Burcon Nutrascience Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Bercon NutriScience Corporation's fiscal 2026 second quarter results, ended September 30, 2025. Joining us today are Kip Underwood, Bercon's chief executive officer, and Alex Vardy, the company's interim chief financial officer. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 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 Bercon, Mr. Kip Underwood.

Please go ahead.

Thank you, Marissa. Good morning, good afternoon, and good evening.

And thank you to all on the phone for your time, your interest, and to many of you for your investment in Berkon. If you have one takeaway from our discussion today is that we at Berkon have tremendous business momentum. Today, you'll hear about the successful commercialization of technology. You will hear us discuss record production. You will hear us talk about, subsequent to the quarter, significant recurring sales. And at the end, as we announced the other day, the desire to complete an additional funding round to accelerate our growth because we can see the customer demand coming. So, again, exciting times for Bercon.

Great business momentum. Our safe harbor statement. To walk through the business momentum I just discussed, we'll go through Q2 highlights.

We'll ground ourselves in our technology platform. We'll go back and we'll talk about the plant protein market dynamic growing. We'll review our sales and production, talk about how we're investing for growth, our cash position, why we believe it's a great time to invest in Bercon, and then look forward to what does 2026 look like.

And in the end, obviously, we will open it up for Q&A. For Q2, on the operational side, I think if there was one word, I would say it's execution.

So, from an executional perspective, again, initial commercial sales, RP protein and arcanoid protein. Successful scale-up of pea protein, phyllo protein, and canola protein. That is very difficult because we are both starting up a new facility with our partner and commercializing technology. Both are hard independently. They're extremely difficult to do together. Great customer engagement as evidenced by our customer pipeline, 200 plus projects. And inside of those projects, customers are progressing. They continue to vote. with their time, and the more time they vote with, the more validation that our products, our proteins, are meeting expectations. And lastly, a great market outreach at IFT First, one of the largest food trade shows in the world. Great opportunity to showcase technology and interact with the entire industry. That's the executional side. With that, I'll turn it over to Alex for the financial highlights. Alex, please.

Thank you, Kip. In respect of financial highlights, what we're really seeing is the translation of the operational achievements made throughout calendar 2025 into our financial performance. In Q2 specifically, we generated revenues of over $350,000, representing a nearly eightfold increase over the comparable year-ago quarter. Further, subsequent to year-end, we've also seen strong sales momentum with orders received from October 1st to date, in excess of $500,000, including multiple repeat commercial sales. As we concentrate our efforts and our resources on production and sales, we have reduced our spending in research and development and in general and administrative expenses by 61% and 27%, respectively over the second quarter in fiscal 2025. Lastly, we announced today the offering of convertible debentures, which will allow us to strengthen our balance sheet and support accelerated growth. We'll discuss this more in detail later on in the presentation. I'll turn it back to you, Ken.

Thank you, Alex, and really reiterate those last two points.

So, all the work we have done since March, finally translating, transitioning into significant commercial sales, And then in discussions with our board, our insiders, seeing those sales come and recognizing we needed to accelerate growth, be ready for growth, hence the fundraise we announced today and that we will discuss later on in the presentation. Our foundation, what enables all of this at our heart is our technology, the innovation that Bercon has invested in over the years. And what that truly delivers is purity, unmatched purity in the marketplace. And that's important because that purity is what delivers superior performance, excellent taste, excellent texture, excellent color to our customers. We like to say we give the food companies a protein blank canvas so they can go create the great foods that we all want to buy and enjoy. The technology is also highly relevant in today's market because protein is hot. If you have walked a grocery store, you have noticed protein on the front of pack, protein positioning, 10 grams of protein, 20 grams of protein in beverages and coffee and cereals across all types of foods.

As our potential customers look to position protein to consumers,

That is a great place for us. That is a great place for our technology to play your role. And in the end, this is a dynamic market that is truly good for Berkut.

And we see this in our robust funnel.

As mentioned, this funnel has delivered $500,000 of orders since October 1st, subsidy quarter, and it is dynamic. So 200 active projects. We talk about a customer's Development in A New Food for All of Us is a 9- to 18-month process. And as they go through that process, we see signs that they are increasing their investment. They start off with small bags, maybe 200 or 500 grams. Then they order maybe a kilo. Then they order a full bag of our products. Over 30 customers have ordered at least a full bag paid for to advance their development efforts. Some, as we mentioned, initial orders, initial pallet orders for pea, fava, and canola. The next step is just leading to your recurring revenue. And so it's the dynamic process because it's moving through the funnel. It has great diversity in terms of type of customer, type of food, and again, across all of our products. And this is really the lifeblood of our growth in the future. It was fantastic to see that first $500,000 plus in orders come out the bottom of the funnel as wins. People often hear me say, one thing you must do before you can sell it is you have to produce it. And working with our partner ProLand, unbelievable, three months in the last quarter, and then subsequent to the quarter. So record production, commercialized, three technologies. So again, plant startup, technology commercialization, both hard individually, done and done successfully at the same time, validating our technology platform. We have quality certifications, third-party, BRC, which is one of the largest food ingredient certification organizations in the world, culture, allergen-free. We have a facility with our partner that has the capability and the people to deliver our technology, our products at a cost, a quality, and a consistency that meet or exceed our customer's expectations and fully enable our business plan.

