This Letter of Intent follows an earlier announcement in May 2012 of a sole-licensing agreement signed between Ceapro and AAFC for the exclusive use by Ceapro of an innovative AAFC-patented malting technology that dramatically increase the concentration of avenanthramides in oats.

Avenanthramides are included in well known brands of cosmetic and personal care formulations. They are the active ingredients responsible for the observed anti-itching and anti-irritating beneficial effects for the skin.

Ceapro scientists were the first to identify the link between the traditional symptomatic relief from oatmeal and the clinical activity resulting from the demonstrated anti-allergic and anti-inflammatory properties of avenanthramides.

Ceapro is the Company that has developed a unique, proprietary expertise in extracting and purifying these compounds and is the only commercial manufacturer worldwide. However, the small quantity of available quality feedstock have only allowed Ceapro to extract small volumes of avenanthramides which has so far limited the markets to cosmetic and personal care applications in dermatology.  These two agreements signed with AAFC will change this situation.
  
“Not only have we licensed a methodology to increase the concentrations of avenanthramides in oats, we now have access to a unique and new variety of oat that should significantly improve our manufacturing productivity. Given our stated objective to penetrate large markets like functional food, nutraceuticals and potentially pharmaceuticals in this new era of “botanical drugs”, it was imperative to be in a position to produce larger quantities and higher concentrations of avenanthramides to enable us to meet our objective “said Gilles Gagnon, President and CEO. “We are very pleased with this partnership with our Canadian Government who is allowing us to transition research on avenanthramides to promising commercial applications” he added.  

 “We are very excited that AAFC has again recognized Ceapro as the worldwide expert with the unique ability to rapidly develop and commercialize this new oat variety that not only will be a benefit to Canadian farmers, but also provide potential health care benefits for Canadians. We expect to make it a big Canadian success story” said David Fielder, Chief Scientific Officer.

Second quarter 2012 corporate highlights

• Signing of a worldwide licensing agreement with Agriculture and Agri-Food Canada for a technology associated with Ceapro’s flagship product, avenanthramides.
• Presentation of the latest results obtained from one of Ceapro’s research programs using a supercritical drying technology.
• Re-election of Directors and appointment of President & Chief Executive Officer

Subsequent to quarter-end

• Successful production at the pilot scale level of the first of Ceapro’s dry powder products.

FINANCIAL RESULTS FOR THE SECOND QUARTER AND THE FIRST SIX MONTHS ENDED JUNE 30, 2012

Revenues were $1,490,000 for the three-month period ended June 30, 2012, as compared to $1,185,000 for the same period in 2011. For the first six months, revenues were $2,680,000 in 2012 compared to $2,719,000 for the same period in 2011. As of June 30, 2012 compared to June 30, 2011 Sales in Europe have decreased by $311,000 partially offset by an increase in sales of $218,000 in the USA.

Research and development Investments were $267,000 and $430,000 for the three-month period and six-month period ended June 30, 2012 as compared to $229,000 and $416,000 for the same periods in 2011. These respective slight increases of 16% ($38,000) and 3% ($14,000) reflect our continued strong commitment to expand our pipeline and position Ceapro as a highly recognized innovative Company.

General and Administration expenses were $490,000 and $881,000 for the three-month period and six-month period ended June 30, 2012 compared to $365,000 and $669,000 for the same periods in 2011. These respective increases of 34% and 32% in 2012 as compared to 2011 are the result of increased salaries and benefits, consulting engineering expenses for feasibility studies to review new manufacturing options, hiring of an Investor Relations firm and legal costs incurred due to a litigation with AVAC Ltd..

Sales and Marketing expenses were $55,000 and $126,000 for the three-month and Six-month period ended June 30, 2012 compared to $34,000 and $64,000 for the same periods in 2011. These increases reflect the planning for implementation of new marketing strategies for Ceapro. It is expected that these expenses will further increase until year end.

Net income/loss. For the three-month period ended June 30, 2012, net loss was $161,000 versus a net profit of $103,000 for the same period in 2011. For the first six-months of 2012, Net loss amounted to $164,000 compared to a net profit of $458,000 for the same period in 2011. These losses are attributed to a decrease in gross margin due to the mix of products sold, increased general and administration and sales and marketing expenses..

