Vancouver, British Columbia--(Newsfile Corp. - November 7, 2022) - Burcon NutraScience Corporation (TSX: BU) ("Burcon or the "Company"), a global technology leader in the development of plant-based proteins for foods and beverages, reported results for the fiscal second quarter ended September 30, 2022.
Operational highlights for the second quarter ended September 30, 2022:
During the quarter, Burcon:
- recorded a 24% quarter-over-quarter increase in royalty revenues from its licensee, Merit Functional Foods Corporation ("Merit");
- completed key due diligence items in support of the partnership discussions with potential partners on opportunities to commercialize one or more of Burcon's innovative plant-based protein technologies;
- developed an economical, scalable process to produce high-purity food grade protein ingredients from sunflower seeds;
- received a notice of allowance from the United States Patent and Trademark Office for a patent application for non-soy oilseeds, including sunflower seeds and others; and
- received notification of four patent grants and four patent allowances covering the company's novel process for the extraction and purification of protein ingredients from soy, pulse, and other non-soy oilseeds. The company's IP portfolio now consists of 332 issued patents in various countries, with 72 in the U.S., as well as more than 170 active patent applications, including 25 in the U.S.
During the quarter Burcon's 31.6% investee, Merit:
- recorded $2.4 million in total revenue;
- launched Peazazz C™, a unique low sodium pea protein ingredient;
- developed a protein-based clean label solution to replace methylcellulose in meat alternatives, using Merit's Peazazz pea protein;
- further fine-tuned and optimized its production process to improve production throughput, yield and first-time quality of its pea and canola protein ingredients;
- increased sales of its best-in-class pea and canola protein ingredients; and
- developed innovative product concepts including a ready-to-drink beverage and demonstrated (through work at a confectionary partner) the first great tasting, high-protein fortified vegan chocolate compound and inclusion, which is now being sold into CPG branded products.
Subsequent to the quarter-end, Burcon:
- announced the nomination of KPMG LLP ("KPMG") as successor auditor and set date for annual meeting of shareholders (the "AGM"); and
- announced the appointment of Kip Underwood as Burcon's new Chief Executive Officer.
During fiscal 2023 second quarter, Burcon's team supported Merit in the implementation of Merit's newly launched Peazazz C™ pea protein ingredient, which has been receiving positive feedback from CPG companies for its exceptional solubility and grit free texture when used in ready-to-drink beverages and dairy alternative applications. Burcon's proprietary membrane filtration process produces Peazazz C™ with four times less sodium than standard pea proteins on the market, an attribute that food formulators prefer and is exclusive to Merit's Peazazz C™ pea protein. In addition to the Peazazz C™ launch, Merit developed and introduced a 100% protein-based clean label solution to replace methylcellulose, a synthetic chemical used as a binding agent in meat alternative products. Together, these two developments are expected to add significant value and should be accretive to existing sales. We are very encouraged to see Merit fulfill new sales orders for both its original and new SKUs.
Merit achieved significant production improvements this past quarter as it underwent continuous process improvements. Production throughput and yield for both of Merit's pea protein and canola protein processes improved considerably, resulting in high quality protein products being delivered to Merit's customers and formulated into innovative food and beverage products. We are pleased to continue to see quarter-over-quarter increase in sales as production ramps up.
During the quarter, Burcon completed key due diligence items as part of our partnership discussions to bring one or more of Burcon's plant-based protein technologies to market. Due diligence that included process and product evaluation and validation, market and competitive analysis, and project economics, are now largely complete. There are further additional due diligence items to complete while Burcon and its potential partners continue to work diligently toward a strategic partnership agreement that would see us quickly bring Burcon's technologies to market.
Leveraging its core protein technology platform, Burcon announced during the quarter that it has successfully developed a novel process to produce high purity sunflower protein isolates from sunflower meal, a low value by-product of the production of sunflower oil. Extracting upcycled sustainable protein ingredients from a by-product is a hallmark of Burcon's technologies and we are highly encouraged on the potential of our new sunflower protein isolate setting a new category for sunflower protein with its high purity, exceptional taste and excellent functionality. Burcon is currently pursuing commercial opportunities to rapidly bring this unique one-of-a-kind protein ingredient to market.
