Lignol Reports Fiscal 2013 Third Quarter Financial Results

VANCOUVER, March 25, 2013 /CNW/ -Lignol Energy Corporation (TSXV: LEC) ("LEC" or "the Company"), a leading technology development company in the advanced biofuels and renewable chemicals sector, today announced its consolidated financial results for the three months ended January 31, 2013. All figures in Canadian dollars, unless otherwise noted.

Highlights

LEC continued to develop a number of strategic investment opportunities in energy related projects which have technical and commercial synergies with the Company.

• Increased the Company's equity interest in Australian Renewable Fuels Limited (ASX: ARW) ("ARW") to 14.9% in November 2012, and further to 21.4% by March 18, 2013
• Closed a $4.515 million brokered financing and converted into LEC shares a $2.245 million convertible debenture in December 2012
• Established a secured credit facility for up to $5 million with Difference Capital Funding Inc. ("DCF") in February 2013
• Subscribed for convertible notes with a principal value of A$1.18 million issued by Territory Biofuels Limited ("TBF") in March 2013, which are convertible into an equity interest of between 20% to 40%
• Lignol Innovations Limited ("LIL") established an agreement with a European market leader in the sustainable thermoplastics industry to supply tonnage quantities of HP-L^TM lignin

During the quarter, the Company's activities were focused mainly on performing the ground work for the above investments and related financings which were either completed during the quarter or shortly thereafter.

In December 2012, LEC strengthened its balance sheet and closed a brokered private placement which raised gross proceeds of $4.515 million. Also, in connection with the private placement, Wasabi Energy converted its $2.245 million convertible debenture into 14,971,800 LEC shares at a price of $0.15 per share. As a part of the private placement, DCF subscribed $1.150 million for 7,666,667 Subscription Receipts; which amount was held in escrow until March 2013, when shareholders voted in favour of a resolution to approve DCF becoming a "Control Person" as defined in the TSX Venture Exchange Corporate Finance Manual.

In February 2013, LEC increased its access to financial resources by entering into a secured credit facility for up to $5 million with DCF. Amounts drawn down in respect of the facility bear interest at 8% per annum and the facility will mature on the earlier of February 27, 2014, or upon the completion of an equity financing raising gross proceeds of at least $5 million. The credit facility is secured initially by a general security agreement covering all of LEC's present and future personal property until such time as DCF has a perfected security interest in all of the shares of ARW and the convertible notes of TBF held by LEC.

LEC's wholly owned subsidiary LIL continued to complete a body of work related to the work programs which are largely funded by Sustainable Development Technology Canada and other grant agencies. Such work included processing different feedstocks to optimize the production of higher value cellulose derivatives and to compare them against industry standards and to increase the yield of hemicellulose sugars. LIL also shipped a range of lignins for ongoing application development activities. Most notable amongst these was related to a commercial supply agreement secured with a European market leader in the sustainable thermoplastics industry.

Financial Results

For the three months ended January 31, 2013 ("Q3 FY13"), LEC reported a net comprehensive loss of $3.0 million, and a total loss of $0.01 per share (basic and fully diluted). Included in the total comprehensive loss were non-cash charges relating to a reduction in the fair market of LEC's investment in ARW of $1.3 million at the end of the period. Included in the total loss were non-cash charges of $0.3 million relating to the difference in the market value of the consideration LEC paid for its December 2012 acquisition of a further 88 million shares in ARW. After excluding these $1.6 million in total non-cash charges, the adjusted loss for Q3 FY13 would have been comparable to the total loss of $1.2 million incurred during the same period of the prior year.

Total research and development expenditures (excluding amortization) were $0.7 million in the quarter ended Q3 FY13 compared to $1.3 million in the prior year. The current quarter decrease in operating expenses of $0.6 million was a result of reductions in headcount and related expenses of $0.3 million, reductions in pilot plant operating expenses of $0.2 million, and a reduction in general overheads of $0.1 million. General and administrative expenses increased by $0.4 million due to an increase in corporate development costs, comprised of legal and professional fees and corporate development related expenses incurred in respect of acquisition and financing activities.

Total funding from government and corporate contributions were $0.2 million for the current quarter, compared to $0.8 million in the same quarter of 2012. Overall grant related research expenses declined by $0.6 million, which reduced the potential for eligible grant claims, and several grant programs which had provided funding in the previous year, had been completed by the start of the current quarter.