“While we have significantly advanced our scientific portfolio over the last two years, we now expect to expand our business development and marketing activities to increase sales in targeted territories” said Gilles Gagnon, President and CEO. “On the manufacturing side, given new opportunities that are arising, we expect to make a decision on the type and location of a new manufacturing facility by the end of 2012. Our operating results in 2012 reflect the significant efforts and resources we have dedicated to this important project. Additional capital investments will be required to efficiently manufacture our current and anticipated new portfolio. We are very confident that significant rewards will be derived from these investments” he added.
The complete financial statements are available for review on SEDAR at http://sedar.com/Ceapro and on the Company’s website at www.ceapro.com.

The Board of Directors of Ceapro is also pleased to announce the appointment of Gilles R. Gagnon, M.Sc., MBA as President and Chief Executive Officer (CEO), effective July 1, 2012. As part of his compensation, Mr. Gagnon was granted options to purchase 300,000 common shares of the Company, each with an exercise price of $0.10, the closing market price as of July 6, 2012. Such options will vest in three equal instalments, the first of which vests immediately with the second and third instalments vesting on the first and second anniversaries of the date of grant. Each option is exercisable, once vested, for a period of ten years from the date of grant. The granting of all options is subject to TSX Venture approval.

“Gilles joined the Board four years ago and we are very pleased with the way he helped us to turn around and reposition Ceapro into a sustainable biotechnology Company. The board is delighted to have an executive with proven leadership credentials, successful product development track record and commercialization experience at the helm as President & CEO” said Edward Taylor, Chairman of the Board

“We have worked very hard to bring the Company to this enviable position and I am enthusiastic about this opportunity to bring Ceapro to the next level of growth and product success. I look forward to building a new biopharmaceutical Company by leveraging the solid foundation that we have established with our excellent and dedicated team while realizing the full potential of our development pipeline” added Gilles Gagnon.

Gilles Gagnon spent over 30 years in the management of healthcare related organizations in both hospital administration (8 years) and in the pharmaceutical industry (23 years) where he held several executive positions. In addition to general management functions, he was especially involved in corporate development, alliance management, as well as marketing functions where he participated to the launch of 9 innovative pharmaceutical products.

Gilles Gagnon holds post-graduate degrees in Pharmacology (M.Sc.) and Administration (M.B.A.) from the Université de Sherbrooke and a certificate in General Management from the London Business School, UK. He completed the Directors Education Program at the Rotman School of Management of University of Toronto and is a member of the Canadian Institute of Corporate Directors.

PDF of Ceapro Reports First Quarter 2012

FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2012

• Total sales of $1,190,000 compared to $1,534,000 in 2011.
• Income from operations of $17,000 compared to $353,000 in 2011
• Net loss of $4,000 compared to a net income of $330,000 for 2011.

“Our sales revenue and profits were lower in the first quarter versus last year and were the result of normal quarterly fluctuations”, said Gilles Gagnon, Acting CEO of Ceapro.  “Our results are best measured over the course of the entire year due to timing of orders and because different product mixes with different gross margins can have a big influence on quarterly results.  Our operations in the quarter demonstrated solid operational performance while extra expenditures were required for launching a marketing study and to conduct a feasibility study related to manufacturing activities.  We have continued to invest in our Company, our solid R&D program, and new technology to ensure Ceapro remains well noticed on the world innovation stage”, added Mr. Gagnon.

CORPORATE UPDATE

Marketing and Sales:

New business:

• First sales orders received from new customers serviced by Ross Organics in the US Southwest
• New distribution partners in Europe get strong interest in Ceapro products. During the first quarter several new companies have begun formulating with Ceapro products and placing small initial orders.  We are very pleased with their rapid acceptance and positive reception as our experience has shown that the sales cycle will often run two years or even longer for new customers.

Marketing strategy:

During the first quarter we launched a strategic marketing review to help determine the best way to increase the distribution and sales of Ceapro products across the globe.  A US based company with exposure to the personal care industry was engaged to do a comprehensive review of our company and products, assess the markets, and determine the best strategy to grow. While we have successfully focused most of our limited resources on developing good products and processes as a sound foundation for success, it is now time to invest significantly in building out our marketing and sales network with the appropriate expertise to assist us in that regard. We will also take the opportunity to assess the branding of Ceapro.

Business Development:

• Completion of a major world-wide avenanthramide technology licensing agreement with Agriculture and Agri-Food Canada to allow product expansion to several indications in cosmetics and potential access to new food and nutraceutical markets

• Ongoing discussions with potential distributors in European and Asia Pacific markets .

Research and Development:

Our research and collaboration efforts have continued to generate positive news which we expect will translate into large gains in the future for Ceapro.

