Burcon NutraScience Corporation (BU) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Burcon NutraScience Corporation's Fiscal 2022 ended March 31, 2022. Joining us today are Peter Kappel, Interim CEO and Chairman of the Board; and Jade Cheng, the company's Chief Financial Officer. [Operator Instructions] 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. I would now like to turn the call over to the interim CEO of Burcon, Mr. Peter Kappel. Sir, please go ahead.

Thank you, operator, and thank you all for joining us this afternoon. I want to start by thanking our team members for their contributions this past year and for their commitment and dedication to Burcon's vision. Burcon's fiscal 2022, which ended March 31 was in many ways a challenging year for Burcon, but also a year in which Burcon transitioned into a revenue-generating company. The year also included significant milestone achievements for our joint venture company, Merit Functional Foods. Burcon's focus during the year was to support Merit in the commissioning of its state-of-the-art pea and canola flex protein production facility located in Winnipeg, Manitoba. The team at our Winnipeg Technical Center worked diligently to assist Merit, often requiring team members to be working inside Merit's facility for extended periods of time. As of the end of December, after successfully working through and resolving operational challenges with the goal of optimizing production throughput and yield, Merit's Flex Production Facility is now commissioned and producing its best-in-class pea and canola protein ingredients. During the year, our joint venture partner Bunge Limited exercised its option to invest an additional $4.95 million into Merit, further supporting Merit's growth. Merit had other noticeable developments, including receiving 2 further co-investments from Protein Industries Canada, which I will mention in more detail in today's call. We will also discuss Merit's ongoing sales pipeline and sell-in process. An important development for Burcon during the year included significantly advancing the strategic partnership discussions we are having to commercialize our other plant broad-based protein technologies. This is something we, as a team, are very excited about, and I look forward to talking about this in more detail on today's call. Before I talk about these developments, I'd first like to turn the call over to our Chief Financial Officer, Jade Cheng, who will briefly take us through the financial details for the year. Then I'll return to provide more color on recent developments and the opportunities we are pursuing. We will open the call to questions following our remarks. Jade, please go ahead.

