Mr. Gilles Gagnon reports

CEAPRO INC. REPORTS FINANCIAL RESULTS FOR FIRST QUARTER 2023 AND PROVIDES CORPORATE UPDATE

Ceapro Inc. has released financial results and operational highlights for the first quarter ended March 31, 2023.

"Our team significantly advanced toward several key milestones related to new product development as well as strategic corporate initiatives. While sales orders were lower during the first quarter of 2023 as compared to the previous all-time record first quarter in 2022, we continue to leverage our solid base business to enable the development of new products and technologies. The priorities being the assessment of avenanthramides as anti-inflammatory products in a phase 1-2a clinical trial, the scale-up of our PGX technology for the development of yeast beta glucan as an immune modulator, and the commercial scale-up of a malting technology to enable the production and selling of enriched formulations with high concentration of avenanthramides to serve some nutraceutical market segments. In pursuing our objective to successfully position Ceapro as a biopharmaceutical company, the company expects to advance these projects using our cash on hand while continuing our discussions to assess different market capitalization initiatives and corporate opportunities to unlock value," commented Gilles Gagnon, MSc, MBA, president and chief executive officer.

Corporate and operational highlights

Pipeline development

Clinical development

Avenanthramides:

• Protocol for phase 1-2a clinical trial, "A Double-Blind, Placebo-Controlled, Randomized, Adaptive, First-in-Human Study to Assess Safety, Tolerability, and Pharmacokinetics of Single and Multiple Ascending Oral doses of Avenanthramide," is ready to go at the Montreal Heart Institute. Full approval was received from the ethics committee and GMP (good manufacturing practice) clinical batches were completed by Corealis. Up to 96 subjects may be included in the study and dosages will escalate from 30 milligrams to 960 mg according to response. Recruitment is expected to commence in Q2 2023.

Preclinical development

Avenanthramides and oat beta glucan:

• Announced positive results from animal studies conducted by Angiogenesis Foundation on a wound healing model. Both avenanthramides and oat beta glucan stimulated wound healing in mice, significantly improved the speed and quality of the healing process, and decreased scar formation. More specifically, avenanthramides suppressed inflammatory cells and beta glucan promoted epithelial progenitor (stem) cells at the scar level, making the treated skin look more normal than the untreated skin. This is a major discovery in tissue regeneration and these results will support additional claims for commercial and new products formulated with Ceapro's oat-based products.

Yeast beta glucan (YBG):

• Subsequent to quarter, announced positive results from research collaboration with McMaster University researchers demonstrating that PGX-processed YBG is respirable and able to safely and reliably reprogram macrophages in the lungs in preclinical mouse models. These results mark another step forward to a go/no-go decision for further evaluation of PGX-YBG microparticles in a phase 1 clinical study as a potential much-needed therapeutic option for a broad spectrum of fibrotic diseases.

Yeast beta glucan/alginate (YBG-ALG):

• Pursued the development of novel drug delivery systems focusing specifically on alginates (ALG) and yeast beta glucan (YBG), generating composites and cross-linked polymers with tunable properties, which can form strips, pads, masks or fast-dissolving orodispersible films. Over 100 runs have been performed with PGX YBG-ALG on the PGX demo scale and these new chemical complexes appear to be currently the most promising commercial application from a cost evaluation and market potential perspective. The company believes that the exciting results obtained with YBG and/or ALG formulations impregnated with CoQ10 showing superior bioavailability data than commercially available CoQ10 products are appealing for potential licensing partners.

Technology:

• Malted technology (avenanthramides): Significantly advanced the scale-up for the commercial production of enriched formulations with high concentration of avenanthramides to serve some nutraceutical markets.
• Pressurized gas expanded technology (PGX): Significantly advanced the design of the PGX-100 pilot plant in collaboration with a European specialized engineering firm and equipment manufacturer and with a local Alberta-based engineering procurement and contract management firm (EPCM), which can handle the local building modifications, electrical work and regulatory requirements. This project includes three phases: (1) the design; (2) modifications of the building at Agri Food Discovery Place (AFDP) in Edmonton and detailed design and construction of the PGX modular skids; and (3) the installation testing and commissioning of the PGX-100 in the AFDP building which is anticipated to occur in the first half of 2024. The PGX-100 pilot plant will be a major step toward commercialization of products coming from the use of the technology.

Corporate:

• Ceapro recognized as a top 50 TSX Venture Exchange company.
• Pursued licensing discussions with potential partners, mostly for YBG-ALG/CoQ10 new chemical entity.
• Subsequent to quarter, appointed Michel Regnier as senior vice-president, technical operations. Mr. Regnier is an experienced and respected operations executive and professional engineer with over 20 years of progressive technical and leadership experience in the medical device, pharmaceutical and aerospace materials manufacturing industries.

Financial highlights for the first quarter ended March 31, 2023:

• Total sales of $3.5-million for the first quarter of 2023 compared with $6,172,000 for the comparative period in 2022. The decrease compared with last year was primarily due to a significant decrease in product sales of avenanthramides in the United States and to postponed shipments of beta glucan to a major Chinese customer.
• Gross margin of 46 per cent in Q1 2023 compared with 64 per cent in Q1 2022, mostly due to inflationary costs and the lower yield derived from the oats used in this quarter as compared with the oats used in the prior quarter which were of exceptionally high quality.
• Net loss of $385,000 in Q1 2023 compared with a net profit of $1,813,000 in Q1 2022. Loss was incurred due to lower sales, increased research and development investments, as well as increased general and administrative expenses, mostly due to professional fees incurred for assessments of corporate opportunities.
• Cash on hand of $12.6-million as of March 31, 2023.
• Positive working capital balance of $18,496,554 as of March 31, 2023.

"Despite the fact that inflation is prevailing on all fronts and that sales were mainly impacted by lower orders from U.S. for avenanthramides, for which we expect the reordering pattern should resume upon completion of reorganization resulting from the spinoff of the consumer division from one major customer, management believes the prospects for the company remain positive. While we are looking for additional sources of revenues, we feel fortunate to benefit from the support of our long-time partner, Symrise, with whom we have strengthened our relationship in 2022 through the signing of a renewable three-year supply and distribution agreement. This includes minimum annual volumes providing visibility and sustainability of cash flows that will help us to pursue developments and growth opportunities," concluded Mr. Gagnon.

About Ceapro Inc.

Ceapro is a Canadian biotechnology company involved in the development of proprietary extraction technology and the application of this technology to the production of extracts and active ingredients from oats and other renewable plant resources. Ceapro adds further value to its extracts by supporting their use in cosmeceutical, nutraceutical and therapeutics products for humans and animals. The company has a broad range of expertise in natural product chemistry, microbiology, biochemistry, immunology and process engineering. These skills merge in the fields of active ingredients, biopharmaceuticals and drug-delivery solutions.