Mr. Francois Roberge reports

LSL PHARMA GROUP EXPANDS ITS ACTIVITIES BY ACQUIRING DERMOLAB PHARMA AND ANNOUNCES THE CLOSING OF A CONCURRENT DEBT FINANCING

LSL Pharma Group Inc. has acquired Dermolab Pharma Ltd., a contract manufacturing company specializing in the manufacturing of liquid and semi-solid products, based in Ste-Julie, Que. This acquisition increases LSL Pharma's contract development and manufacturing activities, while creating synergies with its other subsidiaries, LSL Laboratory Inc., Steri-Med Pharma Inc. and Virage Sante Inc. LSL Pharma also announced the closing of a $2-million concurrent debt financing. The closing of the transaction occurred after markets had closed on Dec. 17, 2024.

Details about the Dermolab transaction

The total consideration for the transaction includes: (i) the renewal of Dermolab's operating line of credit and term loan totalling a maximum of $3-million; and (ii) a cash payment of $955,000 on closing. The cash portion of the purchase price was financed by the proceeds of the concurrent debt financing and will be subject to postclosing adjustments. For the 12-month period ended on Aug. 31, 2024, Dermolab generated net earnings and net earnings before interest, taxes, depreciation and amortization (EBITDA) of nil and $500,000, respectively, from revenues of $10.1-million. As at Aug. 31, 2024, Dermolab had total assets of $7.9-million and liabilities of $5.3-million, including bank loans totalling $2.7-million. The acquisition is expected to boost LSL Pharma's revenues by approximately 40 per cent for the upcoming fiscal year. The acquisition is also expected to broaden Dermolab's customer base, which will benefit from the LSL Group's expanded service offering. Robert Boisvert, Dermolab's prior president, has been retained for an interim period to ensure a smooth transition.

"We are excited about the opportunity to add Dermolab to our contract manufacturing division. This acquisition fits with LSL Pharma's growth strategy of diversifying its service offering and increasing its manufacturing capabilities to better serve the pharmaceutical sector, as well as to expand our activities to the cosmetic market," said Francois Roberge, president and chief executive officer.

"By leveraging the management talent and expertise of its seasoned staff, we expect Dermolab to operate as a standalone entity as part of our group. We look forward at the opportunity to continue building Dermolab into a dominant player in the development and manufacturing of high-quality creams and liquids for the Canadian, U.S. and European pharmaceutical and cosmetic markets. Finally, we are especially thankful for the support of the departing president, Robert Boisvert, who has been at the helm of the corporation for the last 20 years," concluded Mr. Roberge.

About the financing

Concurrent to the transaction, LSL Pharma successfully completed a $2-million note offering. Of such notes, $1-million results from the amendment of an existing note entered into on Nov. 19, 2024, with a non-related party, as disclosed in the corporation's Nov. 25, 2024, news release. The notes are unsecured, bear interest at a blended rate of 13 per cent and mature on Jan. 1, 2028. Two million warrants were issued in connection with the notes, with each warrant entitling the holder, subject to adjustments in certain cases, to purchase one common share of the corporation at a price equal to the greater of: (i) 70 cents; or (ii) the closing price of the LSL Pharma shares on Dec. 20, 2024, for a period of 36 months following the closing of the financing. The notes may be redeemed by the corporation at any time on or after Jan. 1, 2026.

The purpose of the financing was to support growth initiatives, such as the Dermolab acquisition, by strengthening LSL Pharma's working capital.

Each warrant and warrant share will be subject to a four-month hold period under the applicable securities laws. The financing is subject to the TSX Venture Exchange's approval. There were no finders involved with the financing.

A corporation controlled by Luc Mainville, executive vice-president and chief financial officer of the corporation, contributed an amount of $1-million into the financing. The participation of the insider in the financing and the issuance of warrants to the insider constitute related party transactions as defined under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions. The corporation is exempt from the need to obtain a formal valuation and minority shareholder approval, as required by MI 61-101 in respect of such insider participation the financing, since the notes are deemed to create a new loan, and such loan is on reasonable commercial terms that are not less advantageous to the corporation than if the loan was obtained from a person dealing at arm's length with the corporation. Furthermore, the loan is not convertible, directly or indirectly, into equity or voting securities of the corporation or a subsidiary, or otherwise participating in nature, or repayable, as to principle or interest, directly or indirectly, in equity or voting securities of the corporation or a subsidiary. The corporation is also exempt from the need to obtain a formal valuation and minority shareholder approval for the issuance of warrants to the insider because the fair market value of the warrants does not exceed 25 per cent of the corporation's market capitalization. A material change report in respect of these related party transactions will be filed by the corporation.

Appointment of Guy Paul Allard

The corporation also announced today the appointment of Mr. Allard as vice-president, legal affairs and corporate secretary. A seasoned lawyer specializing in corporate and securities law for over 25 years, Mr. Allard has practised in national and global law firms, and has previously held similar executive in-house positions in the pharmaceutical industry. "The corporation's growth requires the addition of specialized legal resources internally and we are pleased to welcome Guy Paul in our management team," said Mr. Roberge.

About Dermolab Pharma Ltd.

Founded in 1985, Dermolab operates a 50,000-square-foot plant, employs 85 staff and specializes in the development, manufacturing and packaging of liquid and semi-solid cosmetic, pharmaceutical and natural health products. The corporation serves both the Canadian and international markets, and its manufacturing operations meet the U.S. Food and Drug Administration (FDA) and Health Canada standards.

About LSL Pharma Group Inc.

LSL Pharma is a Canadian integrated pharmaceutical corporation specializing in the development, manufacturing and commercialization of high-quality sterile ophthalmic pharmaceuticals, as well as natural health products in solid and liquid dosage forms.

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