VANCOUVER, BRITISH COLUMBIA, Nov 09, 2009 (MARKETWIRE via COMTEX) -- Forbes Medi-Tech Inc. ("Forbes" or "Company") today announced its results for the third quarter ended September 30, 2009. The comparative period for these statements is the three and nine-month periods ended September 30, 2008. All amounts are in Canadian Dollars unless otherwise noted.
THIRD QUARTER OVERVIEW:
Reducol(TM): In October 2009 the Company announced that the European Union had approved a health claim for plant sterols -- Reducol(TM) -- in free or esterified form.
Exchange Listings: In January 2009, Forbes announced that it had received notice from the Toronto Stock Exchange ("TSX"), indicating that the TSX was reviewing the eligibility of its common shares for continued listing on the TSX, relating to Forbes' market capitalization, which had fallen below the designated minimum TSX threshold for continued listing.
On August 12, 2009, Forbes announced that it had received notice from the TSX that its common shares will be delisted at the close of market on September 11, 2009. The delisting decision announced by the TSX related to the Company's market capitalization, which had remained below the TSX designated minimum, $3,000,000 market capitalization threshold for continued listing. On September 11, 2009, as the Company had not regained compliance with the TSX listing requirements, the Company's shares were delisted from trading on the TSX.
Since the beginning of the year, NASDAQ has three times extended its suspension of its bid price and market value of publicly held shares requirements, with the result that the Company's compliance deadline is now January 4, 2010.
Net income for the year to date: For the nine months ended September 30, 2009, the net income of $1,724,000 includes the one-time positive impact of the reversal of the $1,424,000 provision for loss on certain purchase commitments. This provision was previously recognized as a charge against income in prior accounting periods and reversed in the second quarter ending June 30, 2009. Net income also includes a one time gain related to the completion of the Deans Knight public offering and conversion of the convertible debenture. These events resulted in the recognition of a gain of approximately $4,148,000 in the first quarter ended March 31, 2009.
Revenues: Phytosterol revenues - includes direct sales of branded Reducol(TM) ingredients, non-branded sterol esters and sterols, sales through the Forbes-Fayrefield joint venture of finished products containing Reducol(TM), and license fees received. Phytosterol revenues for the nine months ended September 30, 2009 totaled $3,022,000 compared with $6,648,000 for the nine months ended September 30, 2008. The decrease is primarily due to re-alignment of inventories by one of the Company's major customers in the first six months of 2009. This customer is returning to its prior purchasing patterns in the second half of 2009. Also, the Company's sales to its European customers have shown a decrease, primarily due to the effect of the economic downturn. In addition, sales by Forbes-Fayrefield of finished products to key European markets have also decreased, in part as a result of a switch from revenue to commission based sales. As a result of these events, together with current general market uncertainties, the Company anticipates that this year's revenue will be significantly below its prior year's level.
Cost of Sales/ Margins: Excluding the impact of the inventory and purchase commitment allowances, for the nine months ended September 30, 2009, the Company realized a gross margin percentage of 20% on phytosterol revenues of $3,022,000 compared with a gross margin percentage of 19% on phytosterol revenues of $6,648,000 for the nine months ended September 30, 2008.
Excluding the impact of the inventory and purchase commitment allowances, for the three months ended September 30, 2009, the Company realized a gross margin percentage of 8% on phytosterol revenues of $1,279,000 compared with a gross margin percentage of 22% on phytosterol revenues of $1,927,000 for the three months ended September 30, 2008. The margins decreased primarily due to a customer mix with lower margins and less favorable foreign exchange rates.
Operating expenses: The Company continues to reduce operating expenses wherever possible. The reduction in expenses in the current nine months in comparison to the comparable nine months in the previous year is attributable to a reduced head count and other cost saving measures. In addition, in the prior year, for the nine months ended September 30, 2008, the Company incurred one-time costs associated with the Special General Meeting, the NASDAQ hearing, the non dilutive financing and severance costs associated with the corporate restructuring.
Liquidity & Capital Resources: The Company's cash position as of September 30, 2009 totaled $1,197,000 compared with $1,377,000 as at December 31, 2008. Forbes had working capital of $4,834,000 at September 30, 2009 compared with $3,531,000 as at December 31, 2008.
The Company has projected that its capital resources will be sufficient to finance operations through the first quarter of 2010. This view is based on a number of factors and assumptions, which includes the assumption that the Company's expenditures will not exceed those currently planned, and its revenues will meet or exceed current expectations.
The Company's future operations are completely dependent upon its ability to complete a strategic transaction such as a merger, acquisition, sale of business or other suitable transaction, and/or secure additional funds. The market for any of these activities for companies such as Forbes has always been challenging, and the Company believes that current economic conditions and uncertainties have provided, and will continue to provide, additional challenges. While management is continuing to seek available alternatives, there is no assurance that any of these activities will be successfully completed in a timely manner, or at all. If the Company cannot complete one or more of these activities in advance of the end of the first quarter of 2010, it will have to consider winding up, dissolution or liquidation.