As Kip has highlighted, Procon has the opportunity to capture growing market demand for plant proteins, and we've undertaken a number of steps to strengthen our balance sheet such that we are positioned to capitalize on this opportunity. The central pillar of our strategy here is the offering of the convertible debentures that were announced this morning. Procon is undertaking a non-brokered private placement of convertible debentures of up to $4 million. We intend to use the net proceeds of this offering to invest in inventory of labor and production efficiencies, to plan for Bercon's future infrastructure needs, and to repay the short-term loan. We further highlight that there is significant support from insiders who have committed to participate at a minimum of $2 million of the offering. The convertible ventures themselves will be unsecured, carry an annual interest rate of 15%, with interest payable in full at maturity and have a 48-month term. The convertible debentures are convertible at the option of the holder in whole or in part into common shares of Bercon at a conversion price of $2.27 per share. Bercon comparably holds an accelerated prepayment rate whereby if the common share price trades on the TSX or another stock exchange where the shares are principally traded, If the price is above $4.54 for a period of 14 consecutive trading days, then Bercon may prepay the principal amount and accrued an unpaid interest thereon. Upon written notice from the company for such prepayment, the holder has 30 days to accept the prepayment, failing which the company may accelerate the conversion of the convertible debentures into common shares at the conversion price. In looking at the... Next slide, please. In looking at the financial strategy as a whole here, in addition to the convertible debentures, we've undertaken a number of other steps to strengthen the balance sheet. Specifically, we have obtained a short-term loan of $700,000 from one of Bercon's directors, which carries a 12% interest rate and is repaid at the earlier of four months and the closing of the convertible debentures. This loan, along with our existing cash resources, allow us to maintain the momentum and scale production through to the closing of the convertible debentures financing. Lastly, we've also extended the maturity of tranche two of the secured loan, which was provided by Bercon's largest shareholder, and we've extended that until December of 2026. Across these three financing segments, steps that we have taken. I can highlight that they each involve significant financial support from Postcon's insiders, and collectively, they position us to be able to capture that growing market demand. I'll pass it back to Chip to go through our investment opportunity and our future outlook.

Thanks, Alex. Just to reiterate one piece, and again, I thought the overall theme is great business momentum, and what you're seeing from our insiders, those who follow us closely and are participating with us, is belief in that momentum and full support for us to actually accelerate, to raise money so that we can pull forward investments that were planned in 26 into 2025 so that we are ready for those next customer orders and we are prepared to truly accelerate our growth the back half of 25 and into 2026. We talked about, you know, the market, sales, production, our balance sheet, investing for growth. Collectively, we believe this positions Bercon as a fabulous investment opportunity. The last piece I want to make is if you back up from March to now, again, we've significantly de-risked Bercon. Again, we've successfully commercialized the technology in place many people failed. We have a startup, a new production facility, incredibly difficult. We have validation by customer activity, either within a project or through already recurring sales. We are investing for not just a day's work, for tomorrow's growth. So, substantially de-risked on one side with significant upside opportunity on the other side.

Again, we believe in great investment opportunity.

Looking forward into 2026, you know, and people always ask me, well, how do we know you're being successful? Where are you going? What are you driving for? And to reiterate, to affirm, especially with the recent sales momentum is we are absolutely affirming our guidance of one to three million in sales in 2025. Our 26 guidance, 10 plus million or double digit revenue and reaching a cash flow positive state. And the drivers for that are? Keep driving sales, driving revenue. In this industry, when you achieve your first sales, they are pretty much, by definition, recurring sales. Every time a customer manufactures a new food, they come back to us and buy, either monthly or every other month. As we drive sales and sell at capacity, we get margin expansion critical to our growth. We'll be investing in capacity, be that more operating days, more shifts, more equipment, or all of the above. And we do all of these with a strong execution event, always looking for efficiency to help us produce our products at a cost, quality, and consistency that exceed our customers' expectations, as well as drive our financial plan. With that, Marissa, I will turn it back to you for Q&A.

Excellent. Thank you. Ladies and gentlemen, should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. And then should you wish to remove your hand from the queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys.

Just a moment for your first question. And your first question comes from Rob Lynch with Stonegate Capital Partners. Please go ahead.

Hey, good afternoon, Kip and Alex.

Hey, good afternoon, guys. Congratulations on the quarter. Really appreciate you taking my questions here. The first one, you know, is going to be around financing. Could you walk me through the headcount and logistics of bringing on an additional shift? I guess the expected lag to be reflected in revenue given the subsequent quarter end orders.

Yeah, so I think the simplest way to equate an additional shift is additional operating days. I think that's the simplest way to do that. Every time you add an operating day, you add, you know, one-seventh more capacity per week, and that translates per year. For us, I think to get ahead of that, to hire and train a shift to get to a base level of performance, that's a minimum of 90 days. So it's really important that we get ahead of that. We bring those people in and get them trained to ensure they can actually get their jobs so that we can, you know, again, produce our products with the cost, quality, and consistency that our customers expect and the financial plan needs.

