Ceapro Reports Increased Sales in Third Quarter and Nine-Month Period of 2008
EDMONTON, ALBERTA, CANADA -- (MARKET WIRE) -- 11/27/08 -- 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) -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- $3,398,732 $4,587,593 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- 3,935,969 3,033,941 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- $3,398,732 $4,587,593 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- Gross margin 1,198,441 1,370,594 264,739 201,847 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- 2,222,674 1,616,566 670,618 555,584 -------------------------------------------------------------------------- (Loss) income from operations (1,024,233) (245,972) (405,879) (353,737) -------------------------------------------------------------------------- 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) -------------------------------------------------------------------------- (403,885) (614,883) (81,754) (248,213) -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- 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) -------------------------------------------------------------------------- Deficit, end of period $(5,905,659) $(3,193,593) $(5,905,659) $(3,193,593) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net loss per share: Basic $(0.05) $(0.02) $(0.01) $(0.01) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Diluted $(0.05) $(0.02) $(0.01) $(0.01) -------------------------------------------------------------------------- CEAPRO INC. Consolidated Statements of Cash Flows Unaudited Nine Months Ended Quarters Ended September 30 September 30 2008 2007 2008 2007 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- (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 - - - -------------------------------------------------------------------------- (903,959) (220,618) 192,857 (124,983) -------------------------------------------------------------------------- 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) -------------------------------------------------------------------------- (296,562) (1,344,096) (54,660) (644,972) -------------------------------------------------------------------------- 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) -------------------------------------------------------------------------- 67,554 2,981,636 (29,209) 3,061 -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- Cash and cash equivalents at end of period $149,359 $1,727,848 $149,359 $1,727,848 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Supplementary Information -------------------------------------------------------------------------- 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 -------------------------------------------------------------------------- $149,359 $1,727,848 $149,359 $1,727,848 -------------------------------------------------------------------------- --------------------------------------------------------------------------
Contacts: Ceapro Inc. Branko Jankovic Chief Financial Officer 780-917-8376 (Edmonton) info@ceapro.com www.ceapro.com Sun International Communications Nicole Blanchard, B.Sc., B.Comm Managing Partner 450-973-6600 (Montreal) nicole.blanchard@isuncomm.com
Released November 27, 2008