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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNITED STATES<br/>
SECURITIES AND EXCHANGE COMMISSION<br/>
WASHINGTON, D.C. 20549</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric> <b>REGISTRATION STATEMENT PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric> <b>ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the Fiscal Year Ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric> <b>TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the transition period from __________ to
___________</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric> <b>SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of event requiring this shell company report
______________</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Commission file number <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-38354</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="-sec-ix-hidden: hidden-fact-0">PROCAPS GROUP, S.A.</span></b></span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Exact name of Registrant as specified in its charter)</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Not Applicable</b></span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Translation of Registrant&#8217;s name into English) </span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grand Duchy of <ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode">Luxembourg</ix:nonNumeric></b></span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Jurisdiction of incorporation or organization)</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><b>Ruben Minski</b></ix:nonNumeric></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">9 rue de Bitbourg</ix:nonNumeric></ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">L-1273</ix:nonNumeric></ix:nonNumeric></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Luxembourg</ix:nonNumeric></ix:nonNumeric></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>Grand Duchy of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry"><ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">Luxembourg</ix:nonNumeric></ix:nonNumeric></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>R.C.S. 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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Securities registered pursuant to Section 12(b)
of the Act:</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 36%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title of each class</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 28%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of each exchange in which registered</b></span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c2" name="dei:Security12bTitle"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary Shares, U.S.$0.01 nominal value per share</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><ix:nonNumeric contextRef="c2" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PROC</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The <ix:nonNumeric contextRef="c2" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Stock Market LLC</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: White"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c3" name="dei:Security12bTitle"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Warrants</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c3" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PROCW</span></ix:nonNumeric></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The <ix:nonNumeric contextRef="c3" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Stock Market LLC</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Securities registered pursuant to Section 12(g)
of the Act: </b>None</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: </b>None</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate the number of outstanding shares of
each of the issuer&#8217;s classes of capital or common stock as of the close of the period covered by the annual report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><span style="text-decoration:underline"><ix:nonFraction contextRef="c4" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">112,824,183</ix:nonFraction> Ordinary Shares, as of December
31, 2022</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><span style="text-decoration:underline">23,375,000 Warrants to purchase Ordinary Shares,
as of December 31, 2022</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#9744; Yes &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#9744; Yes &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> &#9744; No</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (&#167;232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> &#9744; No</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of &#8220;large
accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer &#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 33%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Accelerated filer</ix:nonNumeric> &#9746;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 33%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-accelerated filer &#9744;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany">&#9746;</ix:nonNumeric></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards&#8224; provided pursuant to Section 13(a) of the Exchange
Act. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityExTransitionPeriod">&#9744;</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">&#8224;</td><td style="text-align: justify">The term &#8220;new or revised financial accounting standard&#8221;
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
has filed a report on and attestation to its management&#8217;s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. &#9744;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant&#8217;s
executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif"> <td style="text-align: center; font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 26%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S. GAAP &#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="text-align: center; font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 46%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="-sec-ix-hidden: hidden-fact-1">International Financial Reporting Standards</span> as issued<br/> by the International Accounting Standards Board &#9746;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="text-align: center; font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 26%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other &#9744;</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If &#8220;Other&#8221; has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#9744; Item 17 &#9744; Item 18</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). &#9744; Yes <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric> No</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt; text-transform: uppercase"><b>TABLE
OF CONTENTS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FREQUENTLY USED TERMS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">ii</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING
    STATEMENTS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">v</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CERTAIN CONVENTIONS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">x</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CURRENCY PRESENTATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">x</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRESENTATION OF FINANCIAL INFORMATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">x</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRESENTATION OF INDUSTRY AND MARKET DATA</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">xi</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td colspan="2">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 8%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 1.</span></td>
    <td style="width: 83%"><a href="#a_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
    AND ADVISERS</span></a></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 8%; text-align: center">1</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 2.</span></td>
    <td><a href="#a_008"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OFFER STATISTICS AND EXPECTED TIMETABLE</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 3.</span></td>
    <td><a href="#a_009"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">KEY INFORMATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 4.</span></td>
    <td><a href="#a_010"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMPANY INFORMATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">34</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 4A.</span></td>
    <td><a href="#a_011"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">UNRESOLVED SEC STAFF COMMENTS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">60</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 5.</span></td>
    <td><a href="#a_012"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OPERATING AND FINANCIAL REVIEW AND PROSPECTS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">60</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 6.</span></td>
    <td><a href="#a_013"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">92</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 7.</span></td>
    <td><a href="#a_014"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">101</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 8.</span></td>
    <td><a href="#a_015"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL INFORMATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">105</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 9.</span></td>
    <td><a href="#a_016"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THE OFFER AND LISTING</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">106</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 10.</span></td>
    <td><a href="#a_017"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADDITIONAL INFORMATION</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">106</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 11.</span></td>
    <td><a href="#a_018"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING
    MARKET RISK</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">120</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 12.</span></td>
    <td><a href="#a_019"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">121</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 13.</span></td>
    <td><a href="#a_020"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">121</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 14.</span></td>
    <td style="vertical-align: bottom"><a href="#a_021"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MATERIAL MODIFICATIONS
    TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">121</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 15.</span></td>
    <td><a href="#a_022"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CONTROLS AND PROCEDURES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">122</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16.</span></td>
    <td><a href="#a_023"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">RESERVED</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16A.</span></td>
    <td><a href="#a_024"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AUDIT COMMITTEE FINANCIAL EXPERT</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16B.</span></td>
    <td><a href="#a_025"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CODE OF ETHICS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16C.</span></td>
    <td><a href="#a_026"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRINCIPAL ACCOUNTANT FEES AND SERVICES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16D.</span></td>
    <td><a href="#a_027"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">125</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16E.</span></td>
    <td><a href="#a_028"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">125</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16F.</span></td>
    <td><a href="#a_029"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT.</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">125</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16G.</span></td>
    <td><a href="#a_030"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CORPORATE GOVERNANCE</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">125</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 16H.</span></td>
    <td><a href="#a_031"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MINE SAFETY DISCLOSURE</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16I.</span></td>
    <td><a href="#a_032"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
    INSPECTIONS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 17.</span></td>
    <td><a href="#a_033"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 18.</span></td>
    <td><a href="#a_034"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 19.</span></td>
    <td><a href="#a_035"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">EXHIBITS</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_036"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SIGNATURES</span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">129</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 3; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>FREQUENTLY
USED TERMS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In this Annual Report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;1915 Law&#8221; means
the Luxembourg law of August 10, 1915 on commercial companies, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Adjusted EBITDA&#8221;
means EBITDA further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs
incurred in connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination,
certain costs related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance
costs and other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Annual Report&#8221;
means this annual report on Form 20-F for the fiscal year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Board of Directors&#8221;
means the board of directors of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Business Combination&#8221;
means the transactions consummated pursuant to the Business Combination Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Business Combination
Agreement&#8221; means the Business Combination Agreement, dated as of March 31, 2021, as amended on September 29, 2021, by and among
Union, Crynssen, the Company and Merger Sub.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Closing&#8221; means
the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Closing Date&#8221;
means September 29, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Code&#8221; means
the Internal Revenue Code of 1986, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Company&#8221; means
Procaps Group, S.A., a public limited liability company (<i>soci&#233;t&#233; anonyme</i>) governed by the laws of the Grand Duchy
of Luxembourg, having its registered office at 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg, and registered with
the Luxembourg Trade and Companies&#8217; Register (<i>Registre de Commerce et des Soci&#233;t&#233;s, Luxembourg</i>) under number
B 253360.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;COVID-19&#8221; means
the novel coronavirus known as SARS-CoV-2 or COVID-19, and any evolutions, mutations thereof or related or associated epidemics, pandemic
or disease outbreaks.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Crynssen&#8221; means
Crynssen Pharma Group Limited, a private limited liability company registered and incorporated under the laws of Malta and, particularly,
the Companies Act Cap. 386 with company registration number C 59671.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#8220;Crynssen Ordinary Shares&#8221;
means ordinary shares of Crynssen, with a nominal value of $1.00 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Crynssen Shareholders&#8221;
means the shareholders of Crynssen prior to the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Deseja&#8221; means
the Deseja Trust, a trust organized under the laws of the State of Delaware and a Crynssen Shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;EBITDA&#8221; means
profit (loss) for the year before interest expense, net, income tax expense and depreciation and amortization.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Exchange Act&#8221;
means the Securities Exchange Act of 1934, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;FDA&#8221; means the
United States Food and Drug Administration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;GAAP&#8221; means
generally accepted accounting principles in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 4; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->ii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;IASB&#8221; means
the International Accounting Standards Board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;IFC&#8221; means the
International Finance Corporation, an international organization established by Articles of Agreement among its member countries, and
a Crynssen Shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;IFC Redemption Agreement&#8221;
means that certain Share Redemption Agreement entered into by and between the Company and IFC on March 31, 2021, and subsequently amended
on September 29, 2021, pursuant to which the Company agreed to redeem 4,500,000 Redeemable B Shares from IFC for a total purchase price
of $45,000,000 in accordance with the terms thereunder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;IFRS&#8221; means
the International Financial Reporting Standards, as issued by the IASB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;IPO&#8221; means Union&#8217;s
initial public offering of units, consummated on October 22, 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;INVIMA&#8221; means the Colombian <i>Instituto Nacional de Vigilancia
de Medicamentos y Alimentos</i> (National Food and Drug Surveillance Institute).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;JOBS Act&#8221; means
the U.S. Jumpstart Our Business Startups Act of 2012, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Merger&#8221; means
the merging of Merger Sub with and into Union pursuant to the laws of the Cayman Islands, with Union surviving the Merger as a wholly
owned subsidiary of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Merger Effective Time&#8221;
means the time at which the merger certificate was filed on September 29, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Merger Sub&#8221;
means OZLEM Limited, an exempted company incorporated under the laws of the Cayman Islands with registration number 373625.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Nasdaq&#8221; means
The Nasdaq Stock Market LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Nomination Agreement&#8221;
means that certain nomination agreement by and among the Company, certain Crynssen Shareholders and the Sponsors dated September 29,
2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Ordinary Shares&#8221;
means the ordinary shares of the Company, nominal value $0.01 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;PIPE&#8221; means
the private placement pursuant to which the PIPE Investors purchased 10,000,000 SPAC Ordinary Shares, for a purchase price of $10.00
per share, which were converted into Ordinary Shares in connection with the Closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;PIPE Investors&#8221;
means persons that entered into Subscription Agreements with the SPAC to purchase SPAC Ordinary Shares which were subsequently converted
into Ordinary Shares in connection with the consummation of the Business Combination on the Closing Date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Redeemable A Shares&#8221;
means the redeemable A shares of the Company, nominal value $0.01 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Redeemable B Shares&#8221;
means the redeemable B shares of the Company, nominal value $0.01 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Registration Rights
and Lock-Up Agreement&#8221; means that certain registration rights and lock-up agreement entered into on September 29, 2021 by and among
the Company, the Sponsors, certain other shareholders of Union and the Crynssen Shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;SEC&#8221; means the
U.S. Securities and Exchange Commission.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Securities Act&#8221;
means the Securities Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Simphony&#8221; means
the Simphony Trust, a trust organized under the laws of the State of Delaware and a Crynssen Shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Sognatore&#8221; means
the Sognatore Trust, a trust organized under the laws of New Zealand and a Crynssen Shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;SPAC&#8221; or &#8220;Union&#8221;
means Union Acquisition Corp. II, a Cayman Islands exempted company limited by shares with registration number 345887.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;SPAC Ordinary Shares&#8221;
means the ordinary shares of Union, par value $0.0001 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;SPAC Warrants&#8221;
means warrants to purchase SPAC Ordinary Shares as contemplated under the Warrant Agreement, with each warrant exercisable for the number
of SPAC Ordinary Shares stated in the applicable SPAC Warrant at an exercise price per SPAC Ordinary Share of $11.50.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Sponsors&#8221; means
Union Group International Holdings Limited and Union Acquisition Associates II, LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Subscription Agreements&#8221;
means the subscription agreements entered into by Union and a number of qualified institutional buyers and institutional and individual
accredited investors, in connection with the execution of the Business Combination Agreement, pursuant to which such investors agreed
to purchase, and Union agreed to sell to such investors, an aggregate of 10,000,000 SPAC Ordinary Shares for a purchase price of $10.00
per share and an aggregate purchase price of $100,000,000, which SPAC Ordinary Shares were automatically converted into Ordinary Shares
upon Closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Transaction Support
Agreement&#8221; means the Transaction Support Agreement, dated as of March 31, 2021, by and among Union, Crynssen, the Company, certain
Crynssen Shareholders, the Sponsors, certain other shareholders of Union prior to the Closing of the Business Combination and certain
officers and directors of Union, as amended, modified or supplemented from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Warrant Amendment&#8221;
means that certain Assignment, Assumption and Amendment Agreement entered into on September 29, 2021 by the Company, Union and Continental
Stock Transfer &amp; Trust Company as warrant agent.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Warrant Agreement&#8221;
means the warrant agreement, dated October 17, 2019, by and between Union and Continental Stock Transfer &amp; Trust Company, as warrant
agent, governing Union&#8217;s warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#8220;Warrants&#8221; mean
the former warrants of Union converted at the Merger Effective Time into a right to acquire one Ordinary Share on substantially the same
terms as were in effect immediately prior to the Merger Effective Time under the terms of the Warrant Agreement, which was assigned to
and assumed by the Company pursuant to the Warrant Amendment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 6; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="text-transform: uppercase"><b>CAUTIONARY
STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Annual Report contains
forward-looking statements about our expectations, beliefs and intentions regarding, among other things, our products and services, development
efforts, business, financial condition, results of operations, strategies, plans and prospects. Forward-looking statements can be identified
by the use of forward-looking words such as &#8220;believe,&#8221; &#8220;expect,&#8221; &#8220;intend,&#8221; &#8220;plan,&#8221; &#8220;may,&#8221;
&#8220;should,&#8221; &#8220;could,&#8221; &#8220;might,&#8221; &#8220;seek,&#8221; &#8220;target,&#8221; &#8220;will,&#8221; &#8220;project,&#8221;
&#8220;forecast,&#8221; &#8220;continue&#8221; or &#8220;anticipate&#8221; or their negatives or variations of these words or other comparable
words or by the fact that these statements do not relate strictly to historical matters. Forward-looking statements relate to anticipated
or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters
that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to
differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual
activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but
not limited to, the factors listed below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
financial performance of Procaps following the Business Combination;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
to our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
ability to develop and launch new products and services;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
ability to successfully and efficiently integrate future acquisitions or execute on dispositions;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
availability of raw materials used in our products and our ability to source such raw materials, or find adequate substitutes, in a cost-effective
manner;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
product development timeline and estimated research and development (&#8220;R&amp;D&#8221;) costs;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">developments
and projections relating to our competitors and industry;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
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</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
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</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe these forward-looking
statements are reasonable; however, these statements speak only as of the date of this Annual Report and are subject to known and unknown
risks, uncertainties and other factors that may cause our or our industry&#8217;s actual results, levels of activity, performance or
achievements to be materially different from those anticipated by the forward-looking statements. We discuss these risks in this Annual
Report in greater detail under Item 3.D. &#8220;Risk Factors.&#8221; Given these uncertainties, you should not rely upon forward-looking
statements as predictions of future events.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless required by law, we
undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or developments
or otherwise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 7; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of a number of
known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied
by these forward-looking statements. Some factors that could cause actual results to differ include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    applicable laws or regulations;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">any identified material
    weaknesses in our internal control over financial reporting which, if not corrected, could adversely affect the reliability of our
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the effects
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the ability to implement
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    failure or delay in the development of new pharmaceutical products and the costs involved;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk that delays in
    regulatory reviews and approvals of new products could delay our ability to market such products, and that post-approval requirements,
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    and materialize acquisition opportunities;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk associated with
    fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active pharmaceutical
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->vi<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk of disruption
    at any of our manufacturing facilities or disruption of the relationship with our key customers;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risks associated with
    exchange rate volatility of the currencies in which we do business;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk of any breach,
    disruption or misuse of our, or our external business partners&#8217;, information systems or cyber security efforts;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk of changes in
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    in applicable policies regarding the healthcare industry;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk that we or our
    customers are unable to secure or protect our respective intellectual property or that we or our customers may infringe on the intellectual
    property rights of others;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the loss of customers&#8217;
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  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the possibility that we
    may be adversely affected by other economic, business, and/or competitive factors; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other risks and uncertainties
    described in this Annual Report, including those under the heading &#8220;Risk Factors&#8221; in Item 3.D of this Annual Report.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 9; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->vii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>SUMMARY
OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify">Our business is subject to numerous risks and
uncertainties, including those described in &#8220;Item 3.D&#8212;Key Information&#8212;Risk Factors&#8221; in this Annual Report. You
should carefully consider these risks and uncertainties when investing in our Ordinary Shares. The principal risks and uncertainties
affecting our business include the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            development of new pharmaceutical products is a complex, risky and lengthy process involving
                                            significant financial, research and development and other resources, which may be delayed
                                            due to various factors. Such delays can result in increased costs or the emergence of competing
                                            products, which may have a material adverse effect on Procaps&#8217; business, financial
                                            condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            is subject to strict controls on the commercialization processes for its pharmaceutical products,
                                            including their development, manufacture, distribution and marketing, which vary by country
                                            and by region. Any delays in regulatory reviews or approvals could delay Procaps&#8217; ability
                                            to market our products, which could have a material adverse effect on its business, financial
                                            condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps&#8217;
                                            future results of operations are subject to fluctuations in the costs, availability, and
                                            suitability of the components of the products it manufactures, including active pharmaceutical
                                            ingredients, excipients, purchased components, and raw materials. In addition, the COVID-19
                                            pandemic may interfere with the operations of certain of Procaps&#8217; direct or indirect
                                            suppliers or with international trade for these supplies, which could raise Procaps&#8217;
                                            costs or reduce the productivity or slow the timing of its operations, which could have a
                                            material adverse effect on its business, financial condition and results of operations,</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
                                            disruption at any of Procaps&#8217; main manufacturing facilities could materially and adversely
                                            affect its business, financial condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps&#8217;
                                            independent registered public accounting firm has included an explanatory paragraph relating
                                            to Procaps&#8217; ability to continue as a going concern in its report on Procaps&#8217;
                                            Annual Audited Consolidated Financial Statements included elsewhere in this Annual Report.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            has identified a material weakness in its internal control over financial reporting. If Procaps
                                            is unable to develop and maintain an effective system of internal control over financial
                                            reporting, it may not be able to accurately report its financial results in a timely manner,
                                            which may adversely affect investor confidence in Procaps and materially and adversely affect
                                            its business and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            is an international company with operations primarily in Latin America and is subject to
                                            the market risks of the countries in which it manufactures and/or sells its products, and
                                            to risks associated with foreign exchange rates.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            Procaps does not enhance its existing products and services, or introduce new technology
                                            or service offerings in a timely manner, its products and services may become uncompetitive
                                            over time, or customers may not buy its products or buy less of them, which could have a
                                            material adverse effect on Procaps&#8217; business, financial condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            demand for OTC products may be impacted by changes in consumer preferences. If Procaps is
                                            unable to adapt to these changes, it may lose market share and its net sales may be negatively
                                            impacted, which could have a material adverse effect on Procaps&#8217; business, financial
                                            condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps&#8217;
                                            business depends upon certain customers for a significant portion of its sales, therefore,
                                            a disruption of Procaps&#8217; relationship with these customers or any material adverse
                                            change in these customers&#8217; businesses could have a material adverse effect on Procaps&#8217;
                                            business, financial condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            depends on key personnel to operate and grow its business and to develop new and enhanced
                                            offerings and technologies and the loss of, or the failure to attract and retain, such key
                                            personnel could adversely affect its operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            may be unable to identify acquisition opportunities and successfully execute and close acquisitions,
                                            which could limit its potential for growth.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            may not be able to realize the benefits of business acquisitions and divestitures it enters
                                            into, including being unable to successfully and efficiently integrate acquisitions or execute
                                            on dispositions, which could have a material adverse effect on its business, financial condition
                                            and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            demand for Procaps&#8217; iCDMO services depends in part on its customers&#8217; research
                                            and development and the clinical and market success of their products. In the event Procaps&#8217;
                                            customers spend less on, or are less successful in, these activities for any reason, including
                                            as a result of decrease in spending due to the COVID-19 pandemic or recessionary economic
                                            conditions caused in whole or in part by the pandemic, Procaps&#8217; business, financial
                                            condition, and results of operations may be materially adversely affected.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><!-- Field: Page; Sequence: 10; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->viii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            participates in a highly competitive market, and increased competition may adversely affect
                                            its business, financial condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
                                            in market access or healthcare reimbursement for, or public sentiment towards Procaps, or
                                            its customers&#8217;, products in Latin America, the United States and other countries in
                                            which Procaps operates, or other changes in applicable policies regarding the healthcare
                                            industry, could adversely affect Procaps&#8217; financial condition and results of operations
                                            by affecting demand for Procaps&#8217; products and services.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            illegal trade in pharmaceutical products, including counterfeiting, theft and illegal diversion,
                                            is widely recognized. Public loss of confidence in the integrity of pharmaceutical products
                                            as a result of illegal trade could materially adversely affect Procaps&#8217; reputation,
                                            financial condition and results of operation.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            and its customers depend on patents, copyrights, trademarks, know-how, trade secrets, and
                                            other forms of intellectual property protections, but these protections may not be adequate.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps&#8217;
                                            products and services, or its customers&#8217; products, may infringe on the intellectual
                                            property rights of third parties and any such infringement could have a material adverse
                                            effect on Procaps&#8217; business.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
                                            significant portion of medication on the market, including Procaps&#8217;, is subject to
                                            price control regulations. This control may limit Procaps&#8217; margins and its ability
                                            to pass on cost increases to its customers, which could have a material adverse effect on
                                            Procaps&#8217; business, financial condition and results of operations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            may be held liable if a consumer has an adverse health reaction to a product it sells or
                                            manufactures.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            is subject to product and other liability risks that could exceed its anticipated costs or
                                            adversely affect its results of operations, financial condition, liquidity, and cash flows.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Failure
                                            to comply with existing and future regulatory requirements could adversely affect Procaps&#8217;
                                            business, financial condition and results of operations, or result in claims from customers.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps&#8217;
                                            global operations are subject to economic, political, and regulatory risks, including the
                                            risks of changing regulatory standards or changing interpretations of existing standards
                                            that could affect its financial condition and results of operation or require costly changes
                                            to its business.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Procaps
                                            is subject to governmental export and import controls that could impair its ability to compete
                                            in international markets and subject it to liability if Procaps is not in compliance with
                                            applicable laws.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>CERTAIN
CONVENTIONS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company was incorporated
under the laws of the Grand Duchy of Luxembourg on March 29, 2021. The Company owns no material assets other than its direct ownership
of the issued share capital in Crynssen, a private limited liability company registered and incorporated under the laws of Malta. Except
where the context otherwise requires or where otherwise indicated, all references to &#8220;Procaps,&#8221; &#8220;we,&#8221; &#8220;us&#8221;
and &#8220;our&#8221; refer to the Company and its consolidated subsidiaries, as well as those businesses we account for using the equity
method.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Trademarks and Trade Names</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Annual Report contains
references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred
to in this Annual Report, including logos, artwork and other visual displays may appear without the &#174; or TM symbols, but such references
are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their
rights thereto. We do not intend our use or display of other companies&#8217; trade name or trademarks to imply a relationship with,
or endorsement or sponsorship of us by, any other companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>CURRENCY
PRESENTATION</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In this Annual Report, unless
otherwise specified or the context otherwise requires:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;U.S.$&#8221;,
    &#8220;$&#8221; and &#8220;U.S. dollar&#8221; each refers to the United States dollar;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;COP&#8221;
    and &#8220;Colombian Peso&#8221; refers to the Colombian peso, the lawful currency of Colombia; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Reais&#8221;,
    &#8220;R$&#8221; and &#8220;Brazilian Real&#8221; refers to the Brazilian real, the lawful currency of Brazil.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have translated some of
the local currency amounts contained in this Annual Report into U.S. dollars for convenience purposes only. The U.S. dollar-equivalent
information presented in this Annual Report is provided solely for convenience and should not be construed as implying that the amounts
represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain numbers and percentages
included in this Annual Report have been subject to rounding adjustments. Accordingly, figures shown for the same category presented
in various tables or other sections of this Annual Report may vary slightly, and figures shown as totals in certain tables may not be
the arithmetic aggregation of the figures that precede them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>PRESENTATION
OF FINANCIAL INFORMATION</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Annual Report contains
the annual audited consolidated financial statements of Procaps Group, S.A. as of December 31, 2022 and 2021, and for the years ended
December 31, 2022, 2021 and 2020 (the &#8220;Annual Audited Consolidated Financial Statements&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Annual Audited Consolidated
Financial Statements have been prepared in accordance with the IFRS as issued by the IASB and in its presentation currency of the U.S.
dollar.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Annual Audited Consolidated
Financial Statements are presented in U.S. dollars. Our fiscal year ends on December 31 of each year. Accordingly, all references to
a particular year are to the year ended December 31 of that year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Non-IFRS Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management uses certain
non-IFRS financial information to assess our operating performance across periods and for business planning purposes. We believe the
presentation of these non-IFRS financial measures is useful to investors as it provides additional information to facilitate comparisons
of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency
on how we evaluate our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We use non-IFRS financial
measures to budget, make operating and strategic decisions, and evaluate our performance. Below is a description of the non-IFRS financial
measures we have used in this Annual Report, including any adjustments to the IFRS financial measures derived therefrom. We believe the
non-IFRS measures should always be considered along with the related IFRS financial measures. We have provided the reconciliations between
the IFRS and non-IFRS financial measures in Item 5.A. of this Annual Report under the heading &#8220;Operating and Financial Review and
Prospects&#8212;Operating Results&#8211;&#8211;Non-IFRS Financial Measures.&#8221;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The primary non-IFRS financial
measures utilized by our management is described below and reflects how we evaluate our current and prior-year operating results. As
new events or circumstances arise, our management may alter the definitions of such measures to better reflect our financial performance
or adopt new measures in the future. In the event any of these definitions change, or if new non-IFRS financial measures are adopted
by our management, we will provide the updated definitions and present the related non-IFRS historical results on a comparable basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Use of Constant Currency</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As exchange rates are an
important factor in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results
on a constant currency basis in addition to the IFRS reported results helps improve investors&#8217; ability to understand our operating
results and evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial information
that compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency
basis as one measure to evaluate our performance. We currently present revenue, cost of sales, gross profit, sales and marketing expenses,
administrative expenses, Contribution Margin and Adjusted EBITDA on a constant currency basis. We calculate constant currency by calculating
year-end period results using prior-period foreign currency exchange rates. We generally refer to such amounts calculated on a constant
currency basis as excluding the impact of foreign exchange. These results should be considered in addition to, not as a substitute for,
results reported in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly
titled measures used by other companies and are not measures of performance presented in accordance with IFRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information, see
the discussion on constant currency in Item 5.A of this Annual Report under the heading &#8220;Operating and Financial Review and Prospects&#8212;Operating
Results&#8211;&#8211;Non-IFRS Financial Measures&#8211;&#8211;Use of Constant Currency.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>EBITDA, Adjusted EBITDA, and Adjusted EBITDA
Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We define EBITDA as profit
(loss) for the year before interest expense, net, income tax expense and depreciation and amortization. We define Adjusted EBITDA as
EBITDA further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs incurred
in connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination, certain costs
related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance costs and
other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time. Adjusted EBITDA is one
of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance compared to other companies in
the pharmaceutical industry, as similar measures are commonly used by companies in this industry. We also report Adjusted EBITDA as a
percentage of revenue as an additional measure so investors may evaluate our Adjusted EBITDA margins on revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information and
a reconciliation of profit (loss) for the year to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, see Item 5.A of this Annual Report
under the heading &#8220;Operating and Financial Review and Prospects&#8212;Operating Results&#8211;&#8211;Non-IFRS Financial Measures&#8211;&#8211;EBITDA,
Adjusted EBITDA, and Adjusted EBITDA Margin.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Contribution Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We define Contribution Margin
as gross profit less selling expenses. Contribution Margin is one of the key performance indicators we use in evaluating our profitability.
We believe Contribution Margin is useful to investors in evaluating our operating performance compared to other companies in the pharmaceutical
industry, as similar measures are commonly used by companies in this industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information and
a reconciliation of gross profit to Contribution Margin, see Item 5.A of this Annual Report under the heading &#8220;Operating and Financial
Review and Prospects&#8212;Operating Results&#8211;&#8211;Non-IFRS Financial Measures&#8211;&#8211; Contribution Margin.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>PRESENTATION
OF INDUSTRY AND MARKET DATA</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In this Annual Report, we
rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain
economic and industry data and forecasts used in this Annual Report were obtained from internal surveys, market research, governmental
and other publicly available information and independent industry publications. Industry publications, surveys and forecasts generally
state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness
of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable, but we have not
independently verified them and cannot guarantee their accuracy or completeness.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain market share information
and other statements presented herein regarding our position relative to our competitors are not based on published statistical data
or information obtained from independent third parties, but reflects our best estimates. We have based these estimates upon information
obtained from publicly available information from our competitors in the industry in which we operate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 1.</b></span><b> IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 2.</b></span><b> OFFER
STATISTICS AND EXPECTED TIMETABLE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 3.</b></span><b> KEY
INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. Reserved</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 23.75pt; text-align: justify; text-indent: -23.75pt"><b>B. CAPITALIZATION
AND INDEBTEDNESS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. REASONS FOR THE OFFER AND USE OF PROCEEDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. RISK FACTORS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>You should carefully consider
the risks and uncertainties described below, together with the other information contained in this Annual Report, before making any investment
decision. Any of the following risks and uncertainties could have a material adverse effect on our business, prospects, results of operations
and financial condition. The market price of our Ordinary Shares and Warrants could decline due to any of these risks and uncertainties,
and you could lose all or part of your investment. The risks described below are those that we currently believe may materially affect
us.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Product Development and Manufacturing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The development of new pharmaceutical products
is a complex, risky and lengthy process involving significant financial, research and development and other resources, which may be delayed
due to various factors. Such delays can result in increased costs or the emergence of competing products, which may have a material adverse
effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We develop advanced pharmaceutical
oral delivery systems technologies primarily in the form of soft gelatin capsules (&#8220;Softgel&#8221;) that are used in the manufacturing
of prescription pharmaceutical drugs (&#8220;Rx&#8221;) and over the counter (&#8220;OTC&#8221;) pharmaceutical products, as well as
high-complexity drugs for hospital use, personal protective equipment, immunosuppressant, oncology and analgesics products and syringes,
among other products. The development of new pharmaceutical products, including our advanced oral delivery systems, is a complex, inherently
risky and lengthy process involving significant financial, R&amp;D and other resources, and may not result in a commercially viable product.
We must successfully develop, test, manufacture and launch our products as well as successfully register our products in each relevant
jurisdiction, in advance of our competitors. A project may be delayed at any stage of the process due to various factors, including failure
to obtain the required regulatory approvals for the product being developed or for its manufacturing facilities in a timely manner. Our
products currently under development, if and when fully developed and tested, may not perform as we expect, or competitors may already
occupy the market opportunity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Decisions on the launch of
a new oral delivery system and the timing of such launches are primarily driven by our R&amp;D development team. Once the development
of the product is completed and the results and appropriate documentation is submitted to the applicable health authority, investments
made in the manufacture of pre-launch product, marketing materials and sales force training, may result in additional expenses if the
product is not approved in a timely manner. Additionally, other factors such as price negotiation, large-scale natural disasters or global
pandemics, and competitor activity may significantly delay the launch of a new product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of our products must
meet and continue to comply with regulatory and safety standards and receive regulatory approvals in each of the markets in which they
are to be commercialized. If health or safety concerns arise with respect to a product, we may be forced to withdraw it from the market
and could face legal action if any harm came from the use of our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Significant delays in the
development and anticipated launch dates of new products could hinder our achievement of development targets, adversely affect the reputation
of our R&amp;D capabilities, allow our competitors to bring competing products to the market before we do, significantly reduce the return
on costs incurred in preparing for the launch of seasonal products that are launched off-season, and result in increased costs if marketing
and sales efforts need to be rescheduled, which could materially adversely affect our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, product development
requires the accurate assessment of market trends and market acceptance among consumers and the medical community, particularly physicians
and hospitals, in each of our target markets. Although hospitals often use generic products to reduce their costs, procurement departments
of hospitals may not purchase our products. Physicians may not prescribe or recommend our products to patients, and pharmacists may not
respect the prescription. Despite our track record of success in certain markets, the acceptance of any of our products among the medical
community depends upon several factors, including the reputation of the brand, the safety and efficacy of the product, the effectiveness
of our sales force, the product&#8217;s price, the product&#8217;s perceived advantages and disadvantages relative to competing products
or treatments, and the prevalence and severity of side effects. Our overall profitability depends on, among other things, our ability
to introduce new products in a timely manner, to differentiate our products with innovative formulations, to continue to manufacture
products cost-efficiently and to manage the life cycle, including market acceptance, of our product portfolio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to strict controls on the
commercialization processes for our pharmaceutical products, including their development, manufacture, distribution and marketing, which
vary by country and by region. Any delays in, or rejections of, regulatory reviews, approvals or permits could delay our ability to market
our products, which could have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to strict
controls and approvals on the commercialization processes for our pharmaceutical products, including their development, manufacturing,
distribution and marketing. The criteria for establishing safety, efficacy and quality, which are essential for securing marketing approvals,
vary by country and by region. Obtaining approval for our products and manufacturing processes requires us to submit a dossier in respect
of each international non-proprietary name (&#8220;INN&#8221;) and each formulation and dosage variation for such INN in each country
in which we wish to market such product. Regulators may delay approvals and require additional data before approval is granted, or reject
approvals requested, even though the pharmaceutical products may already be approved or launched in other countries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain factors, including
advances in science and technology, evolving regulatory science and new laws and policies, can result in delays in the approval of new
pharmaceutical products, including new advanced oral delivery systems. While we seek to manage most of these risks, unanticipated and
unpredictable policymaking by governments and regulators, limited regulatory authority resources or conflicting priorities can often
lead to delays in regulatory approvals. Any such delays in regulatory reviews and approvals could delay the marketing of our products,
resulting in increased costs as described above, which may have a material adverse effect on our business, financial condition and results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our future results of operations are subject
to fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active pharmaceutical
ingredients, excipients, purchased components, and raw materials. In addition, global supply chain crisis may interfere with the operations
of certain of our direct or indirect suppliers or with international trade for these supplies, which could raise our costs or reduce
the productivity or slow the timing of our operations, which could have a material adverse effect on our business, financial condition
and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We depend on various active
pharmaceutical ingredients, components, compounds, raw materials, and energy supplied primarily by others for our offerings. This includes,
but is not limited to, pharmaceutical and biologic ingredients, gelatin, starch, and iota carrageenan for our Softgel products, packaging
films for our Rx and OTC products, and glass vials and syringes for injectable fill-finish for certain of our Rx and Diabetrics (as defined
below) products. Also, certain of our customers provide to us their active pharmaceutical or biologic ingredient for formulation or incorporation
in the finished product and may supply other raw materials as well. It is possible that any of our or our customers&#8217; supplier relationships
could be interrupted due to changing regulatory requirements, import or export restrictions, natural disasters, international supply
disruptions, whether caused by pandemics or otherwise, geopolitical issues, operational or quality issues at the suppliers&#8217; facilities,
and other events, or could be terminated in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For example, gelatin is a
critical component in most of our Softgel products produced by our NextGel segment. Gelatin is available from only a limited number of
sources. In addition, much of the gelatin we use is bovine-derived. Past concerns of contamination from bovine spongiform encephalopathy
(&#8220;BSE&#8221;), have narrowed the number of possible sources of particular types of gelatin. If there were a future disruption in
the supply of gelatin from any one or more key suppliers, we may not be able to obtain an adequate alternative supply from our other
suppliers. If future restrictions were to emerge on the use of bovine-derived gelatin due to concerns of contamination from BSE or otherwise,
any such restriction could hinder our ability to timely supply our customers with products and the use of alternative non-bovine-derived
gelatin could be subject to lengthy formulation, testing, and regulatory approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>A disruption at any of our main manufacturing
facilities could materially and adversely affect our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our manufacturing operations
are concentrated in seven locations throughout Colombia, Brazil, El Salvador and the United States, including the first FDA-approved
pharmaceutical plant in South America and Central America and our first U.S.-based Softgel production facility and R&amp;D center which
began operations in May 2022. A significant disruption at one or more of these facilities, whether it be due to fire, natural disaster,
power loss, intentional acts of vandalism, climate change, war, terrorism, insufficient quality, cyber-attacks, or pandemic could materially
and adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, regulatory
authorities routinely inspect all of our manufacturing facilities for compliance with applicable laws, rules, regulations and practices.
If a regulatory authority were to identify serious adverse findings not corrected upon follow up inspections, we may be required to issue
product recalls, shut down manufacturing facilities, pay fines, and take other remedial actions. Also, if the lessor under any leased
facility identifies any breach thereto, it may have the right to terminate the lease in advance. If any manufacturing facility were forced
to cease or limit production, our business, financial condition and results of operations could be materially adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Our Business and Financial
Condition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our independent registered public accounting
firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our Annual Audited
Consolidated Financial Statements included elsewhere in this Annual Report.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify">Our Annual Audited Consolidated Financial Statements
were prepared assuming that we will continue as a going concern. However, the report of our independent registered public accounting
firm included elsewhere in this Annual Reports contains an explanatory paragraph on our consolidated financial statements stating there
is substantial doubt about our ability to continue as a going concern, meaning that we may not be able to continue in operation for the
foreseeable future or be able to realize assets and discharge liabilities in the ordinary course of operations. Such an opinion could
materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no
assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The perception that we
may not be able to continue as a going concern may also make it more difficult to raise additional funds or operate our business due
to concerns about our ability to meet our contractual obligations. Any inability to raise additional funds, when needed, could materially
adversely affect our business, financial condition and results of operations. For more information regarding management&#8217;s assessment
regarding its ability to continue as going concern. See &#8220;Item 5. Operating and Financial Review and Prospects&#8212;Operating Results&#8212;Going
Concern Update&#8221; and Note 2.1 Note 2.1 to our Annual Audited Consolidated Financial Statements, included elsewhere in this Annual
Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have identified material weaknesses
in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor
confidence in us and materially and adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the audit
of our Annual Audited Consolidated Financial Statements, we identified material weaknesses in our internal controls related to (i) our
manual consolidation process which lacks the appropriate internal controls to prevent or detect material misstatements in a timely manner
and to ensure that financial data recorded was complete and accurate, (ii) our information technology controls not being sufficiently
designed and implemented to address certain information technology risks, (iii) the sufficiency of technical accounting resources with
an appropriate level of technical experience required for timely and accurate financial reporting in accordance with IFRS, (iv) lack
of system controls and effective processes to ensure that all manual journal entries are properly reviewed and approved prior to posting
to the general ledger, and (v) our controls and monitoring activities not being effective to ascertain whether the components of our
internal control are present and functioning. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements
will not be prevented or detected on a timely basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our remediation activities
are ongoing, and we will continue to implement our initiatives to effectively implement our internal controls over financial reporting
and further document our policies, procedures and internal controls, including, among others, (i) implementation and deployment of a
plan for the business planning and consolidation module, which includes improving existing controls and adjusting policies and procedures
and implementing automated consolidation, (ii) design, implementation, and operation of the segregation of duties model, for which the
project is being executed with the support of an external advisor, and on ensuring the proper implementation and operation of controls,
(iii) recruiting additional personnel in our finance and accounting departments to ensure that we have a sufficient complement of personnel
with the appropriate level of knowledge and experience required for the timely and accurate financial reporting in accordance with IFRS,
(iv) designing and implementing procedures over the preparation and review of journal entries to establish that manual journal entries
are properly prepared, supported by adequate documentation, and independently reviewed and approved, and (v) implementing actions to
strengthen the monitoring activities of internal controls. However, if our remedial measures are insufficient to address the material
weaknesses, or if additional material weakness or significant deficiencies in our internal control are discovered or occur in the future,
our financial statements may contain material misstatements. If our financial statements are not accurate, investors may not have a complete
understanding of our operations. Likewise, if our financial statements are not filed on a timely basis in the future, we could be subject
to sanctions or investigations by Nasdaq, or any other stock exchange on which the Ordinary Shares are listed, the SEC or other regulatory
authorities. Either case could adversely affect investor confidence in us and materially and adversely affect our business and results
of operations. For a discussion on our remedial measures, see Item 15.B under the heading &#8220;Management&#8217;s Annual Assessment
of Internal Control Over Financial Reporting &#8211;&#8211; Remediation Efforts&#8221; in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have indebtedness, which may increase
risk to our business and your investment in us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">As of December 31, 2022,
we had $285.9 million of outstanding indebtedness, including under our Senior Notes, Syndicated Loan, and other indebtedness,
including under the Additional Loan Agreement. Our ability to make scheduled payments of the principal of, to pay cash interest on,
our indebtedness, including the Senior Notes, Syndicated Loan and Additional Loan Agreement, or to refinance such indebtedness, or
any other indebtedness we may incur, depends on our future performance, which is subject to economic, financial, competitive and
other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our
debt and make necessary capital expenditures. The NPA, Syndicated Loan and Additional Loan Agreement contain customary restrictive
covenants that limit our ability to engage in activities that may be in our long-term best interest. Those covenants include
restrictions on our ability to, among other things, incur additional debt and issue disqualified stock; create liens; pay dividends,
acquire shares of capital stock, or make certain investments; issue guarantees; sell certain assets and enter into transactions with
affiliates. The NPA, Syndicated Loan and Additional Loan Agreement also each contain certain financial ratio covenants that we must
comply with at certain measurement dates. &#160;Our failure to comply with any of those covenants could result in an event of
default which, if not cured or waived, could result in the acceleration of our debt issued under the applicable agreement. For
example, we were not in compliance with certain of these financial ratios under the NPA, Syndicated Loan and Additional Loan
Agreement as of December 31, 2022, and we entered into the Waivers where the applicable parties under the Waivers (i) waived our
noncompliance as of December 31, 2022 and (ii) agreed to prospectively waive any noncompliance&#160;with these certain financial
ratio covenants for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, if applicable, provided that we meet
certain agreed upon adjusted ratio thresholds as specified in each Waiver under the applicable financial ratio covenants. Any such
event of default or acceleration could have an adverse effect on the trading price of our Ordinary Shares. Furthermore, the terms of
any future debt we may incur could have further additional restrictive covenants. We may not be able to maintain compliance with
these covenants in the future, and in the event that we are not able to maintain compliance, we cannot assure you that we will be
able to obtain waivers from the lenders or amend the covenants. For additional details on our indebtedness and the Waivers see
&#8220;Item 5.B&#8212;Operating and Financial Review and Prospects&#8212;Liquidity and Capital Resources&#8212;Debt Financing and
Borrowings.&#8221;</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are unable to generate
such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional
debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will
depend on the capital markets, contractual restrictions and our financial condition at such time. We may not be able to engage in any
of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition,
any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our
failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration
of our debt.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we do not enhance our existing products
and services, or introduce new technology or service offerings in a timely manner, our products and services may become uncompetitive
over time, or customers may not buy our products or buy less of them, which could have a material adverse effect on our business, financial
condition and results of operations.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The healthcare industry is
characterized by rapid technological change. Demand for our Rx and OTC pharmaceutical products, Diabetrics products and services, and
our integral contract development and manufacturing organization (&#8220;iCDMO&#8221;) services may change in ways we may not anticipate
because of evolving industry standards as well as a result of evolving customer needs that are increasingly sophisticated and varied
and the introduction by others of new offerings and technologies that provide alternatives to our products and services. To the extent
that such technologies are protected by patents, their related offerings may become subject to competition as the patents expire. Without
the timely introduction of enhanced or new products and services, and technologies, our offerings may become uncompetitive over time,
in which case our revenue and operating results would suffer. For example, if we are unable to respond to changes in the nature or extent
of the technological or other needs of our pharmaceutical customers through enhancing our pharmaceutical products and services offerings,
our competition may develop offerings that are more competitive than ours and we could find it more difficult to renew or expand existing
agreements or obtain new agreements. Potential innovations intended to facilitate enhanced or new offerings generally will require a
substantial investment before we can determine their commercial viability, and we may not have financial resources sufficient to fund
all desired innovations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The success of enhanced or
new pharmaceutical products and services will depend on several factors, including our ability to:</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">properly
anticipate and satisfy customer needs, including increasing demand for lower cost products;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">enhance,
innovate, develop, and manufacture new offerings in an economical and timely manner;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">differentiate
our products and services from competitors&#8217; offerings;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">achieve
positive clinical outcomes for our and our customers&#8217; new products;</span></td>
</tr></table><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">meet
safety requirements and other regulatory requirements of governmental agencies;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtain
valid and enforceable intellectual property rights; and</span></td>
</tr></table><div>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">avoid
infringing the proprietary rights of third parties.</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if we succeed in creating
enhanced or new pharmaceutical products and services from these innovations, they may still fail to result in commercially successful
offerings or may not produce revenue in excess of the costs of development, and they may become uncompetitive due to changing customer
preferences or the introduction by our competitors of offerings embodying new technologies or features. Finally, innovations may not
be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice, the need for regulatory
clearance, and uncertainty over market access or government or third-party reimbursement.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The demand for OTC products may be impacted
by changes in consumer preferences. If we are unable to adapt to these changes, we may lose market share and our net sales may be negatively
impacted, which could have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Consumer preferences related
to health concerns may change, which could negatively impact demand for our OTC products or cause us to incur additional costs to change
our OTC products or product packaging. The success of certain our OTC products such as gastrointestinal, skin care and vitamins, minerals
and supplements, is dependent on the continued growth in demand for overall health related products. If demand for products in this category
decreases, our financial condition and results of operations would be negatively impacted.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, our OTC consumer
products customers may request changes in packaging to meet consumer demands, which could cause us to incur inventory obsolescence charges
and redesign costs, which in turn could negatively impact our results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be unable to identify acquisition
opportunities and successfully execute and close acquisitions, which could limit our potential for growth.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have made several acquisitions
in recent years, such as the U.S.-based Softgel production facility and R&amp;D center located in West Palm Beach, Florida we acquired
in January 2022, and expect to actively seek new acquisitions that management believes will provide meaningful opportunities for growth
by increasing our existing capabilities and expanding into new areas and markets of operations. However, we may not be able to identify
suitable acquisition candidates or complete acquisitions on acceptable terms and conditions. For example, on May 16, 2022, the Company
entered into a definitive agreement to acquire Grupo Somar (including Grupo Farmac&#233;utico Somar, S.A.P.I de C.V., Qu&#237;mica
y Farmacia S.A. de C.V., Gelcaps Exportadora de Mexico S.A. de C.V. and related entities) which acquisition (the &#8220;Acquisition&#8221;)
was terminated following its failure to close by December 31, 2022.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other companies in our industry
have similar investment and acquisition strategies to ours, and competition for acquisitions may intensify. If we are unable to identify
acquisition candidates that meet our criteria, or complete acquisitions on acceptable terms and condition, our potential for growth may
be restricted. Additionally, because we may pursue acquisitions around the world and may actively pursue a number of opportunities simultaneously,
we may encounter unforeseen expenses, complications and delays in connection with identifying or acquiring suitable acquisition targets.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to realize the benefits
of business acquisitions and divestitures we enter into, including being unable to successfully and efficiently integrate acquisitions
or execute on dispositions, which could have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We engage from time to time
in acquisitions and other transactions that may complement or expand our business or in divestments of non-strategic businesses or assets.
These transactions, including our acquired U.S.-based Softgel production facility and R&amp;D center, which began operations in May 2022,
are accompanied by risks, many of which are beyond our control, and any one of them could result in increased cost, decreased net sales
and diversion of management&#8217;s time and energy, any or all of which could materially impact our business, financial condition, and
results of operations. Such risks include, among others, risks relating to our ability to successfully and efficiently integrate acquisitions
or execute on dispositions and realize anticipated benefits therefrom.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to implement our
growth strategy, we evaluate opportunities to buy or otherwise acquire rights to other businesses or technologies, enter into joint ventures
or otherwise enter into strategic arrangements with business partners that could complement, enhance, or expand our current business
or offerings and services or that might otherwise offer us growth opportunities, or divest assets or an ongoing business. We may face
competition from other companies in pursuing acquisitions and similar transactions in the pharmaceutical industry. Our ability to complete
transactions may also be limited by applicable antitrust and trade laws and regulations in the jurisdictions in which we or the operations
or assets we seek to acquire carry on business. To the extent that we are successful in making acquisitions, we expend substantial amounts
of cash, incur debt, or assume loss-making divisions as consideration. We or the purchaser of a divested asset or business may not be
able to complete a desired transaction for any number of reasons, including a failure to secure financing.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any acquisition that we are
able to identify and complete may involve a number of risks, including, but not limited to (i) the diversion of management&#8217;s attention
to integrate the acquired businesses or joint ventures, (ii) the possible adverse effects on our operating results during the integration
process, (iii) the potential loss of customers or employees in connection with the acquisition, (iv) delays or reduction in realizing
expected synergies, (v) unexpected liabilities, (vi) exposure to compliance, intellectual property, environmental, legal or other issues,
not uncovered by a limited due diligence review of the target or otherwise, and (vii) our potential inability to achieve our intended
objectives for the transaction.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that we are
not successful in completing desired divestitures, as such may be determined by future strategic plans and business performance, we may
have to expend substantial amounts of cash, incur debt, or continue to absorb the costs of loss-making or under-performing assets. Any
divestiture, whether we are able to complete it or not, may involve a number of risks, including diversion of management&#8217;s attention,
a negative impact on our customer relationships, costs associated with maintaining the business of the targeted divestiture during the
disposition process, and the costs of closing and disposing of the affected business or transferring remaining portions of the operations
of the business to other facilities.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our business depends upon certain customers
for a significant portion of our sales, therefore, a disruption of our relationship with these customers or any material adverse change
in these customers&#8217; businesses could have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales to the five largest
economic groups that form part of our customer base comprised approximately 25% and 26% of our net sales for the years ended December
31, 2022 and 2021, respectively. No other customer individually comprised more than 5.7% and 6.5% of net sales for the years ended December
31, 2022 and 2021, respectively. If our relationship with one of the five largest economic groups that form part of our customer base,
including the terms of doing business with such customers, changes significantly, it could have a material adverse impact on our business,
financial condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many of our customers, which
include major global, national, and regional retail drug, supermarket, and mass merchandise chains, major wholesalers, sourcing groups,
hospitals and grocery stores located primarily in Latin America and the United States, continue to merge or consolidate. Such consolidation
has provided, and may continue to provide, customers with additional purchasing leverage, and consequently may increase the pricing pressures
we face. The emergence of large buying groups representing independent retail pharmacies enable those groups to extract price discounts
on our products.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, if we are unable
to maintain adequately high levels of customer service over time, customers may choose to obtain alternate sources for products and/or
end their relationships with us.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We depend on our executive officers and
other key personnel to operate and grow our business and to develop new and enhanced offerings and technologies and the loss of, or the
failure to attract and retain, such key personnel could adversely affect our operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We depend on our executive
officers and other key personnel, including our technical personnel, to operate and grow our business and to develop new and enhanced
products, services and technologies. The loss of any of these officers or other key personnel or a failure to attract and retain suitably
skilled technical personnel could adversely affect our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to our executive
officers, we rely on seven senior vice presidents and senior management personnel to lead and direct our business. The members of the
senior leadership team hold positions in areas such as corporate finance, audit and internal controls, human resources, corporate and
legal affairs, international marketing and R&amp;D, investor relations and mergers and acquisitions. Furthermore, each of our business
segments (NextGel, Procaps Colombia, CAN (as defined below), CASAND (as defined below) and Diabetrics) is managed by an executive that
reports directly to the Chief Operating Officer.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With respect to our technical
talent, we employ more than 300 scientists, technicians and skilled personnel in R&amp;D and innovation as of December 31, 2022. Many
of our facilities are located in competitive labor markets like those in which our Colombia, Brazil, El Salvador and United States facilities
are located. Global and regional competitors and, in some cases, customers and suppliers compete for the same skills and talent as we
do.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We depend on our specialized sales representatives
to generate the net sales and the levels of product and brand name awareness we desire.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely on our network of
specialized sales representatives to create greater awareness of our products and brand names. As a result, our operations involve certain
risks, including that our sales representatives may fail to comply with local requirements, to devote the resources necessary to achieve
physician confidence or loyalty, to otherwise effectively market our products, and/or to provide us with accurate or timely information
about product sales. In addition, we invest in the formation and specialization of each sales representative and have no assurance of
their continued employment with us. Our future growth and profitability will depend in part on the effectiveness and efficiency of our
sales force.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b><i>Inflation could adversely affect our
business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt; background-color: white">While
inflation in the United States and global markets has been relatively low in recent years, during 2021 and 2022, the economy in the United
States and global markets encountered a material increase in the level of inflation. The impact of COVID-19, geopolitical developments
such as the Russia-Ukraine conflict and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and
long-term economic activity, including whether inflation will continue and how long, and at what rate. Increases in inflation raise our
costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure
these on reasonable terms may adversely impact our financial condition. A sustained increase in inflation may continue to increase these
costs. Our efforts to recover inflation-based cost increases from our customers may be delayed or capped as a result of our contracts
as well as the competitive industry and economic conditions in which we operate. The rate and scope of these various inflationary factors
may continue to increase our operating costs and capital expenditures materially and may have a material adverse impact on our on our
costs, profitability and financial results. Additionally, increases in inflation, along with the uncertainties surrounding COVID-19, geopolitical
developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty
about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure
to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>General inflation
and increases in the minimum wage and general labor costs have affected and may continue to adversely affect our business, financial
condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Labor
is a significant portion of our cost structure and is subject to many external factors, including minimum wage laws, prevailing wage
rates, unemployment levels, health insurance costs and other insurance costs and changes in employment and labor legislation or other
workplace regulation. Most companies experienced an increase in labor costs in 2022 and expect additional increases in 2023, primarily
in response to raising rates of inflation. As the cost of labor and statutory minimum wage rates increase or related laws and regulations
change, we will need to continue to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other
hourly or salaried employees. Increases in the cost of our labor could have an adverse effect on our business, financial condition and
results of operations, or if we fail to pay such higher wages we could suffer increased employee turnover. Increases in labor costs generally
could force us to increase prices for other customers, which could adversely impact our sales.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">For
some customers with multi-year fixed pricing contracts, increases in the minimum wage could decrease our profit margins or result in
losses and could have a material adverse effect on our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b><i>The impact of worldwide economic conditions
may adversely affect our business, operating results, and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
financial performance is subject to worldwide economic conditions, including adverse economic conditions caused by the continuing effects
of the COVID-19 pandemic, rising inflation and interest rates, the continued conflict between Russia and Ukraine, and supply chain disruptions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
are currently operating during a period of economic uncertainty and cannot predict the timing, strength, or duration of economic downturns.
To the extent general macroeconomic conditions remain uncertain or worsen, our business may be harmed. Inflation has the potential to
adversely affect our liquidity, business, operating results, and financial condition by increasing our overall cost structure, particularly
if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has
resulted in, and may continue to result in, higher interest rates and capital costs, increased costs of labor, fluctuations in foreign
currency exchange rates, and other similar effects. As a result of inflation, we have experienced, and may continue to experience, cost
increases, which could materially and adversely affect our business, operating results, and financial condition.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Adverse developments affecting the financial
services industry, such as actual events or concerns involving liquidity, defaults or nonperformance by financial institutions or transactional
counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Actual events involving limited
liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or
other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events
of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Inflation and rapid
increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates
below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program
to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions
to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity
needs of financial institutions for immediately liquidity may exceed the capacity of such program. There is no guarantee that the U.S.
Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure
of other banks or financial institutions, or that they would do so in a timely fashion.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although we assess our banking
relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate
to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect
us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These
factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various
types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or
financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors
could involve financial institutions or financial services industry companies with which we have financial or business relationships,
but could also include factors involving financial markets or the financial services industry generally.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The results of events or
concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected
business operations and our financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, investor concerns
regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest
rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby
making it more difficult for us to acquire financing on acceptable terms or at all. Any of these impacts, or any other impacts resulting
from the factors described above or other related or similar factors not described above, could have material adverse impacts on our
liquidity and our current and/or projected business operations and financial condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our business, financial condition, and
results of operations may be adversely affected by global health epidemics, including the COVID-19 pandemic.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business, financial condition,
and results of operations have been and may continue to be adversely affected by global health epidemics, including the COVID-19 pandemic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2020, the World
Health Organization declared the COVID-19 pandemic to be a &#8220;Public Health Emergency of International Concern.&#8221; COVID-19 has
spread across the globe and is affecting worldwide economic activity. Any public health epidemic, including the COVID-19 pandemic, may
affect our operations and those of third parties on which we rely, including our customers and suppliers. Our business, financial condition,
and results of operations may be affected by disruptions in our customers&#8217; abilities to fund, develop, or bring to market products
as anticipated; delays in or disruptions to the conduct of clinical trials; cancellations of contracts or confirmed orders from our customers;
decreased demand for categories of products in certain affected regions; and inability, difficulty, or additional cost or delays in obtaining
key raw materials, components, and other supplies from our existing supply chain; among other factors caused by the COVID-19 pandemic.
