January 3, 2022
All amounts expressed in Canadian dollars unless otherwise noted
TORONTO, Canada and RIONEGRO, Colombia (December 31, 2021) – PharmaCielo Ltd. (“PharmaCielo”or the “Company”) (TSXV: PCLO, OTCQX: PCLOF), the Canadian parent of Colombia’s premier cultivator and producer of medicinal-grade cannabis extracts, PharmaCielo Colombia Holdings S.A.S. (“Holdings”), is pleased to announce that it has closed the first tranches of its previously announced non-brokered private placement (the “Offering”), consisting of an aggregate of 5,000 debenture units (each a “Unit”). The Units were issued at a price of $1,000 per Unit for aggregate proceeds of $5,000,000.
The Company closed an initial tranche of the Offering consisting of $4,000,000 principal amount of Units on December 24, 2021 and a further tranche consisting of $1,000,000 principal amount of Units on December 31, 2021. Insiders participated in this initial tranche of financing. The Company expects to close the issuance of up to an additional $10,000,000 principal amount of Units in one or more tranches on or about January 14, 2022.The Company intends to use the proceeds from the Offering for operations, working capital and the build-out of its international psychoactive dry flower sales program.
Each Unit consists of $1,000 principal amount of 11% secured debentures (“Debentures”) and 250 non-transferable common share purchase warrants (“Debenture Warrants”). Each Debenture Warrant entitles the holder to acquire one common share of the Company (each a “Common Share”) at an exercise price of $1.44 per Common Share until December 24, 2024 (subject to customary anti-dilution adjustments). The Debentures bear interest at a rate of 11% per annum, mature on December 24, 2024, and are guaranteed by Holdings. Holdings’ guarantee of the Debentures will be secured by mortgages on the real property of the Company and its subsidiaries. Interest payable on the Debentures may be paid by the Company in Common Shares at the Company’s option, subject to approval of the TSX Venture Exchange.The Company has the right to redeem any or all of the Debentures from time to time at the following percentages of face value: (i) 105% at any time prior to December 24, 2022; (ii) 103% at any time on or after December 24, 2022 and prior to December 24, 2023; and (iii) 101% on or after December 24, 2023, in each case together with accrued and unpaid interest to, but not including, the date of redemption.Upon a change of control of the Company, holders have the right to have their Debentures repurchased at 105% of face value plus accrued and unpaid interest to, but not including, the date of repurchase.The Debentures, Debenture Warrants and any Common Shares issuable upon exercise of the Debenture Warrants are subject to a statutory hold period under applicable Canadian securities laws, expiring on April 25, 2022 with respect to Units issued on December 24, 2021 and May 1, 2022 with respect to Units issued on December 31, 2021. Debentures, Debenture Warrants and Common Shares corresponding to subsequent tranches of Units will be subject to a four-month hold period starting from the date of issuance of the applicable Units.
Certain directors and senior officers of the Company have subscribed for Units in the Offering, in an aggregate principal amount totaling $490,000. Each subscription by a director or senior officer of the Company is considered to be a “related party transaction” for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company did not file a material change report more than 21 days before the expected closing date of the Offering as the details of the Offering and the participation therein by each “related party” of the Company were not settled until shortly prior to the closing of the Offering, and the Company wished to close the Offering on an expedited basis for sound business reasons. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 of MI 61-101 and the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on section 5.5(a) and section 5.7(1)(a), respectively, of MI 61-101, as the fair market value of the transaction, insofar as it involves interested parties, is not more than the 25% of the Company’s market capitalization.
PharmaCielo Ltd. (TSXV: PCLO, OTCQX: PCLOF) is a global company, headquartered in Canada, with afocus on ethical and sustainable processing and supplying of all natural, medicinal-grade cannabis oil extracts and related 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 themedical cannabis industry, and the Company, together with its directors and executives, is executing on abusiness plan focused on supplying the international marketplace.
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 orachieved. Forward-looking statements in this news release include, without limitation, statements regarding the proposed use of proceeds of the Offering and the closing of any future tranches of the Offering.The forward-looking statements in this news release are necessarily based on assumptions, includingassumptions with respect to PharmaCielo’s ability to obtain necessary approvals for the issuance of the Units.
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 necessaryregulatory 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 yearended December 31, 2019, which is available at www.sedar.com. Accordingly, readers should not placeundue reliance on forward-looking statements. Except as required by law, PharmaCielo undertakes noobligation to publicly update any forward-looking statements, whether as a result of new information, futureevents 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 pressrelease.