Lignol Reports Fiscal 2011 First Quarter Financial Results

VANCOUVER, Sept. 28 /CNW/ - Lignol Energy Corporation (TSX-V: LEC) ("Lignol" or "the Company"), a leading technology company in the cellulosic ethanol, biochemicals and biorefining sector, today announced its financial results for the three-month period ended July 31, 2010. (All figures in Canadian dollars, unless otherwise noted).

Q1 FY11 Highlights:

    
    -   Cash runway extended from May 2011 to August 2011;
    -   Met operability targets for the production of cellulosic ethanol and
        HP-L(TM) lignin at Lignol's integrated pilot plant;
    -   Signed a Memorandum of Understanding with Pacific Ethanol (NASDAQ :
        PEIX) to evaluate the opportunities to integrate Lignol's biorefining
        technology with Pacific Ethanol's existing corn ethanol facilities;
    -   Novozymes and Lignol announced an important joint development program
        to produce biofuels from wood using Lignol's industrial pilot plant,
        and;
    -   Industry pioneer and "thought-leader" Colin South joined Lignol as a
        member of the Board of Directors.
    

"Lignol is presently one of only a handful of companies with an operational industrial-scale pilot plant producing cellulosic ethanol and biochemicals from non-food feedstocks. During the quarter, we successfully leveraged this capability to attract important corporate partnerships which provide strong third party validation for the commercial potential of our unique biorefinery process," said Ross MacLachlan, President and CEO of Lignol. "Our goal for the coming year is to work with strategic partners to develop a commercial demonstration project that can leverage available government funding and position our unique technology for the commercialization of biochemicals and the production of cellulosic ethanol without the need for long-term government incentives."

Financial Results

For the three-month period ended July 31, 2010 ("Q1 FY11"), the Company reported a loss of $0.9 million, or $(0.02) per share (basic and fully diluted) compared to a loss of $1.9 million or $(0.04) per share (basic and fully diluted) for the three-month period ended July 31, 2009 ("Q1 FY10"). Although operating expenses incurred were similar in both periods, government and corporate contributions related to research and development expenses increased by $0.9 million in Q1 FY11.

Gross expenditures on plant and equipment, and research and development were $1.6 million for the quarter ended Q1 FY11 compared to $2.4 million in Q1 FY10. Of these amounts, $0.03 million and $0.8 million, for Q1 FY11 and Q1 FY10, respectively, related to expenditures on plant and equipment and were capitalized. Expenses related to research and development were $1.6 million in both Q1 FY11 and Q1 FY10 and these costs were expensed during the periods. The reduction in capital expenditures of $0.8 million is attributable to the fact that prior to Q1 FY11 the construction of Lignol's new industrial-scale biorefinery pilot plant had been completed.

General and Administrative ("G&A") expenses declined from $0.5 million in Q1 FY10 to $0.4 million in Q1 FY11 largely due to the net impact of a reduction in stock-based compensation expense of $0.15 million and an increase in legal and advisory fees of $0.11 million.

Total government and corporate contributions for Q1 FY11 were $1.55 million, compared to $1.43 million for Q1 FY10. Of these amounts, $0.01 million and $0.77 million, for Q1 FY11 and Q1 FY10, respectively, were credited against plant and equipment on the balance sheet, and $1.55 million and $0.66 million, for Q1 FY11 and Q1 FY10, respectively, were credited against the research and development expenses on the statement of operations. Government and corporate contributions are credited against the actual expenses incurred as defined in the various contribution agreements.

As at July 31, 2010, the Company had cash, cash equivalents and short-term investments of $1.9 million and a working capital surplus of $1.9 million. These balances represent a decrease of $5.7 million and $5.5 million, respectively, compared to the corresponding balances as at July 31, 2009. The decreases reflect cash used to fund operations and for capital additions. Lignol is eligible to receive in the future up to a further $12.2 million from various government agency grants and corporate contributions. These awards are intended to be applied against future expenses incurred under various development programs which are expected to be completed at various times before early 2012. The combination of $1.9 million in available funds on hand at July 31, 2010 and such additional government grants and corporate contributions brings the total of current and potential resources available to the Company to up to $14.1 million.

The Company believes that the combination of funding sources noted above should be sufficient to fund its Baseline Operations until at least August 2011, 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 month period ended July 31, 2010. This amount excludes funds from any potential new government grants or contributions from any potential new corporate partnerships. Lignol is actively seeking additional non-dilutive funding from government grants and contributions from corporate partnerships, the scale of which will determine the size and timing of any possible sale of additional equity required by the Company.

Lignol's complete financial statements for the three-months ended July 31, 2010 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.

Mailing of Notice of AGM and Information Circular

The Notice of Meeting and Information Circular in respect of the Company's Annual General and Special Meeting of Shareholders to be held on October 15, 2010 has been mailed to all shareholders of record as of September 7, 2010.

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. HP-L(TM) lignin represents a new class of high purity lignin extractives (and their subsequent derivatives) which can be engineered to meet the chemical properties and functional requirements of a range of industrial applications that until now has not been possible with traditional lignin by-products generated from other processes. 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 (as defined in the Company's Management's Discussion & Analysis of Financial Condition and Results of Operations for the three months ended July 31, 2010) the development status of our fully integrated biorefinery pilot plant in Burnaby, British Columbia, the planning and development of our 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 including our HP-L(TM) lignin and lignin derivatives and our ability to pursue these opportunities with strategic partners, the ability of Lignol and Novozymes to successfully complete their joint development program, and the receipt of future funding by way of government awards and corporate contributions. 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 scale our technology, our ability to satisfy the conditions of existing government grants and to obtain new additional grants, the timely receipt of funding under various government awards and corporate contribution agreements, 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, the price of gasoline and demand for ethanol, 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, David Turner, Chief Financial Officer, Tel: [phone], Email: [email protected], Email: [email protected]; The Equicom Group, James Smith, Investor Relations, Tel: [phone] ext. 229, Email: [email protected]