BioExx Specialty Proteins Ltd.
TSX : BXI

BioExx Specialty Proteins Ltd.

March 30, 2010 16:49 ET

BioExx Announces 2009 Annual Results

Conference Call: Wednesday, March 31, 10:00 a.m. ET

Dial-in Numbers: 416-340-8061 / 866-225-0198

TORONTO, ONTARIO--(Marketwire - March 30, 2010) - BioExx Specialty Proteins Ltd. (TSX:BXI) announced today its financial results for the fiscal year and quarter ended December 31, 2009. Complete financial statements and Management's Discussion and Analysis have been filed for public review at www.sedar.com.

Summary of Q4 Events

  • Receipt of ISO 22000, HACCP and GMP Certification
  • Completion of US FDA GRAS Self-affirmation
  • Filing of Toasted Meal patent application
  • Receipt of environmental clearances for North Dakota plant
  • Strong plant operations performance in Saskatoon, accelerating through year-end to current
  • Continued weakness in canola crush margins but relative strength in protein markets
  • Further protein product quality validation from pilot programs
  • Solid progress in Saskatoon engineering, procurement, and construction towards protein production

"We are very pleased with all of the operating metrics that have now been achieved in our crush plant as we prepare for our more lucrative protein operations including recently running the plant on a full day basis at an equivalent of 40,000 MT annual capacity at much higher oil yields than even the equipment suppliers thought possible, as well as operating at full capacity for our lower yield, high protein quality in preparation for protein operations," said Chris Carl, BioExx CEO. "The management of schedules and expectations is challenging, particularly in a very sophisticated first-of-its-kind project of this nature, with potentially disruptive global market impact. Nevertheless, on current schedules, this would bring us to market with commercial products approximately one year from pilot production, less than one year from the Company's decision to accelerate its move into these markets, and less than two years from the original laboratory discovery work and patent filing. We believe this is a tremendous achievement and one in which we take great pride."

Financial Results

Revenues

Revenues for the year were $4,170,507, comprised of $2,761,466 from canola oil sales and $1,409,041 from canola meal sales. This revenue was earned over the last three quarters of the year, as there were no revenues earned in the first quarter of 2009. There is no prior year comparative on revenues, as the Company was in development stages and not yet earning revenues in prior years.

During the fourth quarter, the Company generated $1,384,862 of revenue from canola oil and canola meal sales at its Saskatoon plant, down 15% versus revenue of $1,633,153 in the prior quarter. Revenue was impacted by slightly lower processing volumes and yields during the quarter, due to planned off-line days for the installation of additional equipment and the planned switch to a new seed input variety, together with weakness in uncontrollable commodity prices for oil and meal.

Total revenue is driven by two factors, specifically production quantity and price. In turn, production quantity is driven by two factors, namely processing volumes and oil yield. The following chart shows the performance of the plant through Q4 and more recently for each of these parameters:

DAILY AVERAGE October 2009 November 2009 December 2009 January 2010 February 2010
           
Seed Processed (kg) 43,918 45,224 60,974 73,555 79,975
           
Oil Produced (kg) 12,755 13,507 19,351 24,422 26,430
           
Meal Produced (kg) 28,321 28,669 37,425 44,077 47,176
           
Oil Yield (%) 74% 77% 81% 85% 85%

While the chart above shows monthly averages, during recent trials, the facility has actually achieved 130,000 kg in a 24 hour day at above 85% yield. The Company is therefore pleased to note that as a result of the above noted improvements, the plant now has the capability of running materially in excess of its Phase 1 budget expectations with respect to oil yield and daily quantities processed.

Cost of Goods Sold

Cost of Goods Sold consists primarily of canola seed which is purchased by BioExx for processing, and also includes direct labour and direct utilities. Cost of Goods Sold for the year was $5,493,600. There is no prior year period against which to compare this, given the commercial operations commenced in 2009.

In the 4th quarter of 2009, Cost of Goods Sold fell by 17% from $2,129,095 in Q3 to $1,777,703 in Q4, or $351,392, more than offsetting the revenue decrease of $248,291. This created a negative Gross Margin of $392,841 in Q4 versus negative $495,942 in Q3, an improvement of 21% or $103,101. The Gross Margin improvement points to lower seed input prices during Q4, together with relatively flat expenditures in the labour and utilities areas.