In 2021, a new delta variant of the COVID-19 surged which was significantly more virulent than other virus variants, resulting in a significant
increase in COVID-19 cases and related deaths. By December 2021, the then new omicron variant also started to spread. With improved vaccination
rates, however, its impact was less severe than of previous waves. Moving forward, there continues to be significant uncertainty relating
to the further progression of other waves and variants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the COVID-19
pandemic may affect the operations of INVIMA, the FDA, and other drug regulatory authorities, which could result in delays of inspections,
reviews, and approvals of our customers&#8217; products. Our operations could be disrupted if our employees become ill or are otherwise
absent from work as a result of the COVID-19 pandemic. Governmental restrictions, including travel restrictions, quarantines, shelter-in-place
orders, business closures, new safety requirements or regulations, or restrictions on the import or export of certain materials, or other
operational issues related to the COVID-19 pandemic have had, and may continue to have, an adverse effect on our business, financial
condition and results of operations. Additionally, while the potential economic impact brought by and the duration of the COVID-19 pandemic
are difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access
capital, which could negatively affect our short- and long-term liquidity.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The COVID-19 pandemic has
had a negative impact on our business. It has caused complications in logistics and personnel transport during mandatory quarantine periods.
Also, we had to hire additional personnel to substitute unavailable staff due to quarantine for potential exposure to COVID-19. We also
incurred additional expenses by purchasing COVID-19 vaccines from the Colombian government for our employees, implementing a bus fleet
to transport our employees to and from the plants, implementing COVID-19 testing, contracting third parties to substitute unavailable
personnel and purchasing personal protective equipment. Price changes in raw materials also impacted our business, however, we were able
to mitigate the impact of these effects by launching new products, training our sales forces to capitalize on opportunities, implementing
fewer discount promotions, generating demand in markets such as Colombia and Central America, and by growing our generic drug business.
However, the extent to which COVID-19 may affect our future results will depend on future developments that are highly uncertain, including
the duration of the pandemic, new information that may emerge concerning the severity of the virus, and the actions governments, the
pharmaceutical industry, competitors, suppliers, customers, patients, and others may take to contain or address its direct and indirect
effects. The COVID-19 pandemic and associated mitigation measures may also have an adverse impact on healthcare systems, global economic
conditions, or economic conditions in one or more regions where we or our customers operate, which could have an adverse effect on our
business and financial condition.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the COVID-19 pandemic,
the Colombian government implemented several mitigation measures, including, among others, a strict quarantine imposed to most industries,
except indispensable and health related industries. As of the date this Annual Report, such measures have been fully lifted and terminated.
Despite these restrictions, we were allowed to continue full operation of its business and facilities.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the impact of
the COVID-19 pandemic could exacerbate other risks we face, including those described elsewhere in &#8220;Risk Factors.&#8221; For more
information on the impact of the COVID-19 pandemic on us, see Item 4.B under the heading &#8220;Recent Developments.&#8221;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Any breach, disruption or misuse of our,
or our external business partners&#8217;, information systems or cyber security efforts could have a material adverse effect on our business,
financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are increasingly dependent
upon information technology systems to operate our business. Our systems, information and operations are highly complex and interrelated
with our external business partners. These systems may contain confidential information (including personal data, trade secrets or other
intellectual property, or proprietary business information). The nature of digital systems, both internally and externally, makes them
potentially vulnerable to disruption or damage from human error and/or security breaches, which include, but are not limited to, ransomware,
data theft, denial of service attacks, sabotage, industrial espionage, and computer viruses. Such events may be difficult to detect,
and once detected, their impact may be difficult to assess and address.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We and our external business
partners have been subject to cyber-attacks in the past, and we have experienced immaterial business disruption and data loss as a result
of phishing, business email compromise and other types of attacks on our information technology systems and those of our external business
partners. While we continue to employ resources to monitor our systems and protect our infrastructure, these measures may prove insufficient
depending upon the attack or threat posed, and that could subject us to significant risks, including ransomware attacks, other cyber
breaches and disruptions that (i) cause system issues, (ii) cause the loss, misappropriation or unauthorized access, use or disclosure
of confidential information, including personal data, (iii) impair our operations, (iv) cause us to lose customers or experience lower
sales volume, or (v) causes us to incur significant liabilities or expenses to remediate such risks, which, individually or collectively,
could result in financial, legal, business or reputational harm to us and could have a material adverse effect on our business, financial
condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, our information
technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters,
power outages, systems failures and viruses. If we are unable to execute our disaster recovery and business if our plans prove insufficient
for a particular situation or take longer than expected to implement in a crisis situation, it could have a material adverse effect on
our business, financial condition and results of operations, and our business interruption insurance may not adequately compensate us
for losses that may occur.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also subject to numerous
laws and regulations designed to protect personal data, such as the European national laws implementing the Regulation (EU) 2016/679
of the European Parliament and the Council dated April 27, 2016 related to the protection of individuals with respect to processing of
personal data and usage of such data, Brazil&#8217;s General Data Protection Law (<i>Lei Geral de Prote&#231;&#227;o de Dados</i>)
and Colombia&#8217;s Law 1581 of 2012 (<i>Ley de Proteci&#243;n de Datos Personales</i>). These data protection laws introduced more
stringent data protection requirements and significant potential fines, as well as increased our responsibility and potential liability
in relation to personal data that we process. For instance, failure to comply with data protection regulations in Colombia may result
in the impositions of sanctions against us, such as: fines, temporary suspensions of all personal data processing-related activities,
temporary or permanent closure or blocking of personal data processing operations or business units (when authorities have previously
ordered corrective measures and such measures are not being fully complied). We have put mechanisms in place designed to ensure compliance
with applicable data protection laws but there can be no guarantee of their effectiveness.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The demand for our iCDMO services depends
in part on our customers&#8217; research and development and the clinical and market success of their products. In the event our customers
spend less on, or are less successful in, these activities for any reason, including as a result of decrease in spending due to the COVID-19
pandemic or recessionary economic conditions caused in whole or in part by the pandemic, our business, financial condition, and results
of operations may be materially adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The demand for our iCDMO
offerings depends in part on our customers&#8217; research and development and the clinical and market success of their products. Our
business, financial condition, and results of operations may be negatively affected if our customers spend less on, or are less successful
in, these activities. In addition, customer spending may be affected by, among other things, the COVID-19 pandemic or recessionary economic
conditions caused in whole or in part by the pandemic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our customers are engaged
in research, development, production, and marketing of pharmaceutical, biotechnology, and consumer health products. The amount of customer
spending on research, development, production, and marketing, as well as the outcomes of such research, development, and marketing activities,
have a large impact on our sales and profitability, particularly the amount our customers choose to spend on our iCDMO offerings. Our
customers determine the amounts that they will spend based upon, among other things, available resources and their need to develop new
products, which, in turn, are dependent upon a number of factors, including their competitors&#8217; research, development, and production
initiatives, and the anticipated market uptake, clinical, and reimbursement scenarios for specific products and therapeutic areas. In
addition, consolidation in the industries in which our customers operate may have an impact on such spending as customers integrate acquired
operations, including research and development departments and their budgets. Our customers finance their research and development spending
from private and public sources. A reduction in spending by our customers, for these reasons or because of the COVID-19 pandemic or its
direct or indirect effects, could have a material adverse effect on our business, financial condition, and results of operations. If
our customers are not successful in attaining or retaining product sales due to market conditions, reimbursement issues, or other factors,
our results of operations may be materially adversely affected.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Certain proposed amendments to tax directives
may impact our current tax treaties benefits.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The EU Commission published
a proposal for a Council Directive which included rules to prevent the misuse of shell entities for tax purposes and amending Directive
2011/16/EU dated December 22, 2021. These new rules would mainly apply to EU entities (i) deriving passive income, (ii) engaged in cross-border
transactions and (iii) which outsourced the administration of day-to-day operations and the decision-making on significant functions.
EU entities that meet these three conditions would need to declare in their annual tax returns whether they meet indicators of minimum
substance and provide related documentary evidence (unless they benefit from an automatic exemption). Entities not meeting those indicators
of minimum substance and that cannot rely on an automatic exemption will be presumed not to have sufficient substance for tax purposes
(unless they can rebut this presumption by providing evidence (i) of the business activities which they perform to generate their passive
income or (ii) that they do not serve the objective of obtaining a tax advantage). In this case and in the absence of rebuttal of the
presumption, such EU entities would not be allowed to benefit from the provisions of double tax treaties or certain EU Directives (such
as the Interest and Royalties EU Directive). In addition, they would not be entitled to a certificate of tax residence to the extent
that such certificate serves to obtain the benefit of the aforementioned provisions. If the Directive is determined to be applicable
to the Company, it may have an impact on our current tax treaties benefits.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have previously restated our financial
statements for several prior periods, which may affect investor confidence, the price of our securities, our ability to raise capital
in the future, our results of operations and financial condition, and which may result in stockholder litigation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We previously filed restated
financial statements for several prior periods in our Annual Report on Form 20-F for the year ended December 31, 2021. Such restatement
may have the effect of eroding investor confidence in the Company and our financial reporting and accounting practices and processes,
and may negatively impact the trading price of our securities, could have a material adverse effect on our business, financial condition
and results of operations, and may make it more difficult for us to raise capital on acceptable terms, if at all. The restatement and
related material weaknesses in our internal control over financial reporting may also result in stockholder litigation that could ultimately
have a negative adverse effect on our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to our Industry</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We participate in a highly competitive
market, and increased competition may adversely affect our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We operate in a market that
is highly competitive. We compete with multiple companies as to each of our offerings and in every region of the globe in which we operate,
including competing with other companies that offer advanced delivery technologies, outsourced dose form, or development services to
pharmaceutical and consumer health companies based in North America, South America, Europe, and the Asia-Pacific region. We also compete
in some cases with the internal operations of those pharmaceutical, biotechnology, and consumer health customers that also have manufacturing
capabilities and choose to source these services internally.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We face substantial competition
in each of our markets. Competition is driven by proprietary technologies and know-how, capabilities, consistency of operational performance,
quality, price, value, responsiveness, and speed. Some competitors have greater financial, R&amp;D, operational, and marketing resources
than we do. Competition may also increase as additional companies enter our markets or use their existing resources to compete directly
with ours. Expanded competition from companies in low-cost jurisdictions, such as India and China, may in the future adversely affect
our results of operations or limit our growth. Greater financial, research and development, operational, and marketing resources may
allow our competitors to respond more quickly with new, alternative, or emerging technologies. Changes in the nature or extent of our
customers&#8217; requirements may render our offerings obsolete or non-competitive and could adversely affect our business, financial
condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Changes in market access or healthcare
reimbursement for, or public sentiment towards our, or our customers&#8217;, products in Latin America, the United States and other countries
in which we operate, or other changes in applicable policies regarding the healthcare industry, could adversely affect our financial
condition and results of operations by affecting demand for our products and services.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The healthcare industry has
changed significantly over time, and we expect the industry to continue to evolve. Some of these changes, such as ongoing healthcare
reform, adverse changes in governmental or private funding of healthcare products and services, legislation or regulations governing
patient access to care and privacy, or the delivery, pricing, or reimbursement approval of pharmaceuticals and healthcare services or
mandated benefits, may cause healthcare industry participants to change the amount of our products and services that they purchase or
the price they are willing to pay for these offerings. In particular, there is significant uncertainty about the likelihood of changes
to the Affordable Care Act (the &#8220;ACA&#8221;) in the United States and healthcare laws in general in the United States, including
future legislation that may affect or put a cap on future pricing of pharmaceutical products. Similarly, Colombian sanitary regulations
change significantly over time. For instance, the Colombian Ministry of Health has recently issued Decree No. 334/2022 which provides
new provisions and requirements for renewal, modification and suspension of sanitary registrations for chemically synthesized medicines,
medicinal gases, biological and homeopathic products, information and advertising of medicines and phototherapeutic products. Additionally,
some external factors have increased delay in medicine approval timeframes. While we are unable to predict the likelihood of changes
to healthcare legislation, any substantial revisions in these legislations, including in the ACA, could have a material adverse effect
on the demand for our or our customers&#8217; products, which in turn could have a negative impact on our business, financial condition
and results of operations. Changes in the healthcare industry&#8217;s pricing, selling, inventory, distribution, or supply policies or
practices, or in public or government sentiment for the industry as a whole, could also significantly reduce our revenue and results
of operations. In particular, volatility in individual product demand may result from changes in public or private payer reimbursement
or coverage.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Rx products business
in particular could be materially adversely impacted by measures taken by governmental entities or private payers to restrict patients&#8217;
access to our products or increase pressure on drug pricing, including denial of price increases, prospective and retrospective price
decreases, and increased mandatory discounts or rebates. These actions may drive us and our competitors to decrease prices or may reduce
the ability of customers to pay for our products, which could materially negatively impact our Rx products business&#8217; results of
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The illegal trade in pharmaceutical products,
including counterfeiting, theft and illegal diversion, is widely recognized. Public loss of confidence in the integrity of pharmaceutical
products as a result of illegal trade could materially adversely affect our reputation, financial condition and results of operation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The illegal trade in pharmaceutical
products is widely recognized by the industry, non-governmental organizations and governmental authorities to be increasing. Illegal
trade includes counterfeiting, theft and illegal diversion (that is, when our products are found in a market where we did not send them
and where they are not approved to be sold). There is a risk to public health when illegally traded products enter the supply chain,
as well as associated financial risk. Authorities and the public expect us to help reduce opportunities for illegal trade in our products
through securing our supply chains, surveillance, investigation and supporting legal action against those found to be engaged in illegal
trade.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Public loss of confidence
in the integrity of pharmaceutical products as a result of illegal trade could materially adversely affect our reputation and financial
performance. In addition, undue or misplaced concern about this issue may cause some patients to stop taking their medications, with
consequential risks to their health.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are found liable for
breaches in our supply chains, authorities may take action, financial or otherwise, that could adversely impact the distribution of our
products. Counterfeit and/or illegally diverted products replacing sales of genuine products in a market can have a direct financial
impact on our global markets as well as being a risk to patient safety.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to our Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We and our customers depend on patents,
copyrights, trademarks, know-how, trade secrets, and other forms of intellectual property protections, but these protections may not
be adequate.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely on a combination
of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual property laws, nondisclosure and other contractual
provisions, and technical measures to protect many of our products, services and intangible assets. These proprietary rights are important
to our ongoing operations. There can be no assurance that these protections will provide uniqueness or meaningful competitive differentiation
in our offerings or otherwise be commercially valuable or that we will be successful in obtaining additional intellectual property or
enforcing our intellectual property rights against unauthorized users. Our exclusive rights under certain of our products and services
are protected by patents, some of which will expire in the near term. When patents covering a product or service expire, loss of exclusivity
may occur, which may force us to compete with third parties, thereby negatively affecting our revenue and profitability. We do not currently
expect any material loss of revenue to occur as a result of the expiration of any patent currently protecting our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our proprietary rights may
be invalidated, circumvented, or challenged. We may in the future be subject to proceedings seeking to oppose or limit the scope of our
patent applications or issued patents. In addition, in the future, we may need to take legal actions to enforce our intellectual property
rights, to protect our trade secrets, or to determine the validity or scope of the proprietary rights of others. Legal proceedings are
inherently uncertain, and the outcome of such proceedings may be unfavorable to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any legal action regardless
of outcome might result in substantial costs and diversion of resources and management attention. Although we use reasonable efforts
to protect our proprietary and confidential information, there can be no assurance that our confidentiality and non-disclosure agreements
will not be breached, our trade secrets will not otherwise become known by competitors, or that we will have adequate remedies in the
event of unauthorized use or disclosure of proprietary information. Even if the validity and enforceability of our intellectual property
is upheld, an adjudicator might construe our intellectual property not to cover the alleged infringement. In addition, intellectual property
enforcement may be unavailable or practically ineffective in some countries. There can be no assurance that our competitors will not
independently develop technologies that are substantially equivalent or superior to our technology or that third parties will not design
around our intellectual property claims to produce competitive offerings. The use of our technology or similar technology by others could
reduce or eliminate any competitive advantage we have developed, cause us to lose sales, or otherwise harm our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">We have applied in the United
States, Colombia and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered or issued, and also claim common law rights in various trademarks and service marks. In the past, third parties have occasionally
opposed our applications to register intellectual property, and there can be no assurance that they will not do so in the future. It is
possible that in some cases we may be unable to obtain the registrations for trademarks, service marks, and patents for which we have
applied, and a failure to obtain trademark and patent registrations in the United States, Colombia or other countries could limit our
ability to protect our trademarks and proprietary technologies and impede our marketing efforts in those jurisdictions. See Item 4.B.
of this Annual Report under the heading &#8220;Business Overview&#8212;Intellectual Property.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">License agreements with third
parties control our rights to use certain patents, software, and information technology systems and proprietary technologies owned by
third parties, some of which are important to our business. Termination of these license agreements for any reason could result in the
loss of our rights to this intellectual property, causing an adverse change in our operations or the inability to commercialize certain
offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, many of our
branded pharmaceutical customers rely on patents to protect their products from generic competition. Because incentives exist in some
countries, including Colombia and the United States, for generic pharmaceutical companies to challenge these patents, pharmaceutical
and biotechnology companies are under the ongoing threat of challenges to their patents. If the patents on which our customers rely were
successfully challenged and, as a result, the affected products become subject to generic competition, the market for our customers&#8217;
products could be significantly adversely affected, which could have an adverse effect on our business, financial condition and results
of operations. We attempt to mitigate these risks by making our offerings available to generic manufacturers and distributors in the
United States, as well as branded manufacturers and distributors world-wide, but there can be no assurance that we will be successful
in marketing these offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our products and services, or our customers&#8217;
products, may infringe on the intellectual property rights of third parties and any such infringement could have a material adverse effect
on our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time, third
parties have asserted intellectual property infringement claims against us and our customers, and there can be no assurance that third
parties will not assert infringement claims against either us or our customers in the future. While we believe that our products and
services do not infringe in any material respect upon proprietary rights of other parties, and that meritorious defenses would exist
with respect to any assertion to the contrary, there can be no assurance that we could successfully avoid being found to infringe on
the proprietary rights of others. Patent applications in the United States, Colombia and certain other countries are generally not publicly
disclosed until the patent is issued or published, and we and our customers may not be aware of currently filed patent applications that
relate to our or their products, services, or processes. If patents later issue on these applications, we or they may be found liable
for subsequent infringement. There has been substantial litigation in the pharmaceutical industry with respect to the manufacture, use,
and sale of products that are the subject of conflicting patent rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any claim that our products,
services or processes infringe third-party intellectual property rights (including claims arising through our contractual indemnification
of our customers), regardless of the claim&#8217;s merit or resolution, could be costly and may divert the efforts and attention of our
management and technical personnel. We may not prevail against any such claim given the complex technical issues and inherent uncertainties
in intellectual property matters. If any such claim results in an adverse outcome, we could, among other things, be required to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">pay
                                            substantial damages (potentially including treble damages in the United States);</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">cease the manufacture,
    use, or sale of the infringing offerings or processes;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discontinue the use of
    the infringing technology;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">expend
                                            significant resources to develop non-infringing technology;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">license
                                            technology from the third-party claiming infringement, which license may not be available
                                            on commercially reasonable terms or at all; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">lose
                                            the opportunity to license our technology to others or to collect royalty payments based
                                            upon successful protection and assertion of our intellectual property against others.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, our customers&#8217;
products may be subject to claims of intellectual property infringement and such claims could materially affect our business if their
products cease to be manufactured or they have to discontinue the use of the infringing technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of the foregoing could
affect our ability to compete or have a material adverse effect on our business, financial condition, and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to the Countries We Operate
In</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are an international company with operations
primarily in Latin America and are subject to the market risks of the countries in which we manufacture and/or sell our products, and
to risks associated with foreign exchange rates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently maintain production
facilities in Colombia, Brazil, El Salvador and recently in the United States. On December 31, 2021 we acquired an FDA approved 86,000
square feet pharmaceutical production facility located in West Palm Beach, Florida; our first U.S.-based Softgel production facility
and R&amp;D center, which began operations in May 2022. Our ability to conduct and expand our business and our financial performance
are subject to the risks inherent to international operations, such as currency controls, currency fluctuations, trade barriers, increases
in duties, taxes and governmental royalties, nationalization, forced negotiation, changes in local labor conditions, labor strikes, price
instability, interest rates, modification of existing contracts and changes in local laws and policies, regulation, taxation, social
instability and other political, social and economic developments affecting the countries in which we operate. We have no control over
these factors and they may have an adverse effect on our business, financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We report our financial results
in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated
in foreign currencies. These currencies include, among others, the Colombian Peso, the Brazilian Real, and the Peruvian Soles. Approximately
45% of our revenue for the year ended December 31, 2022 was U.S. dollar denominated. Our results of operations and, in some cases, cash
flows, have in the past been, and may in the future be, adversely affected by movements in exchange rates. Although a significant portion
of our operating costs are denominated in foreign (non-U.S.) currency, naturally reducing our exposure to changes in certain foreign
currency exchange rates, we may implement currency hedges or take other actions intended to further reduce our exposure to changes in
foreign currency exchange rates. If we are not successful in mitigating the effects of changes in exchange rates on our business, any
such changes could materially impact our results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, our operations
may be adversely affected by trade barriers, increases in duties, taxes and governmental royalties, social unrest, labor strikes, expropriation,
nationalization, forced negotiation or modification of existing contracts, and changes in the local laws and policies of the countries
in which we conduct our business. We are also exposed to risks related to social instability and other political, economic or social
events in these countries, which could have an adverse effect on our business, financial condition and results of operations, as well
as our ability to comply with our financial obligations in a timely manner.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, several emerging
market economies are particularly vulnerable to the impact of rising interest rates, inflationary pressures, higher oil and other commodity
prices, and large external deficits. Risks in one country can limit our opportunities for portfolio growth and negatively affect our
operations in another country or countries. As a result, any such unfavorable conditions or developments could have an adverse impact
on our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Many of our assets are located in, and
a large part of our income is earned in, Colombia and, thus, we are dependent on economic and political conditions in Colombia.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Several of our subsidiaries,
such as Procaps, S.A., organized as a capital stock corporation (<i>sociedad an&#243;nima</i>) (&#8220;Procaps S.A.&#8221;), and Diabetrics
Healthcare S.A.S., organized as simplified stock corporation (<i>sociedad por acciones simplificada</i>) (&#8220;Diabetrics Healthcare&#8221;),
are organized under the laws of Colombia. Many of our assets are located in Colombia and a portion of our income is earned in Colombia.
Our assets and income are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization,
renegotiation or voiding of existing contracts, currency exchange restrictions and international monetary fluctuations. Accordingly,
our financial condition and results of operations depend significantly on macroeconomic and political conditions prevailing in Colombia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In Colombia, inflation rates
have fluctuated significantly in recent years. The inflation rate reached 13.1% and 5.62% for the years ended December 31, 2022 and 2021,
respectively. We cannot assure you that inflation rates will remain stable or that inflation rates will not increase significantly in
the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Changes in economic policies in Colombia
could affect our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our financial condition and
results of operations may be adversely affected by changes in the political climate of Colombia to the extent that such changes affect
the economic policies, growth, stability, outlook or regulatory environment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Colombian Government
has historically exercised influence on the local economy, and governmental policies are likely to continue to have an important effect
on companies operating in Colombia like us, market conditions and the prices of securities of issuers operating in Colombia, including
the Notes. The President of Colombia has considerable power to determine governmental policies and actions relating to the economy and
may adopt policies that may negatively affect us. Colombia held presidential elections on May 29, 2022, with runoffs on June 19, 2022.
Gustavo Francisco Petro Urrego was elected president and took office on August 7, 2022. The new government has announced a tax pension,
labor, justice and health reform bill. As of the date of this Annual Report, these bills have not been published, except tax reform enacted
on December 13, 2022. Therefore, we cannot predict which policies will be adopted by the new government and whether those policies would
have a negative impact on the Colombian economy, on the pharmaceutical or healthcare industry or on our business, financial performance
and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot provide any assurances
that political or social developments in Colombia over which we have no control, will not have an adverse effect on our respective economic
situations and will not adversely affect the business, financial condition and results of operations of our subsidiaries and their ability
to pay dividends or make other distributions to us. This could have a material adverse effect on our business, results of operations,
financial condition and ability to make payments on the Notes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot predict which policies
will be adopted by the Colombian Government and whether the policies would have a negative impact on the Colombian economy, on the pharmaceutical
or healthcare industry or on our business, financial condition and results of operations. Furthermore, there can be no assurance that
the Colombian Peso will not depreciate or appreciate relative to the U.S. dollar and other currencies in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Colombian Government and the Colombian
Central Bank exercise influence on the Colombian economy. Political and economic conditions may have an impact on our business, financial
condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Colombian Government
and the Colombian Central Bank can intervene in Colombia&#8217;s economy and make significant changes in monetary, fiscal and regulatory
policy, which could result in currency devaluation and the changes in international reserves. Our business, financial condition and results
of operations may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic
developments that may affect Colombia or the international markets. Possible developments include fluctuations in exchange rates, inflation,
instability of prices, changes in interest rates, liquidity of domestic capital and debt markets, exchange controls, deposit requirements
on foreign borrowings, controls on capital flows, and limits on foreign trade.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the Colombian Government
has not imposed foreign exchange restrictions since 1990, Colombia&#8217;s foreign currency markets have historically been extremely
regulated. Colombian law permits the Colombian Central Bank to impose foreign exchange controls to regulate the remittance of dividends
and/or foreign investments in the event that the foreign currency reserves of the Colombian Central Bank fall below a level equal to
the value of three months of imports of goods and services into Colombia. Please see &#8220;Exchange Rates and Controls&#8221; for actions
the Colombian Central Bank could take to intervene in the exchange market. An intervention that precludes us from possessing, utilizing
or remitting dollars would impair our financial condition and results of operations, and would impair the shareholders&#8217; ability
to convert any dividend payments to U.S. dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Colombian Government
has considerable power to shape the Colombian economy and, consequently, affect the operations and financial performance of businesses.
The Colombian Government may seek to implement new policies aimed at controlling further fluctuation of the <i>peso</i> against the U.S.
dollar and fostering domestic price stability. The president of Colombia has considerable power to determine governmental policies and
actions relating to the economy and may adopt policies that are inconsistent with those of the prior government or that negatively affect
us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Any further downgrade in the credit rating
of Colombia could adversely affect the Colombian economy</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2017, S&amp;P
downgraded the rating of its long-term foreign currency sovereign credit ratings on Colombia from &#8220;BBB&#8221; to &#8220;BBB-,&#8221;
on the grounds of Colombia&#8217;s weakened fiscal and external profiles generating diminished policy flexibility. In May 2019, Moody&#8217;s
changed Colombia&#8217;s rating outlook from negative to stable and Fitch changed Colombia&#8217;s rating outlook from stable to negative,
and in March 2020, the outlook of Colombia&#8217;s credit rating was changed to negative by S&amp;P due to external risks. In April 2020,
Fitch downgraded its long-term foreign currency sovereign credit ratings on Colombia from &#8220;BBB&#8221; to &#8220;BBB-&#8221; maintaining
a negative outlook. In July 2021, Fitch downgraded its long-term foreign currency sovereign credit ratings on Colombia from &#8220;BBB-&#8221;
to &#8220;BB+&#8221; stabilizing it to the same level given by S&amp;P. As a result of these downgrades, Colombia&#8217;s long-term debt
denominated in foreign currency is currently rated &#8220;BB+&#8221; by Fitch, &#8220;BB+&#8221; by S&amp;P (ratified in January 2023)
and &#8220;Baa2&#8221; by Moody&#8217;s. Any further downgrade of Colombia&#8217;s credit rating could adversely affect the Colombian
economy and our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Certain of our assets are located in, and
a part of our income is earned in, El Salvador and, thus, we are dependent on economic and political conditions in El Salvador</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have two manufacturing
facilities in El Salvador and a large part of our income is earned in El Salvador. The assets and income of our subsidiaries in El Salvador
are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization and renegotiation or
voiding of existing contracts. Accordingly, our financial condition and results of operations depend significantly on macroeconomic and
political conditions prevailing in El Salvador.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An emerging country such
as El Salvador is subject to many different factors that may affect its economic results, including the following:</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
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    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">financial regulation in
    the United States;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
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    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes in economic or
    tax policies in El Salvador;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the ability of El Salvador
    to effect key economic reforms;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the impact of hostilities
    or political unrest in other countries that may affect international trade, commodity prices and the global economy;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">internal security issues
    relating to crime and violence; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">low GDP growth rate in
    El Salvador.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">El Salvador&#8217;s economy
remains vulnerable to external shocks, including global economic crises that could be caused by future significant economic difficulties
of its major regional trading partners or by more general &#8220;contagion&#8221; effects, which could have a material adverse effect
on El Salvador&#8217;s economic growth and therefore our operations in the country.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A significant decline in
the economic growth of any of El Salvador&#8217;s major trading partners could adversely affect El Salvador&#8217;s economic growth.
In particular, a decline in economic growth in the United States could affect the level of remittances received in El Salvador, which
in turn could affect El Salvador&#8217;s balance of payments and domestic demand. In addition, because international investors&#8217;
reactions to the events occurring in one emerging market country sometimes appear to demonstrate a &#8220;contagion&#8221; effect, in
which an entire region or class of investment is disfavored by international investors, El Salvador could be adversely affected by negative
economic or financial developments in other emerging market countries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There can be no assurance
that any crises such as those described above or similar events will not negatively affect investor confidence in emerging markets or
the economies of the principal countries in Latin America, including El Salvador.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2022, Moody&#8217;s
Investors Service downgraded the El Salvador&#8217;s long-term foreign-currency issuer rating and long-term foreign-currency senior unsecured
debt ratings from Caa1 to Caa3. Moody&#8217;s Investor Service decision to downgrade El Salvador&#8217;s ratings reflects an increased probability
of a credit event (restructuring, distressed exchange, or default), with relatively high severity, as El Salvador faces a challenging
debt amortization schedule with bond maturities in 2023 and 2025 in a context of continued funding stress and persistently high financing
needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Similarly, in February 2022,
Fitch Ratings downgraded El Salvador&#8217;s long-term foreign currency issuer default rating (IDR) from &#8216;B-&#8217; to &#8216;CCC&#8217;.
The downgrade reflects heightened financing risks stemming from increased reliance on short-term debt, a U.S.$ 800 million Eurobond repayment
due in January 2023, a still-high fiscal deficit, limited scope for additional local market financing, uncertain access to additional
multilateral funding and external market financing given high borrowing costs. Furthermore, El Salvador&#8217;s debt to GDP ratio is
expected to rise to 86.9% in 2022 after modest improvement in 2021, increasing concerns around debt sustainability over the medium term.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have assets in Brazil, and a part of
our income is earned in Brazil and, thus, we are dependent on economic and political conditions in Brazil.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have a manufacturing facility
in Brazil and part of our income is earned in Brazil. The assets and income of our subsidiaries in Brazil, like many emerging markets,
are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization, renegotiation or voiding
of existing contracts, currency exchange restrictions and international monetary fluctuations. Accordingly, our financial condition and
results of operations depend significantly on macroeconomic and political conditions prevailing in Brazil and could be materially and
adversely affected if such conditions deteriorate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Brazilian government has exercised
and continues to exercise significant influence on the Brazilian economy. This influence, as well as Brazilian political and economic
conditions, could adversely affect us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Brazilian economy has
been characterized by intervention by the Brazilian government and unstable economic cycles. The Brazilian government has often changed
monetary, taxation, credit and other policies to influence the course of Brazil&#8217;s economy. The Brazilian government&#8217;s actions
to control inflation and affect other policies have often involved wage and price controls, depreciation of the real, controls on remittances
abroad, fluctuations of the Brazilian Central Bank&#8217;s base interest rate, as well as other measures. We do not have any control
over what measures or policies the Brazilian government may adopt in the future and we cannot foresee them. Our business, financial condition,
results of operations, and prospects may suffer from significant changes in policies or regulations involving or affecting factors such
as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">expansion
                                            or contraction of the global or Brazilian economy;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">currency
                                            exchange controls and restrictions on remittances abroad;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">economic
                                            and social instability;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">political
                                            elections;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">import
                                            and export controls;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">significant
                                            exchange rate fluctuations;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in tax regimes and taxation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in labor regulations;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">liquidity of financial
    and domestic capital markets;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">interest rates;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">inflation;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">monetary policy;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the regulatory environment
    applicable to our activities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">fiscal policy; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other political, diplomatic,
    social, and economic events that may take place in Brazil or may affect it.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Brazilian Central Bank
has intervened occasionally to control unstable movements in the foreign exchange rate. We cannot predict whether the Brazilian Central
Bank will continue to let the real float freely. Accordingly, it is not possible to predict what impact the Brazilian government&#8217;s
exchange rate policies may have on us. We cannot assure that in the future the Brazilian government will not impose a band within which
the real U.S. dollar-real exchange rate could fluctuate or set fixed exchange rates, nor can we predict what impact such an event might
have on our business, financial position or operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Uncertainty regarding the
Brazilian government&#8217;s implementation of changes in policies or regulations that may affect these or other factors in the future
could contribute to economic uncertainty in Brazil. Such uncertainties and other future developments in the Brazilian economy and governmental
policies in respect of the above may materially and adversely affect us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Brazilian politics have historically
affected the performance of the Brazilian economy, and past political crises have affected the confidence of investors and the public,
generally resulting in an economic slowdown and volatility of securities issued by Brazilian companies. The impeachment of former President
Dilma Rouseff, investigations into former President Jair Bolsonaro, as well as wide-scale protests throughout Brazil focused on economic
and political reform, have led to a climate of growing uncertainty. Brazilian presidents have substantial power to determine public policy,
as well as to introduce measures affecting the Brazilian economy and the operations and financial results of companies such as ours.
The prior conviction, imprisonment and release of President Luiz Inacio Lula da Silva and his reelection in 2022 has further increased
political and economic instability. There is uncertainty as to which policies and regulations will be adopted by the new government.
We cannot assure you that the new government will maintain policies designed to promote macroeconomic stability, fiscal disciple and
domestic and foreign investments, and failure on the part of the new government to do so or other new or amended policies and regulations
may adversely impact Brazil&#8217;s economy as well as our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The ongoing economic and political instability
in Brazil may have a material adverse effect on our business, operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">The ongoing economic and
political instability in Brazil caused by the COVID-19 pandemic, a slowdown in GDP growth, and uncertainty as to whether the Brazilian
government will enact the necessary economic reforms to improve Brazil&#8217;s deteriorating fiscal accounts and economy have led to
a decline in market confidence in the Brazilian economy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Additionally, Brazilian
markets have faced increased volatility due to the uncertainty in relation to ongoing corruption investigations by the Brazilian Federal
Police and the Federal Prosecutor&#8217;s Office, including under Operation Car Wash (<i>Opera&#231;&#227;o Lava Jato</i>), and the
impact of other scandals on the Brazilian economy and political environment. Members of the Brazilian government, including the legislative
and executive branch, as well as senior officials of large corporations have been investigated or prosecuted for corruption. The sum
was used to illegally finance political campaigns and to enrich members of the corruption scheme. As a result, several politicians, including
congressmen and high-profile business executives of public and private companies resigned and/or were arrested.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">This scenario has had negative
impacts on the general perception of the Brazilian market. The development of these cases of unethical conduct has materially adversely
affected the Brazilian economy and may continue to do so. We cannot predict the impacts of the investigations on the Brazilian economy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Moreover, the Brazilian
government may be subject to internal pressure to change its current macroeconomic policies in order to achieve higher rates of economic
growth. We cannot predict what policies will be adopted by the Brazilian government. As has happened in the past, the Brazilian economy
has been affected by the country&#8217;s political events, which have also affected the confidence of investors and the public in general,
thereby adversely affecting the performance of the Brazilian economy. Furthermore, any indecisiveness by the Brazilian government in
implementing changes to certain policies or regulations may contribute to economic uncertainty in Brazil and any difficulties the Brazilian
government may face establishing a majority in Congress could result in a government impasse, political unrest and mass demonstrations
and/or strikes that could in each case materially adversely affect our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Recent economic and political
instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which
also may adversely affect us and our securities. Any continued economic instability and political uncertainty may have a material adverse
effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Inflation and government efforts to control
inflation may have an impact on the Brazilian economy and adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Brazil has experienced extremely
high rates of inflation in the past and has therefore implemented monetary policies that have resulted in one of the highest interest
rates in the world. According to the IGP-M, a general price inflation index, the inflation rates in Brazil were 23.1% in 2020, 17.7%
in 2021 and 5.45% in 2022. In addition, according to the National Extended Consumer Price Index (<i>&#205;ndice Nacional de Pre&#231;os
ao Consumidor Amplo</i>), published by the IBGE, the Brazilian price inflation rates were 4.5% in 2020, 10.0% in 2021 and 5.79% in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Brazilian government&#8217;s
measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting availability
of credit and reducing economic growth. Inflation, actions to combat inflation and public speculation about possible additional actions
have also contributed materially to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.
The Brazilian government&#8217;s measures to fight inflation, principally through the Central Bank, have had and may in the future have
significant effects on the Brazilian economy and our business in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If Brazil experiences high
inflation rates, the Brazilian federal government may decide to intervene in the economy, including through the implementation of governmental
policies that may have an adverse effect on us and our clients. In addition, if Brazil experiences high inflation rates, we may not be
able to adjust the prices of our products in order to compensate for the effects of inflation in our costs structure, which may have
an adverse effect on us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Laws and Regulations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>A significant portion of medication on
the market, including ours, is subject to price control regulations. This control may limit our margins and our ability to pass on cost
increases to our customers, which could have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to a variety
of legislation that imposes price controls over certain pharmaceutical products that we manufacture and sell. Among these laws are Colombian
regulations that establish price controls for certain drugs or groups of medication, which take into consideration factors such as the
number of manufactures of such drugs and competitors in the market, market concentration, inflation and the impact on the private sector
or commercial channels, as defined by Colombia&#8217;s National Drug and Medical Devices Pricing Commission (<i>Comisi&#243;n Nacional
de Precios de Medicamentos y Dispositivos M&#233;dicos</i>), which applies a methodology based on a comparison between average price
in the Colombian market and prices in certain foreign markets, determined based on criteria such as a geographical proximity to Colombia,
overall economic intervention, membership to the Organisation for Economic Co-operation and Development, and availability of information.
The INVIMA analyzes these factors at least once a year, resulting in annual modifications to the list of drugs and groups of medication
subject to price controls. In Brazil there is legislation which limits price increases and inflation adjustments to once per year, according
to a cap based on the National Broad Consumer Price Index (<i>&#205;ndice Nacional de Pre&#231;os aos Consumidores Amplo</i>), a
productivity factor and an adjustment factor, all calculated as percentages per year. These price controls, among others, have resulted
in lower profit margins. We cannot guarantee that we will be able to maintain our profit margins in the future or that the governments
in the jurisdictions in which we operate will not impose additional or more restrictive price controls, which may have a material adverse
effect on our business, financial condition and results of operations. Failure to comply with price controls may lead to the imposition
of fines to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be held liable if a consumer has
an adverse health reaction to a product we sell or manufacture.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The use or misuse of our
products may result in adverse health reactions in our consumers. Incidents involving our products may have a material adverse effect
on us. Lawsuits, including product liability or administrative cases, may be filed against us claiming that our products were spoiled,
tampered with, contaminated, did not meet the product descriptions, involve false or misleading product labeling, or did not contain
appropriate disclosure information on possible side-effects or risks, among other things. In Colombia, product liability cases may result
in fines for damages. Additionally, administrative cases may result in the imposition of sanctions against us, such as, fines, temporary
or definitive closure of facilities, temporary or definitive prohibition to manufacture, prohibition to distribute or market certain
products, and destruction of products which are considered dangerous to consumers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These cases may result in
significant expenses due to product recalls, which may be required by regulatory authorities, as well as warnings, fines, suspension
and/or cancellation of the sanitary registration or the sanitary operation license, including temporary or permanent closing of facilities.
Any real or potential health risk associated with our products, including negative publicity, may cause our consumers to lose their trust
in the safety, efficiency and quality of our products. Even if products manufactured by third-parties harm consumers, our industry may
suffer from negative publicity, which could decrease demand for our products. Any claim of this type against our products may have a
material adverse effect on our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to product and other liability
risks that could exceed our anticipated costs or adversely affect our results of operations, financial condition, and cash flows.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to potentially
significant product liability and other liability risks that are inherent to the design, development, manufacture, marketing and distribution
of our products and services. We may be named as a defendant in product liability lawsuits, which may allege that our products and services
have resulted or could result in an unsafe condition or injury to consumers. Such lawsuits could be costly to defend and could result
in reduced sales, significant liabilities, and diversion of management&#8217;s time, attention, and resources. Even claims without merit
could affect our reputation due to adverse publicity and require us to incur in significant legal fees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, product liability
claims and lawsuits, regardless of their ultimate outcome, could have a material adverse effect on our business operations, financial
condition, and reputation and on our ability to attract and retain customers. We have historically sought to manage this risk through
the combination of product liability insurance policies and contractual indemnities provisions, together with liability limitations in
our agreements with customers and vendors. The availability of product liability insurance for companies in the pharmaceutical industry
is generally more limited than insurance available to companies in other industries. Insurance carriers providing product liability insurance
to those in the pharmaceutical and biotechnology industries generally limit the amount of available policy limits, require larger self-insured
retentions, and exclude coverage for certain products and claims. We maintain product liability insurance with annual aggregate limits
in excess of $15 million. This insurance policy provides coverage for defense expenses, which according to Colombian law, are payable
in excess of the insured limit. There can be no assurance that a successful product liability or other claim would be adequately covered
by our applicable insurance policies or by any applicable contractual indemnity or liability limitations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with existing and future
regulatory requirements could adversely affect our business, financial condition and results of operations, or result in claims from
customers.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The healthcare industry is
highly regulated. We, and our customers, are subject to various local, state, federal, national, and transnational laws and regulations,
which include the operating, quality, and security standards of INVIMA, the FDA, Brazil&#8217;s Health Regulatory Agency (<i>Ag&#234;ncia
Nacional de Vigil&#226;ncia Sanit&#225;ria,</i> or &#8220;ANVISA&#8221;), Health Canada, the United Kingdom&#8217;s Medicines and
Healthcare products Regulatory Agency (the &#8220;MHRA&#8221;), Australia&#8217;s Department of Health Therapeutic Goods Administration
(the &#8220;TGA&#8221;), Mexico&#8217;s Federal Commission for the Protection against Sanitary Risk (<i>Comisi&#243;n Federal para
la Protecci&#243;n contra Riesgos Sanitarios</i>, or &#8220;Cofepris&#8221;) and various state boards of pharmacy, state health departments,
and other similar bodies and agencies of the jurisdictions in which we operate, and, in the future, any change to such laws and regulations
could adversely affect us. Among other rules affecting us, we are subject to laws and regulations concerning manufacturing practices,
drug safety, advertising, labelling and packaging. Our subsidiaries may be required to register for permits or licenses, and may be required
to comply, with the laws and regulations of such agencies, boards of pharmacy, health departments, or other comparable agencies in various
jurisdictions around the world, as well as certain accrediting bodies, such as the International Organization for Standardization (&#8220;ISO&#8221;),
depending upon the type of operations and locations of distribution and sale of the products manufactured or services provided by those
subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The manufacture, distribution,
and marketing of our products and services are subject to extensive ongoing regulation by INVIMA, FDA, ANVISA, Health Canada, MHRA, TGA,
Cofepris and other equivalent local, state, federal, national, and transnational regulatory authorities. Failure by us or by our customers
to comply with the requirements of these regulatory authorities could result in warning letters, product recalls or seizures, monetary
sanctions, injunctions to halt manufacture or distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal
of existing or denial of pending approvals, permits, or registrations, including those relating to products or facilities. In addition,
any such failure relating to the products or services we provide could expose us to contractual or product liability claims as well as
claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, which cost could
be significant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, any new products
or services classified as pharmaceutical must undergo lengthy and rigorous clinical testing and other extensive, costly, and time-consuming
procedures mandated by the regulatory authorities in the jurisdictions that regulate our products or services. We or our customers may
elect to delay or cancel anticipated regulatory submissions for current or proposed new products or services for any number of reasons.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although we believe that
we comply in all material respects with applicable laws and regulations, there can be no assurance that a regulatory agency or tribunal
would not reach a different conclusion concerning the compliance of our operations with applicable laws and regulations. For instance,
INVIMA has authority to conduct ex-post reviews, which allows the entity to issue official actions or to initiate ex-officio investigations
to ensure compliance of all regulations. In addition, there can be no assurance that we will be able to maintain or renew existing permits,
licenses, or other regulatory approvals or obtain, without significant delay, future permits, licenses, or other approvals needed for
the operation of our businesses. Any noncompliance by us or our customers with applicable law or regulation or the failure to maintain,
renew, or obtain necessary permits and licenses could have an adverse effect on our business, financial condition and results of operations.
Furthermore, loss of a permit, license, or other approval in any one portion of our business may have indirect consequences in another
portion of our business if regulators or customers adjust their reviews of such other portion as a result or customers cease business
with such other portion due to fears that such loss is a sign of broader concerns about our ability to deliver products or services of
sufficient quality.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with municipal zoning
regulations could adversely affect our business, financial condition, and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The real estate properties
we utilize in connection with our operations are subject to a variety of zoning regulations of the municipalities where such properties
are located. Those regulations impose zoning and planning requirements that we must comply with and, in certain cases, zoning license
that we need to obtain. For more information, see Item 4.B of this Annual Report under the heading &#8220;Business Overview&#8211;&#8211;Manufacturing
and Distribution&#8212;Manufacturing Facilities<i>.</i>&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For instance, Colombian zoning
authorities (local planning offices and <i>curadur&#237;as</i>) have the authority to issue zoning licenses required for the construction
of buildings and facilities and for particular use of the land we own. Colombian police officers and judges are also entitled to issue
fines or even shutdown the facilities if they do not comply with the zoning regulations or permits. Therefore, any failure by us to comply
with zoning regulations and permits can result in monetary fines or the shutdown of our facilities and consequently have a material adverse
effect on our business, financial condition, and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to environmental, health,
and safety laws and regulations, which could increase our costs and restrict our operations in the future.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations are subject
to a variety of environmental, health, and safety laws and regulations in each of the jurisdictions in which we operate. These laws and
regulations govern, among other things, air emissions, wastewater discharges, the use, handling, and disposal of hazardous substances
and wastes, soil and groundwater contamination, and employee health and safety. Any failure by us to comply with environmental, health,
and safety requirements could result in the limitation or suspension of production or subject us to monetary fines, civil or criminal
sanctions, or other future liabilities in excess of our reserves. We are also subject to laws and regulations governing the destruction
and disposal of raw materials and non-compliant products, the handling of regulated material included in our products, and the disposal
of our products or their components at the end of their useful lives. In addition, compliance with environmental, health, and safety
requirements could restrict our ability to expand our facilities or require us to acquire costly environmental or safety control equipment,
incur other significant expenses, or modify our manufacturing processes. Our manufacturing facilities may use, in varying degrees, hazardous
substances in their processes. Any contamination at our current facilities, at formerly owned or operated properties, or at any surrounding
property can result in liability to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event of the discovery
of new or previously unknown contamination either at our facilities or at third-party locations, including facilities we formerly owned
or operated, or the imposition of cleanup obligations for which we are responsible, we may be required to take additional, unplanned
remedial measures for which we have not recorded reserves, which could have a material adverse effect on our business, financial condition
and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to meet regulatory or ethical expectations
on environmental impact, including climate change, could affect our ability to market and sell our products if other products with a
better carbon footprint are available.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The physical risks that climate
change poses to our business have been analyzed and we expect exposure to periods of extreme heat, floods and water scarcity to become
more frequent and severe in some regions where we operate, in the medium to longer term. These conditions may pose physical risks to
our business and supply chain. Among our initiatives to mitigate our impact on the planet and the climate crisis, we designed a carbon
neutrality strategy which we launched at the end of 2021. Our strategy has the goal of, among others, (i) calculating our baseline carbon
footprint and comparing it to the footprint of similar businesses to identify a benchmark, (ii) identifying greenhouse gas emissions
mitigation opportunities, and (iii) developing a strategy combining mitigation and offsetting to become carbon neutral by a date to be
determined. There can be no assurance that we will be able to achieve our carbon neutrality strategy and goals and if climate risks continue
to exacerbate, including if global temperatures continue to rise, and we are unable to adapt to such risks, our business and supply chain
may be adversely affected, which could have a material adverse effect on our financial condition and results of operations. For more
information on our carbon neutrality strategy, see Item 4.B under the heading &#8220;Corporate Responsibilities and Environmental, Social,
and Governance (&#8220;ESG&#8221;) &#8211;&#8211; Carbon Neutrality Strategy&#8221; in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, there is an increasing global focus
from regulators, investors, healthcare providers and broader society regarding measures needed to transition to a low carbon economy
and the impact that this transition will have on businesses. In some markets, regulators or healthcare providers may choose not to approve
or reimburse our products if other products with a better carbon footprint are available. In addition, carbon taxes and fees may be imposed
on us and our suppliers as a way to reduce greenhouse gas emissions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Environmental, social and governance matters
may impact our business and reputation</i></b>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Increasingly, in addition
to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social
and governance, or ESG, matters, which are considered to contribute to the long-term sustainability of companies&#8217; performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A variety of organizations
measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized. In addition, investment
in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors
have publicly emphasized the importance of such ESG measures to their investment decisions. Topics taken into account in such assessments
include, among others, the company&#8217;s efforts and impacts on climate change and human rights, ethics and compliance with law, and
the role of the company&#8217;s board of directors in supervising various sustainability issues.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In light of investors&#8217;
increased focus on ESG matters, there can be no certainty that we will manage such issues successfully. Any failure or perceived failure
by us in this regard could have a material adverse effect on our reputation and on our business, stock price, financial condition, or
results of operations, including the sustainability of our business over time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, we expect there
will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters. For example, the SEC has
published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic
reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional
internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased
oversight obligations on our management and board of directors. These and other changes in stakeholder expectations will likely lead
to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our
customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may
not be known to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our global operations are subject to economic,
political, and regulatory risks, including the risks of changing regulatory standards or changing interpretations of existing standards
that could affect our financial condition and results of operation or require costly changes to our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conduct our operations
in various regions of the world, including South America, Central America, North America and Europe. Global and regional economic and
regulatory developments affect businesses such as ours in many ways. Our operations are subject to the effects of global and regional
competition, including potential competition from manufacturers in low-cost jurisdictions such as India and China. Local jurisdiction
risks include regulatory risks arising from local laws. Our global operations are also affected by local economic environments, including
inflation and recession. Political changes, some of which may be disruptive, and related hostilities can interfere with our supply chain,
our customers, and some or all of our activities in a particular location. While some of these risks can be hedged using derivatives
or other financial instruments and some are insurable, such mitigating measures may be unavailable, costly, or unsuccessful.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Legislative or regulatory initiatives,
such as the 2021 Colombian Tax Reform and the 2021 Colombian Tax Reform, new interpretations or developments concerning existing tax
laws, or challenges to our tax positions could adversely affect our results of operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a large multinational
enterprise with operations in 13 countries throughout the world, including Colombia, Brazil, El Salvador, Peru and the United States,
and we do business with suppliers and customers in over 50 countries. As such, we are subject to the tax laws and regulations of various
jurisdictions, including U.S. federal, state, and local governments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2021, the
Colombian Congress approved a tax reform by enacting Law No. 2155 (the &#8220;2021 Colombian Tax Reform&#8221;), which came into force
on January 1, 2022 and implemented certain tax measures intended to mitigate the economic and social effects of the COVID-19 pandemic.
These tax measures included among others, increasing the corporate income tax rate from 31% to 35% as of January 1, 2022 and the public
spending budget.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">In addition to the 2021
Colombian Tax Reform, on August 8, 2022, the incoming Colombian Government, under the lead of the recently elected President,
Gustavo Petro, and the minister of Finance and Public Credit, Jos&#233; Antonio Ocampo, submitted to the Colombian Congress for
its consideration a new tax reform bill to collect approximately $25 trillion Colombian Pesos (the &#8220;2022 Colombian Tax
Reform&#8221;). On December 13, 2022, the Colombian President, Gustavo Petro, enacted Law 2277 of 2022. The purpose of the
amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These tax measures
include an unchanged Corporate Income Tax (CIT) rate of 35%. However, a new net tax rate will be introduced, under which Colombian
companies, including free trade zone (FTZ) users, will be subject to a minimum 15% effective tax rate, calculated based on financial
net profit, in accordance with the OECD Pillar Two global minimum tax rules. CIT rate for qualified FTZ companies will remain at 20%
subject to an annual exportation requirement. Certain non taxable income items, special deductions, exempt income and tax credits
will be capped at 3% of the taxpayer&#8217;s net income before these detractions. In addition, the capital gains tax rate to rise to
15% (from 10%). For further information on this new tax reform bill, see &#8220;<i>Business&#8211;</i>&#8211;<i>Regulatory
Matters&#8211;&#8211;2021 Colombian Tax Reform</i>.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot anticipate the
impact of this tax reform nor, the impact of the measures that could be adopted by the incoming government to meet its financial obligations,
which might negatively affect Colombia&#8217;s economy and, in turn, our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There can be no assurance
that our effective tax rate or tax payments will not be adversely affected by the new tax reform.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the tax laws
of several of the countries we operate in, including Brazilian and U.S. federal, state and local tax laws and regulations are extremely
complex and subject to varying interpretations. We are subject to regular examination of our income tax returns by various tax authorities.
Examinations or changes in laws, rules, regulations, or interpretations by taxing authorities could result in adverse impacts to tax
years open under statute or to our operating structures currently in place. We regularly assess the likelihood of adverse outcomes resulting
from these examinations or changes in laws, rules, regulations, or interpretations to determine the reasonableness of our provision for
taxes. It is possible that the outcomes from these examinations or changes in laws, rules, regulations, or interpretations by taxing
authorities will have a material adverse effect on our financial condition or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to labor and employment
laws and regulations, which could increase our costs and restrict our operations in the future.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022,
we employed more than 5,500 individuals worldwide, primarily in South and Central America. Our management believes that our employee
relations are satisfactory. Employees in our Rymco (2 employees), Funtrition (4 employees), and Softgel (39 employees) manufacturing
facilities are currently represented by industry labor union organizations, representing approximately 0.8% of our total employees. However,
further organizing activities, collective bargaining, or changes in the regulatory framework for employment may increase our employment-related
costs or may result in work stoppages or other labor disruptions. Also, Law No. 2102, enacted in 2021, set forth a progressive reduction
scheme of the maximum legal working schedule from 48 to 42 hours per week, prohibiting any reduction of employees&#8217; salaries thereof.