Subsequent Events

On February 27, 2013, the Company announced that it had entered into a secured credit facility for up to $5 million with DCF, a major shareholder. Amounts drawn under this facility will bear interest at 8% per annum and the facility will mature on the earlier of February 27, 2014 or upon the completion of an equity financing raising gross proceeds of at least $5 million. These funds will initially be secured by a general security agreement providing for a security interest in all of LEC's present and future personal property until such time as DCF has a perfected security interest in all of the shares of ARW and the convertible notes issued by TBF which are owned by LEC. Once DCF's security interest in the ARW shares has been perfected, the general security agreement will be terminated.

On March 6, 2013, the Company held a Special Meeting of Shareholders to consider two resolutions. At the meeting shareholders approved DCF becoming a "Control Person" as defined in the TSX Venture Exchange Corporate Finance Manual; and a waiver of the application of the shareholder rights plan agreement between the Company and Computershare Corporation Trust Company of Canada dated July 8, 2010 (the "Rights Plan"). On March 7, 2013, the Company announced that following the above shareholder approvals, the proceeds of $1.15 million relating to the subscription receipts (the "Subscription Receipts") issued to DCF as a part of the December 17, 2012 private placement had been released from escrow to the Company. Concurrently, each Subscription Receipt had been converted into one unit of the Company (each a "Unit"), each Unit consisting of one common share of the Company (a "Common Share") and one half of one warrant, each whole warrant entitling the holder to purchase one additional Common Share at a price of $0.20 per Common Share prior to December 17, 2014.

On March 11, 2013 the Company announced that it had subscribed for convertible notes with a principal value of A$1.18 million ("Notes") issued by TBF and signed a Technology Collaboration Agreement that includes a package of technical and further assistance to aid in the restart of TBF's 150 million litre per year biodiesel plant and glycerine refinery located in Darwin, Australia.

The terms of the Notes provide for conversion into an equity position for LEC of between 20% to 40% in TBF, depending on a range of criteria related to the development of TBF's Darwin facility. This investment was funded, in part, from the Company's recently announced line of credit with one of its major shareholder, DCF. The terms of the Technology Collaboration Agreement provide for technical assistance from LIL and its partners with respect to both the restart of the TBF facility and the potential integration of new pretreatment technologies and catalysts to facilitate the processing of a broad range of low cost feedstocks.

On March 18, 2013, the Company announced that it had increased its ownership of equity in ARW to approximately 898 million shares, representing 21.4% of the outstanding equity. This increase was accomplished as a result of the Company's participation in a financing previously announced by ARW on February 7, 2013; at that time, ARW announced that it proposed to raise A$12.3 million at A$0.007 per share, comprising an immediate private placement of A$4.27 million (the "ARW Placement") and an underwritten rights offering of A$8 million to ARW shareholders at A$0.007 per share, with the ability of shareholders to apply for oversubscriptions (the "ARW Entitlement Offer").

The ARW Placement of A$4.27 million successfully closed on February 12, 2013 and LEC further acquired approximately 179 million ordinary shares at that time. On March 18, 2013 LEC announced that it had invested approximately A$2.5 million to further acquire approximately 356 million shares as a part of ARW's underwritten rights issue which had successfully closed raising the balance of approximately A$8 million.

Going Concern and Subsequent Events

LEC's consolidated financial statements have been prepared on a going concern basis which assumes that LEC will continue its operations and those of LIL for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.

LEC's consolidated financial statements and the accompanying Management's Discussion and Analysis do not reflect adjustments to the amounts and classification of assets and liabilities that may be necessary if the going concern assumptions were not appropriate and such adjustments could be material should LEC be unable to continue as a going concern.

LEC has historically financed its working capital requirements largely through public and private sales of equity securities, and interest income. The ongoing funding requirements of its wholly owned subsidiary LIL, were met out of these funds together with funds received directly by LIL in the form of government grants and corporate contributions. LEC's recent investments in ARW and TBF have also been made out of its general working capital and from the Company's line of credit with DCF.

At January 31, 2013, LEC and its subsidiary LIL, had $2.7 million in cash and cash equivalents and up to $1.8 million in future funding receivable from contracted government and corporate funding agreements, and $1.4 million in current liabilities. The Company had a $4.7 million surplus in net shareholders' equity after taking into account an accumulated deficit of $34.1 million. As of the date of this report and incremental to the balances at January 31, 2013, the Company had requested a total of $4.0 million to be drawn under the line of credit with DCF.

LEC currently forecasts that its working capital requirements for the next twelve months may exceed the combination of its current working capital and those funds which are expected to be received in the future from LIL's existing government grants and corporate relationships. The ability of LEC to continue as a going concern is dependent upon its ability to continue to fund its stated business objectives and to repay amounts drawn under the DCF credit facility. There can be no assurance that LEC will be able to obtain further financing on favourable terms and in such event, LEC's working capital may not be sufficient to meet its stated business objectives.

