Burcon Announces Year-End Results, Reviews Operations

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| Source: Burcon NutraScience Corporation

VANCOUVER, British Columbia, June 25, 2012 (GLOBE NEWSWIRE) -- Burcon NutraScience Corporation (TSX:BU) (Nasdaq:BUR) ("Burcon") today reported financial results for the fiscal year ended March 31, 2012 and provided a review of the year's operations.

A summary of the highlights of the past year includes:

  • Archer Daniels Midland Company ("ADM") launched CLARISOY 100, the first product in the CLARISOY line, at the IFT Annual Meeting and Food Expo in June 2011. ADM also announced that they will launch the first extension of CLARISOY at the 2012 IFT Annual Meeting and Food Expo in June 2012;
  • ADM announced the opening of its first commercial-scale plant to make CLARISOY;
  • In October 2011, Burcon's common shares commenced trading on The NASDAQ Global Market under the symbol "BUR";
  • Developed PEAZAZZ, a novel pea protein that is 100% soluble and transparent in low pH solutions with clean flavour characteristics and is heat stable permitting hot fill applications;
  • Filed several patent applications over novel or alternative processes for the production and functional applications of, and functional attributes of CLARISOY® soy protein, as well as over the composition and functional applications of canola protein isolates;
  • Nine U.S. patents granted over Burcon's canola protein patent applications; and
  • Canola License and Development agreement with ADM terminated on March 1, 2012.

Since the signing of the License and Production Agreement with ADM in March 2011 for CLARISOY soy protein, Burcon's scientific team has been focused on further optimization of the CLARISOY process and further improvements of the final products, including increasing yields and improving economics. In addition, the Winnipeg Technical Centre focused on gathering data required for scale-up to production plant and equipment selection and provided assistance in the start-up of the semi-works facility. Burcon produced significant quantities of CLARISOY samples for ADM customer evaluations.

Burcon announced it had developed a novel pea protein isolate that it has branded PEAZAZZ. PEAZAZZ pea protein may be used in a variety of healthy consumer product applications and should be of interest to companies looking for a functional alternative plant protein ingredient. Until April 2012, Burcon held exclusive negotiations with a potential partner to commercialize PEAZAZZ pea protein and the associated protein extraction technology. On April 23, 2012, Burcon announced that although discussions with this potential partner are ongoing, the exclusivity period had lapsed. Therefore, Burcon will consider additional routes-to-market for its PEAZAZZ pea protein.

On March 1, 2011, Burcon and ADM amended the License and Development Agreement (the "Canola Agreement") to provide a one-year extension to the development period to March 1, 2012 to facilitate continued research aimed at expanding the commercial value of Puratein® and Supertein™ canola protein isolates. Burcon agreed to reimburse ADM for its share of the U.S. regulatory recognition process of US$360,000 (CA$359,100) if ADM chose not to proceed with the license under the Canola Agreement. These funds were deposited into an interest-bearing escrow account held in trust for Burcon and ADM and would be released to ADM if Burcon and ADM did not agree to any further extensions and amendments by March 1, 2012. Upon ADM's receipt of the escrow funds, all intellectual property, reports, studies or other materials prepared by ADM, Burcon or by a third party in connection with the U.S. regulatory recognition process would be deemed to be owned solely by Burcon and ADM would have no further rights with respect thereto. The Canola Agreement terminated on March 1, 2012 and the funds held in escrow were released to ADM in April 2012. Given the termination of the Canola Agreement, Burcon is free to choose alternative paths for the commercialization of its technology for the production of its canola proteins: Puratein®, Supertein™ and Nutratein™ canola protein isolates.

In the case of Puratein® and Supertein™ canola protein isolates, Burcon continues to work with food and beverage manufacturers to establish the value of Burcon's proteins in their food products. Burcon has executed material transfer agreements with certain major companies. In the case of Nutratein canola protein isolate, Burcon has been in discussions with a leading animal nutrition company with the intention of using Nutratein canola protein isolate to replace or partially replace dairy protein in certain animal feed applications.

For the coming year, Burcon's objectives are to further the development and commercialization of its soy, canola and pea products.

Soy

Burcon will support ADM in connection with its development of a commercial facility for the production, marketing and sale of CLARISOY soy protein.