The progressive reduction on the maximum working schedule is expected to become enforceable as of July 15, 2023. Moreover, as employers
are subject to various employment-related claims, such as individual and class actions relating to alleged employment discrimination
and wage-hour and labor standards issues, such actions, if brought against us and successful in whole or in part, may affect our ability
to compete or have a material adverse effect on our business, financial condition, and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to governmental export and
import controls that could impair our ability to compete in international markets and subject us to liability if we are not in compliance
with applicable laws.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our products are subject
to export and import control laws and regulations of the jurisdictions in which we operate. Exports of our products must be made in compliance
with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject
to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on
us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, changes in our
products or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of
our products in international markets, prevent customers from using our products or, in some cases, prevent the export or import of our
products to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our products
could adversely affect our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Certain pharmaceutical
products we manufacture contain &#8220;controlled substances&#8221; and although we only manufacture and sell such products in the jurisdictions
in which we are licensed to do so, the proceeds from the sale of such products could be considered criminal property in other jurisdictions.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Certain
products we manufacture, such as Dronabinol, which contains a synthetic form of tetrahydrocannabinol (THC), contain &#8220;controlled
substances&#8221; as defined in the Controlled Substances Act, the U.K. Misused of Drugs Regulations 2001, and other similar regulations
in other jurisdictions. We only manufacture and sell products containing &#8220;controlled substances&#8221; in jurisdictions in which
we are licensed to do so, such as Dronabinol, which we have received FDA approval to manufacture and sell in the United States. However,
the proceeds from the sale of &#8220;controlled substances&#8221; in jurisdictions in which we are licensed to do so may be considered
&#8220;criminal property&#8221; in other jurisdictions in which such products have not been licensed, such as the proceeds from the sale
of Dronabinol in the United States, which could be considered criminal property in the United Kingdom under the U.K. Proceeds of Crime
Act 2002.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Although
we are not aware of any cases where regulatory authorities have prosecuted a company, whose primary business in not the manufacturing
and sale of &#8220;controlled substances&#8221;, for the use of criminal property in connection with the use of proceeds from the sale
of &#8220;controlled substances&#8221; in jurisdictions in which it was licensed to do so, we cannot provide any assurances that the
payments with proceeds derived from the sale of &#8220;controlled substances&#8221;, such as Dronabinol, would not be considered criminal
property under the U.K. Proceeds of Crime Act 2002, or other similar regulations in another jurisdiction. </p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with the U.S. Foreign
Corrupt Practices Act and similar laws associated with our activities in other jurisdictions could subject us to penalties and other
adverse consequences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a substantial portion
of our revenues is, and we expect will continue to be, from jurisdictions outside of the United States, we face significant risks if
we fail to comply with the U.S. Foreign Corrupt Practices Act (&#8220;FCPA&#8221;) and other laws that prohibit improper payments or
offers of payment to governments and their officials and political parties by us and other business entities for the purpose of obtaining
or retaining business. In many countries, particularly in countries with developing economies, some of which represent significant markets
in which we operate, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited
by the FCPA or other laws and regulations. Although we have implemented company policy requiring employees and consultants to comply
with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations. In addition, we
cannot guarantee the compliance by our partners, resellers, suppliers and agents with applicable laws, including the FCPA. Therefore,
there can be no assurance that none of our employees or agents will take actions in violation of our policies or of applicable laws,
for which we may be ultimately held responsible. Any violation of the FCPA and related policies could result in severe criminal or civil
sanctions, which could have a material and adverse effect on our reputation, business, financial condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Our Status as a Publicly
Traded Company </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our management has limited experience in
operating a public company.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our executive officers have
limited experience in the management of a publicly traded company. Our senior management team may not successfully or effectively manage
our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities
laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage
in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being
devoted to the management and growth of our company. We may not have adequate personnel with the appropriate level of knowledge, experience,
and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the
United States. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards
required of a public company in the United States may require costs greater than expected. It is possible that we will be required to
expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating
costs in future periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are controlled by the Minski Family,
whose interests may conflict with our interests and the interests of our other shareholders.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Minski Family, through
Deseja, Sognatore and Simphony, owns 59.6% of the issued and outstanding Ordinary Shares, including 10,464,612 Ordinary Shares that is
held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and the related escrow agreement. As long
as the Minski Family owns at least 50% of the outstanding Ordinary Shares, the Minski Family will have the ability to determine all ordinary
corporate actions requiring shareholder approval, including the election and removal of directors and the size of our Board of Directors
(within the limits provided for in the Company&#8217;s amended and restated articles of association). Our Board of Directors may, without
any approval required by our shareholders, decide upon, under certain circumstances, a sale of substantially all of our assets. If any
shareholder or group of shareholders were to own 2/3 or more of the outstanding Ordinary Shares, such shareholder or group of shareholders
would have the required majority pursuant to Luxembourg law and the Company&#8217;s amended and restated articles of association to amend
the Company&#8217;s amended and restated articles of association and take all other shareholder resolutions which require at least 2/3
of the outstanding Ordinary Shares. In addition, pursuant to the Nomination Agreement, the Minski Family has the right to propose for
appointment a majority of the Board of Directors, at least one-half of whom must be independent under Nasdaq rules, and the right to
appoint a director to each committee of the Board of Directors. Such rights of the Minski Family shall terminate upon the earlier of
(i) 20 years from the date of the Nomination Agreement and (ii) the date on which the Minski Family, or its affiliates, cease to beneficially
own, in the aggregate, 30% of the outstanding Ordinary Shares. This could have the effect of delaying or preventing a change in control
or otherwise discouraging a potential acquirer from attempting to obtain control of the company, which could cause the market price of
Ordinary Shares to decline or prevent shareholders from realizing a premium over the market price for Ordinary Shares. The Minski Family&#8217;s
interests may conflict with our interests as a company or the interests of our other shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>A market for our securities may not continue,
which would adversely affect the liquidity and price of our securities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The price of our securities
may fluctuate significantly due to the market&#8217;s reaction to general market and economic conditions. An active trading market for
our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to
general economic conditions and forecasts, our general business condition and the release of financial reports. Additionally, if our
securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation
system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited
than if it were quoted or listed on Nasdaq or another national securities exchange. Shareholders may be unable to sell our securities
unless a market can be established or sustained.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If securities or industry analysts cease
publishing research or reports about us, our business, or our market, or if they change their recommendations regarding the Ordinary
Shares adversely, then the price and trading volume of Ordinary Shares could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading market for the
Ordinary Shares will be influenced by the research and reports that industry or securities analysts publish about us, our business, our
market, or our competitors. If any of the analysts who cover us change their recommendation regarding the Ordinary Shares adversely,
or provide more favorable relative recommendations about our competitors, the price of the Ordinary Shares would likely decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The JOBS Act permits &#8220;emerging growth
companies&#8221; like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies
that are not emerging growth companies.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently qualify as an
&#8220;emerging growth company&#8221; as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012, which we refer to as the &#8220;JOBS Act.&#8221; As such, we take advantage of certain exemptions from various
reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an
emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial
reporting under Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information they
deem important.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot predict if investors
will find the Ordinary Shares less attractive because we rely on these exemptions. If some investors find the Ordinary Shares less attractive
as a result, there may be a less active trading market and the share price for the Ordinary Shares may be more volatile.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We cannot guarantee that our share repurchase
program will be utilized to the full value approved or that it will enhance long-term shareholder value. Repurchases we consummate could
increase the volatility of the price of our Ordinary Shares and could have a negative impact on our available cash balance.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2023, our Board of Directors approved
a share repurchase program for the purchase of up to $5.0 million Ordinary Shares or 2,000,000 Ordinary Shares, whichever is less (the
&#8220;Repurchase Program&#8221;). Under the Repurchase Program, repurchases can be made from time to time using a variety of methods,
which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC
and other applicable legal requirements. The specific timing, price and size of the purchases will depend on prevailing share prices,
general economic and market conditions, and other considerations consistent with our capital allocation strategy. Share repurchases could
have an impact on our Ordinary Share trading prices, increase the volatility of the price of our Ordinary Shares, or reduce our available
cash balance such that we will be required to seek financing to support our operations. The repurchase program does not obligate us to
acquire a particular amount of Ordinary Shares, and the repurchase program may be suspended or discontinued at any time at our discretion,
which may result in a decrease in the trading prices of our Ordinary Shares. Even if our <b>share repurchase program</b> is fully implemented,
it may not enhance long-term shareholder value.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Investment in a Luxembourg
Company and Our Status as a Foreign Private Issuer</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>As a foreign private issuer, the Company
is exempt from a number of U.S. securities laws and rules promulgated thereunder and will be permitted to publicly disclose less information
than U.S. public companies must. This may limit the information available to holders of the Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company qualifies as
a &#8220;foreign private issuer,&#8221; as defined in the SEC&#8217;s rules and regulations, and, consequently, it will not be subject
to all of the disclosure requirements applicable to public companies organized within the United States. For example, the Company is
exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation
of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors
are exempt from the reporting and &#8220;short-swing&#8221; profit recovery provisions of Section 16 of the Exchange Act and related
rules with respect to their purchases and sales of our securities. For example, some of our key executives may sell a significant number
of Ordinary Shares and such sales will not be required to be disclosed as promptly as public companies organized within the United States
would have to disclose. Accordingly, once such sales are eventually disclosed, the price of Ordinary Shares may decline significantly.
Moreover, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S.
public companies. We will also not be subject to Regulation FD under the Exchange Act, which would prohibit us from selectively disclosing
material nonpublic information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly,
there may be less publicly available information concerning us than there is for U.S. public companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Company may lose its foreign private
issuer status in the future, which could result in significant additional costs and expenses. This would subject us to GAAP reporting
requirements which may be difficult for it to comply with.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a &#8220;foreign private
issuer,&#8221; the Company is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange
Act and related rules and regulations. Under those rules, the determination of foreign private issuer status is made annually on the
last business day of an issuer&#8217;s most recently completed second fiscal quarter, and, accordingly, the next determination will be
made on June 30, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the future, the Company
could lose its foreign private issuer status if a majority of the Ordinary Shares are held by residents in the United States and we fail
to meet any one of the additional &#8220;business contacts&#8221; requirements. Although we intend to follow certain practices that are
consistent with U.S. regulatory provisions applicable to U.S. companies, the loss of our foreign private issuer status would make such
provisions mandatory. The regulatory and compliance costs under U.S. securities laws if we are deemed a U.S. domestic issuer may be significantly
higher. If the Company is not a foreign private issuer, we will be required to file periodic reports and prospectuses on U.S. domestic
issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, we
may be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such
conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain
corporate governance requirements of Nasdaq that are available to foreign private issuers. For example, Nasdaq&#8217;s corporate governance
rules require listed companies to have, among other things, a majority of independent board members and independent director oversight
of executive compensation, nomination of directors, and corporate governance matters. As a foreign private issuer, we are permitted to
follow home country practice in lieu of the above requirements. We intend to follow Luxembourg practice with respect to quorum requirements
for shareholder meetings in lieu of the requirement under Nasdaq Listing Rules that the quorum be not less than 33 1/3% of the outstanding
voting shares. Under the Company&#8217;s amended and restated articles of association, at an ordinary general meeting, there is no quorum
requirement and resolutions are adopted by a simple majority of validly cast votes. In addition, under the Company&#8217;s amended and
restated articles of association, for any resolutions to be considered at an extraordinary general meeting of shareholders, the quorum
shall be at least one half of our issued share capital unless otherwise mandatorily required by law. As long as we rely on the foreign
private issuer exemption to certain of Nasdaq&#8217;s corporate governance standards, a majority of the directors on our Board of Directors
are not required to be independent directors, our compensation committee is not required to be comprised entirely of independent directors,
and we will not be required to have a nominating committee. Also, we would be required to change our basis of accounting from IFRS as
issued by the IASB to GAAP, which may be difficult and costly for us to comply with. If we lose our foreign private issuer status and
fail to comply with U.S. securities laws applicable to U.S. domestic issuers, we may have to de-list from Nasdaq and could be subject
to investigation by the SEC, Nasdaq and other regulators, among other materially adverse consequences.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Company no longer
qualifies as a foreign private issuer, we may be eligible to take advantage of exemptions from Nasdaq&#8217;s corporate governance standards
if we continue to qualify as a &#8220;controlled company.&#8221; The Minski Family owns 59.6 % of the issued and outstanding Ordinary
Shares, including 10,464,612 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement
and the related escrow agreement. As a result, we are a &#8220;controlled company&#8221; within the meaning of Nasdaq rules. Under these
rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another
company is a &#8220;controlled company&#8221; and may elect not to comply with certain corporate governance requirements, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            requirement that a majority of its board of directors consist of independent directors;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            requirement that compensation of its executive officers be determined by a majority of the
                                            independent directors of the board or a compensation committee comprised solely of independent
                                            directors with a written charter addressing the committee&#8217;s purpose and responsibilities;
                                            and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            requirement that director nominees be selected, or recommended for the board&#8217;s selection,
                                            either by a majority of the independent directors of the board or a nominating committee
                                            comprised solely of independent directors with a written charter addressing the committee&#8217;s
                                            purpose and responsibilities.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we elect to take advantage
of these exemptions, shareholders would not have the same protections afforded to shareholders of companies that are subject to all the
Nasdaq corporate governance standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Company is organized under the laws
of the Grand Duchy of Luxembourg and a substantial amount of our assets are not located in the United States. It may be difficult for
you to obtain or enforce judgments or bring original actions against us or the members of our Board of Directors in the United States.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is incorporated
under the laws of the Grand Duchy of Luxembourg. In addition, a substantial amount of our assets is located outside the United States.
Furthermore, some of the members of our Board of Directors and officers reside outside the United States and a substantial portion of
our assets are located outside the United States. Investors may not be able to effect service of process within the United States upon
us or these persons or enforce judgments obtained against us or these persons in U.S. courts, including judgments in actions predicated
upon the civil liability provisions of the U.S. federal securities laws. Likewise, it also may be difficult for an investor to enforce
in U.S. courts judgments obtained against us or these persons in courts located in jurisdictions outside the United States, including
judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Awards of punitive damages in actions brought
in the United States or elsewhere are generally not enforceable in the Grand Duchy of Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As there is no treaty in
force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand
Duchy of Luxembourg (the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters
is not yet in force and it has not yet been ratified by the United States),, courts in the Grand Duchy of Luxembourg will not automatically
recognize and enforce a final judgment rendered by a U.S. court. However, a party who received such favorable judgment in a U.S. Court
may initiate enforcement proceedings in the Grand Duchy of Luxembourg (<i>exequatur</i>) by requesting enforcement of the U.S. judgment
by the District Court (<i>Tribunal d&#8217;Arrondissement</i>) pursuant to Section 678 of the New Luxembourg Code of Civil Procedure.
The District Court will authorize the enforcement in Luxembourg of the U.S. judgment if it is satisfied that all of the following conditions
are met:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. judgment is enforceable (<i>ex&#233;cutoire</i>) in the United States;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. court awarding the judgment had jurisdiction to adjudicate the applicable matter under
                                            applicable U.S. federal or state jurisdictions rules, and the jurisdiction of the U.S. court
                                            is recognized by Luxembourg private international and local law;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. court has applied the substantive law as designated by the Grand Duchy of Luxembourg
                                            conflict of laws rules according to certain Luxembourg case law, it is admitted that the
                                            Grand Duchy of Luxembourg courts which are asked to grant an exequatur do not have to verify
                                            whether the substantive law actually applied by the U.S. court awarding the judgment was
                                            the law which would have been applied;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. judgment does not contravene international public policy or order as understood under
                                            the laws of Luxembourg;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. court has acted in accordance with its own procedural rules and laws;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. judgment was granted following proceedings where the counterparty had the opportunity
                                            to appear, and if it appeared, to present a defense; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            U.S. judgment was not granted pursuant to an evasion of Grand Duchy of Luxembourg law (<i>fraude
                                            &#224; la loi luxembourgeoise</i>).</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Please note that the Grand
Duchy of Luxembourg case law is constantly evolving. Some of the conditions of admissibility described above may change, and additional
conditions could be required to be fulfilled by the Grand Duchy of Luxembourg courts while other conditions may not be required by Luxembourg
courts in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the conditions
described above, courts of the Grandy Duchy of Luxembourg tend not to review the merits of a foreign judgment, although such a review
is not statutorily prohibited.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If an original action is
brought in the Grand Duchy of Luxembourg, the Grand Duchy of Luxembourg courts may refuse to apply the law designated and applied in
the original action if (i) the choice of such law was not bona fide or if the foreign law was not pleaded or proved or if pleaded and
proved, the foreign law was contrary to the Grand Duchy of Luxembourg mandatory provisions (<i>lois imp&#233;ratives</i>) or incompatible
with the Grand Duchy of Luxembourg public policy rules, and (ii) its application is manifestly incompatible with the Grand Duchy of Luxembourg
international policy rules. In an action brought in the Grand Duchy of Luxembourg on the basis of U.S. federal or state securities laws,
the Grand Duchy of Luxembourg courts may not have the requisite power to grant the remedies sought. Also, an exequatur may be refused
if it involves punitive damages.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Litigation in the Grand Duchy
of Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including, with respect to the taking and admissibility
of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in the Grand Duchy of Luxembourg would in principle
have to be conducted in the French or German language, and all documents submitted to the court would, in principle, have to be translated
into French or German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a Grand Duchy of Luxembourg
court predicated upon the civil liability provisions of the U.S. federal securities laws against us, the members of our Board of Directors,
our officers, or the experts named herein. In addition, even if a judgment against us, the non-U.S. members of our Board of Directors,
our officers, or the experts named in this Annual Report based on the civil liability provisions of the U.S. federal securities laws
is obtained, a U.S. investor may not be able to enforce it in U.S. or the Grand Duchy of Luxembourg courts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, in the event of
any proceedings being brought in the Grand Duchy of Luxembourg court in respect of a monetary obligation expressed to be payable in a
currency other than the Euro, a Grand Duchy of Luxembourg court would have power to give judgment expressed as an order to pay a currency
other than the Euro. However, enforcement of the judgment against any party in the Grand Duchy of Luxembourg would be available only
in Euros and for such purposes all claims or debts would be converted into Euros.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated
articles of association adopted in connection with the Business Combination contain specific indemnification provisions stating that
every person who is, or has been, a member of our Board of Directors or officer (<i>mandataire</i>) shall be indemnified by us to the
fullest extent permitted by Luxembourg law against liability and against all expenses reasonably incurred or paid by such director or
officer in connection with any claim, action, suit or proceeding in which such director or officer becomes involved as a party or otherwise
by virtue of his or her being or having been a director or officer and against amounts paid or incurred by him or her in the settlement
thereof.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Luxembourg and European insolvency and
bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer our shareholders less protection than
they would have under U.S. insolvency and bankruptcy laws. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a company organized under
the laws of the Grand Duchy of Luxembourg and with our registered office in the Grand Duchy of Luxembourg, the Company is subject to
the Grand Duchy of Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it including,
among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should
courts in another European country determine that the insolvency and bankruptcy laws of that country apply to us in accordance with and
subject to such European Union (&#8220;EU&#8221;) regulations, the courts in that country could have jurisdiction over the insolvency
proceedings initiated against us. Insolvency and bankruptcy laws in the Grand Duchy of Luxembourg or the relevant other European country,
if any, may offer our shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult
for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.</p><div>





</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The rights of our shareholders may differ
from the rights they would have as shareholders of a United States corporation, which could adversely impact trading in Ordinary Shares
and our ability to conduct equity financings.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our corporate affairs are
governed by the Company&#8217;s amended and restated articles of association and the laws of Luxembourg, including the Luxembourg Company
Law (<i>loi du 10 ao&#251;t 1915 sur les soci&#233;t&#233;s commerciales, telle que modifi&#233;e</i>). The rights of our shareholders
and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated
in the United States. For example, under Delaware law, the board of directors of a Delaware corporation bears the ultimate responsibility
for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary
duties of care and loyalty to the corporation and its shareholders. Luxembourg law imposes a duty on directors of a Luxembourg company
to: (i) act in good faith with a view to the best interests of a company; and (ii) exercise the care, diligence, and skill that a reasonably
prudent person would exercise in a similar position and under comparable circumstances. Additionally, under Delaware law, a shareholder
may bring a derivative action on behalf of a company to enforce a company&#8217;s rights. Under Luxembourg law, the board of directors
has sole authority to decide whether to initiate legal action to enforce a company&#8217;s rights (other than, in certain circumstances,
an action against members of the board of directors, which may be initiated by the general meeting of the shareholders, or, subject to
certain conditions, by minority shareholders holding together at least 10% of the voting rights in the company). Further, under Luxembourg
law, there may be less publicly available information about us than is regularly published by or about U.S. issuers. In addition, Luxembourg
laws governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg
laws and regulations in respect of corporate governance matters might not be as protective of minority shareholders as are state corporation
laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests in connection with actions
taken by our directors, officers or principal shareholders than they would as shareholders of a corporation incorporated in the United
States. As a result of these differences, our shareholders may have more difficulty protecting their interests than they would as shareholders
of a U.S. issuer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Non-Luxembourg resident holders of Ordinary
Shares could be subject to adverse Grand Duchy of Luxembourg income tax consequences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax position of the holders
of Ordinary Shares may vary according to their particular financial and tax situation. Our tax structuring and/or our investments may
not be tax-efficient for a particular prospective holder of Ordinary Shares. No assurances can be given that amounts distributed or allocated
to the holders of Ordinary Shares will have any particular characteristics or that any specific tax treatment will apply. Furthermore,
no assurances can be given that any particular investment structure in which we have a direct or indirect interest will be suitable for
all holders of Ordinary Shares and, in certain circumstances, such structures may lead to additional costs or reporting obligations for
some or all of the holders of Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-Luxembourg resident holders
of Ordinary Shares that have neither a permanent establishment nor a permanent representative in the Grand Duchy of Luxembourg to which
or whom the Ordinary Shares are attributable, are generally not subject to any income tax in the Grand Duchy of Luxembourg on gains realized
upon the sale, repurchase or redemption of the Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-Luxembourg resident holders
of Ordinary Shares will only be subject to the Grand Duchy of Luxembourg income tax on capital gains in the event they hold a substantial
participation in us (i.e. more than 10% of our issued shares, either alone or together with certain close relatives, at any time during
the five-year period preceding the disposition of Ordinary Shares) and (a) the disposition of Ordinary Shares (including liquidation)
takes place within six months after acquisition or (b) in case of a disposition of Ordinary Shares after six months or more, such holder
had been a Grand Duchy of Luxembourg resident taxpayer for more than fifteen years and has become a non-Luxembourg taxpayer less than
five years before the disposition of Ordinary Shares occurs. Nevertheless, holders should consult their own tax advisors to determine
which double tax treaties concluded by the Grand Duchy of Luxembourg, if any, apply in order to determine which state (residency state
or the Grand Duchy of Luxembourg) has the right to tax any such capital gains.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>U.S. Tax Risk Factors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If a United States person is treated as
owning at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a United States person
is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may
be treated as a &#8220;United States shareholder&#8221; with respect to us. If United States shareholders own more than 50% of the value
or voting power of our shares, then we will be considered a controlled foreign corporation. Additionally, as a result of complex attribution
rules, a direct or indirect subsidiary of us may be considered a &#8220;controlled foreign corporation&#8221; and a United States shareholder
may be subject to the controlled foreign corporation rules with respect to such subsidiary even if we ourselves are not a controlled
foreign corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A United States shareholder
of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of the
controlled foreign corporation&#8217;s &#8220;Subpart F income&#8221; and (in computing its &#8220;global intangible low-taxed income&#8221;)
&#8220;tested income&#8221; and a pro rata share of the amount of U.S. property (including certain stock in U.S. corporations and certain
tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign
corporation makes any distributions. Failure to comply with these reporting obligations (or related tax payment obligations) may subject
such United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such United
States shareholder&#8217;s U.S. federal income tax return for the year for which reporting (or payment of tax) was due from starting.
An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain
tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide
any assurances that it will assist holders in determining whether it, or any of our non-U.S. subsidiaries, are treated as a controlled
foreign corporation or whether any holder is treated as a United States shareholder with respect to any of such controlled foreign corporations
or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 4.</b></span><b> COMPANY
INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">The Company makes its filings
in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company&#8217;s
filings are also available to the public through the Internet at Procaps&#8217;s website at https://investor.procapsgroup.com. Procaps&#8217;s
website is provided for informational purposes only and the information contained on its website or that can be accessed through its website
is not part of this Annual Report.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. HISTORY AND DEVELOPMENT OF THE COMPANY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company was incorporated
under the laws of the Grand Duchy of Luxembourg on March 29, 2021 as a public limited liability company (<i>soci&#233;t&#233; anonyme</i>)
governed by the laws of the Grand Duchy of Luxembourg for an unlimited duration and registered with the Luxembourg Trade and Companies&#8217;
Register (<i>Registre de Commerce et des Soci&#233;t&#233;s, Luxembourg</i>) under number B 253360. The Company was incorporated
solely for the purpose of effectuating the Business Combination, which was consummated on September 29, 2021. The Company owned no material
assets other than its interests in Crynssen acquired in the Business Combination and did not operate any business. Crynssen is a private
limited liability company registered and incorporated under the laws of Malta and, particularly, the Companies Act Cap. 386. See Item
5 of this Annual Report under the heading &#8220;Operating and Financial Review and Prospects&#8221; for a discussion of our principal
capital expenditures and divestitures for the years ended December 31, 2022, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s mailing
address and registered office is 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg, and its telephone number is +356 7995-6138.
The Company&#8217;s principal website address is https://www.procapsgroup.com. The information contained on, or accessible through, the
Company&#8217;s websites is not incorporated by reference into this Annual Report, and you should not consider it a part of this Annual
Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is subject to
certain of the informational filing requirements of the Exchange Act. Since the Company is a &#8220;foreign private issuer&#8221;, it
is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers,
directors and principal shareholders of the Company are exempt from the reporting and &#8220;short-swing&#8221; profit recovery provisions
contained in Section 16 of the Exchange Act with respect to their purchase and sale of Ordinary Shares. In addition, the Company is not
required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities
are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing
financial statements audited by an independent accounting firm. The SEC also maintains a website at http://www.sec.gov that contains
reports and other information that the Company files with or furnishes electronically to the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The Business Combination</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 29, 2021, the
Business Combination was consummated. As part of the Business Combination, on the Closing Date, pursuant to the Business Combination
Agreement:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Merger Sub
    merged with and into SPAC, with SPAC surviving such merger and becoming a direct wholly-owned subsidiary of the Company and, in the
    context of the Merger, (a) all SPAC Ordinary Shares outstanding were exchanged with for Ordinary Shares pursuant to a share capital
    increase, (b) each SPAC Warrant became a Warrant exercisable for Ordinary Shares, on substantially the same terms as the SPAC Warrants,
    and (c) the Company entered into the Warrant Amendment to amend and assume SPAC&#8217;s obligations under the SPAC Warrant Agreement
    to give effect to the conversion of SPAC Warrants to Warrants;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">immediately
    following the consummation of the Merger and prior to the Exchange (as defined below), the Company redeemed all 4,000,000 Redeemable
    A Shares held by Crynssen for a total purchase price of $40,000 (corresponding to their nominal value of $0.01 per share);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">immediately
    following the consummation of the Merger and the redemption of all the Redeemable A Shares, pursuant to those certain individual
    contribution and exchange agreements, each dated as of March 31, 2021, as amended, and entered into by and among the Company, Crynssen
    and each of the Crynssen Shareholders, each of the Crynssen Shareholders, contributed its respective Crynssen Ordinary Shares to
    the Company in exchange for Ordinary Shares, and, in the case of IFC, for Ordinary Shares and 4,500,000 Redeemable B Shares, which
    were subscribed for by each such Crynssen Shareholder (such contributions and exchanges of Crynssen Ordinary Shares for Ordinary
    Shares and, in the case of IFC, Ordinary Shares and Redeemable B Shares, collectively, the &#8220;Exchange&#8221;);</span></td></tr>
  </table><div>






































































</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; text-transform: uppercase">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="margin: 0">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">as
a result of the Exchange, Crynssen became a direct wholly-owned subsidiary of the Company and the Crynssen Shareholders became holders
of issued and outstanding Ordinary Shares and, in the case of IFC, Ordinary Shares and Redeemable B Shares; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">immediately
following the Exchange, the Company redeemed 4,500,000 Redeemable B Shares from IFC for a total purchase price of $45,000,000 (corresponding
to a purchase price of $10.00 per Redeemable B Share) in accordance with the IFC Redemption Agreement.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Certain Agreements Related to the Business
Combination</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Registration Rights and Lock-Up Agreement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the Closing
of the Business Combination, Crynssen, the Sponsors, certain other persons and entities (&#8220;Original Holders&#8221;) holding SPAC
Ordinary Shares issued by Union prior to its IPO (the &#8220;Founder Shares&#8221;) and the Crynssen Shareholders entered into the Registration
Rights and Lock-Up Agreement which provides customary demand and piggyback registration rights. Additionally, the Ordinary Shares held
by the Sponsors and the Original Holders which were previously Founder Shares will be locked-up until the earliest of: (i) the date that
is one year from the Closing Date, (ii) the date on which the closing price of the Ordinary Shares on the Nasdaq equals or exceeds $12.50
per Ordinary Share for any 20 trading days within any 30-trading day period commencing 150 days after the Closing Date, or (iii) such
date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our shareholders having
the right to exchange their Ordinary Shares for cash, securities or other property.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ordinary Shares held by
the Crynssen Shareholders were also subject to a lock-up which has expired.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ordinary Shares and Warrants
began trading on the Nasdaq Global Market under the ticker symbol &#8220;PROC&#8221; and &#8220;PROCW&#8221;, respectively, on September
30, 2021. A copy of the Business Combination Agreement is included as Exhibit 4.1 to this Annual Report and the amendment to the Business
Combination Agreement, which is included as Exhibit 4.2 to this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Assignment, Assumption and Amendment Agreement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On the Closing Date, the Company
entered into the Warrant Amendment to amend and assume Union&#8217;s obligations under the existing Warrant Agreement to give effect to
the conversion of SPAC Warrants to Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Nomination Agreement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On the Closing Date, the Company,
the Sponsors, certain Original Holders and certain Crynssen Shareholders entered into the Nomination Agreement pursuant to which, in connection
with any general meeting at which the Company&#8217;s directors are to be elected, or any adjournment or postponement thereof, Deseja,
Sognatore and Simphony (collectively, the &#8220;Minski Family Shareholders&#8221;) shall collectively have the right to propose for appointment
a number of directors that equals a majority of our Board of Directors (each, a &#8220;Majority Shareholder Director&#8221;). For as long
as Hoche Partners Pharma Holding S.A. (&#8220;Hoche&#8221;) owns no less than 7% of the Company&#8217;s issued and outstanding share capital,
Hoche shall have the right to propose for appointment one director (such director, the &#8220;Hoche Shareholder Director&#8221; and collectively
with the Majority Shareholder Directors, each a &#8220;Shareholder Director&#8221; and collectively, the &#8220;Shareholder Directors&#8221;).
Alejandro Weinstein served as the Hoche Shareholder Director for the period from Closing through January 19, 2023, the effective date
of his resignation from the Board of Directors. In connection with Mr. Weinstein&#8217;s resignation, pursuant to the Nomination Agreement,
Hoche nominated and the Board appointed, Alberto Eguiguren Correa to serve as the Hoche Shareholder Director and fill the vacancy created
by Mr. Weinstein&#8217;s resignation. In connection with our first two consecutive general shareholders&#8217; meetings following September
1, 2021 at which directors are to be elected, or any adjournment or postponement thereof, the Sponsors shall have the right to propose
for appointment Daniel W. Fink and Kyle P. Bransfield as directors of our Board of Directors. At least one-half of the Shareholder Directors
must qualify as independent directors (&#8220;Independent Directors&#8221;) under applicable stock exchange rules, subject to any independence
requirements established by the listing rules of the stock exchange on which the Ordinary Shares are listed that would require a greater
number of Shareholder Directors to qualify as Independent Directors, provided that the Minski Family Shareholders will not be required
to nominate any additional Independent Directors unless and until all of the directors, other than the Majority Shareholder Directors,
qualify as Independent Directors. In addition, for so long as we maintain any committee, such committees shall each include at least one
Majority Shareholder Director so long as he or she is independent. The Nomination Agreement will automatically terminate upon the earlier
of (i) the date on which the Minski Family Shareholders or their affiliates cease to beneficially own, in the aggregate, 30% of our outstanding
shares and (ii) 20 years from the date of the Nomination Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Share Forfeiture Agreement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On the Closing Date, the Sponsors
entered into a share forfeiture agreement by and among the Sponsors, the Company, Crynssen and Union (the &#8220;Share Forfeiture Agreement&#8221;),
pursuant to which, the Sponsors forfeited a combined 700,000 SPAC Ordinary Shares prior to the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Senior Notes Offering</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 12, 2021, we closed
a private placement offering of $115 million aggregate principal amount of 4.75% guaranteed senior notes (the &#8220;Senior Notes&#8221;)
issued by Procaps, S.A., due November 12, 2031, pursuant to a note purchase agreement (the &#8220;NPA&#8221;) entered into on November
5, 2021 with The Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life &amp; Health
Insurance Company, Inc. and Cigna Health and Life Insurance Company Inc. The Senior Notes are the senior unsecured obligations of Procaps,
S.A. and unconditionally guaranteed by the Company and the following subsidiaries: Crynssen, Procaps, S.A., Diabetrics Healthcare, Pharmayect
S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Ind&#250;stria e Com&#233;rcio Ltda., and Sofgen Pharmaceuticals LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Senior Notes were issued
in a single tranche, with a final maturity of 10 years and a principal amortization schedule of five annual equal payments commencing
on the sixth anniversary of the closing (<i>i.e.</i> years 6 to 10), resulting in a weighted average life of 8 years. Procaps, S.A. used
the net proceeds from the issuance of the Senior Notes primarily to repay certain of its and its subsidiaries existing indebtedness in
full, as well as for general corporate purposes. The Senior Notes also contain change-of-control provisions and certain customary affirmative
and negative covenants and events of default. In addition, the Senior Notes require Procaps, S.A., the Company and the other obligors
thereunder to comply with certain financial ratios.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the expected
closing of the Acquisition and associated borrowings under the Credit Agreement (as defined herein), we intended to prepay in full the
Senior Notes, together with interest accrued thereon to the date of such prepayment and the make-whole amount determined for the date
of such prepayment pursuant to the NPA (the &#8220;Notes Payoff&#8221;). We previously expected that the closing of the Acquisition would
occur on October 14, 2022, and accordingly, pursuant to the requirements of the NPA, delivered advance notice to the noteholders of the
Notes Payoff to occur on such date. As a result of a delay and subsequent termination in the closing of the Acquisition, the expected
borrowing under the Credit Agreement did not occur, and we were unable to complete the Notes Payoff on the date scheduled, which technically
constituted an event of default under the NPA. The noteholders informed us that they would not exercise any rights or remedies under the
NPA due to such technical default pending entry into an amendment to the NPA formally waiving such default, and we and the noteholders
executed temporary waivers in connection therewith. On November 1, 2022, we and the noteholders entered into an amendment to the NPA (the
&#8220;NPA Amendment&#8221;), formally waiving the technical default and which also (i) provided us with the ability, until November 30,
2022, to prepay the Senior Notes with two business days&#8217; notice, (ii) provided that the make-whole amount under the NPA shall in
no case be less than USD 1,488,204.60, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022, a
waiver fee of 3.75% per annum on the outstanding principal amount of Senior Notes outstanding shall (a) accrue from (and including) October
14, 2022 and (b) be payable to the noteholders on the 12th day of February, May, August and November in each year (commencing on February
12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and payable in
accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022, therefore
triggering the 3.75% per annum waiver fee on the outstanding principal amount of Senior Notes with the terms mentioned above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For more information on the
Senior Notes, see Item 5.B of this Annual Report under the heading &#8220;Liquidity and Capital Resources &#8211;&#8211;Debt Financing
and Borrowing &#8211;&#8211;Senior Notes.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. BUSINESS OVERVIEW</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Overview:</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Founded in 1977 by the Minski
family, we are a leading integrated international healthcare and pharmaceutical company that develops pharmaceutical and nutraceutical
solutions, medicines and hospital supplies. Our customers are located in over 50 countries, in six out of the seven continents, and we
have a direct presence in 13 countries - Colombia, Brazil, El Salvador, United States, Peru, Costa Rica, Guatemala, Honduras, Ecuador,
Bolivia, Panama, Nicaragua and Dominican Republic. We currently have over 5,500 employees working under our sustainable model.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business model focuses
on four strategic cornerstones to drive growth. First, we have state-of-the-art manufacturing capabilities that allow us to provide innovative
delivery technologies. Our corporate culture focuses on innovation and R&amp;D, which has enabled us to offer extensive scientific expertise
with more than 300 scientists, technicians and skilled personnel, allowing us to develop an average of over 150 new products per year
over the last three years. Second, our regional footprint and vertical integration enables organic growth opportunities and synergies.
We currently operate six manufacturing facilities in Latin America, including the first FDA-approved pharmaceutical plant in South America
and Central America, and our first U.S.-based Softgel production facility and R&amp;D center, which began operations in May 2022 and sell
and distribute products to over fifty distinct markets. Third, our Rx and OTC pharmaceutical product portfolio is driven by our proprietary
delivery systems, allowing us to focus on the development and sale of high-growth and premium pharmaceutical products which we believe
are subject to less pricing pressures when compared to more generic pharmaceutical products. Finally, we have an extensive track record
of developing new businesses and growing via mergers and acquisitions, which is evidenced by the development of one of our in-house business
incubation, Diabetrics, which took place in 2015, and several successful acquisitions throughout Latin America (including the acquisitions
of Rymco S.A., Laboratorios Lopez and Biokemical S.A. de C.V.) which took place between 2012 and 2016. On September 29, 2021, we consummated
the Business Combination with Union, which resulted in our Ordinary Shares and warrants being listed on the Nasdaq Global Market on September
30, 2021 under the symbols &#8220;PROC&#8221; and &#8220;PROCW&#8221;, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are primarily engaged in
developing, producing and marketing pharmaceutical solutions consisting of the following four products and services categories: (i) iCDMO,
(ii) Rx pharmaceutical products, (iii) OTC products, and (iv) Diabetrics. For more information, see &#8220;&#8212;Products and Services&#8221;
below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Strengths and Competitive Advantages</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Innovation in Delivery
Systems. </i></b>We are one of the leading global providers of advanced delivery technologies and development and manufacturing solutions
for pharmaceutical and consumer health products. In particular, we are the number one Softgel manufacturer in South and Central America
and top five in the world in terms of Softgel production capacity, according to an independent third-party industry analysis report of
2019. We have extensive expertise in developing and manufacturing Softgel capsules and related dosage forms as evidenced by our development
of an average of over 150 new products per year over the last three years. Our innovative oral delivery mechanisms allow us to transform
branded generics into differentiated products for the pharmaceutical market. For more information, see &#8220;&#8211;&#8211; Research
and Development&#8221; and &#8220;&#8211;&#8211; Intellectual Property&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Flexibility &amp; Adaptability.
</i></b>Our NextGel business segment&#8217;s Softgel iCDMO platform provides an extensive set of solutions designed to serve our clients&#8217;
unique needs, with the goal of ultimately improving product time to market, which is primarily accomplished through our ability to adapt
to a diverse set of customer business structures and our experience servicing different markets. For more information, see &#8220;&#8211;&#8211;
Products and Services &#8211;&#8211; iCDMO&#8211;&#8211;NextGel (Softgel band)&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Cost Competitiveness.
</i></b>We are able to maintain a competitive price and cost structure due to a combination of the geographic location of our facilities,
our expertise in R&amp;D, our skilled labor force, our ability to manufacture in-house several of the equipment used in the production
of Softgel and the flexible nature of our equipment. These factors allow us to produce a wide variety of products, and to purchase raw
materials at scale. For more information, see &#8220;&#8211;&#8211; Manufacturing and Distribution&#8221;, &#8220;&#8211;&#8211; Raw Materials
and Material Sourcing&#8221;, and &#8220;&#8211;&#8211; Research and Development&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Specialized Facilities.
</i></b>Our state-of-the-art facilities are segregated and highly adaptable, enabling Procaps to undertake the manufacturing of highly
complex products. Our manufacturing facilities include the first FDA-approved Rx pharmaceutical plant in South and Central America and
one of only five hormonal Softgel plants in the world. Additionally, our manufacturing facilities are certified, where required, by several
regulatory entities including the FDA, Health Canada, the MHRA, the TGA, Cofepris and ISO. For more information, see &#8220;&#8211;&#8211;Manufacturing
and Distribution&#8212;Manufacturing Facilities&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Integration into Clients&#8217;
Value Chain. </i></b>We strive to be part of our customers&#8217; value chain by adapting to their logistics&#8217; processes by adopting
and integrating with our customers&#8217; manufacturing resource planning software and other processes. For more information, see &#8220;<i>&#8212;Manufacturing
and Distribution&#8212;Distribution and Logistics</i>&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Recent Developments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Acquisition Termination</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 16, 2022, we entered into a Stock Purchase
Agreement (the &#8220;SPA&#8221;) with AI Global Investments PCC Limited (Netherlands), a protected cell company limited by shares organized
under the laws of the Island of Guernsey (&#8220;PCC&#8221;), acting for and on behalf of the Soar Cell, Triana Capital S.A. de C.V.,
a corporation organized under the laws of Mexico (&#8220;Triana&#8221;), AI Pearl (Netherlands) B.V., a private limited company (besloten
vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands (&#8220;Pearl Holding Seller&#8221;), Perrigo
Ireland 7 DAC, a company duly organized and validly existing under the laws of the Republic of Ireland (&#8220;Pearl Ireland&#8221;, and
together with PCC, Triana and Pearl Holding Seller, each a &#8220;Seller&#8221; and collectively, the &#8220;Sellers&#8221;), AI Soar
(Netherlands) BV, a (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands (&#8220;Somar
Holding Company&#8221;), Qu&#237;mica y Farmacia S.A. de C.V., a Sociedad An&#243;nima de Capital Variable duly organized and validly
existing under the laws of Mexico (&#8220;Quifa&#8221;), PDM Acondifarma S.A. de C.V., a Sociedad An&#243;nima de Capital Variable duly
organized and validly existing under the laws of Mexico (&#8220;PDM&#8221;), Gelcaps Exportadora de M&#233;xico S.A. de C.V., a Sociedad
An&#243;nima de Capital Variable duly organized and validly existing under the laws of Mexico (&#8220;Gelcaps&#8221;, and together with
Quifa and PDM, &#8220;Pearl Mexico&#8221;) and Grupo Farmac&#233;utico Somar S.A.P.I. de C.V., a Sociedad An&#243;nima Promotora de
Inversi&#243;n de Capital Variable organized under the laws of Mexico (&#8220;Somar&#8221; and together with Somar Holding Company,
&#8220;Grupo Somar&#8221;, and together with Pearl Mexico, the &#8220;Targets&#8221;) (the &#8220;Acquisition&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Acquisition, which was expected to close in
the fourth quarter of 2022, was delayed indefinitely and subsequently terminated on January 1, 2023 after we were informed by the sellers
that a court in Mexico City issued a precautionary lien affecting a portion of capital stock of Grupo Somar in connection with a pending
dispute that involves an investment by a fund managed by Advent International but that is otherwise unrelated to the sellers, Grupo Somar,
the Group, or the Acquisition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Bridge Facility Termination</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">As previously
reported, on October 11, 2022, we and certain of our subsidiaries entered into a credit agreement with Bank of New York Mellon, as administrative
and collateral agent (collectively, the &#8220;Agent&#8221;), BofA Securities, Inc. (&#8220;BofA Securities&#8221;), JPMorgan Chase Bank,
N.A. (&#8220;JPMorgan&#8221;) and Morgan Stanley Senior Funding, Inc. (&#8220;Morgan Stanley&#8221;, and together with BofA Securities
and JPMorgan, the &#8220;Joint Lead Arrangers and Bookrunners&#8221;), as the joint lead arrangers and bookrunners, and the lenders from
time to time party thereto (the &#8220;Bridge Facility&#8221;) to finance the cash portion of the purchase price of the Acquisition, to
pay fees and expenses related to the Bridge Facility, to prepay, refinance and/or redeem certain existing indebtedness, and to the extent
any proceeds remained after applying to the foregoing, to use for working capital and other general corporate purposes.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">In connection
with the termination of the Acquisition, we advised the Joint Lead Arrangers and Bookrunners under the Bridge Facility of our desire to
terminate the Bridge Facility and related documentation and pay all outstanding obligations owing thereunder, and on January 10, 2023,
the Company and certain of its subsidiaries, the Agent, the Joint Lead Arrangers and Bookrunners, J.P. Morgan Securities LLC (&#8220;JPMorgan
Securities&#8221;), Morgan Stanley &amp; Co. LLC (&#8220;Morgan Stanley &amp; Co&#8221;) and the lenders party thereto entered into a
termination letter in connection therewith (the &#8220;Termination Letter&#8221;). Pursuant to the Termination Letter, (i) each of the
loan documents in connection with the Bridge Facility, (ii) the Commitment Letter dated as of May 16, 2022 among Bank of America, N.A.
(&#8220;Bank of America&#8221;), the Joint Lead Arrangers and Bookrunners and the Company and (iii) the Engagement Letter dated as of
May 16, 2022 among Bank of America, BofA Securities, JPMorgan Securities, Morgan Stanley &amp; Co and the Company, were terminated and
all outstanding obligations owed by the Company thereunder were paid in full in the amount of $5,719,426.58.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Senior Notes Amendment</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See &#8220;Item 4.A. Company Information&#8212;History
and Development of the Company&#8212;Senior Notes Offering&#8221; for a summary of the NPA Amendment, which was entered into in November
2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Changes in Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 19, 2023, Mr. Alejandro Weinstein resigned
from the Company&#8217;s Board of Directors, effective immediately. In connection with Mr. Weinstein&#8217;s resignation, Mr. Weinstein
also resigned from his position as a member and Chairman of the M&amp;A Committee of the Board (the &#8220;M&amp;A Committee&#8221;).
In connection with Mr. Weinstein&#8217;s resignation, and pursuant to the nomination rights of Hoche under the Nomination Agreement, the
Board appointed Alberto Eguiguren Correa as a Director to fill the vacancy created by Mr. Weinstein&#8217;s resignation, effective immediately
for a period ending at the annual general meeting of shareholders approving the annual accounts for the fiscal year ended December 31,
2022 (which corresponds to the duration of mandate of Mr. Weinstein). The Board determined that Mr. Eguiguren met the definition of &#8220;independent
director&#8221; for purposes of serving on the Board under applicable Nasdaq Stock Market rules. In addition, in connection with Mr. Weinstein&#8217;s
resignation from the M&amp;A Committee, the Board appointed existing director Jos&#233; Minski as Chair of the M&amp;A Committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 13, 2023, Mr. Daniel Fink resigned
from the Board, effective immediately. In connection with Mr. Fink&#8217;s resignation, Mr. Fink also resigned from his position as a
member of the Audit Committee of the Board (the &#8220;Audit Committee&#8221;). Mr. Fink will continue as a Board Observer to the Board.
In connection with Mr. Fink&#8217;s resignation, the Board appointed Mr. Alejandro Weinstein as a Director to fill the vacancy in the
Board created by Mr. Fink&#8217;s resignation, effective immediately for a period ending at the annual general meeting of shareholders
approving the annual accounts for the fiscal year ended December 31, 2022 (which corresponds to the duration of mandate of Mr. Fink).
The Board determined that Mr. Weinstein met the definition of an &#8220;independent director&#8221; for purposes of serving on the Board
under applicable Nasdaq Stock Market rules. In addition, in connection with Mr. Fink&#8217;s resignation from the Audit Committee, the
Board appointed existing director Kyle Bransfield as a member of the Audit Committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>CEO Succession Planning</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 13, 2023, Procaps Chief Executive
Officer Ruben Minski announced his expectation to transition from his role as CEO to Executive Chairman of the Company in early 2024.
The Nominating Committee of the Board is leading the succession planning process and is forming a search committee to proactively manage
the selection and transition process. Mr. Minski will work with the rest of the Board to ensure the successful identification of a successor
CEO.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span><i>Certain
Debt Waivers</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 31, 2023, we
entered into the Waiver Agreement (the &#8220;NPA Waiver Agreement&#8221;), by and among, the Company, in its capacity as the parent
guarantor, Procaps S.A., in its capacity as the issuer of the Senior Notes, the subsidiary guarantors named therein, and each of the
holders (the &#8220;Noteholders&#8221;) of the Senior Notes relating to NPA. On March 28, 2023, we entered into the Waiver Agreement
with respect to certain other indebtedness (the &#8220;Additional Loan Agreement&#8221;). In addition, on May 2, 2023, we entered
into the Waiver Agreement (the &#8220;Syndicated Loan Waiver Agreement&#8221;), by and among Procaps S.A., in its capacity as
obligor, the subsidiary co-obligors and guarantors named therein, the lenders named therein and Fiduciaria Bancolombia S.A., as
administrative agent (the &#8220;Administrative Agent&#8221;) relating to Syndicated Loan (as defined herein). The three waivers are
herein after referred to as the &#8220;Waivers&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The applicable parties under the Waivers waived
(i) our noncompliance with certain financial ratio covenants under the Note Purchase Agreement, Syndicated Loan and Additional Loan Agreement,
as applicable, as of, and for the year ended, December 31, 2022 In addition, the applicable parties under the Waivers agreed to prospectively
waive, as applicable, any noncompliance with these certain financial ratio covenants for the quarters ended March 31, 2023, June 30, 2023
and September 30, 2023, provided that we meet certain agreed upon adjusted ratio thresholds as specified in each Waiver under the applicable
financial ratio covenants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For additional information
with respect to the Waivers, please see Item 5.B &#8220;Operating and Financial Review and Prospects&#8212;Liquidity and Capital Resources.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>New Products and First Time Launch Products</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We consider a product to be
a &#8220;first time launch product&#8221; if it was reformulated; was a product line extension due to changes in characteristics such
as strength, flavor, or color; had a change in product status from Rx to OTC; was a new store brand or branded launch; or was provided
in a new dosage form, in all cases, within 36 months prior to the end of the period for which net sales are being measured.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We consider a product to be
a &#8220;new product&#8221; if it was a &#8220;first time launch product&#8221; (<i>i.e.</i> if it was reformulated; was a product line
extension due to changes in characteristics such as strength, flavor, or color; had a change in product status from Rx to OTC; was a new
store brand or branded launch; or was provided in a new dosage form); or if it was sold to a new geographic area with different regulatory
authorities, in all cases, within 36 months prior to the end of the period for which net sales are being measured.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">New product sales for the
year ended December 31, 2022 totaled $111.0 million in net revenues, accounting for approximately 27.1% of our net revenue for the period,
and for the year ended December 31, 2021, totaled $96.3 million in net revenue, accounting for approximately 23.5% of our net revenue
for the period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the number of new product applications, and of applications of certain products developed that have not yet been commercialized, that
have been approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">26</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had over 179 drug registrations pending approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Products and Services</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>iCDMO &#8212; NextGel (Softigel brand)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our NextGel business segment,
operated under our Softigel Sofgen, Softcaps and Funtrition brands, is the iCDMO arm of Procaps which offers services specializing in
development and manufacturing in Softgel and related technologies, and operates globally in the B-to-B market, more specifically in Brazil,
Colombia and the United States. We are the top Softgel manufacturer in South and Central America and top five in the world in terms of
Softgel production capacity, according to an independent third-party industry analysis report. The iCDMO agreements with our top-tier
customers range from five to ten-year terms. Our NextGel business segment has over 130 clients across more than 50 countries and the key
products that we manufacture in this segment include Softgel pharmaceutical products such as Advil, Apronax Liquidgels, multivitamins,
Vitamin D and Dolex ActivGel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 53; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Through our iCDMO brands,
we provide formulation, development, and manufacturing services for Softgel related technologies and gummy technologies for the global
pharmaceutical and consumer health and nutraceutical markets and supporting ancillary services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Softgel technology was
first commercialized in 1978 with the launch of our Dolofen brand, and we have continually enhanced the platform since then. Softgel capsules
are used in a broad range of customer products, including Rx drugs, OTC medications, dietary supplements, unit-dose cosmetics, and animal
health medicinal preparations. Softgel capsules encapsulate liquid, paste, or oil-based formulations of active compounds in solution or
suspension within an outer shell. In the manufacturing process, the capsules are formed, filled, and sealed simultaneously. We typically
perform encapsulation for a product within one of our Softgel manufacturing facilities, with active ingredients provided by customers
or sourced directly by us. Softgels have historically been used to solve formulation challenges or technical issues for a specific drug,
to help improve the clinical performance of compounds, to provide exact doses, to provide important market differentiation, particularly
for OTC medications, and to provide safe handling of hormonal, highly potent, and cytotoxic drugs. We also participate in the Softgel
vitamin, mineral, and supplement business in selected regions around the world.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal Softgel technologies
include Unigel, Versagel, Chewgels, and G-tabs:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unigel<sup>: </sup>a smart
Softgel capsule technology which incorporates other delivery systems such as tablets, capsules, microgranules or pellets into one single
Softgel capsule. Our Unigel capsules combine two different active pharmaceutical ingredients (&#8220;API&#8221;) that were not previously
compatible in a tablet dosage form, by use of a barrier that avoids permeation from the liquid phase into the tablet core without affecting
the dissolution rate of the API contained in this dosage form, encapsulating a smaller tablet into a Softgel capsule.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Versagel: versatile plant-based
Softgel shell, that allowed us to extend the Softgel dose form to a broader range of active ingredients that due to their natural potential
of hydrogen (PH) levels, are impossible to encapsule in more traditional gelatin, and serve patient/consumer populations that were previously
inaccessible due to religious, dietary, or cultural preferences.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Chewgels: a chewable Softgel
capsule technology providing a new solution for children and consumers who have difficulty swallowing standard Softgel capsules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">G-tabs: gelatin coated tablets
that are easy to swallow, and we believe, based on current technology, to be impossible to counterfeit. G-tabs are coated with one- or
two-toned color gelatin (which can be printed on not printed) and helps mask unpleasant odors and flavors. In addition, our G-tabs technology
helps enhance product stability, provides protection for photosensitive pharmaceutical ingredients, reduces degradation due to exposure
to air, and is available in a variety of shapes and colors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Products</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary Softigel products by category and the percentage of the NextGel segment&#8217;s gross revenue attributed to the sale of such
product for the years ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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gross revenues for the year<br/>
ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">17</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Isotretinoin</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Progesterone</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Umbral</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our NextGel segment launched
more than 50 new products in 2022, most notably Kyzatrex (prescription testosterone softgel), OLLY Collagen and Fiber rings (gummies)
Brainiac Gummies, Ogestan Plus (Multivitamin Softgels), Benet Man &amp; Woman Unigels, D&#180;Vida Max (Vitamin D Softgels), Prenavit
DHA Softgels, Umbramil G-Tabs, and 49 new products in 2021, most notably Eye Mojo gummies, Turmeric gummies, Zinc gummies, No Filter sleep
gummies, Mulgatol, Deferol and Fortzkink gummies, Feminis DHA, Provicta D, Ogestan Blues, Vidyn D3, Nutragesta, Novagesic, Lemoflu, Benet
Man &amp; Woman MultiVitamin, and over 45 new products in 2020, most notably Quelatus gest (prenatal multivitamins), Vitamin D3, Lufbem
(Simeticona), Agar immunity gummy, Agar sleep gummy, and Agar stress gummy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 54; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Marketing and Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary customers for our iCDMO Softgel technology, including percentage of sales for the years ended December 31, 2022 and 2021 and
average relationship years by category.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Percentage of NextGel<br/>
Segment Sales <br/>
for the year ended<br/>
 December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="padding-bottom: 1.5pt; font-weight: bold; text-align: center">Average<br/>
Relationship</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Category</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Selected Clients</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 20%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Big Pharma<sup>(2)</sup></span></td><td style="width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">26</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">19</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">23</td><td style="vertical-align: top; text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">52</td><td style="vertical-align: top; text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">9</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Eurofarma, Biolab, Roemmers, PharmaScience, Liomont, Consilient Health and Hypera Pharma</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large Suppliers<sup>(4)</sup></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">22</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Average
relationship years is based on revenue weighted average.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consists
of pharmaceutical companies that have a global presence and are among the top 30 worldwide in terms of revenues.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consists
of pharmaceutical companies that have a presence in more than three countries and are among the top 20 in such markets in terms of revenues.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consists
of organizations within the Vitamins, Minerals and Supplements categories that are not pharmaceutical companies.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We seek to establish customer
loyalty through superior customer service by providing a comprehensive assortment of high-quality products; timely processing, shipment
and delivery of orders; assistance in managing customer inventories; and support in managing and building the customer&#8217;s store brand
business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are specialized in advanced
oral drug delivery technologies, particularly Softgel capsules providing integrated, end-to-end solutions from development to delivery
by working closely with customers providing &#8220;Idea to Market&#8221; solutions, from the initial conception of a product idea to marketing
strategy, sales team training and promotional plans. As a value-added service to product development, we provide sales and marketing assistance
for customers that are not familiar with the pharmaceutical industry, or have a limited presence, in Latin America. In addition to pharmaceutical
clients, our NextGel segment works closely with consumer healthcare and supplement companies on the development and commercialization
of nutritional and health supplements in novel formats.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The sales efforts for our
NextGel segment are focused on assisting and participating in worldwide tradeshows and key industry events for the CDMO segment (such
as CPhI Worldwide, Vitafoods Europe and Supply Side West), as well as by strengthening existing relationships with our B-to-B client base.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The NextGel segment&#8217;s
product development proposals are highly detailed, involving a significant amount of preparatory work in market and business intelligence,
R&amp;D, manufacturing and marketing efforts. Once a specific opportunity to apply one of our proprietary Softgel technologies is identified
(such as converting an existing product to a Softgel dosage form), the commercial and marketing teams prepare a presentation outlining
the benefits of the Softgel format and illustrating the end-product&#8217;s &#8220;look and feel&#8221;. The proposal will show the anticipated
pricing impact of the Softgel dosage form on the existing products. Proposals also include concept art on product packaging and illustrative
shelf presence, and occasionally we prepare pilot sample batches of real capsules to present to the clients. In certain cases, our brand
proposals are by Procaps and then transferred to the client.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Competition</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The market for CDMO services
is highly competitive. Our primary competitors in this area include Catalent, Aenova and Patheon. Procaps is the number one Softgel manufacturer
in South and Central America and top five in the world in terms of Softgel production capacity, according to an independent third-party
industry analysis report of 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Rx Pharmaceutical Products &#8212; Farma
Procaps and Clinical Specialties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">Our Rx product line comprises
the Farma Procaps and the Clinical Specialties brands/business units, and forms part of three of Procaps&#8217; business segments; Procaps
Colombia, CAN and CASAND. For more information on our business segments, see Item 5.A of this Annual Report under the heading &#8220;Operating
Results&#8211;&#8211;Business Segments.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Farma Procaps formulates,
manufactures and markets branded prescription drugs. It represents a high growth portfolio that focuses on nine therapeutic areas (feminine
care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system and respiratory).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical Specialties is a
leading provider of high-complexity care treatments to private institutions in the region. Its diverse product portfolio, targets various
in-demand therapeutic areas and develops, manufactures and markets personal protective equipment, high-complexity drugs for hospital use
such as antibiotic, blood clot, immunosuppressant, oncology and analgesics products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Products</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary Farma Procaps products by category and the percentage of Farma Procaps&#8217; gross revenue attributed to the sale of such
product for the years ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; text-align: center"><b>Percentage of<br/> Farma Procaps&#8217;<br/> gross
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  <tr style="vertical-align: bottom">
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    <td style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Category</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 55%">Citragel</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Isoface</td><td>&#160;</td>
    <td style="text-align: center">Skin Care</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gestavit Dha</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Ezolium</td><td>&#160;</td>
    <td style="text-align: center">Digestive Health</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;&#160;&#160;&#160;&#160;5 4</span></td><td style="text-align: left">%</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary Clinical Specialties products by category and the percentage of Clinical Specialties&#8217; gross revenue attributed to the
sale of such product for the year ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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 Clinical Specialties&#8217; <br/>
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 the year ended<br/>
 December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 56; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We launched a number of new
Rx products during the year ended December 31, 2022, most notably Aludel an oncological drug, antibiotics such as Amoxicillin and Ampicillin,
and a new reference drug Mentsii. During the year ended December 31, 2022, new product sales of our Rx products were $38.4 million, representing
18% of the segment&#8217;s total sales. During the year ended December 31, 2021, we launched a number of new Rx products most notably
Nutrigel, Deferol and Mabal. During the year ended December 31, 2021, new product sales of our Rx products were $45.3 million, representing
21% of the segment&#8217;s total sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the number of Rx drug applications approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had 94 Rx drug applications pending approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Marketing and Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Rx pharmaceutical products
customers include Coopidrogas &#8212; Cooperativa Nacional de Drogas, Drogueria Cruz Verde S.A.S., Droguer&#237;as Colsubsidio, Copservir
Ltda and Unidrogas S.A, among others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We seek to establish customer
loyalty through superior customer service by providing a comprehensive assortment of high-quality products and timely processing, shipment
and delivery of orders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Demand for our Farma Procaps
products is largely generated by doctors and physicians. We analyze the doctors and physicians by specialty that we believe would be most
beneficial to directly market our products to and schedule strategic visits once or twice a month to present our product portfolio specifically
targeting their practice. We also offer technical and scientific information on our products and product samples for the exclusive use
of the doctors and physicians to provide to their patients. Our sales force is segmented by medical specialties and receive periodic technical
training on the brands and products we sell, as well as sales and relationship training techniques to better enable them to market and
sell our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We directly target our marketing
and sales effort for our Clinical Specialties products to clinics and hospital. We work together with in-hospital medical specialties
to provide primarily medium and high complexity products for use with their patients, which are supported by technical or clinical studies
to guarantee their safety.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Competition</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">The market for Rx pharmaceutical
products is subject to intense competition from generic drug manufacturers, brand-name pharmaceutical companies launching their own or
generic version of their branded products (known as an authorized generic), manufacturers of branded drug products that continue to produce
those products after patent expirations, and manufacturers of therapeutically similar drugs. Among our primary competitors are Genfar
S.A., Abbott Laboratories &#8212; Lafrancol S.A.S, Tecnoquimicas S.A., La Sant&#233; Pharmaceutique SA, Bayer AG, Glaxo Corp. and Sanofi
S.A.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 57; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>OTC Products &#8212; VitalCare</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our OTC product line primarily
consists of the VitalCare brand/business unit, and forms part of three of Procaps&#8217; business segments; Procaps Colombia, CAN and
CASAND. For more information on our business segments, see Item 5.A under the heading &#8220;Operating Results&#8211;&#8211;Business Segments&#8221;
in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">VitalCare develops, manufactures
and markets OTC consumer healthcare products through an extensive portfolio focused on over eight high-prevalence therapeutic areas (including
gastrointestinal, skin care, cough and cold, analgesics, urological, and vitamin, minerals and supplements) at what we believe to be accessible
and appealing price points. Our Colmed OTC product line, which is part of our VitalCare business unit, consists of products in the following
categories: antibiotics, anti-infective, anti-parasitic, cardiovascular, feminine care, cutaneous antimycotic, pain killers, gastrointestinal,
hormonals, metabolic, endocrine, nervous system, ophthalmic, osteoarticular, respiratory, diet supplements and vitamins and minerals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We market and sell our OTC
products in the following key regional markets: Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras,
Nicaragua, Panama, Peru, and the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Products</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary VitalCare OTC products by category and the percentage of the VitalCare&#8217;s gross revenue attributed to the sale of such
product for the year ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">VitalCare Product</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%">Artribion</td><td style="width: 1%">&#160;</td>
    <td style="width: 15%; text-align: center">Pain Relief</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Esomeprazole</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Vitamin E</td><td>&#160;</td>
    <td style="text-align: center">Vitamins</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4</td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Orlistat</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Foskrol</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We launched a number of new
OTC products during the year ended December 31, 2022, most notably Deferol K, as well as line extensions for our brands Dolofen, Gummivit
and PROCAPS multivitamins+minerals. During the year ended December 31, 2022, new product sales of our OTC products were $13.0 million,
representing 15% of the segment&#8217;s total sales. During the year ended December 31, 2021, we launched several new OTC products, most
notably Minoxidil and Betahistina. During the year ended December 31, 2021, new product sales of our OTC products were $10.3 million,
representing 12% of the segment&#8217;s total sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the number of OTC drug applications approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of OTC drug applications<br/> approved for the<br/> year ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Jurisdiction/Regulatory Agency</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Bolivia (AGEMED)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Ecuador (ARSCA)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">8</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Guatemala (Ministry of Public Health and Social Assistance)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Panama (National Directorate of Pharmacies and Drugs)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Peru (DIGEMID)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Dominican Republic (Health Ministry)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Venezuela (INHRR)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had 8 OTC drug applications pending approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Marketing and Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our OTC products customers
include Coopidrogas &#8212; Cooperativa Nacional de Drogas, Pricesmart S.A.S., Drogueria Cruz Verde S.A.S., Olimpica S.A, and Sodimac
Colombia S.A., among others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Demand for our VitalCare OTC
products and generics is generated by the end consumer. We target the end consumer through traditional advertising means, and increasingly
though social media in order to more specifically target individual end consumer segments in order to highlight the attributes and differentials
of our brands and products. We work with several points of sale customers such as global, national, and regional retail drug, supermarket,
and mass merchandise chains, major wholesalers, sourcing groups, hospitals and grocery stores to ensure the homogeneous distribution of
our products. We seek to establish customer loyalty through superior customer service by providing a comprehensive assortment of high-quality
products and timely processing, shipment and delivery of orders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Competition</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">The markets for our OTC products
are highly competitive and differ for each product line and geographic region. Our primary competitors include manufacturers, such as
GlaxoSmithKline plc, Bayer AG, Sanofi S.A., Tecnoquimicas S.A., Pfizer Inc., Lafrancol S.A.S, Genomma Lab Internacional S.A.B. de C.V.,
McKesson Corporation, The Procter &amp; Gamble Company and Abbott Laboratories, among others. The various major categories of our OTC
products each have certain key competitors, such that a competitor generally does not compete across all product lines. However, some
competitors do have larger sales volumes in certain of our categories. Additionally, national brand companies tend to have more resources
committed to marketing their products and could in the future manufacture store brand versions of their products at lower prices than
their national brand products. Competition is based on a variety of factors, including price, quality, assortment of products, customer
service, marketing support, and approvals for new products. See Item 3.D of this Annual Report under the heading &#8220;Risk Factors&#8212;Risks
Related to our Industry&#8212;We participate in a highly competitive market, and increased competition may adversely affect our business,
financial condition and results of operations.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Diabetrics Solutions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With approximately 7% of the
global population living with diabetes and 11.5% of global health expenditures spent on diabetes each year, we believe our Diabetrics
business segment, which is comprised of our Diabetrics brand/business unit, is an attractive regional B-to-C diabetes-focused treatment
and management platform that focuses primarily on the Colombian market. It has a unique business model when compared to our competitors,
as it aims to cover the full spectrum of needs of patients with diabetes by providing products and services such as blood glucose meters,
telemonitoring, Rx oral anti-diabetics products, cosmeceuticals (cosmetics that have medicinal properties for diabetic care), insulin
delivery systems and other diabetes solutions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps currently has a leading
position in the Colombian market in two Diabetrics product categories with over a 60% market share for blood glucose monitors (strips,
meters and lancets) and over a 50% market share for insulin delivery systems (pen needles), based on the total number of patients diagnosed
with diabetes that require insulin in Colombia (all individuals diagnosed with type 1 diabetes and 20% of individuals diagnosed with type
2 diabetes) that use such products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As part of our Diabetrics
segment&#8217;s integral product strategy and holistic approach, we offer products in other product categories such as insulin (Glaritus-
Glargine Insulin, launched in the beginning of 2021) and supplements (Cromega and Preventia), among others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Products</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
our primary Diabetrics products by category and the percentage of the Diabetrics segment&#8217;s gross revenue attributed to the sale
of such product for the year ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="white-space: nowrap; padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Percentage of Diabetrics&#8217;<br/>
gross revenues for<br/>
 the year ended<br/>
 December 31,</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; text-align: left; font-weight: bold">Diabetrics Product</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; white-space: nowrap; text-align: center; font-weight: bold">Category</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">2022</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">2021</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 60%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Glucoquick<sup>(1)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 15%; text-align: center">Blood Glucose Monitor</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">46</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">42</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Predial Lex</td><td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">Rx oral anti-diabetics</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Glucoquick Agujas</td><td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">Insulin Delivery Systems</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">16</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>GMet</td><td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">Rx oral anti-diabetics</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Lipotic</td><td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">Rx oral anti-diabetics</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4</td><td style="text-align: left">%</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Includes
all Glucoquick blood glucose monitor family products.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We launched two new Diabetrics
products during the year ended December 31, 2022, Dermatonics and Diabetes Prevent. During the year-ended December 31, 2022, new product
sales in the Diabetrics segment did not represent a meaningful portion of the segment&#8217;s total sales. During the year ended December
31, 2021, we launched several new Diabetrics products, most notably insulin Glaritus (<i>Glargine Insulin</i>) and Tiras Diamond (BGMs).
