Mr. John McMullen reports

LGC CAPITAL ANNOUNCES AGREEMENT TO ACQUIRE A SIGNIFICANT INTEREST IN FULLY LICENCED EUROPEAN PHARMACEUTICAL COMPANY, FREIA FARMACEUTICI SRL

LGC Capital Ltd. has entered into an investment agreement to acquire a 35-per-cent equity interest in the hemp-focused Italian pharmaceutical company, Freia Farmaceutici Srl.

Freia's market presence

Freia was established in 2009 and is currently the only company in Italy, and one of the few in Europe, to have developed and marketed hemp-based pharmaceutical products authorized by the Italian Ministry of Health.

Freia currently owns two patents, has filed five patent applications and is in the process of completing six additional applications. Currently Freia has six registered pharmaceutical drug products in the market intended for patients on radio and chemotherapy treatment, suffering from atopic dermatitis and psoriasis, and from dysmetabolism (hypercholesterolemia, diabetes and endocrine dysfunction). Freia's product pipeline includes six products already authorized in the nutrition and topical fields, eight further products have been authorized in the gynecological field and are to be launched in 2019, another nine products are awaiting authorization and 12 products are in the development stage in the areas of gastroenterology and nutrition. A special research project also involves an application for use in the treatment of multiple sclerosis. Since its establishment the company has been conducting several clinical trials in the above therapeutic areas.

Since June, 2014, Freia has conducted market tests in Italy through medical information activities (multimandated agents) to validate the true value of the products and their therapeutic potential.

Financial performance

In 2017, Freia achieved sales of $740,00 and earnings before interest, taxes, depreciation and amortization of $265,000 (36-per-cent EBITDA margin) which was achieved with an initial suite of authorized drugs in the market. In 2018, with the addition of further authorized drugs to Freia's portfolio, sales levels increased by 74 per cent to $1.29-million and EBITDA grew to $280,000 (22-per-cent EBITDA margin). In 2019, Freia will be focusing on expanding its business nationally and internationally through the sales of increased volumes of existing drugs and the rollout of a further eight authorized drugs into the market.

The transaction

LGC and Freia's existing shareholders have entered into an investment agreement whereby LGC will acquire a 35-per-cent equity interest in Freia for a total cash consideration of $4,847,033 to be paid in three instalments over the course of 10 months.

The investment agreement contains standard representations, warranties and covenants of the parties, and closing of the transaction is subject to standard closing conditions and final acceptance by the TSX Venture Exchange. LGC has also appointed members to Freia's board of directors.

Mazen Haddad, chief executive officer of LGC, stated: "We believe our partnership with Freia is very strategic having access to an EU pharma company provides significant future leverage. For example this relationship can facilitate access to medicinal cannabis licensing. Currently, the business has excellent growth prospects which the LGC team can help fulfill. Freia will be core to LGC's pharma strategy building a portfolio of medicines that can fully bring cannabis health benefits from belief to clinically trialed, statistics-based foundations that doctors can rely on. Despite many anecdotal examples of cannabis being effective medicinally the greater medical community is still seeking statistics-based information to give more proof and confidence of these benefits. In fact, we are seeing rapid adoption of Freia's medicines explicitly because they are providing doctors with fact-based findings from their clinical trials in a traditional manner which doctors respect.

About LGC Capital Ltd.

LGC Capital is a leading cannabis investment firm with a focus on the legal global cannabis market. Through its growing portfolio of investment companies, LGC is building a transversal integrated organization of interconnected legal cannabis companies with cultivation, processing and distribution in Australia, Jamaica, Switzerland, Italy and Canada serving domestic and export markets.

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