TORONTO, ONTARIO--(Marketwire - Nov. 13, 2012) - BioExx Specialty Proteins Ltd. (TSX:BXI), announced today its financial results for the three and nine months ended September 30, 2012. Complete Financial Statements and Management Discussion & Analysis have been filed for public review at www.sedar.com and will be posted on the Company's website at www.bioexx.com.
"This has been a year of positive transition and forward progress. While it may not yet be visible to all, we have seen and continue to see the benefits of our commitment to the execution of our strategy, in each of our key mandates of strategic partnering, scale-up engineering, and cost reduction. As we firm up our cash position through our current convertible debenture offering, we will remain focussed on these core tenets through the home stretch as the critical foundation for our next stages of growth," said BioExx CEO, Chris Schnarr.
Financial Results for the Three and Nine Months Ended September 30, 2012
During the quarter, the Company generated $Nil revenue from canola oil and canola meal sales at its Saskatoon plant, versus revenue of $930,239 in Q3 2011 (including a loss on derivative instruments of $14,682; Q2 2012 - $Nil), and $136,008 in Q2 2012. During Q3, the Company ran its crush operations only as required to support the extensive piloting activity required for the completion of the Company's detailed engineering scale-up mandate. This resulted in low processing volumes and $Nil revenue earned during the quarter. Further, as previously discussed, to conserve capital and exercise appropriate fiscal discipline, the Company had scaled back plant operations generally, earlier in the year.
Gross Profit (Loss)
Cost of Goods Sold for the quarter was $Nil, compared to $2,218,434 in Q3 2011 and $602,611 in Q2 2012. The decrease results from the low processing volumes and reduced scope of operations as discussed above. Given the absence of revenue from commercial operations in the quarter, on-going plant operations expenses (including depreciation) for the quarter have been included in Plant commissioning and start-up expenses, as discussed below, rather than in Cost of Goods Sold. As a result of the foregoing factors, Gross Loss for the quarter was $Nil, versus $1,288,195 for the comparable prior year period, and $466,603 in Q2 2012.
The Company incurred other expenses during the quarter of $4,088,359, compared to $4,462,498 in Q3 2011 and $3,390,160 in Q2 2012. The primary components of this variance were:
General and administrative expenses were $795,417 in Q3 2012, versus $1,028,876 in Q3 2011, and $980,219 in the prior quarter, as a result of the Company's previously noted cost reduction efforts.
As discussed in the prior quarter and annual 2011 filings, as a result of the migration in 2011 from a solvent-based to a solvent-free production process, certain assets were no longer in use and were made available for sale, resulting in an impairment charge in Q4 2011. As a result of additional scale-up engineering in 2012, the Company identified certain additional production assets which it determined would no longer be required in the context of the planned production environment. As a result, inclusive of asset purchase prices, engineering fees, and installation fees, and net of proceeds of sale, the Company recognized an impairment expense in Q3 2012 of $1,236,230.
Plant commissioning and start-up expenses were $1,599,604 in Q3 2012, versus $2,368,705 in Q3 2011, with the lower amount resulting from several offsetting factors. As a result of the previously noted reduction in crushing operations, and the fact the Company did not generate oil and meal revenue, the Company presented fixed and variable crushing operational costs, including depreciation on crush PP&E assets, as a component of plant commissioning and start-up expenses. The increase, as a result of including crush related costs, is offset by the Company's cost reduction efforts and reduced scope of plant operations. In addition, as previously discussed, the Company ran its operations only as required to support the extensive piloting activity required for the completion of the Company's detailed engineering scale-up mandate. Under the requirements of International Accounting Standard 38, Intangible Assets the Company capitalized expenditures which directly related to the piloting activity as a component of Development Costs, in the amount of $616,190 (including depreciation of plant and equipment of $406,966). Looked at another way, the sum of the Cost of Goods Sold, Plant commissioning and start-up expenses and operational expenditures capitalized to Development Costs totalled $2,215,794 for Q3 2012 versus $4,587,139 for Q3 2011. Exclusive of depreciation expense, these totals were $769,228 and $3,244,604, respectively.
