Ambrilia Biopharma Inc.
TSX : AMB

Ambrilia Biopharma Inc.

March 24, 2008 16:00 ET

Ambrilia Announces Fiscal 2007 Results and Provides Programs and Milestones Review

Attention Business/Financial/Health Editors

MONTREAL, QUEBEC--(Marketwire - March 24, 2008) - Ambrilia Biopharma Inc. (TSX:AMB) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2007, and provided a review of its development programs and upcoming milestones.

"The year 2007 and beyond has brought many changes at Ambrilia resulting in a more focused strategic direction supported by a clear plan of action. With a new leadership, our efforts are geared towards implementation and execution of our strategy, namely, divestment of non-core assets combined with progressive acceleration of R&D in virology in the context of a tight cash flow management. While we believe that there is significant value in our non-virology assets, we recognize that third parties with broader resources and experience can accelerate the development of our non-core early stage products, and better support the mature assets, particularly at commercial stage. Accordingly, monetization of non-virology assets through third parties agreements will allow the Company to strengthen its financial position and continue to invest in its promising antiviral drug program" said Dr. Philippe Calais, President and CEO of Ambrilia.

2007 HIGHLIGHTS AND BEYOND

- On January 22, 2008, Ambrilia reported preliminary Phase III data showing the safety and efficacy of its proprietary prolonged release formulation of Octreotide ("C2L") in acromegaly patients.

- On January 3, 2008, Philippe Calais, Ph.D, Pharm., became President and Chief Executive Officer of Ambrilia and a member of its Board of Directors.

- On October 30 and November 8, 2007, the Company completed a $18.7 million public offering.

- In June and September 2007, Ambrilia presented the latest preclinical data on its new series of HIV integrase inhibitors at XVI International HIV Drug Resistance Workshop (June 12-16) and at the 47th ICAAC (Sept. 17-20).

- On July 17, 2007, the Company announced the conclusion of a Korean partnership with Shin Poong for its C2L.

- In May 2007, Ambrilia completed a $5.8 million private placement.

- On April 24, 2007, the Company reported data from the Memorial Sloan Kettering Cancer Center Phase I/II pilot study with PCK3145 showing clinical activity in metastatic prostate cancer patients.

DEVELOPMENT PROGRAMS REVIEW

A- Non-core Assets

Improved Formulation of Octreotide ("C2L"): Phase III

Ambrilia's proprietary prolonged release formulation of Octreotide ("C2L") is a therapeutic alternative to Novartis' Sandostatin® LAR (long-acting release) ("SLAR") to treat acromegaly. Recently, Ambrilia reported the interim results of the first phase III study (study 301) comparing its C2L to SLAR in acromegaly patients. The primary objective of this study was met with both products inducing a highly statistically significant decrease of the major makers for acromegaly, Insulin-like Growth Factor 1 (IGF-1) and Growth Hormone (GH) plasma levels. The adverse events reported were minor and not unexpected, and their incidence and severity was similar in both groups.

The Phase III program for C2L is ongoing as planned and final data of the 301 study is expected to be available during the second quarter of 2008 (Q2/08). The Company still expects the regulatory filings to be initiated during the second half of 2008 (H2/08) and will aim at extracting the maximum value from this asset by year end.

New 3-month Formulation of Goserelin: Preclinical

Ambrilia's Goserelin is potentially the first-to-market generic to Astra Zeneca's Zoladex® 3-month biodegradable implant, the European market leader for the treatment of hormone-sensitive prostate cancer. The Company is currently completing reproducibility and validation of its formulation. Pending successful completion of the formulation work, clinical testing of the product in patients could be initiated during the first half of 2008 (H1/08). The Company aims at divesting Goserelin by the end of 2008.

Therapeutic Peptide PCK3145: Phase I/II

Ambrilia's PCK3145 is a patented, non-toxic, therapeutic peptide for the treatment of advanced metastatic prostate cancer. Reported data of a Phase I/II study showed that PCK3145 had an excellent safety profile, and signs of disease stabilization were observed in several patients. Ambrilia aims to out-license PCK3145 during the course of 2008. Likewise, the Company is pursuing its discussions with diagnostic companies for the out-licensing in 2008 of PSP94, its novel diagnostic/prognostic marker for prostate cancer.

