Mr. Nicholas Kadysh reports

PHARMALA EXECUTES BINDING LETTER OF INTENT FOR FORMATION OF SPECIAL PURPOSE VEHICLE TO DEVELOP PATENTED NOVEL MDXX MOLECULE APA-01

Pharmala Biotech Holdings Inc. has executed a binding letter of intent with a strategic partner, Aluvaris Inc., for the formation and operation of a special-purpose vehicle for the clinical and regulatory development of APA-01 (also known as Pharmala-1), the company's patented novel MDXX molecule.

APA-01 is (R)-2-[(2H-1,3-benzodioxol-5-yl)methyl]pyrrolidine, a novel molecule protected by U.S. patent No. 12,042,478, with potential therapeutic applications in the treatment of psychological trauma and neurological conditions, including traumatic brain injury and stroke. APA-01 is part of Pharmala's broader portfolio of novel MDXX class molecules being developed alongside its lead drug candidate, ALA-002, through its Phenesafe.AI drug discovery platform.

Transaction overview

Under the terms of the binding LOI, Pharmala and Aluvaris have agreed to form an SPV for the purpose of advancing APA-01 through clinical and regulatory development. The key terms of the arrangement are as follows.

Intellectual property licence

Pharmala will seed the SPV with a global exclusive licence to its APA-01 intellectual property portfolio, including all patents, patent applications worldwide, research data and related know-how). The licence will be granted on a conditional basis, and will become final and irrevocable upon the SPV's strategic partner meeting the financing threshold.

Capital commitment

Aluvaris has committed to securing seed capital for the SPV. The financing threshold is a critical condition for the finalization of the Pharmala IP licence.

Licence fee

Upon the SPV completing a financing event that satisfies the financing threshold, the SPV will pay to Pharmala a one-time fee in consideration for the Pharmala IP licence. The licence fee is payable within 30 days of the closing of the financing threshold.

Royalty: In addition to the licence fee, the SPV and any future assignees of the Pharmala IP will pay to Pharmala a perpetual royalty of 3 per cent on net sales of any product incorporating or derived from APA-01.

Contract research organization services

The SPV has retained an experienced contract research organization, Diteba Inc., to manage the advancement of APA-01 through the clinical and regulatory stages of development. Diteba is a Canadian leader in complex analytical and bioanalytical testing, licensed by Health Canada and registered with Food and Drug Administration as a drug establishment and also licensed to handle controlled drugs and substances. Diteba has exceptional capabilities in GLP drug investigations, and will provide analytical and scientific services to the SPV, leveraging its capabilities in complex analytical and bioanalytical testing under GLP and GMP standards.

Good faith negotiation and break fee

Both parties are bound to negotiate diligently and in good faith toward the execution of a definitive agreement. Either party that withdraws from negotiations will pay the other party a break fee.

Timeline

The parties have agreed to complete due diligence and execute a definitive agreement by June 8, 2026, subject to extension by mutual written agreement. Completion of the definitive agreement is subject to customary closing conditions, including satisfactory completion of due diligence by both parties and receipt of all requisite board, shareholder and regulatory approvals.

Management commentary

"This binding LOI represents a significant milestone in Pharmala's strategy of creating value from our intellectual property portfolio beyond LaNeo MDMA and ALA-002," said Nicholas Kadysh, chief executive officer of Pharmala Biotech. "APA-01 is a molecule with compelling therapeutic potential and significant regulatory upside noted in the executive order signed by President Donald Trump on April 18. By partnering with a strategic counterparty that brings capital to the SPV, Pharmala can advance APA-01 while allowing us to devote our resources to our core business assets. The retainer of Diteba by the SPV facilitates the clinical development of APA-01 without diverting Pharmala management and science resources from the development of the balance of its intellectual property portfolio. The terms and structure of the SPV ensure that Pharmala and its shareholders can participate meaningfully in the upside of APA-01's development while allowing us to maintain our focus and resources on our core LaNeo MDMA business and ALA-002 clinical program."

Strategic rationale

The SPV structure is designed to advance APA-01 through clinical and regulatory development without diluting Pharmala's existing capital resources or diverting management attention from its core business.

About Pharmala Biotech Holdings Inc.

Pharmala is a biotechnology company focused on the research, development and manufacturing of MDXX class molecules, including MDMA. Pharmala was founded with a dual focus: to alleviate the global backlog of generic, clinical-grade MDMA to enable clinical trials and commercial sales in selected jurisdictions, and to develop novel drugs in the same class. Pharmala is the only company currently provisioning clinical-grade MDMA for patient treatments outside of clinical trials. Pharmala's research and development unit has completed proof-of-concept research into several IP families, including ALA-002, its lead drug candidate. Pharmala is a regulatory first organization, formed under the principle that true success in the psychedelic industry will only be achieved through excellent relationships with regulators.

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