Avenanthramides:

• The recent licensing of key avenanthramide process technology from Agriculture and Agri-Foods Canada is a very important milestone. This technology should support the growth of our flagship avenanthramide products by allowing for greater increases in output capacity and then enabling to pursue new markets like functional foods which were not previously possible due to the limited commercial supply.  We believe that this market offers a great potential for our avenanthramides. Research data from other parties also suggest that consumption of avenanthramides have the ability to provide significant therapeutic benefits for conditions such as inflammatory bowel syndrome, colon cancer, and exercise induced inflammation.  Given the expected availability of higher quantities and concentrations of avenanthramides, we look forward to  the development of formulations suitable for the functional food, nutraceutical and pharmaceutical areas

Beta Glucan

• Beta glucan is another oat product with high potential. Ceapro customers currently utilize this ingredient for skin moisturization, anti-aging, wound and skin repair formulations. In order to further support new claims, we recently completed a study demonstrating superior and longer lasting skin moisturization of Ceapro Oat Beta Glucan versus Hyaluronic acid, a similar molecular weight product also used for this indication.,

• Beta glucan is also the ingredient in oats that is well known to significantly reduce cholesterol levels (“the bad one”). In light of this opportunity, Ceapro has successfully created a high purity powder form of beta glucan from its liquid product at pilot scale using a novel supercritical fluid drying process.  This may allow for new formulations to be launched into new markets like functional foods and drinks and pharmaceuticals.  The technology has attracted the interest of third parties and may provide Ceapro an opportunity to generate additional value through out-licensing.

Spearmint:

• Yield

Our spearmint program is beginning its third growing season and we have developed prototype extracts for analysis at our in-vitro lab in Charlottetown.  While we are relatively early in our studies, we are very pleased with the results to date.  We have previously obtained concentrations of rosmarinic acid as high as 13.5% in our plants with the super spearmint variety licensed from University of Guelph which is up to 27 times higher than the usual concentration of 0.5% found in regular spearmint varieties. This type of yield will provide a strong competitive advantage for Ceapro.

• Clinical trial

There is currently a very interesting clinical trial being conducted by researchers at University of Guelph. Given rosmarinic acid has recognized anti-inflammatory properties, the goal of this study is to confirm expected beneficial effects of drinking a spearmint tea for the improvement of conditions like osteoarthritis and cartilage degradation of the knee, a patholology that affects more than 10% of the Canadian population.  This two arms controlled trial which has been set for 50 participants had already enrolled 40 participants. They will randomly consume two cups of spearmint tea each day for four months- either a regular spearmint tea or a super spearmint tea with high concentration of rosmarinic acid. Expected results will be to confirm efficacy, if any and to compare any dose response relationship of different concentrations of rosmarinic acid.

• Equine and Companion Animal Market

Before initiating the human clinical trial with the spearmint tea, University of Guelph researchers conducted a study with horses where they indeed demonstrated the positive effects on inflammation when horses consumed the spearmint.  Potential markets for equine and senior companion animals where inflammation is a major issue are definitely significant markets to consider in the future.

We have high expectations for this spearmint product for which we have obtained the rights for all indications from the University of Guelph. This is a great example of one plant that can produce several therapeutic products for several large markets that need solutions and represents a good example of how Ceapro may transition into the functional food or nutraceutical markets.  It is also a great example of Canadian collaboration on the world stage and we expect this will be very beneficial for all the participants, and Canadian agriculture producers who may have opportunities to grow large volumes of a novel crop.

“As you can see, at Ceapro, we have a lot of exciting things to look forward in 2012 and beyond.  The Ceapro team has worked very hard to develop these attractive growth opportunities and we anticipate this will result in increases in shareholder value”, commented Mr. Gagnon.

The complete audited annual report and financial statements are available for review on SEDAR at http://sedar.com/Ceapro and on the Company’s website at www.ceapro.com .

About Ceapro Inc.

Ceapro Inc. is a Canadian growth-stage biotechnology company. Primary business activities relate to the development and commercialization of active ingredients for personal care and cosmetic industries using proprietary technology and natural, renewable resources. To learn more about Ceapro, visit www.ceapro.com.

For more information contact:

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

“While we have initially presented this technology as a powdered beta glucan project, we realize that this technology might offer much more by becoming a platform suitable for many water-soluble products.”, stated Gilles Gagnon, CEO of Ceapro. “With its potential usage for impregnation, coating and encapsulation of Ceapro’s bio-actives, it is expected that this technology would enable Ceapro to offer product formulations which would be suitable for the transition to the functional food, nutraceutical and potentially pharmaceutical areas”, added Mr. Gagnon.