Thanks, Peter. Earlier today, our financial results for fiscal 2022 were issued in the news release and filed with SEDAR and EDGAR as well as posted to the Investor Relations section of our website. Turning first to our income statement. Burcon recorded its first royalty revenues from Merit starting in the first quarter of fiscal 2022. And the amounts have increased quarter-over-quarter for the year with a total of $171,000 of royalty revenues recorded from Merit during fiscal 2022. Merit's total sales revenues for the year were $6.3 million, which included sales of commodity and co-products in addition to pea and canola protein sales. Merit's fourth quarter total sales increased 84% over the third quarter. During fiscal 2021, we recorded $250,000 of research revenues from Nestle for work on improving functionality of Burcon's and Merit's plant-based proteins as well as $9,000 of royalty revenues recorded from ADM for CLARISOY. During fiscal 2022, we reported a net loss of $10.3 million or $0.09 per basic and diluted share. This compares to a net loss of $618,000 or $0.01 per basic and diluted share in the past year. The higher loss this year as compared to last year's includes noncash items such as an increase of our share of Merit's loss of $1.9 million, a decrease of the dilution gain on the investment in Merit of $5.4 million as well as a reduction of costs that were capitalized of $1.1 million. These will be covered in more detail that follows. For fiscal 2022, we recorded our share of loss in Merit of $4.3 million as compared to $2.4 million in the prior year. The higher loss incurred by Merit reflects the stage of development as we continue to commission the Flex Production Facility for most of fiscal 2022. Merit successfully completed commissioning the Production Facility by December 31, 2021. During this year, Bunge invested an additional $4.9 million in Merit, which reduced Burcon's ownership interest slightly from 33.3% to 31.6%. As a result, Burcon recorded a gain on dilution of $961,000 in our investment at Merit. This compares to a dilution gain of $6.4 million recorded in fiscal 2021 when Bunge initially invested in Merit. Gross research and development expenses totaled $3.4 million for the year as compared to $2.3 million in fiscal 2021. About 1/2 of the increase is due to higher stock-based compensation expense with the balance to salary increases, staff additions and higher amortization expense. With Merit's Flex Production Facility commissioned by December 31, 2021, Burcon sees the capitalization of pea and canola costs to deferred development costs and commenced amortization on January 1, 2022. Gross intellectual property expenses did not change significantly during this year over the past year. As with R&D expenses, we also ceased capitalizing intellectual property expenses related to our pea and canola technology and began amortization on January 1, 2022. G&A expenses increased by $622,000 from $3.7 million in fiscal 2021 to $4.3 million in fiscal 2022. The increase is due mainly to higher professional fees, investor relation expenses and insurance costs related to the NASDAQ listing. As of March 31, 2022, our cash balances totaled $7 million. Subsequent to March 31, Burcon advanced $3.16 million as a proportionate share of a $10 million funding to Merit to address Merit's liquidity requirements as it ramps up production and sales. On June 21, we also announced a loan agreement with our major shareholder of up to $10 million, available in two $5 million tranches, of which the first tranche is currently available to Burcon. If the loan is fully drawn, our cash resources are expected to fund our operations through February 2024, putting Burcon in a strengthened financial position to focus on new joint venture opportunities and collaborations. I would like to refer you to our complete financial statements and management's discussion and analysis that are available in the Investors section of our website at burcon.ca as well as on sedar.com. In terms of our patent portfolio, Burcon filed 5 additional U.S. patent applications during fiscal 2022, covering technologies for the production of sunflower seed protein and pulse protein ingredients. We further expanded our patent portfolio by 23 issued patents during this year, including 2 additional U.S. patents granted. The new patents increased our patent portfolio to 327 issued patents in various countries, including 72 in the U.S. and more than 180 active patent applications with 26 additional U.S. patent applications. With that, I'd like to turn the call back over to our Interim CEO and Chairman, Peter Kappel. Peter?

