Berken NutraScience reports $342,000 Q1 revenue, capitalizing on growing plant protein demand and achieving key production milestones.

OPERATOR - (00:01:34)

Sam. Good afternoon, everyone, and thank you for participating in today's conference call to discuss Berken NutraScience Corporation's fiscal 2026 first quarter results ended June 30, 2025. Joining us today are Kip Underwood, Burcon NutraScience Chief Executive Officer, and Alex Vardy, the company's interim Chief Financial Officer. Following their presentation, we will open up the call for your questions. After the presentation, there will be an opportunity to ask questions. To join the question queue, you May press star 1 in your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing 0. Then, before we conclude today's call, I'll provide the company's Safe harbor statement with important cautions regarding the forward looking statements made during this call. Now, I would like to turn the call over to the CEO of Berken, Mr. Kip Underwood. Sir, please go ahead.

Kip Underwood - Chief Executive Officer - (00:04:31)

Thank you. Operator. Good morning, good afternoon, and good evening. To those on the call today, And thank you for attending our Q1 conference call. Before we get started, I would like. To preface this, we hope you All walk away with three fundamental takeaways. First, with our production facility in Galesburg Illinois, working with our alliance partner, we have proven capability. We've proven we can produce our products at a cost and a quality that fully enable our business plan. Second, the customer response to our products and the market growth for proteins, in particular plant proteins, has exceeded our expectations. Put those two together, and the third Key takeaway is fundamentally, we are on track. We are on track to execute our business plan. Our Safe harbor statement, which we will read will read So today we'll go through recent milestones, we'll talk a little bit about our technology portfolio. It's the foundation for our business, how we've integrated that technology into the Galesburg facility. General customer update. Why we believe this represents a tremendous investment opportunity for those on the phone today. And then we'll look ahead. What should you on the phone look for, what Should our investors look for from us? During the balance of 2025. Right now, for us, it is all about execution. I mentioned we are targeting a growing market. We have proven technology execution is the key to our success. We frequently say that we want to say what we do and do what we say. We say we believe. In the last six months, we've earned credibility in our ability to execute with. We have cleared real critical milestones for our success. So if we wind back to the. Successful rights offering we completed a little. Less than six months ago, working with our alliance partner, they acquired the facility in Galesburg. We Completed the first commercial production of our PZASP protein. Followed that with executing on our capital market strategy with the 20 to 1 share consolidation. As we move forward, we've entered into. A $6.8 million multi year production agreement. And then lastly, subsequent to the quarter, we also announced the official launch and The first commercial production of our fava protein. Execution is critical to our success, We believe we have demonstrated our ability to do so with the clearing of these milestones and absolutely expect to continue. Strong execution into the future. The foundation of who we are, Foundation of why Bercon can be a lead in this marketplace, is our technology, our proprietary technology that fundamentally takes the. byproduct of grain processing, We upcycle that product to 90 to 95% pure protein. And it's that extra purity that really. Delivers our advantage in the marketplace. That extra purity delivers better flavor, better color, better functionality than the alternatives on the marketplace today. What that means for our customers, which are food manufacturers, they can in turn produce products that we all buy at the grocery store, fortified with protein that Not only deliver the nutrition we desire. but deliver the joy of eating. So in the end, again, a technology platform upcycling grains that deliver market-leading purity, which delivers taste, flavor, functionality, and color. The bulk of our efforts in Q1. was integrating that technology into the facility in Galesburg, Illinois. Within a few weeks of the acquisition. by our partner, we were able to install our proprietary process equipment. That was followed by the commissioning and then really the hard work began in. moving our processes from pilot to commercial scale. Training of operators, a tremendous amount of work. Really a seamless integration from the team, from our technological center in Winnipeg with the local team in Galesburg. It was fabulous to be a part of. I was there personally most of these. Days and what I'm most proud of is successful. Through that work, we've been able to announce and demonstrate that we can and have produced our PZASP protein successfully at commercial scale. That doesn't mean once, that means repeatedly. We have to deliver consistent quality to our customers. We've demonstrated that capability within the quarter. And then subsequent to the quarter, we also demonstrated that same capability with our FavaPro team. And this tremendous success, really all the credit goes to our team on the ground. And a tremendous thank you to the team in Galesburg, the team from our. Technical center for their work, their dedication and their creativity. We have been very focused on successful quality of production because fundamentally, we have Customers who want to buy our products. We announced the quarter, we had $342,000 revenue. I also mentioned the $6.8 million multi year production agreement. We have strong customer interest and we. Have a robust customer funnel. We get asked a lot, what does this mean? So our customer funnel mirrors our customers decision making process. And when a food company launches a new food that any of us buy, that's a nine to 18 month process. and our funnel mirrors that. So what that