jalan Villaraya lI5, Villaraya Industrial Park 1, Pekan Batu 23, Jalan Sungai Lalang, 43500 Semenyih, Selangor  3,300 sq. ft. / (2)  1,500 per month  01.01.2014 to 31.12.2015  Choong Yoke Chin and Choong Yoke Fee  No. 193, Jalan Villaraya liS, Villaraya Industrial Park I, Pekan Batu 23, Jalan Sungai Lalang, 43500 Sernenyih, Selangor  3,300 sq. ft. / (2)  1,500 per month  01.01.2014 to 31.12.2015  Alphacare  Wan Shahinur Izran Bin Mohamad Salleh and Wan Izzana Fatimah Zabedah Binti Mohamad  No.2, Ground Floor, Jalan Solaris 5, Solaris Mont Kiara, Off Jalan Duta Kiara 50480 Kuala Lumpur  One (I) corner unit on the ground floor of a four (4) storey building for our “LifeSprings” retail outlet  1,680 sq. ft. / (2)  17,000 per month  16.04.2014 to 15.04.2017  Salleh  Chua Lay Choo  No. B-IO-06, 6th Floor, Dataran 3 Two, No.2, Jalan 19/1,46300 Petaling Jaya, Selangor  A unit on the 6th floor of a 7 storey office block for our marketing office  2,213 sq. ft./ (2)  5,900 per month  01.05.2014 to 30.04.2015
97 ICompany No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) Tenant  Landlord  Location  Description and Existing Use  Built-Up Areal  ··Rental  Rental!  Land Area  RM  Lease  Period
BHB,  ECERDC  Lot PT 1748 H. S. (D) 1966, Mukim  BISB and  Pasir  Raja,  Daerah  Dungun,  BECA  Terengganu  Notes:
Agricultural land for the cultivation and farming of herbal plants with the following infrastructure erected thereon: an administration and management building; • a fertilizer storage facility;
• an equipment store cum repair and maintenance workshop;
• residential buildings as follows:
(i) one (I) unit of bungalow;
(ii) twelve (12) units of office terrace;

(iii) nine (9) units of family terrace; (iv) two (2) blocks of hostel;
(v) surau;
(vi) convenience store;

 

• common facilities as follows:
(i) skid tank;
(ii) guardhouse; and

 

(iii) water storage tank. (3)/123.5 acres 63,500 07.04.2014 (4) per annum (4) to 06.04.2044 (1) We have commenced interior renovation of the building including amongst others, setting up ofpartitions, ceiling and wiring for our new fully-automated liquid bottling production line, which has been completed in December 2014. This interior renovation does not require approvalfrom MPKj as the renovation does not involve any external structural works. Please refer to Section 6.17(vii) ofthisProspectus forfurther details ofournewfully-automatedliquidbottlingline.
(2) Not available as the leased property is a shop lot or a unit within a building.
(3) Not available as the leased buildings and infrastructures are ofdifferent types and sizes.

98 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’tl) (4) Pursuant to the ECERDC Agreement, we have entered into a sub-lease agreement with ECERDC for the lease of123.5 acres ofPasir Raja Land under phase 1. Further, subject to thefulfilment ofthefollowing key performance indicators within two (2) yearsfrom the date oftheECERDCAgreement andECERDC’sapproval, weshallhave the right to commence development on the remaining 879. 7 acres ofPasirRaja Landunderphase 2for aperiod oftwenty eight (28) years commencingfrom 7 April 2016 to 6 April 2044: • investment ofRM3 millionfor the development under phase 1;
• creation of35 newemployments, wherein 70% ofthelabourpoolshallconsist oflocalworkers; • obtain a Malaysian Farm Certification Scheme for Good Agricultural Practice (MyGAP) from the Department ofAgriculture ofthe MOA; and

• completion ofplanting ofthe 123.5 acres with certain minimum annual yieldjiJr eleven (11) ofthe planted herbal plants in bothfresh and driedforms.

