Botry-Zen chairman Dr Max Shepherd said in a statement to the sharemarket late yesterday the company had encountered production difficulties with its Botry-Zen and Armour-Zen grape fungus-fighting products.
Directors had reassessed the company's ability to meet production targets this week.
Those targets had been the basis of recent forecasts provided to the Bank of New Zealand and proposed subscribers to a recent capital raising of $1.8 million in convertible notes and options, Dr Shepherd said.
"The conclusion of that reassessment [of forecasts] has been that if the production issues are not able to be resolved then those targets would not be met, with a consequential adverse effect on the company's cashflow," Dr Shepherd said.
Less than three weeks ago, in a brief statement to the sharemarket, Dr Shepherd announced Botry-Zen's chief executive John Scandrett had resigned to pursue interests outside the biotechnology sector.
Botry-Zen raised $5 million in a fully subscribed issue at 10c per share in August 2001, before listing on the stock exchange in November 2002.
It raised a further $4.5 million in 2005 and was part way through the present $1.8 million issue which, in late June, management had said was a target it was likely to achieve, with commitments for $1.3 million in place.
Shares in the company were trading at 3.5c yesterday.
Dr Shepherd said yesterday that in recent weeks the company had experienced "sporadic and unpredictable yield outcomes" in Botry-Zen fermentation runs, citing possible deficiencies in aspects of the sterilisation process and issues affecting overall product strength.
"In addition, it is possible that the grain we have been utilising recently as our substrate has actually received an unwanted, and unknown to us, chemical treatment at some stage of the growing cycle. All these matters are under close review," Dr Shepherd said.
Discussions would be held with the BNZ and recent subscribers about the production difficulties "over the next few days" and the share market would be advised, Dr Shepherd said.
By mid June, Botry-Zen had clawed back its previous year's losses of $1.6 million to a $1.22 million loss this financial year, but at the cost of an expanding overdraft facility.
Dr Shepherd said at the time the company was faced with further expansion and development costs and was in discussions with its bankers and third parties regarding future working capital requirements.
Trading revenue increased from $60,000 to $342,208 for the year to March but, while having cut back on expenses in administration, distribution and marketing, Botry-Zen's total liabilities for the 12 months grew from $895,000 to $1.28 million, including its increased overdraft facility, which rose from $577,000 to $983,000.
