Mr. Hugh Rogers reports

XPHYTO THERAPEUTICS ANNOUNCES STRATEGIC SUPPLY, IMPORT AND DISTRIBUTION AGREEMENT FOR THE GERMAN CANNABIS MARKET

Xphyto Therapeutics Corp. has signed a three-year definitive supply, import and distribution agreement with Pharmacielo Ltd.

Pharmacielo is a global company, headquartered in Canada, with a focus on ethical and sustainable processing and supplying of all natural, medicinal-grade cannabis oil extracts and related products to international markets. Pharmacielo's principal (and wholly owned) subsidiary, Pharmacielo Colombia Holdings SAS, is headquartered at its nursery and propagation centre located in Rionegro, Colombia.

Xphyto has prioritized near-term revenue generation by way of import and distribution of medical cannabis products into Germany as a key corporate initiative for 2020 and beyond. Pursuant to the agreement and subject to all necessary regulatory approvals, Xphyto plans to commence the commercial import of cannabis oils and isolates in mid-2020 with a three-year minimum sales target of approximately 30,000 kilograms for a full range of extracted products including 99 per cent pure cannabidiol and THC (tetrahydrocannbinol) isolates, broad spectrum CBD oils, and full spectrum THC oils.

"Xphyto is extremely pleased with its new and growing relationship with Pharmacielo. There are clear synergies between our businesses. In our estimation, Pharmacielo is one of the highest quality large-scale producers in the world combining an industry-leading cost per gram with global good agricultural practice (GAP) and ISO 9001:2015 certifications that are difficult for large-scale producers to achieve," said Hugh Rogers, chief executive officer of Xphyto. "Xphyto looks forward to working with Pharmacielo as a preferred supplier for our European import and distribution business and to supply premium oils and isolates for our innovative medical cannabis products, such as oral films, transdermal patches and topical treatments."

Pursuant to the agreement, Pharmacielo has agreed to purchase, on a private placement basis, the principal amount of $500,000 of unsecured convertible debentures of the company and 500,000 common share purchase warrants. The debentures will bear interest from the date of issuance at a rate of 8.0 per cent per annum, payable semi-annually, and will mature on the date that is two years from the date of issuance. The debentures will be convertible at the option of the holder into 500,000 common shares of the company at any time prior to maturity. Conversion of the debentures may be forced in part or in whole at the option of the company if the 15-day volume-weighted average price of the company's common shares on the Canadian Securities Exchange exceeds $2.50 per share. The warrants are exercisable by the holder into common shares of the company at a price of $1.50 per share for a period of two years from the date of issuance. The use of proceeds from the debentures is to facilitate European imports by way of expanded EU GMP lab processing and storage capacity, associated regulatory compliance, and product development and manufacturing, as well as general working capital.

Also pursuant to the agreement, the company has issued Pharmacielo an additional 500,000 common share purchase warrants exercisable by the holder into common shares of the company at a price of $2 per share for a period of two years from the date of issuance.

Pharmacielo has agreed to subscribe for a minimum of $500,000 out of the total maximum debenture financing of up to $2-million as set out in a price reservation filed with the Canadian Securities Exchange on Jan. 9, 2020. All securities issued pursuant to the agreement are subject to CSE approval and a four-month hold period from the closing date in accordance with applicable securities laws.

About Xphyto Therapeutics Corp.

Xphyto is a next-generation cannabis company focused on formulation, clinical validation and European imports, distribution and sales. Xphyto's 100-per-cent-owned subsidiary, Vektor Pharma TF GmbH, a German narcotics manufacturer, importer and researcher, has expertise in the design, testing and manufacture of thin film drug delivery systems, particularly transdermal patches and sublingual (oral) strips. Vektor also holds a number of narcotics licences issued by the German Federal Institute for Drugs and Medical Devices (BfArM), including import and manufacturing permits, as well as EU GMP lab certification. Xphyto's 100-per-cent-owned German subsidiary, Bunker Pflanzenextrakte GmbH, has been granted a unique German cannabis cultivation and extraction licence for scientific purposes by BfArM.

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