 

Pursuant thereto, the annual rentalfor the entire Pasir Raja Land, that is both phase 1 and phase 2, shall be RM203, 52 7. 50 and shall be reviewed everyfive (5) years from the date ofthe sub-lease agreement of30 January 2015, whereby any increment shall be a minimum of10% or other mutually agreed rates. As at the LPD, we are in compliance with all regulatory requirements in respect of our owned and leased properties. 6.16.2 Other Property As at the LPD, we use the following property for our herb farm: Registered  Location  Description and Existing  Land  Remarks  Owner  Use  Area  Acres
Perbadanan  PTD 4825 H.S.(D) 31408  Agricultural  land  for  294.9  Pursuant to the Joint Venture Agreement, the parties have agreed to form BJHSB,  Setiausaha  and  PTD  4823  H.S.(D)  cultivation  and  farming  of  whereby J-Biotech Herbal shall contribute to the capital of BJSHB by way of  Kerajaan Johor  31406,  Mukim  Pantai  herbal and non-herbal plants  injection of a 60 years lease on these lands to BJHSB without encumbrances based  Timur,  Daerah  Kota  on the agreed value ofRM15,000.00 per acre as contribution for 300,000 ordinary  Tinggi, Johor  shares of RM1.00 each in BJHSB at par and any amount in excess of the capital  contribution shall be paid back to J-Biotech Sdn Bhd and BASB shall contribute a  cash payment of RM700,000  as  contribution for  700,000 ordinary shares of  RM1.00 each in BJHSB. The formal lease agreement for these lands is still  pending but BJHSB has been granted the rights to occupy these lands pursuant to  the Joint Venture Agreement.
As at the LPD, we have yet to enter into a lease agreement with the registered owner of Desaru Land and register the same under Section 221 (4) of the NLC. Please refer to Section 4.1.6 of this Prospectus for further details of the risk associated with non-registration of our herb farms’ leases. 99 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont'{/)

 

 

6.17 FUTURE PLANS AND STRATEGIES We aim to be a regional health supplement Group, to improve the wellbeing of people in the markets that we operate in through a culture of innovation and adoption of technology and best practices in research and product development. Our future plans and strategies to achieve our objectives are as follows: (i) Development of new health supplement product formulations Going forward, we aim to develop 30 new product formulations per year. Our in-progress product formulations include, amongst others, the following: • Development of six (6) new C sinensis based product formulations
We expect to develop six (6) new C. sinensis based product formulations by end 2015. These new formulations will provide health benefits such as general health maintenance and body strengthening.
• Development of enhanced L. rhinocerus based product formulations

The development of enhanced L. rhinocerus based product formulations will follow the successful completion of our R&D on the extraction of “polysaccharide”, a complex carbohydrate, from L. rhinoceros. Polysaccharide is known for its energy restoration and immune-boosting functions, and with this extract, we will be able to develop new product formulations with these benefits. We expect to complete the development of the above formulations in the third quarter of2015. • Development of formulations from four (4) other medicinal mushroom strains through the development of fermentation process for these strains We presently ferment two (2) medicinal mushroom strains (i.e. C. sinensis and L. rhinocerus), and we intend to expand these range of medicinal mushrooms to include four (4) other medicinal mushroom strains (i.e. Grifola frondosa, Lentinula edodes, Cordyceps militaris and Ganoderma lucidum). The development of fermentation processes for these four (4) medicinal mushrooms will commence in the third quarter of 2015 and we expect to successfully develop these processes by end 2016, after which we will be able to commercialise product formulations produced from these four (4) strains. This development is estimated to cost approximately RM2.60 million, and will be funded through our IPO proceeds. We intend to work closely with specialist scientists to develop mediums suitable for the fermentation of these medicinal mushrooms, establish optimum culture methods to achieve high yields, and establish appropriate methods for extracting active ingredients from these medicinal mushrooms. The development of new health supplement products to widen and enhance our product portfolio will contribute towards our continuous business growth and will help us expand our customer base. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (il) Commercialisation of High-value herbal products We have, in 20 II, entered into the NKEA Agreement with the Government, whereby we were appointed and funded as an Anchor Company to undertake pre-clinical and clinical research studies on two (2) of our herbal supplement products for diabetes and as hormone replacement therapy (“NKEA Project”). The salient terms of the NKEA Agreement are as follows: • In consideration of the execution and completion of the NKEA Project and fulfilment of BISB’s obligations under the NKEA Agreement, the Government agrees to make available to BISB an incentive up to RM20,000,000.
• The amount of the incentive maybe adjusted by the Government and the Government has the absolute discretion to review the application of the incentive or the aggregate amount to be paid to BISB.
• BISB shall source at least 70% of raw materials from local entities.
• The NKEA Agreement shall be for a duration of 24 months commencing from February 2012 until January 2014. The Government had vide a letter dated 25 February 2014, confirmed that having been satisfied with BISB’s performance and compliance with the NKEA Agreement, the NKEA Agreement will be continued for an indefinite term.
• Intellectual Property:

