Functional Technologies Corp.
TSX VENTURE : FEB

Functional Technologies Corp.

February 28, 2012 09:00 ET

Functional Technologies Announces First Quarter 2012 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 28, 2012) - Functional Technologies Corp. (TSX VENTURE:FEB) (the "Company") today reported operational and financial results for the first quarter ended November 30, 2011 ("Q1/12"). Amounts, unless specified otherwise, are expressed in Canadian dollars. The Company's Q1/12 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), reporting standards by which the Company has transitioned to from Canadian Generally Accepted Accounting Principles.

"Functional Technologies continues to accomplish substantial achievements in building technical and commercial value for our proprietary acrylamide-preventing as well as hydrogen sulphide-preventing yeast platforms, in alignment with our corporate goal to drive technologies from bench to commercialization. These lead programs continue to achieve significant third party validation for our core technologies, which has also translated into increasing requirements for management time and resources," said Mr. Christopher Morris, Functional Technologies' acting CEO.

Mr. Morris added, "As a result, we maintain our efforts to focus on and implement initiatives to optimize the Company's capital resources and streamline corporate as well as development activities, including an ongoing review by management of non-core programs associated with Phyterra Bio Inc. and Maritime Pulse Drying Inc., enabling the Company to continue to drive significant value from the Company's promising lead programs. With the intensifying technical and business development activities associated with both our lead programs, it is our belief that the coming year could be a significant evolutionary and transitional year for Functional Technologies."

Operating Highlights

During Q1/12, the Company:

  • Announced that it has commenced evaluation food trials for a leading European producer of intermediary starch-based food products including extruded snack food pellets (the "Collaborator"), which are purchased and integrated by numerous downstream food manufacturers into a variety of other food products. These downstream food manufacturers represent many brand leaders in the processed food industries, and the Collaborator has established its global position over decades.

  • Announced that the development of a next generation of its proprietary AP yeast platform, wherein various improvements made to the Company's original underlying AP technology have enabled the yeast's capacity to degrade asparagine, the rate-limiting precursor to acrylamide, to be accelerated and elevated.

  • Announced that it has signed an agreement enabling an undisclosed leading European producer of sweet and savoury baked goods, snacks and confectionaries (the "Collaboration Partner") to evaluate the Company's proprietary AP yeast technology in the Collaboration Partner's commercial materials used to produce many of their branded food products.

  • Announced that efficacy studies conducted on end-user materials, investigating the Company's proprietary AP yeast technology in a novel food application, have demonstrated significant reduction of asparagine. Moreover, the reduction was achieved well under the normal processing times associated with the application. Asparagine is a key precursor to the formation of the mutagen (i.e. carcinogenic), as well as neurologically and reproductively toxic chemical, acrylamide. Functional Technologies previously demonstrated that the ability of its technology to reduce asparagine has been significantly effective in preventing the formation of, and thereby reducing, acrylamide.

Subsequent to quarter-end, the Company:

  • Reported, on February 27, 2012, positive efficacy data with the Company's AP yeast in studies conducted on end-user materials in a novel food application that traditionally does not incorporate yeast ingredients as processing aids. Under the simulated commercial conditions defined by the industry third party in mixtures typically used to produce extruded starchy food products, significant reduction of asparagine, the main known precursor in the formation of acrylamide, was achieved consistently under short contact times and with relatively low AP yeast concentrations. These results support claims that relevant processing protocols across a variety of food applications and sectors have strong indications for the ability to implement and benefit from the use of Functional Technologies' AP yeast technologies, with the potential for reasonably seamless adoption.

  • Announced, on February 8, 2012, that it has submitted to the U.S. Food and Drug Administration (FDA) a Generally Recognized as Safe (GRAS) notification for the Company's acrylamide-preventing (AP) yeast. The application was submitted to the FDA on the view that this yeast is considered GRAS for use in reducing asparagine levels and thereby preventing the formation of acrylamide during heat-related processing of a variety of foods including grain- and vegetable-based food products (e.g. breads, biscuits, processed potato products, crackers, cereals, etc.).

Financial Results

The Company incurred a net loss of $1.1 million during Q1/12, compared to a net loss of $0.7 million for the three months ended November 30, 2010 ("Q1/11"), representing an increase of $0.4 million due primarily to an increase in operating expenses and a decrease in government assistance.

Operating expenses, excluding stock-based compensation expenses, for Q1/12 were $1.2 million, compared to $0.9 million in Q1/11. The increase in operating expenses was attributed primarily to increases in research and development, legal and consulting expenses associated in part with elevated product development, business development, and marketing activities. Government funding in Q1/12 decreased by $0.1 million from $0.2 million in Q1/11 due to reduced R&D activities conducted by the Company's subsidiary Phyterra Bio Inc.

Liquidity and Outstanding Share Capital

As at November 30, 2011, the Company had cash and short-term investments of $3.1 million compared to $4.2 million as at August 31, 2011. As at November 30, 2011, the Company had working capital of $2.8 million compared to $3.9 million as at August 31, 2011.

As at February 28, 2012, Functional Technologies had 49,396,895 common shares issued and outstanding.

Additional Information

This news release should be read in conjunction with the Company's consolidated financial statements for the quarter ended November 30, 2011 and the notes thereto, together with the MD&A for the corresponding period, which are available on the Company's website www.functionaltechcorp.com and on SEDAR at www.sedar.com.

About Functional Technologies Corp.

Functional Technologies develops and commercializes proprietary, advanced yeast-based solutions to significant challenges in the food, beverage and healthcare industries. The Company's platform improves the performance of innate yeast functions, and prevents the formation of naturally occurring toxins and contaminants that either affect final product quality or are classified by the World Health Organization as probable human carcinogens. Functional Technologies' lead technologies include yeasts that prevent and reduce the formation of the foul-smelling hydrogen sulphide (H2S) and the carcinogens acrylamide and ethyl carbamate (more commonly known as urethane), by-products of food and beverage processing. These contaminants are found in many commonly consumed items, such as fermented food products and alcoholic beverages, and baked and fried foods. With a head office in Vancouver, Functional Technologies Corp. has R&D operations in Prince Edward Island and Europe, as well as a U.S. sales office in Napa Valley, California. For more information, please visit our website at www.functionaltechcorp.com.

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