During the year ended December 31, 2021, new product sales in the Diabetrics segments were $4.3 million, representing 15% of the segment&#8217;s
total sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, we received approval from INVIMA for four Diabetrics products and 33 in other countries. During the year ended December 31,
2021, we received approval from INVIMA for six Diabetrics products. As of December 31, 2022, we had 30 Diabetrics products pending approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Marketing and Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Diabetrics products and
services are marketed directly to consumers through a comprehensive offering of innovative products and differentiated services with the
goal of providing the optimal cost-benefit ratio. We also focus our efforts on developing prevention, education and self-management strategies
with our partners in order to provide value-based-healthcare. Our sales efforts are focused on private and governmental channels, and
involve participating in government contract bidding, primarily through Colombia&#8217;s public health insurance plan (<i>Entidades Promotoras
de Salud</i>).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Competition</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We market our Diabetrics products
and services primarily in Colombia. Our primary competitors include: (i) F. Hoffmann-La Roche AG, Abbot Laboratories, and Johnson &amp;
Johnson in the blood glucose monitor product category; (ii) Becton, Dickinson and Company, Novo Nordisk A/S and Nortstray Nuart SAS in
the insulin delivery system product category; (iii) Merck &amp; Co. Inc., Pfizer, Inc., Mckesson Corporation and Siegfried Holding in
the Rx oral-anti-diabetics product category; and (iv) Abbot Laboratories in the nutrition products category. We recently entered the insulin
product category and will compete primarily with Sanofi S.A.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Manufacturing and Distribution</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently operate eight
manufacturing facilities in Colombia, Brazil, El Salvador, and the United States and sales offices throughout 13 different countries,
which coordinate the sale of our products globally.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The map below illustrates
our global geographical footprint, setting forth the location of our manufacturing facilities and sales offices, and the countries in
which we commercialize our products and services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Manufacturing Facilities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our manufacturing facilities
include the first FDA-approved Rx pharmaceutical plant in South and Central America and one of only five hormonal Softgel plants in the
world. Additionally, our manufacturing facilities are certified, where required, by several regulatory entities including the FDA, Health
Canada, the United Kingdom&#8217;s MHRA, Australia&#8217;s TGA, Mexico&#8217;s Cofepris and the ISO under its 14000 standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our sites
and equipment are in good condition, are well-maintained, and are able to operate at present levels in all material respects; however,
we intend to make additional investments to expand our production capacity in the near future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our manufacturing operations
are focused on employee health and safety, regulatory compliance, operational excellence, continuous improvement, and process standardization
across our organization. Our manufacturing operations are structured around an enterprise management philosophy and methodology that utilizes
principles and tools common to a number of quality management programs, including &#8220;current Good Manufacturing Practices&#8221; (&#8220;cGMP&#8221;),
ISO under its 9000 and 14000 standards, the Business Alliance for Secure Commerce and Authorized Economic Operator (<i>Operador Econ&#243;mico
Autorizado</i>).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Procaps Barranquilla &#8212; Barranquilla,
Colombia</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Procaps Barranquilla manufacturing
facility is located in Barranquilla Colombia, with approximately 35,200 square meters of total built area and approximately 8,200 square
meters of manufacturing plant floor space. This is our primary manufacturing facility and it was the first FDA-approved Rx pharmaceutical
plant in South America and Central America. This facility produces products associated with our Softigel, Farma Procaps and VitalCare
brands, including Softgel capsules, hormonal soft capsules, nutritional products, tablets, powders, blisters, liquids and hard capsule
products. The installed capacity of this facility is approximately 3 billion units of Softgel, 530 million units of tablets, 100 million
units of hormonal products, 73 million units of capsules, and 27 million units of other forms per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Procaps Barranquilla manufacturing
facility is certified by the FDA, Good Manufacturing Practices (<i>Buenas Pr&#225;cticas de Manufactura</i>, &#8220;BPM&#8221;), MHRA,
the Business Alliance for Secure Commerce, the Colombian Institute of Technical Standards and Certification (<i>Instituto Colombiano de
Normas T&#233;cnicas y Certificaci&#243;n</i>, or &#8220;ICONTEC&#8221;), ANVISA, Cofepris, Health Canada and ISO under its 14000
standard.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Rymco &#8212; Barranquilla, Colombia</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Rymco manufacturing facility
is located in Barranquilla, Colombia on an approximately 10,300 square meter lot, with approximately 11,650 square meters of floor space.
This facility was acquired as part of Procaps&#8217; acquisition of Rymco S.A. in 2015 and currently produces products associated with
our Clinical Specialties brand, including single-use medical products such as syringes, needles, infusion equipment, face masks, and surgical
clothing (personal protective equipment). The installed capacity of this facility is approximately 430 million units per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Rymco manufacturing facility
is certified by Argentine National Administration of Drugs, Foods and Medical Devices (<i>Administraci&#243;n Nacional de Medicamentos,
Alimentos y Tecnolog&#237;a M&#233;dica</i>), ISO under its 13485 medical standard and T&#220;V S&#220;D America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Funtrition &#8212; <ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">Bogot&#225;, Colombia</ix:nonNumeric></i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Funtrition manufacturing
facility is located in Bogot&#225;, Colombia, on an approximately 2,900 square meter lot, with approximately 1,400 square meters of
floor space. This facility produces products associated with our Softigel brand, including gummies related technologies for OTC products
and nutraceuticals. The installed capacity of this facility is approximately 960 million units per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Funtrition manufacturing
facility is certified by INVIMA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Pharmayect &#8212; Bogot&#225;, Colombia</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Pharmayect manufacturing
facility is located in Bogot&#225;, Colombia, on a 18,700 square meter lot, with approximately 13,070 square meters of floor space.
This facility produces associated with our Clinical Specialties brand, including syringes, injection vials, sterilized powder products,
blisters and vials. The installed capacity of this facility is approximately 138 million units per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Phamayect manufacturing
facility is certified by BPM, ISO under its 9001-2015 standard and ICONTEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Softcaps &#8212; S&#227;o Paulo, Brazil</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Softcaps manufacturing
facility is located in an industrial complex in the city of Cotia, state of S&#227;o Paulo in Brazil, on a 9,034 square meter lot, with
approximately 5,560 square meters of floor space. There are two buildings; one includes the administrative offices, warehouse and quality
control laboratory and the other includes the production areas and cafeteria. This facility produces products associated with our Softigel
brand, including Softgel capsule products. The installed capacity of this facility is approximately 2 billion units per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Softcaps manufacturing
facility is certified by ANVISA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The operating license (<i>licen&#231;a
de opera&#231;&#227;o</i>) in connection with the warehouse and quality control laboratory located at our Softgel manufacturing facility
was denied, however, such facilities are still being permitted to operate by the State of S&#227;o Paulo&#8217;s Environmental Agency
(<i>Companhia Ambiental do Estado de S&#227;o Paulo</i>, or &#8220;CETESB&#8221;). For more information, see Item 8.A under the heading
&#8220;Legal Proceedings&#8212;Operating License&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Procaps SA de CV &#8212; El Salvador</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Procaps SA de CV, which
include both the Procaps Salvador, S.A. de C.V. (formerly Laboratorios L&#243;pez) and Biokemical S.A. de C.V. manufacturing plants,
is located in San Salvador, El Salvador, on an approximately 20,270 square meter lot, with approximately 7,950 square meters of floor
space. This facility was acquired as part of Procaps&#8217; acquisition of Laboratorios L&#243;pez and Biokemical S.A. de C.V. in 2014
and currently produces products associated with our Farma Procaps and VitalCare brands, including multiple dosage form products. The installed
capacity of this facility is approximately 218 million units per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Procaps SA de CV manufacturing
facility is certified by DNM.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Sofgen Facility &#8211; West Palm Beach</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2021, we completed
the acquisition of an 86,000 square feet pharmaceutical production facility located in West Palm Beach, Florida from Strides Pharma, Inc.
The newly acquired facility, which began operations in May 2022, has an annual production capacity of approximately 1.8 billion capsules
per year. In addition, this facility also has development and analytical testing capabilities. The primary assets included in the acquisition
were several Softgel encapsulation lines, critical support systems, automated packaging line capabilities, as well as development facilities
including pilot and scale up capabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Distribution and Logistics</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our logistics team is centralized
by line of business in order to enable us to better capture the synergies of our businesses and maintain our operational focus. They operate
throughout all countries in which we have a presence and assist us with the transportation of our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We use a network of third-party
transportation companies for customized services, which are regulated by INVIMA, ANVISA, the International Air Transport Association,
World Customs Organization (<i>Organizaci&#243;n Mundial de Aduanas</i>), the International Chamber of Shipping and other applicable
regulatory agencies where we operate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our products are stored in
self-owned storages in Barranquilla in Colombia, El Salvador and Brazil, and with third-party storage facilities that meet all of the
requirements of our products in terms of space and environmental conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Raw Materials and Material Sourcing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Affordable, high-quality raw
materials and packaging components are essential to all of our business segments due to the nature of the products we manufacture. We
use a broad and diverse range of raw materials in the design, development, and manufacturing of our products. This includes, but is not
limited to, key materials such as gelatin, starch and iota carrageenan for our Softgel products, packaging films for our Rx and OTC products,
and glass vials and syringes for injectable fill-finish for certain of our Rx and Diabetrics products. The raw materials that we use are
sourced externally on a global basis and are generally available from multiple suppliers. Supplies of certain raw materials and product
delivery systems may be more limited, as they are available from one or only a few suppliers and may require extensive compatibility testing
before we can use them. For more information on the risks associated with the raw materials we use and their sourcing, please see Item
3.D of this Annual Report under the heading &#8220;Risk Factors&#8212;Risks Related to Product Development and Manufacturing&#8212;Our
future results of operations are subject to fluctuations in the costs, availability, and suitability of the components of the products
we manufacture, including active pharmaceutical ingredients, excipients, purchased components, and raw materials. In addition, the global
supply chain crisis may interfere with the operations of certain of our direct or indirect suppliers or with international trade for these
supplies, which could raise our costs or reduce the productivity or slow the timing of our operations, which could have a material adverse
effect on our business, financial condition and results of operations.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Globally, our supplier relationships
could be interrupted due to natural disasters and international supply disruptions, including those caused by pandemics or geopolitical
and other issues. For example, commercially usable gelatin is available from a limited number of sources. In addition, much of the gelatin
we use is bovine derived. Past concerns of contamination from BSE have narrowed the number of possible sources of particular types of
gelatin. If there were a future disruption in the supply of gelatin from any one or more key suppliers, there can be no assurance that
we could obtain an alternative supply from our other suppliers. Any future restrictions that were to emerge on the use of bovine-derived
gelatin from certain geographic sources due to concerns of contamination from BSE could hinder our ability to timely supply our customers
with products and the use of alternative non- bovine-derived gelatin for specific customer products could be subject to lengthy formulation,
testing and regulatory approval periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We work very closely with
our suppliers to assure continuity of supply while maintaining excellence in material quality and reliability. We continually evaluate
alternate sources of supply, although we do not frequently pursue regulatory qualification of alternative sources for key raw materials
due to the strength of our existing supplier relationships, the reliability of our current supplier base, and the time and expense associated
with the regulatory process. Although a change in suppliers could require significant effort or investment by us in circumstances where
the items supplied are integral to the performance of our products or incorporate specialized material such as gelatin, we do not believe
that the loss of any existing supply arrangement would have a material adverse effect on our business. See Item 3.D of this Annual Report
under the heading &#8220;Risk Factors&#8212;Risks Related to Product Development and Manufacturing &#8212;Our future results of operations
are subject to fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active
pharmaceutical ingredients, excipients, purchased components, and raw materials. In addition, the global supply chain crisis may interfere
with the operations of certain of our direct or indirect suppliers or with international trade for these supplies, which could raise our
costs or reduce the productivity or slow the timing of our operations, which could have a material adverse effect on our business, financial
condition and results of operations.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our R&amp;D activities are
directed primarily toward the development of new products and services, and the improvement of our manufacturing processes and delivery
technologies. Our R&amp;D platform is decentralized with research centers in Barranquilla, Colombia, Cotia, Brazil, and West Palm Beach,
Florida. We employ more than 300 scientists, technicians and skilled personnel in R&amp;D and innovation. Our main R&amp;D operation is
in the city of Barranquilla, Colombia, which employs over 300 scientists, technicians and skilled personnel in R&amp;D and technological
innovation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our R&amp;D capabilities have
led to the development of our Softgel proprietary delivery systems which drives our NextGel business segment and our Rx and OTC product
portfolio, allowing us to focus on the development and sale of high-growth and premium pharmaceutical products which we believe are subject
to less pricing pressures when compared to more generic pharmaceutical products. The NextGel business segment&#8217;s product development
proposals involve a significant amount of R&amp;D, among other efforts, which enables Procaps to apply its proprietary Softgel technologies
to existing products (such as converting an existing product to a Softgel dosage form). Some of our Softgel technologies include our standard
Softgel capsule; Versagel, our versatile plant-based Softgel shell; Chewgel, a chewable Softgel capsule; Unigel, a smart Softgel capsule
which incorporates other delivery systems into a single Softgel capsule; and G-tabs, gelatin coated tablets that are easy to swallow and
we believe, based on current technology, to be impossible to counterfeit. In addition, our R&amp;D capabilities have allowed us to develop
gummies related technologies for our Funtrition OTC products. For more information on such products and technologies, see &#8220;&#8212;Products
and Services.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our corporate culture focuses
on innovation and R&amp;D. We rely on a combination of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual
property, nondisclosure and other contractual provisions, and technical measures to protect a number of our products, services, processes
and intangible assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have applied in Colombia,
the United States and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered and issued, and also hold common law rights in various trademarks and service marks. As of December 31, 2022, we have
been granted 42 patents and have 34 patents pending approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the product type/technology for which our granted patents relate, the jurisdiction of registration, the expiration date and the type of
patent. None of our patents listed below have been licensed from third parties or have expired.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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Registration</td><td style="width: 1%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; text-align: center">Costa Rica</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">Utility Model</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Mexico</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Europe</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Canada</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">30/07/2027</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Electronic Dosage Dispensing System</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">05/25/2023<br/> Extended under 35 U.S.C.154 (b) by 715 days</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">07/18/2031<br/> Extended under 35 U.S.C.154 (b) by 97 days</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">07/30/2027 <br/> Extended under 35 U.S.C.154 (b) by 694 days</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Korea</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Unigel Technology</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Japan</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">18/07/2031</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Blefadex Composition</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Colombia</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">30/12/2034</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Cynclor Project</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">29/08/2034</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: center; text-indent: -10pt; padding-left: 10pt">Blefadex Composition</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Patent</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">United States</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">30/12/2034</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, as of December
31, 2022, we hold 5,415 trademarks, and 302 pending approval. Additionally, as of December 31, 2022, we have 202 drug registrations approved,
with over 179 pending approval.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not consider any individual
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compliance Standards</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our facilities and operations
are subject to various environmental laws and regulations. We undergo periodic internal audits relating to environmental, health and safety
requirements in order to maintain compliance with applicable laws and regulations in each of the jurisdictions in which we operate. Additionally,
pursuant to an agreement with one of our shareholders, IFC, we are required to comply with IFC&#8217;s Performance Standards on Social
&amp; Environmental Sustainability, permit environmental and social representatives of IFC to visit our facilities on an annual basis
and provide IFC with an annual sustainability report, among other requirements. As part of this agreement, we have committed to adhere
to the processes and compliance mechanisms of IFC&#8217;s Performance Standards on Social &amp; Environmental Sustainability in order
to improve our environmental and social risk management, including the preparation of an Annual Sustainability Report that follows the
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have made, and continue
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with such laws and regulations have been or will be material to our business. We do not have any material remediation liabilities outstanding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are committed to doing
business in an ethical manner. We have a long history of environmentally sound and efficient operations, safe and healthy working conditions,
and active participation in the communities where we are located. We have sought to strengthen our long-term ESG goals by incorporating
environmental and social management into strategic business decisions, aligned with sustainable development goals with the aim of generating
shared value and a positive impact on the communities we serve.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We seek to strengthen our
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products to the population in the regions we operate in, while seeking to reduce the environmental impact of our activities.</p><div>

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<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">1.</td><td style="text-align: justify">Fundamental: We are building a responsible and financially
sustainable business that is supported by a strong governance structure, compliance with good governance standards, an ethical business
culture, and risk management.</td>
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portfolio of innovative, effective, safe, and high-quality health solutions that contribute to the well-being of society.</td>
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growth.</td>
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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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all employees to achieve personal development (physical, mental, social and emotional), acquire new competencies, skills and abilities,
and promote the proper attitudes to improve their interpersonal skills and enhance their future employment prospects in the changing and
competitive market we operate. Our human development, hiring and training process includes:</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">promoting
activities and training to improve the health of our employees and protection from occupational risk factors; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">encouraging and supporting self-development, self-monitoring,
    individual and collective learning, and promoting continuous self-improvement.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, we develop an annual communication
    plan to promote diversity and inclusion. The relations with our employees and other stakeholders are framed by ethical principles and
    values, as set out in our reputation and communication policy that reaches employees in all countries where we operate. We are committed
    to promoting gender equality. Annually, we perform a cross-countries strategy to carry out activities and deploy communications that contribute
    to this goal. We have identified 3 key areas in which we can strengthen equality in our work environment: female leadership, female health,
    and motherhood support.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Carbon Neutrality Strategy</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, Procaps designed
a carbon neutrality strategy which we officially launched at the end of 2021. Our strategy has the goal of, among others, (i) calculating
our baseline carbon footprint and comparing it to the footprint of similar businesses to identify a benchmark, (ii) identifying greenhouse
gas emissions mitigation opportunities, and (iii) developing a strategy combining mitigation and offsetting to become carbon neutral by
a date to be determined.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first phase of our strategy
consists of measuring the carbon footprint of our facilities. We began by measuring the carbon footprint of our Barranquilla, Colombia
facility, which has the highest production volume and contribution to greenhouse gas emissions in its three scopes. The results were published
in our 2021 ESG Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we extended our carbon
footprint measurement to our other facilities in El Salvador and Brazil. We expect to complete it in 2023, and to communicate the results
in our ESG Report. We expect that this information will provide us with a full dimension of our carbon footprint for our business at this
time, with the goal of allowing us to define a corporate baseline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on our progress to date,
we have identified opportunities that we believe are viable for the mitigation of greenhouse gas emissions, some of which are currently
in progress while others are under review for inclusion in our ESG initiatives in 2023. We have classified these opportunities into three
scopes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Scope 1</span>: (i) Replacement of refrigerant
gases by less polluting alternative gases; and (ii) replacement of fire extinguishers technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Scope 2</span>: (i) promote energy consumption
efficiency initiatives; and (ii) renewable energy consumption projects (solar panels).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Scope 3</span>: optimization of transport
routes for raw materials and company products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our corporate strategy to
achieve carbon neutrality is still under review. Options have been identified; however we have to calculate a complete baseline in order
to be able to commit to targets and timeframes, which calculation remains ongoing. Once we have the corporate baseline, we intend to define
reduction and compensation goals in order to approve our commitment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Regulatory Matters</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The manufacturing, processing,
formulation, packaging, labeling, testing, storing, distributing, advertising, and sale of our products and services are subject to regulation
by a variety of agencies in the localities in which our products are sold. In addition, we manufacture and market certain of our products
in accordance with standards set by various organizations, including the FDA, Health Canada, MHRA, TGA, Cofepris and ISO. We believe that
our policies, operations, and products comply in all material respects with existing regulations to which we are subject.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The manufacturing, distribution,
and marketing of healthcare products and the provision of certain services for development-stage pharmaceutical products are subject to
extensive ongoing regulation by INVIMA, ANVISA, the FDA, other regulatory authorities in the countries in which we operate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Colombian Regulations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A majority of our products
are manufactured in our four manufacturing facilities in Colombia. INVIMA is the Colombian regulatory authority charged with inspecting
and supervising the marketing and manufacturing of health products, identifying and evaluating the violation of health standards or procedures,
and implementing best practices and providing medical approval for the import and export of products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">INVIMA carries out periodic
inspections of our facilities, processes and products to verify compliance with cGMP and Good Laboratory Practices in accordance with
the regulations established by the World Health Organization (&#8220;WHO&#8221;) in the Technical Report Series 823 &#8212; 32<sup>nd</sup>
Report of the WHO Expert Committee on Specifications for Pharmaceutical Preparations (the &#8220;WHO Report 32&#8221;). In addition, our
facilities are also subject to regulation and inspection by the Colombian Agricultural Institute (<i>Instituto Colombiano Agropecuario</i>,
or &#8220;ICA&#8221;), a public entity attached to the Colombian Ministry of Agriculture and Rural Development (<i>Ministerio de Agricultura
y Desarrollo Rural</i>), responsible for controlling agricultural health in Colombia. The ICA is charged with inspecting our plants to
verify compliance with cGMP for the production of products for veterinary use, also in accordance with the provisions of the WHO Report
32.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>United States Regulations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA has jurisdiction over
certain of our Rx, OTC pharmaceutical products and API. The FDA&#8217;s jurisdiction extends to the manufacturing, testing, labeling,
packaging, storage, distribution, and promotion of these products. We are committed to consistently provide our customers with high quality
products that adhere to cGMP regulations promulgated by the FDA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All facilities where Rx and
OTC products are manufactured, tested, packaged, stored, or distributed for the U.S. market must comply with FDA, cGMPs and regulations
promulgated by competent authorities in the countries, states and localities where our manufacturing facilities are located. All of our
drug products destined for the U.S. market are manufactured, tested, packaged, stored, and distributed according to cGMP regulations.
The FDA performs periodic audits to ensure that our FDA registered manufacturing facility remains in compliance with all appropriate regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, certain of our
subsidiaries are subject to other healthcare laws, including the U.S. Federal Food, Drug, and Cosmetic Act, the Public Health Service
Act, the Controlled Substances Act, and comparable state and foreign laws and regulations in certain of their activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Third parties develop and
manufacture APIs for use in certain of our pharmaceutical products that are sold in the U.S. and other global markets. API manufacturers
typically submit a drug master file to the regulatory authority that provides the proprietary information related to the manufacturing
process. The FDA inspects the manufacturing facilities to assess cGMP compliance, and the facilities and procedures must be cGMP compliant
before API may be exported to the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Brazilian Regulations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain of our products are
manufactured in our Brazil manufacturing facilities. ANVISA is the Brazilian regulatory agency that is responsible for the approval and
supervision of food, cosmetics, tobacco, pharmaceuticals, health services, and medical devices, among other products, and carries out
sanitary control and inspection activities in ports, airports and the border regions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ANVISA is charged with the
protection of the Brazilian population&#8217;s health through sanitary control over the production and marketing of products and services,
including facilities, processes, materials and technologies related thereto. We may only operate our facilities subject to the jurisdiction
of ANVISA once we have received ANVISA&#8217;s approval. In addition, all of our pharmaceutical products must be submitted to ANVISA for
approval before being offered to our customers in Brazil. As a governmental agency, ANVISA has police power over sanitary controls, as
a result, in the event an inspection reveals non-compliance with its regulations, it may shut down businesses, suspend the sale of products,
appropriate and seize items, or issue fines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to approvals from
ANVISA, we also require the approval of CETESB, an agency of the government of the State of S&#227;o Paulo responsible for the control,
inspection, monitoring and licensing of activities that generate pollution, to operate our facilities in Brazil. CETESB is responsible
for granting operating licenses for our facilities and carries out frequent inspections to assess whether there have been any changes
to the environmental impact caused by our activities. For information on current regulatory proceedings involving CETESB, please see Item
8.A under the heading &#8220;<i>Legal Proceedings&#8212;Operating License</i>.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>El Salvador Regulations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain of our products are
manufactured in our El Salvador manufacturing facilities. DNM is the El Salvadorian regulatory agency that is responsible for safeguarding
the health of the country&#8217;s population through the regulation and surveillance of pharmaceutical, cosmetic, hygienic, chemical products,
medical devices and raw materials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The DNM is the competent health
authority in El Salvador charged with authorizing and registering all pharmaceutical products in El Salvador and is responsible for regulating
the importation and manufacturing of pharmaceutical products, implementing price controls, and controlling of distribution chains. The
DNM acts based on the guidelines established by the Central American Technical Regulation (<i>Reglamento T&#233;cnico Centroamericano</i>)
which is a guide based on the WHO Report 32, to implement the best practices in the manufacturing, storage, distribution and sale of pharmaceutical
products. The DNM is also responsible for certifying that pharmaceutical laboratories in El Salvador comply with cGMP.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Regulatory Requirements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also subject to various
federal, state, local, national and transnational laws, regulations, and requirements in Colombia, Brazil, the United States and other
countries in which we operate, relating to safe working conditions, laboratory and distribution practices, and the use, transportation
and disposal of hazardous or potentially hazardous substances. In addition, applicable import and export laws and regulations require
us to abide by certain standards relating to the cross-border transit of finished goods, raw materials and supplies and the handling of
information. We are also subject to various other laws and regulations concerning the conduct of our non-U.S. operations, including FCPA
and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The costs associated with
our continued compliance with the various applicable federal, state, local, national and transnational regulations to which we are subject
could be significant, and the failure to comply with such legal requirements could have an adverse effect on our results of operations
and financial condition. See Item 3.D under the heading &#8220;<i>Risk Factors&#8212;Risks Related to Laws and Regulations&#8212;Failure
to comply with existing and future regulatory requirements could adversely affect our business, financial condition and results of operations,
or result in claims from customers</i>&#8221; in this Annual Report for additional discussion of the costs associated with complying with
the various regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the years ended December
31, 2022, 2021 and 2020, we were subject to three regulatory audits by INVIMA and the Saudi Arabia Food and Drug Administration, all of
which were successfully completed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>2021 Colombian Tax Reform</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2021, Colombia&#8217;s
President approved the 2021 Colombian Tax Reform, which includes certain tax measures intended to generate additional tax revenues to
fund social programs for purposes of mitigating the impact of the COVID-19 pandemic. These tax measures include, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increasing
the corporate tax rate from 30% to 35% for both domestic and foreign entities, permanent establishments and branches;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">maintaining
the rates for the special tax regime and free-trade zones at 20%;</span></td>
</tr></table><div>
</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#160;</td><td style="text-align: justify">&#160;</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">continuing
to limit the amount of turnover tax that taxpayers may claim as a corporate income tax credit to 50% by repealing a previously enacted
law change that would have allowed taxpayers to claim 100% of the turnover tax effectively paid as an income tax credit;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iv)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increasing
the carry forward period of profits subject to taxation at the corporate level exceeding the profits recorded in the company&#8217;s
accounting records in the same year, from 5 to 10 years for taxpayers engaged in concession and public-private agreements;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(v)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">establishing
a new normalization tax (i.e., tax amnesty) applicable to income taxpayers that did not declare certain assets or claimed non-existent
liabilities for tax purposes, taxing such amounts at a rate of 17%, as of January 1, 2022.; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(vi)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">eliminating
the value added tax (&#8220;VAT&#8221;) exclusion for imports of goods with a value of $200 or less that enter Colombia through postal
services. The exclusion, however, continues for imports from countries with which Colombia has signed a free trade agreement, by virtue
of which the non-collection of VAT has been expressly agreed. For imports from countries with a free trade agreement with Colombia, the
exclusion will not apply if the imports are for commercial purposes.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>2022 Colombian Tax Reform Bill</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify">On December 13, 2022, the Colombian President
Gustavo Petro enacted Law 2277 of 2022 (available in Spanish only), which contains the tax reform proposals previously approved by congress.
The purpose of the amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These
tax measures include, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">1.</td><td style="text-align: justify">Corporate Income Tax (CIT) rate to remain unchanged at 35%. However, a new net tax rate (TDD per its acronym
in Spanish) will be introduced, under which Colombian companies, including free trade zone users, will be subject to a minimum 15% effective
tax rate, calculated based on financial net profit, in accordance with the OECD Pillar Two global minimum tax rules.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                              </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">2.</td><td style="text-align: justify">CIT rate for qualified FTZ companies to remain at 20% subject to an annual exportation requirement.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                                             </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">3.</td><td style="text-align: justify">Certain non-taxable income items, special deductions, exempt income and tax credits to be capped at 3%
of the taxpayer&#8217;s net income before these detractions.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">4.</td><td style="text-align: justify">The capital gains tax rate to rise to 15% (from 10%).</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                               </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">5.</td><td style="text-align: justify">The tax credit provided in article 256 of the Tax Code for investment in research and development, as
determined by the National Council of Science and Technology Tax Benefits, will be increased to 30% (from 25%). However, expenses related
to the investment covered by the tax credit no longer will be deductible. The tax credit currently is not covered by the 3% cap on tax
benefits, but the increased credit will be subject to the cap.</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">6.</td><td style="text-align: justify">The following non-taxable items to become subject to CIT:</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                   </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="padding-left: 0in; width: 0.25in; text-align: left">a.</td><td style="text-indent: 0in; padding-left: 0in; text-align: justify">Profits on the sale of listed shares on the Colombian Exchange
Market (currently available when shares held by a single individual and do not represent more than 10% of the total outstanding shares</td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">b.</td><td style="text-align: justify">Profits on the trading of financial derivatives the underlying
assets of which are listed shares, index, funds or collective portfolios.</td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">c.</td><td style="text-align: justify">Dividends distributed in shares or capitalization of the revaluation
account.</td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">d.</td><td style="text-align: justify">The distribution in shares or capitalization of the profits
that surpass the threshold of non-taxable income as set out at Sections 48 and 49 of the CTC.</td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">e.</td><td style="text-align: justify">Yields from security bonds.</td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">7.</td><td style="text-align: justify">ICA (municipal tax) tax to become deductible instead of creditable at 50% against CIT.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                                </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">8.</td><td style="text-align: justify">The following items of exempt incomes to become taxable:</td></tr>
                                                                                                                                                                  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&#9679; Orange economy, &#9679; Productivity
incentives for the agricultural industry. &#9679;VIS housing and priority interest, &#9679; New forest plantations, &#9679; River transport
services, &#9679; Literary creations and, &#9679; Cinematography.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">9.</td><td style="text-align: justify">The mega-investment regime to be repealed.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                    </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">10.</td><td style="text-align: justify">Effective Place of Management rules to broaden to consider day to day activities in Colombia as opposed
to testing only the place where decisive and key decisions are taken.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                               </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">11.</td><td style="text-align: justify">A new form of tax presence for non-residents to apply for a significant economic presence in Colombia,
subject to revenue threshold, use of co. domains or number of customers in the country. WHT to apply at 20% subject to regulations to
define how and when for B2C sales.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                            </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">12.</td><td style="text-align: justify">Dividend tax for non residents to rise from 10% to 20%. The withholding tax rate on dividends paid by
Colombian companies to Colombian resident entities out of profits taxed at the corporate level will be increased to 10% (from 7.5%).</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                             </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">13.</td><td style="text-align: justify">Dividends received by individuals to be taxed at the general rate of up to 39%.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                          </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">14.</td><td style="text-align: justify">A wealth tax of up to 1% to apply to individuals and non-resident companies
who are not CIT filers and provided net equity exceeds over USD 700,000.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                   </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">15.</td><td style="text-align: justify">A tax on single-use plastic products for packing to be introduced.
Certain exemptions to apply for waste and the like.</td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">16.</td><td style="text-align: justify">A tax on the consumption of ultra-processed sweetened beverages to be introduced.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                            </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">17.</td><td style="text-align: justify">A 10% tax on the consumption of ultra-processed food products with a high content of added sugars, to
be introduced.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This information provides an overview of the most
significant amendments under the new act. Most changes will enter into force as from the date of enactment of the legislation; however,
some changes that alter substantial matters concerning periodic taxes became effective on January 1, 2023, and certain other provisions
become effective on a date specified in the legislation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are evaluating the potential impact of the
2022 Colombia Tax Reform on our business, financial condition and results of operations. We cannot anticipate the impact that the 2022
Colombia Tax Reform may have, nor the measures that could be adopted by the current administration in order to meet its financial obligations,
which might negatively affect Colombian&#8217;s economy and, in turn, our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Quality Assurance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are committed to ensuring
and maintaining the highest standard of regulatory compliance while providing high quality products to our customers. To meet these commitments,
we have developed and implemented a company-wide quality management system. We have approximately 670 employees focusing on quality and
regulatory compliance. Our senior management team is actively involved in setting quality policies and standards, as well as managing
internal and external quality performance. Our quality assurance department provides quality leadership and supervises our quality systems
programs. An internal audit program monitors compliance with applicable regulations, standards, and internal policies. In addition, our
facilities are subject to periodic inspection by the INVIMA, ANVISA, the FDA, and other equivalent local, state, and foreign regulatory
authorities, as applicable, as well as IFC. All INVIMA, ANVISA, FDA and other regulatory inspectional observations have been resolved
or are on track to be completed at the prescribed timeframe provided in commitments to the applicable agency in all material respects.
We believe that our operations are in compliance in all material respects with the regulations under which our facilities are governed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Environmental Matters</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations are subject
to a variety of environmental, health, and safety laws and regulations, including those of the Colombian Ministry of Environment and Sustainable
Development (Ministerio de Ambiente y Desarrollo Sostenible), the Brazilian Institute of the Environment and Renewable Natural Resources
(Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renov&#225;veis), the U.S. Environmental Protection Agency (EPA), Ministry
of Environment and Natural Resources (Ministerio de Ambiente y Recursos Naturales) from El Salvador, and equivalent state, local and national
regulatory agencies in each jurisdiction in which we operate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These laws and regulations
govern, among other things, air emissions, wastewater discharges, the use, handling, and disposal of hazardous substances and wastes,
soil and groundwater contamination, and employee health and safety. Our manufacturing facilities use, in varying degrees, hazardous substances
in their processes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">We believe that our operations
are in compliance in all material respects with the environment, health, and safety regulations applicable to our facilities. Additionally,
we are required to comply with IFC&#8217;s Performance Standards on Social &amp; Environmental Sustainability, among other requirements.
For more information, see &#8220;<i>&#8212;Corporate Responsibilities and Environmental, Social, and Governance (ESG).</i>&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. ORGANIZATIONAL STRUCTURE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following diagram reflects
a simplified summary of our organizational structure as May 1, 2023:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_001.jpg" style="width: 750px; height: 240px"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
diagram above only shows selected subsidiaries of Procaps.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not have any established branches.
For a complete list of the Company&#8217;s subsidiaries, see Exhibit 8.1 to this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 4A.</b></span><b> UNRESOLVED
SEC STAFF COMMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has no unresolved
comments from the staff of the SEC with respect to its periodic reports under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 5.</b></span><b> OPERATING
AND FINANCIAL REVIEW AND PROSPECTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Our discussion and analysis
of our results of operations and financial condition are based upon our Annual Audited Consolidated Financial Statements, which have been
prepared in accordance with IFRS. Our operating and financial review and prospects should be read in conjunction with our Annual Audited
Consolidated Financial Statements, the accompanying notes thereto and other financial information appearing elsewhere in this Annual Report.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. <span style="text-transform: uppercase">OPERATING RESULTS</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For an overview of our business,
see Item 4.B &#8220;Overview&#8221; of this Annual Report.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Business Segments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>NextGel</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our NextGel business segment,
operated under our Softigel, Sofgen, Softcaps and Funtrition brands, is the iCDMO arm of Procaps which offers services specializing in
development and manufacturing in Softgel and related technologies, and operates globally in the B-to-B market, more specifically in Brazil,
Colombia and the United States. We are the top Softgel manufacturer in South and Central America and top five in the world in terms of
Softgel production capacity, according to an independent third-party industry analysis report. The iCDMO agreements with our top-tier
customers range from five to ten-year terms. Our NextGel business segment has over 130 clients across more than 35 countries and the key
products that we manufacture in this segment includes Softgel pharmaceutical products such as Advil, Apronax Liquidgels, multivitamins,
Vitamin D and Dolex ActivGel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Procaps Colombia, CAN and CASAND</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These three business segments
serve each of its respective regional B-to-C markets by offering the following key product lines/business units:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Rx Pharmaceutical Products </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Rx product line comprises
the Farma Procaps and the Clinical Specialties brands/business units.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Farma Procaps formulates,
manufactures and markets branded prescription drugs. It represents a high growth portfolio that focuses on nine therapeutic areas (feminine
care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system and respiratory).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical Specialties is a
leading provider of high-complexity care treatments to private institutions regionally. Its diverse product portfolio, targets various
in-demand therapeutic areas and develops, manufactures and markets personal protective equipment, high-complexity drugs for hospital use
such as antibiotic, blood clot, immunosuppressant, oncology and analgesics products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>OTC Product Line</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our OTC product line primarily
consists of the VitalCare brand/business unit. VitalCare develops, manufactures and markets OTC consumer healthcare products through an
extensive portfolio focused on over eight high-prevalence therapeutic areas (including gastrointestinal, skin care, cough and cold, analgesics,
urological, and vitamin, minerals and supplements) at what we believe to be accessible and appealing price points. Our Colmed OTC product
line, which is part of our VitalCare business unit, consists of products in the following categories: antibiotics, anti-infective, anti-parasitic,
cardiovascular, feminine care, cutaneous antimycotic, pain killers, gastrointestinal, hormonals, metabolic, endocrine, nervous system,
ophthalmic, osteoarticular, respiratory, diet supplements and vitamins and minerals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We market and sell our OTC
products in the following key regional markets: Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras,
Nicaragua, Panama, Peru, and the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps Colombia primarily
serves the Colombian market, CAN primarily serves the Honduras, Nicaragua, El Salvador, United States and Guatemala markets, and CASAND
primarily serves the Panama, Costa Rica, Ecuador, Dominican Republic, Peru and Bolivia markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Diabetrics</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Diabetrics business segment
is comprised of our Diabetrics brand/business unit, and we believe is an attractive regional B-to-C diabetes-focused treatment and management
platform that focuses primarily on the Colombian market. It has a unique business model when compared to our competitors, as it aims to
cover the full spectrum of needs of patients with diabetes by providing products and services such as blood glucose meters, telemonitoring,
Rx oral anti-diabetics products, cosmeceuticals (cosmetics that have medicinal properties for diabetic care), insulin delivery systems
and other diabetes solutions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The Business Combination</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 31, 2021, Union,
Crynssen, the Company and Merger Sub entered into the Business Combination Agreement, and subsequently amended the Business Combination
Agreement on September 29, 2021. As a result of the transactions contemplated by the Business Combination Agreement, each of Union and
Crynssen became direct wholly owned subsidiaries of the Company and each Crynssen Shareholder and shareholder of Union were issued Ordinary
Shares, and, in the case of IFC, Ordinary Shares and Redeemable B Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Union also entered into separate
Subscription Agreements, each dated March 31, 2021, with the PIPE Investors, pursuant to which, and subject to the terms and conditions
thereto, the PIPE Investors collectively subscribed for an aggregate of 10,000,000 SPAC Ordinary Shares for an aggregate purchase price
of $100,000,000. The PIPE investment was consummated immediately prior to the Closing of the Business Combination, and each SPAC Ordinary
Share subscribed for by the PIPE Investors were exchanged for one Ordinary Share, substantially concurrently with the closing of the Business
Combination.</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 16, 2021, in connection
with the vote to approve the amendment to the then current amended and restated articles of association of Union to extend the date by
which Union was required to consummate its initial business combination from April 22, 2021 to October 22, 2021, certain shareholders
of Union exercised their right to redeem 6,446,836 SPAC Ordinary Shares for cash at a redemption price of approximately $10.07 per share,
for an aggregate redemption amount of approximately $64.9 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to the Closing, on September
22, 2021, in connection with the vote to approve the Business Combination and other related proposals, at Union&#8217;s extraordinary
general meeting, certain shareholders of Union exercised their right to redeem 7,657,670 SPAC Ordinary Shares for cash at a redemption
price of approximately $10.19 per share, for an aggregate redemption amount of approximately $78.0 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, on September
29, 2021, the Sponsors entered into the Share Forfeiture Agreement, pursuant to which, the Sponsors forfeited a combined 700,000 SPAC
Ordinary Shares prior to the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For a description of the Business
Combination, see Item 4.A. of this Annual Report under the heading &#8220;Company Information&#8211;&#8211;History and Development of
the Company&#8211;&#8211;The Business Combination.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Going Concern Update</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, the Company
was in breach of certain of the covenants included under the NPA, the Syndicated Loan and the Additional Loan Agreement. Although none
of the lenders declared an event of default under the applicable agreements, these breaches could have resulted in the lenders requiring
immediate repayment of the applicable indebtedness and as a result, the Company has classified the respective indebtedness, amounting
to approximately $139 million in the aggregate, to current liabilities. As of December 31, 2022, the Company reported a working capital
deficit (which is current assets minus current liabilities) of approximately $70.9 million. These events and conditions, cosidered in
the aggregate, absent the Waivers (as defined and described in this Annual Report), cast substantial doubt upon the Company&#8217;s ability
to continue as a going concern.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On <span style="background-color: white">March
28, 2023, March 31</span>, 2023 and May 2, 2023, as applicable, the Company obtained the Waivers. Based on management&#8217;s
projections over the next 12 months, the Company is expected to be in compliance with the applicable covenants under the NPA, the
Syndicated Loan and the Additional Loan Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, the Company
had cash of approximately $43.0 million. Currently, the Company maintains financing lines, which, together with the expected internal
generation of funds, will allow it to finance its growth and working capital needs. For the year ended December 31, 2022, the Company
recognized income of approximately $42.5 million. The Company generated approximately $14.1 million of cash from operating activities.
As of December 31, 2022, the Company retains a negative equity position of $1.9 million, and comprehensive income of approximately $36.5
million. As of December 31, 2022, the Company had a net working capital deficit of approximately $71.0 million due to the reclassification
of non-current borrowings to current borrowings and as a result of the breach in loan covenants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company maintains current
short and long-term financing lines, which, together with the expected internal generation of funds through operations, will allow it
to finance its growth and its need for working capital. For the years 2021 and 2022, the Company has been generating cash inflows from
operating activities and projects that operating cash inflows from operating activities will continue during 2023.</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management has evaluated the
Company&#8217;s capital position and its ability to continue in the normal course of business for the foreseeable future and ability to
meet its financial obligations for the next twelve months. Based on the Company&#8217;s cash flow projections and improvement in financial
covenant ratios as a result of the Waivers, the Company&#8217;s management believes the Company will have sufficient funds to repay their
obligations as they fall due and to meet its financial covenants in 2023. However, due to the uncertainty caused by current economic conditions,
including rapid growth in inflation, increasing interest rates, global disruption to the supply chain, volatility in foreign exchange
rates and industry price regulations, there is a risk the Company will not meet its financial covenants. The Company&#8217;s failure to
comply with such financial covenants could result in an event of default, which if that were to occur would materially and adversely affect
the Company&#8217;s business, financial condition, liquidity and results of operations. As a result of this material uncertainty, the
Company&#8217;s management concluded the above conditions and events raise significant doubt about the Company&#8217;s ability to continue
as a going concern.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has implemented,
or is in the process of implementing, various cost saving and business strategies to mitigate the above mentioned macro risks and resulting
risk of future covenant noncompliance.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information, including
details regarding the Company&#8217;s mitigation plan, see Note 2.1 to our Annual Audited Consolidated Financial Statements, included
elsewhere in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Comparison of the years ended December 31,
2022 and December 31, 2021</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
historical operating results for the periods indicated:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the<br/> year ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Increase/ (Decrease)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year ended <br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Constant Currency Increase/ (Decrease)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Contribution Margin and Adjusted EBITDA are non-IFRS
    measures. We include these metrics as supplemental disclosures because we believe they are useful indicators of our operating performance.
    Contribution Margin and Adjusted EBITDA are well recognized performance measures in the pharmaceutical industry that are frequently used
    by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry. However,
    because Contribution Margin and Adjusted EBITDA are non-IFRS measures and their calculation is not determined in accordance with IFRS,
    such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, our
    calculation of Contribution Margin and Adjusted EBITDA as presented may not be directly comparable to similarly titled measures by other
    companies. For more information on Contribution Margin, Adjusted EBITDA and other non-IFRS financial measures, please see &#8220;&#8212;Non-IFRS
    Financial Measures&#8221; below.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As exchange rates are an important factor
in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results on a constant currency
basis in addition to the IFRS reported results helps improve investors&#8217; ability to understand our operating results and evaluate
our performance in comparison to prior periods. Constant currency information is non-IFRS financial information that compares results
between periods as if exchange rates had remained constant period-over-period. We calculate constant currency by calculating year-end
period results (year ended December 31, 2022) using prior-period (year ended December 31, 2021) foreign currency exchange rates. Results
on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are
not measures of performance presented in accordance with IFRS. For more information on constant currency adjustments, please see &#8220;&#8212;Non-IFRS
Financial Measures&#8221; below.</p></td></tr>
  </table><div>
</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Revenue</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps recognizes revenue
from the sale of pharmaceutical products and licensing revenue. Revenue increased by $0.2 million, or 0.0%, from $409.7 million for the
year ended December 31, 2021 to $409.9 million for the year ended December 31, 2022. On a constant currency basis, revenue increased by
$28.0 million, or 6.8%, to $437.8 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in revenue for
the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to (i) an increase in demand for our products
and services across three strategic business segments, including: an increase of approximately $4.2 million from Nextgel, an increase
of approximately $12.4 million from CASAND and an increase of approximately 4.5 million from CAN; and (ii) an increase of sales for new
products of approximately $12.0 million, offset mainly by (iii) the currency devaluation in the period of approximately $27.8 million
and (iv) the decrease in sales of the anesthetics portfolio of approximately $25 million due to the slower pace of sales of products for
the intensive care units and higher than usual inventory cycles in the distributors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cost of sales and gross profit</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cost of sales represents
the direct costs of producing the goods sold by Procaps, such as cost of the materials and labor directly used to create the goods. Gross
profit is revenue less cost of sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cost of sales decreased by
$3.7 million, or 2.1%, from $174.0 million for the year ended December 31, 2021 to $170.4 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On a constant currency basis, cost of sales increased
by $6.7 million, or 3.9%, to $180.8 million for the year ended December 31, 2022</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The decrease in cost of sales
for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the currency devaluation of approximately
$10.4 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit increased by $3.9 million, or 1.6%, from $235.7 million
for the year ended December 31, 2021 to $239.6 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
gross profit increased by $21.3 million, or 9.0%, to $257.0 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in gross profit
for the year ended December 31, 2022 compared to the year ended December 31, 2021 was also primarily attributable to the change of the
product mix sold, brand sales during the first half of 2022 of approximately $3.5 million, and an increase of sales of other services
of approximately $4.9 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sales and marketing expenses </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales and marketing expenses
include primarily expenses incurred for promotional activities, such as marketing expenses, sales force and logistics expenses. Sales
and marketing expenses increased by $10.5 million, or 12.7%, from $83.1 million for the year ended December 31, 2021, which represents
approximately 20.3% of revenue for the year ended December 31, 2021, to $93.6 million for the year ended December 31, 2022, which represents
approximately 22.8% of the revenue for the year ended December 31, 2022. On a constant currency basis, sales and marketing expenses increased
by $16.7 million, or 20.1%, to $99.7 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in sales and
marketing expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to increased marketing
efforts, with the full return of events and travel efforts as the effects of the COVID-19 pandemic continue to lessen. There were also
expenses of approximately $5 million during the year ended December 31, 2022, related to the pre-operative expenses of the West Palm Beach
facility.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Administrative expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses include
costs incurred for administrative and certain corporate departments, such as payroll, power and utilities, and certain legal and professional
expenses. Administrative expenses increased by $23.7 million, or 28.9%, from $82.2 million for the year ended December 31, 2021 to $105.9
million for the year ended December 31, 2022. On a constant currency basis, administrative expenses increased by $30.9 million, or 37.6%,
to $113.1 million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in administrative
expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to (i) full year of expenses
related to being a public company, such as increased personnel costs, legal and consulting services which totaled in aggregate of approximately
a $15.6 million and (ii) an increase of approximately $6.1 million in expenses related to M&amp;A activities for the since terminated
acquisition of Grupo Somar and business growth projects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Finance expenses, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finance expenses, net include
certain banking expenses and bank fees, financing interest expenses, interest recognized on the financial liabilities associated with
certain put options held by IFC and Hoche, and a one-time loss on the termination of such put options. On the Closing of the Business
Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement (both as defined below) were cancelled as part of the Business
Combination in exchange for a portion of the Ordinary Shares issued to IFC and Hoche, respectively, in the Exchange. The one-time loss
on termination of the Hoche put option in the amount of $35.9 million was recognized in 2021 aligns the carrying value of such put option
on the termination date to the fair value of the Ordinary Shares issued. In 2022, interest expense includes an extinguishment loss of
$1,600, as a result of the substantially modified terms of the Senior Notes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finance expenses, net decreased
by $116.6 million, or 148.2%, from expenses of $78.6 million for the year ended December 31, 2021 to an income of $37.9 million for the
year ended December 31, 2022. The decrease in finance expenses, net was primarily due to (i) the valuation of shares held in escrow with
a net fair value gain of approximately $61.8 million, (ii) the net fair value gain of warrants liabilities of approximately $12.2 million
and (ii) the decrease of interest expense of approximately $59.6 million. In 2021 the net fair value gain related to shares held in escrow
was approximately $4.5 million and the net fair value gain of warrants liabilities was approximately $5.9 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other expenses, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other expenses, net include:
(i) currency exchange rate differences, (ii) economic emergency contribution expenses, (iii) fines, penalties, and assumed taxes, (iv)
donations, (v) listing expenses, (vi) the change in the fair value of the warrant liability, and (vii) other expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other expenses decreased by
$53.7 million, or 68.0%, from $79.0 million for the year ended December 31, 2021 to $25.3 million for the year ended December 31, 2022.