NGR-Delivery Platform (formerly named TVT Technology): Preclinical

Ambrilia has developed a targeted delivery technology that uses a proprietary peptide (NGR peptide) coupled with a carrier. The Company has already established a proof-of-concept with doxorubicin, a cytotoxic drug, and shown its efficient delivery in animal solid tumor models. A second proof-of-concept was recently demonstrated with a small gene-modifying molecule, showing efficient delivery to tumor cells. Ambrilia is currently working on completing and validating this proof-of-concept in vivo by the end of the third quarter of 2008 (Q3/08). Successful outcome of the validation work will allow the Company to divest its NGR-Delivery Platform by the end of 2008.

B- Antiviral Assets

PPL-100 (MK-8122): Phase I

Ambrilia has regular interactions with Merck in their advancement of the development of PPL-100 (renamed MK-8122) for the treatment of HIV/AIDS.

Other antivirals: Discovery

Further progress in the early-stage antiviral programs is planned during 2008. Ambrilia's goal is to generate at least one preclinical drug candidate by the first half of 2009 (H1/09) among its lead programs described below:

HIV Integrase Inhibitor Program

Ambrilia has developed a novel series of pyrazolopyridine compounds which demonstrated potent inhibition against HIV-1 integrase strand transfer activity. Besides pyrazolopyridine compounds, other novel series of HIV integrase inhibitors are being generated by Ambrilia.

HIV Entry Inhibitor Program

Entry inhibitors are a class of antiretroviral drugs which targets key proteins involved in the HIV entry process, interfering with the virus binding, fusion and entry to a host cell. Ambrilia has identified compounds which demonstrate a high potency and specificity against HIV entry.

HCV Polymerase Inhibitor Program

HCV treatments represent a rapidly growing market characterized by a sub-optimal standard of care, and to date no small molecules have been approved for HCV treatment. Small molecules inhibitors in development target the HCV polymerase and protease enzymes, both involved in viral replication. Ambrilia has identified a series of potent polymerase inhibitors.

RESULTS OF OPERATIONS

QUARTERLY INFORMATION

Quarter ended December 31, 2007 compared with the quarter ended December 31, 2006

The net loss for the fourth quarter of 2007 was $6,265,104 or $0.15 per common share, compared with net income of $12,801,588 or $0.45 per common share for the same quarter last year. The fourth quarter of 2006 results included license revenue of $19,138,862, which was primarily the result of the upfront licensing fee of US$17 million received on the grant to an affiliate of Merck & Co. of exclusive worldwide rights to the Company's Protease Inhibitor Program, including PPL-100, its lead compound against HIV/AIDS.

Revenues for the fourth quarter of 2007 amounted to $242,979, compared with $19,329,641 in the corresponding quarter in 2006. The higher level of revenues in the 2006 period resulted primarily from the above mentioned license revenue, partially offset by an increase in interest income earned in the last quarter of 2007 as a result of higher average levels of cash compared to the fourth quarter of 2006.

Research and development expenses for the fourth quarter of 2007 amounted to $2,912,907, compared with $3,136,448 in same quarter in 2006. The decrease of $223,541 reflected an increase in spending on C2L, Goserelin and Integrase which was more than offset by a reduction in other technologies. Research and development tax credits were $249,268 in the last quarter of 2007, compared with $496,687 in the corresponding quarter last year. The decrease reflects the fact that the Company no longer qualifies for the additional tax credit of 20% on the first $2 million of eligible research expenditures in Quebec.

General and administrative expenses for the fourth quarter of 2007 were $1,681,207, a decrease of $1,077,862 from the total of $2,759,069 incurred in the final quarter of 2006. The decrease resulted primarily from higher professional fees in the 2006 period, including $0.9 million of expenses of a non-recurring nature, relating primarily to the out-licensing of the Company's HIV Protease Inhibitor Program and to the development and implementation of tax planning strategies following the Ambrilia France acquisition.

YEARLY INFORMATION

Year ended December 31, 2007 compared with the year ended December 31, 2006

The net loss for the year ended December 31, 2007 amounted to $25,277,859 or $0.75 per common share, compared with a net loss of $2,339,465 or $0.09 per common share for the year ended December 31, 2006. The increase in the net loss was primarily due to the license revenue of $19,154,706 earned in 2006, which included the upfront licensing fee of $19.1 million (US$17 million) on the grant to an affiliate of Merck & Co. of exclusive worldwide rights to the Company's Protease Inhibitor Program, including PPL-100, its lead compound against HIV/AIDS. In addition, higher amortization expense and general and administrative expenses in 2007 contributed to the increased loss.