Thanks, Jade. As mentioned at the beginning of today's call, fiscal 2022 was the transition year for Burcon included some significant advancements for both Burcon and its joint venture, Merit Foods. Before I get into Merit's progress, I'd like to give a brief overview of the current market landscape for plant-based and how Merit is poised to be in a position to thrive in the growing plant-based food revolution. According to data from SPINS, U.S. retail sales of plant-based foods grew 3x faster than total food retail sales despite the ongoing challenges presented by the pandemic and supply chain disruptions, reaching a record value of $7.4 billion this past year. Food and beverage companies continue to develop and launch products that offer a plant-based alternative for consumers. There are 3 main drivers for consumers to consider plant-based products, and they are perceived health aspect of plant-based foods, the lower environmental impact of choosing plant-based versus animal-based products and for the betterment of animal welfare. Based on these drivers, consumers are expected to continue to demand more products that are both better for you and better for the planet. Similar to how consumers are shifting more and more towards owning electric vehicles, the sustained growth of plant-based foods will continue for years to come. Nestle recently reported strong double-digit organic sales growth of their plant-based categories with Nestle CEO stating that he "continues to believe that plant-based food is one of these once-in-a-generation opportunities to revitalize and upgrade our food category." We believe that Merit as the protein ingredient solutions provider is poised to meet this growing demand with its exceptional and unique protein ingredients. From the SPINS data, [ ag ] alternatives plant-based, ready-to-drink beverages and creamers. We're among the fastest-growing plant-based categories in 2021, while plant-based meat sales were steady at $1.4 billion in sales. According to a separate study undertaken by [ Makkila Foods ], while sales of plant-based meat alternatives have experienced a deceleration since 2021, the category does have strong underlying steady growth. The study identified the consumers who were genuinely interested in trying and switching to plant-based products, but factors such as premium pricing, taste and texture, fell short of consumer expectations and contributed to a lack of repeat sales. This actually presents a fantastic opportunity for Merit to gain market share in the meat alternative space. The improvement of meat alternative products will require innovative ingredients that won't negatively affect the consumer sensory experience. Merit's pea and canola protein ingredients, which are neutral in taste and have exceptional functionality, have the potential to improve product formulations, shorten the ingredient list with clean label [ lateral ] ingredients and contribute to an overall positive consumer experience. Within the backdrop of a growing plant-based market, our joint venture, Merit Functional Foods achieved a significant milestone during the year by reaching the production output threshold as stated under the amended and restated license and production agreement for the successful commissioning of Phase 1 of a multiphase build-out of its Flex protein Production Facility. Since commissioning, Merit's first of its kind Flex Production Facility has been scaling up production throughput capabilities and achieving a series of new high watermarks reduction output of its best-in-class pea and canola protein ingredients. Merit continues to fulfill commercial sale orders for many food and beverage companies as they fine-tune and optimize their process. Over the past year, top priority for both teams at Merit and Burcon were to complete the commissioning of Merit's Flex Production Facility. Our teams worked on implementing process modifications and improving operational efficiencies that brought about the scaling up of production throughput and yield. -- challenges associated with commissioning a normal processing facility let alone a dual process facility continued to be negatively impacted by pandemic-related delays and supply chain constraints. Despite these challenges, Merit achieved a stated production throughput and marked this facility as commercially ready. It is worth noting again that commissioning of its facilities complex is Merit's dual process production facility, where it can flex between the production of pea proteins and canola proteins was a significant and challenging undertaking. Both the pea and canola protein extraction technologies incorporated into Merit's new production facility have not previously been implemented on a commercial scale. So we have truly been breaking new ground. Despite having achieved commission status, Merit continues to fine-tune and optimize the production throughput quality and yield of its protein ingredients with the goal of reaching a state of continuous and consistent production. As Merit optimizes and ramps up its production process, we are encouraged to have seen a quarter-over-quarter increase in overall protein sales this past year. While revenues remained modest at this juncture, we are confident that in time, Merit will reach the production and sales potential of its originally designed nameplate capacity. I am pleased to note that there is significant interest in demand for Merit's pea and canola protein ingredients, which offer unparalleled purity and exceptionally clean and neutral taste compared to what's currently available in the market. As discussed in previous calls, Merit is currently working with hundreds of CPG companies who are at various stages of the procurement cycle and many who are already customers of Merit to incorporate its protein ingredients into innovative and taste forward product all formulations. While Merit continues to optimize its process for higher production throughput, we expect Merit to ramp up production and sales as the