Lignol Reports Fiscal 2010 Second Quarter Financial Results

VANCOUVER , Dec. 16 /CNW/ - Lignol Energy Corporation (TSX-V: LEC) ("Lignol" or "the Company"), a leading technology company in the cellulosic ethanol and biorefining sector, today announced its financial results for the three and six-month periods ended October 31, 2009 . (All figures in Canadian dollars, unless otherwise noted).

"Our industrial biorefinery pilot plant is showcasing our technology and capabilities to industry leaders and government stakeholders. Operating the plant has enabled us to identify key process improvements, equipment configurations and enzyme formulations for a variety of non-food feedstocks, to optimize the yield of cellulosic ethanol as well as the quality and performance of our biochemical outputs, including our unique class of High-Purity Lignin and lignin derivatives, or HP-L(TM) lignin. This information is now being incorporated into our design and engineering plans for larger scale projects," said Ross MacLachlan, President and CEO of Lignol. "Looking ahead, our primary near term goals include: the continued performance optimization of our pilot plant; the development of a commercial demonstration project with strategic stakeholders; and advancing the development of commercial applications for our unique biochemicals and biomaterials."

"Subsequent to quarter end, we signed a Joint Development Agreement with PPG Industries, Inc., to develop commercial applications for HP-L(TM) lignin in certain PPG industrial coatings. Potential applications for HP-L(TM) lignin could result in the displacement of certain petroleum-based chemicals currently used in PPG's coatings products," continued Mr. MacLachlan . "The combination of $7.26 million in cash and cash equivalents as at October 31, 2009 and additional funding available under government grant awards announced to date brings the total of current and potential resources available to the Company to $17.16 million , which we believe will fund operations until at least December 31 , 2010."

Financial Results

For the three-month period ended October 31, 2009 ("Q2 FY10"), Lignol reported a loss of $2.21 million , or $(0.04) per share (basic and fully diluted) compared to a loss of $2.21 million or $(0.05) per share (basic and fully diluted) for the three-month period ended October 31, 2008 ("Q2 FY09"). For the six-month period ended October 31, 2009 , Lignol reported a loss of $4.08 million , or $(0.08) per share (basic and fully diluted) compared to a loss of $4.12 million , or $(0.09) per share (basic and fully diluted).

Total gross research and development related costs in Q2 FY10 were $3.19 million compared to $3.50 million in Q2 FY09. Of these amounts, $0.88 million and $1.65 million , for Q2 FY10 and Q2 FY09, respectively, were capitalized; and $2.31 million and $1.85 million , for Q2 FY10 and Q2 FY09, respectively, were expensed during the periods. This reflects a year-over-year decrease in capital expenditures of $0.77 million which is attributable to the higher level of construction activity on Lignol's industrial-scale biorefinery pilot plant in Q2 FY09 compared to the current quarter.

General and Administrative ("G&A") expenses for Q2 FY10 decreased to $0.51 million from $0.89 million in Q2 FY09. The decrease in G&A expenses is primarily due to a reduction in stock based compensation charges recorded in Q2 FY09.

Government and corporate contributions for Q2 FY10 totaled $1.73 million , compared to $1.53 million in Q2 FY09. Of these amounts, $0.69 million and $0.96 million , for Q2 FY10 and Q2 FY09, respectively, were credited against plant and equipment and capitalized on the balance sheet; and $1.04 million and $0.58 million , for Q2 FY10 and Q2 FY09, respectively, were credited against the statement of operations. Despite a decline in research and development related costs, government and corporate contributions for Q2 FY10 increased as compared to Q2 FY09 as final funding holdback amounts of $0.7 million were recorded in Q2 FY10 which related to projects that had taken place in prior years.

