Forbes Medi-Tech Inc. Announces Financial Results for First Quarter Ended March 31, 2010
VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 10, 2010) - Forbes Medi-Tech Inc. (OTCBB: FMTI) ("Forbes" or "Company") today announced its results for the first quarter ended March 31, 2010. The comparative period for these results is the three-month period ended March 31, 2009. All amounts are in Canadian Dollars unless otherwise noted.
2010 OVERVIEW:
- Exchange Listings:
In January 2010, the Company received a Nasdaq Staff Deficiency Letter indicating that it did not meet The NASDAQ Capital Market initial listing standard and its common shares were subject to suspension. The Company provided the NASDAQ with a notice of appeal of the Nasdaq Staff Deficiency determination to a Hearings Panel.
In February 2010, the Company received notification that a NASDAQ Listing Qualifications Panel has determined to delist the Company's common shares from The NASDAQ Stock Market, effective February 18, 2010. With the delisting, the Company's common shares were immediately transferred for quotation to the Pink Sheets.
In April 2010, the Company received notification that its common stock was eligible for trading on the Over-the-Counter Bulletin Board ("OTCBB"), an electronic quotation service maintained by the Financial Industry Regulatory Authority ("FINRA"), effective on April 7, 2010. The Company's common shares continue to trade under the symbol FMTI.
- Going Concern
Management is of the view that there are sufficient financial resources to finance operations through the second quarter of 2010. This view is based on a number of factors and assumptions and includes the assumption that our expenditures will not exceed those currently planned, and that our revenues will meet or exceed our 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. If it is unable to close on a strategic transaction before it exhausts its available financial resources, then it may be unable to continue operations as a going concern and will have to consider winding up, dissolution or liquidation.
- FINANCIAL RESULTS:
The following table offers a summary of the financial results for the first quarter of 2010.
--------------------------------------------------------------------------- Summary: 3 month period 3 month period (thousands of $ except per share ended March 31, ended March 31, values and number of shares) 2010 2009 --------------------------------------------------------------------------- Sales-phytosterol products $ 1,063 $ 615 Sales-finished goods 90 108 Licensing - 2 --------------------------------------------------------------------------- Phytosterol revenues 1,153 725 Cost of Sales (982) (509) Inventory allowances (58) 6 --------------------------------------------------------------------------- 113 222 Expenses (983) (1,419) Other income 28 4,188 --------------------------------------------------------------------------- (Loss) / income from operations (842) 2,991 Income tax expense - (2) --------------------------------------------------------------------------- Net (loss) / income and comprehensive (loss) / income $ (842) $ 2,989 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Weighted average number of shares 4,969,813 4,969,813 --------------------------------------------------------------------------- Net (loss) / income per share Basic and diluted $ (0.17) $ 0.60 ---------------------------------------------------------------------------Revenues:
Phytosterol revenues include direct sales of phytosterol products (branded - Reducol™, non-branded sterol esters and sterols), sales of finished products containing Reducol™. Phytosterol revenues for the quarter ended March 31, 2010 totaled $1,153,000 compared with $725,000 for the quarter ended March 31, 2009. The increase is primarily due to a major customer returning to regular purchasing patterns whereas this customer was realigning inventories in first three months of 2009. The increase was partially offset by a decrease in sales to European customers and a decrease in sales by Forbes-Fayrefield of finished products.
Cost of Sales/ Margins:
For the quarter ended March 31, 2010, the Company realized a gross margin percentage of 10% on phytosterol revenues of $1,153,000, compared with a gross margin percentage of 31% on phytosterol revenues of $725,000 for the quarter ended March 31, 2009.
In the quarter ended March 31, 2010, $58,000 was charged to cost of sales, relating to valuation allowances on inventories. In the quarter ended March 31, 2009, $6,000 relating to valuation allowances was relieved from cost of sales. Prior to the impact of these allowances, in the quarter ended March 31, 2010 the Company realized a gross margin percentage of 15%, compared with a gross margin percentage of 30% for the quarter ended March 31, 2009.
The decrease in gross margin percentage is 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 quarter in comparison to the comparable quarter in the previous year is attributable to a reduced head count and other cost saving measures.