Revenues for 2007 amounted to $837,009, compared with $19,765,122 in 2006. The higher level of revenues in 2006 resulted primarily from the above mentioned license revenue, which was partially offset by an increase in interest income earned in 2007 as a result of both higher average levels of cash and increased interest rates compared to 2006.

Research and development expenses for 2007 amounted to $10,663,289, compared with $10,938,984 in 2006. The reduction of $275,695 or 3% from 2006 reflected primarily the decrease of $1.9 million in spending on PPL-100 following its out-licensing (net of government assistance of $0.9 million in 2006 under the National Research Council Canada Industrial Research Assistance Program) and reduced spending on the NGR-Delivery platform of $0.2 million, partially offset by an increase of $1.7 million for C2L and Goserelin. Research and development tax credits were $845,632 in 2007, compared with $1,474,793 in 2006. The decrease reflected the impact of the fact that the Company no longer qualifies for the additional tax credit of 20% on the first $2 million of eligible research expenditures in Quebec due to its more than 50% foreign ownership.

General and administrative expenses for 2007 were $8,021,643, an increase of $949,409 over the total of $7,072,234 incurred in 2006. The increase resulted primarily from higher compensation costs of $0.9 million, due to the inclusion of payments in cash and shares totalling $0.9 million to a former executive, and an increase in directors' fees of $0.9 million, in part due to fees added as a result of increased involvement of outside directors in management activities during 2007 in the absence of a President & CEO, partially offset by lower professional fees of $0.7 million. The 2006 professional fees included $1.0 million of expenses of a non-recurring nature, relating primarily to the out-licensing of the Company's Protease Inhibitor Program and to the development and implementation of tax planning strategies following the Ambrilia France acquisition.

Amortization expense amounted to $9,047,774 in 2007, compared with $7,199,692 in 2006. The increase reflected primarily the full-year impact of amortization on intellectual property resulting from the acquisition of Ambrilia France on March 1, 2006, together with added amounts arising from the acquisition of additional shares of Ambrilia France during 2006 and 2007.

Interest expense on long-term liabilities for 2007 amounted to $1,055,932, compared with $1,160,198 in 2006. The decrease resulted primarily from the reduced interest on the Biolevier loan as a result of the $2 million loan repayment made in December 2006.

As a consequence of the intellectual property arising on the acquisition of Ambrilia France, a future income tax liability of $9,787,526 was recorded during 2006, with an additional $604,356 added in 2007 through the exercise of acquisition warrants to acquire additional shares of Ambrilia France. This future income tax liability is being drawn down over a term of up to the 7-year period during which the intellectual property is being amortized. This resulted in a future income tax recovery of $2,271,909 in 2007, compared with a recovery of $2,000,276 in 2006. These amounts were increased by foreign exchange gains relating to the future income tax liability of $279,780 in 2007 and $1,492,157 in 2006.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and short-term investments at December 31, 2007 totalled $25,399,921, compared with $22,359,604 at December 31, 2006, an increase of $3,040,317 in 2007. An amount of $17,785,616 was utilized to finance operating activities including an increase of $352,910 in non-cash working capital, resulting primarily from a decrease of $2,661,734 in accounts payable and accrued liabilities, partially offset by decreases in investment tax credits recoverable of $1,902,212 and $435,796 in accounts receivable. The decrease in investment tax credits recoverable resulted primarily from the collection during 2007 of Quebec research and development tax credits for the years 2005 and 2006.

Financing activities generated cash flow of $22,030,409 during 2007, with a total of $22,796,800 being generated from two equity issues, after cash expenses of $1,739,327. In addition, an Ambrilia France loan of $766,391 was repaid during 2007.

During the fourth quarter of 2007, Ambrilia announced the closing of its public offering of 14,940,000 units at a price of $1.25 per unit, resulting in total gross proceeds of $18.7 million. In May 2007, Ambrilia issued by way of a private placement 2,417,353 common shares at a price of $2.42 per share, for aggregate gross proceeds of $5.8 million.

Investing activities utilized $1,204,476 of cash, excluding amounts relating to short-term investments. An amount of $275,895 was utilized for the purchase of intellectual property and $928,581 for net additions to property, plant and equipment.

The semi-annual interest expense on the $3,500,000 of convertible debentures issued in June 2005 is payable either in cash or common shares, at the option of the Company. To-date, the Company has elected to pay the interest in shares.