BISB shall prepare and file intellectual property application(s) wherever applicable with MyIPO or other intellectual property bodies within three (3) months after submission of final milestone report(s). The NKEA Project intellectual property shall be solely owned by BISB. However, the Government may be entitled to use the NKEA Project intellectual property for its own purposes upon consultation with BISB. • Termination by Government: In the event BISB without reasonable cause: (a) suspends the NKEA Project and fails to proceed regularly and diligently with the performance of its obligations under the NKEA Agreement;
(b) fails to execute the NKEA Project in accordance with the NKEA Project proposal and persistently neglects to carry out its obligations in relation to the NKEA Project;
(c) defaults in performing the duties under the NKEA Project and/or the NKEA Agreement; or
(d) breaches any of its obligations or fail to comply with any other terms and conditions of the NKEA Project and/or the NKEA Agreement;

then the Government shall give notice in writing (“Notice of Default”) to BISB specifying the relevant default and requiring BISB to remedy such default within 30 days from the receipt of the Notice of Default. If BISB fails to remedy the relevant default within the 30 days period, the Government may terminate the· NKEA Agreement. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) As at the LPD, we are in the midst of pre-clinical studies on the two (2) products, which are expected to be completed by end 2015. If pre-clinical trial results are positive, we will be able to submit registrations to the NPCB for herbal beverages for diabetes and as hormone replacement therapy with ‘medium’ or ‘functional’ claims. Further, with successful completion of the pre-clinical studies, we will embark on clinical trials, which are expected to take place in 2016-2017. If clinical trials are successful, we will be able to register and commercialise our products as botanical drugs. (iii) Expansion into new markets We have entered into a Memorandum of Understanding with Fathima Group of Companies (“FGC”) for the appointment ofFGC as our distributor in UAE on 28 October 2014. Based on preliminary discussions, we expect to distribute our house brand products, through FGC, to supermarkets, pharmacies and healthcare centres in UAE by the second quarter of 2015, that is after obtaining the required licenses or permits and completion of product registrations with the relevant authorities in UAE. FGC was established in 1968 and is one of the largest chains of retail outlets consisting of supermarkets, hypermarkets, department stores and general markets in UAE and other member countries of the Gulf Cooperation Council. FGC has a total of 25 retail outlets to date. We believe that international expansion is a step forward for our Group, as it will help us broaden our revenue and customer base, as well as strengthen our product and corporate branding. (iv) Increase our retail market presence The sales of our house brand products have increased over the last three (3) years, from RMlO.75 million in FYE 31 December 2011 to RM13.89 million in FYE 31 December 2013, as well as over the latest financial period, from RM7.86 million in FPE 30 September 2013 to RMl1.67 million in FPE 30 September 2014. With the increasing recognition of our house brand products in the market, we intend to place greater focus in our efforts to market our house brands and to increase our retail market presence. Part of our marketing strategy in doing so includes the expansion of our retail outlet business, in which we currently own and operate one (1) retail outlet, opened in June 2014 in Solaris Mont Kiara. We have entered into a Memorandum of Understanding with MyAngkasa, a wholly-owned subsidiary of the National Cooperative Organisation of Malaysia, in relation to a proposed partnership to establish a chain of retail outlets on 8 October 2013. Pursuant thereto, MyAngkasa has submitted a proposal to the National Cooperative Organisation of Malaysia to invest in 30% of the equity interests in Alphacare, whereby this proposal is expected to be completed by the second quarter of20l5. We intend to establish this chain of retail outlets through licensing arrangements. Based on preliminary discussions, the proposed chain of retail outlets are expected to be based on our existing “LifeSprings” retail outlet. As at the LPD, discussions on the licensing arrangements are still on-going and no agreements have been entered into. MyAngkasa has also assisted us to invite the individual members of its member cooperatives to be members of our “LifeSprings” retail outlet with certain membership privileges. This has enabled us to tap onto MyAngkasa’s wide membership base as potential LifeSprings’ customers. We believe these retail outlets will enable us to boost our revenues generated from products sold under our house brands as we will be able to secure key display locations for our house brand products within these retail outlets. 102 I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (v) Development of agricultural land In 2014, we were appointed by ECERDC as an Anchor Company to invest, develop and manage Pasir Raja Land. Our participation in this initiative will assist the Government in boosting the herbal agriculture industry through creation of new jobs and development of human resources, alongside securing the supply of herbal plants for our manufacturing of herbal supplement products. As an Anchor Company, we shall, amongst others, perform the following: (a) construct, complete, operate andlor maintain the equipment, infrastructure and utilities, including a primary processing plant as mentioned below and other facilities (if required);
(b) cultivate, individually and/or jointly through contract farmers, herbs such as kacip fatimah, hempedu bumi, rnisai kucing and dukung anak; and
(c) appoint, supervise, train and/or manage contract farmers to produce and supply herbs through cultivation of herbal plants on Pasir Raja Land in accordance with our specifications and requirements, whereby we shall purchase such products which have been produced/supplied in accordance with our specifications and requirements.