year progresses. As a quick note, we are also quite excited about the recent launch of Merit's organic pea protein, which arises from the process that Burcon recently developed. Now part of Merit's portfolio, we expect that organic pea protein will be well received by a market that is looking for clean label, organic ingredients. Coming back to Merit sales. Burcon recorded a total of $171,000 in royalty revenues from Merit for the year, with $77,000 of those earned from the last quarter. While a positive uptrend in protein sales, this still remains disproportionately small compared to potential production capacity of Merit's production facility. We believe that these sales figures are just at the outset of what Merit sales can grow into, and we look forward to Merit converting more sales prospects into long term -- with long-term customers. I know we touched on this before. but it's worth noting again now that Merit has commissioned its facility. In the food ingredient industry, sales cycles are lengthy and the lead up to initial sales orders can take a long time. However, this lengthy procurement process by CPG companies, where they follow a cautious approach of stringent quality, safety, assurance and product consistency checks, once completed, can often result in lasting revenue streams and continuous supply contracts for many years to come. Food formulators are less likely to reformulate once they have incorporated an ingredient into an application and where the application is well received by customers. We are encouraged to see that consumer products on store shelves using Merit's protein ingredients are well received and CPG brands are then placing subsequent orders with Merit. Merit continues to develop its sales pipeline supporting the procurement process with many leading food and beverage customers. It is encouraging to see Merit convert more of these prospects into initial sales orders and we expect to see many more consumer products using Merit's proteins as they become available in the marketplace later this year. As mentioned, during the year, our joint venture partner, Bunge Limited exercised its special preemptive right to make a further equity investment into Merit Foods. As a result, Merit received an additional $4.95 million from Bunge. Merit also received 2 further co-investments from Protein Industries Canada providing 1/2 of total respective project costs. The 2 separate projects which would see Merit's pea and canola protein ingredients developed into new plant-based food and beverage applications. The first project with a total investment of $7.9 million has Merit partnering with TWC Nutrition, Daiya Foods and Grand River [ flex ] Foods to develop new plant-based products, which may include meat and dairy alternatives, ready-to-drink beverages, supplement powders and other plant-based applications. The second project with the total investment of $7.6 million, we see Merit partnering with Winecrush Technology, Wamame Foods and Wismettac Asian Foods for the development and distribution throughout Europe, Asia and North America of a line of plant-based need alternatives to pork and Wagyu beef. These projects are an excellent opportunity for Merit to show the case, the versatility and functional capabilities of these proteins and expand its sales reach to more leading food and beverage customers. Fiscal 2022 was the year we saw the successful commercialization of Burcon's pea and canola protein technology through Merit joint venture. While that is a significant achievement for our team. We are equally excited about the commercial prospects of our other protein technologies such as sunflower, hemp and oats. While Merit focused on production and sales, Burcon has had the opportunity this year to reallocate its bandwidth from supporting Merit to pursuing strategic partnerships and collaboration opportunities to commercialize our additional protein technologies that we have in our pipeline. During the year, we entered into an advanced discussions and negotiations with a number of potential joint venture partners interested in commercializing Burcon's other innovative protein technologies for the Global Food Ingredient Market. The process of forming a partnership in this area involved a number of stages with the most important being technology evaluation by our potential partners and customers. Feedback on the protein products produced by Burcon technologies has been overwhelmingly positive and has generated strong interest from potential partners and customers alike. We are very encouraged by the market potential of our protein ingredients to set a new benchmark in terms of taste, purity, functionality for protein ingredients. For example, sunflower protein and hemp protein on the market today range from 60% to 70% protein purity with undesirable color and flavor, whereas Burcon's proprietary protein platform can produce protein isolates unlike anything available in the market today. Respective proteins with greater than 90% purity, excellent functionality and exceptional color and taste that does not negatively affect the formulation. We believe that our current proteins in development offer a new category of premium protein ingredients that address many of the formulation challenges to date. Burcon and our potential partners see considerable value in bringing to market a new class of novel based plant proteins extracted from sunflower seed, hemp seed and/or oats, all of which are established agricultural products with a history of use of food and food ingredients. By leveraging resources from Burcon and our potential partners, we can shorten the time to market for our new protein technologies, securing strategic partnership that is the most beneficial to [indiscernible] shareholders is our top business development focus for the year. During the year, we have strengthened our already substantial intellectual property portfolio with additional patent applications and improvements. A total of 23 patent grants, including 2 additional