PharmaCielo Ltd. Announces Best Efforts Private Placement Offering

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO, April 1, 2020 /CNW/ - PharmaCielo Ltd. ("PharmaCielo" or the "Company") (TSXV: PCLO, OTCQX: PCLOF) is pleased to announce that, subject to all necessary approvals, it is undertaking a "best efforts" private placement offering of special warrants of the Company (the "Special Warrants") at a price of $0.75 (the "Offering Price") per Special Warrant (the "Offering"). The Company has received interest from multiple investors for the Offering, including a subscription agreement for Special Warrants totaling $5 million, conditional on aggregate proceeds committed to the Company pursuant to the Offering of $9 million. The size of the Offering may increase upon exercise by the Agents (as defined herein) of the Overallotment Option (as defined herein). The Offering will be conducted through a syndicate of agents led by Cormark Securities Inc. (collectively, the "Agents"). Certain members of the board of directors (the "Board") and management of the Company will subscribe for Special Warrants under the Offering in amounts to be determined.

The Company has continued to see increased international demand for its high-grade CBD isolate and broad-spectrum CBD oil. In January this year, the Company announced two multi-year commercial agreements representing demand for not less than 36,000 kg of the Company's products with additional substantial sales negotiations progressing for future announcement. Phase 1 of the Company's processing facility is expected to be operational in mid-year with a monthly capacity of 2,000kg to 2,500kg per month, a 4.0-5.0x increase over the Company's current processing capacity of 500kg per month. Management believes this processing capacity will more than support both the Company's 1.2 million square feet of harvest currently producing 500,000kg of dry flower annually and the additional volume capacity to be provided through contract cultivation expansion in current-year. The net proceeds of the Offering shall be used to support the anticipated processing capacity expansion, commence ramping up the Company's contract growing operations, working capital and general corporate purposes. The full breadth of current operations, with explanatory stage reference, can be viewed at PCLO Rionegro 2020.

Each Special Warrant shall entitle the holder thereof to receive one common share (each, a "Common Share") of the Company. Each Special Warrant will be automatically exercised on the earlier of: (i) fifth business day after the Prospectus Qualification (as defined below) (the "Qualification Date"); and (ii) at 4:59 p.m. (EDT) on the date which is four months and a day following the Closing Date (as defined below).

The Company has agreed to use commercially reasonable efforts to obtain a receipt for a final short form prospectus qualifying the distribution of the underlying Common Shares to be issued upon automatic exercise of the Special Warrants (the "Prospectus Qualification") on or before 5:00 p.m. (EDT) on May 15, 2020 (the "Qualification Deadline"). If the Qualification Date does not occur before the Qualification Deadline, each holder of Special Warrants shall be entitled to receive, without payment of additional consideration, 1.1 Common Shares per Special Warrant.

In addition, the Company has granted the Agents an option to arrange for the sale of up to an additional 15% of the Special Warrants sold in the Offering on the same terms exercisable at any time upon the Agents providing written notice to the Company up to 48 hours prior to the closing of the Offering (the "Overallotment Option").

The Agents will be paid a cash commission equal to 6% of the gross proceeds of the Offering (including from the sale of Special Warrants issued pursuant to the exercise of the Overallotment Option), but excluding gross proceeds from subscribers on the President's List (as defined herein) (the "Commission") plus the number of broker warrants ("BrokerWarrants") equal to 6% of the number of Special Warrants sold under the Offering. Each Broker Warrant is exercisable for Common Shares at the Offering Price for two years from the Closing Date. In addition the Agents will be paid a cash commission equal to 1% of the gross proceeds from subscribers introduced to the Offering by the Company (the "President's List"), up to maximum proceeds of $7.5 million (the "President's List Commission") plus the number of Broker Warrants equal to 1% of the number of Special Warrants sold to subscribers under the President's List, each exercisable for Common Shares at the Offering Price for two years from the Closing Date (the "President's List Broker Warrants").

It is a condition of the Offering that certain members of senior management of the Company and the Board will enter into lock-up agreements ("Lock-up Agreements") for a period of 120 days from the Closing Date prohibiting their disposition of securities of the Company subject to certain exceptions. The Company will also use commercially reasonable efforts to procure Lock-up Agreements from security holders of the Company that own more than 10% of the issued and outstanding Common Shares.

