BioFuels Journal

Vancouver—Lignol Energy Corporation (TSX-V: LEC) ("Lignol" or "the Company"), a leading technology company in the cellulosic ethanol and biorefining sector, announced March 10 its financial results for the three and nine-month periods ended January 31, 2010.

"During the quarter, we completed significant improvements to our pilot plant and successfully achieved major milestones in the development of high purity lignin deriviatives for industrial applications," said Ross MacLachlan, President and CEO of Lignol.

"Our goal this quarter is to operate the pilot plant in a fully integrated fashion such that we can begin to optimize the production of cellulosic ethanol as well as the quality and performance of related biochemicals.

"We will also continue to develop plans for a commercial demonstration project in collaboration with strategic stakeholders and advance the development of commercial applications for our unique biochemicals and biomaterials."

Financial Results

Three Months Ended January 31, 2010

For the three-month period ended January 31, 2010 ("Q3 FY10"), Lignol reported a loss of $2.30 million, or $(0.05) per share (basic and fully diluted) compared to a loss of $1.88 million for the same period in FY09.

The increase in loss was primarily due to a increase in Research and Development ("R&D") expenses which was only partially offset by a decrease in General and Administration ("G&A") expenses.

Q3 FY10 total gross R&D related costs (before government and corporate contributions), totaled $2.39 million compared to $1.96 million for the same period in FY09. Of these amounts, $0.26 million and $0.30 million for Q3 FY10 and Q3 FY09 respectively, were capitalized; and $2.13 million and $1.66 million for Q3 FY10 and Q3 FY09 respectively, were expensed.

The 44% increase in R&D expenses in the current quarter reflects the increased costs associated with operating Lignol's integrated industrial-scale biorefinery pilot plant. In Q3 FY09 the pilot plant was still under construction.

G&A expenses decreased by 35% to $0.49 million in Q3 FY10 from $0.76 million in the same period in FY09, largely due to a reduction in non-cash stock-based compensation charges.

Government and corporate contributions for the three months ended January 31, 2010 totaled $0.85 million, which was slightly lower than the $1.09 million reported in Q3 FY09. Of these amounts, $0.13 million and $0.44 million for Q3 FY10 and Q3 FY09 respectively were credited against plant and equipment on the balance sheet, and $0.72 million and $0.65 million for Q3 FY10 and Q3 FY09 were credited against the statement of operations.

The decrease in total government and corporate contributions of $0.24 million is due to a reduction in activities eligible for reimbursement under current funding programs and the completion of certain funding arrangements during the current and prior periods.

Nine months ended January 31, 2010

For the nine-month period ended January 31, 2010 Lignol reported total expenses before government and corporate contributions of $8.81 million compared to $7.90 million for the same period in FY09.

The 36% increase in R&D expenses was partially offset by an increase of 39% in government and corporate contributions and a reduction of 41% in G&A expenses.

As a result, Lignol reported a loss of $6.38 million, or $(0.13) per share (basic and fully diluted) compared to a loss of $5.99 million, or $(0.13) per share (basic and fully diluted) for the same period in FY09.

As at March 10, 2010, common shares outstanding totaled 49,297,286 and stock options outstanding totaled 5,404,645.

Liquidity and Capital Resources

As at January 31, 2010, the Company had cash, cash equivalents and short-term investments of $5.50 million and a working capital surplus of $3.43 million compared to $9.51 million and $8.58 million respectively as at April 30, 2009.

The decreases reflect cash used in operations and for capital additions incurred in the first nine months of FY10, net of government and corporate contributions.

Lignol continues to be eligible to receive a U.S. Department of Energy award of US$30 million to partially fund a proposed commercial demonstration plant.

As at January 31, 2010, Lignol was eligible to receive future government funding of $5.34 million from contracted agreements and $3.40 million from awards which have been announced, but have not yet been contracted.

These funding awards are intended to be applied against future expenses incurred under various development programs, which are expected to be completed at various times before early 2012.

Receipt of this additional funding is conditional upon meeting the obligations of related funding agreements and, in some cases, to completion of the funding agreements.

The combination of $5.50 million in cash on hand at January 31, 2010 and such additional government grants brings the total of current and potential resources available to the Company to $14.24 million.

The Company believes that, factoring in the expected timeline of receipt of the funding from the various government agencies, the combination of funding sources noted above should be sufficient to fund its Baseline Operations until at least the end of February 2011, using the definition of "Baseline Operations" as set out in Lignol's Management's Discussion & Analysis of Financial Condition and Results of Operations ("MD&A") for the three and nine-month periods ended January 31, 2010.

This is an improvement by two months over the previous forecast disclosed in the Company's MD&A for the three and six months ended October 31, 2009.

This improvement is primarily due to an updated projection of expected capital expenditures over the next year.

This forecast excludes funds from any potential new government grants or contributions from any potential new corporate partnerships.

Lignol is actively seeking funding from additional government and corporate sources which, if obtained, would further extend the Company's projected operating runway for Baseline Operations past February 2011.

Lignol's complete financial statements for the three and nine-month periods ended January 31, 2010 and the related Management's Discussion & Analysis of Financial Condition and Results of Operations are available on the Company's website, www.lignol.ca, or at www.sedar.com under the Company's profile.

For more information, call 604-453-1246.

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