PharmaGap Reaches Agreement with Debenture Holders to extend Maturity Date

    OTTAWA, Aug. 31 /CNW Telbec/ - PharmaGap Inc. (TSX-V: GAP) ("PharmaGap"
or "the Company"), a Canadian biotechnology company developing novel compounds
to treat cancer, today announced that it has reached agreement with holders of
its Series 2 and 3 Convertible Secured Debentures ("Debentures"), which
matured on August 26, 2007, to extend the maturity date of the debentures by
18 months to February 26, 2009.
    Robert McInnis, President and C.E.O. of PharmaGap, said: "This extension
provides PharmaGap with the time necessary to complete our program currently
underway to generate full value from our drug development technology and lead
drug compound, PhG-alpha-1. While this program has taken a full year longer
than expected, our confidence level in our technology and in PhG-alpha-1 has
never been higher. The agreement of our debenture holders and our Board
indicate that they share this confidence."
    A total of $3,297,223 in principal and interest was due on August 26,
    The Debentures are convertible into equity units of PharmaGap consisting
of one common share and one common share purchase warrant. In return for the
granting of the extension of the maturity date, the conversion price of the
Debentures will be reduced from Thirty or Thirty-two and one half Cents ($0.30
and $0.325) to Seventeen and One Half Cents ($0.175), and the warrant exercise
price of the Series 2 and 3 Debentures will be reduced from Forty-Five or
Forty-Eight and three quarters Cents ($0.45 or $0.4875) to Twenty-Six and One
Quarter Cents ($0.2625).
    At the revised conversion price and warrant exercise price, the
Debentures (excluding interest accruing in the future at 10% per annum) are
convertible into 18,841,274 common shares and the same number of warrants.
Following conversion of all debentures, total shares outstanding would be
47,715,071 (76,455,522 following full warrant exercise). The Debentures
following conversion represent an ownership interest of 39% (49% assuming full
warrant exercise).
    SC Stormont Holdings Inc. ("Stormont"), a company controlled by Roderick
M. Bryden, Chairman of PharmaGap, holds Debentures with total value on
August 26, 2007 of $2,923,028. Following conversion of the Debentures, and
conversion of $261,726 Series 1 Convertible Secured Promissory Notes at the
same conversion price, Stormont would hold 39% of shares outstanding (48.1%
assuming full warrant exercise).
    PharmaGap's Board of directors (the "Board") has considered the related
transaction between PharmaGap and Stormont and the Board (and separately, the
independent members of the Board comprising an Independent Committee to review
and provide guidance to the Board) determined that the related transaction is
exempt from the valuation and minority voting requirements of Ontario
Securities Commission Rule 61-501 pursuant to section 5.5 paragraph 8 and
section 5.7 paragraph 6 of Rule 61-501
    The agreement is subject to final approval by the TSX Venture Exchange.

    About PharmaGap Inc.

    PharmaGap Inc. (TSX-V: GAP), based in Ottawa, ON, is a biotechnology
company with a core focus on developing novel therapeutic compounds for the
treatment of cancer. PharmaGap's research platform targets cellular signaling
pathways controlled by protein kinase C (PKC) isoforms. PharmaGap's lead drug
compound, PhGalpha1, is in preclinical development. The Company's strategy is
to out-license drug compounds to larger life sciences companies at the
preclinical stage. For more information please visit the Company's website at

    Note: The TSX Venture Exchange does not accept responsibility for the
    adequacy or accuracy of this release.  No Securities Commission or other
    regulatory authority having jurisdiction over PharmaGap has approved or
    disapproved of the information contained herein.  This release contains
    forward-looking statements that may not occur or may change materially.

For further information:

For further information: relating to this release: Robert McInnis,
President & CEO, (613) 990-9551,

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