Research and development expenses were $51,606 in Q3 2012, down from $141,315 in Q3 2011, and comparable to $38,598 in the prior quarter, as a result of the Company's previously noted cost reduction efforts.
Sales and marketing expenses were $62,606 in Q3 2012 versus $97,509 in Q3 2011 and $66,023 in Q2 2012, again as a result of on-going cost reduction efforts.
Net Finance Costs in Q3 2012 were $472,569 versus $58,247 in Q3 2011 and $224,131 in Q2 2012. The higher amount versus the comparable prior periods is due primarily to the interest expense and accretion of the deferred financing fees associated with the Romspen debt financing.
The Net Loss for the quarter was $4,088,359, versus $5,750,693 in Q3 2011 and $3,856,763 in Q2 2012. The significant variance in losses compared to Q3 2011 and Q2 2012 reflects the cumulative impact of the Company's ongoing cost reduction efforts and reduced scale of interim operations, which is partially offset by the aforementioned Impairment and other income (expenses) on the assets disposed of during the quarter. Adjusting for the Impairment and other income (expenses), the respective net losses are $2,852,129, $5,678,374, and $3,912,504.
Working Capital and Liquidity
As at September 30, 2012, current assets were $2,536,181, including cash and cash equivalents of $2,138,913. Against current liabilities of $7,859,015, this results in negative net working capital of ($5,322,834), primarily due to the inclusion of the $6.6 million Romspen loan, including accrued interest, due in July 2013 as a current liability, as its maturity falls within one year. This compares to current assets of $12,393,905 and net working capital of $6,537,704 as at December 31, 2011, and current assets of $4,673,259 and net working capital of $2,225,012 as at June 30, 2012.
BioExx's Net Cash Flow Used In Operating Activities during the quarter was ($1,535,617), compared to ($3,318,871) in Q3 2011 and ($1,931,026) in Q2 2012. The differences primarily reflect the different operating environments and cost reduction efforts in the respective quarters, as discussed above.
BioExx's Net Cash Flow (Used In) From Investing Activities during the quarter was ($463,172). The balance results from significant reductions in capital spending, at $157,850 in the quarter, offset by proceeds received from the disposal of certain assets held for sale. The capital spending in Q3 2012 is mainly a result of property, plant and equipment expenditures from 2011 and Q1 2012 which were paid during the quarter. In addition, capital spending on intangible assets was $354,175, as a result of the aforementioned capitalization of plant expenditures which directly related to the piloting activity as a component of Development Costs, in the amount of $209,224. This compares to Q3 2011 at ($3,648,564), with capital spending much higher at $3,452,381. Net Cash Flows From Investing Activities in Q2 2012, by comparison, was $949,496. The positive cash flows in Q2 2012 was a result of capital spending in the amount of $655,966 which was more than offset by proceeds received from the disposal of certain assets held for sale and Investment Tax Credits refunds received.
BioExx's Net Cash Flow (Used In) From Financing Activities during the quarter was ($33,723), as a result of interest and principal repayments on the Ag-West Bio Inc. loan. This compares to $2,712,095 in Q3 2011, largely due to the completion of the over-allotment on a bought deal equity financing for gross proceeds of $3,000,000 in Q3 2011. The comparative amount for Q2 2012 was $1,940,359, resulting primarily from the Romspen debt financing, net of the repayment of the prior Farm Credit Canada mortgage.
About BioExx Specialty Proteins Ltd.
Headquartered in Toronto, Canada, BioExx is focused on the separation of oil and high-value proteins from oilseeds for global food, beverage, nutrition, and other markets. BioExx employs trade secret, patented and patent-pending technologies to enable the improved separation of proteins from oilseeds. BioExx believes that these processes cumulatively have the potential to make a valuable contribution to global food and protein supply while maintaining an environmentally sustainable footprint.
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.