BLT
01/10/2012 09:45
GENERAL
REL: 0945 HRS BLIS Technologies Limited
GENERAL: BLT: Share Placement and Share Purchase Plan October 2012
BLIS Technologies Limited
Letter to Shareholders
Share Placement and Share Purchase Plan October 2012
BLIS Technologies Limited (BLIS and/or the Company) is seeking new investment
to further progress the development of both food and
nutraceuticalapplications for the company's novel probiotics. Probiotics are
live bacteria that confer a health benefit for the user. BLIS has established
a strong position as a global leader in developing oral probiotics, with
products containing the company's probiotics sold in several markets
internationally.
Background
Over the last two years, BLIS has continued to progress the commercialisation
of its probiotics, BLIS K12 and BLIS M18, and the company has achieved a
number of significant milestones. However, due to revenues from
nutraceutical sales taking longer tobuild than anticipated and the adverse
consequences forboth our financial performance and position,further capital
is required.
The Directorscontracted Murray & Co to conduct a strategic and financial
review of the Company earlier this year and subsequently mandated them to
raisefunds for the company. Although presented with several alternative
capital raising options pursuant to the mandate,the Board considers that none
of these proposals are sufficiently advanced at this stage to provide the
funding certainty required in the current economic environment. The Board
therefore determined to launch this Share Purchase Plan and
Placement.Further, the Board is of the view that in the absence of a
successful Share Purchase Plan supplemented by funds raised pursuant to the
Murray & Co mandate, a capital raising in the form of a pro-rata issue to
shareholders in conjunction with a further review of the Company's operations
would likely be required in the 2014 financial year.
BLIS has not yet returned a profit,and expects to report an operating deficit
of $1.3m in the 2013 financial year. BLIS has no plans to pay a dividend to
shareholders but will reconsider this at such time as the Company returns a
profit. Theexpected deficit of the Company is substantially higher than that
anticipated earlier this year and is based on revised expectations for
ingredient sales into the United States and China. No meaningful ingredient
sales into these markets are anticipated before the 2014 financial year due
to delaysin the launch of products containing BLISK12 in China and a review
of immediate supply chain requirements by our recently-appointed distributor,
Stratum Nutrition.The decision by shareholders to maintain an NZX listing has
also added to previously forecast compliance costs.
The Companyhas conducted a further review of operations and operating costs
and undertaken market analysis in conjunction with Stratum Nutrition. The
reviews have confirmed the potential of our operations and consequently the
Board and Management remain committed to the Company's commercialisation
strategy. As a result, the Company continues to invest inintellectual
property protection, regulatory approval processes, targeted product
development, and clinical work.
The Company has generated considerable interest and activity from several
large international companies who are seeking to develop and market products
in the oral probiotics category. The investment by these parties reflects
ourstrong patent position (supported by trade secrets, especially in product
formulation, and trade marks), a solid scientific base,clinical data,
regulatory approvals and the strong market position of our exemplar products
in New Zealand.
Notable recent achievements include GRAS (Generally Recognized AsSafe) status
for K12 in food applications, a positive legal opinion allowing the sale of
ingredients in the European Union and the signing of the distribution
agreement with Novus Nutrition Brands (Stratum Nutrition). The launch of BLIS
K12 ice cream by Gourmet is also important as it enables BLIS to show
customers anexemplarproductand to extend the consumer benefits to a broader
audience.However the complexities of the regulatory environment have
increased and this has slowed market access.In addition, the time-scale for
the introduction of new productsby major corporates has lengthened with the
current global financial situation.
The Company recognises that the product focus must be broadened to provide
the opportunity for a more diversified revenue stream and therefore we have
advanced the evaluation of companion animal and other applications.
New funds and the application of the new investment
In order to continue to progress, further funds are required. The terms and
details of the Share Purchase Plan including the price for new shares are set
out in the attached documents.
The funds will be applied to ensuring that the Company can maintain core
competencies whilst investing further in the development of its on-line
presence andpursuing opportunities provided from GRAS and the pathway now
open tothe Company through the EU regulatory process. The funds will also
support the release of M18 in the New Zealand market, planned for late
September, initially through our website.
The BLIS products
BLIS has oral probiotic products in the market in New Zealand and has
established ingredient sales in the United States, Europe and Asia.
The Company's primary focus is on Streptococcus salivarius K12, an oral
bacterium that produces bacteriocin-like inhibitory substances that provide
protection against a range of oral conditions. S. salivarius is a natural
inhabitant of the human mouth with K12 being a particular strain that
produces bacteriocin-like substances (salivaricins) which act as natural
antibiotics and inhibit the growth of undesirable bacteria.
The K12 strain is active against Streptococcus pyogeneswhich causes
conditions including strep throat. The company has also generated good
clinical evidence (published) for the effectiveness of K12 against
halitosis/bad breath. BLIS has also developed M18 (another strain of S.
salivarius), for which there is evidence of activity against S. mutans, a
pathogen implicated in caries (tooth decay).We also have numerous customers
who travel very frequently report that their regular use of BLIS K12 has
meant that they have a much reduced incidence of ill-health following travel.
The company has developed significant expertise around the production of
these probiotics that ensures that the organisms are stable and are active in
the mouth of the user. This is an important area of trade secrets.
Sales and marketing
The sale of products via the BLIS website(http://www.blis.co.nz).has provided
relevant data about our consumers which is proving valuable in helping
stimulate further interest, especially in the dietary supplement market. The
Company has committed to upgrading its web site and continuing with its
execution of the web strategy.
BLIS is also actively involved in supporting Stratum Nutrition in its
capacity as the major distributor to the USA and Europe of BLIS products, and
is supporting our partner in the Chinese market, as they work to introduce
products there.
BLIS Technologies has relationships with two major international companies
who are each investigating further applications of the company's probiotic
ingredients.
Scientific and clinical
Internationally, there is increasing scientific coverageof the BLIS K12
strain with independent researchers investigating the properties and efficacy
of the organism. In support of the regulatory approval processes, the company
also expects to make further investments in clinical trials. These trials
are designed to support the evidence-base for our products, and the
importance of the ongoing involvement of our partners in this area cannot be
over-stated and is essential in opening up new markets for the Company's
advanced probiotics.The Company continues to make good progress in this.
Conclusion
Your support of the Share Purchase Plan will enable the company to maintain
its core competencies, support the launch of K12 icecream and M18 dietary
supplements in New Zealand and continue with the execution of its branded
ingredients strategy for advanced probiotics internationally.
Yours faithfully
BLIS Technologies Limited
End CA:00227946 For:BLT Type:GENERAL Time:2012-10-01 09:45:03
