The Company: Functional Technologies develops and commercializes proprietary, advanced yeast-based solutions to significant challenges in the food, beverage and healthcare industries, for which viable solutions are lacking. The Company's platform technologies improve the performance of innate yeast functions to primarily prevent the formation of naturally occurring toxins and contaminants that either affect final product quality or are classified by various global agencies as dangerous substances (e.g. carcinogens, neurotoxicants or reproductive toxicants).

Lead technologies: The Company's lead technologies include yeasts that prevent and reduce the formation of the carcinogen and reproductive toxicant acrylamide, and the foul-smelling hydrogen sulphide (H2S), by-products of food and beverage processing. These contaminants are found in many commonly consumed items, such as baked and fried foods, and fermented alcoholic beverages. Drivers to adoption of our products exist as a result of the business risks (e.g. litigation and/or brand equity loss) and increasing regulatory vigilance associated with the contaminants.

Large market opportunities: By addressing critical needs affecting multiple food sectors, our proprietary yeast products impact multi-billion dollar global markets, providing multiple revenue stream opportunities. For example, given the widespread impact of acrylamide as it affects numerous food products, including bakery and cereal products, processed potato products, biscuits, snack foods, coffee and baby foods, the estimated cumulative downstream impact is greater than US$800 billion. The baker's yeast market is considered a natural, directly addressable, adopter market for Functional Technologies' acrylamide-preventing (AP) yeasts, given seamless adoption and direct replacement potential. The baker's yeast market alone is estimated to be greater than US$2.0 billion annually. Additional food sectors however, such in snack foods and processed potato products, represent lucrative new markets in which the Company's yeasts could be utilized.

Business strategy: Functional Technologies' technology platforms enable the strategic pursuit of intellectual property and patent protection, similar to many biopharma or nutraceutical products. Based on the large scale and scope of the applications associated with the Company's AP yeast products, the pursuit of out-licensing models are viewed as being the most appropriate. As the Company's wine yeasts present premium priced products in a niche market, where the margin potentials are high, the current approach is to utilize a hybrid distributor-technical support sales model. We anticipate growth to continue in increasing the customer base and demonstrating the platform nature of the H2S-preventing technology by the growing product portfolio offered by the Company.

Properties that favour adoption: The use of yeasts in food and beverage processing has been well established for thousands of years and are considered safe. Functional Technologies' yeasts have also received GRAS (Generally Recognized As Safe) designations by the U.S. FDA, and although GRAS status nor regulatory trials are required prior to commercialization, Functional Technologies is committed to reaching or exceeding regulatory standards of quality and care. Consequently, the Company believes its proprietary yeast solutions offer the potential for relatively seamless adoption into food processing protocols. The ability to manufacture and produce large quantities of yeasts lends to the expectation that the adoption of Functional Technologies' proprietary yeast solutions should be minimally disruptive to the end-user and food producer's cost of goods.

Growing validation: Helping to validate the commercial opportunities and the technologies supporting the Company's products, Functional Technologies' AP yeasts have demonstrated impressive and compelling efficacy data, with up to 95%+ reduction in certain applications. These yeasts are already in testing partnerships with several large global companies in various sectors, and additional collaborations are in discussions to begin. Meanwhile, the Company's H2S-preventing wine yeasts enjoyed encouraging market adoption by more than 75 U.S. wineries in its introductory season in 2010, and we look forward to growing the Company's market penetration in this industry.