PharmaCielo Ltd. today announced the closing of its previously announced private placement offering of subscription receipts co-led by Echelon Wealth Partners Inc., Cormark Securities Inc. and GMP Securities L.P., for aggregate gross proceeds of approximately $39.2 million.

“The PharmaCielo team has made substantial progress over the past 10 months,” said Anthony Wile, CEO of PharmaCielo. “With 200,000 CBD-dominant plants currently being harvested and processed, 45,000 THC-dominant plants under cultivation, 15 million square feet² of available cultivation capacity and an expanding base of medical clinics across the country, we believe PharmaCielo is the dominant player in Colombia’s rapidly growing cannabis sector. The closing of the Offering substantially advances the Company’s current business plan. It enables PharmaCielo to expand its active cultivation footprint and complete the construction and commercial commissioning of its downstream processing facility, with a target of beginning the commercial sale of cannabis oil extracts in the first half of 2019. The Company is also in active negotiations to enter additional prospective markets and with a sustainable, low-cost, scalable cultivation and production model, PharmaCielo has the capacity to grow rapidly and generate significant value for shareholders.”

The Offering

Gross proceeds raised pursuant to the Offering were $39,273,443.60. Pursuant to the closing of the first tranche of the Offering on June 22, 2018 and June 26, 2018, PharmaCielo issued and sold an aggregate 9,289,202 Subscription Receipts at a price of $3.35 per Subscription Receipt for gross proceeds of $31,118,826.70. Pursuant to the closing of the second tranche of the Offering on July 26, 2018, PharmaCielo issued and sold an aggregate 2,434,214 Subscription Receipts at the Offering Price for gross proceeds of $8,154,616.90.

The Offering was conducted in connection with the previously announced proposed business combination between AAJ Capital 1 Corp. and PharmaCielo, that is intended to constitute AAJ’s “Qualifying Transaction” pursuant Policy 2.4 of the TSX Venture Exchange. In connection with the Proposed Transaction, AAJ’s name will be changed to “PharmaCielo Corporation”, subject to regulatory and board approval.

The Offering was conducted pursuant to an agency agreement dated June 22, 2018 among PharmaCielo, AAJ and the Co-Lead Agents. Each Subscription Receipt entitles the holder thereof to receive, upon satisfaction of the Escrow Release Conditions (as defined below) on or before the Escrow Release Deadline (as defined below), and without payment of additional consideration, one common share in the capital of PharmaCielo. Each PharmaCielo Share shall be exchanged, without further consideration, for one common share in the capital of the Resulting Issuer upon the completion of the Proposed Transaction.

The gross proceeds of the Offering, net of: (i) the Co-Lead Agents’ reasonable costs and expenses at the time of closing of the First Tranche and the Second Tranche and (ii) 50% of the Co-Lead Agents’ cash compensation (consisting of commission and corporate finance fees), are being held in escrow pursuant to the terms of a subscription receipt agreement dated June 22, 2018 between PharmaCielo, AAJ, the Co-Lead Agents and TSX Trust Company, as registrar and subscription receipt agent for the Subscription Receipts and as escrow agent for the Escrowed Funds. Upon satisfaction or waiver of the escrow release conditions including, among other things, the satisfaction or waiver of all conditions precedent to the completion of the Proposed Transaction, each Subscription Receipt will automatically convert without any further action on the part of the holder into a Resulting Issuer Share, and the Escrowed Funds, together with any interest earned thereon, will be released to the Resulting Issuer (and the Co-Lead Agents in respect of the remaining cash compensation, corporate finance fees, and expenses) in accordance with the terms set out in the Subscription Receipt Agreement. The Co-Lead Agents were also issued compensation options in connection with services provided to the Company relating to the Offering. Additional details of the Offering are available in the previous joint press release of AAJ and PharmaCielo dated April 23, 2018, available on AAJ’s profile in SEDAR at www.sedar.com.

In the event that the Escrow Release Conditions are not satisfied or are incapable of being satisfied on or before September 30, 2018, or such later date as may be established in accordance with the Agency Agreement, the Escrowed Funds, as well as any accrued interest earned thereon (less any applicable withholding taxes), will be returned to purchasers of the Subscription Receipts, and outstanding Subscription Receipts will then be cancelled.

Upon completion of the Proposed Transaction and satisfaction or waiver of the Escrow Release Conditions, PharmaCielo expects to use the net proceeds of the Offering to construct facilities necessary for the production and processing of medicinal cannabis extracts and oils, and general corporate purposes. Management will have discretion with respect to the use of proceeds of the Offering and there may be circumstances where a reallocation of funds from the expected use of proceeds may be necessary for sound business reasons.

Corporate Update

PharmaCielo is currently harvesting its first scale crop of 200,000 CBD-dominant plants, and expanding CBD-dominant plants under cultivation through continued planting. The Company is also currently processing the harvested plants and producing cannabis oil extracts.

On July 30^th, PharmaCielo Colombia Holdings S.A.S., the wholly owned subsidiary of PharmaCielo, began planting THC-dominant cannabis under quota from the Colombian government. PharmaCielo Holdings was the first recipient of a license to cultivate THC-dominant strains and produce THC-focused cannabis oil extracts. PharmaCielo has planted 45,000 THC-dominant cannabis plants to date.

GMP¹ Oil Processing Facility

PharmaCielo is currently producing CBD-focused cannabis oil extracts. With the closing of the Offering, the Company believes it will be able to complete the construction of its oil processing facility and expects to begin the commercial-scale production and sale of both CBD-focused and THC-focused cannabis oil extracts during the first half of 2019.

Clinic Roll-Out Through UBIQUO

The Company entered into a binding letter of intent to acquire UBIQUO, Colombia’s only medical patient and e-clinic platform. UBIQUO currently has 80,000 patients on its platform in its home base of Medellin. Part of the proceeds of the Offering will be applied to adding clinics in seven additional Colombian jurisdictions, which is expected to significantly grow UBIQUO’s patient base, beginning in late 2018/early 2019.

¹ GMP (Good Manufacturing Practices) as defined by the World Health Organization (WHO) Expert Committee on Specifications for Pharmaceutical Preparations

² 15 million square feet comprised of: 1.3 million square foot, nursery & propagation center (Company-owned); 0.4 million square feet of open air greenhouses owned by the Company with indigenous growers; and 13.3 million square feet of open-air greenhouse capacity accessed through contract growers.

About PharmaCielo

PharmaCielo Ltd. is a private company headquartered in Canada, with a focus on processing and supplying 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, has built a compelling business plan focused on supplying the international marketplace.

About AAJ

AAJ is a capital pool company formed under the TSXV capital pool company program.