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CS MEDICA A/S: Notice of Extraordinary General Meeting

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The shareholders of CS MEDICA A/S ("CS MEDICA" or the "Company") are hereby notified of an Extraordinary General Meeting that will be held on Friday the 14th of April 2023 at 15:00 at TEAMS. Shareholders will be entitled to vote by submitting postal vote forms prior to the meeting. Information about the resolutions passed at the meeting will be made public after the extraordinary general meeting has been held.

Registration
The registration date is 7th of April 2023. Only those who are shareholders on this date can participate and vote at the extraordinary general meeting.

To obtain access to the general meeting and thus be able to participate and vote at the general meeting, a shareholder must, no later than 2 days before the general meeting, request an admission card, cf. section 5.9 of the articles of association. Such a request must be made to Sanne Holte, e-mail sh@cs-medica.com. The request must be received no later than 7th of April 2023, at 11.59 PM (CET). A shareholder also has the possibility of requesting an admission card for a proxy holder who attends the general meeting by meeting on behalf of the shareholder. The request must be made according to the same above guidelines. The shareholder must fill in and sign the proxy and postal voting form, enclosed as schedule 1 which can also be found on the Company's website www.cs-medica.com. The proxy must bring the admission card and the original form to the general meeting.

Participation
To be entitled to participate in the general meeting, shareholders whose shares are registered in the name of a nominee must temporarily re-register their shares in their own names in the share register. Such registration must be duly affected in the share register the 7th of April 2023 and the shareholders must therefore advise their nominees well in advance of such date.

The shareholders have the right to ask questions in relation to the issues on the agenda to be discussed at the general meeting. The questions can be made in writing before the general meeting or at the general meeting. The answer will - with the limitations that follow from the legislation - if possible be made at the general meeting or made available to the shareholders no later than two weeks after the general meeting.

All material mentioned in this notice can be obtained from Sanne Holte, e-mail sh@cs-medica.com. The material will only be forwarded by e-mail, and thus the e-mail address must be specified.

The total number of votes as of the date of this notice is 12,322,635.

Proposed agenda

  1. Election of chairman of the meeting
  2. Proposal to approve to complete a cash capital increase (direct issue) of 2,132,954 new shares at a price of DKK 28.13 per share without pre-emption right for the existing shareholders. If certain conditions are not met, the share price will be reduced to DKK 14,065. The capital increase is subscribed by Inner Mongolia RongShi Hi-Tech Co., Ltd.(RongShi), following the signing of an Investment Agreement. RongShi undertakes to invest up to 60,000,024 DKK corresponding to 14.76% of CS MEDICA 's outstanding shares on a non-diluted basis. The shares are subscribed with a nominal value of DKK 0.065 for and a nominal amount of DKK 138,642.
  3. Authorization for the board of directors to issue the shares covered by sec. 2 above on the terms described in sec. 2. The authorization is valid for a period of five years from the date of the extraordinary general meeting. The authorization shall be adopted in the Company’s articles of association. 
  4. Any other business.


Re 2. Proposal to approve to complete a cash capital increase (direct issue) of 2,132,954 new shares at a price of DKK 28.13 per share without pre-emption right for the existing shareholders. If certain conditions are not met, the share price will be reduced to DKK 14,065. The capital increase is subscribed by Inner Mongolia RongShi Hi-Tech Co., Ltd.(RongShi), following the signing of an Investment Agreement. RongShi undertakes

The capital increase is divided into two tranches each of DKK 30M.

  1. The first tranche, 50% of Investment Amount, will be paid by the Investor by subscribing 1,066,477 new shares in the Company by cash contribution of DKK 30,000,012 corresponding to a 7.38% ownership.

This tranche is subject to the registration and approval of 3-5 of the CANNASEN CBD products by the China National medical Products Administration.[1]

  1. The second tranche, 50% of capital increase, will be paid by the RongShi by subscribing 1,066,477 (making a total of 2,132,954 shares) in the Company by cash contribution of DKK 30,000,012 whereby theRongShi’s ownership percentage is increased by 7.38% to 14.76%.

The second tranche is subject to CS MEDICA reaching a revenue of minimum DKK 62.4M in the 12-month period following the payment of the first tranche. If CS MEDICA doesn’t reach this revenue, 1,066,477 of new shares will be issued to RongShi at a share price of DKK 0,00 (zero), resulting in a net average share price for the total investment of DKK 14,065.

Motivation for the directed share issue to RongShi
The investment agreement with RongShi is entered into in conjunction with the establishment of a joint venture (JV) between RongShi and CS MEDICA.  The JV will be a production company facilitating the production and delivery of the CANNASEN® product line to the Asian market. (India excepted)

The subscription price of DKK 28,13 per share has been determined based on a yearlong due diligence and negotiation between the Company and RongShi.  The Shares are proposed issued to fulfill the Investment Agreement with Inner Mongolia RongShi Hi-Tech Co., Ltd.(“’RongShi”) As joint venture partners it has been paramount for both parties that RongShi also becomes shareholder in CS MEDICA at a valuation the parties believe represent a fair value of the company, which at a share price of 28.13 corresponds to DKK 347 million

CS MEDICA will in the JV, deliver all knowhow related to the acquisition and installation of the production line, as well as product related quality assurance according to GMP & ISO 13485 and approvals associated to the ongoing production. Furthermore, CS MEDICA will deliver all product and production instructions related to the ongoing production.

