Lignol Reports Fiscal 2010 Financial Results

VANCOUVER, July 27 /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 its fiscal year and fourth quarter ended April 30, 2010 ("fiscal 2010"). (All figures in Canadian dollars, unless otherwise noted).

    
    Fiscal 2010 Highlights:

        -  Completed integrated production campaigns and met operability
           targets for the production of cellulosic ethanol and HP-L(TM)
           lignin at Lignol's fully integrated industrial-scale biorefinery
           pilot plant in Burnaby, British Columbia;
        -  Increased the number of HP-L(TM) lignin product development
           projects being undertaken in collaboration with industry leaders
           in both the corporate and research sectors;
        -  Formalized collaboration with Novozymes, the world's leading
           enzyme company, to utilize Lignol's industrial pilot plant in a
           program to optimize formulations and process enhancements for the
           production of cellulosic ethanol;
        -  Awarded over $5.9 million in new government funding which included
           $1.2 million from BC Bioenergy Network and $4.7 million from
           Sustainable Development Technology Canada ("SDTC").
    

"Despite a challenging economic environment, we made marked progress this past fiscal year in the development and commercialization of our technologies," said Ross MacLachlan, President and Chief Executive Officer of Lignol. "Our recent agreements with Pacific Ethanol, Novozymes, BAE Systems, PPG and Kingspan underscore the growing demand for fuel ethanol and biochemicals, which is being driven by factors such as renewable fuel standards, high fossil fuel prices and the desire for fuels and materials produced from renewables."

"With our industrial pilot plant now operating on a regular basis and showcasing our technologies, Lignol is well positioned to achieve its primary goals for fiscal 2011. These include the continued development of high value applications for our unique HP-L(TM) lignin, increasing the strength of our intellectual property portfolio and the development of strategic partnerships necessary to construct a commercial demonstration plant," continued Mr. MacLachlan. "We reported at this time last year that we anticipated having sufficient cash to fund Baseline Operations into fiscal 2011. As a result of increased non-dilutive contributions from partners and government grants, together with effective financial management we now expect to have sufficient resources available to fund Baseline Operations to at least the end of May 2011 and we will continue to seek additional financial support from corporate partners and government funding to extend this cash runway further."

Financial Results

For the year ended April 30, 2010, the Company reported a loss of $7.8 million or $(0.16) per share (basic and fully diluted) compared to a loss of $6.2 million or $(0.13) per share in fiscal 2009. The increased loss of $1.6 million for fiscal 2010 is a reflection of a combination of higher research and development expenses related to the operation of the new integrated industrial-scale pilot plant and increasing work on lignin application development, lower levels of government grants earned and a reduction in general and administrative costs.

Total gross research and development related costs were $10.2 million for the year ended April 30, 2010 as compared to $13.3 million in fiscal 2009. Of these amounts, $2.0 million and $6.7 million, for fiscal 2010 and fiscal 2009 respectively, were capitalized and $8.2 million and $6.6 million, respectively, were expensed during the periods. This reflects a year-over-year decrease in capital expenditures of $4.7 million due to the completion of pilot plant commissioning in early 2010. The increased expense for the current year of $1.6 million results from the increased cost of running the pilot plant and increased third party engineering expenses incurred in preparing detailed engineering drawings and cost estimates.

General and administrative expenses for the year-ended April 30, 2010 totaled $1.9 million compared to $3.0 million for the year ended April 30, 2009. Expenses incurred in 2009 included an additional $0.5 million in respect of stock based compensation charges and additional legal fees were incurred related to various contract negotiations and certain corporate matters.

Government and corporate contributions for the year-ended April 30, 2010 totaled $5.8 million, compared to $8.5 million for the year ended April 30, 2009. Of these amounts, $1.8 million and $4.7 million, for fiscal 2010 and fiscal 2009 respectively, were credited against plant and equipment capitalized on the balance sheet, and $4.0 million and $3.8 million, respectively, were credited against the statement of operations. This net reduction reflects the completion of certain contribution agreements in late 2009 and early 2010.

For the three-month period ended April 30, 2010 ("Q4 FY10") the Company reported a loss of $1.4 million, or $(0.03) per share (basic and fully diluted) compared to a loss of $0.2 million, or $(0.00) per share (basic and fully diluted) for the same period in 2009 ("Q4 FY09"). The increase in loss for Q4 FY10 as compared to Q4 FY09 was primarily due to an increase in research and development expenses of $0.8 million, and a decrease in related government and corporate contributions to the Company of $0.4 million.

As at April 30, 2010, the Company had cash, cash equivalents and short-term investments of $3.2 million and a working capital surplus of $2.4 million. These balances represent a decrease of $6.3 million and $6.1 million, respectively, compared to the balances as at April 30, 2009. As at April 30, 2010 the Company was also eligible to receive unclaimed contracted government and corporate funding of up to $6.7 million and a further $3.4 million from awards which have been previously announced but contracted subsequent to April 30, 2010. These funding 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. This brings the total of current and other eligible resources available to the Company to $13.3 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 the end of May 2011. This is an improvement by three months over the previous forecast disclosed in the Company's MD&A for the three and nine months ended January 31, 2010. Lignol is actively seeking funding from additional government and corporate sources which, if obtained, would extend the Company's projected operating runway further.

Lignol's complete financial statements for the year ended April 30, 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(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, (using the definition of "Baseline Operations" as set out in Lignol's Management's Discussion & Analysis of Financial Condition and Results of Operations for the quarter and year ended April 30, 2010), the ability of Lignol and Novozymes to successfully work together to achieve the aforementioned goal of producing fuel-grade ethanol at a production cost competitive with gasoline and corn ethanol at the current US market prices, the ability to scale our technology, the development status of 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, including HP-L(TM) lignin, and our ability to pursue these opportunities with the financial and operational support of 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 technological challenges that remain to be surpassed in obtaining the necessary operating data from our fully integrated biorefinery pilot plant that is required prior to completing the next design and scale-up of the technology, the complexity of the development of the commercial demonstration plant, changes in government policy, legislation or regulation, changes in financial 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.

%SEDAR: 00004360E

SOURCE Lignol Energy Corporation

For further information: For further information: Lignol Energy Corporation, David Turner, Chief Financial Officer, Tel: 604-453-1241, Email: dturner@lignol.ca, Email: info@lignol.ca; The Equicom Group, James Smith, Investor Relations, Tel: 416-815-0700 ext. 229, Email: jsmith@equicomgroup.com

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Lignol Energy Corporation

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