Mr. Gilles Gagnon reports

CEAPRO INC. REPORTS 2023 SECOND QUARTER AND SIX-MONTH FINANCIAL RESULTS AND PROVIDES CORPORATE UPDATE

Ceapro Inc. has released financial results and operational highlights for the second quarter and six months ended June 30, 2023.

"While sales from the base business are trailing by one quarter for the first half of 2023 as compared to the previous all-time record period last year, we are very encouraged by the significant advancements in new products and technologies development. Further, over the past quarter, we remained very active with our activities related to strategic corporate initiatives. Our business remains solid, and we believe we are positioned now for the return of a more consistent reordering pattern from one of our major customers. We are also very pleased with the recent signing of an extended supply and distribution agreement reinforcing our relationship with long-time partner Symrise while securing our base business for the upcoming years," stated Gilles Gagnon, MSc, MBA, president and chief executive officer.

Corporate and operational highlights

Pipeline development

The company's focus is on avenanthramides, beta glucan from oat and yeast, and new chemical complexes/delivery systems.

Clinical development

Avenanthramides (AVS)

Formulation:

• Stability studies are continuing for the 30-milligram and 240-milligram pill formulations manufactured, packaged and labelled by Corealis Inc. GMP Manufacturing Services.

Phase 1-2a clinical trial:

• Recruitment and enrolment of healthy subjects for phase 1 are planned for mid-November, 2023, upon the complete development of a bioassay for the live analytical measurement of avenanthramides in blood and urine during the hospital stay of healthy subjects. Testing AVS in urine has never been done before and this newly developed test requires standardized stability data.

Preclinical development

Avenanthramides and oat beta glucan

Wound healing -- tissue regeneration:

• Announced positive results from animal studies conducted by the Angiogenesis Foundation; studies showed statistically significant results characterizing the bioactivity of both Ceapro's oat-derived bioactive products on wound healing and tissue regeneration; tissue treated with avenanthramides (AV) and oat beta glucan (BG) bioactives at concentration as low as 1 per cent healed to become more like normal skin as compared with untreated scar tissue; these unprecedented results will not only support additional claims for commercially available formulations using Ceapro's oat-based products but should also trigger interest from medical supply companies;
• Subsequent to the quarter, announced next steps with new studies with the Angiogenesis Foundation to focus on speed of healing and molecular profiling of tissue regeneration induced by oat-derived bioactive products.

Yeast beta glucan (YBG) -- potential inhalo-therapeutic:

• Announced encouraging results from research collaboration study with McMaster University evaluating PGX-processed (pressurized gas expanded technology) YBG (PGX-YBG) for interstitial lung diseases; data presented in May, 2023, at two major international conferences (American Thoracic Society in Washington and at the Pharmaceutical Science annual symposium in Toronto) demonstrated that PGX-YBG is respirable and able to safely and reliably reprogram macrophages in the lungs in preclinical mouse models;
• Following discussions with experts, while it is desirable to immediately initiate the design of the protocol for a phase 1 trial, a required next step is to conduct toxicological studies with a contract research organization before presenting a file to health authorities for a phase 1 clinical study to assess PGX-YBG microparticles as a potential much-needed therapeutic option for a broad spectrum of fibrotic lung diseases.

Immune/energy booster:

• Completed specifications for YBG as a natural health product;
• Achieved batch to batch consistency at demo level;
• Continuing studies for testing and standardization of loading capacity of CoQ10 by YBG, which is a requirement for dose selection when assessing safety and efficacy.

Yeast beta glucan is the product that will be used for the PGX scale-up project at pilot scale levels of 50-litre and 100-litre vessels.

Technology

Malted technology (avenanthramides):

• Successfully achieved the malting procedure for a first batch at small-commercial-scale level; obtention of batch-to-batch consistency should allow for the offer of enriched formulations with high concentration of avenanthramides to serve some nutraceutical markets.

Pressurized gas expanded technology (PGX):

• Fully reassessed the pilot scale-up project; instead of doing it sequentially from demo-scale 10 litres to pilot 50 litres and 100 litres, the pilot scale-up project is now designed to be conducted in parallel in two different locations; the 50 litres will be installed and tested in Edmonton while the 100 litres will be developed and tested within the facility of a European-based global leader in design, construction and commissioning of high-pressure supercritical processing plants; this approach should save time and money; the 50 litres should be installed by year-end and commissioned during the first quarter of 2024 while the 100 litres should be ready during Q3 2024; yeast beta glucan will be used for the pilot testing at all levels; successful results from these experiments would pave the way for commercialization of YBG as an immune booster and as a basis for the construction of a large-commercial-scale unit in Canada.

Corporate:

• Appointed Michel Regnier as senior vice-president, technical operations; Mr. Regnier is an experienced and respected operations executive and professional engineer with more than 20 years of progressive technical and leadership experience in the medical device, pharmaceutical and aerospace material manufacturing industries;
• Continued to assess possible corporate strategies to support the accelerated growth of the company, along with stated objective of uplisting to Nasdaq.

Subsequent to the quarter:

• Signed an extended supply and distribution agreement reinforcing vote of confidence and relationship with long-time partner Symrise.

Financial highlights for the second quarter and the six-month period ended June 30, 2022:

• Sales of $1,869,000 for the second quarter of 2023 and $5,364,000 for the first six months of 2023, compared with $5.5-million and $11,672,000 for the comparative periods in 2022; the decrease in sales revenue for the first six months was primarily driven by an overall decrease in sales volume of 61 per cent, mainly due to a one-time stocking campaign by one major customer in 2022;
• Net loss after tax of $1,154,000 for the second quarter of 2023 and $1,539,000 for the first six months of 2023 compared with an after-tax net profit of $1,805,000 and $3,618,000 for the comparative periods in 2022;
• Cash used in operations of $2,213,000 for the first six months of 2023 versus cash generated from operations of $3,958,000 in 2022;
• Positive working capital balance of $17,425,000 as of June 30, 2023;
• Cash on hand of $11,306,000 as of June 30, 2023 ($11,368,000 in 2022).

"Despite a slower start to the year, our business remains solid, and we expect the reordering pattern from one major customer to resume shortly. Given our healthy balance sheet and the reaffirmed vote of confidence from our long-time partner Symrise, we will continue to leverage on our base business to enable the development of new products and technologies like the planned phase 1-2a clinical trial with avenanthramides, the scale-up of the PGX technology for the development of YBG as an immune modulator, and the commercial scale-up of a malting technology to enable the production and selling of enriched oat flour with high concentration of avenanthramides to serve important nutraceutical market segments. The company expects to complete these projects using cash on hand in 2023 while continuing to assess different strategic market initiatives to unlock value," concluded Mr. Gagnon.

The complete financial statements are available for review on SEDAR+ and on the company's website.

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.

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