Gross Margin

Gross Margin for the year was negative $1,323,093. Other plant expenses for the year, which includes items such as maintenance expenses, QA/QC expenses, production supervision, plant supplies, and miscellaneous other plant expenses, was $913,065. Plant labour costs overall are impacted by the retention of a higher number of staff than would be required if the plant was to remain a pure crushing operation, in order to ensure readiness for Phase 2 protein operations. Amortization of plant and equipment was $347,304. Taken together, this results in a negative Plant Margin of $2,583,462. Again, as 2009 was the first year of commercial plant operations, there is no comparable prior year period.

In the 4th quarter, Other plant expenses decreased slightly versus the prior quarter, by $17,962 or 6%, from $324,386 to $306,424. Together with non-cash Amortization of Plant and Plant Equipment of $133,777, this resulted in a net decrease in negative Plant Margin from $895,005 in Q3 to $833,042 in Q4.
As the Company has discussed in prior quarters, the operation of a very small 40,000 metric tonne crush-only plant is economically challenging in any environment, let alone one which has been characterized by weak crush margins. Thus, 2009 plant operations are best viewed not on a stand-alone basis but rather as a necessary stepping stone to protein production in 2010.

Administrative and General Expenses

The Corporation incurred Administrative and general expenses during the year of $5,659,655, compared to $3,810,439 in the prior year. The increase in expenditures reflects the ramp up of efforts in all areas of operations. As can be seen from the milestones met by the Company in the year, activities were intensified throughout 2009, and the Company achieved measurable success in research and development, market and customer engagement, plant construction and operations, and public company administration. These efforts were targeted towards and in preparation for commercial protein production operations.

In the 4th quarter of 2009, Administrative and general expenses increased 34% to $1,867,319 in Q4, versus $1,393,486 in Q3. Office and general expenses were higher as a result of higher payroll costs due to the addition of staff and the payment of regular annual performance bonuses to staff, increasing insurance costs as premiums rise to reflect the asset build-out in Saskatoon, higher legal and accounting costs relating mainly to the Company's filing of an AIF and its move to the Toronto Stock Exchange, and higher travel expenses reflecting the intensive involvement of Toronto-based staff in Saskatoon Phase 2 activities. Research and development spending was also higher in Q4, primarily flowing from the Company's very active protein isolate pilot production program as part of the drive to commercial operations, as discussed earlier in this MD&A.

Net Loss

The Net Loss for the year was $8,171,994, compared to $3,525,814 for the prior year. This increase in net loss is a result of the negative Plant Margin and the increase in expenditures discussed above. On a per share basis then, the Net Loss is $0.06 for the year, versus $0.04 in 2008. The Net Loss for the 4th quarter increased 17% to $2,662,667, compared to $2,274,780 in the prior quarter, with the increase in loss accruing to the net impact of the individual items discussed above. On a per share basis, the Net Loss is $0.02 for the quarter, versus $0.02 in the prior quarter.

About BioExx Specialty Proteins Ltd.

Headquartered in Toronto, Canada, BioExx is a leading technology and industrial processing company focused on the extraction of oil and high-value proteins from oilseeds for the global food, beverage, and nutrition markets. BioExx uses patented and patent-pending technology that utilizes significantly lower temperatures than conventional methods for extracting the final quantities of oil necessary to enable its simplified and patent-pending methods for separating proteins from oilseeds. Relative to other commercial processes, the low temperature BioExx process results in comparatively low energy requirements, environmentally sound extraction and protein separation processes, and very high human food yield that cumulatively have the potential to make a highly valuable contribution to global food and protein supply while maintaining an excellent environmentally sustainable footprint. BioExx operates a commercial scale extraction facility in Saskatoon, Saskatchewan, is in development stages on it second plant in Minot, North Dakota and has a mission to construct additional and larger processing facilities on a global basis.

To find out more about BioExx Specialty Proteins Ltd. (TSX:BXI), please visit www.bioexx.com

The statements made in this press release include forward-looking statements that involve a number of risks and uncertainties. These statements relate to future events or future performance and reflect management's current expectations and assumptions. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, such as the economy, generally, competition in its target markets, the demand for BioExx's products, the availability of funding, the efficacy of its technology, and the anticipated costs of BioExx's plant construction and operation. These forward-looking statements are made as of the date hereof and BioExx does not assume any obligation to update or revise them to reflect new events or circumstances. Actual events or results could differ materially from BioExx's expectations and projections.

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