PharmaCielo Independent Investigation Concludes Short Seller Report Contains Accusations and Claims Based on Faulty Interpretation of Events and Information
- Company invites shareholders to review its full response, the Independent Review findings and supporting evidence at pharmacielo.com/special-committee
TORONTO, CANADA (March 23, 2020) – PharmaCielo Ltd. (“PharmaCielo” or the “Company”) (TSXV: PCLO, OTCQX: PCLOF), has issued the Company’s detailed response to a short seller report that contains incorrect analysis of a broad range of events and information on the Company’s operations, land and property acquisitions, marketing and distribution contracts, and claims about the founders and directors, among others. The Company referenced the misleading short seller report in its press release dated March 3, 2020.
On March 3, PharmaCielo’s board of directors appointed Doug Bache, Audit Committee Chair, as lead independent director (the “Lead Director”) to undertake an independent investigation of the allegations and claims made by a short seller against the Company and its founders. The Lead Director was mandated to perform an independent review (the “Independent Review”) of the short seller’s allegations and claims in conjunction with the Audit Committee’s work in connection with the preparation and review of the Company’s annual financial statements for the year ended December 31, 2019. The Lead Director retained external legal counsel and external forensic auditors to assist in connection with the Independent Review.
PharmaCielo’s detailed response, based on the findings of the Independent Review, along with a video statement by PharmaCielo’s CEO David Attard, and additional visual assets related to the current operations at the Company properties in Colombia, are available for review at www.pharmacielo.com/special-committee.
Summary of the Independent Review:
- Neither Anthony Wile nor Federico Cock-Correa used their office or position with PharmaCielo to personally benefit or for self-enrichment at the expense of the Company or its shareholders.
- Claims alleging the Company’s co-founders pursued undisclosed related party transactions detrimental to the Company and its shareholders were incorrect.
- Contrary to the allegations in the short seller report, the acquisition of PharmaCielo’s flagship agricultural property, the Rionegro Land in Rionegro, Colombia, was purchased directly from third-party vendors, at arm’s length to the Company, and there was no related party transaction or “property flip” to enrich any of the Company’s founders at the expense of shareholders.
- Any mould or pesticide contamination at the Rionegro property, regularly tested by a third-party independent laboratory, is considered minimal and normal for an agricultural operation located in the tropics.
- The delay in developing the Company’s property in Colombia’s Cauca region relates to conditions in the area that would prevent proper operation as well as the fact that the Company is currently focused on pursuing CBD isolate and oil production at its Rionegro property as opposed to pursuing any THC product production at the Cauca property.
- The Company entered into supply agreements with third parties, including General Extract LLC, a subsidiary of Redwood Green Corp., and XPhyto Therapeutics Corp. The Independent Review concluded that the agreements with General Extract and Xphyto were made for valid business reasons including entry into key US and EU CBD oil markets and represent genuine contractual commitments on commercially reasonable terms reflecting market prices negotiated at the time.
About the Independent Review:
In conducting the Independent Review, Mr. Bache is considered “independent” of the Company as determined under National Instrument 52-110 Audit Committees. As part of the Independent Review, the Lead Director engaged legal teams from McMillan LLP and forensic audit professionals from Grant Thornton LLP.
David Attard, Chief Executive Officer, commented, “The independent report and conclusion speaks volumes and I encourage our shareholders and stakeholders to read its conclusions. This is a classic ‘short and distort’ campaign waged against PharmaCielo with false claims to manipulate its stock price. If anything, it is the short seller who was trying to run a self-enrichment scheme on the expense of honest shareholders but instead clearly demonstrated their analytical shortcomings.”
“I would like to thank our long-term shareholders, suppliers and business partners for their support and confidence in the company during the past couple of weeks,” continues David Attard. “While there will be challenges ahead, especially as the world at large is dealing with the COVID-19, we expect 2020 to be a very important year for PharmaCielo, as we leverage our Colombian operations to initiate and grow commercial sales of medicinal cannabis extracts worldwide.”
Simon Langelier, Chair of the Board of Directors, stated, “On behalf of the Board, we believe the short seller’s accusations and claims against the company, its properties, founders and directors are without merit and substantiation and, in contrast, the Company’s operations, corporate and business development strategies are sound. I confirm the Board’s support for management and its employees during this uncertain and difficult time, and we have taken steps to protect our stakeholders and the community.
PharmaCielo expects to report its Q4-2019 and fiscal 2019 financial results in the second half of April 2020, in accordance with regulatory timelines.
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.
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, 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 nursery and propagation centre located in Rionegro, Colombia.
The boards of directors and executive teams of both PharmaCielo and PharmaCielo Colombia Holdings 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 will play 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.
This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as, “expects”, “anticipates”, “intends”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may” or “will” be taken, occur or be achieved. Certain statements contained in this news release, such as those relating to PharmaCielo leveraging its Colombian operations to initiate and grow commercial sales of medicinal extracts, the release of the Q4-2019 and fiscal 2019 financial results of the Company and statements relating to COVID-19 are “forward-looking statements” as such term is used in applicable Canadian securities laws. Forward-looking statements are based on plans, expectations and estimates of management at the date the information is provided and are subject to certain factors and assumptions, including the Company’s ability to grow its sales, fulfill product production goals, obtain necessary regulatory approvals related to its business and to execute its business objectives. Forward-looking information is subject to a variety of risks and uncertainties and other factors that could cause plans, estimates and actual results to vary materially from those projected in such forward-looking information. Factors that could cause the forward-looking information in this news release to change or to be inaccurate include, but are not limited to, the risk that the Company’s sales may not grow as anticipated, that the Company may not be able to fulfill its product production goals, that the Company may not be able to obtain necessary regulatory approvals or there may be a delay in obtaining these approvals, that the market for the Company’s products may be subject to volatility, that there may be less than anticipated demand for the Company’s products, risks associated with the Company operating in Colombia, risks associated with global economic instability relating to COVID-19 and the potential for it to disrupt global markets as well as the other risks and uncertainties applicable to cannabis producing companies. The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.
For further information:
David Gordon, ICD.D, Chief Corporate Officer
International: Gal Wilder, Cohn & Wolfe
Colombia: María Paula Peña Fdz., SPR GROUP S.A.
PBX: 57-1 2877234