2021 was affected by the recording of non-cash listing expenses of $73.9 million associated with the deemed listing services received
by Procaps from Union, which is the difference between the deemed costs of the Ordinary Shares issued by the Company to Union shareholders
in connection with the Business Combination, in excess of the net assets obtained from Union. This was a one-time listing expense. In
2022, other expenses include approximately $16.2 million of foreign exchange and an impairment charge of Rymco S.A. of approximately $6.0
million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income tax expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income tax expense includes
two components: (i) current tax and (ii) deferred tax. Current tax is calculated based on the tax rate of each jurisdiction. Deferred
tax corresponds to the differences generated between the accounting figures and tax figures, which can result in a future income or expense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income tax expense decreased
by $3.5 million, or 25.8%, from $13.7 million for the year ended December 31, 2021 to $10.2 million for the year ended December 31, 2022.
The decrease in income tax expense was primarily due to (i) decrease in profits in Colombian companies (-51%) added to optimization
of the use of tax credits as well as deferred tax shield with an impact on lower taxes $4.6 million, (ii) increase in profits in Brazil,
as well as adjustments in deferred tax, resulting in $1.3 million in higher tax expenses recognized in the period, (iii) Rymco impairment
adjustment increase by $1.1 million (iv) tax rate reduction from 30% to 10% in El Salvador, resulting in profits from the sale of intangible
assets of $0.9 million and consolidation adjustments and eliminations of approximately $0.4 million. The accounting income effect from
the net fair value of the Warrants&#8217; liabilities ($12.2 million) and Ordinary Shares held in escrow ($61.8 million), which increase
accounting profit, did not have an impact with respect to our current or deferred tax expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Comparison of the years ended December 31,
2021 and December 31, 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets
forth historical operating results for the periods indicated:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify">Contribution Margin and Adjusted EBITDA are non-IFRS measures.
We include these metrics as supplemental disclosures because we believe they are useful indicators of our operating performance. Contribution
Margin and Adjusted EBITDA are well recognized performance measures in the pharmaceutical industry that are frequently used by investors,
securities analysts and other interested parties in comparing the operating performance of companies in our industry. However, because
Contribution Margin and Adjusted EBITDA are non-IFRS measures and their calculation is not determined in accordance with IFRS, such measures
are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, our calculation
of Contribution Margin and Adjusted EBITDA as presented may not be directly comparable to similarly titled measures by other companies.
For more information on Contribution Margin, Adjusted EBITDA and other non-IFRS financial measures, please see below under the heading
&#8220;<i>&#8212;Non-IFRS Financial Measures</i>&#8221; in this Annual Report.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of certain financial
metrics and results on a constant currency basis in addition to the IFRS reported results helps improve investors&#8217; ability to understand
our operating results and evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial
information that compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant
currency by calculating year-end period results (year ended December 31, 2021) using prior-period (year ended December 31, 2020) foreign
currency exchange rates. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures
used by other companies and are not measures of performance presented in accordance with IFRS. For more information on constant currency
adjustments, please see below under the heading &#8220;<i>&#8212;Non-IFRS Financial Measures</i>&#8221; in this Annual Report.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160; &#160; &#160; &#160; &#160; &#160; &#160;
&#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160;
&#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Revenue</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps recognizes revenue
from the sale of pharmaceutical products and licensing revenue. Revenue increased by $78.3 million, or 23.6%, from $331.5 million for
the year ended December 31, 2020 to $409.7 million for the year ended December 31, 2021. On a constant currency basis, revenue increased
by $84.92 million, or 25.6%, from $331.5 million for the year ended December 31, 2020 to $416.4 million for the year ended December 31,
2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in revenue for
the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to an increase in demand for our products
and services across all strategic business segments (Procaps Colombia, NextGel, CAN, CASAND and Diabetrics), including (i) an increase
of approximately $60.7 million in sales from existing brands in several therapeutic categories, such as gastrointestinal, respiratory,
anesthetics and wellness products, among others, and (ii) an increase in revenue from the sales of new products of approximately $17.6
million, or 22.3%, from $78.7 million for the year ended December 31, 2020 to $96.3 million for the year ended December 31, 2021 amounting
to 23.5% of total revenue for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cost of sales and gross profit</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cost of sales represents
the direct costs of producing the goods sold by Procaps, such as cost of the materials and labor directly used to create the goods. Gross
profit is revenue less cost of sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cost of sales increased by
$33.9 million, or 24.2%, from $140.2 million for the year ended December 31, 2020 to $174.0 million for the year ended December 31, 2021.
Gross profit increased by $44.4 million, or 23.2%, from $191.3 million for the year ended December 31, 2020 to $235.7 million for the
year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
cost of sales increased by $38.1 million, or 27.2%, from $140.2 million for the year ended December 31, 2020 to $178.3 million for the
year ended December 31, 2021. Gross profit increased by $46.8 million, or 24.5%, from $191.3 million for the year ended December 31, 2020
to $238.1 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in cost of sales
for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the strong increase in the volume
of products sold as described in the &#8220;Revenue&#8221; section above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in gross profit
for the year ended December 31, 2021 compared to the year ended December 31, 2020 was also primarily attributable to strong increase in
our sales volume of products sold as described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sales and marketing expenses </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales and marketing expenses
include primarily expenses incurred for promotional activities, such as marketing expenses, sales force and logistics expenses. Sales
and marketing expenses increased by $13.4 million, or 19.3%, from $69.6 million for the year ended December 31, 2020, which represents
approximately 21.0% of revenue for the year ended December 31, 2020, to $83.1 million for the year ended December 31, 2021, which represents
approximately 20.3% of the revenue for the year ended December 31, 2021. On a constant currency basis, sales and marketing expenses increased
by $14.2 million, or 20.5%, from $69.6 million for the year ended December 31, 2020 to $83.9 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in sales and
marketing expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the increase
in expenditures in the amount of $12.1 million related to advertising and marketing activities, and an increase in expenses related to
in-person sales events and travel, which returned as the COVID-19 pandemic situation improved worldwide and travel and gathering restrictions
were eased, permitting such events and activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Administrative expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses include
costs incurred for administrative and certain corporate departments, such as payroll, power and utilities, and certain legal and professional
expenses. Administrative expenses increased by $23.6 million, or 40.2%, from $58.6 million for the year ended December 31, 2020 to $82.2
million for the year ended December 31, 2021. On a constant currency basis, administrative expenses increased by $24.5 million, or 41.8%,
from $58.6 million for the year ended December 31, 2020 to $83.1 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in administrative
expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to (i) the transaction expenses
incurred in connection with the Business Combination which amounted to $10.2 million for the year ended December 31, 2021, (ii) an increase
in expenditures related to employee safety in connection with the COVID-19 pandemic, such as transportation, personal protection equipment,
COVID-19 testing for employees, vaccination, among other expenditures, in the amount of $3.8 million, (iii) an increase in travel expenses
as most countries relaxed lockdowns and travel restrictions as the situation surrounding the COVID-19 pandemic has gradually improved
during the year ended December 31, 2021, and (iv) an increase in costs and other expenses to accommodate new, emerging roles within the
administrative and finance departments of the Company as a result of our growth and becoming a publicly listed company on the Nasdaq.
In addition, certain of our departments have also initiated a plan to return to work at our facilities, which has also contributed to
the increase in administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Finance expenses, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finance expenses, net include
certain banking expenses and bank fees, financing interest expenses, interest recognized on the financial liabilities associated with
certain put options held by IFC and Hoche, and a one-time loss on the termination of such put options. On the Closing of the Business
Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement (both as defined below) were cancelled as part of the Business
Combination in exchange for a portion of the Ordinary Shares issued to IFC and Hoche, respectively, in the Exchange. The one-time loss
on termination of the Hoche put option in the amount of $35.9 million, aligns the carrying value of such put option on the termination
date to the fair value of the Ordinary Shares issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finance expenses, net increased
by $24.1 million, or 44.3%, from $54.5 million for the year ended December 31, 2020 to $78.6 million for the year ended December 31, 2021.
The increase in finance expenses, net was primarily due to the increase of the one-time extinguishment loss of the Hoche put option in
the amount of $35.9 million. The increase was partially offset by (i) a decrease of approximately $3.8 million, or 14.0%, in interest
expenses related to the put options financial liabilities, from $27.3 million for the year ended December 31, 2020 to $23.5 million for
the year ended December 31, 2021, and (ii) a net fair value gain related to warrants liabilities and shares held in escrow.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other expenses, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other expenses, net include:
(i) currency exchange rate differences, (ii) economic emergency contribution expenses, (iii) fines, penalties, and assumed taxes, (iv)
donations, (v) listing expenses, (vi) the change in the fair value of the warrant liability, and (vii) other expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other expenses increased by
$71.3 million, or 923.7%, from $7.7 million for the year ended December 31, 2020 to $79.0 million for the year ended December 31, 2021.
The increase in other expenses was primarily due to the recording of non-cash listing expenses of $73.9 million associated with the deemed
listing services received by Procaps from Union, which is the difference between the deemed costs of the Ordinary Shares issued by the
Company to Union shareholders in connection with the Business Combination, in excess of the net assets obtained from Union.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income tax expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income tax expense includes
two components: (i) current tax and (ii) deferred tax. Current tax is calculated based on the tax rate of each jurisdiction. Deferred
tax corresponds to the differences generated between the accounting figures and tax figures, which can result in a future income or expense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income tax expense increased
by $2.4 million, or 21.3%, from $11.3 million for the year ended December 31, 2020 to $13.7 million for the year ended December 31, 2021.
The increase in income tax expense was primarily due to (i) higher profits before taxes in some jurisdictions, and an increase in deferred
tax liabilities due to the increase in the tax rate in Colombia, resulting in an increase in income tax expenses of approximately $1.7
million, and (ii) certain amendments to the tax returns of certain of our subsidiaries during the year ended December 31, 2021, resulting
in $0.7 million in penalties and related nondeductible interest expenses, resulting in higher tax expenses recognized in the period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results by Segments After Inter-Segment Elimination,
Excluding Corporate for the years ended December 31, 2022 and December 31, 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="18" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Reportable segments</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 82; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>NextGel</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the NextGel segment
increased by $4.2 million, or 3.5%, from $120.8 million for the year ended December 31, 2021 to $125.1 million for the year ended December
31, 2022, primarily as a result of (i) an increase in product development services with the commencement of operations of the West Palm
Beach facility and the sales of certain product registrations totaling approximately $4.3 million, (ii) the increase in sales of gummy
products totaling approximately $2.7 million, <span style="background-color: White">(iii) an increase of sales from products with current
partners of approximately $5.0 million, </span>offset by the change of manufacturing site of dronabinol (that leads to a new registration
process) which represented lower sales of approximately $6.6 million and the lower sales of progesterone of approximately $2.9 million
due to the ongoing bioequivalent test.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the NextGel
segment decreased by $0.2 million, or 0.3%, from $64.9 million for the year ended December 31, 2021 to $64.7 million for the year ended
December 31, 2022, primarily impacted by the devaluation of certain currencies, inflation, and the increase in costs of raw materials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
NextGel segment decreased by $1.7 million, or 3.1%, from $54.1 million for the year ended December 31, 2021, to $52.4 million for the
year ended December 31, 2022, primarily as a result of the increase in sales and marketing and operational expenses due to the hiring
of additional personnel as part of the initiation of operations at the West Palm Beach facility.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the NextGel segment increased by $9.2 million, or 7.6%, to $130.0 million for the year ended December 31, 2022.
Gross profit attributable to the NextGel segment increased by $3.1 million, or 4.8% to $68.0 million for the year ended December 31, 2022,
and Contribution Margin attributable to the NextGel segment increased by $0.5 million, or 0.9%, $54.6 million for the year ended December
31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Procaps Colombia</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the Procaps Colombia
segment decreased by $13.0 million, or 8.4%, from $155.3 million for the year ended December 31, 2021 to $142.3 million for the year ended
December 31, 2022, primarily due to (i) the impact of the currency devaluation of approximately $19.4 million and (ii) the decrease in
sales of the Clinical Specialties portfolio of approximately $19.7 million driven by to the slower pace of sales of products for the intensive
care units due to higher than usual inventory cycles in the distributors. The Farma Procaps and VitalCare business units are growing in
sales in 2022 when compared with 2021, primarily due to the demand increase of its leading brands in the market, such as Gestavit, Citragel,
Muvett S, and others, as well as the performance of new products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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Colombia segment decreased by $7.7 million, or 9.4%, from $81.2 million for the year ended December 31, 2021 to $73.5 million for the
year ended December 31, 2022, due to the impact of the decrease in sales described above and the changes in the product portfolio mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
Procaps Colombia segment decreased by $7.2 million, or 13.8%, from $51.9 million for the year ended December 31, 20210 to $44.8 million
for the year ended December 31, 2022, due to the impact of the decrease in sales as described above and higher sales and marketing expenses
impacted by currency devaluation and increase in logistics expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to Procaps Colombia increased by $6.5 million, or 4.2%, to $161.8 million for the year ended December 31, 2022, gross
profit attributable to the Procaps Colombia segment increased by $5.0 million, or 6.1%, to $86.1 million for the year ended December 31,
2022, and Contribution Margin attributable to the Procaps Colombia segment increased by $1.3 million, or 2.4%, to $53.2 million for the
year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>CAN</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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increased by $4.5 million, or 8.9%, from $50.9 million for the year ended December 31, 2021 to $55.5 million for the year ended December
31, 2022, due to (i) sales from new product launches in the amount of approximately $1.0 million, such as Albisec One and Alercet, (ii)
increased sales of the current portfolio, particularly cardiology, feminine care and respiratory lines, and (iii) price increases in Guatemala
(approximately 4% increase), Honduras (approximately 4% increase) and El Salvador (approximately 5% increase).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the CAN segment
increased by $2.0 million, or 5.8%, from $33.9 million for the year ended December 31, 2021 to $35.8 million for the year ended December
31, 2022, primarily as a result of the increase in sales as described above, which was partially offset by higher raw material costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
CAN segment decreased by $1.7 million, or 9.3%, from $18.5 million for the year ended December 31, 2021 to $16.8 million for the year
ended December 31, 2022, due to the impact of higher sales and marketing expenses due to an expanding portfolio, especially in gastrointestinal,
cardiovascular, and feminine care therapeutic areas.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">On a constant currency basis,
revenue attributable to the CAN segment increased by $4.6 million, or 9.1%, to $55.6 million for the year ended December 31, 2022, gross
profit attributable to the CAN segment increased by $2.0 million, or 5.9%, to $35.9 million for the year ended December 31, 2022, and
Contribution Margin attributable to the CAN segment decreased by $1.7 million, or 9.2%, to $16.8 million for the year ended December 31,
2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>CASAND</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the CASAND segment
increased by $12.4 million, or 22.9%, from $54.0 million for the year ended December 31, 2021, to $66.3 million for the year ended December
31, 2022, primarily as a result of (i) an increase of approximately $4.4 million in sales of new products launched during 2022, such as
Fortzink Ultra, Muvett and Dayflu, (ii) an increase of approximately $6.6 million in sales of existing brands, and (iii) an average price
increase of approximately 6% in certain countries in the region, offset by the decrease in sales of the Clinical Specialties portfolio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the CASAND
segment increased by $13.9 million, or 32.1%, from $43.2 million for the year ended December 31, 2021 to $57.1 million for the year ended
December 31, 2022, primarily as a result of the increase in sales explained above, especially in Dominican Republic and changes in our
portfolio product mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">Contribution Margin of the
CASAND segment increased by $7.8 million, or 35.8%, from $21.7 million for the year ended December 31, 2021 to $29.5 million for the year
ended December 31, 2022, primarily as a result of the increase in sales explained above, impacted by the return of events and commercial
efforts, especially in Dominican Republic to support top line growth.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the CASAND segment increased by $12.9 million, or 23.9%, to $66.9 million for the year ended December 31, 2022,
gross profit attributable to the CASAND segment increased by $14.2 million, or 32.9%, to $57.5 million for the year ended December 31,
2022, and Contribution Margin attributable to the CASAND segment decreased by $8.0 million, or 37.0%, to $29.7 million for the year ended
December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Diabetrics</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the Diabetrics
segment decreased by $8.0 million, or 27.8%, from $28.7 million for the year ended December 31, 2021 to $20.7 million for the year ended
December 31, 2022, primarily due to (i) the impact of currency devaluation of approximately $3.4 million, (ii) lower sales of Predial
Lex product due to entrance of new competitors with an innovative patented formulation of approximately $3.0 million, and (iii) lower
prices in a few products due to more competitors with an impact of approximately $2.3 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the Diabetrics
segment decreased by $4.1 million, or 32.5%, from $12.6 million for the year ended December 31, 2021, to $8.5 million for the year ended
December 31, 2022, due to the impact of inflation and currency devaluation which led to increase in costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
Diabetrics segment decreased by $3.8 million, or 55.0%, from $6.8 million for the year ended December 31, 2021 to $3.1 million for the
year ended December 31, 2022, primarily due to the impact of the decrease in sales as described above and a change in our portfolio product
mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">On a constant currency basis,
revenue attributable to the Diabetrics segment decreased by $5.2 million, or 18.1%, from $28.7 million for the year ended December 31,
2021 to $23.5 million for the year ended December 31, 2022, gross profit attributable to the Diabetrics segment decreased by $3.0 million,
or 23.8%, to $9.6 million for the year ended December 31, 2022, and Contribution Margin attributable to the Diabetrics segment decreased
by $3.4 million, or 49.5%, to $3.5 million for the year ended December 31, 2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results by Segments After Inter-Segment Elimination,
Excluding Corporate for the years ended December 31, 2021 and December 31, 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
the year ended December 31, 2021, we changed our methodology for calculating our internal measurement of segment profit and loss. We
revised how cost of goods sold is measured in our businesses segments by revising the allocation of standard cost inventory variances.
As a result of such changes, the segment results for the year ended December 31, 2020 have been recast to conform with the new methodology
adopted for the year ended December 31, 2021. This change did not have any impact on our consolidated results of operations, EBITDA or
Adjusted EBITDA for the year ended December 31, 2020. For further information, see Note 8 &#8220;Segment reporting&#8221; to the Annual
Audited Consolidated Financial Statements included elsewhere in this Annual Report.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>NextGel</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the NextGel segment
increased by $14.8 million, or 14.0%, from $106.0 million for the year ended December 31, 2020 to $120.8 million for the year ended December
31, 2021, primarily as a result of (i) an increase in sales in our Funtrition (gummies) product line of approximately $8.8 million due
to increased demand for our immunity gummies and probiotics product lines, the launch of new products such as Kids Multi Pro and an increase
in the numbers of product portfolio offered to important clients such as Olly, Amway, and Trace among others, and (ii) an increase in
sales of approximately $6.0 million of our iCDMO products such as Advil and Dronabinol, as well as an increase in sales in Brazil primarily
due to the launch of new products in the country.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the NextGel
segment increased by $7.3 million, or 12.7%, from $57.6 million for the year ended December 31, 2020 to $64.9 million for the year ended
December 31, 2021, primarily driven by the increase in sales volume and partially offset by changes in our portfolio product mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
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year ended December 31, 2021, primarily as a result of the increase in sales volume described above and improved management of our sales
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the NextGel segment increased by $17.7 million, or 16.7%, from $106.0 million for the year ended December 31,
2020 to $123.7 million for the year ended December 31, 2021. Gross profit attributable to the NextGel segment increased by $8.4 million,
or 14.5%, from $57.6 million for the year ended December 31, 2020 to $66.0 million for the year ended December 31, 2021, Contribution
Margin attributable to the NextGel segment increased by $7.6 million, or 16.3%, from $46.9 million for the year ended December 31, 2020
to $54.5 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Procaps Colombia</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the Procaps Colombia
segment increased by $40.4 million, or 35.2%, from $114.9 million for the year ended December 31, 2020 to $155.3 million for the year
ended December 31, 2021, primarily as a result of (i) increased demand for existing Rx and OTC products, resulting in an increase in sales
of approximately $21.7 million, including $8.2 million from Clenox, $2.9 million from Tracurion, and $1.6 million from B-Vit, among other
existing brands, and (ii) an increase of approximately $18.7 million in sales from new products, which includes $3.9 million in sales
from new products launched during 2021, such as Minoxidil and Maball.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the Procaps
Colombia segment increased by $17.9 million, or 28.3%, from $63.3 million for the year ended December 31, 2020, to $81.2 million for the
year ended December 31, 2021, primarily as a result of the increase in sales volume as described above, which was partially offset by
a change in the product portfolio mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
Procaps Colombia segment increased by $9.7 million, or 23.0%, from $42.2 million for the year ended December 31, 2020 to $51.9 million
for the year ended December 31, 2021, as a result of the increase in sales as described above, which was partially offset by an increase
in sales and marketing expenses and a change in the product portfolio mix.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to Procaps Colombia increased by $43.0 million, or 37.4%, from $114.9 million for the year ended December 31, 2020
to $157.9 million for the year ended December 31, 2021, gross profit attributable to Procaps Colombia increased by $18.7 million, or 29.5%,
from $63.3 million for the year ended December 31, 2020 to $82.0 million for the year ended December 31, 2021, and Contribution Margin
attributable to Procaps Colombia increased by $9.8 million, or 23.3%, from $42.2 million for the year ended December 31, 2020 to $52.0
million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>CAN</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the CAN segment
increased by $5.3 million, or 11.6%, from $45.6 million for the year ended December 31, 2020 to $50.9 million for the year ended December
31, 2021, due to (i) an increase of approximately $4.2 million in sales of existing brands and new products launched in 2019 and 2020,
which includes an increase of approximately $1.8 million in sales from Testiton and $1.5 million in sales from Artribion, among other
products, and (ii) an increase of approximately $1.1 million in sales of new products launched during 2021, such as Glucoquick, Dolantag
and Alercet.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the CAN segment
increased by $4.3 million, or 14.5%, from $29.6 million for the year ended December 31, 2020 to $33.9 million for the year ended December
31, 2021, primarily as a result of (i) an increase in the revenue described above, (ii) greater inventory turnover of Farma Procaps products,
which yielded a higher margin sales mix as compared to the year ended December 31, 2020 and (iii) increased production efficiencies through
process automation and improvement in batch production management in our El Salvador facilities by standardizing packaging for similar
products, reducing unit manufacturing costs and expenses, and eliminating import tariff duties for most products imported from Colombia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
CAN segment increased by $3.0 million, or 19.4%, from $15.5 million for the year ended December 31, 2020 to $18.5 million for the year
ended December 31, 2021, as a result of the increase in gross profit described above and improved management of sales and marketing expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the CAN segment increased by $6.1 million, or 13.3%, from $45.6 million for the year ended December 31, 2020 to
$51.7 million for the year ended December 31, 2021, gross profit attributable to the CAN segment increased by $4.6 million, or 15.6%,
from $29.6 million for the year ended December 31, 2020 to $34.2 million for the year ended December 31, 2021, and Contribution Margin
attributable to the CAN segment increased by $3.2 million, or 20.9%, from $15.5 million for the year ended December 31, 2020 to $18.7
million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>CASAND</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the CASAND segment
increased by $15.4 million, or 39.9%, from $38.6 million for the year ended December 31, 2020 to $54.0 million for the year ended December
31, 2021, primarily as a result of (i) an increase of approximately $10.5 million in sales of existing brands and new products launched
in 2019 and 2020, (ii) an increase of approximately $2.8 million in sales of new products launched during 2021, such as Tapectam, Ezolium,
Cuticlin and Vitybelle, (iii) an increase in sales of approximately $1.6 million as a result of successful negotiations with distributors
in the Dominican Republic which expanded our business with new product launches and higher profitability in the country, and (iv) an increase
in revenue of approximately $0.5 million as a result of an increase in prices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the CASAND
segment increased by $15.9 million, or 58.2%, from $27.3 million for the year ended December 31, 2020 to $43.2 million for the year ended
December 31, 2021, primarily as a result of the increase in sales explained above, and successful price negotiations with distributors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
CASAND segment increased by $11.9 million, or 121.4%, from $9.8 million for the year ended December 31, 2020 to $21.7 million for the
year ended December 31, 2021, primarily as a result of (i) the increase in revenue and gross profit described above, and (ii) our investment
in product launches and digital marketing during the year ended December 31, 2020, which started ramping up during the year ended December
31, 2021, which resulted in decreasing sales and marketing expenses while strengthening our sales for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the CASAND segment increased by $15.4 million, or 40.0%, from $38.6 million for the year ended December 31, 2020
to $54.0 million for the year ended December 31, 2021, gross profit attributable to the CASAND segment increased by $16.0 million, or
58.5%, from $27.3 million for the year ended December 31, 2020 to $43.3 million for the year ended December 31, 2021, and Contribution
Margin attributable to the CASAND segment increased by $11.9 million, or 121.6%, from $9.8 million for the year ended December 31, 2020
to $21.7 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Diabetrics</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue of the Diabetrics
segment increased by $5.9 million, or 25.9%, from $22.8 million for the year ended December 31, 2020 to $28.7 million for the year ended
December 31, 2021, primarily as a result of the increase in the demand for our product portfolio as a result of the expansion of our products
offering in this segment to a more complete diabetes solution focus. In particular, demand for blood glucose meters, Rx, oral antidiabetic
medicine and insulin in the form of Glargine,a new product launched during the year ended December 31, 2021, continue to be our focus
and were the largest growth areas for our Diabetrics segment, enabling us to work with <i>Entidad Promotora de Salud</i>, one of the largest
government sponsored health insurance available in Colombia, and reach more patients during the year ended December 31, 2021. Additionally,
we launched diabetes therapeutic solutions and medical devices in El Salvador in April 2021, which contributed to our increased sales
for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit of the Diabetrics
segment increased by $2.7 million, or 27.3%, from $9.9 million for the year ended December 31, 2020, to $12.6 million for the year ended
December 31, 2021, primarily as a result of a shift in sales to a more profitable product portfolio mix focused on Rx products, which
was partially offset by a devaluation of the Colombian Peso of approximately 15% which we were able to mitigate due to the efficiencies
we were able to generate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Contribution Margin of the
Diabetrics segment increased by $1.3 million, or 23.6%, from $5.5 million for the year ended December 31, 2020 to $6.8 million for the
year ended December 31, 2021, primarily as a result of the increase in revenue and the shift to a more profitable product mix described
above, which was partially offset by the increase in sales and marketing expenses due to such activities gradually returning to pre-pandemic
levels, as well as the launching of our new insulin product Insulin Glargine (Glaritus).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a constant currency basis,
revenue attributable to the Diabetrics segment increased by $6.3 million, or 27.5%, from $22.8 million for the year ended December 31,
2020 to $29.1 million for the year ended December 31, 2021, gross profit attributable to the Diabetrics segment increased by $2.8 million,
or 28.5%, from $9.9 million for the year ended December 31, 2020 to $12.7 million for the year ended December 31, 2021, and Contribution
Margin attributable to the Diabetrics segment increased by $1.4 million, or 25.9%, from $5.5 million for the year ended December 31, 2020
to $6.9 million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Non-IFRS Financial Measures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management uses certain
non-IFRS financial information to assess our operating performance across periods and for business planning purposes. We believe the presentation
of these non-IFRS financial measures is useful to investors as it provides additional information to facilitate comparisons of historical
operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate
our business. We use non-IFRS financial measures to budget, make operating and strategic decisions, and evaluate our performance. Below
is a description of the non-IFRS financial measures we have used in this Annual Report, including any adjustments to the IFRS financial
measures derived therefrom. We believe the non-IFRS measures should always be considered along with the related IFRS financial measures.
We have provided the reconciliations between the IFRS and non-IFRS financial measures below, and we also discuss our underlying IFRS results
throughout Item 5 of this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The primary non-IFRS financial
measures utilized by our management is described below and reflects how we evaluate our current and prior-year operating results. As new
events or circumstances arise, our management may alter the definitions of such measures to better reflect our financial performance or
adopt new measures in the future. In the event any of these definitions change, or if new non-IFRS financial measures are adopted by our
management, we will provide the updated definitions and present the related non-IFRS historical results on a comparable basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Use of Constant Currency</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As exchange rates are an important
factor in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results on a constant
currency basis in addition to the IFRS reported results helps improve investors&#8217; ability to understand our operating results and
evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial information that compares
results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as
one measure to evaluate our performance. We currently present revenue, cost of sales, gross profit, sales and marketing expenses, administrative
expenses, Contribution Margin (consolidated and by segment) and Adjusted EBITDA on a constant currency basis. We calculate constant currency
by calculating year-end period for the years ended December 31, 2022, 2021 and 2020 using prior-periods (year ended December 31, 2021
and December 31, 2020, respectively) foreign currency exchange rates. The functional foreign currencies for the primary regional markets
where we operate, such as the Colombian Peso and the Brazilian Real, were adjusted on a constant currency basis at the exchange rates
of COP $4,255.44 per U.S. $1.00 and R$5.1655 per U.S. $1.00, respectively, for the year ended December 31, 2022, COP $3,693.36 per U.S.
$1.00 and R$5.1578 per U.S. $1.00, respectively, for the year ended December 31, 2021, and COP $3,281.09 per U.S. $1.00 and R$3.9443 per
U.S. $1.00, respectively, for the year ended December 31, 2020. We generally refer to such amounts calculated on a constant currency basis
as excluding the impact of foreign exchange. These results should be considered in addition to, not as a substitute for, results reported
in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures
used by other companies and are not measures of performance presented in accordance with IFRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>EBITDA, Adjusted EBITDA and Adjusted EBITDA
Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We define EBITDA as profit
(loss) for the year before interest expense, net, income tax expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA
further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs incurred in
connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination, certain costs
related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance costs and
other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time. Adjusted EBITDA is one of
the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance compared to other companies in the
pharmaceutical industry, as similar measures are commonly used by companies in this industry. We also report Adjusted EBITDA as a percentage
of revenue as an additional measure so investors may evaluate our Adjusted EBITDA margins on revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
a reconciliation from profit (loss) for the year to EBITDA and Adjusted EBITDA, and Adjusted EBITDA margins for the years ended December
31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year ended <br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Increase/(Decrease)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">$ Change</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">%<b> Change</b></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td colspan="14" style="font-style: italic; text-align: center">(in thousands of U.S. dollars except percentages)</td><td style="font-style: italic">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">17.1</td><td style="font-weight: bold; text-align: left">%</td><td style="font-weight: bold">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">17.2</td><td style="font-weight: bold; text-align: left">%</td><td style="font-weight: bold">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify">COVID-19 impact adjustments for the year ended December 31, 2022 primarily include expenses incurred
                                                                              for safety precautions during the pandemic, such as employees&#8217; COVID-19 testing, vaccination, office, and production
                                                                              infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the employees, other
                                                                              miscellaneous expenses resulted from COVID-19 pandemic. For the year ended December 31, 2021, these expenses primarily include: (i)
                                                                              $1.7 million expenses incurred for safety precautions during the pandemic, such as employees COVID-19 testing, vaccination, office
                                                                              and production infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the
                                                                              employees, (ii) $0.6 million operating and production expenses incurred in connection with hiring of additional employees and costs
                                                                              paid to third party agencies for such hiring, contractors and production sub-contractors in order to mitigate any decrease in
                                                                              production and operating capabilities of Procaps as a result of employees absenteeism or attrition as a result of the COVID-19
                                                                              pandemic, (iii) $1.2 million expense incurred for certain logistic arrangements to minimize Procaps employees&#8217; exposure to
                                                                              COVID-19 through arranging transportation from home to work, lodgings, face masks and PPE, and (iv) $0.4 million of other
                                                                              miscellaneous expenses resulted from COVID-19 pandemic.</td>
</tr></table><div>

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<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify">Business transformation initiatives consists of non-recurring
expenses related to the launch of a new patient program platform for Diabetrics (Zutrics) during the year ended December 31, 2022.</td>
</tr></table><div>

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<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(3)</td><td style="text-align: justify">Foreign currency translation adjustments represent the reversal
of exchange losses we recorded due to foreign currency translation of monetary balances of certain of our subsidiaries from U.S. dollars
into the functional currency of those subsidiaries as of December 31, 2022 and 2021.</td>
</tr></table><div>

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<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(4)</td><td style="text-align: justify">Other finance costs adjustments represent non-operating expenses
we incurred, primarily including additional interests incurred due to the withholding tax obligations of certain financial institutions
outside of Colombia.</td>
</tr></table><div>

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<td style="width: 0"></td><td style="width: 0.25in; text-align: left">(5)</td><td style="text-align: justify">Transactions expenses for the year ended December 31, 2022 primarily
include: (i) consulting and legal fees and expenses incurred in connection with acquisitions and SPA termination in the amount of 12.3
million, (ii) incremental director and officer policy insurance costs in the amount of $1.0 million in connection with the Business Combination,
(iii) tail policy insurance costs incurred of $0.5 million in connection with the Business Combination, and (iv) incremental audit fees
of approximately $0.3 million incurred in connection with the Business Combination. For the year ended December 31, 2021, these expenses
primarily include: (i) capital markets advisory fees of $4.5 million incurred in connection with the Business Combination, (ii) incremental
audit fees of $2.7 million incurred in connection with the Business Combination, (iii) consulting, accounting and legal expenses of $0.4
million incurred in connection with the Business Combination, (iv) management bonuses of $0.7 million paid in connection with the consummation
of the Business Combination and the listing of the Company on the Nasdaq, (v) tail policy insurance costs incurred of $1.6 million in
connection with the Business Combination, (vi) incremental director &amp; officer policy insurance costs incurred of $0.3 million in
connection with the Business Combination, (vii) incurred audit fees of $0.2 million to comply with the Syndicated Loan (as defined below)
requirements that will not be necessary in the future, and (viii) consulting and legal fees and expenses related to asset acquisitions
and other transaction in the amount of $0.3 million. (6) Other expenses include a write off related to Rymco impairment charge of approximately
$6.0 million for the year ended December 31, 2022. For the year ended December 31, 2021, other expenses include listing expense of $73.9
million associated with the deemed listing services received by Procaps from Union, which is the difference between the deemed costs
of the Ordinary Shares issued by the Company to Union shareholders in connection with the Business Combination, in excess of the net
assets obtained from Union, as required by IFRS 2 Share-based payments.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">  &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
a reconciliation from profit (loss) for the year to EBITDA and Adjusted EBITDA, and Adjusted EBITDA margins for the years ended December
31, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Business transformation initiatives<sup>(2)</sup></span></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COVID-19
impact adjustments primarily include: (i) for the year ended December 31, 2021, $1.7 million ($0.5 million for the year ended December
31, 2020) expenses incurred for safety precautions during the pandemic, such as employees COVID-19 testing, vaccination, office and production
infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the employees, (ii) for
the year ended December 31, 2021, $0.6 million ($1.2 million for the year ended December 31, 2020) operating and production expenses
incurred in connection with hiring of additional employees and costs paid to third party agencies for such hiring, contractors and production
sub-contractors in order to mitigate any decrease in production and operating capabilities of Procaps as a result of employees absenteeism
or attrition as a result of the COVID-19 pandemic, (iii) for the year ended December 31, 2021, $1.2 million ($0.9 million for the year
ended December 31, 2020) expense incurred for certain logistic arrangements to minimize Procaps employees&#8217; exposure to COVID-19
through arranging transportation from home to work, lodgings, face masks and PPE, (iv) for the year ended December 31, 2020, $1.4 million
additional costs incurred to acquire certain raw materials that are essential to production due to the lockdowns of suppliers&#8217;
factories and ports of entry worldwide, and additional logistic costs due to delays, (v) for the year ended December 31, 2020, $0.9 million
expense of certain one-off financial discounts that Procaps provided to its customers, such as medicine distributors, during the COVID-19
pandemic due to financial and liquidity difficulties and customers&#8217; inability to settle invoices as a result of the effects of
the COVID-19 pandemic and governmental restrictions such as lockdowns, and (vi) for the year ended December 31, 2021, $0.4 million ($0.2
million for the year ended December 31, 2020) of other miscellaneous expenses resulted from COVID-19 pandemic.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Business
transformation initiatives consists of costs and expenses in connection with severance payments made to separate our employees for certain
business transformation initiatives implemented during the year ended December 31, 2020.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
currency translation adjustments represent the reversal of exchange losses we recorded due to foreign currency translation of monetary
balances of certain of our subsidiaries from U.S. dollars into the functional currency of those subsidiaries as of June 30, 2022 and
2021.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
finance costs adjustments represent non-operating expenses we incurred, primarily including additional interests incurred due to the
withholding tax obligations of certain financial institutions outside of Colombia.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transactions
expenses primarily include: (i) capital markets advisory fees of $4.5 million incurred in connection with the Business Combination, (ii)
incremental audit fees of $2.7 million incurred in connection with the Business Combination, (iii) consulting, accounting and legal expenses
of $0.4 million incurred in connection with the Business Combination, (iv) management bonuses of $0.7 million paid in connection with
the consummation of the Business Combination and the listing of the Company on the Nasdaq, (v) tail policy insurance costs incurred of
$1.6 million in connection with the Business Combination, (vi) incremental director &amp; officer policy insurance costs incurred of
$0.3 million in connection with the Business Combination, (vii) incurred audit fees of $0.2 million to comply with the Syndicated Loan
(as defined below) requirements that will not be necessary in the future, and (viii) consulting and legal fees and expenses related to
asset acquisitions and other transaction in the amount of $0.3 million.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Listing
expense of $73.9 million associated with the deemed listing services received by Procaps from Union, which is the difference between
the deemed costs of the Ordinary Shares issued by the Company to Union shareholders in connection with the Business Combination, in excess
of the net assets obtained from Union, as required by IFRS 2 Share-based payments.</span></td>
</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Contribution Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We define Contribution Margin
as gross profit less selling expenses. Contribution Margin is one of the key performance indicators we use in evaluating our profitability.
We believe Contribution Margin is useful to investors in the evaluating our operating performance compared to other companies in the pharmaceutical
industry, as similar measures are commonly used by companies in this industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
a reconciliation from gross profit to Contribution Margin for the years ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">239,569</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
a reconciliation from gross profit to Contribution Margin for the years ended December 31, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(69,629</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(13,428</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19.3</td><td style="text-align: left">%</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. LIQUIDITY AND CAPITAL RESOURCES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal source of liquidity
has been cash flow generated from operations, supplemented by credit arrangements with third parties. The principal uses of cash are to
fund operating and capital expenditures, business or asset acquisitions, interest payments on debt, any mandatory or discretionary principal
payment on our debt and investments in R&amp;D.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, our
cash and cash equivalents amounted to $43.0 million. We believe that our existing cash and cash equivalents and cash inflows from operations,
will be adequate to meet our anticipated cash needs for the next twelve months. We routinely monitor current and expected operational
requirements and financial market conditions to evaluate other available financing sources including term and revolving bank credit. In
determining our future capital requirements, we regularly consider, among other factors, known trends and uncertainties, such as the COVID-19
pandemic, and other contingencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 92; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to generate cash
is subject to our performance, general economic conditions, industry trends and other factors. To the extent that the funds received from
the Business Combination, combined with existing cash and cash equivalents are insufficient to fund our future activities and requirements,
we may need to raise additional funds through public or private equity or debt financing. Although certain of our lenders have made commitments
to make funds available to us in a timely fashion under our revolving credit agreements and overdraft facilities, if economic conditions
worsen, including due to current geopolitical issues, or new information becomes publicly available impacting the institutions&#8217;
credit rating or capital ratios, these lenders may be unable or unwilling to lend money pursuant to our existing credit facilities. Should
our outlook on liquidity requirements change substantially from current projections, we may seek additional sources of liquidity in the
future. If we issue equity securities in order to raise additional funds, substantial dilution to existing shareholders may occur. If
we raise cash through the issuance of indebtedness, we may be subject to additional contractual restrictions on our business. We cannot
assure the investor that we would be able to raise additional funds on favorable terms or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: White"><b><i>Cash
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table summarizes
our consolidated statements of cash flows from operations for the years ended December 31, 2022 and 2021:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; font-style: normal; text-align: center">&#160;</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="font-weight: bold; font-style: normal; text-align: center">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow provided by operating activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, net cash provided by operating activities was $14.1 million, compared to $37.3 million for the year ended December 31, 2021,
a decrease of $23.2 million. The decrease was primarily the result of (i) (i) a decrease in cash flow from operating activities before
changes in the working capital, impacted by higher operating expenses, (ii) an increase in trade receivables as a result of customers
remitting payments closer to the end of the negotiated payment term due to current economic conditions and (iii) an increase in inventory
held as of December 31, 2022 compared to December 31, 2021 as a result of supply chain challenges.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow used in investing activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, net cash used in investing activities was $28.8 million compared to $23.7 million during the year ended December 31, 2021, an
increase of $5.1 million. Net cash used in investing activities for the year ended December 31, 2022 consisted primarily of (i) $20.6
million in cash used in the acquisition of property, plant and equipment for certain strategic capacity expansion, including, the new
Miramar facility for gummy products and equipment and automation improvements in our current facilities, and (ii) $11.0 million in cash
used in the acquisition of intangibles for internal product development.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow generated from (used in) financing
activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, net cash used in financing activities decreased by $71.7 million from net cash generated from financing activities of $58.0
million for the year ended December 31, 2021 to net cash used in financing activities of $13.6 million for the year ended December 31,
2022. The decrease was primarily due to (i) the impact of the acquisition in the prior period, resulting in net cash inflows of $85.0
million. The decrease in net cash used in financing activities was partially offset by (i) the decrease in interest paid of $7.4 million,
(ii) the decrease in payment of lease liabilities of $2.2 million, (iii) the decrease in net proceeds from borrowings of $1.7 million
and (iv) the decrease in payments to related parties of $2.0 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cash Flow for the years ended December 31,
2021 and 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table summarizes
our consolidated statements of cash flows from operations for the years ended December 31, 2021 and 2020:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(23,703</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(17,091</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(6,612</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow provided by operating activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2021, net cash provided by operating activities was $37.3 million, compared to $70.9 million for the year ended December 31, 2020,
a decrease of $33.6 million. The decrease was primarily the result of (i) an increase in trade receivables together with a reduction in
the collectability of certain trade receivables between the periods, (ii) an increase inventory held as of December 31, 2021 compared
to December 31, 2020 as a result of an increase in production in anticipation of an expected increase in demand, and (iii) a decrease
in other liabilities due to the payment of certain aged payables that became due.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow used in investing activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2021, net cash used in investing activities was $23.7 million compared to $17.1 million during the year ended December 31, 2020, an
increase of $6.6 million. Net cash used in investing activities for the year ended December 31, 2021 consisted primarily of $14.1 million
in cash used in the acquisition of property, plant and equipment for certain strategic capacity expansion, including, the acquisition
of an FDA approved 86,000 square feet pharmaceutical production facility located in West Palm Beach, Florida, which increased when compared
to the year ended December 31, 2020. Furthermore, we invested $8.0 million in R&amp;D during the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash flow generated from (used in) financing
activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2021, net cash generated from financing activities increased by $98.6 million from net cash used in financing activities of $40.5
million for the year ended December 31, 2020 to net cash generated from financing activities of $58.3 million for the year ended December
31, 2021. The increase was primarily due to (i) the closing of the private placement of the Senior Notes in the amount of $112.9 million,
(ii) entering into other term loans in the amount of $193.1 million, and (iii) the consummation of the Business Combination resulting
in gross cash proceeds of $160.0 million as described above. The increase in net cash generated from financing activities was partially
offset by (i) the prepayment of a portion of the Syndicated Loan facility (as defined below) in the amount of $28.2 million, (ii) the
payment of other term loans in the amount of $224.4 million, and (iii) factoring obligations in the amount of $18.8 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Financial Resources</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our capital structure consists
of net debt (loans offset by cash and bank balances) and consolidated equity (comprised of issued and paid-in capital, reserves, retained
earnings and non-controlling interests). We are not subject to any externally imposed capital requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">Our primary indebtedness consists
of the outstanding balance of the Senior Notes and Syndicated Loan (defined below). The Senior Notes, the Syndicated Loan and certain
other loans include certain covenants that obligate the borrower and guarantors thereunder to comply with a series of financial ratios,
consisting of a debt to EBITDA ratio and EBITDA interest coverage ratio as described below under the heading &#8220;&#8212;Debt Financing
and Borrowings&#8212;Senior Notes&#8212;Covenants.&#8221; The Syndicated Loan includes certain covenants that obligate the borrower and
co-debtors thereunder to comply with a series of financial ratios, consisting of a debt to EBITDA ratio, short-term leverage ratio and
EBITDA interest coverage ratio as described below under the heading &#8220;&#8212;Debt Financing and Borrowings&#8212;Syndicated Loan&#8212;Covenants.&#8221;
These financial ratios serve as local management parameters for both arrangements.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We analyze and review our
capital structure on a quarterly basis. As part of this review, we consider the cost of capital and the risks associated with each class
of capital.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, 2021
and 2020 we had total borrowings of $285.9 million, $253.4 million and $454.5 million, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Debt Financing and Borrowings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below summarizes
our outstanding interest-bearing liabilities for year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year <br/> ended <br/> December&#160;31, <br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">(in thousands of U.S. dollars)</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">Syndicated Loan</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">38,626</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other term loan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">95,720</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Lease liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">34,192</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Factoring obligations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,317</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Bank overdrafts</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">80</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Senior Notes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">115,000</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Total Interest bearing liabilities</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">285,935</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Syndicated Loan</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 20, 2018, Procaps S.A. entered into
a syndicated term loan agreement the &#8220;Syndicated Loan Agreement&#8221;) with the following banks: Portion in Colombian pesos (COP)
- Davivienda and Bancolombia; US dollar portion (USD) - Banco de Credito del Peru, Bancolombia Panama and Banco Sabadell. The total value
of the syndicated loan amounts to $200,434 million COP (portion in COP) and $35 million USD (portion in USD), Fiduciaria Bancolombia acts
as the agent of the loan. C.I. Procaps S.A., Procaps S.A. de C.V, Biokemical S.A., Pharmarketing S.A. (Panama), Pharmarketing Salvador
S.A. de C.V., Pharmarketing S.A. (Guatemala S.A.), C.D.I. Salvador S.A. de C.V., C.D.I. Nicaragua S.A., C.D.I. Guatemala S.A., Pharmarketing
Dominicana SRL, and Pharmarketing Costa Rica S.A., act as co-debtors, while Pharmayect S.A., Inversiones Crynssen S.A.S., Inversiones
Ganeden S.A.S., Inversiones Henia S.A.S., Inversiones Jades S.A.S., and Industrias Kadima S.A.S., act as guarantors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The resources obtained were
used for advance payment and/or novation of certain obligations to be refinanced. The conditions of the loan had a term of 5 years for
installment payments and the interest rates agreed are as follows: IBR + 5.30% for the portion in COP and Libor + 4.80% for the USD portion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The loans received by Banco
de Cr&#233;dito del Peru and Banco Sabadell were precanceled during the month of November 2021, due to a new agreement and improvement
in terms and conditions with Senior Notes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, the
total amount outstanding under the Syndicated Loan was $38.6 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Covenants</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Syndicated Loan contains
covenants that, among other things, restrict, subject to certain exceptions, the borrower and co-debtors&#8217; ability to change its
line of business; incur additional indebtedness resulting in a Debt/EBITDA Ratio (as defined below) above 3.5; enter into derivative transactions
(except for those in connection with the purchase of raw materials or for the purpose of mitigating interest or exchange rate risks);
sell or transfer title to operating assets; pay dividends and distributions; engage in mergers and consolidations; amend agreements material
to the operations of the borrower and co-debtors; enter into any financial or operating lease obligation with an option to purchase in
an aggregate amount of over COP $85,000,0000,0000; change our fiscal year reporting; engage in certain transactions with affiliates; enter
into any joint venture or similar agreements. For purposes of the Syndicated Loan, EBITDA is calculated as income from sales and services,
<i>less</i> (i) sales and production costs, <i>less</i> (ii) operating expenses, <i>less</i> (iii) administrative expenses, <i>plus </i>(iv)
depreciation, <i>plus</i> (ii) amortizations, <i>plus</i> (iii) provisions, and l<i>ess</i> (iv) portfolio write-offs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->82<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Syndicated Loan also contains
change-of-control provisions and certain customary affirmative covenants and events of default. The Syndicated Loan also requires compliance
with the following ratios: (i) a pro forma consolidated debt of the borrower and the co-debtors to pro forma consolidated EBITDA for the
last twelve months of the borrower and co-debtors ratio (&#8220;Syndicated Loan Debt/EBITDA Ratio&#8221;) of 3.5 or less, measured every
June 30 and December 30; (ii) a short-term leverage ratio (the &#8220;Syndicated Loan Short-Term Leverage Ratio Covenant&#8221;) (calculated
as the pro forma consolidated short-term debt of the borrower and the co-debtors divided by pro forma consolidated EBITDA for the last
twelve months of the borrower and co-debtors) of less than 1.0, calculated at the end of each semester; and (iii) an EBITDA interest coverage
ratio (the &#8220;Syndicated Loan Interest Coverage Ratio&#8221;) (calculated as the pro forma consolidated EBITDA for the last twelve
months of the borrower and co-debtors divided by the pro forma consolidated financial expenses of the borrower and the co-debtors) of
greater than or equal to 3.0, calculated at the end of each semester.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Syndicated Loan establishes
that, in the event of breach of covenants by the debtor, the lenders shall be entitled to declare early maturity of the debts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Syndicated Loan Waiver</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 2, 2023, we
entered into the Syndicated Loan Waiver Agreement which relates to certain covenant noncompliance under the Syndicated Loan.