Interest on the Biolevier loan balance of $8,927,466 is at prime rate plus 3% and subsequent to November 19, 2006, is payable in cash. Prior to this date, the interest on the loan was capitalized, including $804,497 in 2006. The loan is reported on the balance sheet at December 31, 2007 net of related expenses at $8,205,038 and is being accreted to the full amount due of $8,927,466 over the remaining term of the loan.

During 2007, general and administrative and net research and development expenses amounted to $17.8 million, for an average of $1.5 million per month. In 2008, management expects the Company's burn rate to be less than $1.4 million per month and consequently believes that it will have sufficient funds available to support its ongoing activities for more than 12 months.

OUTSTANDING SHARE DATA

The number of common shares outstanding as of March 10, 2008 is 47,963,634, an increase of 448,318 from December 31, 2007. The number of stock options outstanding at March 10, 2008 is 1,349,517, an increase of 326,250 from December 31, 2007. In addition, 15,877,037 warrants are outstanding on March 10, 2008, a decrease of 1,188,604 from December 31, 2007. The increase in the common shares results from the issue of 448,318 shares relating to the purchase of the final tranche of the Ambrilia France securities under the share exchange agreement.



CONSOLIDATED BALANCE SHEETS

As at December 31

2007 2006
$ $
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ASSETS
Current assets
Cash and cash equivalents 10,795,297 3,155,854
Short-term investments 14,604,624 19,203,750
Accounts receivable 411,892 847,688
Investment tax credits recoverable 642,352 2,158,930
Prepaid expenses 175,738 116,154
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26,629,903 25,482,376
Long-term receivables 1,214,712 1,095,130
Property, plant and equipment 2,133,196 1,782,558
Intellectual property 48,657,580 53,379,022
Deferred financing costs - 979,534
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78,635,391 82,718,620
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 3,743,044 6,019,144
Deferred license revenues 3,527,958 3,377,976
Loan payable - 768,841
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7,271,002 10,165,961
Minority interest 1 1
Biolevier loan facility 8,205,038 8,927,466
Future income tax liability 4,347,762 6,295,095
Convertible debentures 2,568,034 2,408,559
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22,391,837 27,797,082
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Shareholders' equity
Share capital 137,951,135 114,401,167
Warrants 8,610,715 6,143,141
Contributed surplus 8,502,544 7,920,211
Equity component of convertible debentures 1,920,914 1,920,914
Deficit (100,741,754) (75,463,895)
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56,243,554 54,921,538
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78,635,391 82,718,620
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CONSOLIDATED STATEMENTS OF OPERATIONS, DEFICIT AND COMPREHENSIVE LOSS

Years ended December 31

2007 2006
$ $
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REVENUES
License revenue 35,628 19,154,706
Interest and other income 801,381 610,416
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837,009 19,765,122
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EXPENSES
Research and development 10,663,289 10,938,984
Research and development tax credits (845,632) (1,474,793)
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Net research and development 9,817,657 9,464,191

General and administrative 8,021,643 7,072,234
Amortization of intellectual property 8,413,643 6,642,316
Amortization of property, plant and equipment 634,131 402,354
Amortization of deferred financing fees - 155,022
Accretion on long-term liabilities 416,580 251,537
Interest on long-term liabilities 1,055,932 1,160,198
Restructuring charges 208,341 251,120
Financial charges 58,846 120,399
Foreign exchange losses 39,784 77,649
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28,666,557 25,597,020
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Loss before income taxes (27,829,548) (5,831,898)

Future income tax recovery 2,271,909 2,000,276
Foreign exchange gain on future
income tax liability 279,780 1,492,157
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(2,551,689) (3,492,433)
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Net loss and comprehensive loss for the year (25,277,859) (2,339,465)
Deficit, beginning of year (75,463,895) (73,124,430)
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Deficit, end of year (100,741,754) (75,463,895)
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Basic and diluted loss per share (0.75) (0.09)
Weighted average number of
common shares outstanding 33,637,211 24,864,231
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CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31

