CEAPRO INC.
TSX VENTURE : CZO

CEAPRO INC.

November 27, 2008 07:30 ET

Ceapro Reports Increased Sales in Third Quarter and Nine-Month Period of 2008

EDMONTON, ALBERTA, CANADA--(Marketwire - Nov. 27, 2008) - Ceapro Inc. (TSX VENTURE:CZO) today reported 47% increase in sales for the third quarter ended September 30, 2008. Revenues reached $871,000 compared with $591,000 in the same period last year. This was achieved despite a lower US dollar exchange rate for the first nine months of 2008 and an interruption in the supply of key raw material due to flooding in the Midwest U.S. during July and August. Globally, there is a growing demand for Ceapro's natural and organic active ingredients and the Company has taken several actions to increase gross margins and to be in a position to respond to an expected overall increased demand in 2009.

Strategic Review Initiatives

In August 2008 the Board and the Management of Ceapro announced several strategic initiatives that have been quickly implemented. The focus of the Company on its core expertise - extracting active ingredients from natural sources - has delivered good growth in revenues during the third quarter and the Company foresees increased sales for the rest of the year and in 2009.

A contract manufacturing organization will be contracted for supplement production of bulk intermediates during the fourth quarter, while the finishing manufacturing steps will continue to be done at the Company's facilities in Leduc, Alberta. This will allow the Company to increase sales and gross margins in 2009.

Out-licensing discussions are advancing well with a strategic partner for the Company's proprietary diabetes test meal CeaProve®.

Financial Highlights for Third Quarter and Nine Month Period Ended September 30, 2008

- Sales of active ingredients to personal care markets were $871,000 for the quarter and $3,179,000 for the nine-month period, compared with $591,000 and $2,671,000 in the corresponding periods in 2007.

- Gross margins were at 30% for the quarter and 38% for the nine-month period, down substantially from the same periods in 2007. The majority of costs are variable in relation to volume and specific formulation of products but the Company continues to face pressures from higher labor costs and labor shortages, rising commodity prices, and a lower US dollar during the first nine months of 2008.

- For the third quarter and nine-month period, R&D expenses increased 54% and 62% respectively due to hiring of new scientific personnel to develop products and new technologies. In the cosmeceutical and nutraceutical fields, this is vital in order to satisfy customers request for very high-quality ingredients and new products.

- Net loss for the quarter was $488,000 or $0.01 per share, compared with a net loss of $602,000 or $0.01 per share in 2007.

The complete audited annual report and financial statements are available for review on SEDAR at http://sedar.com/Ceapro and on the Company's website at www.ceapro.com.

About Ceapro Inc.

Ceapro Inc. is a Canadian growth-stage biotechnology company. Primary business activities relate to the development and commercialization of organic products for personal care and cosmetic industries using proprietary technology and natural, renewable resources. The commercial line of natural and organic active ingredients include beta glucan, avenanthamides (colloidal oat extract), oat powder, oat oil, oat peptides and lupin peptides.



CEAPRO INC.
Consolidated Balance Sheets


September 30 December 31
2008 2007
(Unaudited) (Audited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $149,359 $1,282,326
Accounts receivable 398,338 708,165
Inventories 406,307 156,584
Prepaid expenses and deposits 86,270 130,100
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1,040,274 2,277,175

RESTRICTED CASH 50,000 50,000
LICENSES 30,000 -
PROPERTY AND EQUIPMENT (NET OF
ACCUMULATED AMORTIZATION) 2,278,458 2,260,418
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$3,398,732 $4,587,593
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LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $628,168 $494,413
Current portion of deferred revenue 62,838 107,007
Current portion of long-term debt 129,835 112,638
Current portion of royalties payable 330,463 138,185
Employee future benefits obligation 200,750 -
SGGF legal fees (Note 12) 755,469 -
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2,107,523 852,243

DEFERRED ROYALTY REVENUE 279,218 328,377
EMPLOYEE FUTURE BENEFITS OBLIGATION 121,476 283,648
LONG-TERM DEBT 1,399,790 1,499,768
ROYALTIES PAYABLE 27,962 69,905
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3,935,969 3,033,941
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SHAREHOLDERS' DEFICIENCY

SHARE CAPITAL 5,016,395 5,016,395
CONTRIBUTED SURPLUS 352,027 259,329
DEFICIT (5,905,659) (3,722,072)

(537,237) 1,553,652
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$3,398,732 $4,587,593
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CEAPRO INC.
Consolidated Statements of Net Loss, Comprehensive Loss and Deficit