Pursuant to the terms of the Syndicated Loan, we informed the lenders that the following events of defaults have occurred and were
continuing as of the date of the of the Syndicated Loan Waiver Agreement (collectively, the &#8220;<span style="text-decoration:underline">Specified Syndicated Loan
Defaults</span>&#8221;):</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(i)</td><td style="text-align: justify">the event of default arising as a result of the Syndicated Loan Debt/EBITDA Ratio for the twelve months
ending December 31, 2022 being in excess of 3.50:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the &#8220;<span style="text-decoration:underline">Syndicated
Loan Debt/EBITDA Ratio Covenant</span>&#8221;);</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(ii)</td><td style="text-align: justify">the event of default arising as a result of the Syndicated Loan Interest Coverage Ratio for the twelve
months ending December 31, 2022 being less than 3.00:1.00), in default of the applicable covenant set forth in the Syndicated Loan (the
&#8220;<span style="text-decoration:underline">Syndicated Loan Interest Coverage Ratio Covenant</span>&#8221;);</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(iii)</td><td style="text-align: justify">the event of default arising as a result of the Syndicated Loan Short-Term Leverage Ratio being in excess
of 1.00:1. as at December 31, 2022, in default of the covenant set forth in the Syndicated Loan (the &#8220;<span style="text-decoration:underline">Syndicated Loan Short-Term
Leverage Ratio Covenant</span>&#8221;); and</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(iv)</td><td style="text-align: justify">the event of default arising as a result of our failure to deliver to the lenders, within the time period
specified in the Syndicated Loan, written notice of the events of default described in the foregoing clauses (i) through (iii) as required
by the Syndicated Loan.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">Pursuant to the Syndicated Loan Waiver Agreement, the lenders (a) with
effect from December 31, 2022, waived the Specified Syndicated Loan Defaults, (b) prospectively waived our potential non-compliance by
with the Syndicated Loan Debt/EBITDA Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated Loan
Debt/EBITDA Ratio Covenant as at such dates does not exceed 4.50:1.00, (c) prospectively waived our potential non-compliance with the
Syndicated Loan Interest Coverage Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated Loan
Interest Coverage Ratio Covenant as at such dates is not less than 1.80:1.00, and (d) prospectively waived our potential non-compliance
with the Syndicated Loan Short-Term Leverage Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated
Loan Short-Term Leverage Ratio Covenant as at such dates does not exceed 1.60:1.00.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The foregoing summary of the
Syndicated Loan Waiver Agreement is qualified in its entirety by the full text of the Syndicated Loan Waiver Agreement, which is filed
as Exhibit 4.17 to this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of our noncompliance
with the aforementioned covenants, the approximately $19.7 million unpaid principal balance previously classified as non-current borrowings
has been reclassified to current borrowings within the consolidated financial statements included in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Term Loans</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below summarizes
the terms of our other term loans as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Currency</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Range of Interest</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Maturity Year</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Outstanding <br/> Balance for <br/> the year <br/> ended<br/>
 December&#160;31, <br/>
2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td colspan="2" style="font-style: italic; text-align: center">(in thousands of U.S. dollars)</td><td style="font-style: italic">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 40%">COP</td><td style="width: 1%">&#160;</td>
    <td style="width: 34%; text-align: center">IBR+ 5.0%, DTF+ 3%, 13.99%-25.3%</td><td style="width: 1%">&#160;</td>
    <td style="width: 12%; text-align: center">2022-2025</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">9,549</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>COP</td><td>&#160;</td>
    <td style="text-align: center">IBR+2.25%-10.2%</td><td>&#160;</td>
    <td style="text-align: center">2022-2025</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">21,267</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>SOL</td><td>&#160;</td>
    <td style="text-align: center">8.0% - 12.79% (Fixed)</td><td>&#160;</td>
    <td style="text-align: center">2022-2024</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,837</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>REAIS</td><td>&#160;</td>
    <td style="text-align: center">9.84% - 18% N.A.</td><td>&#160;</td>
    <td style="text-align: center">2023-2024</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,176</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>USD</td><td>&#160;</td>
    <td style="text-align: center">SOFR+ (4.80%-5.80%)</td><td>&#160;</td>
    <td style="text-align: center">2023</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">23,454</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">USD</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">6.36%-16.8%</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">2022-2025</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">32,437</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; font-weight: bold">Total</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
    <td style="padding-bottom: 4pt; font-weight: bold; text-align: center">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
    <td style="padding-bottom: 4pt; font-weight: bold; text-align: center">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">95,720</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2022, Procaps, S.A. entered into the Additional
Loan Agreement with a lender to borrow approximately $8.7 million. The Additional Loan Agreement contained certain financial ratio covenants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we were not in compliance with certain of
the covenants. On March 28, 2023, we entered into a waiver with the lender where the lender agreed to (i) waive our noncompliance with
the covenant as of December 21, 2022 and (ii) prospectively waive our potential noncompliance with the covenants as of, June 30, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">As a result of our noncompliance
as of December 31, 2022, the $4,490 unpaid principal balance previously classified as a non-current borrowings under the credit agreement
has been reclassified to current borrowings within the consolidated financial statements included in this Annual Report.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Lease Liabilities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">We had $34.2 million of lease liabilities
as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Factoring Obligations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have accounts receivable
factoring arrangements with non-related third-party financial institutions (the &#8220;Factors&#8221;). Pursuant to the terms of the arrangements,
we sell to the Factors certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. An administrative
fee per invoice is charged on the gross amount of accounts receivables assigned to the Factors, and interest is calculated based on an
annual average variation of USD LIBOR and Colombian DTF, as well as fixed rates, ranging from approximately 7.2% in USD denominated arrangements
to approximately 24.6% in COP denominated arrangements. The total amount factored on a non-recourse basis and excluded from accounts receivable
was $2.3 million as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Put Option Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Crynssen and the Minsky Family
granted IFC a put option pursuant to that certain put option agreement entered into in 2017 (the &#8220;IFC Put Option Agreement&#8221;),
whereby Crynssen and the Minski Family agreed to purchase up to 432,271 Crynssen Ordinary Shares held by IFC upon IFC&#8217;s delivery
of a put notice for a price sufficient to provide IFC with an internal rate of return of 12% on IFC&#8217;s investment in Crynssen, beginning
on the eighth anniversary of IFC&#8217;s subscription of Crynssen Ordinary Shares and ending on the earlier of the eleventh anniversary
of such date or the consummation of a qualified initial public offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Crynssen and the Minsky Family
also granted Hoche a put option pursuant to that certain put option agreement dated December 23, 2019 (the &#8220;Hoche Put Option Agreement&#8221;),
whereby Crynssen and the Minski Family agreed to purchase up to all of Hoche&#8217;s Crynssen Ordinary Shares upon Hoche&#8217;s delivery
of a put notice for a price sufficient to provide Hoche with an internal rate of return of 12% on Hoche&#8217;s investment in Crynssen,
beginning on the eight anniversary of September 1, 2017, and ending on the earlier of the eleventh anniversary of such date or the consummation
of a qualified initial public offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We classified and measured
the obligation to buy back Crynssen Ordinary Shares from IFC and Hoche at amortized cost and recognized finance expense using the effective
interest rate method, including transaction costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective as of September
29, 2021, immediately after the Closing of the Business Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement were
terminated and cancelled. The termination of the put option agreements resulted in the reclassification of the associated liabilities
into the Company&#8217;s equity, along with a loss in income statement as the difference between such associated liabilities and the fair value
of a portion of the Ordinary Shares received by IFC and Hoche as part of the Business Combination. The one-time loss on termination of
such put options in the amount of $35.9 million aligns the carrying value of such put options on the termination date to the fair value
of the Ordinary Shares issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Bank Overdrafts</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have overdraft facilities
available that we use to support our cash management operations. We had approximately $0.1 million of overdrafts and credit card liabilities
outstanding as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Senior Notes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 12, 2021, the
Company closed a private placement offering of $115.0 million aggregate principal amount of 4.75% guaranteed senior notes issued by Procaps,
S.A., a subsidiary of the Company, due November 12, 2031, pursuant to a note purchase and guarantee agreement (the &#8220;NPA&#8221;)
entered into on November 5, 2021 with The Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring
Life &amp; Health Insurance Company, Inc. and Cigna Health and Life Insurance Company Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Senior Notes are the senior
unsecured obligations of Procaps, S.A. and unconditionally guaranteed by the Company and the following subsidiaries of the Company: Crynssen,
Procaps, S.A., Diabetrics Healthcare, Pharmayect S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Ind&#250;stria e Com&#233;rcio
Ltda., and Sofgen Pharmaceuticals LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">The Senior Notes were issued
in a single tranche, with a final maturity of 10 years and a principal amortization schedule of five annual equal payments commencing
on the sixth anniversary of the closing (<i>i.e.</i> years 6 to 10), resulting in a weighted average life of 8 years. We used the net
proceeds from the issuance of the Senior Notes primarily to repay certain of its and its subsidiaries existing indebtedness in full (including
the syndicated loans granted by Banco de Sabadell S.A. Miami Beach and Banco de Cr&#233;dito del Per&#250;), as well as for general
corporate purposes.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the expected
closing of the Acquisition and associated borrowings under the Credit Agreement (as described below), we intended to prepay in full the
Senior Notes, together with interest accrued thereon to the date of such prepayment and the make-whole amount determined for the date
of such prepayment pursuant to the NPA (the &#8220;Notes Payoff&#8221;). We previously expected that the closing of the Acquisition would
occur on October 14, 2022, and accordingly, pursuant to the requirements of the NPA, delivered advance notice to the noteholders of the
Notes Payoff to occur on such date. As a result of a delay and subsequent termination in the closing of the Acquisition, the expected
borrowing under the Credit Agreement did not occur, and we were unable to complete the Notes Payoff on the date scheduled, which technically
constituted an event of default under the NPA. The noteholders informed us that they would not exercise any rights or remedies under the
NPA due to such technical default pending entry into an amendment to the NPA formally waiving such default, and we and the noteholders
executed temporary waivers in connection therewith. On November 1, 2022, we and the noteholders entered into an amendment to the NPA (the
&#8220;NPA Amendment&#8221;), formally waiving the technical default and which also (i) provided us with the ability, until November 30,
2022, to prepay the Senior Notes with two business days&#8217; notice, (ii) provided that the make-whole amount under the NPA shall in
no case be less than USD 1,488,204.60, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022, a
waiver fee of 3.75% per annum on the outstanding principal amount of Senior Notes outstanding shall (a) accrue from (and including) October
14, 2022 and (b) be payable to the noteholders on the 12th day of February, May, August and November in each year (commencing on February
12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and payable in
accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022, therefore
triggering the 3.75% per annum waiver fee on the outstanding principal amount of Senior Notes, raising the interest rate from 4.75% to
8.50%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Covenants</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Senior Notes contain change-of-control
provisions pertaining to Procaps, S.A. and certain customary affirmative and negative covenants and events of default. In addition, the
Senior Notes require us, Procaps, S.A., and the other obligors thereunder to comply with the following financial ratios: (i) consolidated
total debt of the Company, Procaps, S.A., and the other obligors thereunder to consolidated EBITDA for the last twelve months (the &#8220;NPA
Debt/EBITDA Ratio&#8221;) of 3.50:1.00 or less, measured at certain quarterly determination dates and (ii) an EBITDA interest coverage
ratio (the &#8220;NPA Interest Coverage Ratio&#8221;) (calculated as the consolidated EBITDA for the last twelve months of the Company,
Procaps, S.A., and the other obligors thereunder divided by the consolidated interest expenses of the Company, Procaps, S.A., and the
other obligors thereunder) in excess of, or equal to, 3.00:1.00, calculated at certain dates of determination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Senior Notes also contain
covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company, Procaps, S.A. and the other obligors
thereunder to change lines of business; incur additional secured indebtedness; permit subsidiaries to incur additional indebtedness; sell
or transfer title to operating assets; pay dividends and distributions; engage in mergers and consolidations; create liens on assets;
guarantee, indemnify or assume the liabilities of third parties; change our fiscal year reporting; or engage in certain transactions with
affiliates. In addition, the Senior Notes contain a covenant that incorporates into the Senior Notes any more restrictive financial, affirmative
or negative covenants, information reporting requirements or events of default from any other credit facilities in excess of $25,000,000
(including from the Syndicated Loan facility, as in effect on February 28, 2022, see &#8220;<i>Liquidity and Capital Resources&#8212;Syndicated
Loan</i>&#8221;) entered into by the Company, Procaps, S.A., or any of our subsidiaries. For purposes of the Senior Notes, EBITDA is calculated
as income from sales and services, less (i) sales and production costs, less (ii) operating expenses, less (iii) administrative expenses,
plus (iv) depreciation, plus (ii) amortizations, plus (iii) provisions, and less (iv) portfolio write-offs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Senior Notes Waiver</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 31, 2023, we entered into the NPA Waiver Agreement which relates
to certain covenant noncompliance under the NPA. Pursuant to the terms of the NPA, we informed the Noteholders that the following events
of defaults have occurred and were continuing as of the date of the of the NPA Waiver Agreement (collectively, the &#8220;<span style="text-decoration:underline">Specified
NPA Defaults</span>&#8221;):</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(v)</td><td style="text-align: justify">the event of default arising as a result of the NPA Debt/EBITDA Ratio for the twelve months ending December
31, 2022 being in excess of 3.50:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the &#8220;<span style="text-decoration:underline">NPA Debt/EBITDA
Ratio Covenant</span>&#8221;);</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(vi)</td><td style="text-align: justify">the event of default arising as a result of the NPA Interest Coverage Ratio for the twelve months ending
December 31, 2022 being less than 3.00:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the &#8220;NPA <span style="text-decoration:underline">Interest
Coverage Ratio Covenant</span>&#8221;);</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(vii)</td><td style="text-align: justify">the event of default arising as a result of the short-term leverage being in excess of 1.00:1.00 as at
December 31, 2022, in default of the covenant described in, and incorporated into the NPA pursuant to, that certain Most Favored Lender
Notice dated April 7, 2022 and delivered to the Noteholders on or about such date (the &#8220;NPA <span style="text-decoration:underline">Short-Term Leverage Ratio Covenant</span>&#8221;);
and</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(viii)</td><td style="text-align: justify">the event of default arising as a result of our failure to deliver to the Noteholders, within the time
period specified in the NPA, written notice of the events of default described in the foregoing clauses (i) through (iii) as required
by the NPA.</td></tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the NPA Waiver Agreement, the Noteholders (a) with effect
from December 31, 2022, waived the Specified NPA Defaults, (b) prospectively waived our potential non-compliance by with the NPA Debt/EBITDA
Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated pursuant to the NPA Debt/EBITDA
Ratio Covenant as at such dates does not exceed 4.00:1.00, (c) prospectively waived our potential non-compliance with the NPA Interest
Coverage Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated pursuant to the NPA
Interest Coverage Ratio Covenant as at such dates is not less than 2.20:1.00, and (d) prospectively waived our potential non-compliance
with the NPA Short-Term Leverage Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated
pursuant to the NPA Short-Term Leverage Ratio Covenant as at such dates does not exceed 1.60:1.00.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The foregoing summary of the
NPA Waiver Agreement is qualified in its entirety by the full text of the NPA Waiver Agreement, which is filed as Exhibit 4.18 to this
Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of our noncompliance
with the aforementioned covenants, the $115 million unpaid principal balance previously classified as non-current borrowings has been
reclassified to current borrowings within the consolidated financial statements included in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the outstanding balance and certain other information on the Senior Notes as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Currency</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Range of <br/> Interest</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Maturity <br/> Year</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Outstanding <br/> Balance<br/>
 as of
    December&#160;31, <br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 11%; text-align: center">USD</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: right">8.50% (Fixed)</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: center">2031</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">60,020</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Prudential Annuities Life Assurance Corporation</td><td>&#160;</td>
    <td style="text-align: center">USD</td><td>&#160;</td>
    <td style="text-align: right">8.50% (Fixed)</td><td>&#160;</td>
    <td style="text-align: center">2031</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">29,980</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Healthspring Life &amp; Health Insurance Company, Inc</td><td>&#160;</td>
    <td style="text-align: center">USD</td><td>&#160;</td>
    <td style="text-align: right">8.50% (Fixed)</td><td>&#160;</td>
    <td style="text-align: center">2031</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 4pt; text-align: right">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="margin-top: 0; margin-bottom: 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Bridge Facility </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 11, 2022, the Company
and certain of its subsidiaries entered into a credit agreement with Bank of New York Mellon, as administrative and collateral agent (collectively,
the &#8220;Agent&#8221;), BofA Securities, Inc. (&#8220;BofA Securities&#8221;), JPMorgan Chase Bank, N.A. (&#8220;JPMorgan&#8221;) and
Morgan Stanley Senior Funding, Inc. (&#8220;Morgan Stanley&#8221;, and together with BofA Securities and JPMorgan, the &#8220;Joint Lead
Arrangers and Bookrunners&#8221;), as the joint lead arrangers and bookrunners, and the lenders from time to time party thereto (the &#8220;Bridge
Credit Agreement&#8221;) to finance the cash portion of the purchase price of the Acquisition, to pay fees and expenses related to the
Bridge Facility, to prepay, refinance and/or redeem certain existing indebtedness, and to the extent any proceeds remained after applying
to the foregoing, to use for working capital and other general corporate purposes. The Credit Agreement terms are consistent with the
terms of the Commitment Letter. The Credit Agreement provided for a bridge loan of up to $485 million (the &#8220;Bridge Facility&#8221;),
which would have been guaranteed by each existing and future direct and indirect material subsidiary of the Company, and the target entities
subject to the Acquisition and each of their subsidiaries upon the closing of the Acquisition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the termination
of the Acquisition, we advised the Joint Lead Arrangers and Bookrunners under the Bridge Facility of our desire to terminate the Bridge
Facility and related documentation and pay all outstanding obligations owing thereunder, and on January 10, 2023, the Company and certain
of its subsidiaries, the Agent, the Joint Lead Arrangers and Bookrunners, J.P. Morgan Securities LLC (&#8220;JPMorgan Securities&#8221;),
Morgan Stanley &amp; Co. LLC (&#8220;Morgan Stanley &amp; Co&#8221;) and the lenders party thereto entered into a termination letter in
connection therewith (the &#8220;Termination Letter&#8221;). Pursuant to the Termination Letter, (i) each of the loan documents in connection
with the Bridge Facility, (ii) the Commitment Letter dated as of May 16, 2022 among Bank of America, N.A. (&#8220;Bank of America&#8221;),
the Joint Lead Arrangers and Bookrunners and the Company and (iii) the Engagement Letter dated as of May 16, 2022 among Bank of America,
BofA Securities, JPMorgan Securities, Morgan Stanley &amp; Co and the Company, were terminated and all outstanding obligations owed by
the Company thereunder were paid in full in the amount of $5,719,426.58.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Contractual Obligations and Commitments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A summary of our enforceable
and legally binding obligations as of December 31, 2022 are set forth in the following table. Some of the amounts included in this table
are based on management&#8217;s estimates and assumptions about these obligations, including the duration, the possibility of renewal,
anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, the enforceable
and legally binding obligations actually paid in future periods may vary from the amounts reflected in the table.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">3,642</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">563</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Finance lease obligations<sup>(2)</sup></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,629</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,962</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22,236</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">46,001</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">90,187</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">380,258</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">10,271</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">6,525</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">22,236</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">419,290</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents gross maturities of our long-term debt obligations, excluding finance lease obligations as of December 31, 2022, including the interest payments. Estimated future interest payments on our variable-rate debt obligations were calculated using the interest rates in effect as of December 31, 2022. As a result of our noncompliance with certain debt ratio covenants as of December 31, 2022, $139,155 is reflected as payable in 2023 and classified as a current liability. Refer to the disclosure above regarding the Waivers as well as Notes 19, 2.1 and 28 in the Annual Audited Consolidated Financial Statements included in this Annual Report for further details regarding the noncompliance and the Waivers.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td>
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents maturities of our finance lease obligations included within long-term debt as of December 31, 2022, including interest payments. Estimated future interest payments on our variable-rate debt obligations were calculated using the interest rates in effect as of December 31, 2022.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Deferred tax liabilities were
$4.0 million as of December 31, 2022. This amount is not included in the contractual obligations table above because we believe this presentation
would not be meaningful. Deferred tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities
and their book basis, which will result in taxable amounts in future years when the book basis is settled. The results of these calculations
do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred tax liabilities
as payments due by period could be misleading because this scheduling would not relate to liquidity needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management believes that
our financial resources and expected future cash flows from operating activities shall be sufficient to satisfy our contractual obligations
and commitments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Off-Balance Sheet Arrangements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no commitments or
obligations, including contingent obligations, arising from off-balance sheet arrangements with unconsolidated entities or persons that
have a material current effect, or that are reasonably likely to have a material future effect, on our financial condition, changes in
financial condition, net sales or expenses, results of operations, liquidity, capital expenditures, or capital resources.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 101; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->88<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our R&amp;D activities are
directed primarily toward the development of new products for corporate brands and development services for third parties, as well as
the improvement of our manufacturing processes and delivery technologies. Our R&amp;D platform is decentralized with research centers
in Colombia (Barranquilla and Bogot&#225;), Brazil (Cotia, SP); and Florida, USA (West Palm Beach). We employ over 300 scientists, technicians
and skilled personnel in R&amp;D and innovation. Our main R&amp;D hub at Barranquilla, Colombia, employs over 280 scientists, technicians
and skilled personnel in processes such as formulation, analytical, manufacturing, packaging, as well as technological innovation related
to ingredients, formulas and equipment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our corporate culture focuses
on innovation and R&amp;D. We rely on a combination of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual
property, nondisclosure and other contractual provisions, and technical measures to protect a number of our products, services, processes
and intangible assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have applied in Colombia,
the United States and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered and issued, and also hold common law rights in various trademarks and service marks.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For more information, see &#8220;Item
4: Information on the Company.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. TREND INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Impact of COVID-19</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The consequences from the
COVID-19 pandemic have continued to affect Latin America through 2022 and 2021, including the pharmaceutical industry. We believe pharmaceutical
companies which offered positive solutions to consumer demands during the COVID-19 pandemic continue to thrive in both local and regional
markets. The personal physician workforce has begun to return to work after periods of quarantine, resulting in an increased demand for
Rx drugs during part of the year ended December 31, 2022, in particular for those related to chronic and certain acute therapies. Sales
of COVID-19 related products declined to pre-pandemic levels during 2022, and other sales of non-COVID-19 related products increased during
the year ended December 31, 2022, such as OTC pharmaceutical products. Although supplements and analgesics continued to thrive, Clinical
Specialties products such as anesthetics and anticoagulants have experienced a decline in sales during 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In-person physician consultations
have returned to pre-pandemic levels during 2022, with much focus on medical training. In-person meetings and events involving physician
groups and associations began in Colombia during the first half of 2021 through in-person medical events, allowing us to exhibit our brands
more effectively. These events were primarily initiated regionally but have an international presence. Nonetheless, continuous efforts
to deploy new technologies such as tele-health and other innovative technological solutions are a priority, for enabling open and better
ways of communication between patients and doctors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite these challenges,
we believe our ability to respond to the changes in consumer demand during the COVID-19 pandemic and its aftermath, efforts to maintain
close communications with physicians, and our reinforcement of key brands has allowed us to increase our market share of certain Farma
Procaps and Colmed OTC products during 2022 in terms of total sales within product category.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development for Pharmaceuticals
Industry</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Continued strengthening in
early-stage development pipelines for drugs and biologics, compounded by increasing clinical trial breadth and complexity, support our
belief in the attractive growth prospects for development of delivery solutions. Large companies are in many cases reconfiguring their
R&amp;D resources, increasingly involving the use of strategic partners for important outsourced functions. Additionally, an increasing
portion of compounds in development are from companies that do not have a full R&amp;D infrastructure, and thus are more likely to need
strategic development solutions partners.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have invested $18.1 million,
$16.0 million and $15.8 million in R&amp;D for the years ended December 31, 2022, 2021 and 2020, respectively,</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">For more information, see &#8220;Item
4: Information on the Company.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Aging Population in Latin America</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Aging population demographics
in Latin American countries, combined with health care reforms in many global markets that are expanding access to treatment to a greater
proportion of their populations, will continue to drive increases in demand for pharmaceuticals, biologics, and consumer health products.
Increasing economic affluence in developing regions will further increase demand for healthcare treatments, and we are taking active steps
to allow us to participate effectively in these growth regions and product categories. In accordance with a report by the United Nations
Department of Economics and Social Affairs, in 1975, 41% of the population in Latin America was 14 years of age or younger, 55% was between
15 and 64 years of age and 4% was 65 years of age or older, and in 2000, 31% of the population was 14 years of age or younger, 63% was
between 15 and 64 years of age and 6% was 65 years of age or older. Pursuant to the report, it is estimated that by 2025, 22% of the population
will be 14 years of age or younger, 68% will be between 15 and 64 years of age and 10% will be 65 years of age or older, and by 2050,
16% of the population will be 14 years of age or younger, 63% will be between 15 and 64 years of age and 21% will be 65 years of age or
older.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the market access
and payor pressures our customers face, global supply chain complexity, and the increasing demand for improved treatments will continue
to escalate the need for product differentiation, improved outcomes, and treatment cost reduction, all of which can often be addressed
using our advanced delivery technologies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fast Growing Pharmaceuticals Market in Latin
America</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We participate in the global
pharmaceutical and biotechnology industry, which has been estimated to generate more than $1 trillion in annual revenue over the next
eight years following 2020, including, but not limited to, the prescription drug and biologic sectors as well as consumer health, which
includes the OTC and vitamins and nutritional supplement sectors. Innovative pharmaceuticals continue to play a critical role in the global
market, while the share of revenue due to generic drugs and biosimilars is increasing in both developed and developing markets. Sustained
developed market demand and rapid growth in emerging economies such as Latin America is driving the consumer health product growth rate
to more than double that for pharmaceuticals. Payors, both public and private, have sought to limit the economic impact of pharmaceutical
and biologics product demand through greater use of generic and biosimilar drugs, access and spending controls, and health technology
assessment techniques, favoring products that deliver truly differentiated outcomes. Additionally, we believe the demand for innovative
delivery systems will increase due to growing healthcare expenditures globally and the implementation of government reforms to improve
the regulatory environment in Latin America and intellectual property protection.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Large and Fast-growing CDMO (Contract Manufacturing
Organization) Market</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We participate in the CDMO
market which, according to independent third-party industry reports, is estimated to continue its growth of 6.4% over the next four years.
It is also estimated that outsourced pharmaceutical manufacturing will continue its growth of 6.5% over the next four years. We believe
there is a high potential to increase outsourced pharmaceutical manufacturing worldwide since only approximately 26% of global pharmaceutical
manufacturing being outsourced. The CDMO industry is highly fragmented, with the top 10 manufacturers holding less than a 20% market share
in terms of revenue, creating opportunities for inorganic growth through consolidation and entry into adjacent markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Healthcare Expenditures</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We participate in global pharmaceutical
and biotechnology industry; healthcare expenditure in Latin America is expected to outgrow other markets, including the European and American
pharmaceutical and biotechnology markets. We believe this increase in expenditure is primarily driven by an increasing middle class across
Latin America coupled with a rapidly aging population, with the percentage of individuals over 65 years of age expected to increase from
6% in 2020 to 21% by 2050.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Exchange Rates</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating network is global,
and, as a result, we have substantial revenues and operating expenses that are denominated in currencies other than the U.S. dollar, the
currency in which we report our financial results, and are therefore influenced by changes in currency exchange rates. For the years ended
December 31, 2022 and 2021, approximately 55% and 48% of our revenue, respectively, was generated in currencies other than the U.S. dollar.
Functional foreign currencies for certain regional markets such as the Colombian Peso and Brazilian Real, where we have significant operations,
have experienced significant decrease in value when compared with the U.S. dollar in 2022 and for the year ended December 31, 2021, as
a result of several factors, such as the COVID-19 pandemic, which caused economic distress in those regional markets, significant fluctuation
in oil prices, supply chain challenges, and the political climate and uncertainty in such markets. As a result, the devaluation of the
Colombian Peso and Brazilian Real had a negative impact on our results of operations for the years ended December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>E. CRITICAL ACCOUNTING ESTIMATES.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For discussion on our critical
accounting estimates see Note 4 &#8220;Critical accounting judgements and key sources of estimation uncertainty&#8221; in our Annual Audited
Consolidated Financial Statements, included elsewhere in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 6.</b></span><b> DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. DIRECTORS AND SENIOR MANAGEMENT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. Directors and Senior Management</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Set forth below is information
concerning our current officers and directors. Our executive officers are appointed by the board of directors to serve in their roles.
Each executive officer is appointed for such term as may be prescribed by the board of directors or until a successor has been chosen
and qualified or until such officer&#8217;s death, resignation or removal. The business address for each director is provided below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name</b></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Age</b></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Position Held</b></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Committees</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 24%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ruben Minski<sup>(1)</sup></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 9%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">71</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 28%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chairman of the Board</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 36%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mergers and Acquisitions</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jose Minski<sup>(2)</sup></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">64</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mergers and Acquisitions (Chair)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Alberto Eguiguren Correa<sup>(3)</sup></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">58</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td>&#160;</td></tr>
  <tr style="background-color: White">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Luis Fernando Castro<sup>(4)</sup></span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">56</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compensation (Chair), Nominating (Chair) and Audit</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Alejandro Weinstein<sup>(5)</sup></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">65</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kyle P Bransfield<sup>(6)</sup></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">38</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mergers and Acquisitions and Audit</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">David Yanovich<sup>(7)</sup></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">52</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compensation, Nominating and Audit (Chair)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Ruben Minski is Calle 80 No. 78B-201, Barranquilla, Atl&#225;ntico, Colombia.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Jose Minski is 21500 Biscayne Boulevard, Suite 600, Aventura, Florida 33180.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Eguiguren is Avenida El Bosque Norte 0177, Oficina 1102, Las Condes, Santiago, Chile.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Castro is Calle 77 No.59-35, Centro Empresarial Las Americas 3, Oficina 1303, Barranquilla, Atl&#225;ntico, Colombia.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Weinstein is 21 Chesham Place, SW1XHG, London, United Kingdom.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Bransfield is 1425 Brickell Ave., #57B, Miami, FL 33131</span>.</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Yanovich is Calle 80 No. 78B-201, Barranquilla, Atl&#225;ntico, Colombia.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Background of Our Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a brief biography
of each of our directors:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Ruben Minski. </i></b>Mr.
Ruben Minski has been our founder and Chief Executive Officer since 1976. Mr. Ruben Minski received a Chemical Engineering degree from
Northeastern University in Boston, Massachusetts. He also participated in the Owners/President Management program at the Harvard Business
School, and the CEOs&#8217; II: The Next Step in Strategic Management and the CEOs&#8217; Management Programs at Northwestern University&#8217;s
Kellogg School of Management. Currently, he is a member of our board of directors and the board of directors of Crynssen, Union, Gelco
S.A.S., Descafeinadora Colombiana S.A. &#8212; Descafecol and Endeavor Colombia. Ruben Minski is the brother of Jose Minski, a member
of our board of directors and Chairman of our Merger and Acquisition Committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Jose Minski. </i></b>Mr.
Jose Minski holds a BS in Management Engineering from Worcester Polytechnic Institute and a Certificate in Mergers and Acquisitions from
Northwestern University&#8217;s Kellogg School of Management. He has more than 35 years of experience working in the health, wellness
and consumer goods sectors. He is a co-founder of WM Partners LP, a middle-market private equity firm focused on the health and wellness
industry. He is a member of our board of directors and Chairman of the Merger and Acquisition Committee. Mr. Minski also serves on the
boards of directors of Gelco S.A.S. and Descafeinadora Colombiana S.A. &#8212; Descafecol. He previously served as Chief Executive Officer
of Nutranext LLC. Jose Minski is the brother of Ruben Minski, our Chief Executive Officer and Chairman of our board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Alberto Eguiguren Correa.
</i></b>Mr. Eguiguren currently is partner at Russi &amp; Eguiguren SpA, a law firm offering broad experience in legal counsel to local
and international clients, such as multinational corporations, private equity firms, and private investors doing business with or in Chile,
a role which he has held since 2002. He also currently serves a director on the board of directors of Sonda S.A., Aguas Nuevas S.A., Aguas
Atacama S.A., Aguas D&#233;cima S.A. and Medismart S.A. He previously served on the board of Walmart Chile S.A., CFR Pharmaceuticals
S.A., Laboratorio Chile S.A. and Cl&#237;nica Las Condes S.A, amongst others. Prior to his time at Russi &amp; Eguiguren SpA, he was
a partner at Carey y C&#237;a Limitada, and as an attorney in the U.S. with Cleary, Gottlieb, Steen &amp; Hamilton and Brobeck, Phleger
&amp; Harrison. He received a Master&#8217;s in Commercial Law from Duke University School of Law and a Licentiate in Legal Sciences at
Catholic University of Chile.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Luis Fernando Castro</i></b>.
Mr. Castro holds a BS in Mathematics from Fordham University, a BS in Industrial Engineering from Columbia University and an MBA from
the Universidad de los Andes Bogota in Colombia. He has 28 years of experience in the financial, construction, infrastructure and agroindustry
sectors. He previously served as Chief Executive Officer of Banco Colombiano de Comercio Exterior S.A., Colombia&#8217;s development bank
and has been an entrepreneur. Currently, he is fund manager of a private equity fund in the agribusiness sector and serves as a member
of our board of directors, and on the boards of Tecnoglass INC. (TGLS), Castro Tcherassi SA (infrastructure and construction), and Accenorte
S.A.S. and Devimed S.A, both road concessions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Alejandro Weinstein.
</i></b>Mr. Weinstein holds a Business Administration degree from the Universidad Catolica de Chile and participated in the Owner/President
Management Program at Harvard Business School. He is a Certified Public Auditor and accountant and has more than 30 years of experience
in the healthcare and wellness industries, both operating and investing. He is a co-founder of WM Partners LP, a middle-market private
equity firm focused on the health and wellness industry. He is also an investor and General Partner of Olive Tree Venture (OTV), an Israel
based venture capital fund, as well as investor and Principal of Vanterra Capital. Mr. Weinstein also serves on our board of directors
and several private companies. Previously, Mr. Weinstein served as Chief Executive Officer of CFR Pharmaceuticals S.A. (&#8220;CFR&#8221;)
for 10 years. As Chief Executive Officer of CFR, he transformed CFR from a local Chilean pharmaceutical company into a global pharmaceutical
player. Mr. Weinstein has been involved in several exit transactions and has extensive M&amp;A transaction experience.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Kyle P. Bransfield</i></b>.
Mr. Bransfield is the founder of Union Acquisition Group and has served as its Chief Executive Officer and director since inception. He
has also served as director and Chief Executive Officer of Union Acquisition Corp, and Union Acquisition Corp. II, leading the companies
through successful mergers with Bioceres Crop Solutions (NASDAQ: BIOX) and Procaps Group (NASDAQ: PROC) in March 2019 and September 2021,
respectively. Mr. Bransfield currently serves on the board of Procaps Group and sits on the mergers and acquisitions committee. Following
Lightjump Acquisition Corp&#8217;s successful business combination with Moolec Science Ltd. (NASDAQ: MLEC) in December 2022, Mr. Bransfield
now serves as a board member on the compensation and audit committees. Mr. Bransfield was a Partner at Exos Technology Financial Partners,
where he established a SPAC Asset Management business through the formation of Exos SPAC Opportunities I and the Morgan Creek-Exos SPAC+
Fund. Mr. Bransfield has over 16 years of experience in direct equity and debt private markets principal investing, public markets portfolio
management, capital raising, and investment banking. Prior to joining Exos, Mr. Bransfield was a partner at Atlantic-Pacific Capital,
leading the firm&#8217;s global direct private placement and structured investment activities from 2015 to 2019. Prior to Atlantic-Pacific,
Mr. Bransfield was an investment banker in Sagent Advisors&#8217; Private Financing Solutions Group from 2014 to 2015. Prior to Sagent,
Mr. Bransfield spent five years as a Principal and General Partner at CS Capital Partners, a Philadelphia-based multi-family office focused
on alternative investments. Mr. Bransfield began his career in the Mergers &amp; Acquisitions Group at Stifel Nicolaus Weisel and received
a B.S. in Business Administration from American University.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><b><i>David Yanovich</i></b>.
Mr. Yanovich holds a master&#8217;s degree in Economics from the London School of Economics and a BS in Industrial Engineering from Universidad
de Los Andes in Colombia. He has more than 25 years of experience in investment banking and project structuring, particularly in the mining
and energy industries. He currently serves as President at Cerrito Capital S.A.S, an advisory, consulting and investment banking firm
focused on the Colombian market. He previously served as General Manager at Colgener S.A. and as Director of Investment Banking at Corfivalle.
He currently serves as a director on the boards of Oleoducto Central S.A, Proterra S.A., Crynssen Pharma Group Ltd, and Grupo de Inversiones
Suramericana (Grupo Sura). He also volunteers his time and is involved as a director of the Best Buddies Foundation in Colombia.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Senior Management</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our senior management oversees
our day-to-day operations to ensure that our overall strategic objectives are implemented and reports to our board of directors. The names,
ages, and current positions of our current senior management team are listed in the table below. For biographical information concerning
Mr. Ruben Minski, see &#8220;<i>&#8212;Background of Our Directors</i>&#8221; above. The business address for our senior management team
is Calle 80 No. 78B-201, Barranquilla, Atl&#225;ntico, Colombia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name</b></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; width: 7%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Age</b></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; width: 57%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Position Held</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ruben Minski</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">71</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Executive Officer (CEO)</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dr. Camilo Camacho</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">49</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Operations Officer (COO)</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Patricio Vargas Mu&#241;oz</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">50</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Financial Officer (CFO)</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Carlos Piocuda Russo</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">38</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice-President of Corporate Finance</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Grethel Moreno Romero</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">59</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice-President of Audit and Internal Controls</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Marcela Carvajalino Pagano</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">56</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice-President of Corporate and Legal Affairs</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mauricio Casta&#241;eda Caballero</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">46</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice-President of Human Resources</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Luis Alberto Palacios Aragon</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">59</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice-President of International Marketing and R&amp;D</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Dr. Camilo Camacho.
</i></b>Dr. Camacho has served as our Chief Operating Officer since April 2021. Prior to joining Procaps, Dr. Camacho served as General
Manager at Abbott Laboratories&#8217; Established Pharmaceutical Division (EPD) of the Colombia region from 2014 to 2018 and of the North
Latin America region from 2018 to 2021. There he led the integration of Abbott Laboratories in Colombia after its acquisition of CFR Pharmaceuticals,
and after Laboratorio Franco Colombiano Lafrancol S.A.S. (&#8220;Lafrancol&#8221;) was acquired by CFR Pharmaceuticals in Colombia. Previously
he worked for CFR Recalcine Colombia as a General Manager, Lafrancol as Vice President and Novartis de Colombia as Product Manager. He
received his Medical Degree from the <i>Escuela Colombiana de Medicina</i>, Colombia, a Specialist in Pharmacology from the <i>Universidad
Nacional de Colombia</i>, and an MBA from the INALDE Business School Colombia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Patricio Vargas Mu&#241;oz.
</i></b>Mr. Vargas serves as our Chief Financial Officer. Mr. Vargas has 24 years of public company experience in finance and business
development with senior executive roles held in multinational corporations. Mr. Vargas previously served as Finance Vice President &amp;
Treasurer at Empresas CMPC S.A. (CMPC.CL), a pulp and paper company with more than $5 billion in revenue that produces and markets solid
wood products, pulp, paper, tissue, personal care and packaging products in Latin America. Prior to that, Mr. Vargas served as Chief Financial
Officer of CMPC Biopackaging S.A. from September 2018 to December 2020 and Chief Executive Officer of Agrofoods Central Valley Chile S.A.,
an international food processor, from November 2015 to October 2017. Prior to that, Mr. Vargas was the Chief Financial Officer of CFR
from August 2010 until January 2015. Mr. Vargas holds an Engineering degree, with specialization in Electrical and Industrial Engineering,
from <i>Universidad Cat&#243;lica de Chile</i>, as well as an MBA from <i>Universidad Adolfo Ib&#225;&#241;ez</i>. Additionally,
Mr. Vargas completed the Advanced Management Program at Harvard Business School.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Carlos Piocuda Russo.
</i></b>Mr. Piocuda serves as our Vice-President of Corporate Finance. Mr. Piocuda has been a member of our senior management team since
2019. Mr. Piocuda also served as one of our financial managers since 2015. Mr. Piocuda received an MBA from <i>Universidad del Norte </i>in
Colombia. Mr. Piocuda has over 12 years of combined experience having held financial and administrative positions in the oil and gas and
pharmaceutical industries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Grethel Moreno Romero.
</i></b>Ms. Moreno serves as our Vice-President of Audit and Internal Controls. Ms. Moreno holds a BS in Systems Engineering from <i>Universidad
del Norte </i>in Colombia as well as an MBA where she specialized in Finance and Senior Management studies. Her experience of more than
30 years in management positions in the financial and internal audit areas in the oil and gas and pharmaceutical industries has allowed
her to lead project structuring processes, mergers and acquisitions operations, equity sale transactions, syndicated loans with local
and international banks, strategic planning, among other responsibilities. Ms. Moreno has served as Vice-President of Audit and Internal
Controls of Procaps since September 2018 and has led the establishment of corporate guidelines aimed at strengthening Procaps&#8217; control
system processes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Marcela Carvajalino
Pagano. </i></b>Ms. Carvajalino has served as our Vice-President of Corporate and Legal Affairs since 2013. Ms. Carvajalino is an attorney
with a law degree from <i>Universidad del Norte</i> in Colombia where she specialized in Negotiation and Conflict Management, and Senior
Management of Corporate Reputation. Ms. Carvajalino has over 28 years of experience, where she has worked in the industrial and health
sectors, and led processes of organizational transformation, strategic planning and reputational development with an emphasis on legal,
corporate and human resources issues, and defining corporate policies and processes. Ms. Carvajalino has also served as an executive member
of several boards of directors of private organizations and associations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Mauricio Casta&#241;eda
Caballero. </i></b>Mr. Casta&#241;eda has served as our Vice-President of Human Resources since August of 2014. Mr. Casta&#241;eda
holds a degree in Business Administrator from <i>Universidad de la Sabana</i> in Colombia. He also holds complimentary studies in specialization
of Strategic Marketing from <i>Colegio de Estudios Superiores de Administraci&#243;n</i> in Colombia and an MBA from INALDE Business
School in Colombia. He has over 20 years of experience in the mass retail, insurance, and health sectors, where he has led organizational
planning and transformation processes, strategic planning of human resources with emphasis on the design of succession plans, labor legislation
and complementary reforms, and variable compensation systems, among other projects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Luis Alberto Palacios
Aragon. </i></b>Mr. Palacios has served as our Vice-President of International Marketing and R&amp;D since 2019. Mr. Palacios graduated
from the <i>Universidad del Pacifico</i> in Peru with a Business Management degree. He later received a Master in Marketing and Commercial
Management from the American University of Paraguay and leadership training at Northwestern University&#8217;s Kellogg School of Management.
He has 35 years of varied and extensive experience in the Latin America pharmaceutical sector, performing different commercial functions
managing clients, especially health professionals from different Latin American countries. He has served Procaps for the past six years
as the head of Procaps&#8217; Farma Procaps business for Colombian operations, leading commercial management and international marketing
practice, promoting the development of science and innovation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Management Structure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">The
table below shows our management structure.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><img alt="" src="image_002.jpg" style="width: 750px; height: 233px"/>&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to our executive
officers and our senior management team, each of our business segments (NextGel, Procaps Colombia, CAN, CASAND and Diabetrics) is managed
by a Vice-President that reports directly to the COO.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. COMPENSATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Compensation of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each non-employee member of
our board of directors receives compensation in the amount of $ 56,000 per annum. Members of our board of director who also serve as an
officer of the Company do not receive any additional compensation with respect to their role as a director.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2023, Jose Minski
and Alejandro Weinstein renounced their compensation to be received by them for serving as Directors for the fiscal year ended December
31, 2023. The Board of Directors intends to submit these renunciations to the next general meeting of shareholders of the Company for
acknowledgement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Compensation of Executive Officers and Senior
Management Team</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the years ended December
31, 2022, 2021 and 2020, our executive officers and senior management team received an aggregate compensation of approximately $3.6 million,
$3.0 million (including a special bonus paid in connection with the Closing of the Business Combination and the listing of the Ordinary
Shares on the Nasdaq), and $2.0 million, respectively. The aggregate compensation paid directly or indirectly to our executive officers
and senior management team consists of: (i) wages paid by our subsidiary, Procaps Group S.A.; (ii) consulting fees paid to certain of
Procaps&#8217; executive officers and senior management team members by Horslig GMBH or Pharminter GMBH, indirect subsidiaries of Procaps;
and (iii) employee benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our executive officers and
members of our senior management team are employed directly by Procaps S.A., or one of our other subsidiaries, and participate in such
company&#8217;s benefits plan and government pension plan, if any, on the same basis as its other employees. We have a strategic variable
bonus system that grants cash compensation for achievement of both financial and tactical objectives. These bonuses represent approximately
30% of our executive officers&#8217; and senior management team&#8217;s total compensation and are paid on a semi-annual basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. BOARD PRACTICES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors consists
of seven directors, including five independent directors. Our board of directors also has an independent audit committee, nominating committee
and compensation committee. Alejandro Weinstein, Kyle P Bransfield, Luis Fernando Castro, Alberto Eguiguren Correa and David Yanovich
are &#8220;independent directors,&#8221; as defined in Nasdaq listing standards and applicable SEC rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board Committees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have established four committees
under the board of directors: an audit committee, a compensation committee, a nominating committee and a mergers and acquisitions committee.
Each committee&#8217;s functions are described below. For information on the members and chairs of each committee see &#8220;&#8212;Directors
and Senior Management&#8221; above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Audit Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee is responsible
for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing, with our independent registered public accounting firm, the scope and results of their audit;</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the annual financial statements that we file with the SEC;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">overseeing our financial and accounting controls and compliance with legal and regulatory requirements;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing our policies on risk assessment and risk management;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing related person transactions; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">establishing procedures for the confidential
anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.</p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee consists
of David Yanovich, as Chairman and Kyle Bransfield and Luis Fernando Castro, as members. Each qualifies as an independent director according
to the rules and regulations of the SEC and Nasdaq with respect to audit committee membership. In addition, all of the audit committee
members meet the requirements for financial literacy under applicable SEC and Nasdaq rules and at least one of the members qualifies as
an &#8220;audit committee financial expert,&#8221; as such term is defined in Item 407(d) of Regulation S-K. The written charter for the
audit committee, is available on our website. The reference to our website address in this Annual Report does not include or incorporate
by reference the information on our website into this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compensation Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our compensation committee
is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">evaluating, recommending and reviewing any equity incentive awards issued to any executive officers and directors that may be made under any equity-based compensation plan adopted by our board of directors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">meet with the Chief Executive Officer and other executive officers annually to discuss any incentive compensation programs to be in effect for the executive officers for such fiscal year and the basis for evaluating the performance of the executive officers.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our compensation committee
consists of Luis Fernando Castro, as Chairman and David Yanovich, as a member, and each qualifies as an independent director according
to the rules and regulations of the SEC and Nasdaq with respect to compensation committee membership, including the heightened independence
standards for members of a compensation committee. The written charter for the compensation committee, is available on our website. The
reference to our website address in this Annual Report does not include or incorporate by reference the information on our website into
this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Nominating Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our nominating committee is
responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our nominating committee consists
of Luis Fernando Castro, as Chairman and David Yanovich, as a member, and each qualifies as an independent director according to the rules
and regulations of the SEC and Nasdaq with respect to nominating committee membership. The written charter for the nominating committee,
is available on our website. The reference to our website address in this Annual Report does not include or incorporate by reference the
information on our website into this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Mergers and Acquisitions Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our mergers and acquisitions
committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">providing guidance to our management and board of directors with respect to our acquisition, investment and divestiture strategies;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">assisting our management and board of directors with identifying acquisition, investment and divestiture opportunities; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our mergers and acquisitions
committee consists of Jose Minski, as Chairman and Ruben Minski and Kyle P. Bransfield, as members. The written charter for the mergers
and acquisition committee, is available on our website. The reference to our website address in this Annual Report does not include or
incorporate by reference the information on our website into this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risk Oversight</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors is
responsible for overseeing our risk management process. Our board of directors focuses on our general risk management strategy, the most
significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our audit committee is also
responsible for discussing our policies with respect to risk assessment and risk management. Our board of directors believes its administration
of its risk oversight function has not negatively affected our board of directors&#8217; ability to fulfill its other duties and obligations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. EMPLOYEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had more than 5,500 full-time and temporary employees worldwide. Employees in our Rymco (2 employees), Funtrition (4 employees), and Softgel
(39 employees) manufacturing facilities are currently represented by industry labor union organizations, representing approximately 0.8%
of our total employees. With respect to our technical talent, we employ more than 300 scientists, technicians and skilled personnel in
R&amp;D and innovation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are committed to our continued
efforts to increase diversity and foster an inclusive work environment that supports the global workforce and the communities we serve.
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply
with all laws applicable to discrimination in the workplace. Our diversity, equity and inclusion principles are also reflected in our
employee training and policies. We continue to enhance our diversity, equity and inclusion policies which are guided by our senior management
team.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 111; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->98<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that we provide
robust compensation and benefits to our employees. In addition to salaries, these programs, which vary by country/region, can include
a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, among many
others. We believe that our employee relations are satisfactory.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the approximate number of our employees by geographic region as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">South <br/> America</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Central <br/> America</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">North <br/> America</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; width: 52%">Approximate number of employees as of December 31, 2022</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">4,677</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">817</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">70</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to our executive
officers, we rely on the Senior Management team above to lead and direct our business. The members of the Senior Management team hold
positions in areas such as corporate finance, audit and internal corporate controls, human resources, corporate legal and regulatory affairs,
and marketing and R&amp;D.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>E. SHARE OWNERSHIP</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table shows
the beneficial ownership of Ordinary Shares as of May 2, 2023, by:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as otherwise noted
herein, the number and percentage of Ordinary Shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act,
and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any Ordinary Shares as to which the holder has sole or shared voting power or investment power and also any Ordinary Shares which
the holder has the right to acquire within 60 days of the Closing through the exercise of any option, warrant or any other right.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have based percentage ownership
on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless otherwise indicated,
we believe that all persons named in the table below have sole voting and investment power with respect to the Ordinary Shares beneficially
owned by them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Name and Address of Beneficial Owner</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; font-style: italic">Executive Officers and Directors:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ruben Minski<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">31,338,454 </span></td><td style="text-align: left"><sup>(7)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">27. </span></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="width: 76%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jose Minski<sup>(3)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">17,960,146
</span></td><td style="width: 1%; text-align: left"><sup>(8)</sup></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">15.9</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Alberto Eguiguren Correa <sup>(4)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;&#160;&#160;&#160;-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;&#160;&#160;-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kyle P. Bransfield<sup>(5)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,047,500
</span></td><td style="text-align: left"><sup>(9)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.8</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Alejandro Weinstein<sup>(6)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15,877,516</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14.1</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">All directors and executive officers as a group (five individuals)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">67,273,616</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">59.6</td><td style="text-align: left">%</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Notes:</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Percentages are based on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 112; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->99<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Ruben Minski is Calle 80 No. 78B-201, Barranquilla, Atl&#225;ntico, Colombia.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Jose Minski is 21500 Biscayne Boulevard, Suite 600, Aventura, Florida 33180.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Eguiguren is Avenida El Bosque Norte 0177, Oficina 1102, Las Condes, Santiago, Chile. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Bransfield is 1425 Brickell Ave., #57B, Miami, Florida 33131.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Mr. Weinstein is 21 Chesham Place, SW1XHG, London, United Kingdom.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents shares held by the Sognatore Trust, which holds shares for Bricol International Corp., a company wholly owned by Mr. Ruben Minski, as beneficiary. Includes 4,875,868 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents shares held by the Simphony Trust, which holds shares for Mr. Jose Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(9)</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Includes shares held by Union Acquisition Associates
    II, LLC, an entity controlled by Mr. Bransfield, and PENSCO Trust Company, which holds shares for Mr. Bransfield as beneficiary. Includes
    625,000 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow
    agreement.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(10)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;Represents shares held by Hoche Partners Pharma Holding S.A., an entity controlled by Mr. Weinstein.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>F. DISCLOSURE OF A REGISTRANT&#8217;S ACTION TO RECOVER ERRONEOUSLY
AWARDED COMPENSATION.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 113; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 7.</b></span><b> MAJOR
SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. MAJOR SHAREHOLDERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table shows
the beneficial ownership of Ordinary Shares as of May 2, 2023 by each person known to by us to be the beneficial owner of more than 5%
of the Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as otherwise noted
herein, the number and percentage of Ordinary Shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act,
and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any Ordinary Shares as to which the holder has sole or shared voting power or investment power and also any Ordinary Shares which
the holder has the right to acquire within 60 days of the Closing through the exercise of any option, warrant or any other right.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have based percentage ownership on 112,824,183 Ordinary Shares outstanding
as of May 2, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless otherwise indicated,
we believe that all persons named in the table below have sole voting and investment power with respect to the Ordinary Shares beneficially
owned by them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Name and Address of Beneficial Owner</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Percentage<sup>(1)</sup></b></span></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; font-style: italic">Five Percent Holders:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sognatore Trust<sup>(2)</sup>&#160;&#160;</span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">31,338,454</td><td style="width: 1%; text-align: left"><sup>(7)</sup></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">27.8</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Simphony Trust<sup>(3)</sup>&#160;&#160;</span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,960,146</td><td style="text-align: left"><sup>(8)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15.9</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deseja Trust<sup>(4)</sup>&#160;&#160;</span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,960,146</td><td style="text-align: left"><sup>(9)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15.9</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hoche Partners Pharma Holding S.A.<sup>(5)</sup>&#160;&#160;</span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15,877,516</td><td style="text-align: left"><sup>(10)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14.1</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International Finance Corporation<sup>(6)</sup>&#160;&#160;</span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,492,427</td><td style="text-align: left"><sup>(11)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7.5</td><td style="text-align: left">%</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Notes:</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Percentages are based on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of the Sognatore Trust is Oficina 503A-02, Edificio Quantum (500) Ruta 8 km. 7.500 Zonam&#233;rica, Montevideo, Uruguay.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of the Simphony Trust is 29 Bancroft Mills Road, Wilmington, Delaware 19806.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of the Deseja Trust is 29 Bancroft Mills Road, Wilmington, Delaware 19806.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of Hoche Partners Pharma Holding S.A. is 3A, Val Ste Croix, L-1371 Luxembourg, Grand Duchy of Luxembourg.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The business address of the International Finance Corporation is 2121 Pennsylvania Avenue, NW, Washington DC, 20433.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Sognatore Trust, which holds shares for Bricol International Corp., a company wholly owned by Mr. Ruben Minski, as beneficiary. Includes 4,875,868 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Simphony Trust, which holds shares for Mr. Jose Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(9)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Deseja Trust, which holds shares for Mr. Meyer Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(10)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based on a Schedule 13D filed on October 12, 2021. Represents shares held by Hoche Partners Pharma Holding S.A., an entity controlled by Mr. Weinstein.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(11)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based on a Schedule 13G filed on February 14, 2022.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><!-- Field: Page; Sequence: 114; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->101<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. RELATED-PARTY TRANSACTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>We have engaged in, and
we expect that we will continue to engage in, transactions with related parties, including, without limitation, the transactions described
below. We believe the terms and conditions of these arrangements are generally equivalent to those which we could obtain from an unaffiliated
third party, to the extent there are third parties which could provide comparable goods or services. For more information regarding our
relationships and transactions with related parties, see Note 29 to our Annual Audited Consolidated Financial Statements, included elsewhere
in this Annual Report.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board of Directors has
adopted a written related person transaction policy that sets forth certain policies and procedures for the review and approval or ratification
of related person transactions, which comprise any transaction, arrangement or relationship in which the Company or any of its subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have
a direct or indirect material interest. A &#8220;related person&#8221; for purposes of such policy means: (i) any person who is, or at
any time during the applicable period was, one of the Company&#8217;s executive officers or one of the Company&#8217;s directors; (ii)
any person who is known by the Company to be the beneficial owner of more than 5% of the Ordinary Shares; (iii) any immediate family member
of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law) of a director, executive officer or a beneficial owner of more than 5% of
the Company&#8217;s voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer
or beneficial owner of more than 5% of the Ordinary Shares; and (iv) any firm, corporation or other entity in which any of the foregoing
persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below sets forth
the entities Procaps has engaged in related party transactions with and their relationship to Procaps.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Related Party</b></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 65%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Relationship to Procaps</b></span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Promedical S.A.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Bolivian sociedad an&#243;nima owned 50% by the Minski Family and measured as an equity method investment.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fundaci&#243;n Procaps</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Colombian non-profit entity owned 100% by members of the Minski Family.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Industrias Intercaps de Venezuela</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Venezuelan compa&#241;&#237;a an&#243;nima owned 100% by members of the Minski Family and Hoche.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Originates Inc.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Florida corporation owned 100% by members of the Minski Family.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gelco S.A.S.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Colombian sociedad por acciones simplificada that is 18.75% owned
by members of the Minski Family.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Productora de Gelatina S.A.S.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Colombian sociedad por acciones simplificada that is 18.75% owned
by members of the Minski Family.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Laboratorios Vivax Pharmaceutical S.A.</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.I. Naturmega S.A.</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Simviel S.A.S.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Colombian sociedad por acciones simplificada owned 100% by a member of the Minski Family.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pharma Perspectives S.A.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A Costa Rican sociedad an&#243;nima owned 100% by members of the Minski Family and Hoche.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Carlton Mega Inversiones S.A.</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sognatore Trust</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deseja Trust</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Simphony Trust</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Union Acquisition Associates II, LLC</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Productora de Gelatina Do Brazil Ltda.</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Palo Santo Media LLC</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">WM Partners LP</span></td>
    <td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Purchase and Sale of Goods and Services and
Commercial Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Purchase of Goods and Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps has purchased goods
and services in the ordinary course of business in arm&#8217;s length transactions under market terms from several related parties. During
the years ended December 31, 2022, 2021 and 2020, Procaps purchased goods and services from the following companies: (i) C.I. Naturmega
S.A.; (ii) Gelco S.A.S.; (iii) Productora de Gelatina S.A.S.; (iv) Originates Inc.; (v) Simviel S.A.S.; and (vi) Productora de gelatina
Do Brazil ltda, (vii) Wm Partners, L. P.; and (viii) Palosanto Media LLC. Such goods and services consisted primarily of the sale of refined
fish oil, gelatin and other raw materials. During the years ended December 31, 2022, 2021 and 2020, Procaps has purchased a total of $12.3
million, $10.2 million and $11.3 million in goods and services from these companies, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sale of Goods</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps has sold goods in
the ordinary course of business in arm&#8217;s length transactions under market terms to several related parties. During the years ended
December 31, 2022, 2021 and 2020, Procaps sold goods to the following companies: (i) Originates Inc.; (ii) C.I. Naturmega S.A., (iii)
Promedical S.A, (iv) Industrias Intercaps de Venezuela C.A. (v) Fundaci&#243;n Procaps and (vi) Laboratorios Vivax Pharmaceutical C.A
.. Such goods consisted primarily of raw materials. During the years ended December 31, 2022, 2021 and 2020, Procaps has sold a total of
approximately $8.0 million, $5.6 million and $5.6 million in goods to these companies, respectively. Amounts previously reported for 2021
and 2020 have been revised to correct for an immaterial misstatement which have no impact on amounts reported in the consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sale of Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">Procaps has sold services in
the ordinary course of business in arm&#8217;s length transactions under market terms to several related parties. During the years ended
December 31, 2022, 2021 and 2020, Procaps sold services to the following companies: (i) Promedical S.A.; (ii) Originest and (iii) CI Naturmega
S.A. Such services consisted primarily of technical advisory services. During the years ended December 31, 2022, 2021 and 2020, Procaps
has sold a total of approximately $1.034 thousand, $116 thousand and $87 thousand in services to these companies, respectively.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Commercial Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps has conducted commercial
operations in the ordinary course of business in arm&#8217;s length transactions under market terms with several related parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the years ended December
31, 2022, 2021 and 2020, Procaps maintained balances of commercial operations with the following companies, generating accounts receivables
by: (i) C.I. Naturmega S.A.; (ii) Industrias Intercaps de Venezuela; (iii) Originates Inc.; (vi) Productora de Gelatina S.A.S.; (v) Pharma
Perspectives S.A.; (vi) Carlton Mega Inversiones S.A.; and (vii) Promedical S.A. Such commercial operations consisted primarily of back-office
services, leases, technical advisory and sale of finished products and raw materials. During the years ended December 31, 2022, 2021 and
2020, Procaps generated a total of approximately $14.0 million, $12.4 million and $13.4 million in accounts receivables owed by these
companies, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the years ended December
31, 2022, 2021 and 2020, Procaps conducted commercial operations with the following companies, generating accounts payable to: (i) C.I.
Naturmega S.A.; (ii) Fundaci&#243;n Procaps; (iii) Originates Inc.; (iv) Gelco S.A.S.; (v) Productora de Gelatina S.A.S.; (vi) Promedical
S.A.; and (viii) Gelco Do Brazil. Such commercial operations consisted primarily of purchase of raw materials, technical advisory and
leases. During the years ended December 31, 2022, 2021 and 2020, Procaps generated a total of approximately $2.8 million, $1.3 million
and $4.8 million in accounts payable to these companies, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Related Party Donations, Advances, Long-Term
Receivables, Loans and Guarantees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Donations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps S.A. has made donations
to Fundaci&#243;n Procaps in the total amount of approximately $0.5 million, $0.4 million and $0.3 million for the years ended December
31, 2022, 2021 and 2020, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Advances</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps periodically advances
payments for services to be performed by certain related parties, including Simviel S.A.S. As of December 31, 2022, the total amount outstanding
advanced by Procaps to Simviel S.A.S. for services to be performed was $0.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Long-Term Receivables</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps sold pharmaceutical
products to Industrias Intercaps de Venezuela and Laboratorios Vivax Pharmaceutical S.A. from 2010 through 2015 which, as of the date
of this Annual Report, have not been paid. Long-term receivables in connection with such past sales outstanding as of December 31, 2022,
owed by Industrias Intercaps de Venezuela and Laboratorios Vivax Pharmaceutical S.A. total approximately $18 million and $5.3 million,
respectively. All such amounts have been provisioned for by Procaps. For more information, see Note 29 to our Annual Audited Consolidated
Financial Statements included elsewhere in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Loans</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 13, 2013, Sognatore
made a loan to Procaps on commercially reasonable, arm&#8217;s length terms, in the total amount of $13.7 million. All amounts owed under
this loan have been paid and as of December 31, 2022, the outstanding balance on such loan is zero.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 30, 2018, Tripod Pharma
Hld made a loan to Procaps on commercially reasonable, arm&#8217;s length terms, in the total amount of $9.5 million. On September 26,
2018, Tripod Pharma Hld made an additional loan to Procaps on commercially reasonable, arm&#8217;s length terms, in the total amount of
$4.0 million. On January 1, 2020, Tripod Pharma Hld, acting as a nominee for Sognatore, Deseja and Simphony under these loans, assigned
one-third (1/3) of the payment obligations under such loans to each of Sognatore, Deseja and Simphony. All amounts owed under these loans
have been paid and as of December 31, 2022, the outstanding balance on such loans is zero.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Guarantees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps S.A., a subsidiary
of Procaps, is a guarantor under a loan by Banco Colpatria Multibanca Colpatria S.A., as lender, to C.I. Naturmega S.A., as borrower,
the outstanding balance of which as of December 31, 2022 was $0.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Other Relationships</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sofgen Pharmaceuticals LLC,
one of Procaps&#8217; indirect subsidiaries, and Originates Inc. share payroll services from ADP and, prior to the closing of the Business
Combination, had a linked employee 401(k) plan sponsored by Originates Inc. in which Sofgen Pharmaceuticals LLC participated as a participating
employer, due to both entities being under common ownership. Prior to the closing of the Business Combination, Sofgen Pharmaceuticals
LLC put in place its own 401(k) plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. INTERESTS OF EXPERTS AND COUNSEL</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 8.</b></span><b> FINANCIAL
INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">The Company&#8217;s Annual
Audited Consolidated Financial Statements are included in Item 18 under the heading &#8220;Financial Statements.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Legal Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are involved in investigations,
claims, lawsuits and other proceedings arising in the ordinary course of business. These matters involve personnel and employment issues,
regulatory matters, contract, administrative and tax proceedings, among others, arising in the ordinary course of business, involving
total contingencies of $0.1 million as of December 31, 2022. As of December 31, 2022, our total contingencies relating to legal proceedings
in which our external legal counsel has identified the risk of loss as being probable and/or for which a provision had been recorded in
our Consolidated Financial Statement were: (i) $0.1 million related to labor claims, and (ii) $0.04 million related to administrative
claims. For more information our litigation contingencies, see Note 22 to our Annual Audited Consolidated Financial Statements, included
elsewhere in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Claims may be filed against
us in the future including by, but not limited to, third parties, employees (of our own or made available by service providers) and federal,
state or local bodies due to transactions and procedures carried out by us or companies we acquire in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than as described below,
we do not believe that any of our current legal or administrative proceedings could individually cause a material adverse effect on our
business, financial condition or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Colombian Social Security and Taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Historically, Procaps has
paid certain benefits to its employees that, according to prior interpretation of applicable Colombian labor and tax laws, were not considered
as part of an employee&#8217;s salary for purposes of calculating taxable employee compensation. In 2012, the interpretation of what constitutes
part of an employee&#8217;s compensation began to change in Colombia, which resulted in Procaps having to eliminate certain employee benefits
such as transportation assistance and certain performance bonuses, and amend its overall policies relating to performance bonuses, in
order to comply with such change in interpretation. Although Procaps has made considerable efforts to comply with such laws, it is possible
that monetary penalties and additional labor taxes will be imposed on Procaps by the Colombia&#8217;s Ministry of Finance&#8217;s Pension
and Parafiscal Management Unit (<i>Unidad de Gestion Pensional y Parafiscal, </i>or &#8220;UGPP&#8221;) for the periods prior to the implementation
of such changes to employee benefits instituted by Procaps. Although Procaps has been subject to administrative proceedings by the UGPP
in the past for alleged failures to pay social security benefits, which have resulted in non-material penalties and fines, there can be
no assurances that future proceedings will not be initiated against Procaps which could result in material fines and liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Operating License</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">On May 9, 2013, CETESB denied
Colbras Industria e Comercio Ltda. the license to operate (<i>licen&#231;a de opera&#231;&#227;o</i>) the warehouse and quality
control laboratory located at our Softgel manufacturing facility in the city of Cotia, State of S&#227;o Paulo, Brazil. Such denial
was because of a legal proceeding initiated against Etesco Construcoes e Comercio LTDA (&#8220;Etesco&#8221;), the developer of the industrial
park where such facilities are located, alleging non-compliance by Etesco with certain environmental requirements related to the distance
of the facilities from the Coitia River and the percentage of &#8220;green area&#8221; (<i>&#225;rea verde</i>) surrounding the park.