The Pasir Raja Land is equipped with facilities for water irrigation, fertiliser storage and residences for farm workers, which provides us with the advantage of not having to set up such facilities at our own cost. Over the next two (2) years, we will be implementing a farming schedule for phase 1 of the Pasir Raja Land of approximately 123.5 acres, for which we estimate to invest approximately RMI million from our internally generated funds for this purpose. We expect our first harvest of herbal plants from our herb farm on Pasir Raja Land by the fourth quarter of 2015. Pursuant thereto, we intend to set up a primary processing plant on Pasir Raja Land for the cleaning, drying and packing of herbs harvested from our herb farm. Construction of the primary processing plant is expected to commence after our first harvest and is expected to be completed within a period of six (6) months from the date of commencement. Prior to the set-up of the primary processing plant, the harvests from our herb farm on Pasir Raja Land will be processed at our Semenyih plant. The construction of the primary processing plant is estimated to cost approximately RM1.5 million, while the machinery for the plant is estimated to cost an additional RMl.5 million, of which the total cost of RM3 million will be funded through our IPO proceeds. Please refer to Section 3.5(i) of this Prospectus for further details of the construction costs and machineries for the primary processing plant. In addition to the cultivation of herbal plants as a source of raw materials as well as additional revenue from sales of the processed herbs, as manager of the integrated herbal cluster, we intend to provide employment opportunities to the local farmers to cultivate herbal plants on the remaining 879.7 acres ofPasir Raja Land under phase 2 of the development. I Company No. 949536-X I 6. BUSINESS OVERVIEW (Cont’d) (vi) Attainment of SAMM accreditation for our laboratory facility We intend to upgmde our laboratory facility in our Bangi plant to attain the SAMM accreditation. SAMM or the National Laboratory Accreditation Scheme is administered by the SAMM National Council under the jurisdiction of the Ministry of Science, Technology and Innovation to accredit testing labomtories or calibration centres. SAMM accredited laboratories are certified to perform biological and microbiological testing, where it provides the following validations: • Laboratory has been independently assessed for technical competence;
• Tests were performed in accordance with the stated specification, method and environment;
• Test samples or products were handled and stored appropriately;
• Equipment utilised were calibrated correctly;
• Appropriate QC procedures were performed; and
• Test reports accurately describe the test results.

We intend to commence upgrading of our laboratory facility in the second quarter of 2015, which is expected to be completed within one (I) year. In order to attain the SAMM accreditation, we will be required to purchase the necessary equipment and upgrade our facility. We estimate that this will cost approximately RMOA million, which will be funded through our IPO proceeds. With a SAMM accredited laboratory, we will be able to perform in-house biological and microbiological testing on samples and attain a test report which will be recognised by MOH. Pursuant thereto, we will no longer be required to allocate resources to outsource the testing of our samples to third party SAMM accredited laboratories, thereby increasing the efficiency of our manufacturing and product formulation processes. (vii) Expansion of our production lines to include a fully-automated liquid bottling line Our Bangi plant presently has a semi-automated liquid bottling production line, and we intend to expand our production lines to include a fully-automated liquid bottling line in order to cater for amongst others, large orders from our existing customers which we have not been able to do so in the past. The fully-automated liquid bottling production line is expected to have a monthly capacity of 2.08 million units, as compared to the monthly capacity of our semi-automated liquid bottling production line of 0.12 million units. We expect to complete installation of this new production line and commence production by the second quarter of 2015. This production line costs approximately RM2 million and is funded through our internally generated funds. The expansion of our production lines to include this new fully-automated liquid bottling production line is expected to generate increased revenues, particularly for our ODM business.

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