20:34:11 EST Tue 29 Nov 2022
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Burcon NutraScience Corp
Symbol BU
Shares Issued 108,728,742
Close 2022-09-06 C$ 0.62
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Burcon CEO airs out auditor woes in shareholders letter

2022-09-06 11:39 ET - Shareholders Letter

Mr. Peter Kappel reports


Burcon NutraScience Corp. has issued a letter to shareholders from its interim chief executive officer and chairman of the board, Peter H. Kappel.

Dear fellow shareholders,

This past Friday we announced the resignation of our auditor of the past 21 years, PricewaterhouseCoopers LLP (PwC). This must have come as a surprise to you, as it did us when we were informed by PwC its intention to resign. What was particularly agonizing for us was its insistence on the immediacy of carrying through its resignation in spite of the inconvenience, cost and disruption this would cause for Burcon given the annual shareholder meeting (AGM) date already being set. Simply, it is impossible to have an AGM without the appointment of an auditor. With PwC no longer available, we needed to have made arrangements with another firm, which not only involves the commercial aspects, but also requires the completion by the audit firm of its client acceptance process. The time was not sufficient and so we had to postpone the AGM. We are in discussion with a successor firm and expect to be able to appoint a successor auditor and to reschedule the AGM for some time in November.

PwC is a fine, very professional firm, we were very pleased with its service to us. We thought we had a relationship that was open and were unaware of any concerns that would lead to its immediate resignation. To our knowledge, PwC did not resign due to any reportable events or ethical issues with respect to Burcon. Every firm is entitled to make a business decision influenced by its assessment of the profitability of a relationship and its ability to manage resources and risk and we are not disputing its rationale. We do, however, vehemently disagree with the timing of resignation. We had made it very clear to them what the implications of the timing were for Burcon, but this did not sway them.

That all of this came about so quickly was a surprise for us. At the meeting of Burcon's audit committee on Aug. 11, PwC was specifically asked if they had any concerns regarding Burcon and the committee was informed that there were not; they gave no indication of its intention to resign. Furthermore, as with the previous 20 years, PwC was aware of our planned AGM and that Burcon was seeking shareholder approval for its reappointment. PwC should also have been acutely aware of the due diligence that an audit firm must undergo prior to accepting an audit mandate and that any successor would have a great deal of difficulty doing so prior to the imminent date of the Burcon AGM.

The decision to delist from Nasdaq was not influenced by the resignation of PwC, however it did affect the timing. Delisting from Nasdaq involves a process and the sooner that process is complete, the clearer it is for any successor auditor taking on the job of the audit risks involved. Burcon's board had come to the conclusion that delisting was in the best interest of the company, and the situation created by PwC's resignation spurred us to do it sooner.

Burcon was given until Sept. 28, 2022, to achieve a share price in excess of $1 (U.S.) for at least 10 consecutive trading days prior thereto. Given the recent share price performance, we were doubtful that the $1 (U.S.) target could be reached. In considering whether alternative actions should be pursued, the board weighed the benefits of the listing against its costs and was unable to justify additional efforts to retain the listing. We have not experienced any significant trading volume on Nasdaq and believe we can provide improved liquidity and flexibility by consolidating trading in Burcon stock on the Toronto Stock Exchange. Against this are the significant costs both in dollars spent (in excess of $500,000 third party costs annually), and in terms of time and effort on the part of staff. While this outcome will disappoint some investors, with our limited resources, we believe it is better for Burcon to use those resources to focus on achieving our strategic goals.

With respect to those goals, we are pleased with recent developments at Merit in terms of production improvements and customer feedback on its latest product launch. In addition, our partnership discussions on other plant proteins using Burcon technologies are moving forward and we are optimistic on being able to make an announcement on one or more of these.

I look forward to providing a more detailed corporate update at our rescheduled AGM.


Peter H. Kappel

Interim CEO and chairman of the board of directors

About Burcon NutraScience Corp.

Burcon is a global technology leader in the development of plant-based proteins for foods and beverages. With over two decades of experience formulating high-purity proteins that have superior functionality, taste and nutrition, Burcon has amassed an extensive patent portfolio covering its novel plant-based proteins derived from pea, canola, soy, hemp and sunflower seed, among other plant sources. In 2019, Merit Functional Foods Corp. was established between Burcon and three veteran food industry executives. Merit Foods has since built and commissioned a state-of-the-art protein production facility in Manitoba, Canada, that is producing, under licence from Burcon, best-in-class pea and canola proteins for the food and beverage industries.

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