Liquidity & Capital Resources:
The Company's net cash and cash equivalents as of March 31, 2010 totaled $1,471,000 compared with $1,329,000 as at December 31, 2009. The Company had working capital of $3,099,000 at March 31, 2010 compared with $3,960,000 at December 31, 2009.
The going concern concept assumes that the Company will continue in operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Certain conditions, discussed below, currently exist which raise substantial doubt about the validity of this assumption.
The Company has sustained continuing operating losses since its formation. The Company's management is of the view that there are sufficient financial resources to finance operations through the second quarter of 2010. This view is based on a number of factors and assumptions and includes the assumption that its expenditures will not exceed those currently planned, and that its revenues will meet or exceed its 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. The outcome of these matters cannot be predicted at this time. Any possible strategic transactions to define the Company's future may require shareholder approval. If the Company is unable to close on a strategic transaction before it exhausts its available financial resources, then it may be unable to continue operations as a going concern and will have to consider winding up, dissolution or liquidation.
First Quarter Report
This news release includes by reference the Company's unaudited financial statements for the first quarter ended March 31, 2010 and the Management Discussion & Analysis (MD&A). More detailed information can be found in the MD&A and financial statements, which are being filed with applicable Canadian and U.S. regulatory authorities.
FINANCIAL INFORMATION
The following information should be read in conjunction with the Company's first quarter reports and the Company's audited consolidated financial statements for the year ended December 31, 2009 and related notes that are prepared in accordance with Canadian generally accepted accounting principles.
FORBES MEDI-TECH INC. CONSOLIDATED BALANCE SHEETS (Expressed in Canadian dollars) (unaudited) --------------------------------------------------------------------------- December 31 March 31 2010 2009 --------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 1,470,708 $ 1,329,176 Accounts receivable 445,560 946,823 Inventories 1,543,312 2,117,159 Prepaid expenses and deposits 278,227 178,287 --------------------------------------------------------------------------- 3,737,807 4,571,445 --------------------------------------------------------------------------- Long-term Assets Capital assets 95,633 102,813 Other long-term assets 21,223 23,210 --------------------------------------------------------------------------- $ 3,854,663 $ 4,697,468 --------------------------------------------------------------------------- LIABILITIES and SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 573,531 $ 546,848 Curent portion tenure allowance payable 65,000 65,000 --------------------------------------------------------------------------- 638,531 611,848 Long-term liabilities Tax provision 722,092 744,000 Tenure allowance 908,057 913,464 --------------------------------------------------------------------------- 2,268,680 2,269,312 Shareholders' equity Share capital $ 2,720,992 $ 2,720,992 Contributed surplus 10,042,877 10,042,877 Deficit (11,177,886) (10,335,713) --------------------------------------------------------------------------- 1,585,983 2,428,156 --------------------------------------------------------------------------- $ 3,854,663 $ 4,697,468 --------------------------------------------------------------------------- FORBES MEDI-TECH INC. Consolidated Statements of Operations, Comprehensive (Loss) / Income and Deficit (Expressed in Canadian dollars, except share and per share amounts) (unaudited) --------------------------------------------------------------------------- Three months ended March 31 2010 March 31 2009 --------------------------------------------------------------------------- REVENUES Sales $ 1,153,284 $ 722,531 Licensing - 2,168 --------------------------------------------------------------------------- Phytosterol revenues 1,153,284 724,699 Cost of sales 981,712 508,706 Change in inventory and purchase commitment allowances 58,000 (6,000) --------------------------------------------------------------------------- 113,572 221,993 --------------------------------------------------------------------------- EXPENSES General and administrative 694,226 961,620 Marketing, sales and product development 134,481 180,779 Nutraceutical research, development and support 116,065 273,130 Depreciation and amortization 7,180 10,782 Foreign exchange loss / (gain) 32,104 (7,691) --------------------------------------------------------------------------- 984,056 1,418,620 --------------------------------------------------------------------------- Loss from operations $ (870,484) $ (1,196,627) OTHER INCOME Gain on dilution of interest in subsidiary - 4,147,975 Interest and other 28,311 40,456 --------------------------------------------------------------------------- 28,311 4,188,431 --------------------------------------------------------------------------- Net (loss) / income before taxes $ (842,173) $ 2,991,804 Income tax expense - (2,324) --------------------------------------------------------------------------- Net (loss) / income and comprehensive (loss) / income (842,173) 2,989,480 Deficit, beginning of period (10,335,713) (10,462,311) --------------------------------------------------------------------------- Deficit, end of period $ (11,177,886) $ (7,472,831) --------------------------------------------------------------------------- Weighted average number of common shares outstanding 4,969,813 4,969,813 Basic and diluted (loss) / income per share $ (0.17) $ 0.60 --------------------------------------------------------------------------- FORBES MEDI-TECH INC. Consolidated Statements of Cash Flows (Expressed in Canadian dollars) (unaudited) --------------------------------------------------------------------------- Three months ended March 31 2010 March 31 2009 --------------------------------------------------------------------------- OPERATIONS Net (loss) / income for the period $ (842,173) $ 2,989,480 Adjustments for: Depreciation and amortization 7,180 10,782 Stock-based compensation expense - 15,822 Accretion of interest - 103,728 Gain on dilution of interest in subsidiary - (4,147,975) --------------------------------------------------------------------------- (834,993) (1,028,163) Net change in non-cash operating items 976,525 834,744 --------------------------------------------------------------------------- Net cash provided by / (used in) operations 141,532 (193,419) Cash and cash equivalents, beginning of period 1,329,176 1,376,575 --------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 1,470,708 $ 1,183,156 ---------------------------------------------------------------------------About Forbes Medi-Tech Inc.
Forbes Medi-Tech Inc. is a life sciences company focused on evidence-based nutritional solutions. A leader in nutraceutical technology, Forbes is a provider of value-added products and cholesterol-lowering ingredients for use in functional foods and dietary supplements. Forbes successfully developed and commercialized its Reducol™ plant sterol blend, which has undergone clinical trials in various matrices and has been shown to lower "LDL" cholesterol levels safely and naturally. Building upon established partnerships with leading retailers and manufacturers across the globe, Forbes helps its customers to develop private label and branded products. For more information, please visit www.forbesmedi.com.
FORWARD LOOKING STATEMENTS
This News Release contains forward-looking statements and forward-looking information concerning anticipated developments in the Company's business including projected sales and revenues, sufficiency of its capital resources, future financing and M&A transactions, and other information in future periods. Forward-looking statements and information can be identified by forward-looking terminology such as "has until", "deadline", "plan", "expects", "continuing", "potential", "will be", "will meet", "seeking", "may", "obtain", "anticipated", "2010", "will", and similar expressions or variations thereon. Forward-looking statements and information are about the future and are inherently uncertain, and actual results may differ materially from those reflected in the forward-looking statements and information due to a variety of risks, uncertainties and other factors, including, without limitation, the Company's need for additional future capital or a suitable M&A transaction, which may not be available in a timely manner or at all and which, if not obtained, would have a material adverse effect on the Company and its ability to continue as a going concern; the risk of unanticipated expenses and inability to control certain costs; the risk that sales revenue may not meet the Company's expectations; the Company's dependence on its key personnel; the Company's need for additional customers and the Company's existing reliance on four major customers for performance; the effect of competition; manufacturing risks and the Company's dependence on third party suppliers; product liability, intellectual property and insurance risks; exchange rate fluctuations; the need for future regulatory approvals, which are not assured; and other risks and uncertainties affecting the Company and its business, as contained in its latest Annual Information Form on Form 20-F and other documents filed with Canadian and U.S. securities regulatory authorities at www.sedar.com and www.sec.gov, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Forward-looking statements and information are based on the beliefs, assumptions, and expectations of the Company's management at the time they are made, and the Company does not assume any obligation, except as required by law, to update its forward-looking statements or information if those beliefs, assumptions, or expectations or other circumstances should change.
Reducol™ is a trademark of Forbes Medi-Tech Inc.
Contacts:
Forbes Medi-Tech Inc.
David Goold
Chief Financial Officer
(604) 689-5899 ext. 239
ir@forbesmedi.com
www.forbesmedi.com