Canola

Burcon plans to conduct further research and development to establish the unique functional and nutritional characteristics of Supertein, Puratein® and Nutratein canola protein isolates. In respect of Nutratein, Burcon will refine the pilot process to produce a consistent product of optimum quality, flavour, colour, aroma, amino acid profile, nutritional and functional attributes. Burcon also intends to pursue a collaboration with animal feed manufacturers on animal and/or fish feeding trials using Nutratein. Burcon will continue to pursue product development agreements with major food, beverage and nutritional product companies to develop improved or novel applications for Supertein and Puratein® canola protein isolates into their products. Burcon will also continue to pursue a strategic alliance with a potential partner in connection with the development of a commercial facility for the production, marketing and sale of Burcon's canola protein isolates.

Pea

Burcon intends to pursue product development agreements with major food, beverage and nutritional product companies to develop improved or novel applications for PEAZAZZ pea protein into their products. Burcon will also pursue a strategic alliance with a potential partner in connection with the development of a commercial facility for the production, marketing and sale of PEAZAZZ pea protein.

Burcon will continue to refine its protein extraction and purification technologies, develop new technologies and related products. In addition, Burcon will further strengthen and expand its intellectual property portfolio. Burcon will also explore opportunities for acquiring or licensing into Burcon, novel technologies that will complement or enhance Burcon's intellectual property portfolio and business initiatives.

Financial Results and Highlights

Burcon reported a loss of $5,962,342 ($0.20 per share) for the year as compared to $8,806,474 ($0.30 per share) in the prior year. Included in the loss amount reported is stock-based compensation (non-cash) costs of $1,716,062 (2011 - $4,091,119). The other non-cash costs included in the loss for the year are amortization of $101,148 (2011 - $178,050) and gain on disposal of property and equipment of $3,359 (2011 - $nil).

In March 2011, the Company determined that it had met all the criteria of deferring development costs with respect to CLARISOY and commenced deferring these expenditures. During the year, Burcon deferred a total of $1,778,888 (2011 - $190,284) of these development expenditures. Burcon expensed about $1,040,000 in R&D expenditures (2011 - $2,890,000). Over one-half of R&D expenditures are comprised of salaries and benefits. Before capitalizing salaries and benefits to deferred development costs, the cash portion of salaries and benefits increased by approximately $128,000 over fiscal 2011. About $83,000 of the increase is due to the addition of new technical staff at the WTC, and the balance due to annual salary increases. Other R&D expenditures, such as laboratory operation, analyses and testing expenses also increased (before capitalization to deferred development costs) due to increased CLARISOY activity levels. In 2011, Burcon agreed to reimburse ADM for its share of the GRAS regulatory recognition process pursuant to the amendment of the Canola Agreement. The amount of US$360,000 was recorded as R&D expenditures in fiscal 2011.

General and administrative expenses decreased by about $993,000 over the prior year. Included in salaries and benefits is stock-based compensation expense of approximately $1,597,000 (2011 –$2,941,000). Options granted to directors this year were vested immediately and a related fair value of about $995,000 was recorded as stock-based compensation expense. Similarly, options granted to directors last year also vested immediately and a related fair value of about $538,000 was recorded as stock-based compensation. This increase was offset by a decrease in stock-based compensation expense of about $1.6 million for options granted in December 2009 that had completed vesting during this year.

The cash portion of salaries and benefits increased by about $529,000 over the prior year due to the full-year effect of two of the Company's officers that transferred their employment from a related party to Burcon in late fiscal 2011, the hiring of a director of corporate development and a business development analyst also late last year, and a salary increase, including a retroactive salary adjustment, for a senior officer. Directors' fees also increased by about $38,000 due to additional board and committee meetings held during this year. As a result of the transfer of employment of the two officers from the related party to Burcon, management fees charged by the related party decreased this year by $127,000 from the prior year.

Patent legal fees and expenses account for a significant portion of Burcon's professional fees. Burcon's patent strategy is to aggressively seek protection for new technologies as well as further protecting current technologies. During the year, Burcon capitalized about $651,000 (2011 - $2,000) of patent costs to deferred development costs. Total patent legal fees and expenditures (before capitalization) increased by about $674,000 over the prior year. As noted above, Burcon filed five new patents (2011 – six) during the year, and nine patent applications (2011 – five) entered national phase, which generated significant filing fees in various countries. Most of the patent applications that entered national phase in the prior year occurred during the last quarter, and the related expenditures continued into the early part of the current year. From inception, Burcon has expended approximately $7.5 million on patent legal fees and disbursements to strengthen its patent portfolio in various countries of the world and file patent applications for new inventions.