2007 2006
$ $
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OPERATING ACTIVITIES
Net loss for the year (25,277,859) (2,339,465)
Items not affecting cash
Amortization of property, plant and equipment 634,131 402,354
Amortization of intellectual property 8,413,643 6,642,316
Amortization of deferred financing fees - 155,022
Loss on disposal of property,
plant and equipment 944 786
Accretion on long-term liabilities 416,581 251,537
Future income tax recovery and
related exchange gain (2,551,689) (3,492,433)
Loan interest capitalized - 804,497
Interest paid by issue of common shares 245,000 245,000
Unrealized foreign exchange loss (gain)
on loan payable (2,450) 92,699
Services paid by issuance of stock options 588,993 355,269
Compensation paid by issuance of common shares 100,000 -
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(17,432,706) 3,117,582
Net change in non-cash balances
relating to operations (352,910) 1,764,929
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Cash flows related to operating activities (17,785,616) 4,882,511
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INVESTING ACTIVITIES
Acquisition of intellectual property (275,895) (299,336)
Acquisition of property, plant and equipment (929,532) (641,612)
Proceeds from disposal of property,
plant and equipment 951 795
Cash and cash equivalents obtained on
acquisition of business - 174,625
Business acquisition costs - (1,979,031)
Maturities of short-term investments 28,531,855 8,878,165
Purchase of short-term investments (23,932,729) (23,139,710)
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Cash flows related to investing activities 3,394,650 (17,006,104)
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FINANCING ACTIVITIES
Issuance of units 18,675,000 -
Unit issue costs (1,539,074) -
Issuance of common shares 5,861,127 18,095,904
Share issue costs (200,253) (1,234,410)
Repayment of loan payable (766,391) -
Repayment of Biolevier loan - (2,000,000)
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Cash flows related to financing activities 22,030,409 14,861,494
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Net increase in cash and cash equivalents 7,639,443 2,737,901
Cash and cash equivalents, beginning of year 3,155,854 417,953
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Cash and cash equivalents, end of year 10,795,297 3,155,854
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CONFERENCE CALL AND WEBCAST DETAILS

Ambrilia will be hosting a conference call and webcast tomorrow, Tuesday, March 25, 2008, at 9:00 am ET, to discuss the financial results for the fourth quarter and year ended December 31, 2007, and provides a review of its development programs and milestones. The call will be hosted by Dr. Philippe Calais, President and Chief Executive Officer, Ambrilia, and Ms. Monique Letourneau, Executive Vice-President, Finance and Chief Financial Officer, Ambrilia.

Interested parties may access the conference call by way of telephone or webcast. The numbers to access the conference call are (416) 644-3416 (international) and 1(800) 732-9303 (toll free). The webcast will be available on the Company's website at www.ambrilia.com, Investors' section, Conference calls and webcasts, and will be archived for 365 days.

A replay of the call will be available on the Company's website at www.ambrilia.com, Investors' section, Conference calls and webcasts, from Tuesday, March 25, 2008, 11:00 am ET to Tuesday, April 1, 2008, 11:59 pm ET, and the numbers to access the replay are (416) 640-1917 (international) and 1(877) 289-8525 (toll free) with access code 21265903.

AMBRILIA'S FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that reflect the Company's current expectation regarding future events. There is a risk that expectations and forward looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on these forward-looking statements as they involve risks and uncertainties, which could make actual results differ materially from those projected herein and depend on a number of factors including, but not limited to, changing market conditions, successful and timely completion of clinical studies, uncertainties related to the regulatory approval process, establishment of corporate alliances and other risks detailed from time to time in the Company's filings. We refer you to the Risk Factors section of the Company's annual information form which contains a more exhaustive analysis of the risks and uncertainties that are generally connected to the business of the Company. Such statements are also based on various assumptions, including the successful and timely completion of clinical studies on Ambrilia's products demonstrating efficacy and safety for human use, their successful commercialization within the forecasted timelines and the attainment of the forecasted milestone payments and other revenues. While Ambrilia anticipates that subsequent events and developments may cause Ambrilia's views to change, Ambrilia specifically disclaims any obligation to update these forward looking statements, unless obligated to do so by applicable securities laws.

ABOUT AMBRILIA BIOPHARMA

Ambrilia Biopharma Inc. (TSX:AMB) is a biotechnology company focused on the discovery and development of novel treatments for viral diseases and cancer. In the latter part of 2007, Ambrilia adopted a new strategic plan, the primary objective of which is to progressively refocus R&D activities solely on antivirals. The strategy aims to capitalize on the Company's broad portfolio and original expertise in virology. Today, Ambrilia's product portfolio comprises of oncology and antiviral assets, including two new formulations of existing peptides for cancer treatment, a therapeutic peptide for prostate cancer, a targeted delivery platform for cancer, an HIV protease inhibitor program (exclusive worldwide rights granted to Merck & Co., Inc.), HIV integrase inhibitor and entry inhibitor programs, and an HCV polymerase inhibitor program. Ambrilia's head office, research and development and manufacturing facilities are located in Montreal with a regional office in France. For more information, please visit the Company's web site: www.ambrilia.com.

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