Functional Technologies Corp. CA:FEB 0.00% (the "Company") reported operational and financial results for the third quarter ended May 31, 2011. Amounts, unless specified otherwise, are expressed in Canadian dollars and in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP").
Mr. Garth Greenham, Functional Technologies' President and COO, said, "We are pleased with the significant achievements accomplished in recent months, which demonstrates our focus in driving our technologies towards revenue. We continue to direct significant effort to attaining considerable revenue growth from our H2S-preventing wine yeasts and developing strategic partnerships across several food sectors for our acrylamide-preventing yeasts."
Q3 2011 Operating Highlights
· Announced the renewal of the Company's distribution agreement with Beverage Supply Group ("BSG"), including an increase of more than 350% in the minimum purchase volume of Phyterra(TM)-branded H2S-preventing wine yeasts in the U.S. market for the upcoming 2011 season. The guaranteed sales represented by this amended agreement will be supported by technical sales and resources from Functional Technologies, and are expected to be complemented by direct sales initiatives of the Company as it also expands commercially in Europe and South America.
· Entered into a collaboration agreement with an undisclosed, leading multinational company to confirm the performance characteristics of its acrylamide-preventing ("AP") yeasts in one of several applicable sectors of food-related products. Collaborating with several leading multinational firms in the food processing and ingredients sectors provides key opportunities to gain rapid access to global production capacity and global distribution networks. Such partnerships are expected to better position the Company to accelerate the commercial progression of its AP yeast products.
· Announced that the Company's subsidiary, Phyterra Yeast Inc., was awarded $2.5 million in non-dilutive funding from the Government of Canada's Atlantic Innovation Fund (AIF) under the oversight of the Atlantic Canada Opportunities Agency (ACOA). These funds will support a project to develop and commercialize the application of its proprietary AP yeast technology in the processed potato industry.
· Strengthened the Company's Boards with the appointment of Mr. Richard Sherman, an Advisor to the Company at the time, to its Board of Directors, and Mr. John Campbell and Mr. Michael Liggett to its Advisory Board. Mr. Sherman possesses extensive experience in numerous life science sectors both as legal counsel and as principal structuring joint ventures, licensing agreements and mergers and acquisitions (M&A).
Mr. Campbell possesses over 29 years of extensive experience in the investment industry as well as significant expertise in M&A, and Mr. Liggett is a chartered accountant and seasoned biotechnology executive experienced in executing strategic collaborations, M&A and financings.
Operating Highlights Subsequent to Quarter-End
· Announced Functional Technologies has entered into an agreement to research and evaluate its AP yeasts in a second food sector, with an undisclosed global company (the "Collaboration Partner") considered one of the leading companies in the development, manufacturing, marketing and distribution of snacks and other food products. This initial agreement enables collaboration between the two companies on proof-of-concept, pre-pilot scale trials, as well as preliminary review and development of production protocols. This stage of development and testing are a condition precedent to full scale pilot trials and commercial negotiations, facilitating meaningful discussions to determine how the Company's technologies and/or services may be employed by the Collaboration Partner.
· Received gross proceeds of $3.3 million from the exercise of 4.1 million common share purchase warrants, which were exercisable at a price of $0.80 per warrant until June 18, 2011. All associated warrants not exercised have expired.
· Appointed Mr. James D. Pratt, an accomplished food industry executive, to the position of Chief Business Officer with responsibilities including the cultivation of strategic partnerships and commercial relationships in new food sectors, increasing the scope and breadth of industry applications and markets for the Company's products. Mr. Pratt possesses more than 24 years of executive experience in the food industry and most recently was CEO of Sepp's Food Group, a multinational manufacturer and provider of frozen foods, including private label "health and well-being" frozen breakfast products.
· Appointed Mr. Alan Maddox, a food industry veteran possessing more than 30 years of sales and executive experience in international business and food industries including several senior sales roles at McCain Foods Ltd., to the Company's Advisory Board.
Q3 2011 Financial Results
The Company incurred a net loss of $1.1 million for the three months ended May 31, 2011, compared to a net loss of $0.8 million for the three months ended May 31, 2010, representing an increase of $0.3 million due primarily to an increase in operating expenses and a decrease in government assistance.
Operating expenses, excluding stock-based compensation expenses, for Q3 2011 were $1.0 million, compared to $0.9 million in Q3 2010, consisting primarily of office and general expenses, professional fees, research and development costs, marketing efforts, salaries and wages, and the amortization of capital assets. The increase in operating expenses was attributed primarily to modest increases in depreciation of capital assets, travel and meal expenses and salaries and wages, associated in part with elevated development, business development, and marketing activities.
Liquidity and Outstanding Share Capital
As at May 31, 2011, the Company had cash and short-term investments of $2.3 million compared to $0.9 million as at August 31, 2010. As at May 31, 2011, the Company had working capital of $3.0 million compared to $1.4 million as at August 31, 2010. Subsequent to quarter-end, Functional Technologies received gross proceeds of $3.3 million associated with the conversion of 4.1 million common share purchase warrants.
As at July 28, 2011, Functional Technologies had 48,796,895 common shares issued and outstanding.
The Company's consolidated financial statements for the quarter ended May 31, 2011 is available on the Company's website http://www.functionaltechcorp.com.