looks like is first They buy, they don't buy, and we send them a couple of cups of Powder as a sample, then they buy. Five to ten pounds. Then the customer will buy a few bags, and then the customer will buy two To four thousand pounds, a couple pallets. as they move through that process, they are testing our product and their process at a larger and larger scale. and seeking to prove we deliver against their expectations at commercial scale. We have many, many customers that are In the bag purchase or pallet purchase. stage right now, and have also announced that within that, we can say and, are proud to say that we have Our initial pea protein commercial scale sales. Commercial sales to a customer. As we continue through this process, what this leads to is recurring revenue. Once the customer begins to incorporate our. ingredients, our proteins into their product, that becomes recurring revenue. Every time they produce their product for their sale, they come back and buy for us. So, robust customer pipeline, robust customer projects. This is foundational to really us becoming a successful company and acquiring recurring revenue for our business. A little detail on our customer activity. During the quarter, or subsequent to the quarter in July, we attended the IFT trade show. This is one of the largest food ingredient trade shows in the world. And we did so for three reasons. First and foremost, to drive customer demand, customer engagement. Second, to engage with trade media. To get our name out there. And third, really was to deliver what we call a wow factor. At the show we demonstrated two prototypes. These are prototypes we make to demonstrate the capability of our proteins. We demonstrated a café latte beverage, which contained 10 grams of protein. And we had a wonderful protein fortified black bean hummus on our cracker. And we do this to demonstrate the technology, What we're really trying to deliver is a wow factor. We want people to taste these products. prospective customers, industry leaders, and sometimes even Competition to taste these products. pause and go, 'Wow, what an amazing product.' And we can say almost and maybe without exception, we delivered that wow factor. To everyone who stopped by. They were blown away by the power of our technology, what it can do in foods. And really, that accelerated our engagement with our prospective customer base. One of the most talked about things at the show was actually plant-based cheese. So how do you, how do you make a plant based cheese that performs like cheese? Does it melt? Does it stretch? Does it look and act like the. cheese we might like on a pizza, or the cheese we might like on a sandwich, or the cheese we might melt in a burrito? And what we This is a great case study for our technology, We have been able to really crack the code with our partners in the plant-based cheese arena. And this is important because plant-based cheeses today at the retail level are about $220 million of sales at the retail level. Cheese sales at the retail level are billions of dollars. And this is where our technology matters. Our technology working with our customers can. unlock that $220 million plant-based cheese category to grow into the billions. of dollars in dairy cheese products. This is not just our opinion. The University of Guelph did a study around the performance of market-leading plant-based plant-based cheese, plant-based cheese, with our offering, or in this case, our solar team. We do it as well, our pea protein offering, and comparing that to cheddar cheese, the gold standard. And you can see in terms of hardness, melt, stretch, the numbers there say we have performed far better than any plant-based cheese out there and are really knocking on the door of true cheddar cheese performance. We had an industry partner of ours, industry veterans say, 'You know, people have been working on plant-based cheese for decades.' Some say it's the holy grail of plant based foods. If you can crack this with your technology, then you are fundamentally allowing and Doing something that has never been done before. This is a great example of the power of our technology, not just to. Help companies create great tasting foods, but. Then also to change categories and deliver growth for our customers, which then delivers. tremendous growth for Burcon. So, reaching market target, growing market. We're getting affirmations from customers, from industry that our technology in fact delivers. And because of this, we believe this is a tremendous investment opportunity. We are currently in phase one of the graph. We are launching our products to market. Phase two gets us into further executing at the capacity, through the capacity of. our Galesburg facility, our partner's facility, going Into phase three, which is really exciting. That's where we scale through licensing and partnerships. We're very excited about where we are. We are reaffirming our financial targets. 1 to 3 million revenue in 2025, double digit revenue in 2026 and cash. flow positive in 2026 as well. Looking ahead, what should our investors, what do they want? What should they look for? So we're in a phase now, again. This is about execution. Say what we do, do what we say. So in the balance of 2025, what. our investor base should look for are Announcements on us moving through the balance of our portfolio. So, as we do our first commercial-scale production of canola protein, our first commercial-scale production of sunflower as an example, and then as we continue to grow recurring revenue, further announcements on commercial achievements that bring growing revenue to life for markets in our customer base and our investor base. With that, before I turn it over to the operator again, I hope the three takeaways, really, for you all are that we have a facility that we've proven can produce our products at a cost and quality that fully enable our business plan. The customer response and the market growth you're seeing have exceeded expectations and fundamentally, we are on track as a business to meet the commitments we made to the marketplace. With that, operator, I will turn it over to questions.

