Mr. Francois Roberge reports

LSL PHARMA GROUP ANNOUNCES CLOSING OF SECOND TRANCHE OF CONVERTIBLE DEBENTURES OFFERING

LSL Pharma Group Inc. has closed the second tranche of its brokered private placement through the issuance of 99,500 unsecured convertible debentures at a price of $10 per debenture for gross proceeds of $995,000.

Together with the first-tranche closing proceeds of $2,293,000 announced on Nov. 1, 2023, LSL Pharma Group has now raised total gross proceeds of $3,288,000 under the offering out of a maximum of $5-million (assuming the full exercise of the agent option to increase the size of the offering by up to $1-million). The net proceeds of the offering will be used for working capital, capital expenditures and for general corporate purposes.

The offering was led by iA Capital Markets as sole agent and sole bookrunner. In connection with the second tranche of the offering, the company paid to the agent a cash commission of $62,150 and issued 88,785 broker warrants. The broker warrants are exercisable to acquire one Class A share of the company at a price of 70 cents for a period of 24 months from the date of issuance. The company and the agent are dealing at arm's length.

All securities issued pursuant to the second tranche of the offering are subject to the applicable statutory hold period of four months and one day from Dec. 8, 2023. The offering is subject to the final approval of the TSX Venture Exchange.

As announced in its press release dated Nov. 1, 2023, the company has received conditional approval to list the debentures on the TSX-V after the expiry of each applicable hold period. The debentures are expected to trade under the symbol LSL.DB. The listing of the debentures is subject to final approval by the TSX-V at the time of listing and the company fulfilling the requirements as outlined in Policy 2.8 of the TSX-V's policies.

Each debenture will, at the option of the holder, be convertible in its entirety into Class A shares of the capital stock of the company at any time prior to the close of business on the earlier of: (i) the last business day immediately preceding the maturity date; and (ii) the date fixed for redemption, at a conversion price of 70 cents per Class A share, subject to adjustment in certain events.

The debentures will, subject to any prior conversion or redemption, mature on Oct. 31, 2028, and are payable on the maturity date in cash. The outstanding principal amount will bear interest at the rate of 11.00 per cent (the base rate) per year, payable in cash semi-annually on the last day of April and October of each year, with the first interest payment to be paid on Oct. 31, 2024. Interest will accrue from Nov. 1, 2023 (the initial closing date), up to the first interest payment date at the base rate, compounding semi-annually on the last day of April and October of each year.

The annual interest rate will be recalculated twice every year on April 30 and Oct. 31 of each year, starting April 30, 2025, until the maturity date, and shall be equal to the base rate less 100 basis points (1.0 per cent) for each business objective (as defined as follows) achieved (the amended base rate). Upon achievement of a business objective, the amended base rate will be effective as of the following interest payment date of the debentures (after April 30, 2025) until the next interest payment date thereafter if business objective 3 (as defined as follows) is achieved or until the maturity date if business objective 1 or 2 (as defined as follows) is achieved.

Business objectives:

1. The obtention by the company of FDA (U.S. Food and Drug Administration) approval for its Steri-Med plant (one-time business objective);
2. The completion by the company of the acquisition of a business that: (1) complements the company's existing product offering and/or creates synergies with the company's existing business operations; and (2) generated a minimum of $5-million in revenue during the last-12-month period preceding the acquisition (one-time business objective);
3. The company generates a minimum of $30-million of revenue with a 20-per-cent EBITDA (earnings before interest, taxes, depreciation and amortization) margin during the fiscal period preceding the interest rate review date (annual business objective); with respect to (3), the company's financial performance and revenue shall be calculated based on its audited financial statements and the company's EBITDA margin shall be calculated as EBITDA (not adjusted EBITDA), as calculated in its audited financial statements, divided by its revenue.

If, at any time following the date that is 24 months from the initial closing date, for the preceding 20 consecutive trading days: (i) the daily volume-weighted average trading price of the Class A shares on the TSX-V is greater than 175 per cent of the conversion price; and (ii) the average daily volume of the Class A shares traded on the TSX-V is no less than the number obtained when dividing the number of shares issued upon conversion of the total amount of debentures outstanding by 20, the company will have the option to convert all of the principal amount outstanding of the debentures at the conversion price with at least 30 days of prior written notice.

Multilateral Instrument 61-101

Under the second tranche of the offering, Francois Roberge, president and chief executive officer of the company, subscribed directly for an aggregate principal amount of $85,000 of debentures, which are convertible for up to a potential 133,571 Class A shares, in the case of a redemption and conversion of the debentures at 110 per cent of the principal amount prior to the fourth anniversary of the initial closing date. Its current shareholding on an undiluted basis remains unchanged at 27.61 per cent (increases from 30.82 per cent to 30.93 per cent on a partly diluted basis, assuming the aforementioned conversion and the conversion of his other convertible securities). Such transaction is a related party transaction as defined under MI 61-101. The transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as the company is listed on the TSX-V and the fair market value of any security issued to, or the consideration paid, does not exceed 25 per cent of the company's market capitalization. The company did not file a material change report pertaining to the insider's interest more than 21 days before the closing of the offering as the details of this insider's participation had not been confirmed at that time. The board members of the company reviewed the state of the financial market and unanimously determined that the terms and conditions of the offering, including the subscription of the related party, were fair and equitable and represented the best strategic financing option available. In addition, neither the company nor the said related party has knowledge of any material information concerning the company or its securities that has not been generally disclosed.

About LSL Pharma Group Inc.

LSL Pharma Group is a Canadian integrated pharmaceutical company specializing in the development, manufacturing and distribution of high-quality natural health products and dietary supplements in solid dosage forms as well as high-quality sterile ophthalmic pharmaceutical products.