Lignol Reports Fiscal 2011 Second Quarter Financial Results

VANCOUVER, Dec. 14 /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 and six-month periods ended October 31, 2010. (All figures in Canadian dollars, unless otherwise noted).

Q2 FY11 Highlights:

• Received $1.2 million in funding from the US Department of Energy ("DOE") in support of pre-construction activities related to developing a commercial demonstration plant
• Announced a major breakthrough in organosolv pre-treatment performance, named AlcellPlus^TM, which provides the potential for lower capital and operating costs and greater flexibility in processing a wider range of cellulosic feedstocks
• Filed several  additional patent applications, bringing Lignol's IP portfolio to more than 50  applications which are at various stages of  prosecution.
• Industry pioneer Colin South joins Lignol as Chief Technology Officer and remains a member of the Board of Directors

Lignol is presently one of only a handful of companies with an operational, integrated industrial-scale pilot plant producing cellulosic ethanol and biochemicals from non-food feedstocks. Lignol's leadership position in biorefining was further reinforced with the announcement in November of the recruitment of industry pioneer Colin South as Lignol's Chief Technology Officer. Lignol's 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 its unique technology for the commercialization of biochemicals and the production of cellulosic ethanol.

Financial Results

For the three-month period ended October 31, 2010 ("Q2 FY11"), the Company reported a net income  of $0.1 million, or $0.00 per share (basic and fully diluted) compared to a loss of $2.2 million or $(0.04) per share (basic and fully diluted) for the three-month period ended October 31, 2009 ("Q2 FY10"). Expenses incurred in Q2 FY11 declined by $0.9 million as a result of a reduction in expenses while related government and corporate contributions increased by $1.5 million largely as a result of the contributions received from the DOE. For the six month period ended October 31, 2010 Lignol reported a loss of $0.8 million, or $(0.02) per share compared to a loss of $4.1 million, or $(0.08) per share in the corresponding period. This reduction arose as a result of a $1.0 million decrease in expenses and an increase of $2.3 million in government and corporate contributions.

A total of $1.8 million was incurred during  the quarter ended Q2 FY11 compared to  $3.5 million in Q2 FY10, on plant and equipment purchases and research and development expenses. Of these amounts, $0.1 million and $0.9 million, respectively, were capitalized and $1.7 million and $2.6 million, respectively were expensed. The reduction in capital expenditures of $0.8 million is attributable to the fact that the industrial scale pilot plant and related improvements had been completed prior to the commencement of the current fiscal year. Research and development expenses declined by $0.9 million in the period largely due to a reduction in headcount and headcount related costs. Also the costs incurred in the comparable period in 2010 included third party engineering charges related to updating designs and costs estimates for the planned commercial demonstration facility.

General and administrative expenses remain unchanged at $0.5 million in Q2 FY11 and Q2 FY10. 

Total government and corporate contributions for Q2 FY11 were $2.7 million, compared to $1.7 million for Q2 FY10. Of these amounts, $0.2 million and $0.7 million, for Q2 FY11 and Q2 FY10, respectively, were credited against capitalized plant and equipment costs, and $2.5 million and $1.0 million, respectively, were credited against the research and development expenses.

As at October 31, 2010, the Company had cash, cash equivalents and short-term investments of $2.4 million and a working capital surplus of $2.6 million. Lignol is also eligible to recognize in the future up to a further $8.1 million in funding from various contracted government agency grants and corporate contributions. Funds received in respect of 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 the end of 2012. Receipt of this funding is conditional upon meeting the obligations of related funding agreements, and in some cases to having matching funds. The combination of available funds on hand at October 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 $10.7 million.

As previously announced on September 28, 2010, the Company continues to believe that the combination of funding sources noted above should be sufficient to fund its Baseline Operations until  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 and six-month period ended October 31, 2010. This amount excludes funds from any potential new government grants or contributions from any potential new corporate partnerships. Lignol is exploring a number of funding options which include 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 a possible sale of additional equity required by the Company.  However, there is no assurance that these activities will be sufficient or successful, in which case it will be necessary to defer or curtail certain expenditures and activities.

Lignol's complete financial statements for the three and six-month periods ended October 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.

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™ 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 continue as a going concern and to raise additional financing 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 October 31, 2010), the development status of our fully integrated biorefinery pilot plant in Burnaby, British Columbia, our ability to realize the benefits of our improved process, AlcellPlus^TM,  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 our 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 continue to finance our Baseline Operations and to finance and complete the development of a 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.