PharmaCielo Announces Continued Progress on Efficiency Initiatives to Accelerate Profitability and Intention to Amend Warrant Terms
February 2, 2023
- Steady progress against the efficiency plans initiated in mid-2021 with the transition to the current senior management team. Expects a reduction in its annualized fixed costs by approximately 25% compared to 2022 as a result of these ongoing efforts.
- The Company is focused on consistently reducing expenses and improving efficiency to facilitate a rapid transition to a cash flow positive position as its revenue continues to grow.
- Intends to amend the terms of 2,823,750 common share purchase Warrants, reducing the exercise price from C$1.44 to C$0.65 per Common Share.
TORONTO, Canada and RIONEGRO, Colombia (February 2, 2023) – PharmaCielo Ltd. (“PharmaCielo” or the “Company”) (TSXV: PCLO, OTCQX: PCLOF), the Canadian parent of Colombia’s premier cultivator and producer of dried flower and medicinal-grade cannabis extracts, PharmaCielo Colombia Holdings S.A.S. (“Holdings”), today provided a corporate update, regarding progress against the efficiency initiatives it began to implement in mid-2021, which are designed to accelerate the Company’s path to profitability. The Company also announced its intention to amend existing warrant terms, and issue shares for debt.
Efficiency Initiatives and Issuance of Shares for Debt
PharmaCielo initiated and began to implement a comprehensive efficiency plan in mid-2021, concurrent with the current senior management team joining the business. The ongoing initiatives designed to achieve this plan are focused on consistent expense reduction and improving efficiency to facilitate a rapid transition to a cash flow positive position as the Company’s sales team continues to execute on revenue opportunities. PharmaCielo has recently initiated additional steps in this ongoing plan, which it expects will result in a reduction of its annualized fixed costs by approximately 25% compared to 2022. These efficiencies will be achieved by outsourcing certain production processes, eliminating unnecessary legacy costs, such as its Medellin corporate office, as well as by voluntary salary reductions and headcount reductions. The Company also announced that, to pay a portion of the severance costs, estimated to not exceed C$450,000, it intends to issue, subject to the approval of the TSX Venture Exchange (the “TSXV”), up to 1,549,627 common shares of the Company (the “Payment Shares”), at an effective price to be determined based on a 10-day volume weighted average price at the time of issuance.
The Payment Shares will be issued in reliance on certain prospectus exemptions available under securities legislation and will fall within the four-month plus one day statutory hold period.
Bill Petron, CEO of PharmaCielo, said, “Our team has made significant progress since I joined the organization in mid-2021, and today we announced additional steps in our long-term plan to steadily move toward positive cash flow. In partial achievement of that objective, our senior team including our CFO Ian and I, will be taking salary reductions. We strongly believe that PharmaCielo is positioned to create value for shareholders, and these steps, along with the personal capital that both senior management and members of the board of directors have injected into the Company, back up this belief. Our sales team has made significant progress over the past 12 months, and we are confident that with the progress to date and our current pipeline, 2023 will be an important year for PharmaCielo as we continue to scale our operations with a view to generating growth and value for shareholders.”
Amendment of Warrant Terms
PharmaCielo has applied to the TSXV to amend the terms of 2,823,750 common share purchase warrants of the Company (the “Warrants”) that were issued pursuant to the non-brokered private placement of debenture units over multiple closings (the “Private Placement”). The Warrants currently have an exercise price of C$1.44 per common share (each, a “Common Share”) and will expire on December 24, 2024. The purpose of the proposed amendments (collectively, the “Amendments”) is to (i) reduce the exercise price of the Warrants from C$1.44 to C$0.65 per Common Share, and (ii) add an Acceleration Clause (as defined herein). In accordance with the terms of the warrant indenture under which the Warrants were issued, the Amendments must be approved by the holders of the outstanding Warrants. Therefore, in order to give effect to the Amendments, the Company will be promptly seeking the written consent of the holders of Warrants to such Amendments.
Subject to the approval of the TSXV, the Warrant terms will include an amended clause whereby, if for any 10 consecutive trading days during the unexpired term of the Warrants, the closing price of the Common Shares on the TSXV is equal to or greater than C$1.00, the expiry date will be accelerated to 30 calendar days (the “Acceleration Clause”). The Company will announce any such accelerated expiry date of the Warrants by news release. All other terms and conditions of the Warrants remain the same. The amended warrant terms remain subject to the final acceptance of TSXV.
PharmaCielo Ltd. (TSXV: PCLO, OTCQX: PCLOF) is a global company, headquartered in Canada, with a focus on ethical and sustainable processing and supplying of all natural, pharmaceutical-grade medical cannabis products to large channel distributors. PharmaCielo’s principal (and wholly owned) subsidiary is PharmaCielo Colombia Holdings S.A.S., headquartered at its cultivation and processing center located in Rionegro, Colombia.
The board of directors and executive team of PharmaCielo are comprised of a diversely talented group of international business executives and specialists with relevant and varied expertise. PharmaCielo recognized the significant role that Colombia’s ideal location plays in building a sustainable business in the medical cannabis industry, and the Company, together with its directors and executives, is executing on a business plan focused on supplying the international marketplace.
For further information:
Ian Atacan, Director & Chief Financial Officer
Media and Investor Inquires:
This news release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as “expects”, “is expected”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may” or “will” be taken, occur or be completed or achieved. Forward-looking statements in this news release include, without limitation, statements regarding the issuance of the Payment Shares, including the terms thereof and the closing date therefor. The forward-looking statements in this news release are necessarily based on assumptions, including assumptions with respect to PharmaCielo’s ability to obtain necessary approvals for the issuance of the Payment Shares and Amendments to Warrant terms.
Forward-looking statements can be affected by known and unknown risks, uncertainties and other factors, including changes to PharmaCielo’s development plans, the failure to obtain and maintain all necessary regulatory approvals relating to the export of cannabinoid products and the import of these products into other countries, TSX Venture Exchange approval, the inability to export or distribute commercial products through sales channels as anticipated due to economic or operational circumstances, risks associated with operating in Colombia, fluctuation of the market price for the Company’s products, risks associated with global economic instability relating to COVID-19 or other developments, risks related to retention of key Company personnel, currency exchange risk, competition in PharmaCielo’s market and other risks discussed or referred to under the heading “Risk Factors” in PharmaCielo’s Annual Information Form for the financial year ended December 31, 2019, which is available at www.sedar.com. Accordingly, readers should not place undue reliance on forward-looking statements. Except as required by law, PharmaCielo undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Neither the 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 press release.