Functional Technologies Corp.
TSX VENTURE : FEB

Functional Technologies Corp.

April 30, 2012 19:30 ET

Functional Technologies Reports Second Quarter 2012 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 30, 2012) - Functional Technologies Corp. (TSX VENTURE:FEB) (the "Company") today reported operational and financial results for the second quarter ended February 29, 2012 ("Q2/12"). Amounts, unless specified otherwise, are expressed in Canadian dollars. The Company's Q2/12 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, reporting standards by which the Company has transitioned to from Canadian Generally Accepted Accounting Principles.

"Functional Technologies' proprietary acrylamide-preventing (AP) and hydrogen sulphide (H2S)-preventing yeast platforms continue to drive significant interest and validation with major food producers and commercial winemakers. As the Company continues to accomplish substantial achievements in building technical and commercial value for these core programs, we have also made significant progress in divesting non-core assets so as to reduce non-essential spending," said Mr. Christopher Morris, Functional Technologies' acting CEO. "Collectively, the strategies we have implemented company-wide are expected to provide opportunities to achieve significant benefits and milestones in the coming quarters."

Operating Highlights

During Q2/12, the Company:

  • Reported positive efficacy data with the Company's AP yeast in studies conducted on third party, end-user materials typically used to produce extruded starch food products that traditionally do not incorporate yeast ingredients as processing aids. Under the simulated commercial conditions defined by the industry third party, 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 are likely to benefit from the use of Functional Technologies' AP yeast technologies, with the potential for reasonably seamless adoption.
  • Announced it has submitted to the U.S. Food and Drug Administration (FDA) a Generally Recognized as Safe (GRAS) notification for the Company's AP yeast. The application was submitted to the FDA on the basis 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.).
  • On April 4, 2012, subsequent to quarter-end, the Company announced, as part of previously announced initiatives to optimize its development activities and capital resources, the signing of a non-binding Letter of Intent ("LOI") to divest non-core assets associated with its subsidiaries, Phyterra Bio Inc. and Maritime Pulse Drying Inc., including their early stage technology and property assets, in a management purchase by the President of the Company and its Chief Scientific Officer. Included in the LOI is the transfer of certain associated federal and provincial government loans and funding, as well as certain other non-core assets of the Company and/or its subsidiary, Phyterra Yeast Inc. This is expected to reduce the capital and resource burdens to Functional Technologies associated with these non-core obligations, allowing the Company to focus on its core programs, namely the AP and H2S-preventing yeasts. The closing of the transaction is subject to a number of conditions including the negotiation and execution of a binding agreement, and the receipt of various governmental approvals and third-party consents and assignments.

Financial Results

The Company incurred a net loss of $4.6 million during Q2/12, compared to a net loss of $1.0 million for the three months ended February 28, 2011 ("Q2/11"), representing an increase of $3.6 million that is primarily the result of the loss of $3.4 million due to a non-cash impairment of the carrying value of Phyterra Bio Inc. and Maritime Pulse Drying Inc.

Operating expenses, excluding stock-based compensation expenses, for Q2/12 were $1.1 million, compared to $1.0 million in Q2/11. The slight increase in operating expenses was attributed primarily to increases in legal expenses as well as salaries and wages associated in part with elevated business development and marketing activities. Government funding in Q2/12 decreased by $0.3 million from $0.5 million in Q2/11 due to reduced R&D activities conducted by the Company's subsidiary Phyterra Bio Inc.

Liquidity and Outstanding Share Capital

As at February 29, 2012, the Company had cash and short-term investments of $1.9 million compared to $4.2 million as at August 31, 2011. As at February 29, 2012, the Company had working capital of $1.7 million compared to $3.9 million as at August 31, 2011.

As at April 27, 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 February 29, 2012 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. For more information, please visit our website at www.functionaltechcorp.com.

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