PharmaCielo Ltd. 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 https://bit.ly/2wy4fNs.
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.
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.