/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
-- Expects to close its previously announced overnight marketed equity financing on or about April 7, 2021, for gross proceeds of approximately $12 million.
All figures are in Canadian dollars ($) unless otherwise specified
TORONTO and RIONEGRO, Colombia, March 31, 2021 /CNW/ - 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., today provided shareholders with an update on several ongoing initiatives. As part of its customary review of the Company's preliminary prospectus related to its best efforts overnight marketed equity offering, Staff of the Ontario Securities Commission (the "OSC Staff") requested the Company provide updates to previous disclosure included by the Company in its June 29, 2020 prospectus (the "Bought Deal Prospectus"), including projections under certain current agreements including those with XPhyto Therapeutics Corp. ("XPhyto") and CBD Export Global ("CBD Export"). See the sections of this press release titled "Update to Business Outlook" and "Update -- Downstream Operations" for more information. The Company has also restated its Q3 2020 financial statements and MD&A after reviewing with its auditors the net realizable valuation of its inventories and as a result of fluctuations in global CBD isolate pricing and at the request of OSC Staff to provide additional information relating to its revenue for the period. See the section of this press release titled "Restating and Refiling Q3 2020 Financial Statements" for more information. Since the end of Q4 2020, the Company has begun to ship a broader and higher value-added suite of CBD products, to commercial customers.
"Over the past several months, with new leadership in place, PharmaCielo has focused on solidifying its commercialization strategy, while completing the necessary operational foundation to support growth in sales volume," said Henning von Koss, CEO of PharmaCielo Ltd. "The completion of the Processing and Extraction Centre late last year, and our ability to offer products produced in compliance with EU-GMP guidelines, were the key missing ingredients to the sales equation for PharmaCielo, and we have seen our sales pipeline begin to grow as a result of the achievement of these milestones. We know where we are headed, we have the necessary ingredients for success and we are positioning the Company to both generate results in the near-term, and to build significant long-term shareholder value."
Restating and Refiling Q3 2020 Financial Statements
Following a review by its auditors, the Company has amended and refiled its previously issued unaudited condensed consolidated interim financial statements ("Q3 Financial Statements") and management discussion and analysis ("Q3 MD&A") for the three and nine months ended September 30, 2020 specifically on the net realisable value of the Q3 inventories, as further described in note 16 and note 25 of the Q3 Financial Statements. In addition, the previously filed Q3 Financial Statements inadvertently omitted that an auditor did not perform a review of the Q3 Financial Statements. The amended Q3 Financial Statements have been reviewed by the Company's auditor.
The Company also amended the Q3 Financial Statements at the request of OSC Staff to provide additional information about revenue for the period, including identifying the percentage of revenue received by the Company from one customer and an overview of management's judgement.
The amended Q3 Financial Statements and Q3 MD&A are available under the Company's profile on SEDAR at www.sedar.com and supersede the respectively previously filed original Q3 Financial Statements and Q3 MD&A. Such previously filed original Q3 Financial Statements and Q3 MD&A should be disregarded.
Overnight Marketed Equity Financing
As previously announced, the Company is in the process of an overnight marketed offering (the "Offering") of common shares (the "Common Shares") from the treasury of the Company, priced at $2.15 per Common Share for gross proceeds of $12,000,010. The Offering is being conducted through a syndicate of agents led by Cormark Securities Inc. and including Stifel GMP (collectively the "Agents"). The Company has granted the Agents an option to purchase up to an additional 15% of the Common Shares sold in the Offering on the same terms exercisable at any time up to 30 days following the closing of the Offering, for market stabilization purposes and to cover over-allotments, if any.
The Offering is now scheduled to close on April 7, 2021 and remains subject to regulatory approvals including the approval of the OSC and the TSX Venture Exchange (the "TSXV").
This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This press release does not constitute an offer of securities for sale in the United States. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements.
Update to Business Outlook
In the Bought Deal Prospectus, PharmaCielo outlined expectations for $37.9 million in revenue for the 12 months ended June 30, 2021 inclusive of anticipated sales under supply agreements with XPhyto and CBD Export as set out below. Additionally, the Company indicated it expected to be able to continue operations for an indefinite period of time once it became consistently cash flow positive. Since this time, previously announced delays in completing the Company's Rionegro Processing and Extraction Centre and the related delay in the Company's production of EU-GMP compliant product postponed the initiation of any meaningful commercial activity related to sales from the sales agreements referenced in the assumption of these revenue expectations. In addition, market pricing for CBD isolate declined, which had a direct impact on potential revenue and timing related to the sales agreements underlying these revenue expectations. Financial results have also been impacted by the previously disclosed issues related to the collection of accounts receivable with a specific customer. As a result of these factors the Company withdraws the expectation of $37.9 million of revenue for the 12 months ended June 30, 2021. The Company believes that based on the revenue expected from existing client contracts and anticipated from additional clients in advanced contract negotiations, the Company will be able to continue operations for at least the next 12 months and, once attaining positive cash flow, it will be able to continue operations indefinitely.
Demand for differentiated products beyond CBD isolate, with higher price levels, has been growing in the market and the Company's broadened product portfolio has been well received, including by current customers. Please see further detail regarding the Company's existing sales agreements and sales pipeline, under "Update -- Downstream Operations" in this press release.
Update -- Downstream Operations
Supply agreement with UK Customer
In November 2020, the Company entered into a renewable, interim sales agreement with a well-established bulk distributor and white label manufacturer based in the United Kingdom, with sales and distribution operations in the United Kingdom and the European Union. Since the signing of the agreement, the Company has been regularly shipping CBD isolate and Broad Spectrum on a monthly basis, which is expected to continue throughout the year.
Supply agreements with XPhyto and CBD Export entered in January 2020
PharmaCielo entered into supply agreements with Xphyto and CBD Export and in the Bought Deal Prospectus, the Company stated it expected revenues under these agreements to represent approximately 46.5% of the $21.5 million the Company stated it needed to enable continuous operations for the following 12 months (July 2020 to June 2021).
The agreements with XPhyto and CBD Export remain in place but measures by global governments to curb the spread of COVID-19 and the resulting impact on global supply chains may interfere with the pace of sales growth and the Company is not able to provide specific volume, product mix and thus revenue projections for the next 12 months for these agreements, as a result. PharmaCielo anticipates it will start selling CBD product to XPhyto in the second half of 2021, provided that XPhyto obtains requisite import and related EU-GMP certification approvals in Germany to accept the products. PharmaCielo initiated first sales to CBD Export in December 2020 and anticipates it will continue to sell to CBD Export on a monthly basis beginning in March 2021.