Burcon incurred about $230,000 in legal and audit expenses related to our NASDAQ listing. As well, audit fees increased by about $50,000 as a result of the NASDAQ listing. This was offset by legal fees of about $47,000 in the prior year relating to the ADM CLARISOY agreement.

The decrease in consulting fees is due primarily to the financial advisory fee of about $510,000 paid last year for the negotiation and finalization of the CLARISOY agreement.

Included in investor relations expenses is approximately $7,000 (2011 - $67,000) of stock-based compensation expense. The cash portion of investor relations expenses increased by approximately $14,000. TSX and NASDSAQ fees accounted for about $39,000 of the increase, which was offset by a decrease in public relations fees of about $31,000. Travel expenses also increased by about $28,000, offset by a decrease in a newly-designed website last year of about $32,000.

At March 31, 2012, the Company's cash and short-term investment totaled approximately $6,159,000, as compared to approximately $11,932,000 at March 31, 2011. Management believes it has sufficient resources to fund its expected level of operations and working capital requirements to at least May 2013, excluding proceeds from outstanding convertible securities and royalty revenues that may be derived from the semi-works commercial facility. Burcon intends to raise additional capital to fund its operations and business objectives through an equity offering within the next twelve months.

About Burcon NutraScience

Burcon is a leader in nutrition, health and wellness in the field of functional, renewable plant proteins. Since 1999, Burcon has developed a portfolio of composition, application, and process patents originating from our core protein extraction and purification technology. We have developed CLARISOY™ soy protein, the only vegetable-based protein that offers clarity and complete protein nutrition for low pH beverage systems; PEAZAZZ™ a uniquely soluble and clean-tasting pea protein and Puratein®, Supertein™ and Nutratein™ canola protein isolates with unique functional and nutritional attributes. Our team of highly specialized scientists and engineers work from our private research facility to develop and optimize environmentally sound technologies. To-date, our patent portfolio consists of 191 issued patents in various countries, including 34 issued U.S. patents, and in excess of 375 additional pending patent applications, 74 of which are U.S. patent applications.

CLARISOY™ is under license from Archer Daniels Midland Company.

CLARISOY™ is a trademark of Archer Daniels Midland Company.

ON BEHALF OF THE BOARD OF DIRECTORS

"Johann F. Tergesen"

Johann F. Tergesen

President and Chief Operating Officer

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 that involve risks and uncertainties. These forward-looking statements relate to, among other things, plans and timing for the introduction or enhancement of our products, statements about future market conditions, supply and demand conditions, and other expectations, intentions and plans contained in this press release that are not historical fact. Our expectations regarding the prospect for future success depend upon our ability to develop and sell products, which we do not produce today and cannot be sold without further research and development. When used in this press release, the words "goal," "intend," "believes" and "potential" and similar expressions, generally identify forward-looking statements. These statements reflect our current expectations. They are subject to a number of risks and uncertainties. In light of the many risks and uncertainties surrounding the development of a source of protein from canola meal, you should understand that we cannot assure you that the forward looking statements contained in this press release will be realized.

     
     
 Burcon NutraScience Corporation     
 Consolidated Balance Sheets     
 As at March 31, 2012 and 2011     
     
  2012 2011
  $ $
 Assets     
     
 Current assets     
 Cash and cash equivalents   3,856,929  9,628,020
 Restricted cash   361,600  -- 
 Short-term investments   2,301,961  2,304,465
 Amounts receivable   37,027  41,919
 Prepaid expenses   117,991  81,570
     
   6,675,508  12,055,974
     
 Property and equipment   626,488  732,977
     
 Deferred development costs --   1,969,172  190,284
 net of accumulated amortization of $nil (2011 -- $nil)     
     
 Goodwill   1,254,930  1,254,930
     
   10,526,098  14,234,165
     
 Liabilities     
     
 Current liabilities     
 Accounts payable and accrued liabilities   916,652  1,328,920
     
 Deferred revenue   222,656  -- 
     
   1,139,308  1,328,920
     
 Shareholders' Equity     
     
 Capital stock   48,061,704  47,158,758
     
 Contributed surplus   4,009,595  3,762,983
     
 Options   10,209,388  8,915,059
     
 Deficit   (52,893,897)  (46,931,555)
     
   9,386,790  12,905,245
     
   10,526,098  14,234,165
     
     
 Burcon NutraScience Corporation 
 Consolidated Statements of Operations and Comprehensive Loss 
 For the years ended March 31, 2012 and 2011 
     