CETESB has allowed our warehouse and quality control laboratory to operate until the proceeding against Etesco is resolved. In the event
such proceeding is resolved negatively against Etesco, CETESB may not grant us a license of operations which could force us to suspend
operations of the warehouse and quality control laboratory located at our Softgel manufacturing facility.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividend Distribution Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From the annual net profits
of the Company, at least 5% shall each year be allocated to the reserve required by applicable laws (the &#8220;Legal Reserve&#8221;).
That allocation to the Legal Reserve will cease to be mandatory as soon and as long as the aggregate amount of the Legal Reserve amounts
to 10% of the amount of the share capital of the Company. The general meeting of shareholders shall resolve how the remainder of the annual
net profits, after allocation to the Legal Reserve, will be disposed of by allocating the whole or part of the remainder to a reserve
or to a provision, by carrying it forward to the next following financial year or by distributing it, together with carried forward profits,
distributable reserves or share premium to the shareholders in proportion to the number of the Ordinary Shares they hold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board of Directors may
resolve that the Company pays out an interim dividend to the shareholders, subject to the conditions of article 461-3 of the 1915 Law
and the Company&#8217;s amended and restated articles of association. The Board of Directors shall set the amount and the date of payment
of the interim dividend.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any share premium, assimilated
premium or other distributable reserve may be freely distributed to the shareholders subject to the provisions of the 1915 Law and the
Company&#8217;s amended and restated articles of association. The dividend entitlement lapses upon the expiration of a five-year prescription
period from the date of the dividend distribution. The unclaimed dividends return to our accounts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. SIGNIFICANT CHANGES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There have been no significant
changes since the approval date of our Annual Audited Consolidated Financial Statements included elsewhere in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 9.</b></span><b> THE
OFFER AND LISTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. OFFER AND LISTING DETAILS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ordinary shares trade
solely on the Nasdaq under the symbol &#8220;PROC.&#8221; Our ordinary shares do not trade in any other market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. DISTRIBUTION PLAN</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. MARKETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Ordinary Shares and Warrants
began trading on the Nasdaq Global Market under the ticker symbol &#8220;PROC&#8221; and &#8220;PROCW&#8221;, respectively, in connection
with the Business Combination, on September 30, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. SELLING SHAREHOLDERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>E. EXPENSES OF THE ISSUE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 10.</b></span><b> ADDITIONAL
INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. SHARE CAPITAL</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. MEMORANDUM AND ARTICLES OF ASSOCIATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>The following is a summary
of some of the terms of our ordinary shares, based on the Company&#8217;s amended and restated articles of association. The following
summary is not complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Company&#8217;s amended
and restated articles of association, and applicable Luxembourg law, including Luxembourg corporate law.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Ordinary Shares</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Share Capital</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is authorized
to issue 687,175,817 Ordinary Shares and zero Redeemable B Shares under its authorized share capital.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of May 2, 2023, there were
112,824,183 Ordinary Shares outstanding and issued, 4,000,000 Redeemable A Shares issued and held in treasury by the Company and 4,500,000
Redeemable B Shares issued and held in treasury by the Company. There were also 23,375,000 Warrants outstanding, each entitling the holder
to purchase one Ordinary Share at an exercise price of $11.50 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 29, 2021, the
Company redeemed 4,000,000 Redeemable A Shares held by Crynssen for an aggregate price of $40,000 so that, following the Merger and the
Exchange, Crynssen would become a direct wholly owned subsidiary of the Company. Immediately prior to the redemption of the Redeemable
A Shares, the Redeemable A Shares represented 16.53% of the total issued capital stock of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 29, 2021, immediately
following the Exchange, the Company redeemed 4,500,000 Redeemable B Shares held by IFC for an aggregate price of $45,000,000, as negotiated
with IFC in connection with the Business Combination, pursuant to the terms of the IFC Redemption Agreement. Immediately prior to the
redemption of the Redeemable B Shares, the Redeemable B Shares represented 3.71% of the total issued capital stock of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Redeemable A Shares and
the Redeemable B Shares will remain issued shares under Luxembourg law until cancelled, but shall have no voting or dividend rights and
shall not be counted for any quorum purposed under Luxembourg law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Share Issuances</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to Luxembourg law,
the issuance of Ordinary Shares and Redeemable B Shares requires in principle approval by the extraordinary general meeting of shareholders
subject to necessary quorum and majority requirements. The extraordinary general meeting of shareholders of Company held prior to the
Closing of the Business Combination approved an authorized capital and authorized the Board of Directors to (i) realize for any reason
whatsoever, including any issue in one or several successive tranches of (a) any subscription and/or conversion rights, including warrants
(which may be issued separately or attached to Ordinary Shares, bonds, options, notes or similar instruments), convertible bonds, notes
or similar instruments as well as (b) new Ordinary Shares and Redeemable B Shares, with or without share premium, against payment in cash
or in kind, by conversion of claims on the Company, by way of conversion of available reserves or in any other manner; (ii) determine
the place and date of the issue or the successive issues, the issue price, the terms and conditions of the subscription of and paying
up on the new Ordinary Shares or Redeemable B Shares; and (iii) remove or limit the preferential subscription right of the shareholders
in case of issue against payment in cash of Ordinary Shares, Redeemable B Shares, warrants (which may be separate or attached to Ordinary
Shares, bonds, notes or similar instruments), convertible bonds, notes or similar instruments, up to the maximum amount of such authorized
capital for a maximum period of five years from the date of incorporation or any subsequent resolutions to create, renew or increase the
authorized capital. The extraordinary general meeting of shareholders of the Company may renew or increase such authorized capital and
such authorization to the Board of Directors to issue Ordinary Shares and Redeemable B Shares, each time for a period not exceeding five
(5) years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, since the adoption
of the amended and restated articles of association of the Company in connection with the Closing of the Business Combination, the Company&#8217;s
shareholders authorized the Board of Directors to allocate existing shares of the Company without consideration or to issue new shares
(&#8220;Bonus Shares&#8221;) paid-up out of distributable reserves (i) to employees of the Company or to certain classes of such employees;
(ii) to employees of companies or economic interest groupings in which the Company holds directly or indirectly at least ten percent (10%)
of the share capital or of the voting rights; (iii) to employees of companies or economic interest groupings which hold directly or indirectly
at least ten percent (10%) of the share capital or of the voting rights of the Company; (iv) to employees of companies or economic interest
groupings in which at least fifty percent (50%) of the share capital or of the voting rights are held, directly or indirectly, by a company
holding itself, directly or indirectly, at least fifty percent (50%) of the share capital of the Company; or (v) to members of the corporate
bodies of the Company or any of the other companies or economic interest groupings referred to under items (ii) to (iv) above, for a maximum
period of five years from the date of incorporation or any subsequent resolutions to create, renew or increase the authorized capital
(such period restriction is only applicable in case of an allotment of newly issued shares). The preferential subscription right of existing
shareholders is, through their authorization to the Board of Directors, automatically waived in case of issuance of Bonus Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currently, no further Redeemable
B Shares may be issued by the Board of Directors under the authorized capital as the maximum amount of Redeemable B Shares authorized
by the extraordinary general meeting of shareholders of the Company held prior to the Closing of the Business Combination has been issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company recognizes only
one (1) holder per share. In case a share is owned by several persons, they shall appoint a single representative who shall represent
them in respect of the Company. The Company has the right to suspend the exercise of all rights attached to that share, except for relevant
information rights, until such representative has been appointed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Upon the consummation of the
Business Combination, a delegate of the Board of Directors, who was granted powers pursuant to resolutions of the Board of Directors,
resolved on the issuance of Ordinary Shares out of the authorized capital to Union shareholders. When delegating such powers to the delegate,
the Board of Directors resolved on the applicable procedures and timelines to which such issuance will be subjected. In the event a proposal
of the Board of Directors to issue new Ordinary Shares exceeds the limits of the Company&#8217;s authorized share capital, the Board of
Directors must then convene the shareholders to an extraordinary general meeting to be held in front of a Luxembourg notary for the purpose
of increasing the issued share capital. Such meeting will be subject to the quorum and majority requirements required for amending the
amended and restated articles of association, it being understood that the amended and restated articles of association may be amended
by a majority of at least two thirds (2/3) of the votes validly cast at such general meeting at which a quorum of more than half (1/2)
of the Company&#8217;s share capital is present or represented. If no quorum is reached in a meeting, a second meeting may be convened
in accordance with the provisions of Luxembourg law and the amended and restated articles of association of the Company, which may deliberate
regardless of the quorum and at which resolutions are adopted at a majority of at least two thirds (2/3) of the votes validly cast. Abstentions
and nil votes shall not be taken into account. If the capital call proposed by the Board of Directors consists of an increase in the shareholders&#8217;
commitments, the Board of Directors must convene the shareholders to an extraordinary general meeting to be held in front of a Luxembourg
notary for such purpose. Such meeting will be subject to the unanimous consent of the shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Preferential Subscription Rights</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Luxembourg law and in
accordance with the amended and restated articles of association of the Company, existing shareholders benefit from a preferential subscription
right on the issuance of new shares by the Company for cash consideration. However, since the adoption of the amended and restated articles
of association of the Company pursuant to the terms of the Business Combination, the Company&#8217;s shareholders authorized the Board
of Directors, within the limits of the Company&#8217;s authorized share capital and within a period of five years, to remove or limit
any preemptive subscription rights of shareholders in case of issue against payment in cash of Ordinary Shares, Redeemable B Shares, warrants
(which may be separate or attached to Ordinary Shares, bonds, notes or similar instruments), convertible bonds, notes or similar instruments
and the Company can limit or suppress, subject to the quorum and majority for the amendment of the articles of association. Such shares
may be issued above, at, or below market value, and, following a certain procedure, even below the accounting par value, if applicable
per share. New Company shares also may be issued by way of incorporation of available reserves, including share premium.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Share Repurchases</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company cannot subscribe
for its own Ordinary Shares. The Company may, however, repurchase issued Ordinary Shares or have another person acting in his, her or
its own name, but on behalf of the Company, repurchase issued Ordinary Shares, subject to the following conditions:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">prior
authorization by a simple majority vote at an ordinary general meeting of shareholders, which authorization sets forth:</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
terms and conditions of the proposed repurchase and in particular the maximum number of Ordinary Shares to be repurchased;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
duration of the period for which the authorization is given, which may not exceed five years; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in
the case of repurchase for consideration, the minimum and maximum consideration per share;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">redemptions,
including shares previously acquired by the Company and held by it in its portfolio and shares acquired by a person acting in his, her
or its own name, but on behalf of the Company, may not result in the net assets as shown in the annual accounts falling below the amount
of the subscribed capital, increased by the reserves which Luxembourg law or the articles of association do not permit to distribute;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">only
fully paid-up Ordinary Shares may be repurchased; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
offer to repurchase must be made on the same terms to all shareholders in the same situation except for repurchases which have been unanimously
decided by a general meeting at which all shareholders were present or represented; similarly, listed companies may purchase their own
Ordinary Shares on the stock exchange without an offer to acquire having to be made to its shareholders.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When the acquisition of the
Company&#8217;s own Ordinary Shares is necessary to avoid serious and imminent harm to the Company, the prior authorization by a simple
majority vote at an ordinary general meeting of shareholders described in paragraph (1) above shall not apply. In such a case, the Board
of Directors must inform the shareholders at the following general meeting of the reasons for, and purpose of, the redemption, the number
and nominal value, or failing that, such acquired Ordinary Share&#8217;s accounting par value, the fraction of the subscribed capital
such acquired Ordinary Shares represent, as well as the countervalue of such Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The prior authorization by
a simple majority vote at an ordinary general meeting of shareholders described in paragraph (1) above shall also not apply in the case
of Ordinary Shares acquired either by the Company itself or by a person acting in his, her or its own name, but on behalf of the Company,
for distribution to the employees of the Company or to the employees of an affiliate of Company due to a control relationship (i.e., its
subsidiaries or controlling shareholder) or in any of the circumstances listed in article 430-16 of the 1915 Law. The distribution of
such Ordinary Shares must be made within 12 months of the acquisition of those shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The authorization will be
valid for a period ending on the earlier of five years from the date of such shareholder authorization and the date of its renewal by
a subsequent general meeting of shareholders. Pursuant to such authorization, the Board of Directors is authorized to redeem all Ordinary
Shares under the conditions set forth in article 430-15 of the 1915 Law. Such purchases and sales may be carried out for any authorized
purpose or any purpose that is authorized by the laws and regulations in force. The purchase price per Ordinary Share to be determined
by the Board of Directors or its delegate shall represent not more than the fair market value of such Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Existing Share Repurchase Program </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the occasion of the annual
general meeting of shareholders of the Company held on June 28, 2022 (the &#8220;2022 AGM&#8221;), the shareholders of the Company authorized
the Board of Directors to acquire up to 10% of the total number of the Company&#8217;s Ordinary Shares in issue at the date of the 2022 AGM
within a period of 5 years as from the date of the 2022 AGM for a consideration which may not exceed an amount equal to 120% of the reference
price of the shares on the Nasdaq and not less than USD 0.01, the reference price being the weighted average price for the market value
for such Ordinary Shares for the 5 days of trading immediately preceding each date of repurchase.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Within the framework approved
at the 2022 AGM, the Board of Directors approved on February 13, 2023 a share repurchase program under Rule 10b-18 of the Exchange Act,
for the purchase of up to $5.0 million Ordinary Shares or 2,000,000 Ordinary Shares, whichever is less (the &#8220;Repurchase Program&#8221;).
The consideration for such repurchase(s) corresponds to the consideration approved by the 2022 AGM.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company may purchase Ordinary
Shares from time to time in the open market, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of
the Exchange Act, through privately negotiated transactions, or any other legally permissible method, at management&#8217;s discretion
based on market and operational conditions, share price, trading volume, legal requirements and other factors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Repurchase Program shall
be made in compliance with the parameters approved by the Company&#8217;s shareholders at the occasion of the 2022 AGM, the rules of the
SEC, and other applicable legal requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is not obligated
to purchase any Ordinary Shares under the Repurchase Program and the Repurchase Program may be suspended or terminated at any time at
management&#8217;s discretion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Voting rights</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Ordinary Share, Redeemable
A Share and Redeemable B Share entitles the holder thereof to one vote. Neither Luxembourg law nor the Company&#8217;s amended and restated
articles of association contain any restrictions as to the voting of Ordinary Shares, Redeemable A Shares and Redeemable B Shares by non-Luxembourg
residents. The voting rights of the Redeemable A Shares and Redeemable B Shares are currently suspended as they are held in treasury by
the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Meetings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Ordinary General Meeting</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the 1915
Law and the Company&#8217;s amended and restated articles of association, there is no quorum requirement at an ordinary general meeting
and resolutions are adopted by a simple majority of validly cast votes of the shareholders present or represented for a given duly convened
ordinary general meeting. Abstentions and nil votes are not taken into account.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Extraordinary General Meeting</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Extraordinary resolutions
are required for any of the following matters, among others: (i) an increase or decrease of the authorized or issued capital (except if
made by the Board of Directors under the authorized capital), (ii) a limitation or exclusion of preemptive rights (except if made by the
Board of Directors under the authorized capital), (iii) approval of a statutory merger or de-merger (<i>scission</i>), (iv) the Company&#8217;s
dissolution and liquidation, (v) any and all amendments to the Company&#8217;s amended and restated articles of association and (vi) change
of nationality. Pursuant to the 1915 Law and the Company&#8217;s amended and restated articles of association, for any resolutions to
be considered at an extraordinary general meeting of shareholders, the quorum shall be at least half (1/2) of the Company&#8217;s issued
share capital at a first duly convened meeting, unless otherwise mandatorily required by law. If the said quorum is not reached, a second
meeting may be convened, for which the 1915 Law and the Company&#8217;s amended and restated articles of association do not prescribe
a quorum. Any extraordinary resolution shall be adopted at a quorate general meeting, except otherwise provided by law, by at least a
two-thirds (2/3) majority of the votes validly cast at such meeting by shareholders. Abstentions and nil votes are not taken into account.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Annual Shareholders Meetings</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The annual general meeting
of shareholders must be held in the Grand Duchy of Luxembourg at the registered office of the Company within 6 months of the end of the
preceding financial year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Warrant Amendment,
Union assigned to the Company all of Union&#8217;s right, title and interest in the Warrant Agreement and the Company assumed, and agreed
to pay, perform, satisfy and discharge in full, as the same become due, all of Union&#8217;s liabilities and obligations under the Warrant
Agreement arising from and after the Merger Effective Time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Warrant is exercisable
for one Ordinary Share and only whole warrants are exercisable. The exercise price of the Warrants is $11.50 per share, subject to adjustment
as described in the Warrant Agreement. A Warrant may be exercised only during the period commencing on the date of the consummation of
the Business Combination, and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years
after the date the Business Combination was completed, (y) the redemption date as provided in Section 6.2 of the Warrant Agreement, or
(z) the liquidation of the Company. Redemptions of warrants for cash pursuant to the Warrant Agreement, once the Public Warrants become
exercisable, may be redeemed (i) in whole and not in part, (ii) at a price of $0.01 per warrant, (iii) upon not less than 30 days&#8217;
prior written notice of redemption to each warrant holder, and (iv) if, and only if, the reported last sale price of the Ordinary Shares
equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before sending the
notice of redemption to each warrant holder. If the Public Warrants are called for redemption for cash, management will have the option
to require all holders that wish to exercise the Public Warrants to do so on a &#8220;cashless basis,&#8221; as described in the Warrant
Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Private Placement Warrants
are identical to the Public Warrants, except that the Private Placement Warrants and the shares issuable upon the exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable
(except as mentioned above) so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be
redeemable and exercisable by such holders on the same basis as the Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividends</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From the annual net profits
of the Company, at least 5% shall each year be allocated to the Legal Reserve. That allocation to the Legal Reserve will cease to be mandatory
as soon and as long as the aggregate amount of the Legal Reserve amounts to 10% of the amount of the share capital of the Company. The
general meeting of shareholders shall resolve how the remainder of the annual net profits, after allocation to the Legal Reserve, will
be disposed of by allocating the whole or part of the remainder to a reserve or to a provision, by carrying it forward to the next following
financial year or by distributing it, together with carried forward profits, distributable reserves or share premium to the shareholders
in proportion to the number of ordinary shares they hold in the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board of Directors may
resolve that the Company pays out an interim dividend to the shareholders, subject to the conditions of article 461-3 of the 1915 Law
and the Company&#8217;s amended and restated articles of association. The Board of Directors shall set the amount and the date of payment
of the interim dividend.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any share premium, assimilated
premium or other distributable reserve may be freely distributed to the shareholders subject to the provisions of the 1915 Law and the
Company&#8217;s amended and restated articles of association. The dividend entitlement lapses upon the expiration of a five-year prescription
period from the date of the dividend distribution. The unclaimed dividends return to the Company&#8217;s accounts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. MATERIAL CONTRACTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With the exception of the
material agreements described in Item 7.B under the heading &#8220;Related Party Transactions-Agreements with Major Shareholders&#8221;
and those executed in connection with the Business Combination, explained elsewhere in this Annual Report, all contracts concluded by
us during the two years preceding the date of this Annual Report were entered into in the ordinary course of business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. EXCHANGE CONTROLS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>E. TAXATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a summary
of the material Luxembourg and U.S. federal income tax consequences of the ownership and disposition of our common shares by persons addressed
herein.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Potential investors in our
common shares should consult their own tax advisors concerning the specific Luxembourg and U.S. federal, state and local tax consequences
of the ownership and disposition of our common shares in light of their particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>LUXEMBOURG TAX CONSIDERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a general
description of certain Luxembourg tax considerations relating to the Company and the holders of Ordinary Shares and Warrants. It does
not purport to be a complete analysis of all tax considerations in relation to the Ordinary Shares and Warrants. Prospective purchasers
should consult their own tax advisers as to which countries&#8217; tax laws could be relevant to acquiring, holding and disposing of the
securities and the consequences of such actions under the tax laws of those countries. This overview is based upon the law as in effect
on the date of this Annual Report and is subject to any change in law that may take effect after such date, even with retroactive effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The summary below is intended
as an overview of certain tax consequences in relation to the Company and the purchase, ownership and disposition of Ordinary Shares and
Warrants under Luxembourg law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Please be aware that the residence
concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present
section to a tax, duty, levy impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only.
Also, please note that a reference to Luxembourg income tax generally encompasses corporate income tax (<i>imp&#244;t sur le revenu des
collectivit&#233;s</i>), municipal business tax (<i>imp&#244;t commercial communal</i>), a solidarity surcharge (<i>contribution au
fonds pour l&#8217;emploi</i>) as well as personal income tax (<i>imp&#244;t sur le revenu des personnes physiques</i>). Corporate taxpayers
may further be subject to net worth tax (<i>imp&#244;t sur la fortune</i>), as well as other duties, levies and taxes. Corporate income
tax, municipal business tax and the solidarity surcharge invariably apply to most corporate taxpayers&#8217; resident in Luxembourg for
tax purposes. Individual taxpayers are generally subject to personal income tax and solidarity surcharge. Under certain circumstances,
where individual taxpayers act in the course of the management of a professional or business undertaking, municipal business tax may apply
as well.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Taxation of the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is subject to
Luxembourg tax on its worldwide profits at the current combined ordinary rate of 24.94% for Luxembourg City, including the 17% corporate
income tax, a 6.75% municipal business tax (rate in the municipality of Luxembourg City in 2023) and a solidarity surcharge (together
the &#8220;Income Tax&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In principle, dividends and
capital gains realized by the Company are fully subject to Income Tax in Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, provided the conditions
of the Luxembourg participation exemption regime are met, dividends or capital gains realized by the Company upon the disposal of shares
are not taxable in Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Luxembourg net wealth tax
(&#8220;NWT&#8221;) will be due annually by the Company at the rate of 0.5% on its total net asset value below or equal to &#8364; 500
million. The tranche above &#8364; 500 million will be taxed at a rate of 0.05%. Net worth is referred to as the unitary value (<i>valeur
unitaire</i>), as determined at January 1 of each year. The unitary value is in principle calculated as the difference between (i) assets
estimated at their fair market value (<i>valeur estim&#233;e de r&#233;alisation</i>), and (ii) liabilities vis-&#224;-vis third
parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 125; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->112<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholdings qualifying for
the Luxembourg participation exemption regime are excluded from the NWT basis provided that, the Company holds a direct shareholding in
a qualifying subsidiary representing at least 10% of the qualifying subsidiary&#8217;s share capital or having an acquisition cost (including
both share capital and share premium) of at least &#8364; 1.2 million; there is no minimum holding period requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Companies for which the sum
of fixed financial assets (i.e., financial assets notably including shares and loans, transferable securities and cash) exceeds 90% of
their total balance sheet and &#8364; 350,000 are liable to a minimum annual NWT of &#8364; 4,815. Other companies are liable to a minimum
progressive tax (in an amount up to &#8364; 32,100), depending on the total assets on their balance sheet.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Withholding taxation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any dividend distributed by
the Company to its shareholders will in principle be subject to a 15% withholding tax unless an exemption or a reduced treaty rate applies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Luxembourg taxation of the holders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Luxembourg tax residence of the holders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders will not be deemed
to be resident, domiciled or carrying on business in Luxembourg solely by reason of holding, execution, performance, delivery, exchange
and/or enforcement of the Ordinary Shares or Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Luxembourg non-residents</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders who are non-residents
of Luxembourg and who do not have a permanent establishment, a permanent representative, or a fixed place of business in Luxembourg with
which the holding of the Ordinary Shares or Warrants is connected, are not liable to any Luxembourg income tax, whether they receive payments
upon redemption or repurchase of the Ordinary Shares or Warrants, or realize capital gains on the sale of any Ordinary Shares or Warrants,
unless they sell a participation of more than 10% in the Company within 6 months of its acquisition, or in case of a disposal of Ordinary
Shares or Warrants after 6 months or more, such holder had been a Grand Duchy of Luxembourg resident taxpayer for more than 15 years and
has become a non-Luxembourg taxpayer less than 5 years before the disposal of Ordinary Shares or Warrants occurs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Luxembourg residents</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders who are Luxembourg
resident individuals will generally be subject to income tax on income derived from the Ordinary Shares and Warrants. Capital gains realized
upon the disposal, sale or redemption of the Ordinary Shares and Warrants by individual resident holders acting in the course of the management
of their private wealth are in principle not subject to income tax (except if the gain has been realized within 6 months of the acquisition
of the Ordinary Shares or Warrants), to the extent they do not hold a participation of more than 10% in the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders who are Luxembourg
resident companies (<i>soci&#233;t&#233; de capitaux</i>) or foreign entities which have a permanent establishment or a permanent
representative in Luxembourg with which the holding of the Ordinary Shares or Warrants is connected, must include in their taxable income
any income (including dividend) and the difference between the sale or redemption price and the lower of the cost or book value of the
Ordinary Shares and Warrants sold or redeemed unless the conditions of the participation exemption regime are satisfied. Under Luxembourg
tax law it is debatable to what extent the Warrants are eligible for the participation exemption regime although certain case law supports
such argumentation in certain circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the conditions of the participation
exemption regime are not met, 50% of the dividends distributed by the Company to the Luxembourg resident company, or to the foreign holders
of Ordinary Shares having a permanent establishment or a permanent representative in Luxembourg with which the holding of the Ordinary
Shares is connected, should nevertheless be exempt from income tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 126; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->113<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A holder who is a Luxembourg
resident company benefiting from a special tax regime, such as (i) a specialized investment fund governed by the amended law of February
13, 2007, (ii) a family wealth management company governed by the amended law of May 11, 2007, (iii) an undertaking for collective investment
governed by the amended law of December 17, 2010 or (iv) a reserved alternative investment fund treated as a specialized investment fund
for Luxembourg tax purposes governed by the amended law of July 23, 2016 is exempt from income tax in Luxembourg and profits derived from
the Ordinary Shares and Warrants are thus not subject to Luxembourg income tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Wealth Tax</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A Luxembourg resident as well
as a non-resident who has a permanent establishment or a permanent representative in Luxembourg to which the Ordinary Shares or Warrants
are attributable, are subject to Luxembourg NWT on such Ordinary Shares or Warrants, except if the holder is (i) a resident or non-resident
individual taxpayer, (ii) a securitization company governed by the amended law of March 22, 2004 on securitization, (iii) a company governed
by the amended law of June 15, 2004 on venture capital vehicles, (iv) a professional pension institution governed by the amended law dated
July 13, 2005, (v) a specialized investment fund governed by the amended law of February 13, 2007, (vi) a family wealth management company
governed by the law of May 11, 2007, (vii) an undertaking for collective investment governed by the amended law of December 17, 2010 or
(viii) a reserved alternative investment fund governed by the amended law of July 23, 2016.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, (i) a securitization
company governed by the amended law of March 22, 2004 on securitization, (ii) a company governed by the amended law of June 15, 2004 on
venture capital vehicles, (iii) a professional pension institution governed by the amended law dated July 13, 2005 and (iv) an opaque
reserved alternative investment fund treated as a venture capital vehicle governed by the amended law of July 23, 2016 remain subject
to minimum NWT.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The minimum NWT tax is levied
on companies having their statutory seat or central administration in Luxembourg. For entities for which the sum of fixed financial assets,
receivables against related companies, transferable securities and cash at bank exceeds 90% of their total gross assets and &#8364; 350,000,
the minimum NWT is currently set at &#8364; 4,815. For all other companies having their statutory seat or central administration in Luxembourg
which do not fall within the scope of the &#8364; 4,815 minimum NWT, the minimum NWT ranges from &#8364; 535 to &#8364; 32,100, depending
on the company&#8217;s total gross assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No stamp, value, issue, registration,
transfer or similar taxes or duties will be payable in Luxembourg by shareholders in connection with the issue of the Ordinary Shares
and Warrants, nor will any of these taxes be payable as a consequence of a subsequent transfer, exchange or redemption of the Ordinary
Shares or Warrants, unless the documents relating to the Ordinary Shares or Warrants are (i) voluntarily registered in Luxembourg or (ii)
appended to a document that requires obligatory registration in Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no Luxembourg value
added tax payable in respect of payments in consideration for the issuance of the Ordinary Shares or Warrants or in respect of the payment
under the Ordinary Shares or Warrants or the transfer of the Ordinary Shares or Warrants. Luxembourg value added tax may, however, be
payable in respect of fees charged for certain services rendered to the Company if, for Luxembourg value added tax purposes, such services
are rendered or are deemed to be rendered in Luxembourg and an exemption from Luxembourg value added tax does not apply with respect to
such services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No Luxembourg inheritance
tax is levied on the transfer of the Ordinary Shares or Warrants upon the death of a holder in cases where the deceased was not a resident
of Luxembourg for inheritance tax purposes. Where a holder is a resident of Luxembourg for tax purposes at the time of his death, the
Ordinary Shares and Warrants are included in such holder&#8217;s taxable estate for inheritance tax assessment purposes. No Luxembourg
gift tax will be levied on the transfer of Ordinary Shares or Warrants by way of gift unless the gift is registered in Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>U.S. FEDERAL INCOME TAX
CONSIDERATIONS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a discussion
of certain U.S. federal income tax considerations to U.S. holders (as defined below) relating to the acquisition, ownership and disposition
of the Ordinary Shares and Warrants as of the date hereof. The discussion below only applies to the Ordinary Share and Warrants held as
capital assets for U.S. federal income tax purposes and does not describe all of the tax consequences that may be relevant to holders
in light of their particular circumstances, including alternative minimum tax and Medicare contribution tax consequences, or holders who
are subject to special rules, such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">financial
institutions or financial services entities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">insurance
companies;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">government
agencies or instrumentalities thereof;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">regulated
investment companies and real estate investment trusts;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">expatriates
or former residents of the United States;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
that acquired the Ordinary Shares or Warrants pursuant to an exercise of employee share options, in connection with employee share incentive
plans or otherwise as compensation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">dealers
or traders subject to a mark-to-market method of tax accounting with respect to the Ordinary Shares or Warrants;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
holding the Ordinary Shares or Warrants as part of a &#8220;straddle,&#8221; constructive sale, hedging, integrated transactions or similar
transactions;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
holders whose functional currency is not the U.S. dollar;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">partnerships
or other pass-through entities for U.S. federal income tax purposes or investors in such entities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
person required to accelerate the recognition of any item of gross income with respect to the Ordinary Shares or Warrants as a result
of such income being recognized on an applicable financial statement;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
person actually or constructively owning 10% or more of the Ordinary Shares (by vote or value); or</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tax-exempt
entities.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This discussion does not consider
the tax treatment of entities that are partnerships or other pass-through entities for U.S. federal income tax purposes or persons who
hold the Ordinary Shares or Warrants through such entities. If a partnership or other pass-through entity for U.S. federal income tax
purposes is the beneficial owner of Ordinary Shares or Warrants, the U.S. federal income tax treatment of partners of the partnership
will generally depend on the status of the partners and the activities of the partner and the partnership.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This discussion is based on
the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury regulations all as of
the date hereof, changes to any of which subsequent to the date of this Annual Report may affect the tax consequences described in this
Annual Report. This discussion does not take into account potential suggested or proposed changes in such tax laws which may impact the
discussion below and does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes.
Each of the foregoing is subject to change, potentially with retroactive effect. Holders are urged to consult their tax advisors with
respect to the application of U.S. federal tax laws to their particular situation, as well as any tax consequences arising under the laws
of any state, local or non-U.S. jurisdiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For purposes of this discussion,
a U.S. holder means a beneficial owner of Ordinary Shares or Warrants that is, for U.S. federal income tax purposes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
individual who is a citizen or resident of the United States;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws
of the United States, any state thereof or the District of Columbia;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
estate whose income is subject to U.S. federal income tax regardless of its source; or</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
trust if (1) a U.S. court can exercise primary supervision over the trust&#8217;s administration and one or more U.S. persons are authorized
to control all substantial decisions of the trust; or (2) the trust has a valid election in effect under applicable Treasury Regulations
to be treated as a U.S. person.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">THIS DISCUSSION IS ONLY A
SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE ORDINARY SHARES AND WARRANTS.
EACH HOLDER OF ORDINARY SHARES OR WARRANTS IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH INVESTOR, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND
ANY APPLICABLE TAX TREATIES.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Distributions on Ordinary Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the discussion
below under &#8220;<i>&#8212;Passive Foreign Investment Company Rules</i>&#8221;, the gross amount of any distribution on Ordinary Shares
that is made out of the Company&#8217;s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes)
generally will be taxable to a U.S. holder as ordinary dividend income on the date such distribution is actually or constructively received.
Any such dividends generally will not be eligible for the dividends received deduction allowed to corporations in respect of dividends
received from other U.S. corporations. To the extent that the amount of the distribution exceeds the Company&#8217;s current and accumulated
earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a non-taxable
return of capital to the extent of the U.S. holder&#8217;s tax basis in its Ordinary Shares, and thereafter as capital gain recognized
on a sale or exchange. Because the Company may not determine its earnings and profits on the basis of U.S. federal income tax principles,
it is expected that distributions on Ordinary Shares will generally be reported to U.S. holders as dividends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Dividends paid by the Company
generally will be taxable to a non-corporate U.S. holder at the reduced rate normally applicable to long-term capital gains, provided
that the Company is considered a &#8220;qualified foreign corporation&#8221; and certain other requirements are met. A qualified foreign
corporation includes a foreign corporation that is eligible for the benefits of the income tax treaty between Luxembourg and the United
States (the &#8220;Treaty&#8221;). A foreign corporation is also treated as a &#8220;qualified foreign corporation&#8221; with respect
to dividends paid by that corporation on shares that are readily tradable on an established securities market in the United States. U.S.
Treasury Department guidance indicates that the Ordinary Shares, which are listed on the NASDAQ, will be readily tradable on an established
securities market in the United States. There can be no assurance, however, that Ordinary Shares will be considered readily tradable on
an established securities market in later years or that that the Company will be eligible for the benefits of the Treaty. A U.S. holder
will not be able to claim the reduced rate on dividends received from the Company if the Company is treated as a PFIC in the taxable year
in which the dividends are received or in the preceding taxable year. See &#8220;<i>&#8212;Passive Foreign Investment Company Rules</i>&#8221;
below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to certain conditions
and limitations, withholding taxes, if any, on dividends paid by the Company may be treated as foreign taxes eligible for credit against
a U.S. holder&#8217;s U.S. federal income tax liability under the U.S. foreign tax credit rules. However, as a result of recent changes
to the U.S. foreign tax credit rules, a withholding tax generally will need to satisfy certain additional requirements in order to be
considered a creditable tax for a U.S. holder. The Company has not determined whether these requirements have been met with respect to
any withholding tax that may be imposed on dividends paid by the Company and, accordingly, no assurance can be given that any such tax
will be creditable. For purposes of calculating the U.S. foreign tax credit, dividends paid on Ordinary Shares will generally be treated
as income from sources outside the United States and will generally constitute passive category income. The rules governing the U.S. foreign
tax credit are complex. U.S. holders should consult their tax advisors regarding the availability of the U.S. foreign tax credit under
particular circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sale, Exchange, Redemption or Other Taxable
Disposition of Ordinary Shares and Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the discussion
below under &#8220;<i>&#8212;Passive Foreign Investment Company Rules</i>,&#8221; a U.S. holder generally will recognize gain or loss
on any sale, exchange, redemption or other taxable disposition of Ordinary Shares or Warrants in an amount equal to the difference between
(i) the amount realized on the disposition and (ii) such U.S. holder&#8217;s adjusted tax basis in such shares and/or warrants. Any gain
or loss recognized by a U.S. holder on a taxable disposition of Ordinary Shares or Warrants generally will be capital gain or loss and
will be long-term capital gain or loss if the holder&#8217;s holding period in such shares and/or warrants exceeds one year at the time
of the disposition. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. holders (including individuals).
The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder on the sale or exchange of
Ordinary Shares or Warrants generally will be treated as U.S. source gain or loss. Therefore, a U.S. holder may have insufficient foreign
source income to utilize foreign tax credits attributable to any Luxembourg withholding tax imposed on a sale, exchange, redemption or
other taxable disposition. U.S. holders should consult their tax advisors as to the availability of and limitations on any foreign tax
credit attributable to Luxembourg withholding tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exercise or Lapse of a Warrant</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as discussed below
with respect to the cashless exercise of a Warrant, a U.S. holder generally will not recognize gain or loss upon the acquisition of an
Ordinary Share on the exercise of a Warrant for cash. A U.S. holder&#8217;s tax basis in a Ordinary Shares received upon exercise of the
Warrant generally should be an amount equal to the sum of the U.S. holder&#8217;s tax basis in the Warrant exchanged therefor and the
exercise price. The U.S. holder&#8217;s holding period for a Ordinary Share received upon exercise of the Warrant will begin on the date
following the date of exercise (or possibly the date of exercise) of the Warrant and will not include the period during which the U.S.
holder held the Warrant. If a Warrant is allowed to lapse unexercised, a U.S. holder generally will recognize a capital loss equal to
such holder&#8217;s tax basis in the Warrant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax consequences of a
cashless exercise of a Warrant are not clear under current tax law. A cashless exercise may be tax-deferred, either because the exercise
is not a gain realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either
tax-deferred situation, a U.S. holder&#8217;s basis in the Ordinary Shares received would equal the holder&#8217;s basis in the Warrants
exercised therefore. If the cashless exercise were treated as not being a gain realization event, a U.S. holder&#8217;s holding period
in the Ordinary Shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of
the Warrants. If the cashless exercise were treated as a recapitalization, the holding period of the Ordinary Shares would include the
holding period of the Warrants exercised therefore.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is also possible that a
cashless exercise of a Warrant could be treated in part as a taxable exchange in which gain or loss would be recognized. In such event,
a U.S. holder would recognize gain or loss with respect to the portion of the exercised Warrants treated as surrendered to pay the exercise
price of the Warrants (the &#8220;surrendered warrants&#8221;). The U.S. holder would recognize capital gain or loss with respect to the
surrendered warrants in an amount generally equal to the difference between (i) the fair market value of the Ordinary Shares that would
have been received with respect to the surrendered warrants in a regular exercise of the Warrants and (ii) the sum of the U.S. holder&#8217;s
tax basis in the surrendered warrants and the aggregate cash exercise price of such warrants (if they had been exercised in a regular
exercise). In this case, a U.S. holder&#8217;s tax basis in the Ordinary Shares received would equal the U.S. holder&#8217;s tax basis
in the Warrants exercised plus (or minus) the gain (or loss) recognized with respect to the surrendered warrants. A U.S. holder&#8217;s
holding period for the Ordinary Shares would commence on the date following the date of exercise (or possibly the date of exercise) of
the Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the absence of authority
on the U.S. federal income tax treatment of a cashless exercise of warrants, there can be no assurance which, if any, of the alternative
tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. holders should consult
their tax advisors regarding the tax consequences of a cashless exercise of Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Possible Constructive Distributions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The terms of each Warrant
provide for an adjustment to the number of Ordinary Shares for which the Warrant may be exercised or to the exercise price of the Warrant
in certain events. An adjustment which has the effect of preventing dilution generally is not taxable. A U.S. holder of a Warrant would,
however, be treated as receiving a constructive distribution from the Company if, for example, the adjustment increases the holder&#8217;s
proportionate interest in the Company&#8217;s assets or earnings and profits (e.g., through an increase in the number of Ordinary Shares
that would be obtained upon exercise of such warrant) as a result of a distribution of cash to the holders of the Ordinary Shares which
is taxable to the U.S. holders of such shares as described under &#8220;<i>&#8212;Distributions on Ordinary Shares</i>&#8221; above. Such
constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. holder of such warrant
received a cash distribution from the Company equal to the fair market value of such increased interest.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Passive Foreign Investment Company Rules</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A non-U.S. corporation, such
as the Company, will be PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules
with respect to the income and assets of its subsidiaries, either (i) 75% or more of the corporation&#8217;s gross income is passive income,
or (ii) 50% or more of the value of the corporation&#8217;s assets in any taxable year (generally based on the quarterly average of the
value of its assets during such year) is attributable to assets, including cash, that produce passive income or are held for the production
of passive income. Passive income generally includes dividends, interest, certain royalties and rents, annuities, net gains from the sale
or exchange of property producing such income and net foreign currency gains.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on the expected composition
of the Company&#8217;s gross assets (including unbooked goodwill as valued based on the market value of the Company&#8217;s equity) and
income and the manner in which the Company expects to operate its business in future years, the Company does not expect to be classified
as a PFIC for U.S. federal income tax purposes for the Company&#8217;s current taxable year or in the foreseeable future. Whether the
Company is a PFIC is a factual determination made annually, and the Company&#8217;s status could change depending, among other things,
upon changes in the composition and relative value of its gross receipts and assets, which may be determined by reference to the price
of Ordinary Shares (which could fluctuate significantly). Based on its current operations, the Company&#8217;s unbooked goodwill (which
it has valued based on the market value of its equity) may be attributable to the Company&#8217;s activities that generate active income
and may be treated as an active asset. Because the Company has valued its goodwill based on the market value of its equity, a decrease
in the price of Ordinary Shares may also result in the Company becoming a PFIC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Company were a PFIC
in any year during which a U.S. holder owns Ordinary Shares, subject to the discussion below regarding the mark-to-market or QEF elections,
a U.S. holder generally will be subject to special rules (regardless of whether the Company continues to be a PFIC) with respect to (i)
any &#8220;excess distribution&#8221; (generally, any distributions received by a U.S. holder on its Ordinary Shares in a taxable year
that are greater than 125% of the average annual distributions received by the U.S. holder in the three preceding taxable years or, if
shorter, the U.S. holder&#8217;s holding period for the Ordinary Shares) and (ii) any gain realized on the sale or other disposition of
Ordinary Shares. Under these rules (a) the excess distribution or gain will be allocated ratably over the U.S. holder&#8217;s holding
period, (b) the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which the Company
is a PFIC will be taxed as ordinary income, and (c) the amount allocated to each of the other taxable years will be subject to tax at
the highest rate of tax in effect for the applicable class of taxpayer for that year and an interest charge for the deemed deferral benefit
will be imposed with respect to the resulting tax attributable to each such other taxable year. The application of the PFIC rules to U.S.
holders of Warrants is unclear. Proposed Treasury Regulations issued under the PFIC rules generally treat an &#8220;option&#8221; (which
would include a Warrant) to acquire the stock of a PFIC as stock of the PFIC. Therefore, it is possible that the proposed Treasury Regulations
if finalized in their current form would apply to cause gain recognized on the disposition of Warrants to be subject to the excess distribution
regime discussed above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A U.S. holder may be able
to avoid some of the adverse impacts of the PFIC rules described above by electing to mark the Ordinary Shares to market annually. The
election is available only if the Ordinary Shares are considered &#8220;marketable stock,&#8221; which generally includes stock that is
regularly traded in more than de minimis quantities on a qualifying exchange. If a U.S. holder makes the mark-to-market election, any
gain from marking the Ordinary Shares to market or from disposing of them would be ordinary income. Any loss from marking the Ordinary
Shares to market would be recognized only to the extent of unreversed gains previously included in income. Loss from marking the Ordinary
Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark-to-market gains previously
included in income. It is expected that Ordinary Shares, which are listed on Nasdaq, will qualify as marketable shares for the PFIC rules
purposes. No assurance can be given that the Ordinary Shares will be traded in sufficient frequency and quantity to be considered &#8220;marketable
stock.&#8221; A valid mark-to-market election cannot be revoked without the consent of the IRS unless the Ordinary Shares cease to be
marketable stock. In addition, U.S. holders of Warrants will not be able to make a mark-to-market election with respect to their Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A U.S. holder would not be
able to avoid the tax consequences described above by electing to treat the Company as a QEF because the Company does not intend to provide
U.S. holders with the information that would be necessary to make a QEF election with respect to the Ordinary Shares. In any event, U.S.
holders of Warrants will not be able to make a QEF election with respect to their warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A U.S. holder that owns (or
is deemed to own) shares in a PFIC during any taxable year of the U.S. holder generally is required to file an IRS Form 8621 (whether
or not a QEF or mark-to-market election is or has been made) with such U.S. holder&#8217;s U.S. federal income tax return and provide
such other information as may be required by the U.S. Treasury Department. Failure to file IRS Form 8621 for each applicable taxable year
may result in substantial penalties and result in the U.S. holder&#8217;s taxable years being open to audit by the IRS until such Forms
are properly filed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">U.S. holders should consult
their own tax advisors concerning the Company&#8217;s possible PFIC status and the consequences to them, including potential reporting
requirements, if the Company were classified as a PFIC for any taxable year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Information Reporting and Backup Withholding</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Information reporting requirements
may apply to dividends received by U.S. holders of Ordinary Shares, and the proceeds received on the disposition of Ordinary Shares effected
within the United States (and, in certain cases, outside the United States), in each case other than U.S. holders that are exempt recipients
(such as corporations). Backup withholding may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification
number (generally on an IRS Form W-9 provided to the paying agent of the U.S. holder&#8217;s broker) or is otherwise subject to backup
withholding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Backup withholding is not
an additional tax. Amounts withheld as backup withholding may be credited against the U.S. holder&#8217;s U.S. federal income tax liability,
and a U.S. holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate
claim for a refund with the IRS and furnishing any required information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain U.S. holders are required
to report information with respect to Ordinary Shares and Warrants not held through an account with a domestic financial institution to
the IRS. U.S. holders that fail to report required information could become subject to substantial penalties. U.S. holders should consult
their tax advisors regarding these rules and any other reporting obligations that may apply to the ownership or disposition of Ordinary
Shares or Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>F. DIVIDENDS AND PAYING AGENTS.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>G. STATEMENT BY EXPERTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>H. DOCUMENTS ON DISPLAY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company makes its filings
in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company&#8217;s
filings are also available to the public through the Internet at Procaps&#8217; website at https://investor.procapsgroup.com/. Such filings
and other information on its website are not incorporated by reference in this Annual Report. Interested parties may request a copy of
this filing, and any other report, at no cost, by writing to the Company at the following address: Procaps Group, S.A. &#8211; 9 rue de
Bitbourg, L-1273, Luxembourg, Grand Duchy of Luxembourg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>1. SUBSIDIARY INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 11.</b></span><b> QUANTITATIVE
AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are exposed to cash flow
and earnings fluctuations as a result of certain market risks. These market risks primarily relate to changes in interest rates and foreign
exchange rate changes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Interest Rate Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Procaps is exposed to risks
in interest rates because it borrows money at both fixed and variable interest rates. Procaps manages this risk by constantly monitoring
the macroeconomic variables that determine the variation of the interest rates and to the extent possible, incurring an appropriate combination
between fixed rate and the variable rate loan financing. At the end of each reporting period a sensitivity analysis is performed for interest
rates determined for financial obligations at the Colombian Dep&#243;sitos Termino Fijo (Fixed Term Deposit Rate, or &#8220;DTF&#8221;),
the Colombian Indicador Bancario de Referencia (Indicative Benchmark Interest Rate, or &#8220;IBR&#8221;) and the London Inter-bank Offered
Rate (&#8220;LIBOR&#8221;) at the end of the reporting period, raising awareness of an increase or a decrease of 100 points, which represents
management&#8217;s assessment of the possible reasonable change in interest rates. For the years ended December 31, 2022, 2021 and 2020,
the impact of these potential interest rate variations was deemed to be immaterial to our financial results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Inflation Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our functional and reporting
currency is the U.S. dollar After a sustained period of relatively low inflation rates, the rates of inflation are above or near recent
historical highs in the United States as well as the other countries in which we operate. High rates of inflation may have a number of
adverse effects on our business. For example, we have experienced an increase in our cost of sales and operating expenses, primarily with
respect to sales, marketing and administrative expenses. For the fiscal year ended December 21, 2022, management has estimated that the
rise in inflation has had an adverse impact on our results of operations of approximately $9.0 million. Our suppliers may also be subject
to material adverse effects as a result of high rates of inflation, including as a result of the impact on their financial conditions,
changes in demand patterns, price volatility, and supply chain disruption. Any increase in the materials supplied to us by our suppliers
could continue to have an effect on our cost of sales. Furthermore, the Company cannot completely offset increased costs due to inflation
by increasing the prices of our products, because, among other things, any such increase would inherently lag behind such cost increases.
