Burcon Issues Shareholder Letter Regarding JV, Merit Functional Foods
Vancouver, British Columbia--(Newsfile Corp. - February 8, 2023) - Burcon NutraScience Corporation (TSX: BU) ("Burcon" or the "Company"), a global technology leader in the development of plant-based proteins for foods and beverages, today issued a letter to shareholders from its Chief Executive Officer, Kip Underwood.
I am writing to you in my 10th week as CEO of Burcon NutraScience Corporation. I joined Burcon because I believe in the future of plant-based foods and the role Burcon's innovation can play in enabling that future. During the past few weeks, I have learned about both future opportunities and near-term challenges. One challenge, in particular, is our investment in Merit Functional Foods Corporation ("Merit"). It is important to us that you understand how the Merit situation affects Burcon, our actions, and our forward plan. Independent of these short-term issues, I am even more convinced today that our innovative plant protein technologies will play a critical role in the future success of plant-based foods and in improving the health of our planet.
Merit Functional Foods Corporation Situation
For the past six months, Merit has made significant progress. Daily production performance has improved while sales continue to increase as compared to prior year. Customers have provided feedback that the products are "best-in-class". Unfortunately, the overall financial performance of the business has fallen short of expectations and led to the current cash flow concerns.
Since inception, the shareholders of Merit, including Burcon, have provided significant financial support to Merit. Most recently, in September 2022, Burcon announced that the shareholders of Merit provided loans in the aggregate amount of $3 million to address Merit’s anticipated liquidity requirements as it continued to ramp up its production and sales. In late 2022, Merit began a process to identify a new strategic investor for its business. To-date, no funding has been received from a new investor.
In the near term, we have real concerns about Merit's financial situation and viability. The situation has forced Burcon to reassess our participation in the Merit business and led us to take a series of actions which are outlined below.
We are offering a level of transparency that is integral to Burcon's shareholders. It is important that you understand both what we are doing and why we are doing it.
Burcon remains committed to the Merit business and firmly believes in its potential. Based upon this belief, we have taken the following actions:
Engaged in discussions with the lenders of Merit to propose terms that maintain current business momentum and provide a path to profitability;
Burcon is exploring interim financing for Merit while working on a more specific, longer-term funding solution;
Burcon is prepared to fund ongoing operating expenses and debottlenecking capital with support from our largest Burcon shareholder to back the overall project;
Within Burcon, we have made tough choices to control costs and ensure that our capital and efforts are going towards the greatest near-term opportunities; and
Evaluating new plant protein markets that can be targeted with the combination of Burcon's technology and Merit's production capability.
If our funding plans are successful, Burcon could have, for the first time in its history, a chance to own its destiny. We could have the opportunity to develop, produce, and market our innovative products. We expect the process and negotiations with Merit's existing lenders to take several weeks. We are working with both the Merit team and lenders to ensure that the ongoing business operations continue without disruption. There may be other financing offers for Merit from competing organizations. We will continue to put our best foot forward and work to create the company Burcon has always aspired to become.
We recognize the news of Merit Functional Food's situation may be a surprise. While there is risk in our current path, we believe this also presents Burcon with a significant opportunity.
We are thankful for the commitment and patience our investor base has shown in the past and are hopeful that it will continue in the future. We look forward to your continued support as we carve a path towards profitability.
Chief Executive Officer
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. Burcon currently holds a 31.6% shareholding interest in Merit Foods. 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 financial circumstances of Merit, the actions and inactions of its shareholders and lenders, our ability to provide interim or long-term funding to Merit and our ability to negotiate with Merit's lenders. 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.
Industry and Investor Contact
Director, Investor Relations
Burcon NutraScience Corporation
Tel (604) 733-0896, Toll-free (888) 408-7960
Steve Campbell, APR
Campbell & Company Public Relations
Tel (604) 888-5267
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