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PharmaCielo Ltd. (OTCQX:PCLOF) (TSXV:PCLO) provided a corporate update, regarding progress against the efficiency initiatives it began to implement in mid-2021, which are designed to accelerate the company's path to profitability. The company also announced its intention to amend existing warrant terms, and issue shares for debt.
Efficiency Initiatives and Issuance of Shares for Debt
PharmaCielo has initiated steps, which it expects will result in a reduction of its annualized fixed costs by approximately 25% compared to 2022. These efficiencies will be achieved by outsourcing certain production processes, eliminating unnecessary legacy costs, such as its Medellin corporate office, as well as by voluntary salary reductions and headcount reductions. The company also announced that, to pay a portion of the severance costs, estimated to not exceed CA$450,000 ($337,000), it intends to issue, subject to the approval of the TSX Venture Exchange, up to 1.55 million common shares of the company, at an effective price to be determined based on a 10-day volume weighted average price at the time of issuance.
The payment shares will be issued in reliance on certain prospectus exemptions available under securities legislation and will fall within the four-month plus one day statutory hold period.
Amendment of Warrant Terms
PharmaCielo has applied to the TSXV to amend the terms of 2.82 million common share purchase warrants of the company that were issued pursuant to the non-brokered private placement of debenture units over multiple closings. The warrants currently have an exercise price of C$1.44 per common share and will expire on December 24, 2024. The purpose of the proposed amendments is to reduce the exercise price of the warrants from CA$1.44 to CA$0.65 per common share, and add an acceleration clause. In accordance with the terms of the warrant indenture under which the warrants were issued, the amendments must be approved by the holders of the outstanding warrants. Therefore, in order to give effect to the amendments, the company will be promptly seeking the written consent of the holders of warrants to such amendments.
Subject to the approval of the TSXV, the warrant terms will include an amended clause whereby, if for any 10 consecutive trading days during the unexpired term of the warrants, the closing price of the common shares on the TSXV is equal to or greater than CA$1.00, the expiry date will be accelerated to 30 calendar days. All other terms and conditions of the warrants remain the same. The amended warrant terms remain subject to the final acceptance of TSXV.
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