Functional foods are one of the strongest growing segments in the market, with an increasing number of products targeting customers, with nutritional health claims.
Although the company suffered a loss of $912,000 for the quarter ending 31 January 2006, it was able to turn around its profit margin from negative 26 per cent to a positive 14 per cent.
Sales for the quarter increased to $2.1m, a rise of 22 per cent.
The company's chairman William Donovan said: "While we still have a long way to go, the third quarter results do show an immediate step in the right direction."
Ailing sales forced the company to cut staff and management, drop product lines and stop supplying clients that could not deliver profits.
"It is never easy to sever long term relationships in a growing young Company, but for the sake of productivity it was something we had to do," said the company's chief executive officer, Grant Petersen.
Cost of sales decreased by 17 per cent, selling expenses decreased by 36 per cent and general and administrative costs declined 41 per cent.
Donovan said growth in the company's subsidiary, ChocoMed, indicated that the company was gaining a foothold in the functional foods market
"After almost two years, we have now been able to combine pure science with gourmet chocolate," he said. "The impetus for launching ChocoMed was the realisation that if we could be the first company to develop a great tasting chocolate that offered functional health benefits, then we could become the confectionary leader in the fast growing market for high margin functional foods."
The company is in partnership some of the top international nutraceutical developers. It has gourmet chocolate products for six medical conditions with several others nearing completion, Donovan said.
Functional foods are products that make specific health benefit claims
Functional food and drink has so far proved more popular with US consumers rather than Europeans, according to a recent report by market research group Datamonitor. It said the US market was worth $19bn in 2004.
Datamonitor, said functional food and drink sectors in Europe and the US could still grow strongly as long as health claims were credible and communicated clearly to consumers.