Burcon NutraScience Corporation (Burcon), a technology company working in the development of plant-based proteins for foods and beverages announced Feb. 28 that Merit Functional Food’s (Merit) lenders, Export Development Canada and Farm Credit Canada have filed an application with Court of King’s Bench of Manitoba according to a release. The application is expected to be heard March 1 regarding the appointment of a receiver in respect to Merit’s assets. Burcon is continuing discussions with Merit’s lenders to try to find a potential solution to fund Merit’s business.
In a letter, Burcon CEO, Kip Underwood issued to shareholders on Feb. 8, provided an update on the future opportunities and challenges. The main challenge that was addressed is their investment in Merit.
Underwood noted Merit’s significant progress in the last six months, but even with the noted improvements, the business has cash flow concerns. The letter stated Merit had ” fallen short of expectations and led to the current cash flow concerns.”
As stated in the letter, Burcon, as well as other shareholders, has supported Merit financially. In 2022, Merit started looking for a new strategic investor, but to date, no funding has been received from a new investor.
Burcon CEO continued to express concerns about Merit’s finances and their viability in the Feb. 8 letter. These concerns have led Burcon to reassess how they are involved in the Merit business and will be taking the actions listed below. Underwood states these are shared to maintain a level of transparency so the shareholders can understand what is going on and why it is happening. Burcon remains committed to Merit and believes there is potential.
Actions Listed Include:
- Discussions with Merit lenders to have terms to maintain momentum and outline a path to profitability:
- Burcon is looking into interim financing for Merit while finding a long-term solution:
- Burcon is going to fund operating expenses with support from the largest Burcon shareholder to back the project:
- Burcan will continue to work to control costs to put capital towards future opportunities:
- Combining Burcon’s technology and Merit’s production capability, new plant protein markets will continue to be evaluated and targeted.
If this plan is successful, Burcon will have the opportunity to develop, produce, and market innovative products. The negotiation process will be timely, but business should not be disrupted.
Underwood calls out while this is a risk, there is also the potential for great opportunities. He thanks their investor base for patience and commitment while they are working towards profitability.
For more information, visit www.burcon.ca.
