Mr. William Long reports

EPICORE BIONETWORKS INC. REPORTS QUARTER TWO RESULTS FOR FISCAL YEAR 2017

Epicore Bionetworks Inc. had second quarter revenue of $3-million and net income of $700,000 or three cents per share for the period ended Dec. 31, 2016 (all amounts are in U.S. dollars).

Second quarter revenue was 36 per cent higher than last year's second quarter. Revenue for the first six months at $5.4-million was 28 per cent higher than last year's first half. Net income was $700,000 in the second quarter, an increase of $600,000 or 603 per cent over prior year's second quarter, bringing first half net income to $900,000, compared with $300,000 in fiscal 2016. Sales grew in all business sectors except non-aqua. The largest revenue increase was in Latin America, but Asia had the largest percentage increase.

The shrimp industry began to recover in the third quarter of fiscal 2016 as shrimp prices started to rise. Prices continue to slowly increase. Also, the industry has begun to adapt to disease presence by improving culturing practices such as the use of raceway systems. Disease prevalence in Asia and Mexico inhibits sales recovery to 2015 levels, so shrimp production will be slow to recover. But, with higher shrimp prices, farmers are more willing to try a crop, which is good for Epicore's hatchery product sales.

Results versus prior fiscal year's second quarter are as follows:

• Q2 revenue of $3-million was 36 per cent higher than Q2 last year;
• Q2 gross profit of $1.8-million was 54 per cent higher than Q2 last year;
• Q2 operating expenses of $1-million were 1 per cent higher than Q2 last year;
• Q2 earnings before taxes of $800,000 were 382 per cent higher than Q2 last year;
• Q2 net income of $700,000 was 603 per cent higher than Q2 last year;
• Q2 EBITDA (earnings before interest, taxes, depreciation and amortization) of $900,000 was 280 per cent higher than Q2 last year;
• Q2 basic earnings per share of three cents were 575 per cent higher than Q2 last year;
• Q2 shareholders' equity of $10.4-million was 22 per cent higher than Q2 last year;
• Q2 cash balance of $3.5-million was 107 per cent higher than Q2 last year;
• Year-to-date cash flow from operating activities was $300,000.

Gross profit increased 54 per cent in the second quarter due to the increase in revenues and to a higher average selling price due to product sales mix. Operating expense was controlled to a small increase of 1 per cent over prior year's second quarter and only a 3-per-cent increase for the first six months. Efficiencies were created from recent capital expenditures.

Higher gross profit and relatively controlled expenses increased net income by 603 per cent to $700,000 versus prior year's second quarter. Taxes at $100,000 were only 57 per cent above prior year's second quarter because of process equipment expenditures tax credits. The attached table summarizes the second quarter results (in thousands of U.S. dollars).

                    For the quarter ended Dec. 31,
                             2016            2015
 
Revenue                  $  2,952        $  2,178    
Gross profit                1,828           1,184    
Operating expenses          1,028           1,022    
Net income                    696              99      
Earnings per share          0.027           0.004    
Shareholders' equity       10,395           8,528    
Cash balance                3,508           1,693 

Epicore continues to generate positive net income from operating activities. Cash at the end of the quarter was $3.5-million versus $3.4-million, the same as the end of fiscal 2016. With these funds, expected sales revenue growth and continued relatively low operating costs, management expects there will be sufficient cash to meet the fiscal year's financial requirements, to finance expansion of aquaculture and environmental remediation marketing efforts, and to pursue new strategies for enhancing shareholder value.

Over the last two years, Epicore has invested materially in a second building and automated packaging equipment. This added space has been critical to the company's ability to increase production levels. All automated packaging equipment are in place and operational. The board has approved a continuing capital program to enhance efficiencies and ensure redundancies in critical applications of the company's operations.

The financial statements of the company have been prepared in accordance with international financial reporting standards.

We seek Safe Harbor.