Thus far the technology has been scaled up to pilot scale at the BioFoodTech Centre in Charlottetown Prince Edward Island.  Each scale up process requires lead time to custom manufacture equipment that has been designed by Ceapro scientists. “Each step of our scale up has gone exceptionally well and this project has been a technical success to this point”, said Dr. Bernhard Seifried, research scientist at Ceapro.  To date the beta glucan purity has exceeded 90% and by adjusting the process conditions we have produced dried beta glucan in the form of microfibrils, sponge type material, and free flowing powder, which all show excellent solubilisation properties”, added Dr Seifried. The next scale up runs are scheduled for the next quarter when Ceapro intends to produce multiple kilogram quantities of dried powder for evaluation by a food company.  Product samples have also been sent to a specialty pharmaceutical company for testing.

“We congratulate Dr Seifried on his success to date on this totally novel technology.  The beta glucan products produced thus far are beyond our expectations. Furthermore, applications of this technology might extend beyond Ceapro’s current products making this technology potentially attractive as an out-license candidate to third parties requiring challenging drying solutions. We look forward to continuing an aggressive path toward commercialization”, added Mr. Gagnon.

About Ceapro Inc.
Ceapro Inc. is a Canadian growth-stage biotechnology company. Primary business activities relate to the development and commercialization of active ingredients for personal care and cosmetic industries using proprietary technology and natural, renewable resources. The commercial line of natural active ingredients include beta glucan, avenanthamides (colloidal oat extract), oat powder, oat oil, oat peptides, and lupin peptides.

To learn more about Ceapro, visit www.ceapro.com

The TSX Venture Exchange nor its Regulation Services Provide (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For more information contact:
Branko Jankovic
Chief Financial Officer
Ceapro Inc.
T (Edmonton): 780.917.8376
E bjankovic@ceapro.com

“ Our core value driver is avenanthramides and this new technology licensed from the Canadian Government will be a game changer for Ceapro. In addition to the cosmetics market, this new technology should allow Ceapro to develop large quantities of new products from avenanthramides with potential applications in functional food, nutraceutical, and pharmaceutical areas, which represent very large potential markets ”, said Mr. Gilles Gagnon, Acting CEO. “This licensing agreement with the Canadian Government is of the utmost strategic and timely importance for Ceapro and our flagship product, which will be manufactured in our upcoming state of the art facility as announced recently” he added. “We are very excited that AAFC has determined that Ceapro, a Canadian biotechnology company, has the unique ability to rapidly commercialize this technology related to a unique class of molecules, first discovered about 25 years ago by Dr. Bill Collins, an AAFC scientist. . Since then, several research groups, including Ceapro, have been actively studying avenanthramides in many potential indications such as metabolic diseases, atherosclerosis, inflammatory bowel syndrome, colon cancer and exercise induced inflammation” said David Fielder, Chief Scientific Officer.

About Ceapro Inc.

Ceapro Inc. is a Canadian growth-stage biotechnology company. Primary business activities relate to the development and commercialization of active ingredients for personal care and cosmetic industries using proprietary technology and natural, renewable resources. To learn more about Ceapro, visit www.ceapro.com.

For more information contact:
Branko Jankovic
Vice President and CFO
Ceapro Inc.
T (Edmonton): 780.917.8376
E: bjankovic@ceapro.com
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of
the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FINANCIAL RESULTS FOR THE FULL YEAR ENDED DECEMBER 31, 2011

• Total sales of $5,786,000 compared to $5,577,000 in 2010, an increase of 4%.
• Income from operations of $585,000 compared to $191,000 in 2010
• Net income of $576,000 compared to a net income of $464,000 for 2010, the 2010 net income included a law suit recovery of $315,000.

“2011 sales and operating results are the best ever in Ceapro’s history with a corresponding improvement in our financial position, and a return to positive shareholders’ equity. Ceapro is amongst a very few Canadian biotech companies to have recorded a net profit in 2011, and we have demonstrated a track record of growing and sustainable operations for the last several years . This was achieved notwithstanding our commitment to significantly increase investments in Research and Development to support commercialization of new products and technologies,” said Gilles Gagnon, Acting President & CEO.  “Our customers, collaboration partners, and governments recognize the value of Ceapro’s innovative products and technology, which covers the whole spectrum of our business “From Field to Formulation”. We have completed several performance and in-vitro studies supporting strong efficacy claims for our products.  With this new data and increased market penetration from new distribution and marketing partners, we expect to see increased sales for our commercial products while our increased R&D expenditures will support our pipeline being commercialized into new products in the future.  We are in discussions for several important business transactions which will set Ceapro on an exciting path of growth and value creation,” he added.