U.S. patent grants were received covering the novel processes of the extraction and purification of protein ingredients arising from pea, soy and canola crops. In the last quarter, we filed an additional 5 U.S. patent applications to protect innovations arising from our R&D into the production of high purity sunflower seed and pulse protein ingredients. Our portfolio of patents totaled 327 issued, 72 of which are U.S. patents with an additional 182 patent applications filed. During the year, Burcon was approved for a dual listing on the NASDAQ Stock Exchange. Our NASDAQ listing affords Burcon's access to a larger group of potential investors interested in an ESG-focused company dedicated to plant-based sustainable nutrition. Within the backdrop of a volatile and challenging market, Burcon share prices suffered. And as a result, subsequent to year-end, Burcon received a letter from NASDAQ regarding minimum price bid deficiency, where Burcon's share price was below U.S. dollar for 30 consecutive days. We have a period of 180 days or until September 28 to regain compliance and are reviewing the various options available in order to gain compliance with NASDAQ's listing rules. Near year-end, Burcon received a co-investment from Protein Industries Canada with the development of high-quality protein -- sunflower protein isolates that use sunflower seed meal, a byproduct of sunflower oil production. Burcon partnered with Pristine Gourmet in a $1 million project to develop its proprietary sunflower protein extraction and purification process. The funds provided by Protein Industries Canada will help support Burcon's R&D efforts in commercializing its novel sunflower protein technology. During the past year, Mr. Johann Tergesen, after cofounding Burcon more than 23 years ago, stepped down as Burcon's President and CEO as of February 28th. I'd like to thank Johann again for his considerable contribution in growing Burcon to where it is today. Burcon also announced my appointment as Chairman of Burcon's Board and subsequent to Johann's departure, my appointment as Interim CEO. Furthermore, we were pleased to announce the additions of Jeanne McCaherty and Alfred Lau to Burcon's Board, adding a wealth of food business experience that will support Burcon in its next phase of development. I would like to briefly provide an update on our search for a new CEO, who brings expertise in the specialty food ingredient space. We engaged Kincannon & Reed, an executive search firm specializing in the food and agribusiness sectors to assist in recruiting a new Chief Executive Officer. Our board was presented with [indiscernible] high-caliber suitable candidates, which we shortened to a few select individuals. We went down the road with a highly qualified individuals. And although that candidate was very pleased with our technology, the team, strategic vision and the overall business outlook of Burcon, there was a mismatch between the role we were able to offer and that which the individual felt comfortable with. While not the result we desired, we understand and respect that individual's perspective. As such, the board is continuing to search for a new CEO. As Chair of the Board, I am 100% confident that the CEO recruitment process, despite taking longer than anticipated, will result in the appointment of a highly suitable candidate that can lead and grow Burcon through the next phase of its evolution. I am also compelled to state that since my appointment as Interim CEO, our entire Burcon team has continued to work relentlessly to move forward in all aspects of our business. The lack of a permanent CEO has not held them back from pursuing the commercial development of Burcon's protein technologies. I am optimistic that our efforts will bear fruit in the very near future. Switching to development subsequent to year-end. Burcon provided Merit of $3.16 million shareholder loan as part of the $10 million shareholder loan cash call, in which all of Merit shareholders contributed their proportionate shareholding. Merit will use the funds to ramp up its production and support its ongoing operations. Just last week, we announced that Burcon has entered into a $10 million loan agreement with its largest shareholder. Available in two $5 million tranches for a term of 24 months and at an interest rate of 8% per annum, the facility is fully drawn, provides Burcon with cash resources sufficient to meet the company's requirements until 2024, a near 2-year runway given our current burn rate and assuming no additional income. In light of the recent share price weakness and the tumultuous market conditions, we are very pleased to secure this non-dilutive financing. I am deeply grateful to our largest shareholders stepping up at this time. The facility allows Burcon to continue pursuing its strategic partnership opportunities and the monetization of its platform of innovative protein technologies. To wrap things up, fiscal '22 marks a notable milestones amidst a challenging environment. Firstly, Merit completed commissioning of Phase 1 of its state-of-the-art pea and canola Flex protein Production Facility and is now focused on the growth of Merit sales pipeline. We look forward to seeing more great taste in food and beverage products on store shelves using Merit's proteins. Secondly, Burcon has been able to focus on the development and commercialization of its other plant-based protein technologies. We look forward to entering into a definitive agreement with one or more partners during the course of the year. Thirdly, we are pleased to have secured a $10 million loan facility, which enables us to rise above the [indiscernible] in the markets and concentrate our efforts on bringing these projects to fruition. We thank you for your continued support as we navigate through this turbulent market. We look forward to updating everyone again on our next call. And now with that, I'd like to open the call up for questions. Operator, can you please provide the appropriate instructions.