  2012 2011
  $ $
 Expenses     
 General and administrative   5,061,510  6,055,351
 Research and development   1,040,085  2,889,853
     
 Loss from operations   (6,101,595)  (8,945,204)
     
 Interest and other income   139,253  138,730
     
 Loss and comprehensive loss for the year   (5,962,342)  (8,806,474)
     
 Basic and diluted loss per share   (0.20)  (0.30)
               
               
 Burcon NutraScience Corporation             
 Consolidated Statements of Changes in Equity             
 For the years ended March 31, 2012 and 2011             
               
  Number of
Fully Paid
Common
Shares
(Unlimited
number of
common
shares
without par
value)
Capital
stock
Contributed
surplus
Options Warrants Deficit Total
shareholders'
equity
    $ $ $ $ $ $
               
 Balance, March 31, 2010   29,056,080  44,236,390  3,762,983  5,673,677  171,972  (38,125,081)  15,719,941
               
 Net loss   --   --   --   --   --   (8,806,474)  (8,806,474)
               
 Options exercised for cash   638,000  1,225,900  --   --   --   --   1,225,900
               
 Transferred from options on exercise of options   --   883,503  --   (883,503)  --   --   -- 
               
 Options granted to employees   --   --   --   4,124,885  --   --   4,124,885
               
 Warrants exercised   111,477  640,993  --   --   --   --   640,993
               
 Transferred from warrants on exercise of warrants   --   171,972  --   --   (171,972)  --   -- 
               
 Balance, March 31, 2011   29,805,557  47,158,758  3,762,983  8,915,059  --   (46,931,555)  12,905,245
               
               
 Balance, March 31, 2011   29,805,557  47,158,758  3,762,983  8,915,059  --   (46,931,555)  12,905,245
               
 Net loss   --   --   --   --   --   (5,962,342)  (5,962,342)
               
 Options exercised for cash   187,517  544,324  --   --   --   --   544,324
               
 Transferred from options on exercise of options   --   358,622  --   (358,622)  --   --   -- 
               
 Options granted to employees   --   --   --   1,899,563  --   --   1,899,563
               
 Options vested but not exercised   --   --   246,612  (246,612)  --   --   -- 
               
 Balance, March 31, 2012   29,993,074  48,061,704  4,009,595  10,209,388  --   (52,893,897)  9,386,790
     
     
 Burcon NutraScience Corporation   
 Consolidated Statements of Cash Flows   
 For the years ended March 31, 2012 and 2011   
     
  2012 2011
  $ $
 Cash flows from operating activities   
 Loss for the year   (5,962,342)  (8,806,474)
 Items not affecting cash     
 Amortizaion of property and equipment   101,148  178,050
 Gain on disposal of property and equipment   (3,359)  -- 
 Stock-based compensation expense   1,716,062  4,091,119
     
   (4,148,491)  (4,537,305)
 Changes in non-cash working capital items   
 Amounts receivable   4,892  (16,867)
 Prepaid expenses   (36,421)  (3,634)
 Accounts payable and accrued liabilities   (412,268)  927,741
 Deferred revenue   222,656  -- 
     
   (4,369,632)  (3,630,065)
 Cash flows from investing activities   
 Decrease in short-term investments   2,504  15,907
 Increase in restricted cash   (361,600)  -- 
 Acquisition of property and equipment   (78,546)  (180,608)
 Development costs deferred   (1,511,886)  (105,852)
 Proceeds from disposal of property and equipment   3,745  -- 
   (1,945,783)  (270,553)
     
 Cash flows from financing activities   
 Issue of capital stock   544,324  1,866,893
     
 Decrease in cash and cash equivalents   (5,771,091)  (2,033,725)
     
 Cash and cash equivalents - Beginning of year   9,628,020  11,661,745
     
 Cash and cash equivalents - End of year   3,856,929  9,628,020
     
 Cash and cash equivalents consist of   
 Cash   3,856,929  531,516
 Cash equivalents   --   9,096,504
   3,856,929  9,628,020
     
 Supplemental disclosure of non-cash investing activities 
 Charged to deferred development costs:   
 Stock-based compensation   183,502  65,397
 Amortization of property and equipment   83,501  19,036
Michael Kirwan, Director, Corporate Development
Burcon NutraScience Corporation
(604) 733-0896 / (888) 408-7960 toll-free
 www.burcon.ca