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Lattice Biologics Ltd. Reports First Quarter 2019 Results

V.LBL.H | March 1, 2019

Lattice Biologics Ltd. Reports First Quarter 2019 Results

Lattice Biologics Ltd. (TSX-V: LBL) (OTCBB: LBLTF) (“Lattice Biologics” or the “Company”) announces financial results for Q1 2019, and preliminary revenues for Q2 2019.

Sales and Product Offerings

Completion of the relocated processing facility to Belgrade, Montana and expanding reach into dental markets.
Gross profit margin was 69% for the three months ended December 31, 2018, compared to 65.8% for the same period in the previous year.
Sales increased 29% year over year, while gross profit increased 35% year over year.
Launched new products into a higher margin dental market.
Sales have increased quarter over quarter for three successive quarters with estimated revenues of $700,000 - $750,000 for the 3 months ended March 31, 2019.

Finance

Relocated operations to Belgrade, Montana from Scottsdale, AZ, resulting in operational efficiencies.
Gross profit of $.32 million on sales of $.46 million for the three months ended December 31, 2018 compared to the same period in the previous year of $0.2 million on $0.4 million of sales.
Incurred a net loss of less than $0.1 million ($0.00 per share) for the three months ended December 31, 2018 compared to $0.1 million ($0.00 per share) for the same period in the previous year.
Total liabilities increased to $8.5 million at December 31, 2018 from $8.4 million at September 30, 2018. Current liabilities increased to $7.1 million at December 31, 2018 from $7.0 million at September 30, 2018.

Research and Development

Patent pending for AmnioBoost product.
Developed next generation AmnioBoost for dental indications.
Developing pipeline of new products to compete in new dental markets.

2019 Business Update:

“I am pleased to announce that the Company has had four quarters of successive growth culminating in the second quarter 2019 sales estimate of $ 700,000 - $750.000,” said Guy Cook, CEO of Lattice Biologics Ltd. We estimate revenues to be $ 2.2-2.4 million for 2019.

With strong distribution partners and an enhanced product line intended for dental indications, we expect sales to continue to grow throughout 2019. Operationally, the company is much more efficient and has lowered its operating and overhead costs to effectively compete in the dental market space.

As we continue to focus to higher margin product line, and to re-position the Amnioboost line for dental indications, we are confident we have turned the corner and positioned the company for profitable and continued growth.

The Company continues to make significant improvements on the balance sheet, and is working with creditors to convert certain balances to equity for working capital purposes.

Lattice Biologics maintains its commitment to honoring the gift of donation by implementing a strong quality control environment for the recovery and processing of donors. The Company has significantly increased its processing efficiencies, and has substantial inventory reserves to meet customer demand.

As indicated below, the Company continues efforts to diversify the sales mix across the new higher margin product lines added in prior years.

Year End Financial Results (all figures denoted in USD):

The product launches have been well received by our clients and the Company continues to replace unprofitable legacy contracts and focus on the newer higher margin products. Lattice Biologics’ total revenue was $467,311 in the three months ended December 31, 2018 compared to $362,137 for the three months ended December 31, 2017, an increase of 29%, as shown in the following quarter sales table:


	Dec-31			Sep-30			Jun-30			Mar-31			Dec-31			Sep-30			Jun-30			Mar-31
		2018			2018			2018			2018			2017			2017			2017			2017

Revenue	$	467,311		$	278,459		$	190,524		$	323,921		$	362,137		$	398,542		$	684,026		$	765,357
Cost of sales		144,849			271,398			115,588			102,963			123,938			554,717			514,761			533,957
Gross profit		322,462			7,061			74,936			220,958			238,199			(156,175	)		169,265			231,400
Operating costs (i)		283,062			567,058			434,925			382,764			336,332			536,590			605,968			950,833
EBITDA (ii)		52,149			(546,873	)		(346,865	)		(148,682	)		(85,509	)		(678,425	)		(416,922	)		(699,652	)

Gross margin percent		69.0	%		2.5	%		39.3	%		68.2	%		65.8	%		-39.2	%		24.7	%		30.2	%

The following table sets out selected unaudited financial information, prepared in accordance with IFRS. The information contained herein is drawn from interim financial statements of the Company for each of the following quarterly periods ending:


	Dec-31				Sep-30				Jun-30				Mar-31				Dec-31				Sep-30				Jun-30				Mar-31
		2018				2018				2018				2018				2017				2017				2017				2017

ADM dermis	$	-	0	%	$	-	0	%	$	18,500	10	%	$	68,600	21	%	$	73,399	20	%	$	54,700	14	%	$	72,370	11	%	$	212,740	28	%
DBM putty		-	0	%		-	0	%		8,300	4	%		10,650	3	%		18,749	5	%		-	0	%		17,941	3	%		62,964	8	%
Bone scaffold		467,311	100	%		222,333	80	%		119,935	63	%		204,028	63	%		212,972	59	%		315,152	79	%		454,132	66	%		403,027	53	%
Other		-	0	%		56,126	20	%		43,789	23	%		40,643	13	%		57,017	16	%		28,690	7	%		139,583	20	%		86,626	11	%

Total revenue	$	467,311	100	%	$	278,459	100	%	$	190,524	100	%	$	323,921	100	%	$	362,137	100	%	$	398,542	100	%	$	684,026	100	%	$	765,357	100	%


Revenue per quarterly data table		467,311				278,459				190,524				323,921				362,137				398,542				684,026				765,357

Certain adjustments have been made to the quarterly information for the first three quarters of the fiscal year ended September 30, 2016, as compared to data contained in the quarterly filings for such quarters. These changes relate to certain adjustments for cost of sales and operating costs that were not recognized until the fourth quarter of such fiscal year.

(i) Operating costs are defined as all general and administrative costs, professional fees, rent, salaries and benefits, sales and marketing, and utilities expenses.

(ii) EBITDA is defined as gross profit less operating costs (as defined above).

About Lattice Biologics Ltd.:

Lattice Biologics is traded on the TSX-V under the symbol: LBL. The Company is an emerging personalized/precision medicine leader in the field of cellular therapies and tissue engineering, with a focus on bone, skin, and cartilage regeneration.

Lattice Biologics develops and manufactures biologic products to domestic and international markets. The Company’s products are used in a variety of surgical applications.

Lattice Biologics maintains its headquarters, laboratory and manufacturing facilities in Belgrade, Montana as well as offices in Phoenix, Arizona. The facility includes ISO Class 1000 and ISO Class 100 clean rooms, and specialized equipment capable of crafting traditional allografts and precision specialty allografts for various clinical applications. The Lattice Biologics team includes highly trained tissue bank specialists, surgical technicians, certified sterile processing and distribution technicians, and CNC operators who maintain the highest standards of aseptic technique throughout each step of the manufacturing process. From donor acceptance to the final packaging and distribution of finished allografts, Lattice is committed to maintaining the highest standards of allograft quality, innovation, and customer satisfaction.

Lattice Biologics maintains all necessary licensures to process and sell its tissue engineered products within the U.S. and internationally. This includes Certificates to Foreign Governments from the U.S. Food and Drug Administration (FDA) and registrations for 29 countries, which allow the export of bone, tendon, meniscus, ligament, soft tissue, and cartilage products outside of the U.S.

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

Cautionary Statement on Forward-Looking Information:

Certain information contained in this news release constitutes “forward-looking statements” within the meaning of the ‘safe harbour’ provisions of Canadian securities laws. All statements herein, other than statements of historical fact, are to be considered forward looking. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “planned”, “potential”, “future”, “expected”, “could”, “possible”, “goal”, “intends”, “will” or similar expressions. Forward-looking statements in this news release include, without limitation: information pertaining to the Company’s strategy, plans, or future financial performance, such as statements with respect to the Transaction, and other statements that express management’s expectations or estimates of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Lattice to be materially different from those expressed or implied by such forward-looking statements.

Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management as of the date such statements are made, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions that could prove to be incorrect, include, but are not limited to: that market prices will be consistent with expectations, the continued availability of capital and financing, and that general economic, market and business conditions will be consistent with expectations. The forward-looking statements are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.

United States Advisory: The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and may not be offered, sold, or resold in the United States or to, or for the account of or benefit of, a U.S. Person (as such term is defined in Regulation S under the U.S. Securities Act) unless an exemption from the registration requirements of the U.S. Securities Act is available. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in the state in the United States in which such offer, solicitation or sale would be unlawful.

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