OPERATOR - (00:17:58)

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press Star one. On your touchtone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star 2. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from Dave Storms of Stonegate. Your line is already open.

Dave Storms - (00:18:40)

Good evening, and I appreciate you guys taking my questions. I just wanted to start with maybe the production agreement. I know you mentioned that you're comfortable reaffirming your guidance. One to three, is there anything more you can tell us about the production agreement though? Maybe you know, the length, any revenue recognition nuances, maybe the margin profile, anything like that.

Kip Underwood - Chief Executive Officer - (00:19:02)

Thank you, Dave. I think we can say a few things. One is we are asking against that, against that agreement and a considerable amount. Of the revenue in Q1 came from that production agreement. Relative to our continued production, that'll be a quarterly production for us. Moving forward, the margin structure, it is profitable for us. It is not as profitable as our own products, but it is indeed profitable. And maybe, maybe to reiterate the why we are doing this is. This type Of agreements help us with our facility. Facility that runs more often runs better. And this base loads our facility. It helps us train our operators, it. Helps us run more often, which means. We can actually run our own products better. So we're excited to have this agreement. It covers five years and this will. be a fundamental part of our growth, not just today, but in the future as well.

Dave Storms - (00:20:01)

Understood. Thank you. That's fantastic. Thinking about your own products and kind of the sales funnel that you mentioned, can you maybe help us understand how the top of that sales funnel is changing as you continue to go to expos, as you continue to launch new products? Are you seeing that sales funnel just continue to expand with traditional customers? Are you seeing any white space maybe open up that you didn't think was going to be there? Anything there would be helpful.

Kip Underwood - Chief Executive Officer - (00:20:28)

I think the first point is that it continues to expand, and we're expanding in very targeted ways for the type of customer and the type of food application where we deliver the most value. That's the first piece. The second area where we're seeing white space, and we believed it was there, but we're getting customer affirmation as consumers seek more plant protein, more and more brands are looking to put plant Protein into new food forms or have. new plant-based foods that taste better, that deliver against new customer or new consumer expectations. So think about maybe a, like I mentioned, plant-based cheese. Maybe it's a cream cheese, maybe it's a condiment. We're seeing lots of activity for our technology in those areas that is really white space for our customer and for us. And really it's where our technology is. Unlocking things that maybe either weren't possible before or weren't very good before. And now we're able to help our customers fundamentally change those things.

Dave Storms - (00:21:33)

That's very helpful, thank you. And then maybe just picking up that a little bit with regards to the Expo that you had. When we're thinking about your portfolio using the Expo as an example, were there any portions of your portfolio that had an exceptionally strong showing? Maybe a strong showing relative to what your expectations were? Any maybe anecdotes there? Sure. Thank you.

Kip Underwood - Chief Executive Officer - (00:21:58)

I think the surprise for us, and we already acted on this was, was our Fava Pro, our fava protein, we. had that in our arsenal. We had sample pilot material, and you know, the market reaction on fava protein really far, far exceeded our expectation. There's a lot of excitement around and there's good reason. Fava protein tends to work better in snacks or more of a savory opportunity. So this is one where the FavaPro samples did great. The market reaction and the customer reaction to our offering were great. And that's also why we pivoted and pulled FavaPro up in our priority list and were able to pivot and produce that commercially within a few weeks of the IFT trade show. And that was all driven by better than expected customer response and, you know, an immediate opportunity for us to produce and hopefully sell in the near future.

Dave Storms - (00:22:56)

That's great. That's a great story of being nimble. And then maybe one more for me, more of a modeling question. We saw R&D and G&A expenses decrease pretty significantly year over year. How sticky should we think these expenses are? You know, is that going to maybe come in waves or is this a new normal as you focus on execution?

Kip Underwood - Chief Executive Officer - (00:23:18)

I guess that's the new normal, Dave. And I think the other thing I would say for modeling is we did. have, you know, a decent amount of one-time startup production costs. So those, those reductions will model moving forward. Maybe slightly up as we do a little more R&D as opposed to production. The other piece on modeling is that a considerable amount of our costs in the quarter on the production side were due to one-time startup costs. So, the production side is not indicative of all the ongoing costs for the business.

Dave Storms - (00:23:52)

That's great. I'll take the rest offline, and I appreciate you taking my questions.

Kip Underwood - Chief Executive Officer - (00:23:55)

Thank you, Dave.

OPERATOR - (00:23:59)

Ladies and gentlemen, as a reminder, if you have a question, please press star 1. Your next question comes from Bruce Lazenby of National Capital Investment. Your line is already open. Bruce, are you there? Hello, Bruce again, your line is already open.