[Operator Instructions] Our first question comes from [ Bruce Lavine ], a private investor.

I was surprised to see the increase in R&D and IP spending, rather significant during that tough market and already looking at losing money. Can you give us a little background on that?

Sure. Peter Kappel here. The R&D expenditure increase, a lot of it is noncash, okay? We had -- I mean generally, the level is more or less the same. I would like to say that we're reevaluating the entire IP portfolio to ensure that there's not stuff that surplus to requirements and we are doing a thorough investigation of that at the moment. But a lot of that R&D spending is in line with where it was previously. And the rest are noncash reversals of what had been in reserve and the fact that we are not able to capitalize anymore now that pea and canola is in production. Is that an adequate answer on that?

Yes, yes. That's good. I have another question, but I don't want to use sort of my position here. So someone else is when I can come back in.

Go in there quickly, come on.

Okay. So obviously, everybody is getting punished in the markets. Money-losing companies are getting particularly punished. So I'm going to ask a couple of questions. One is, if I recall correct, the Merit building had a Phase 1, Phase 2. It sounds like you're completing Phase 1. And so I guess my question is, is Phase 2 still part of the plan?

Phase 2 is still part of the plan, but it's going to be when Phase 1 is totally -- once the ramp-up is sufficiently underway where the full capacity is going to be utilized, then Phase 2 will be initiated. Phase 2, the building is built, it essentially just requires getting the equipment and putting it in place. A little bit of an addition for a bigger [ spray dryer ], but it is able to accommodate Phase 2. And there's a 6- to 12-month lead time for that. There are reviews going on as to how exactly Phase 2 should be constructed. But the decision to go ahead on that hasn't been made yet, but it is capable, and it is still in plan.

Okay. And can you put some time -- how close is Merit to getting 100% capacity of Phase 1? Is that on the -- measured in quarters or months or years or...

It's in quarters. It's a chicken and egg thing in a way, there's the ramp-up of production and the ramp-up of sales, they're hand-in-hand. There has been a lot of fine-tuning adjustments, things that are learned in the process, which -- the goal is to be running 5 days -- 5 to 6 days a week full out on particular batches and the right sort of batches, et cetera, to fulfill the demand. There's a couple of ones of SKUs that have gotten really popular, and there's adaptations going on. But I think towards the end of the year, first quarter of next year, there should be significant sales achieved on an ongoing basis as a rough estimate.

Okay. And so I'll ask the concluding question to all of that. And that is, can you give us any idea of fiscal '23 and '24 financials?

Not at this time, sorry.

Well, I think most of us firmly believe in the market, we firmly believe in the technology. The question, of course, is monetization, and that's -- because I think now your patent portfolio is vastly more valuable than your market cap, and that's obviously something that should get flipped on and that's going to come from the monetization of your use of your technologies.

Yes. No. I mean we're quite bullish on the technology being monetized. As well -- as we noted here in pea and canola, the plane is barreling down the runway and in the process of taking off, with a few fine-tuning it should get there. We're really bullish on the opportunities on sunflower and are working quite hard on that. That's another major cash crop, and we see that coming to fruition. And of late, again, we've seen renewed interest in soy given the market dynamics, and we're also pursuing that, which will be quite easy for us if we do actually find a partner. So we're quite bullish on the technology coming into play. And on the merit side, it's taking a bit of time. We all wish it had gone quicker, but there's been a lot of obstacles and the team has done a great job and that we're becoming...

[Operator Instructions] Our next question comes from Daniel Shahrabani of Fard Investments.

Yes. Peter, thank you for the presentation, and thank you for all the hard work. I know it's a work in process, and hopefully, we're getting there. But I just wanted to ask you, going forward, the share of the loss in Merit functional foods, will that decrease like that now you're saying that we're very close to ramping up and very close to like 24/7 operations, the number was $4.3 million. Do you foresee that as decreasing in fiscal '23? And the second question is that given what's happening in world geopolitics and Ukraine, shouldn't we be in a better position to sell our story in the sense that we are able to produce very good quality protein at much, much lower prices than with live animals. And I'm wondering -- I just would like to get your opinion on my question. Like if that makes -- is that a logical comment?