RongShi will be responsible for the funding related to the purchasing of land, building construction, equipment, and the installation of the production lines including gel line, patch line and inhaler line in Erdos High Tech Zone. After finalizing the installation, the JV will be responsible for the ongoing production processes according to instructions from CS MEDICA.  Furthermore, RongShi will handle all coordination with and approvals by legal authorities related to the product line installation and commissioning.  

RongShi will also ensure that the JV utilizes the maximum benefits from Erdos High Tech Zone.  The JV will be the third pharmaceutical company located in the bio-Pharmaceutical part of Hi-Tech industry park of Erdos Hi-Tech Zone and will receive different types of the policy supports from Erdos Hi-Tech Zone, such as technology project funding, patent funding, 5 years free tax, 3 years free-office and apartments,  in the beginning of JV.

The JV is registered with the name RongShi Medica (Ordos) Ltd., with a registered capital of 50 million[2] CNY (DKK 50,4 million). “RongShi Medica (Ordos) Co., Ltd.” ownership is divided with 51% to RongShi and 49% to CS MEDICA.

It is expected that the establishment of the production facilities will take around 2 years. In the period until completion, the JV will sell the CANNASEN® product line on the Asian market.

Additional terms
The investment agreement with RongShi include the following additional terms;

  • The Investor shall be entitled to nominate one member of the Boards of Directors for election if the Board of Directors is comprised of up to 7 members, and the Investor shall be entitled to nominate two members of the Boards of Directors for election if the Board of Directors is comprised of 8-9 members. This requirement ceases to exist if RongShi’s ownership is reduced by 66,67%.

According to the current AOA of CS MEDICA, the board of directors consists of not less than four and not more than eight members elected by the general meeting.  Currently the board comprises of four members.

  • RongShi shall be entitled to nominate one member to patriciate in the Company's management, which is already implemented by the employment of our Asian Director, LongLong Guo (Harry), who will be responsible for the Asian Market.
  • If CS MEDICA issues additional shares in the 3 years following tranche one RongShi shall be kept non-diluted, meaning addition shares shall be issued with a share price of DKK 0,00 (zero) as a compensation up against the following share prices.
  • First year following tranche one - DKK 28.13
  • Second year following tranche one - DKK 68.40
  • Third Year 3 following tranche one – DKK 132,40
  • CS MEDICA shall send the application for Nasdaq Main Market from Spotlight Stock market before 2025.
  • The Founders of CS MEDICA, undertake not to directly or indirectly sell or transfer any of their shares in the Company until 36 months from the date of the investment agreement.
  • RongShi are free to sell or transfer their shares in CS MEDICA on the public marketplace after 24 months lockup period, calculated from the payment date of the transfer of tranche 2.
  • While the Founders are shareholders in the Company and for a period of 24 months after ceasing to be shareholders, the Founders are obliged not to be engaged, or hold any financial interest, whether directly or indirectly, in any kind of activity that is, directly or indirectly, in competition with the activities that are carried out by the Company at the time of the end of ownership.

The issue costs relating to the capital increase is expected to be approximately DKK 50,000.


EGM - Date and time
April 14, 2023, from 15:00-17:00 p.m. CET

TEAMS link
Registration for EGM  sh@cs-medica.com.

Power of Attorney
Schelldule 1  >>

CS MEDICA A/S
On behalf of the board of directors
Jørgen Flemming Ladefoged, Chairman

[1] Approval by China National medical Products Administration - CS MEDICA is in process with the registration of the CANNASEN® CBD medical device products by the China National Medical Administration. In October 2022, a Beijing company had received the registration approval from Beijing Medical Products Administration for their two products including CBD component classified Class I of Medical Device. One product is “Liquid Dressing” with the registration approval number 20200018. And another is “Medial Cold Paste” with the registration approval number 20200019. Our products such as, Psoriasis gel, Wound Gel and Nasal gel, similar with the Liquid Dressing. Our patch and Arthritics gel are similar with the Medical Cold Paste. Both products were approved as a class 1 medical device within 3 months.  CS MEDICA expect a corresponding classification and approval time. Hence, the company believe it can reach the Clause of the tranche one, within 3 months.

[2] JV registration capital is 50M Chinese currency. Based on the Chinese company law, the registration capital will be injected within 20 years. In the first General Meeting we discussed with RongShi who will help CS MEDICA to inject 49% of total registration capital in the beginning. CS MEDICA will gradually repay this 49% of total registration capital using our profit from JV within 20 years.

 

For more information about CS MEDICA, please contact:
Gitte Lund Henriksen, CFO
Phone: + (45) 2774 2280
Email: glh@cs-medica.com
Website: https://www.cs-medica.com/

CS MEDICA A/S is a Danish-based MedTech company operating within research, development, manufacturing, commercializing, and a part of the pharmaceutical industry. The company combines science and nature with the purpose of creating products for a better every day by using modern technology to research and utilize different compounds found in the cannabis plant. CS MEDICA offers efficient, safe OTC alternative treatments for autoimmune and stress-related disorders under the trademark CANNASEN® or own label options.

The company is listed on Spotlight Stock Market in Stockholm (symbol: “CSMED”). more information, visit cs-medica.com, and LinkedIn.

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