Bruce Lazenby - (00:24:30)

Okay, you got me there, Kip.

Kip Underwood - Chief Executive Officer - (00:24:32)

Yes, Bruce, we do. Great.

Bruce Lazenby - (00:24:35)

Thanks for that presentation. We appreciate it. I thought the insights into the sales cycle was particularly informative. I've lived that kind of sales cycle, and it's frustrating as hell. But once you're in and done, then the ongoing bit kind of flows by itself. That's great. You can look forward to that. Two questions for you. Are there any financing plans coming up? The cap table is going to remain pretty much as it is for the foreseeable future. And the second question is, I'm guessing there's no tariff implications, but these days one has to ask. Yes.

Kip Underwood - Chief Executive Officer - (00:25:09)

So let me deal with the latter first. As of today, Bruce, there are no tariff implications for our business. We have really thought through the tariff side. So we have raw material sourcing from both Canada and the U.S. that meet our quality, expectations, and needs for cost and logistics. So we don't foresee anything here, anything on the tariff side impacting our business. And then relative to financing, what I can say is we have a balance sheet that allows us to fully drive. Our business plan and so our focus. To execute the business plan and grow. And then if for some reason a new opportunity came to us, then we would Evaluate that independently from the plan, as it says today. Okay. Okay, that's great, kid. Thank you.

Bruce Lazenby - (00:25:57)

Thanks, Bruce.

Kip Underwood - Chief Executive Officer - (00:26:00)

Thank you. Now I will hand over the call to Mr. Paul Lam, Director of Investor Relations and Communications. For questions from the webcast, please go ahead.

OPERATOR - (00:26:13)

Thank you. Operator, we have one question from the webcast, from Daniela Godotti, private shareholder. Question is, are you able to produce different proteins in parallel at the Galesburg facility, or must different crops be treated sequentially? Thank you for the question. So we produce one product at a.

Paul Lam - Director of Investor Relations and Communications - (00:26:37)

Time. To ensure we have exact inequality and performance. Where I will add to that is a lot of the core competencies. And how do you switch between products efficiently without impacting overall cost structure? And the way we do that is, every so often in a food process like this, you have to clean your process. So what you do is you schedule a product changeover when you have to. clean the plant anyway so that you're able to change between fava and canola, or canola to pea protein efficiently and cost-effectively. So, one at a time to ensure exactly in quality, and then a lot of work to be sure we can change between products efficiently and to ensure the right quality is adhered to. Thanks for that, Kip. And thank you for your questions. I don't see any more questions from the online webcast. I think we are good. Operator, back to you.

OPERATOR - (00:27:48)

Thank you, everyone. That's all the time we have for questions today. This concludes our question and answer session. I would now like to turn the call back over to Mr. Underwood for any closing remarks. Please go ahead, sir.

Kip Underwood - Chief Executive Officer - (00:28:04)

Thanks, operator. And first and foremost, thank you to. Everyone here for allocating your time for your interest and your investment in Burcon. We cannot thank you enough. Thank you to our team. We had a lot of people working really hard who believe in what we were doing. And it is an absolute joy to work side by side with them. I do want to note that we look forward to speaking to everyone again about a month from now at Burcon's AGM. There we will go more in depth to our strategy, business update and outlook for the company again that will be held on September 17 through a virtual webcast. We really look forward to speaking everyone again. Thank you all again for your time today. Operator.

OPERATOR - (00:28:50)

Before we conclude today's call, I would like to take a moment to read the company's Safe Harbor Statement. This call contains forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements or forward-looking information involve risks, uncertainties, and other factors that could cause actual results, performances, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements or forward-looking information can be identified by words such as anticipate, intend, plan, goal, project, estimate, expect, believe, future, likely, can, may, should, could, will, potentially, and similar references to future periods. All statements other than statements of historical fact included during this call are forward-looking statements. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements or information. Important factors that could cause actual results to differ materially from Burcon's plans and expectations include the actual results of business negotiations, marketing activities, adverse general economic, market, or business conditions, regulatory changes, and other risks and factors detailed herein and from time to time in the filings made by Burcon with securities regulators and stock exchanges, including in the section entitled Risk Factors in Burcon's Annual Information Form filed with the Canadian securities administrators on www.sedar.com. Any forward-looking statement or information only speaks as of the date on which it was made and, except as may be required by applicable securities laws, Burcon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Although Burcon believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, investors should not rely on such statements. Finally, I would like to remind everyone that this call is recorded, and the webcast will be available for replay on the company's website starting later this evening. Thank you ladies and gentlemen for joining us today for our presentation. You may now disconnect.