2011 Key Highlights

• The signing of a sales agreement with a major multi-national company to supply specified products
• Successful performance testing showing the superior hair color fastness benefits of Ceapro’s CP Sweet Blue Lupin Peptide, opening this large market segment to Ceapro
• Successful second year propagation of spearmint crop and expansion to private farms showing extremely high levels of sought active ingredients
• Announcement of successful Development and Commercialization funding application with Innovation PEI and collaboration agreement with the National Research Council to develop commercial products from a unique variety of rosehips
• Amendment of University of Guelph licensing agreement for spearmint to allow for all fields of use, including food and tea applications
• Successful application to Alberta Innovates Bio- solutions to provide grant funding of up to $1.6 million towards a new processing facility
• Successful scale up of a novel drying technology from lab scale unit to pilot scale. Ceapro will be presenting a poster about this technology at the International Symposium of Supercritical fluids in San Francisco from May 13 to May 16.
• Significant increase in gross margin and net profit due to operational improvements implemented over the last year
• Successful completion of manufacturing audit by a multi-national company raising Ceapro status to top level rating

“As you can see there is a lot that has to be done to take a plant material to a product, to manufacture a product at commercial scale and at an acceptable margin, to support the product with clinical data, to meet the qualified supplier requirements of our customers, and then to do it all over again with new product candidates to ensure the Company is sustainable.  Our small group of employees have bought into these challenges and have done a tremendous job to get Ceapro to this enviable position today and I wish to thank everyone for their efforts in striving to make Ceapro one of the best biotech company in Canada ”, added Mr. Gagnon.

The complete audited annual report and financial statements are available for review on SEDAR at http://sedar.com/Ceapro or click here: Income Statement Final 2011.

About Ceapro Inc.

Ceapro Inc. is a Canadian growth-stage biotechnology company. Primary business activities relate to the development and commercialization of active ingredients for personal care and cosmetic industries using proprietary technology and natural, renewable resources. To learn more about Ceapro, visit www.ceapro.com.

For more information contact:

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

“We wish to thank the Honourable Mr. Greg Weadick, Alberta’s Minister of Advanced Education and Technology and Dr. Stan Blade, Chief Executive Officer of Alberta Innovates Bio Solutions for awarding our Company this significant grant”, said Gilles Gagnon, CEO of Ceapro. “As part of the competition launched in 2011, we were one of three successful projects out of 33 total applicants and are gratified that the quality of Ceapro’s proposal was viewed positively amongst the many proposals submitted. We have a great reputation as an innovator with our global multi-national customers and they appreciate that a unique bio processing facility will allow Ceapro to provide product solutions “From Field To Formulation”. We anticipate Ceapro will return several benefits to Alberta including job creation, new crop opportunities for agricultural producers, increases in export sales, and most importantly, highlight some very impressive Alberta innovation on the world stage. With this clear commitment from the Government of Alberta through Alberta Innovates Bio Solutions to support its biotechnology industry, we will continue to work very hard to position Ceapro as one of Alberta’s flagship biotech companies.”, added Mr. Gagnon.

For more information on Alberta Innovates Bio Solutions, please visit their website at www.bio.albertainnovates.ca.

Consequently, Ceapro and CTI will be filing a Statement of Defence which denies all allegations and will be taking all other steps required of it to vigorously defend AVAC’s allegations.

Ceapro previously announced on September 13, 2011 the commencement by AVAC of legal proceedings wherein AVAC alleged damages of $724,500. The prior legal proceedings were with respect to agreements entered into between AVAC, Ceapro and another wholly owned subsidiary for product innovation development in the area of veterinary therapeutics and active ingredients. See Ceapro’s News Release dated September 13, 2011 and related Material Change Report, both of which may be viewed on www.sedar.com.

In consideration of the services to be provided, the Company has agreed on a month to month agreement starting March 1st, 2012 paying a monthly retainer of $7,000 to Renmark Financial Communications Inc.

Renmark Financial Communications does not have any interest, directly or indirectly, in Ceapro Inc. or its securities, or any right or intent to acquire such an interest.