Right. Really appreciate that tip. I'm going to pivot over to just customer base now. Could you provide like a little bit more color on the strategy around new customer acquisition? versus the expansion among the current base, especially as there's a 200 plus active projects converting from the evaluation stage to purchase orders and recurring on top of that. Just kind of more color there would be great.

Sure. So I think first, the primary types of customer focus on are those entrepreneurial brands, those brands that are on the cutting edge, those brands that are on the forefront of innovation. They are the right size. We have common values. They move the fastest, therefore the quicker it sells. That's the type of customer we're looking at. For both our funnel and our current sales, we're looking for diversity. So we want diversity in customers, so customer type or customer size. We want diversity in food types. So we have projects and sales going into a powdered beverage or a ready-to-mix beverage, a liquid beverage, nutrition bars, as well as the broader category of plant-based foods. And then in those, we want diversity of our products. We have both projects and, you know, sales, initial sales of pea protein, fiber protein, and canola. So, the key for our funnel is diversity of those with a real laser focus on those cutting edge, entrepreneurial brands that are aligned on values, move the fastest, and can help drive Berkheim's growth in place.

Really appreciate that again, Kip. I think the last one I have here, it's just going to be around guidance more or less. You know, you touched on it at the end of your closing remarks, but cashflow positive by the end of 2026. Do any of these changes give you an indication that that could be pulled forward a little bit? Anything there would be great.

Right now we're affirming the guidance for 25 and 26, Rob. I think the way to think about it really is, um, The guidance hasn't changed, but it's been de-risked. You know, as we've proven technology, commercialized technology, we've got customers removed from a project to a sale to a buy. I think all of those things de-risk our guidance and truly position us for a strong close to counter 25 and just an amazing counter 26.

All right, great. You know, I think that might be it for me. I'll get back in the queue, and if something comes up, I'll dial back in. But really appreciate it. Congrats, and good luck in the next quarter. Thanks, Rob. Appreciate it.

Your next question comes from Bruce Lazenby with Ottawa. Please go ahead.

Hey, Kip. Great presentation. Thank you so much. I'm thinking from a CapEx point of view, what's the capacity of the current facility? If you're running it at max capacity, however you define that, is that going to get you your 10 to 20 million, or do you need more than that?

The current facility will get us beyond that. Beyond that. We're a few years away from tapping that out as we move forward. So, you know, we'll expand capacity in three different ways. So one is expansion of operating days. We talked about shift people. One is the addition of equipment. And then third is just good old-fashioned process engineering and gaining efficiency. And we'll continue to stack all three of those in the months and, you know, throughout 2026 and then 27 for sure.

Okay. So you think the existing facility can take you to 27, 28, which would put you in the $40, $50, $60 million range?

It certainly takes us into 27. Okay. Good. Good news. Okay. That's it. Thank you. Continue . Thanks, Bruce.

As a reminder, if you would like to ask a question, please press star 1.

I would like to turn the call over to Paul Lam, Director of Investor Relations and Communications for questions from the webcast.

Thank you, Marissa. We have one question from the webcast. This is from Harry Hamaz from ARIS International. Says, hi, long-time investor. Thanks for all the hard work. We keep hearing 1 to 3 million revenue this year. There's a huge difference. What is the forecast?

two or 3 million in revenue, or maybe even more? Thank you for the question.

And it's a good one. So for us, what we're what we want for us, I'll be very, very frank as a new company, we believe it's very important that we're consistent in our guidance. It's very important that we build credibility, we talk a lot about say what we do and do what we say. That is a mantra inside of Berkon. So we're going to hold fast to our guidance of 1 to 3 million for 25, and then at the same time, communicate the reality of where we are, $500,000 in orders from October 1st to now. And then as we continue to have success in the marketplace, we will communicate that as well.

Thank you. Thanks for the question, Harry. I do not see any further questions from the webcast unless anyone is putting in question now. Marisa, back to you. I think we are okay for questions from the webcast.

Excellent. Thank you, everyone. That's all the time we have for questions today, so this concludes our question and answer session, but I would like to turn the call back over to Mr. Underwood for any closing remarks. Sir, please go ahead.

Thank you to everyone on the phone today, in the conference today. Thank you to investors for your confidence and us, respected investors, for your interest. Certainly thank you to our team members that have applied the work and the discipline and the creativity to get us to where we are today, which is a business with great momentum, exciting days are certainly ahead for Virkon. Have a great day, everyone. Thank you again for your time. Cheers all.

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 similar references to future periods all statements other than statements of historical fact including this call are forward-looking statements there can be no assurance that such statements will provide 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 Bercon'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 Bercon with securities regulators and stock exchanges, including in the section entitled risk factors in Bercon's annual information form filed with the Canadian Securities Administrators on www.cedar.com. Any forward-looking statements or information only speaks as of the date on which it was made and except as may be required by applicable securities laws, Bercon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Although Bercon 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 for today's presentation. You may now disconnect.