BLIS Technologies Annual Report

28 May 2013

BLIS Technologies Annual Report

The Directors of BLIS Technologies (“BLT”) advise that the Group recorded a net deficit of $1,856k for the March 2013 financial year (2012:$1,759k). The result was in line with the revised guidance provided in February 2013 and reflected a disappointing operating performance and the decision in February to restructure the operations of BLIS Functional Foods (“BFF”) with the cessation of ice-cream production and a relocation of Group operations to the BFF site.

Trading revenue declined during the period to $1,121k (2012:$1,467k) including a full 12 months trading from BFF (2012: 8 months). The key reason for the reduction in revenue was a review of supply chain requirements by our distributor Stratum Nutrition compounded by the suspension of a United States formulator’s major product launch.

Despite expectations for significant growth in ingredient sales not being met, progress was made advancing the plans of product formulators and distributors to launch products containing BLIS ingredients in major international markets. As a consequence, we anticipate ingredient sales to increase materially with greater concentration on finished product sales globally, assisted by new partners and commercial contacts. The route to market has been determined in China and this will lead to new business developments in the 2014 financial year.

BLIS Technologies has continued to make progress in facilitating the commercialisation of its probiotic offerings particularly in the regulatory and market development areas. Affirmation of our progress and the underlying scientific support for claims associated with our proprietary probiotics is reflected in peer recognition and independent commissioning of clinical studies, scientific publications and an increasing number of global research collaborations.

Our strategy to support ingredient sales by exemplar in-market consumer products and food applications produced mixed results in 2013. Despite enabling critical proof of concept for delivery of our ingredients in ice-cream and yoghurt formulations, the operation of BFF was not on a commercial scale and would have continued to run an operating deficit absent substantial new investment; therefore operations ceased in February 2013. In contrast, investment in developing web-based delivery of our consumer products has proved successful and it also provides a sound platform through which to educate formulators and consumers of the benefits of BLIS-based products. A new initiative planned for the 2014 financial year is the further development and manufacture of a nutritional formulation based on blending our branded ingredients with milk powder.

At the time of the Share Purchase Plan and Placement in September 2012, the Company signaled that supplementary funds would likely be required in the 2014 financial year. The assessment was based on the outcome of an external strategic and financial review and on operating expectations at the time. The Company can now confirm that it will need further capital in order to fund the execution of its business strategy. Therefore the Company has initiated plans to raise such further capital and the expectations of Directors are that a minimum $1 million in new equity can be raised in support of the business strategy.

www.blis.co.nz

ENDS

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