Closing of the Offering is expected to occur on or about April 14, 2020 or such date as the Company and the Agents may agree (the "Closing Date") and is subject to regulatory approval including that of the TSX Venture Exchange (the "TSXV").

The Special Warrants will be offered by way of private placement in Ontario and such other provinces and territories of Canada as may be agreed to by the Agents and the Company and may be offered in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the "US Securities Act"), and applicable state securities laws, and certain other jurisdictions outside of Canada and the United States, all as agreed to by the Company and the Agents.

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 Special Warrants 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.

The Special Warrants and the Common Shares issuable thereunder have not been, nor will they be, registered under the US Securities Act and such securities may not be offered or sold within the United States, or to or for the account or benefit of U.S. persons, absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements. This press release does not constitute an offer of Special Warrants or Common Shares for sale, nor a solicitation for offers to buy such securities.

PharmaCielo Adjusts Operations to Support Colombian Government's COVID-19 Mitigation Efforts

In addition, PharmaCielo announces adjustments to the operations of PharmaCielo Colombia Holdings S.A.S. ("PharmaCielo Colombia") in its Rionegro, Colombia complex. The measures are in support of President Duque and the Colombian government's proactive COVID-19 mitigation efforts and to protect the health and safety of PharmaCielo's staff and the community. The new workplace procedures reflect the Colombian government's nation-wide essential business policy (Decree 457), that came into effect at 12:00 am on March 25 requiring certain quarantining measures (the "Decree"). All agronomic operations at the greenhouses, lab and processing facility that include breeding, tissue culture, propagation, cultivation, harvest, drying, separation and storage continue to operate. Operations are being carried out in rotating shifts with reduced staff and onsite adjustments to enable the important practice of social distancing. While PharmaCielo Colombia is excluded from the Decree, PharmaCielo Colombia has voluntarily temporarily ceased cannabis processing, at the processing facility and temporarily halted construction of the processing and extraction center. PharmaCielo will maintain this routine until April 13th and as long as the Decree is in effect. Additionally, current international border shutdowns are affecting international shipping to various markets and the Company is assessing the impact of potential delays in both equipment import and product export.

ABOUT PHARMACIELO

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, headquartered at its nursery and propagation centre located in Rionegro, Colombia.

The boards of directors and executive teams of both PharmaCielo and PharmaCielo Colombia 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.

"Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release."

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may", "will", "expect", "believe", "intends", "likely", or other words of similar effect may indicate a "forward looking" statement. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the Company's publicly filed documents (available on SEDAR at www.sedar.com). Forward looking statements in this press release include those relating to the size of the Offering, the exercise of the Overallotment Option by the Agents, the expected timing of operation of the processing facility and its monthly capacity, the use by the Company of the net proceeds of the Offering, the timing of the automatic exercise of the Special Warrants, obtaining a receipt for a final short form prospectus, that holders of Special Warrants may be entitled to receive, without payment of additional consideration, 1.1 Common Shares per Special Warrant in certain circumstances, the payment of Commission and President's List Commission and the issuance of Broker Warrants and President's List Broker Warrants to the Agents, the estimated timing of the Closing Date, the entering into of Lock-up Agreements, the approval of the Offering by the TSXV, the timing of continued reduced operations of PharmaCielo Colombia and the Company's ongoing assessment of the impact of delays relating to equipment import and product export. 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, that the size of the Offering may change given current market uncertainties related to COVID 19 and other related factors, that operations at the processing facility could continue to be negatively impacted by disruptions related to COVID 19 and these disruptions could have an impact on the Company's ability to produce its cannabis products and generate revenue, that necessary regulatory approvals including the approval of the TSXV may not be obtained in relation to the Offering, that the Closing Date may be later than anticipated due to unforeseen market events thereby requiring the Company to issue additional Common Shares to holders of the Special Warrants and further diluting current shareholders of the Company, that the Company may face logistical challenges and delays relating to importing equipment it needs for its operations and exporting its products for sale in other countries, 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.

Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward looking statements in this press release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

SOURCE PharmaCielo Ltd.

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