As at October 31, 2009 , the Company had cash, cash equivalents and short-term investments of $7.26 million and a working capital surplus of $5.47 million . These balances represent a decrease of $2.25 million and $3.10 million , respectively, compared to the corresponding balances as at April 30, 2009 . The decreases reflect cash used in operations and for capital additions incurred in the first six months of FY10, net of government and corporate contributions. Subsequent to October 31, 2009 , Lignol is eligible to receive up to $9.90 million in additional funding awards from various government agencies in respect of funding awards which have been made up to and including December 15, 2009 . These funding awards are intended to be applied against future expenses incurred under various development programs which are expected to be complete at various times before early 2012. The combination of $7.26 million in cash and cash equivalents as at October 31, 2009 and such additional government grants brings the total of current and potential resources available to the Company to $17.16 million .

The Company believes that, factoring in the expected timeline of receipt of the funding from the various government agencies, the combination of funding sources noted above should be sufficient to fund its Baseline Operations until at least December 31, 2010 , using the definition of "Baseline Operations" as set out in Management's Discussion & Analysis of Financial Condition and Results of Operations ("MD&A") for the three and six-month periods ended October 31, 2009 . This is an improvement by three months over the forecast in the Company's MD&A for the immediately prior quarter and is primarily due to additional government funding that was contracted for in the quarter ended October 31, 2009 . This forecast excludes funds from any potential new government grants or contributions from any potential new corporate partnerships. Lignol is actively seeking funding from such additional sources which, if obtained, would further extend the Company's projected operating runway for Baseline Operations past December 31, 2010 .

Lignol's complete financial statements for the three and six-month periods ended October 31, 2009 and the related Management's Discussion & Analysis of Financial Condition and Results of Operations are available at the Company's website, www.lignol.ca, or at www.sedar.com under the Company's profile.

About Lignol

Lignol (TSX-V: LEC) is a Canadian company undertaking the development of biorefining technologies for the production of fuel-grade ethanol and other biochemical co-products from non-food cellulosic biomass feedstocks. Lignol's modified solvent based pre-treatment technology facilitates the rapid, high-yield conversion of cellulose to ethanol and the production of value-added biochemical co-products, including high purity HP-L(TM) lignins. Lignol is executing on its development plan through strategic partnerships to further develop and integrate its core technologies on a commercial scale. Lignol also intends to invest in, or otherwise obtain, equity interests in energy related projects which have synergies with its biorefining technology. For more information about Lignol, please visit our website at www.lignol.ca.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Caution concerning forward-looking statements:

Certain statements contained in this document may constitute forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include, without limitation, statements or information about our ability to fund our Baseline Operations, our fully integrated biorefinery pilot plant in Burnaby, British Columbia, the planning and development of our previously proposed cellulosic ethanol commercial demonstration plant, our ability to exploit commercial opportunities and broaden our market opportunities for a range of cellulosic derivatives and environmentally sustainable biochemicals and our ability to pursue these opportunities with strategic partners. Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or words and phrases that state or indicate that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements or information reflect Lignol's current views with respect to future events and are subject to certain risks, uncertainties and assumptions including, without limitation, our ability to establish the validity of our technology at the fully integrated biorefinery pilot plant scale, our ability to satisfy the conditions of existing government grants and to obtain new additional grants, our ability to finance and complete the development of the commercial demonstration plant, our ability to develop our products, our ability to obtain requisite regulatory approvals and our ability to enter into agreements with strategic partners on terms acceptable to us. Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Many factors could cause Lignol's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or information, including among other things, the complexity of the development of the commercial demonstration plant, market conditions which will effect our ability to finance our operations, risks relating to the protection of Lignol's core technology from infringement and those risk factors which are discussed elsewhere in documents that Lignol files from time to time with securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements or information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Except as required by law, the Company expressly disclaims any intention or obligation to update or revise any forward looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

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For further information: Lignol Energy Corporation, Paul Hughes, Vice President - Corporate Development and Communications, Tel: [phone], Email: [email protected], Email: [email protected]; The Equicom Group, Bruce Wigle, Investor Relations, Tel: [phone] ext. 228, Email: [email protected]