Further to Burcon's ongoing protein development, during the quarter we added four issued patents and four patent allowances covering the processes to produce protein from soy, pulse, and other non-soy oilseeds. Strengthening our intellectual property portfolio and protecting our valuable discoveries are part of our long-term strategy to develop and monetize Burcon's unique plant-based protein technologies.
Burcon has been working closely with an executive search firm to recruit a new chief executive officer. Subsequent to quarter-end, the Company announced that it has appointed Kip Underwood, a seasoned veteran executive with over 25 years of experience in the food and specialty protein industry, as its new chief executive officer, effective November 7, 2022. Peter H. Kappel has relinquished his role as interim CEO and remain as chair of Burcon's board of directors.
During the quarter, Burcon announced the resignation of its auditor, PricewaterhouseCoopers LLP ("PwC") and postponed its AGM as a result. PwC has confirmed that there have been no "reportable events", "disagreements" or "unresolved issues" that led to their resignation. Subsequent to quarter-end, Burcon announced that it has nominated KPMG LLP as Burcon's successor auditor to be voted upon at the upcoming AGM to be held virtually on November 23, 2022.
As previously announced, Burcon received a letter from Nasdaq regarding minimum bid price deficiency and had until September 28, 2022 to regain compliance with Nasdaq's minimum bid price requirement. After careful consideration on the probability of Burcon regaining compliance and the associated cost-benefits to Burcon with maintaining continued listing on the Nasdaq Capital Market ("Nasdaq"), the board of directors of Burcon determined that it was in the overall best interests of the Company to delist its common shares from Nasdaq. As of September 22, 2022, Burcon's common shares were delisted from Nasdaq. Management expects that the delisting of its shares from Nasdaq will enable the Company to avoid numerous ongoing costs associated with continued listing, including annual fees, legal and audit costs.
Financial Results (in Canadian dollars)
Burcon recorded Merit royalty revenues of $112,000, as compared to $32,000 in the same year ago quarter. Royalty revenues have been increasing each quarter over the past year, with the current quarter's royalty representing a 24% increase over the previous quarter.
Net loss totaled $3.2 million or $0.03 per basic and diluted share for the current quarter, as compared to $1.4 million or $0.01 per basic and diluted share in the same year-ago quarter. The increase in the higher loss of $1.8 million over the same quarter last year is mainly attributed to an increase in the share of Merit's loss of $1.2 million and $657,000 of pea and canola-related costs that were deferred in the second quarter of fiscal 2022.
During the second quarter of fiscal 2023, Merit recorded total sales of $2.4 million, including sales of co-products in addition to pea and canola protein sales, an increase of 48% as compared to $1.6 million in second quarter of fiscal 2022. With its 31.6% equity stake in Merit, Burcon recorded $1.4 million as its share of loss in Merit Foods for the quarter, as compared to $159,000 in the same quarter in fiscal 2022. Included in the share of Merit Foods' fiscal 2022 second quarter loss is a recovery of $656,000 to correct a deferred income tax adjustment related to the first quarter of fiscal 2022. Merit recorded a loss of $4.4 million for the quarter ended Sept 30, 2022, as compared to $477,000 in same year-ago quarter. Merit's loss reflects its stage of development as it continued to ramp up its production and sales. During the quarter, Merit's shareholders advanced an aggregate of $3 million to Merit to address its liquidity requirements, with Burcon's share being $947,867.
Gross research and development expenses totaled $845,000 for the three months ended September 30, 2022, as compared to $723,000 in the same year-ago quarter. The Company began deferring canola and pea development expenses from the second quarter of fiscal 2020 and began amortization in January, 2022. During the second quarter in fiscal 2022, Burcon allocated $484,000 of R&D costs to deferred development costs. The amortization of these deferred costs during this quarter contributed to most of the increase in gross R&D expenses this quarter.
Gross intellectual property expenses decreased by $121,000 over the same year-ago quarter, due mostly to lower maintenance costs for the soy portfolio.
At September 30, 2022, cash balances totaled $1.1 million compared to $7.0 million at March 31, 2022. During this quarter, Burcon made a drawdown of $2.0 million from the first tranche of the $10 million secured loan facility. If the secured loan facility is fully drawn, management believes it has sufficient resources to fund its expected level of operations and working capital requirements to [November 2023].