The Company's complete financial statements for the three months ended January 31, 2013 and the related Management's Discussion & Analysis of Financial Condition and Results from Operations are available at the Company's website, www.lignol.ca, or at www.sedar.com under the Company's profile. These financial statements were prepared in accordance with the required adoption of International Financial Reporting Standards.

About Lignol Energy Corporation ("LEC")

LEC (TSXV: LEC) owns 100% of the issued and voting shares of Lignol Innovations Ltd. ("LIL") and has interests in Australian Renewable Fuels Limited (ASX: ARW) ("ARW") as well as Territory Biofuels Limited ("TBF"). LEC also intends to invest in, or otherwise obtain, equity interests in energy related projects which have technical and commercial synergies with the Company and have the potential to generate cash flow.

LIL is a leading technology company in the advanced biofuels and renewable chemicals sector undertaking the development of biorefining technologies for the production of advanced biofuels, including fuel-grade ethanol, and other renewable chemicals from non-food cellulosic biomass feedstocks. LIL'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 lignin. 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. LIL is executing on its development plan through strategic partnerships to further develop and integrate its core technologies on a commercial scale. For more information please visit LEC's website at www.lignol.ca.

ARW is the largest biodiesel producer in Australia owning three plants with a total nameplate capacity of 150 million litres per annum. ARW's three plants were built at an aggregate cost of over A$100 million. More information on ARW can be found on their website at www.arfuels.com.au.

TBF owns a large scale biorefining facility located in Darwin, Northern Territory, Australia, which includes a Lurgi designed biodiesel plant and the only glycerine refinery in Australia. The facility was commissioned in 2008 at a cost of A$80 million, along with 38 million litres of related tankage, now leased by TBF. The biodiesel plant is the largest in Australia with a maximum capacity of 150 million litres per year. The plant was shut down in 2009 and TBF is currently in the process of planning the restart of the facility.

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 LEC's ability to invest in, or otherwise obtain, equity interests in energy related projects which have technical and commercial synergies with the Company and which have the potential to generate future dividends and cash flow, the outcome of factors influencing the future conversion of LEC's Notes into an equity position for LEC of between 20% to 40% in Territory Biofuels Limited ("TBF") depending on a range of criteria related to its Darwin facility, TBF's ability to restart and profitably operate its 150 million litres per year biodiesel plant and glycerine refinery, TBF's ability to work with strong commercial partnerships and to become a major regional player in the biodiesel market in the Pacific Rim, TBF's ability to integrate new pretreatment technologies and catalysts to facilitate the processing of a broad range of low cost feedstocks, the successful outcome of projects undertaken under the Technology Collaboration Agreement between LEC and TBF, the future exercise of DCF's warrants, LEC's ability to continue as a going concern and to raise additional financing to fund the operations of LEC and LIL, the development status of LIL's fully integrated pilot scale biorefinery in Burnaby, British Columbia, the planning and development of a commercial plant, LIL's ability to complete project deliverables which are funded in part by government agencies, obtaining strategic partnership investments and government funding for initial commercial projects. 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 LEC'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 LIL's technology at the fully integrated biorefinery pilot plant scale, LIL's ability to satisfy the conditions of existing government grants and to obtain new additional grants, our ability to continue to finance our operations and to finance and complete the development of a commercial project, LIL's ability to work with Novozymes to produce cellulosic ethanol at production costs competitive with gasoline and corn ethanol, LIL's ability to develop products and to obtain off-take agreements, LIL's ability to obtain requisite regulatory approvals and its ability to enter into agreements with strategic partners on terms acceptable to us, the inability of LEC to influence the strategy, operations and financial performance of Australian Renewable Fuels Limited ("ARW") and TBF, the reliance on publically available information of ARW in the Company's evaluation of its acquisition of shares in ARW, the potential inability to divest the ARW ordinary shares due to modest trading volumes and to divest of its TBF shares, the cost of any future ARW capital investment, the fluctuation of biodiesel and feedstock prices on ARW and TBF, the effect on ARW and TBF of changes in government policy relating to the environment, and incentives for renewable fuels, the ability of ARW and TBF to generate cash flow and pay dividends, and the ability of ARW and TBF to market their products overseas and to meet relevant regulatory requirements. Many factors could cause LEC'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 LIL's fully integrated biorefinery pilot plant that is required prior to completing the next scale-up of the technology, financial market conditions which will impact our ability to finance our operations and to finance the construction and operation of a commercial plant, the price of gasoline and demand for ethanol, the market pricing and demand for renewable chemicals, risks relating to the protection of LIL's core technology from infringement and those risk factors which are discussed elsewhere in documents that LEC 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.

SOURCE Lignol Energy Corporation