Okay. Two questions there. Let me answer the first one. Our share in the loss of -- I mean our share in whatever the results are of Merit will be reflected depending on the results. We expect that over the course of this year, there will still be a loss. And then we're looking forward to the following year, there'll be a positive position. That's going to be reflecting the ramp-up period and what's going on there. The exact extent of it I am unable to say right now, but that's really, in many respects, a noncash accounting issue from our perspective, we equity account on Merit, so all of that flows through. On the other one, yes, I agree with you. There -- the unfortunate situation in the Ukraine has led to a number of things. It's one made the input prices a lot higher. The pea prices have gone up. However, the price that one is able to achieve for the protein has also gone up. It sort of, to a large extent, washes through. Earlier in the year, we had a big discussion as to whether or not it made sense to do any hedging. Our large industrial partner felt that the pass-through effect really weighed more than anything else. So we decided to go down that route and just stay open, and we're finding that, that's in fact the experience. But yes, you would think that the base -- on the basis of secure sourcing of ingredients, Canada is a lot more stable than as we've seen in other parts of the world. And if the move is for coming more security and sources of supply, et cetera, then it should fit to our benefit. So yes, I think that's a good way of looking at it.

Yes. I mean, in just one follow-up comment or question is that what is our relationship with Bunge? Is that improving? Like are they -- do you have the sense that they're really impressed with Merit? And since there's such a large multinational, and their stock price has been really soaring in the last, I'm sure you've now this, but how come the sunshine is not shinning on us a little bit?

We have a good relationship with Bunge. We're working together on this. They have many irons in the fire all over the place. This for them is a little iron. And they're keen on how it's going to evolve. But we as Burcon have a good working relationship with them. It's focused on the Merit's situation, and we'll see how that develops.

I'd now like to hand the call over to Paul Lam to take questions from the webcast.

Hi, Peter, given our time right now, we -- let's take a few questions from the webcast. You've touched on this question a little bit earlier. What was Merit's capacity -- oh sorry, this question comes from [ Manfred Lee ]. He is a private investor. What was Merit's capacity utilization as of March 31? How has this changed in the current quarter?

I am sorry, [ Manfred ] offhand, I am unable to say that, but apologies, we will get back to you. I don't have that particular statistic in front of me, and I wouldn't want to say it given what it is, okay? Sorry about that.

Okay. Next question comes from [ Tim Avery ], a shareholder in the company. What is the plan to keep the stock listed on the NASDAQ Exchange?

Well, the plan on keeping this. We are monitoring the situation. Obviously, we've been hit from a number of fronts. We think that there are catalysts that will spur our share price somewhat. There are developments at [ Merit ]. There are the partnership on one other product. And there's obviously the new CEO when we finally bring that individual on board. We are going to see whether or not there's a number of routes that we can take in sustaining it, but we are following it. In any event, we have been a TSX-listed company for a long time. We will continue to be listed there, but we will be assessing the situation closer to September, and we will then decide exactly what we will do.

Okay. We have another question from [ Manfred Lee ]. If Phase 2 of the capacity increase is initiated, what additional capital investment can be expected from Burcon?

If -- the one very interesting thing about the initial plant build-out and everything else was the extent to which third-party finance through Farm Credit Canada and the Export Development Corporation was available. This would all be capital expenditure on an existing proven run and duplication. So we expect that there would be considerable leverage afforded in the sort of 75-ish percent range, 75%, 80% range. And on that basis, given the capital outlay required, the actual capital investment on the part of Burcon as a 31% shareholder would not be that substantial. The exact amount, I can't say, but I would estimate it in the sort of $5 million range.

Okay. That's all the questions we have from the webcast. Aereo, could you close wrapping up?

Certainly. Thank you, everyone. That's all the time we have for questions today. At this time, this concludes our question-and-answer session. I would like to turn the call back over to Mr. Kappel.

Yes. Thank you very much for joining us. I'd also like to take this time to thank the continued support of our staff, partners and shareholders. And I look forward to the next call where hopefully, I will no longer be interim CEO in any event. Thank you very much. Goodbye.

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, performance, 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, may, should, could, will and similar references to future periods. All statements other than statements of historical facts 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 being 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.