EricDavid & Sons, Inc Interview with FACT Corporation (OTCBB:FCTOA)


1) Can you introduce our readers to your management team?

Certainly – presently we have a small but capable management team consisting of our Scientific Director – Dr. Brian Raines, who has spent over 40 years in various scientific and technical positions in the food industry. Dr. Raines oversees our ongoing product development work, most of which is currently managed by a select group of consultants. Mr. Paul Litwack, who has held positions including CEO and Vice President with several large food corporations, also having acted as Director of New Products for the dairy division of Kraft Foods. Mr. Litwack works directly with me to help plan our sales and marketing strategies and set our ongoing corporate mandates. Our sales force is supported directly by myself, and is comprised of consultants working on particular channels of interest. Sales is also further supported by distribution of our commercial mixes through an outside bakery ingredients supplier that presently sells select versions of our premixes under their own private label. Then of course, we further support our efforts with a capable administrative support staff, and our in-house legal counsel to ensure our regulatory filings are up to date and timely filed. Our management team is also supported by a full service marketing and PR firm to help us with the introduction and of new our Nutrition First™ line of products currently available at our www.eatwellstaywell.net. We will likely look to expand our management team this year in a couple of key areas. In particular, we intend to bring on additional sales support to help us better penetrate sales channels across North America .

2) Can you describe Fact Foods product line including any products that may be in the research stage?

Absolutely, presently we offer commercial turnkey premixes for items such as pastas, cookies, breads and bread products such as pizza shells, bagels, cakes etc, as well as muffins, donuts and other sweet goods to commercial bakery manufacturers. We also offer ready-to-eat products, such as our line of Italian crèmes and other prepared products such as snack bars, which are available for branding or Private label, and as of January this year, we also offer a select line of retail products under our Nutrition First™ brand at our new online store. This retail line consists of make-at-home sized versions of some of our most popular commercial premixes.

All our products and mixes are science-based and derived from proprietary formulations which we’ve specially designed using a unique combination of ingredients so that they not only taste great, but also impart “functional” benefits – or added health benefits.

The market for these types of products is a fairly vast one and we are seeing it grow every day as consumers pay more attention to what they are eating. In 2001 Mintel, a firm of industry analysts, suggested the market for functional foods in the US was approx $1.4 billion, with a global market at that time of approx $47 Billion. The trend indicates continuing growth and we see this as a particularly attractive niche – provided we can offer quality products as we grow and continue to secure market share. We’ve only really been selling products for the past 2 years, so we are just now embarking on what we consider to be the start of our growth phase.

Our future developments include products geared specifically towards particular health issues for men and women, seniors and children with a continued focus on the use of functional ingredients.

3) How will you sell the premixes (ex- to stores, through a distributor or directly to bakers)?

As briefly mentioned, currently we sell the premixes in a variety of channels. Direct to commercial manufacturers, through the auspices of our distributor partner, some of the ready-to-eat products are sold directly into retail supermarkets, and then our newest channel is a “direct to the consumer” approach via our online store at www.eatwellstaywell.net.

4) What are the health benefits Fact Foods can provide to consumers?

Here at FACT we focus on the benefits derived from our unique combination of fibers and the low glycemic properties offered by our entire product line. For example, all of our products are low or no sugar, are a great source of functional fiber and contain few simple carbs. This is important because when you eat our products versus regular baked goods, they don’t cause a substantive spike in blood glucose levels (which helps maintain healthy weight levels), and, equally as important, when our products are digested they continue to offer the body additional benefits as they break down. Including: Providing you a fuller-longer feeling, helping the body to better absorb certain vitamins and minerals, breaking down into free fatty acids (which are nutrients to the body) instead of glucose, promoting the growth of good bacteria in the stomach and intestines – and of course the obvious benefits of bulk to the digestive tract.

These properties make our products ideal for those looking to manage their weight, increase fiber to address digestive disorders, manage their glucose levels (such as diabetics) or simply eat a more healthful baked good!

5) Have there been any tastings or focus groups done with the products, if so, what have the results been like?

Yes we did complete focus groups and clinical trials for certain of our products in 2002 when we initially concluded the commercialization process. The purpose of the focus groups conducted was to determine viability of certain of our products with the end consumer. So, baked products were provided and taste-tested against potential price points to see if the consumer would be receptive to products such as ours. This was also useful in determining marketing positions. Because our products use such a high quality group of ingredients to impart our special health benefits – they are premium priced, so the focus groups conducted were helpful in determining reasonable price points, which information was passed along to our commercial clients.

The clinical studies were conducted at the Glycemic Institute in Toronto , Canada , to verify the low glycemic properties of our bread products. Results were extremely positive indicating blood glucose levels were 55% higher in consumers who ate regular bread vs breads manufactured with our mixes. Our 2005 plan calls for additional clinical trials to be conducted on certain of our sweet good products to allow us additional claim support as we move forward.

6) Do you plan to do any advertising, if so, what type?

We have a complete advertising campaign specifically planned for our online store which I expect to commence in May of this year. Our plans include substantive internet marketing, promotional offers including give-ways and a contest, special introductory pricing on products, targeted magazine advertising and some cross-promotion with certain of our clients. I am very excited about our 2005 marketing plan and look forward to providing more information as it kicks off!

7) How much profit did the company make in 2004 and what can you anticipate for 2005?

While our two food subsidiaries were profitable in 2004, the corporation as a whole still had losses. However, our operational losses were reduced from approx. $750,000 in 2003 to approx. $260,000 in 2004. Which is a substantive improvement. Additionally our net losses including interest expenses and extraordinary items were reduced over 50%. Sales in 2004 were more than doubled over 2003 results, and sales from the food segment of our operations increased almost 3 fold. Our plan is to continue that trend to the end of fiscal 2005., and expect 2005 to be our first profitable year of operations.

8) Are you currently seeking financing, if so, how much and what type?

We are not presently seeking financing. Though I do imagine later this year we will look to some form of equity offering to allow us to fulfill our 2005/2006 corporate mandate.

9) How many shares are outstanding and how many are in the public trade-able float?

Presently we have approximately 17 million shares issued and outstanding and the public float consists of about 2.5 million shares.

10) What percentage of stock do company insiders hold?

Insiders have substantive share ownership of between 65 and 75%.

11) Where do you see the company heading in the next 2-3 years?

The next two to three years is going to be all about growth for us. Seeing the market and continuously finding ways to penetrate it. Educating our clients and consumer on the benefits of our products and then getting those products more widely distributed. Our goal is to achieve rapid growth over the next 3 years and secure our brand and our company in the functional marketplace.

12) Is there anything else you would like to add or to say about the company?

I would like to add a few comments. Firstly, at FACT we see ourselves as a nutrition solutions company and I am sure you agree that right now, in the United States , there is almost nothing that is receiving more press than the health issues plaguing the population – from diabetes to obesity to heart disease – so much of this depends on what you eat! People are concerned about the food choices they are making now that they are seeing a direct correlation between diet and health. We truly believe our concept of eating well to stay well – making the right food choices – is going to take the consumer by storm. And we have an exceptional product line to support this trend not only with our own branded products at our online store at www.eatwellstaywell.net, but through our commercial customers using their brands and labels. As well, we are a company that is soon to be virtually debt free, having divested of unnecessary operations in 2004 and presently in the process of completing the divestiture of all other extraneous assets so that we can become a lean organization, an organization focused on our success in the functional foods arena. For those looking to make a long-term investment we see FACT as an excellent choice at this stage of our development.

Please read the disclaimer on FCTOA click here

2004 © Eric, David & Sons, Inc. All Rights Reserved.

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