Unaudited Nine Months Ended Quarters Ended
September 30 September 30
2008 2007 2008 2007
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Revenue
Sales $3,178,917 $2,670,920 $871,331 $590,709
Cost of goods sold 1,980,476 1,300,326 606,592 388,862
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Gross margin 1,198,441 1,370,594 264,739 201,847
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Expenses
General and
administration 1,280,150 933,418 426,059 348,584
Royalties 300,357 252,347 82,323 55,810
Sales and marketing 330,336 301,010 56,063 108,256
Amortization 248,522 98,331 85,409 33,527
Interest on long-term
debt 63,309 28,460 20,764 8,536
Interest - other - 3,000 - 871
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2,222,674 1,616,566 670,618 555,584
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(Loss) income from
operations
(1,024,233) (245,972) (405,879) (353,737)
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Other income (expenses)
Research and product
development (442,324) (461,097) (103,004) (189,967)
Bio-energy
feasibility
study (14,427) (66,765) (55) (21,095)
Other income
(expenses) 52,866 (87,021) 21,305 (37,151)
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(403,885) (614,883) (81,754) (248,213)
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Loss before SGGF legal
fees and income taxes (1,428,118) (860,855) (487,633) (601,950)

SGGF legal fees
(Note 12) (755,469) - - -

Income taxes

Current - - - (68,500)

Reduction as a result
of applying non-capital
losses carried forward
against the current
period's taxable
income
- - - 68,500
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NET LOSS AND
COMPREHENSIVE LOSS
FOR THE PERIOD (2,183,587) (860,855) (487,633) (601,950)

Deficit, beginning of
period (3,722,072) (2,332,738) (5,418,026) (2,591,643)
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Deficit, end of
period $(5,905,659) $(3,193,593) $(5,905,659) $(3,193,593)
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Net loss per share:
Basic $(0.05) $(0.02) $(0.01) $(0.01)
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Diluted $(0.05) $(0.02) $(0.01) $(0.01)
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CEAPRO INC.
Consolidated Statements of Cash Flows


Unaudited Nine Months Ended Quarters Ended
September 30 September 30
2008 2007 2008 2007
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Operating Activities
Net loss for the
period $(2,183,587) $(860,855) $(487,633) $(601,950)
Items not affecting
cash
Amortization 248,522 98,331 85,409 33,527
Employee future
benefits obligation 38,578 48,810 7,582 17,044
Recognition of
deferred royalty
revenue (36,321) (30,513) (9,955) (6,747)
Stock based
compensation 92,698 60,994 38,563 38,752
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(1,840,110) (683,233) (366,034) (519,374)
Changes in Non-Cash
Working Capital Items
Accounts receivable 309,827 386,384 367,310 710,092
Inventories (249,723) 1,519 53,207 55,460
Prepaid expenses and
deposits 43,830 (114,983) (8,786) (27,607)
Accounts payable and
accrued liabilities 133,755 68,817 147,160 (483,598)
Deferred revenue (57,007) 120,878 - 140,044
SGGF legal fees 755,469 - - -
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(903,959) (220,618) 192,857 (124,983)

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Investing Activities
Purchase of licenses (30,000) - - -
Purchase of property
and equipment (266,562) (1,292,760) (54,660) (616,718)
Deposits for the
purchase of property
and equipment - (51,336) - (28,254)
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(296,562) (1,344,096) (54,660) (644,972)
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Financing Activities
Repayment of long-term
debt (82,781) (27,153) (31,389) (9,251)
Repayment of callable
debt - (36,313) - (12,338)
Proceeds from long
term debt - 556,838 - -
Proceeds from issuance
of share capital - 2,692,100 - -
Share capital issue
costs - (288,799) - (11,107)
Proceeds from exercise
of stock options - 138,878 - 105,641
Increase (decrease)
in royalties payable 150,335 (53,915) 2,180 (69,884)
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67,554 2,981,636 (29,209) 3,061
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Increase (decrease)
in cash and cash
equivalents (1,132,967) 1,416,922 108,988 (766,894)
Cash and cash
equivalents at
beginning of period 1,282,326 310,926 40,371 2,494,742

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Cash and cash
equivalents at end
of period $149,359 $1,727,848 $149,359 $1,727,848
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Supplementary
Information
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Interest paid $63,309 $31,460 $20,764 $9,407
Royalties paid $82,260 $308,817 - $132,444
Cash and cash
equivalents consist
of:
Cash on deposit
(overdraft) with
banks $149,359 $(70,497) $149,359 $(70,497)
CAD$ term deposit - 1,200,000 - 1,200,000
US$ term deposit - 598,345 - 598,345
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$149,359 $1,727,848 $149,359 $1,727,848
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