Conference Call Details
Burcon will hold an investor conference call and webcast on Monday, November 7, 2022 at 5:00pm ET.
A link to the webcast of the conference call will be available on Burcon's website under "Presentations" or directly here. The webcast will also be archived for future playback.
Investors interested in participating in the live call can dial in using the details below:
Date: Monday November 7, 2022
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in (North America): 1-855-327-6837
Dial-in (toll/international): 1-631-891-4304
Conference ID: 10020552
About Burcon NutraScience Corporation
Burcon is a global technology leader in the development of plant-based proteins for foods and beverages. With over two decades of experience formulating high-purity proteins that have superior functionality, taste and nutrition, Burcon has amassed an extensive patent portfolio covering its novel plant-based proteins derived from pea, canola, soy, hemp and sunflower seeds, among other plant sources. In 2019, Merit Functional Foods Corporation ("Merit Foods") was established between Burcon and three veteran food industry executives. Merit Foods has since built and commissioned a state-of-the-art protein production facility in Manitoba, Canada that is producing, under license from Burcon, best-in-class pea and canola proteins for the food and beverage industries. For more information, visit www.burcon.ca.
Forward-Looking Information Cautionary Statement
The TSX has not reviewed and does not accept responsibility for the adequacy of the content of the information contained herein. This press release contains forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation including statements with respect to the appointment of KPMG LLP as successor auditor and the ability of Burcon to form a strategic alliance with potential partners. Forward-looking statements or forward-looking information involve risks, uncertainties and other factors that could cause actual results, performances, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements or forward-looking information can be identified by words such as "anticipate," "intend," "plan," "goal," "project," "estimate," "expect," "believe," "future," "likely," "may," "should," "could," "will" and similar references to future periods. All statements included in this release, other than statements of historical fact, are forward-looking statements. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements or information. Important factors that could cause actual results to differ materially from Burcon's plans and expectations include the implementation of our business model and growth strategies; trends and competition in our industry our future business development, financial condition and results of operations and our ability to obtain financing cost-effectively; potential changes of government regulations; and other risks and factors detailed herein and from time to time in the filings made by Burcon with securities regulators and stock exchanges, including in the section entitled "Risk Factors" in Burcon's annual information form for the year ended March 31, 2022 and its other public filings with Canadian securities regulators on SEDAR at www.sedar.com. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements or information. Any forward-looking statement or information speaks only as of the date on which it was made, and, except as may be required by applicable securities laws, Burcon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Although Burcon believes the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance, and, accordingly, investors should not rely on such statements.
Steve Campbell, APR
Campbell & Company Public Relations
Tel (604) 888-5267
|Burcon NutraScience Corporation|
|Condensed Consolidated Interim Statements of Financial Position|
As at September 30, 2022 and March 31, 2022
|(In Canadian dollars)|
|September 30,||March 31,|
|Cash and cash equivalents||1,095,642||7,000,824|
|Property and equipment||969,486||859,386|
|Deferred development costs||6,006,401||6,217,153|
|Investment in and loan to Merit Functional Foods Corporation||14,296,220||13,402,774|
|Accounts payable and accrued liabilities||769,125||906,651|
|Restricted share units||58,199||12,078|
|Burcon NutraScience Corporation|
|Condensed Consolidated Interim Statements of Operations and Comprehensive Loss|
For the three and six months ended September 30, 2022 and 2021
|(In Canadian dollars)|
|Three months ended||Six months ended|
|September 30||September 30|
|Research and development||844,597||238,412||1,700,900||680,196|
|General and administrative||987,260||926,669||1,898,647||1,939,409|
|Loss from operations||(1,951,090)||(1,315,658)||(4,020,219)||(2,911,002)|
|Interest and other income||131,021||104,654||240,398||213,021|
|Management fee income||18,490||24,645||25,130||86,473|
|Share of loss in Merit Functional Foods Corporation||(1,400,506)||(158,933)||(3,404,247)||(1,907,030)|
|Interest and other expense||(36,569)||(9,390)||(77,330)||(16,841)|
|Loss and comprehensive loss for the period||(3,234,050)||(1,353,525)||(7,230,218)||(4,535,347)|
|Basic and diluted loss per share||(0.03)||(0.01)||(0.07)||(0.04)|
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