Increasing prices may also adversely impact customer demand for our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, we incur some
of our expenses in other currencies. As a result, we are exposed to the risk that the rate of inflation in countries in which we are active
other than the United States will exceed the rate of devaluation of such countries&#8217; currencies in relation to the dollar or that
the timing of any such devaluation will lag behind inflation in such countries. To date, we have been affected by the exchange rates of
other countries&#8217; currencies compared to the dollar, and we cannot assure you that we will not be adversely affected in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Foreign Currency Exchange Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the nature of our global
operations, we are exposed to cash flow and earnings fluctuations resulting from foreign exchange-rate variation. These exposures are
transactional and translational in nature. Since we manufacture and sell our products throughout the world, our foreign-currency risk
is diversified. Principal drivers of this diversified foreign-exchange exposure include the Colombia Peso, Brazilian Real, and the Peruvian
Soles. Approximately 45% of our revenue for the year ended December 31, 2022 was U.S. dollar denominated. Our transactional exposure arises
from the purchase and sale of goods and services in currencies other than the functional currency of our operational units. The financial
statements of our operations outside of the United States are measured using the local currency as the functional currency. Adjustments
to translate the assets and liabilities of these foreign operations in Colombian Pesos, Brazilian Reais and the Peruvian Soles are accumulated
as a component of other comprehensive income/(loss) utilizing period-end exchange rates. Foreign-currency transaction gains and losses
calculated by utilizing weighted average exchange rates for the period are included in the statements of operations in other (income)/expense,
net.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 12.</b></span><b> DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. DEBT SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. WARRANTS AND RIGHTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Warrant Amendment,
Union assigned to the Company all of Union&#8217;s right, title and interest in the Warrant Agreement and the Company assumed, and agreed
to pay, perform, satisfy and discharge in full, as the same become due, all of Union&#8217;s liabilities and obligations under the Warrant
Agreement arising from and after the Merger Effective Time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Warrant is exercisable
for one Ordinary Share and only whole warrants are exercisable. The exercise price of the Warrants is $11.50 per share, subject to adjustment
as described in the Warrant Agreement. A Warrant may be exercised only during the period commencing on the date of the consummation of
the Business Combination, and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years
after the date the Business Combination was completed, (y) the redemption date as provided in Section 6.2 of the Warrant Agreement, or
(z) the liquidation of the Company. Redemptions of warrants for cash pursuant to the Warrant Agreement, once the Public Warrants become
exercisable, may be redeemed (i) in whole and not in part, (ii) at a price of $0.01 per warrant, (iii) upon not less than 30 days&#8217;
prior written notice of redemption to each warrant holder, and (iv) if, and only if, the reported last sale price of the Ordinary Shares
equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before sending the
notice of redemption to each warrant holder. If the Public Warrants are called for redemption for cash, management will have the option
to require all holders that wish to exercise the Public Warrants to do so on a &#8220;cashless basis,&#8221; as described in the Warrant
Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Private Placement Warrants
are identical to the Public Warrants, except that the Private Placement Warrants and the shares issuable upon the exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable
(except as mentioned above) so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be
redeemable and exercisable by such holders on the same basis as the Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. OTHER SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. AMERICAN DEPOSITARY SHARES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 13.</b></span><b> DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 14.</b></span><b> MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 15.</b></span><b> CONTROLS
AND PROCEDURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. DISCLOSURE CONTROLS AND PROCEDURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management, under the
supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations
promulgated thereunder) as of the end of the fiscal year covered by this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on such evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures
were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange
Act were included.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Notwithstanding the conclusion
by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures were not effective as of December
31, 2022, and notwithstanding the material weaknesses in our internal control over financial reporting described below, our Chief Executive
Officer and Chief Financial Officer believe that the consolidated financial statements and related financial information included in this
Annual Report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented,
and for the periods ended on such dates, in conformity with IFRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. MANAGEMENT&#8217;S ANNUAL ASSESSMENT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management is responsible
for establishing and maintaining adequate internal control over financial reporting for Procaps as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of Procaps&#8217; internal control
over financial reporting based on the framework in Internal Control &#8211; Integrated Framework 2013 issued by the Committee of Sponsoring
Organizations of the Treadway Commission (&#8220;COSO 2013&#8221;). Based on its evaluation, our management concluded that Procaps&#8217;
internal control over financial reporting was not effective as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Material Weaknesses in Internal Control Over
Financial Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely
basis.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 135; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt"><span style="background-color: white">The
material weaknesses previously disclosed in our annual report for the fiscal year ended December 31, 2021 remain unremediated as of December
31, 2022. These material weaknesses relate to (i) our manual consolidation process which lacks the appropriate internal controls to prevent
or detect material misstatements in a timely manner and to ensure that financial data recorded was complete and accurate, (ii) our information
technology controls not being sufficiently designed and implemented to address certain information technology risks, (iii) the sufficiency
of technical accounting resources with an appropriate level of technical experience required for timely and accurate financial reporting
in accordance with IFRS, (iv) lack of system controls and effective processes to ensure that all manual journal entries are properly reviewed
and approved prior to posting to the general ledger, and (v) our controls and monitoring activities not being effective to ascertain whether
the components of our internal control are present and functioning.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on the material weaknesses
identified above, the Company did not fully implement components of the COSO framework, including elements of the control environment,
risk assessment, control activities, information and communication, and monitoring activities components.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white"><b>Remediation
Efforts</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During fiscal year 2022, the
Company began developing and implementing a remediation plan to address the material weaknesses identified. <span style="background-color: white">Management
believes it identified the root causes that gave rise to the material weaknesses, defined remediation actions, and designed new controls
for the internal control over financial reporting process. </span>Management&#8217;s remediation efforts <span style="background-color: white">include
the following:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; background-color: white">Implementing
company-wide policies to transition from local GAAP to IFRS consistently across the organization.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Developed
a detailed implementation and deployment plan for the Business Planning and Consolidation tool (&#8220;BPC&#8221;), which includes improving
existing controls and adjusting policies and procedures related to the manual consolidation process.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; background-color: white">Migrating
the organization to one instance of enterprise resource planning software (&#8220;SAP&#8221;) to provide a stronger internal control
infrastructure for financial reporting, internal control and improved segregation of duties.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; background-color: white">Strengthened
the structure of its IT department by hiring an internal control expert and adjusted IT department policies, procedures, and controls.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; background-color: white">Continuing
to hire qualified tax, technical accounting and financial reporting personnel to implement and perform control activities. Additionally,
the current structure of the accounting team at the subsidiaries is being reviewed to strengthen the team&#8217;s skills, experience, and operational
capacity.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Engaging
consultants to provide technical expertise.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Implementing
effective review and approval of manual journal entries recorded in SAP.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Continuing
to refine our approach to testing and communicating the results of the operating effectiveness of certain controls over financial reporting.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Engaging
third-party specialists to help assess and commence documentation of our internal controls to address the components of the COSO framework.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Implementing
entity-level controls to address components of the COSO framework for the control environment, risk assessment, control activities, information
and communication, and monitoring activities components.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As we continue to evaluate
and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine that additional measures or
time are required to address the control deficiencies or that we need to modify or otherwise adjust the remediation measures described
above. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluation of our internal control
over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Annual Report does not
include an attestation report of the Company&#8217;s independent registered public accounting firm because we qualify as an emerging growth
company as such term is defined in the JOBS ACT and as such, we are exempted from such attestation requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except for the remediation
procedures implemented by the Company as described above, there have not been any changes in our internal control over financial reporting
during the year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 16. RESERVED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16A.</b></span><b>
AUDIT COMMITTEE FINANCIAL EXPERT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">See Item 6.C above under the heading &#8220;<i>Board
Practices&#8212;Board Committees&#8212;Audit Committee</i>&#8221; of this Annual Report. Each member of our audit committee is financially
literate and our Board of Directors has determined that Mr. David Yanovich qualifies as an &#8220;audit committee financial expert&#8221;
as defined in applicable SEC rules.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16B.</b></span><b>
CODE OF ETHICS</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors adopted a Code of Ethics
applicable to our directors, executive officers and team members that complies with the rules and regulations of Nasdaq and the SEC. The
Code of Ethics is available on the Company&#8217;s website. In addition, the Company has posted on the Corporate Governance section of
its website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision
of the Code of Ethics. The reference to the Company&#8217;s website address in this Annual <span style="text-decoration:underline">Report</span> does not include or incorporate
by reference the information on the Company&#8217;s website into this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16C.</b></span><b>
PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Fees Billed by the Company&#8217;s
Principal Accountant</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, <ix:nonNumeric contextRef="c0" name="dei:AuditorName">Deloitte &amp; Touche
S.A.S</ix:nonNumeric>. served as the principal external auditor for the Company. Fees billed by the principal accountant in 2022 and 2021 are detailed
below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the Year Ended <br/> December 31</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Audit fees</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">2,585</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">4,724</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">130</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">2,715</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">4,724</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Audit Fees</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Audit fees were paid for professional
services rendered by the auditors for the audit of the consolidated financial statements of the Company and the statutory financial statements
of the Company and its subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Audit-Related Fees</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Audit-related fees are typically
services that are reasonably related to the performance of the audit or review of the consolidated financial statements and are not reported
under the audit fee item above. This item includes fees for attestation services on financial information of the Company and its subsidiaries
included in their annual reports that are filed with their respective regulators.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->124<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Tax Fees</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Tax fees were paid for tax
compliance and tax advice professional services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>All other fees</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">All other fees were paid for specific
minor professional services not related to the above categories.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><i>Audit Committee&#8217;s Pre-approval
Policies and Procedures</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s audit
committee is responsible for, among other things, the oversight of the Company&#8217;s independent auditors. The audit committee has adopted
a policy of pre-approval of audit and permissible non-audit services provided by its independent auditors in its charter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the policy, the audit
committee makes its recommendations through the Board of Directors to the shareholders&#8217; meeting concerning the continuing appointment
or termination of the Company&#8217;s independent auditors. On a yearly basis, the audit committee reviews together with management and
the independent auditor, the audit plan, audit related services and other non-audit services and approves the related fees. Any changes
to the approved fees must be reviewed and approved by the audit committee. In addition, the audit committee delegated to its Chairman
the authority to consider and approve, on behalf of the Audit Committee, additional non-audit services that were not recognized at the
time of engagement, which must be reported to the other members of the audit committee at its next meeting. No services outside the scope
of the audit committee&#8217;s approval can be undertaken by the independent auditor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee has authorized
all auditing and non-auditing services provided by our independent accountants during the year ended December 31, 2022 and the fees paid
for such services</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16D.</b></span><b>
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16E.</b></span><b>
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16F.</b></span><b>
CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16G.</b></span><b>
CORPORATE GOVERNANCE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our corporate governance practices
are governed by Luxembourg Companies Law and our amended and restated articles of association. As a foreign private issuer listed on the
Nasdaq Global Market, the Company is permitted to follow certain Luxembourg corporate governance practices in lieu of certain listing
rules of Nasdaq (the &#8220;Nasdaq Listing Rules&#8221;). The Company complies with the corporate governance requirements of the Nasdaq
Listing Rules, except that it intends to follow Luxembourg practice with respect to quorum requirements for shareholder meetings in lieu
of the requirement under Nasdaq Listing Rules that the quorum be not less than 33 1/3% of the outstanding voting shares. Under the Company&#8217;s
amended and restated articles of association, at an ordinary general meeting, there is no quorum requirement and resolutions are adopted
by a simple majority of validly cast votes. In addition, under the Company&#8217;s amended and restated articles of association, for any
resolutions to be considered at an extraordinary general meeting of shareholders, the quorum shall be at least one half of our issued
share capital unless otherwise mandatorily required by law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->125<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For purposes of the Nasdaq
Listing Rules, the Company is a &#8220;controlled company.&#8221; Under Nasdaq Listing Rules, controlled companies are companies of which
more than 50% of the voting power for the election of directors is held by an individual, a group, or another company. The Minski Family
owns 59.6% of the outstanding Ordinary Shares. Accordingly, although the Company will be eligible to take advantage of certain exemptions
from certain Nasdaq corporate governance standards, it currently does not intend to do so except for the quorum requirement discussed
above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 16H.</b></span><b>
MINE SAFETY DISCLOSURE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_032"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_033"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 17.</b></span><b> FINANCIAL
STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has responded
to Item 18 in lieu of responding to this item.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_034"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 18.</b></span><b> FINANCIAL
STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>(1) <span style="text-decoration:underline">Financial Statements</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Procaps Group S.A. and subsidiaries (The Group)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Consolidated Financial Statements for the years ended December
31, 2022, 2021 and 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="background-color: rgb(204,238,255)"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top; width: 90%"><a href="#f_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Report of Independent Registered Public Accounting Firm &#8211; PCAOB &#8211; ID <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">1183</ix:nonNumeric></span></a></td> <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; width: 9%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2</span></td></tr> <tr style="background-color: White"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statement of Profit or Loss and Other Comprehensive Income for the years ended December 31, 2022, 2021 and 2020 </span></a></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statement of Financial Position as of December 31, 2022 and 2021 and 2020 and as of January 1, 2021</span></a></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-5</span></td></tr> <tr style="background-color: White"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statement of Changes in Equity as of December 31, 2022 and 2021</span></a></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statement of Cash Flows for the years ended December 31, 2022, 2021 and 2020</span></a></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7</span></td></tr> <tr style="background-color: White"> <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes to Consolidated Financial Statements for the years ended December 31, 2022, 2021 and 2020</span></a></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-8</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 139; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->126<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_035"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>ITEM 19.</b></span><b> EXHIBITS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>(b) List of Exhibits</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following exhibits are
filed or incorporated by reference as part of this Annual Report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 9%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Exhibit<br/>
Number </b></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; width: 90%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Description </b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex1-1_procaps.htm">Amended and Restated Articles of Association of Procaps Group, S.A., dated as of September 28, 2021 (incorporated by reference to Exhibit 1.1 to Procaps Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863362/000121390021033263/ff42021ex4-4_procapsgroup.htm">Specimen Warrant Certificate of Procaps Group, S.A. (incorporated by reference to Exhibit A of Exhibit 4.4 to Procaps Group, S.A.&#8217;s Registration Statement on Form F-4/A filed August 17, 2021 (file no. 333-257222)).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.2</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1766146/000121390019020703/f8k1019ex4-1_unionacq2.htm">Warrant Agreement, dated October 17, 2019, by and between Union Acquisition Corp. II and Continental Stock Transfer &amp; Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 to Union Acquisition Corp. II&#8217;s Form 8-K, File No. 001-39089, filed with the SEC on October 21, 2019).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.3</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex2-5_procaps.htm">Assignment,
    Assumption and Amendment Agreement with respect to the Warrant Agreement between Union Acquisition Corp. II, Procaps Group, S.A. and
    Continental Stock Transfer &amp; Trust Company, dated as of September 29, 2021 (incorporated by reference to Exhibit 2.5 to Procaps
    Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.4</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022022855/f20f2021ex2-5_procapsgroup.htm" style="-sec-extract: exhibit"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Description of Securities (incorporated by reference to Exhibit 2.5 to Procaps Group, S.A.&#8217;s Amendment No. 1 to Form 20-F, filed with the SEC on May 19, 2022)</span>.</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.1#</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1766146/000121390021019812/ea138847ex2-1_unionacq2.htm">Business Combination Agreement, dated as of March 31, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A. and OZLEM Limited (incorporated by reference to Exhibit 2.1 to Union Acquisition Corp. II&#8217;s Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.2#</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex4-2_procaps.htm">Amendment No. 1 to Business Combination Agreement, dated as of September 29, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A. and OZLEM Limited (incorporated by reference to Exhibit 4.2 to Procaps Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.3</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1766146/000121390021019812/ea138847ex10-1_unionacq2.htm">Form of Contribution and Exchange Agreement (incorporated by reference to Exhibit 10.1 to Union Acquisition Corp. II&#8217;s Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.4</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1766146/000121390021019812/ea138847ex10-2_unionacq2.htm">Form of Subscription Agreement (incorporated by reference to Exhibit 10.2 to Union Acquisition Corp. II&#8217;s Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.5</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1766146/000121390021019812/ea138847ex10-3_unionacq2.htm">Transaction Support Agreement, dated as of March 31, 2021 by and between Crynssen Pharma Group Limited, Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC, Union Acquisition Corp. II and investors in Union Acquisition Corp. II and Crynssen Pharma Group Limited (incorporated by reference to Exhibit 10.3 to Union Acquisition Corp. II&#8217;s Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.6</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex4-7_procaps.htm">Registration Rights and Lock-Up Agreement, dated September 29, 2021, by and between Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC and the persons and entities listed on Exhibit A thereto (incorporated by reference to Exhibit 4.7 to Procaps Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.7</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex4-8_procaps.htm">Nomination Agreement, dated September 29, 2021, by and between Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC, and the persons and entities listed on Exhibit A thereto (incorporated by reference to Exhibit 4.8 to Procaps Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.8</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390021050707/ea148099ex4-9_procaps.htm">Share Forfeiture Agreement, dated as of September 29, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A., Union Acquisition Associates II, LLC and Union Group International Holdings Limited (incorporated by reference to Exhibit 4.9 to Procaps Group, S.A.&#8217;s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).</a></span></td></tr>
</table><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify; width: 9%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.9*</span></td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="text-align: justify; width: 90%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex4-9_procapsgroup.htm">Credit Agreement (<i>English Translation</i>), dated November 20, 2018, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.</a> </span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.10*</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex4-10_procapsgroup.htm">Amendment No. 1 to Credit Agreement (<i>English Translation</i>), dated December 12, 2018, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.11*</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex4-11_procapsgroup.htm">Amendment No. 2 to Credit Agreement (<i>English Translation</i>), dated June 15, 2020, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.12#</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022069389/ea168037ex4-1_procaps.htm">Note Purchase and Guarantee Agreement, dated November 5, 2021 by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life &amp; Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.1 to Procaps Group, S.A.&#8217;s Form 6-K filed with the SEC on November 4, 2022).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.13</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022069389/ea168037ex4-2_procaps.htm">First Amendment to Note Purchase and Guarantee Agreement, dated as of January 12, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life &amp; Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.2 to Procaps Group, S.A.&#8217;s Form 6-K filed with the SEC on November 4, 2022).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.14</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022069389/ea168037ex4-3_procaps.htm">Second Amendment to Note Purchase and Guarantee Agreement, dated as of February 28, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life &amp; Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.3 to Procaps Group, S.A.&#8217;s Form 6-K filed with the SEC on November 4, 2022).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.15</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022069389/ea168037ex4-4_procaps.htm">Waiver and Third Amendment to Note Purchase and Guarantee Agreement, dated as of November 1, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life &amp; Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.4 to Procaps Group, S.A.&#8217;s Form 6-K filed with the SEC on November 4, 2022).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.16</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1863362/000121390022069389/ea168037ex10-1_procaps.htm">Credit Agreement entered into as of October 11, 2022, by and among Procaps Group, S.A., each guarantor from time to time party thereto, each lender from time to time party thereto, The Bank of New York Mellon, as administrative agent and collateral agent for the lenders, and BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as the joint lead arrangers and bookrunners. (incorporated by reference to Exhibit 10.1 to Procaps Group, S.A.&#8217;s Form 6-K filed with the SEC on November 4, 2022).</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.17*</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex4-17_procapsgroup.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Syndicated Loan Waiver Agreement (<i>English Translation)</i>, dated May 2, 2023, by and among, Procaps S.A., the subsidiary co-obligors and guarantors named therein, the lenders named therein and Fiduciaria Bancolombia S.A., as administrative agent</span></a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.18*</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex4-18_procapsgroup.htm">NPA Waiver Agreement, dated March 31, 2023, by and among, the Company, Procaps S.A., the subsidiary guarantors named therein and the Noteholders.</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1*</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex8-1_procapsgroup.htm">List of Subsidiaries.</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.1*</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><a href="f20f2022ex12-1_procapsgroup.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certification of Ruben Minski, Chief Executive Officer of Procaps, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.2*</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><a href="f20f2022ex12-2_procapsgroup.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certification of Patricio Vargas Mu&#241;oz, Chief Financial Officer of Procaps, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.1**</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><a href="f20f2022ex13-1_procapsgroup.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certification of Ruben Minski, Chief Executive Officer of Procaps, pursuant to Section 906 of the Sarbanes Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.2**</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><a href="f20f2022ex13-2_procapsgroup.htm"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certification of Patricio Vargas Mu&#241;oz, Chief Financial Officer of Procaps, pursuant to Section 906 of the Sarbanes Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.INS</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Instance Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.SCH</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension Schema Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.CAL</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension Calculation Linkbase Document</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.DEF</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension Definition Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.LAB</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension Label Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.PRE</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension Presentation Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">104</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed
herewith.</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">**</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furnished
herewith.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain schedules, annexes and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but will be furnished supplementally to the SEC upon request.</span></td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><!-- Field: Page; Sequence: 141; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->128<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_036"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>SIGNATURES</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The registrant hereby certifies
that it meets all of the requirements for filing Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual
Report on its behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PROCAPS GROUP S.A.</b></span></td></tr>
  <tr style="vertical-align: top">
    <td style="width: 60%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 35%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</span></td>
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  <tr style="vertical-align: top">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:&#160; </span></td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dated: May 12, 2023</span></td>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 142; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->129<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><i>Procaps Group, S.A.
and subsidiaries (The Group)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><i>Consolidated Financial
Statements for the years ended December 31, 2022, 2021 and 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 1; Options: NewSection --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the shareholders and the Board of Directors of Procaps Group, S.A.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Opinion on the Financial Statements </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have audited the accompanying consolidated statements of financial
position of Procaps Group, S.A. and subsidiaries (the &#8220;Company&#8221;) as of December 31, 2022 and 2021 and the related consolidated
statements of profit or loss and other comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2022, and the related notes (collectively referred to as the &#8220;financial statements&#8221;). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Going Concern</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2.1 to the financial statements, at December 31, 2022, the Company
was not in compliance with covenants related to certain of its loan agreements and does not have sufficient capital to repay such loans
if such loans are called by the lenders in the event of future covenant breaches. This matter raises substantial doubt about its ability
to continue as a going concern. Management&#8217;s plans in regard to these matters are also described in Note 2.1. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Basis for Opinion</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These financial statements are the responsibility of the Company&#8217;s
management. Our responsibility is to express an opinion on the Company&#8217;s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s internal control
over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ Deloitte &amp; Touche S.A.S.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Barranquilla, Colombia</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">May 12, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have served as the Company&#8217;s auditor since 2013.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="text-align: right; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><img alt="" src="image_003.jpg"/>&#160;</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
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</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Procaps Group, S.A. and
subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Consolidated Statement
of Profit or Loss and Other Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>For the years ended December
31, 2022, 2021 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>(In thousands of United
States Dollars, unless otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 11%; text-align: center">7</td><td style="width: 1%; font-weight: bold">&#160;</td>
    <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 9%; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Revenue" scale="3" unitRef="usd">409,920</ix:nonFraction></td><td style="width: 1%; font-weight: bold; text-align: left">&#160;</td><td style="width: 1%; font-weight: bold">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these Consolidated Financial Statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 3 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Procaps Group, S.A. and
subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Consolidated Statement
of Profit or Loss and Other Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>For the years ended December
31, 2022, 2021 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>(In thousands of United
States Dollars, unless otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Notes</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Owners of the Company</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these Consolidated Financial Statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 4 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="f_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statement of Financial Position</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>As of December 31, 2022 and 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td>&#160;</td><td>&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Goodwill</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Intangible assets, net</td><td>&#160;</td>
    <td style="text-align: center">13</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Investments in joint ventures</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other financial assets</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherNoncurrentFinancialAssets" scale="3" unitRef="usd">210</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Deferred tax assets, net</td><td>&#160;</td>
    <td style="text-align: center">20</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Other assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherNoncurrentAssets" scale="3" unitRef="usd">3,078</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total non-current assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Current assets</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Cash</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CashAndCashEquivalents" scale="3" unitRef="usd">43,003</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Trade and other receivables, net</td><td>&#160;</td>
    <td style="text-align: center">18</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherCurrentReceivables" scale="3" unitRef="usd">129,602</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Inventories, net</td><td>&#160;</td>
    <td style="text-align: center">17</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Amounts owed by related parties, net</td><td>&#160;</td>
    <td style="text-align: center">29</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Current tax assets, net</td><td>&#160;</td>
    <td style="text-align: center">11</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentTaxAssets" scale="3" unitRef="usd">21,187</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Other current assets, net</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">26.1</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherCurrentAssets" scale="3" unitRef="usd">4,344</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherCurrentAssets" scale="3" unitRef="usd">5,839</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total current assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentAssets" scale="3" unitRef="usd">297,443</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Assets" scale="3" unitRef="usd">460,187</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Liabilities and Shareholders&#8217; Equity (Deficit)</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Equity (Deficit)</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Share capital</td><td>&#160;</td>
    <td style="text-align: center">23</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IssuedCapital" scale="3" unitRef="usd">1,011</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IssuedCapital" scale="3" unitRef="usd">1,011</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Share premium</td><td>&#160;</td>
    <td style="text-align: center">23</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:SharePremium" scale="3" unitRef="usd">377,677</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:SharePremium" scale="3" unitRef="usd">377,677</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Reserves</td><td>&#160;</td>
    <td style="text-align: center">23</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherReserves" scale="3" unitRef="usd">45,743</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherReserves" scale="3" unitRef="usd">42,749</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accumulated deficit</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RetainedEarnings" scale="3" sign="-" unitRef="usd">391,513</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RetainedEarnings" scale="3" sign="-" unitRef="usd">431,059</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Accumulated other comprehensive loss</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AccumulatedOtherComprehensiveIncome" scale="3" sign="-" unitRef="usd">33,859</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AccumulatedOtherComprehensiveIncome" scale="3" sign="-" unitRef="usd">27,778</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Equity (deficit) attributable to owners of the Company</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:EquityAttributableToOwnersOfParent" scale="3" sign="-" unitRef="usd">941</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:EquityAttributableToOwnersOfParent" scale="3" sign="-" unitRef="usd">37,400</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these Consolidated Financial Statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 5 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="f_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statement of Changes in Equity</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>As of December 31, 2022, 2021 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Transfer to reserves</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-15">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-17">&#8212;</div></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-18">&#8212;</div></td><td style="font-weight: bold; text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-22">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-23">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Non-controlling interest</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-24">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-25">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-26">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-27">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-28">&#8212;</div></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; padding-bottom: 1.5pt">Other</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c21" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherComprehensiveIncomeThatWillBeReclassifiedToProfitOrLossNetOfTax" scale="3" sign="-" unitRef="usd">47</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherComprehensiveIncomeThatWillBeReclassifiedToProfitOrLossNetOfTax" scale="3" sign="-" unitRef="usd">47</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; padding-bottom: 1.5pt">Balance as of December 31, 2020</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c23" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Equity" scale="3" unitRef="usd">2,001</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c24" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Equity" scale="3" unitRef="usd">54,412</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c25" decimals="-3" format="ixt:num-dot-decimal" id="ix_2_fact" name="ifrs-full:Equity" scale="3" unitRef="usd">39,897</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c29" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Equity" scale="3" unitRef="usd">777</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 10pt">Loss for the year <sup>2</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-29">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-30">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-31">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c34" decimals="-3" format="ixt:num-dot-decimal" id="ix_9_fact" name="pgsa:ProfitlossForTheYear" scale="3" sign="-" unitRef="usd">100,863</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c35" decimals="-3" format="ixt:num-dot-decimal" id="ix_10_fact" name="pgsa:ProfitlossForTheYear" scale="3" sign="-" unitRef="usd">751</ix:nonFraction></td><td style="text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Capital restructuring of Crynssen Pharma Group Limited (at exchange ratio of 1:33.4448)</td><td>&#160;</td>
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-55">&#8212;</div></td><td style="font-weight: bold; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-56">&#8212;</div></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-57">&#8212;</div></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Subtotal - restructured</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Acquisition of Union Acquisition Corp. II</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-58">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughAcquisitionOfSubsidiary" scale="3" unitRef="usd">174,940</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Shares held in escrow</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-62">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; padding-bottom: 1.5pt">Balance as of December 31, 2021</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Transfer to reserves</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-75">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-77">&#8212;</div></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-78">&#8212;</div></td><td style="font-weight: bold; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-79">&#8212;</div></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-80">&#8212;</div></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Other comprehensive (loss)/income for the year</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-81">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-82">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-83">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-84">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c51" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesEquity" scale="3" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Non-controlling interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-85">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-86">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-87">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-88">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c49" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ComprehensiveIncomeAttributableToNoncontrollingInterests" scale="3" unitRef="usd">3</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-89">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; padding-bottom: 1.5pt">Balance as of December 31, 2022</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US">Includes the appropriate values from net income to comply with legal provisions related to asset protection according to applicable jurisdictions with cumulative earnings.</ix:footnote></td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><sup>2</sup></td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US">Includes the OCI related to exchange difference from liquidated foreign transactions reclassified to Other Expenses, net for the year ended December 31, 2021.</ix:footnote></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these Consolidated Financial Statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 6 --><div>
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</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Procaps Group, S.A. and
subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Consolidated Statement
of Cash Flows</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>For the years ended December
31, 2022, 2021 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>(In thousands of United
States Dollars, unless otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Income tax expense</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-90">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Net (gain)/loss on sale of property, plant and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">14</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; padding-bottom: 1.5pt">Provisions</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-style: italic; text-align: left">Changes in working capital:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Trade and other receivables, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInTradeAndOtherReceivables" scale="3" sign="-" unitRef="usd">16,582</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Amounts owed by related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForDecreaseIncreaseInTradeAccountReceivableFromRelatedParties" scale="3" unitRef="usd">474</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForDecreaseIncreaseInTradeAccountReceivableFromRelatedParties" scale="3" sign="-" unitRef="usd">613</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Inventories, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInInventories" scale="3" sign="-" unitRef="usd">32,690</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInInventories" scale="3" sign="-" unitRef="usd">20,536</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInInventories" scale="3" sign="-" unitRef="usd">898</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Current tax assets, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForCurrentTaxAssets" scale="3" unitRef="usd">895</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForCurrentTaxAssets" scale="3" sign="-" unitRef="usd">5,308</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForCurrentTaxAssets" scale="3" sign="-" unitRef="usd">10,077</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Other current assets, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInOtherCurrentAssets" scale="3" unitRef="usd">1,500</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInOtherCurrentAssets" scale="3" sign="-" unitRef="usd">5,441</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInOtherCurrentAssets" scale="3" sign="-" unitRef="usd">9,635</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Trade and other payables</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForIncreaseDecreaseInTradeAndOtherPayables" scale="3" unitRef="usd">14,210</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForIncreaseDecreaseInTradeAndOtherPayables" scale="3" unitRef="usd">32,825</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForIncreaseDecreaseInTradeAndOtherPayables" scale="3" unitRef="usd">11,795</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Amounts owed to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForDecreaseIncreaseInAmountsOwedToRelatedParties" scale="3" unitRef="usd">1,998</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForDecreaseIncreaseInAmountsOwedToRelatedParties" scale="3" sign="-" unitRef="usd">3,448</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForDecreaseIncreaseInAmountsOwedToRelatedParties" scale="3" unitRef="usd">1,354</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Current tax liabilities, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForIncreaseDecreaseInCurrentTaxLiabilities" scale="3" unitRef="usd">6,643</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForIncreaseDecreaseInCurrentTaxLiabilities" scale="3" sign="-" unitRef="usd">2,103</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdjustmentsForIncreaseDecreaseInCurrentTaxLiabilities" scale="3" sign="-" unitRef="usd">7,499</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Investing activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Acquisition of property, plant and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">14</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; padding-left: 0.25in; text-indent: -0.125in; text-align: left">Proceeds from related parties</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ProceedsFromRelatedParties" scale="3" unitRef="usd">28</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ProceedsFromRelatedParties" scale="3" unitRef="usd">195</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Cash flow used in investing activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Payments on borrowings</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Interest paid on borrowings</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Payment of lease liabilities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in">Redeemed shares</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">23</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-109">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; padding-left: 0.25in; text-indent: -0.125in; text-align: left">Cash obtained in acquisition</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-110">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CashAndCashEquivalentsRecognisedAsOfAcquisition" scale="3" unitRef="usd">129,986</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-111">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Net (decrease) increase in cash</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Cash at beginning of the year</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CashAndCashEquivalents" scale="3" unitRef="usd">72,112</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:EffectOfExchangeRateChangesOnCashAndCashEquivalents" scale="3" sign="-" unitRef="usd">760</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US">For the year ended December 31, 2022, non-cash investing
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$5,696 (2021: $8,288, 2020: 7,311), and invoices from suppliers financed via reverse factoring classified as Borrowings $32,358 (2021:
$48,138 2020: 22,426). For the year ended December 31, 2021, it also included 50% purchase price of acquisition of Pharmaceutical Production
Facility $744, termination of the put option agreements in exchange for new equity instruments in Procaps Group, S.A. $(239,273) (Refer
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</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these Consolidated Financial Statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 7 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="f_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><div>

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(collectively, the &#8220;Group&#8221;) primarily engages in developing, producing and marketing pharmaceutical solutions. Further information
about the Group&#8217;s business activities, reportable segments and related party relationships of the Group is included in Note 7. Revenue,
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_3" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s principal subsidiaries as of December
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are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country
of incorporation or registration is also their principal place of business.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_5" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are no significant restrictions on the ability of the Group to
access or use assets and settle liabilities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_6" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Financial Statements of the Group
for the years ended December 31, 2022, 2021 and 2020 comprise the Group and its interest in joint ventures, investments and operations.
The Group prepares and publishes its Consolidated Financial Statements in United States Dollars (&#8220;USD&#8221;), and the numbers are
rounded to the thousands of USD unless otherwise stated. Foreign operations are included in accordance with the policies set out in Note
2.2. Functional and reporting currency.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_7" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Financial Statements were authorized
for issue by the Group&#8217;s Audit Committee on May 10, 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_8" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Reverse reorganization</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_9" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 31, 2021, Union Acquisition Corp. II,
a publicly-traded special purpose acquisition company previously listed on the NASDAQ under &#8220;LATNU&#8221; domiciled in the Cayman
Islands (&#8220;SPAC&#8221;), Crynssen Pharma Group Limited, a private limited liability company registered under the laws of Malta (&#8220;OpCo&#8221;),
Procaps Group, S.A. (&#8220;Holdco&#8221;) and OZLEM Limited, an exempted company incorporated under the laws of the Cayman Islands (&#8220;Merger
Sub&#8221;), entered into a Business Combination Agreement (the &#8220;Business Combination Agreement&#8221; or &#8220;BCA&#8221; or the
&#8220;Transaction&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_10" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Transaction was approved at an Extraordinary
General Meeting of LATNU&#8217;s shareholders on September 22, 2021 and subsequently consummated on September 29, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 8 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_11" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result of the consummation of the Transaction,
OpCo and SPAC had become direct wholly-owned subsidiaries of Holdco and the OpCo shareholders and SPAC shareholders became holders of
issued and outstanding Holdco Ordinary Shares: Procaps Group, S.A.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_12" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Emerging Growth Company Status</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_13" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Procaps Group, S.A. is an emerging growth company,
as defined in the Jumpstart Our Business Startups Act of 2012 (the &#8220;JOBS Act&#8221;). The Group will remain an emerging growth company
until the earliest of:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_14" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">The last day of the first fiscal year (a) following the fifth
anniversary of a public equity offering, (b) in which its annual gross revenue totals at least $<ix:nonFraction contextRef="c4" decimals="-6" format="ixt:num-dot-decimal" name="pgsa:AnnualGrossRevenue" scale="9" unitRef="usd">1.235</ix:nonFraction> billion or (c) when the Group is
deemed to be a large accelerated filer, which means the market value of the Group&#8217;s ordinary shares held by non-affiliates exceeds
$<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="pgsa:NonaffiliatesExceeds" scale="6" unitRef="usd">700.0</ix:nonFraction> million as of the prior June 30th; and</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_15" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The date on which the Group has issued more than $<ix:nonFraction contextRef="c4" decimals="-8" format="ixt:num-dot-decimal" name="pgsa:NonconvertibleDebtSecurities" scale="9" unitRef="usd">1.0</ix:nonFraction> billion in non-convertible debt securities during
the prior three-year period.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -9pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_16" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Grupo Somar and Pearl Mexico Acquisition</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_17" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 16, 2022, Procaps Group, S.A. entered into
a Stock Purchase Agreement (the &#8220;SPA&#8221;) with AI Global Investments PCC Limited (Netherlands), a protected cell company limited
by shares organized under the laws of the Island of Guernsey (&#8220;PCC&#8221;), acting for and on behalf of the Soar Cell, Triana Capital
S.A. de C.V., a corporation organized under the laws of Mexico (&#8220;Triana&#8221;), AI Pearl (Netherlands) B.V., a private limited
company (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands (&#8220;Pearl Holding Seller&#8221;),
Perrigo Ireland 7 DAC, a company duly organized and validly existing under the laws of the Republic of Ireland (&#8220;Pearl Ireland&#8221;,
and together with PCC, Triana and Pearl Holding Seller, each a &#8220;Seller&#8221; and collectively, the &#8220;Sellers&#8221;), AI Soar
(Netherlands) BV, a (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands (&#8220;Somar
Holding Company&#8221;), Qu&#237;mica y Farmacia S.A. de C.V., a Sociedad An&#243;nima de Capital Variable duly organized and validly
existing under the laws of Mexico (&#8220;Quifa&#8221;), PDM Acondifarma S.A. de C.V., a Sociedad An&#243;nima de Capital Variable duly
organized and validly existing under the laws of Mexico (&#8220;PDM&#8221;), Gelcaps Exportadora de M&#233;xico S.A. de C.V., a Sociedad
An&#243;nima de Capital Variable duly organized and validly existing under the laws of Mexico (&#8220;Gelcaps&#8221;, and together with
Quifa and PDM, &#8220;Pearl Mexico&#8221;) and Grupo Farmac&#233;utico Somar S.A.P.I. de C.V., a Sociedad An&#243;nima Promotora de
Inversi&#243;n de Capital Variable organized under the laws of Mexico (&#8220;Somar&#8221; and together with Somar Holding Company,
&#8220;Grupo Somar&#8221;, and together with Pearl Mexico, the &#8220;Targets&#8221;) (the &#8220;Acquisition&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_18" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Acquisition, which was expected to close in
the fourth quarter of 2022, was delayed indefinitely and subsequently terminated on January 1, 2023 (refer to Note 28. Events after the
reporting period) after the Group was informed by the Sellers that a court in Mexico City issued a precautionary lien affecting a portion
of capital stock of Grupo Somar in connection with a pending dispute that involves an investment by a fund managed by Advent International
but that is otherwise unrelated to the Sellers, Grupo Somar, the Group, or the Acquisition.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_19" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i><span style="text-decoration:underline">Debt Commitment Letter and Bridge Loan Credit Agreement </span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_20" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Concurrently with the execution of the SPA, the
Group, as borrower, entered into a Commitment Letter with Bank of America, N.A., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and
Morgan Stanley Senior Funding, Inc. (&#8220;Commitment Letter&#8221;) for a bridge loan of up to $<ix:nonFraction contextRef="c4" decimals="-6" format="ixt:num-dot-decimal" name="pgsa:BridgeLoans" scale="6" unitRef="usd">485</ix:nonFraction> million (the &#8220;Bridge Loan&#8221;),
which would have been guaranteed by each existing and future direct and indirect material subsidiary of the Group, and the Targets and
each of their subsidiaries upon the Closing. The Bridge Loan would have also been secured by a pledge from the Group of its shares in
the Targets. The proceeds of the Bridge Loan would have been used, together with the Group&#8217;s cash on hand, to finance the cash portion
of the purchase price of the Acquisition (including related fees and expenses) and, in the event necessary, to prepay certain of the Group&#8217;s
existing debt.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 9 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_21" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 11, 2022, Procaps Group, S.A. entered
into a Credit Agreement with Bank of America, N.A., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding,
Inc. who are the book runners and joint arrangers (the &#8220;Bridge Credit Agreement&#8221;) for the Bridge Loan. The Bridge Credit Agreement
terms are consistent with the terms of the Commitment Letter. The Bridge Credit Agreement effectively replaced the Commitment Letter upon
its execution.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_22" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Refer to Note 28. Events after the reporting period
for further details regarding the Group&#8217;s termination of the SPA, leading to the termination of commitments under the Bridge Credit Agreement
and the Commitment Letter. For information regarding the financial impact of the Bridge Credit Agreement on the Group&#8217;s results, refer
to Note 9. Finance income (expenses), net.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_23" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Senior Notes Amendment</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_24" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group intended to prepay in full the aggregate
principal amount of the <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="pgsa:AggregatePrincipalAmountPercentage" scale="-2" unitRef="pure">4.75</ix:nonFraction>% guaranteed senior notes due November 12, 2031 (the &#8220;Senior Notes&#8221;) issued by Procaps, S.A.,
the Group&#8217;s subsidiary, pursuant to a note purchase agreement (the &#8220;NPA&#8221;) entered into on November 5, 2021, with the noteholders
thereunder (collectively, the &#8220;Noteholders&#8221;), together with interest accrued thereon to the date of such prepayment and the
make-whole amount determined for the date of such prepayment pursuant to the NPA (the &#8220;Notes Payoff&#8221;). The Group previously
expected that the closing of the Grupo Somar and Pearl Mexico Acquisition would occur on October 14, 2022, and accordingly, pursuant to
the requirements of the NPA, delivered advance notice to the Noteholders of the Notes Payoff to occur on such date. As a result of a delay
and subsequent termination in the closing of the Grupo Somar and Pearl Mexico Acquisition, the expected borrowing under the Credit Agreement
did not occur, and the Group was unable to complete the Notes Payoff on the date scheduled, which technically constituted an event of
default under the NPA. The Noteholders informed the Group that they would not exercise any rights or remedies under the NPA due to such
technical default pending entry into an amendment to the NPA formally waiving such default, and the Group and the Noteholders executed
temporary waivers in connection therewith. On November 1, 2022, the Group and the Noteholders entered into an amendment to the NPA (the
&#8220;NPA Amendment&#8221;), formally waiving the technical default and which also (i) provided the Group the ability, until November
30, 2022, to prepay the Senior Notes with two business days&#8217; notice, (ii) provided that the make-whole amount under the NPA shall
in no case be less than USD <ix:nonFraction contextRef="c4" decimals="-1" format="ixt:num-dot-decimal" name="ifrs-full:PricesSpecifiedInForwardAgreementsToPurchaseFinancialAssetsForCash" scale="3" unitRef="usd">1,488,204.60</ix:nonFraction>, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022,
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October 14, 2022 and (b) be payable to the Noteholders on the 12th day of February, May, August and November in each year (commencing
on February 12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and
payable in accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022,
therefore triggering the <ix:nonFraction contextRef="c60" decimals="4" format="ixt:num-dot-decimal" name="pgsa:WaiverFeePercentage" scale="-2" unitRef="pure">3.75</ix:nonFraction>% per annum waiver fee on the outstanding principal amount of Senior Notes with the terms mentioned above.
Refer to Note 19. Borrowings for further detail on impact of the NPA Amendment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_25" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Ongoing Military Operation in Ukraine and
Related Sanctions</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_26" id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ongoing military operation in Ukraine and
the related sanctions targeted against the Russian Federation have disrupted international commerce and the global economy. The Group
does not have any direct exposure to Ukraine, Russia or Belarus considering there are not any existing operations or sales in those locations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although the Group does not currently operate
in Ukraine or Russia, the duration and severity of the effects on its business and the global economy are inherently unpredictable. Management
will continue to monitor the effects of the war in Ukraine and its potential further impacts, including global supply chain disruptions,
inflation, and rising interest rates, when making certain estimates and judgments relating to the preparation of the Consolidated Financial
Statements of the Group.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 10 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2. Basis of preparation and accounting</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_2" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Financial Statements of the Group
as of December 31, 2022, 2021 and 2020 have been prepared on a going concern basis in accordance with International Financial Reporting
Standards (&#8220;IFRS&#8221;) as issued by the International Accounting Standard Board (&#8220;IASB&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_3" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Financial Statements consist
of the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity and Consolidated Statement of Cash Flows and have been prepared under a historical cost basis, except for
certain financial instruments that have been measured at fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_4" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group opted to present a single Consolidated
Statement of Profit or Loss and Other Comprehensive Income, combining the presentation of profit or loss and comprehensive income in the
same statement. Due to the activities of the Group, costs and expenses presented in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income were classified according to their function.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_5" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Statement of Financial Position
has been prepared based on the nature of the Group&#8217;s operations, distinguishing: (a) current assets from non-current assets, where current
assets are intended as the assets that should be realized, sold or used during the normal operating cycle, or the assets owned with the
aim of being sold in the short term (within 12 months); (b) current liabilities from non-current liabilities, where current liabilities
are intended as the liabilities that should be paid during the normal operating cycle, or over the 12-month period subsequent to the reporting
date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_6" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Statement of Cash Flows has been
prepared using the indirect method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_7" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Consolidated Financial Statements present
comparative information in respect of the previous periods, 2021 and 2020 for Consolidated Statement of Profit or Loss and Other Comprehensive
Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and related notes. Foreign operations are
included in accordance with the policies set out in Note 2.2. Functional and reporting currency.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_8" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting policies set out in Note 3. Summary
of significant accounting policies have been applied in preparing the Consolidated Financial Statements for the year ended December 31,
2022, and the comparative information presented for the years ended December 31, 2021 and 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_9" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group has applied accounting judgments, estimates
and significant accounting assumptions described in Note 4. Critical accounting judgements and key sources of estimation uncertainty in
preparing the Consolidated Financial Statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 11 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_10" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2.1. Going concern</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_11" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">Management
identified the following events and conditions which cast significant doubt on the Group&#8217;s ability to continue as a going concern:
</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_12" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, the Group was in breach
of certain of the covenants included under the NPA, the Syndicated Loan Agreement and the BTG Credit Agreement. Refer to Note 19. Borrowings
for further details regarding the breach of each covenant. Although none of the lenders declared an event of default under the applicable
agreements, these breaches resulted in the lenders having the right to require immediate repayment of the applicable indebtedness and
as a result, the Group has classified the respective indebtedness, amounting to $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CurrentLiability" scale="3" unitRef="usd">139,155</ix:nonFraction> in the aggregate, to current liabilities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_13" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 28, March 31 and May 2, 2023 the Group obtained Waiver Agreements
(&#8220;Waivers&#8221; or &#8220;Waiver&#8221;) from each lender under the NPA, the Syndicated Loan Agreement and the BTG Credit Agreement
for the applicable covenant breaches. Under the terms of the Waivers, the lenders permanently waived their rights to accelerate the repayment
of the loans related to the events of default as of December 31, 2022. In addition, the Group executed Waivers with the lenders to adjust
the applicable covenant ratios for the periods ending March 31, June 30, and September 30, 2023, if applicable, as noted further within
Note 28. Events after the reporting period. For the period ending December 31, 2023, the applicable covenant ratios in the original borrowing
arrangements are unmodified.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_14" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Working capital</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_15" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, the Group had a net working
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of current borrowings ($<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CurrentBorrowingsRelateToTheLoanBreach" scale="3" unitRef="usd">139,155</ix:nonFraction> of current borrowings relates to the breach in loan covenants), $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherPayablesRecognisedAsOfAcquisitionDate" scale="3" unitRef="usd">90,187</ix:nonFraction> of trade and other payables, $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OwedToRelatedParties" scale="3" unitRef="usd">2,914</ix:nonFraction>
of amounts owed to related parties, $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentTaxLiabilities" scale="3" unitRef="usd">6,133</ix:nonFraction> of current tax liabilities, net, $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ChangesInOtherProvisions" scale="3" unitRef="usd">138</ix:nonFraction> of provisions, $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherLiabilities" scale="3" unitRef="usd">11,477</ix:nonFraction> of other liabilities, and $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentAssets" scale="3" unitRef="usd">297,443</ix:nonFraction>
of current assets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_16" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Management&#8217;s assessment</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_17" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management assessed the Group&#8217;s cash flow
projections, ability to meet future covenants and other measures of liquidity for the next twelve months from the balance sheet date.
Based on the Group&#8217;s cash flow projections and adjusted financial covenant ratios as a result of the Waivers, Management believes
they will have sufficient funds to repay their obligations as they fall due and to meet its financial covenants in 2023. However, due
to the uncertainty caused by current economic conditions, including rapid growth in inflation, increasing interest rates, global disruption
to the supply chain, volatility in foreign exchange rates and industry price regulations, there is material uncertainty regarding the
Group&#8217;s ability to meet its financial covenants. The Group&#8217;s failure to comply with such financial covenants would result in an
event of default, which if that were to occur would materially and adversely affect the Group&#8217;s business, financial condition, liquidity
and results of operations. In that event, the Group would seek additional waivers or alternative financing arrangements. As a result of
these material uncertainties, Management concluded the above conditions and events raise significant doubt about the Group&#8217;s ability to
continue as a going concern.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_18" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has implemented or is in the process
of implementing the following plans to mitigate the effect of these events and conditions:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_19" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost saving and revenue growth</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_20" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group has implemented certain measures with
an aim to reduce its operating costs and generate additional revenue in 2023 including: 1) strict controlling and reducing business marketing
and advertising expenses; 2) reducing headcount across multiple business units; and 3) focus on increasing sales volumes for core products
and sell trademarks and sanitary records to generate additional revenue.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 12 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_21" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Renegotiation of existing loans</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_22" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group is in the process of renegotiating the
terms of the Syndicated Loan balance with Bancolombia and Davivienda, with the expectation of extending payment terms. In addition, the
Group is in negotiations with BTG to restructure their short-term loan and negotiating their short-term revolving credit facilities. Refer
to Note 27. Financial instruments for details regarding the carrying balance of loans that will be renegotiated as mentioned above. The
Group has historically been successful in their negotiations with lenders to maintain and meet its liquidity needs and requirements. However,
the Group&#8217;s ability to renegotiate with its lenders is not within the Group&#8217;s control. As of the date of these financial statements,
the Group cannot assure that it will be able to reach an agreement with its lenders, or to waive any potential non-compliance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_23" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Additional measures</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_24" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the above actions do not generate sufficient
liquidity for the Group to meet its contractual obligations, Management has identified additional measures which could be implemented
to further reduce costs and increase total revenues in order to provide sufficient cash flow to meet obligations as they fall due including:
1) reduce discretionary spending on research and development, marketing and capital expenditures; 2) sell additional trademarks and sanitary
records; and 3) further reduce headcount.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_25" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Summary </i></p><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_26" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has evaluated the Group&#8217;s capital
position, its ability to continue in the normal course of business for the foreseeable future and ability to meet its financial obligations
for the next twelve months from the balance sheet date. While Management believes that their cost savings, revenue growth and loan renegotiation
will allow the group to be able to meet its financial obligations and finance its growth, there is no assurance that these plans can be
successfully implemented to generate the liquidity required to meet the Group&#8217;s need. Failure to successfully implement these plans may
have a material adverse effect on the Group&#8217;s business, results of operations and financial position, and may materially adversely
affect its ability to continue as a going concern. As a result, Management concluded there is material uncertainty related to the events
and conditions noted above that cast significant doubt on the entity&#8217;s ability to continue as a going concern.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_27" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">However,
Management believes that the Group will be successful in implementing the above plan and, accordingly, have prepared the financial statements
on a going concern basis. As a result, </span>the consolidated financial statements do not include any adjustments related to the recoverability
and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary
should the Group be unable to continue as a going concern.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_28" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2.2. Functional and reporting currency</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_29" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Items included in the financial statements of
each of the Group&#8217;s entities are measured using the currency of the primary economic environment in which the entity operates (&#8216;the
functional currency&#8217;). The Consolidated Financial Statements are presented in US Dollars (USD), which is Procaps Group, S.A. functional
and presentation currency.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_30" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2.3. Basis of consolidation </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_31" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s subsidiaries are fully consolidated
from the date on which control is transferred to the Group. Consolidation ceases from the date on which control ends.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_32" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All financial results are consolidated with similar
items on a line-by-line basis. If necessary, adjustments are made to the financial statements of the consolidated companies in order to
adapt their accounting policies to those used by the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_33" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All transactions, balances, revenues and related
expenses between the consolidated companies are eliminated.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_34" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>2.3.1. Reverse reorganization</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_35" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The SPAC did not meet the definition of a business
because it lacked substantive processes as defined by IFRS 3. Thus, the Transaction was accounted for as an asset acquisition in exchange
for a share based payment within the scope of IFRS 2.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_36" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Transaction was treated as a common control
transaction due to the fact both OpCo and Holdco are ultimately controlled by the same party or parties, that are all controlled by the
Minski family, both before and after the Transaction, and that control is not transitory. Management concluded that it would be appropriate
to account for it as a restructuring using book value accounting in Holdco&#8217;s Consolidated Financial Statements, on the basis that
there has been no business combination between Opco and Holdco.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_37" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For purposes of calculating earnings per share,
shareholders&#8217; equity of the Group prior to the Transaction was retrospectively adjusted as a capital restructuring for the equivalent
number of shares received and on a pro rata basis for prior reporting periods. Retained earnings and relevant reserves of the Group were
carried forward after the Transaction. Any difference to shareholders&#8217; equity of Group arising from the restructuring of share capital
and equity instruments issued was recorded in equity under share premium.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_38" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Refer to Note 26.1. Reverse reorganization for
further information related to the accounting and presentation of the Transaction.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For purposes of calculating basic earnings per
share, the ordinary shares associated with Put Option Agreements previous to the transaction were included. Note 24. Earnings Per Share.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 3. Summary of significant accounting policies</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_2" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.1. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory">Goodwill</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_3" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_2"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill arising from the acquisition of a business
is recorded at cost at the acquisition date, less accumulated impairment losses, if any.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_4" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_3"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill is stated at cost and not amortized but
is tested for impairment on an annual basis and whenever there is an indicator that the cash-generating unit to which goodwill has been
allocated may be impaired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 14 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_5" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_4"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.1.1 Goodwill impairment</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_6" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_5"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill is tested for impairment annually at
the cash-generating unit level, which is the level at which the assets generate largely independent cash inflows and are monitored for
internal management purposes. An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating
unit exceeds its recoverable amount. Impairment losses are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_7" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_6"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Impairment losses recognized for cash-generating
units first reduce allocated goodwill and then the carrying amounts of the other non-financial assets in the unit on a pro rata basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_8" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_7"><ix:continuation id="_DescriptionOfAccountingPolicyForGoodwillExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Refer to Note 12. Goodwill and Note 4. Critical
accounting judgements and key sources of estimation uncertainty or further information on the goodwill exposure and estimates applied,
respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_9" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.2. <ix:nonNumeric contextRef="c0" continuedAt="pgsa_TransactionsInForeignCurrencyPolicyTextBlock-c0_cont_1" escape="true" name="pgsa:TransactionsInForeignCurrencyPolicyTextBlock">Transactions in foreign currency
</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_10" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_9"><ix:continuation continuedAt="pgsa_TransactionsInForeignCurrencyPolicyTextBlock-c0_cont_2" id="pgsa_TransactionsInForeignCurrencyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When preparing the financial statements of the
individual underlying entities of the Group, transactions in a currency other than the functional currency of the entity (&#8220;foreign
currency&#8221;) are recorded using the exchange rates in effect on the transaction date. At the end of each reporting period, monetary
items denominated in a foreign currency are reconverted at the exchange rates prevailing at that date. Non-monetary items calculated in
terms of historical cost, in foreign currency, have not been reconverted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_11" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_10"><ix:continuation id="pgsa_TransactionsInForeignCurrencyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For purposes of presenting the Consolidated Financial
Statements, the assets and liabilities of the Group&#8217;s foreign currency transactions are expressed in USD, using the exchange rates
prevailing at the end of the respective reporting period. Revenues and expenses are translated at the average exchange rates for the respective
period. The exchange differences that arise, if applicable, are recognized through other comprehensive income and are accumulated in equity
(attributed to the non-controlling interests when appropriate).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_12" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.3. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory">Leases - Right-of-use assets &amp;
lease liabilities</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_13" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_12"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group assesses whether a contract is or contains
a lease at inception of a contract. The Group recognizes a right-of-use asset and a corresponding lease liability with respect to all
lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and
leases of low value assets (defined as assets with a value less than $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:LeasesOfAsset" scale="3" unitRef="usd">5,000</ix:nonFraction>). For these leases, the Group recognizes the lease payments
as an operating expense on a straight-line basis over the term of the lease, and payments for these leases are presented in the combined
statements of cash flows from operating activities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_14" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_13"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The right-of-use assets comprise the initial measurement
of the corresponding lease liability, lease payments made at or before the commencement date, any initial direct costs and less any lease
incentives received. They are subsequently measured at cost less accumulated depreciation and impairment losses. The right-of-use assets
are depreciated starting at the commencement date and over the shorter period of useful life of the underlying asset (in the case the
lease transfers ownership of the underlying asset to the Group by the end of the lease term or cost of the right-of-use assert reflects
that the Group will exercise a purchase option) and lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_15" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_14"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The lease liability is initially measured at the
present value of the lease payments that are not paid at the commencement date, discounted by using the interest rate implicit in the
lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate specific to the country, term and currency
of the contract. In addition, the Group considers its recent indebtedness as well as publicly available data for instruments with similar
characteristics when calculating the incremental borrowing rates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_16" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_15"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lease payments include fixed payments, less any
lease incentives receivable, variable lease payments that depend on an index or a rate known at the commencement date, and purchase options
or extension option payments if the Group is reasonably certain to exercise these options. Variable lease payments that do not depend
on an index or rate are not included in the measurement of the lease liability and right-of-use asset and are recognized as an expense
in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the year/period in which the event or condition that
triggers those payments occurs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_17" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_16"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A lease liability is remeasured upon a change
in the lease term, changes in an index or rate used to determine the lease payments or reassessment of exercise of a purchase option.
The corresponding adjustment is made to the related right-of-use asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_18" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_17"><ix:continuation id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The lease liability is presented in the &#8216;Borrowings&#8217;
line and the right-of-use assets are presented in a single line in the Consolidated Statement of Financial Position. In addition, the
principal portion of the lease payments is presented within financing activities and the interest component is presented within operating
activities in the Consolidated Statement of Cash Flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_19" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.4. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory">Financial Instruments</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_20" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_19"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Financial assets and liabilities are recognized
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_21" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_20"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Financial assets and liabilities are initially
measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities
(other than those designated at fair value through profit or loss) are added to or deducted from the fair value of the financial assets
or liabilities, when appropriate, at initial recognition. Transaction costs directly attributable to the acquisition of financial assets
or liabilities designated at fair value through profit or loss are recognized immediately through profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_22" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_21"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.1 Classification of financial assets </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_23" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_22"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If and when applicable the Group follows the framework
and requirements outlined in IFRS 9 to classify financial assets based on whether:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_24" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_23"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The financial asset is held within a business model whose objective is to collect contractual cash flows
or whose objective is achieved through the collection of contractual cash flows and the sale of financial assets; and</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_25" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_24"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The contractual terms give rise to cash flows that are only payments of principal and interest.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_26" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_25"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">By default, all other financial assets are subsequently
measured at fair value through profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_27" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_26"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Trade receivables are amounts due from customers
for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are
therefore all classified as current. Trade receivables are recognized initially at the amount of consideration that is unconditional,
unless they contain significant financing components, when they are recognized at fair value. The Group holds the trade receivables with
the objective of collecting the contractual cash flows and therefore measures them subsequently at amortized cost using the effective
interest method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 16 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_28" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_27"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.2 Gains and losses in foreign currency</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_29" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_28"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Trade receivables denominated in a currency other
than the subsidiaries&#8217; functional currency are determined in that foreign currency and converted to the subsidiaries&#8217; functional currency
at the end of each reporting period using the then prevailing spot rate. Exchange differences are recognized through profit or loss and
are classified within other expenses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_30" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_29"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.3 Impairment of financial assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_31" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_30"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_13" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group recognizes an impairment for expected
credit losses on trade and other receivables.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_32" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_31"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_14" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group applies the &#8216;simplified&#8217; approach as
required by IFRS 9 since generally the Group&#8217;s trade receivables do not include a significant financing component. The Group therefore
recognizes the lifetime expected credit losses over the life of the trade receivables.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_33" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_32"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_15" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other receivables are generally assessed individually
and a lifetime expected credit loss is estimated based on the receivable and debtor specific facts and circumstances.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_34" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_33"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_16" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.4 Definition of default</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_35" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_34"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_17" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group considers that an event of default has
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information to demonstrate that such default is not in existence.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_36" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_35"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_18" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.5 Impaired trade receivables</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_37" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_36"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_19" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A financial asset has been impaired when one or
more events have occurred that have a negative impact on the estimated future cash flows of the trade receivable. The evidence of credit
impairment includes observable data on the following events:</p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_38" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_37"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_20" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">significant financial difficulty of the customer;</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_39" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_38"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_21" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">customer enters into or is likely to enter into bankruptcy;</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_40" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_39"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_22" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">a breach of contract, such as an expired event; and</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_41" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_40"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_23" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">for economic or contractual reasons one or more concessions have been granted.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_42" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_41"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_24" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.6 Measurement of impairment</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_43" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_42"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_25" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The expected credit losses on trade receivables
are estimated using a methodology where a probability of default is estimated based on historical information, adjusted for current and
forecasted economic conditions, if applicable. If applicable and significant, the Group may adjust the provision based on a probability
weighing of various scenarios and factors in the time value of money:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_44" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_43"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_26" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Probability of default (&#8216;PD&#8217;): The PD is derived by analyzing a rolling dataset of twenty-four months
in which trade receivables are tracked and analyzed as they move through the aging buckets.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_45" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_44"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_27" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_26"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><i>&#9679;</i></td><td style="text-align: justify">Loss given default: The Group typically defines the loss given default to be one hundred percent.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_46" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_45"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_28" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><i>&#9679;</i></td><td style="text-align: justify">Exposure at default: The trade receivable balance as of the reporting date, net of advances and credit
notes.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_47" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_46"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_29" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the reporting dates presented, the Group
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_48" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_47"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_30" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group estimates the probability of default
at the pool level and then applies such pool level PD to the trade receivables within that pool. The Group generally defines each pool
within its main subsidiaries as:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_49" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_48"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_31" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_30"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Domestic</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_50" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_49"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_32" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_31"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Export</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_51" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_50"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_33" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_32"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Government</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_52" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_51"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_34" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_33"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Related parties</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 39.1pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_53" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_52"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_35" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group recognizes an impairment loss or gain
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 17 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_54" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_53"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_36" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group writes-off individual trade receivables
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_55" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_54"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_37" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.4.7 Derecognition of financial assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_56" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_55"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_38" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group derecognizes a financial asset only
when the contractual rights to the asset&#8217;s cash flows expire, or when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party. If the Group does not transfer or substantially retains all risks and rewards
of ownership and continues to control the transferred asset, the Group recognizes its interest retained in the asset and an associated
liability for the amounts to be paid. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognize the financial asset and also recognizes a loan secured by the revenue received.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_57" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_56"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_39" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon derecognition of a financial asset measured
at amortized cost, the difference between the carrying amount of the asset and the sum of the consideration received and receivable is
recognized through profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_58" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_57"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_40" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_39"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group also derecognizes a financial asset
when there is information which indicates that the counterparty is in serious financial difficulty and there is no realistic prospect
of recovery. The derecognized financial assets may still be subject to compliance activities in accordance with the Group&#8217;s recovery
procedures, taking into account legal advice when appropriate. Any recovery is recognized through profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_59" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_58"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_41" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_40"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Accounts receivable factoring</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_60" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_59"><ix:continuation id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of the regular business and in case of
immediate cash needs, the Group could sell its accounts receivable (i.e., invoices) to a third party (factor) at a discount. The Group
analyzes whether these transactions are <i>with recourse </i>or <i>without recourse</i> and applies the recognition criteria in IFRS
9 to assess whether the arrangement transfers substantially all risks and rewards to the factor. For arrangements <i>with recourse,</i>
where substantially all risks and rewards have not been transferred, the cash received from the factor is accounted for as a secured
borrowing. In the case of arrangements <i>with recourse</i>, the transferred assets are not derecognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_61" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_60"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.5. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories">Inventories, net</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_62" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_61"><ix:continuation id="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventories are presented at the lower of acquisition
cost or net realizable value. Cost is determined by the weighted average method. The net realizable value represents the estimated sale
price less all the estimated termination and selling costs. The cost of finished products and products in progress includes the costs
of raw materials, direct labor, other direct costs and the respective direct production expenses (based on normal operating capacity),
excluding borrowing costs. Inventories are presented net of the allowances for obsolescence and, in consolidation, net of eliminations
of unrealized profit on inventories.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_63" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_62"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.6. Property, plant and equipment, net</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_64" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_63"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property, plant and equipment assets are measured
at historical cost less accumulated depreciation and any impairment loss, except for those acquired in a business combination, which are
then recorded at fair value; assets under construction and land are not depreciated. The cost of the property, plant and equipment is
the fair value of the consideration initially provided to acquire or construct the item and prepare it for use. Subsequent costs incurred
for repair and maintenance, are expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income unless these costs
meet the criteria for capitalization (i.e., extension of the useful life). Depreciation commences when the assets are ready for use.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 18 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_65" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_64"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property, plant and equipment is depreciated based
on the straight-line method over estimated useful lives.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_66" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_65"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An item of property, plant and equipment will
be derecognized upon disposal or when future economic benefits from the continued use of the asset are no longer expected. The gain or
loss arising from the derecognition is measured as the difference between the net disposal proceeds and the carrying amount of the asset
and is recognized through profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_67" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_66"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The useful lives of property, plant and equipment
are:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_68" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_67"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfUsefulLivesOfPropertyPlantAndEquipmentExplanatory"><ix:continuation id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="background-color: #CCEEFF">
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  <tr style="background-color: white">
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  <tr style="background-color: #CCEEFF">
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  <tr style="background-color: white">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_69" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_68"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.7. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory">Intangible assets</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_70" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_69"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.7.1 Intangible assets generated internally</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_71" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_70"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Disbursements originated by research activities
are recognized as an expense in the period in which they are incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_72" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_71"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An intangible asset generated internally as a
result of development activities (or the development phase of an internal project) is recognized if, and only if, the following conditions
are met:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_73" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_72"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">It is commercially and technically feasible to complete the production of the intangible asset so that
it can be available for use or sale;</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_74" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_73"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Management intends to complete the intangible asset in question in order to use or sell it or can demonstrate
the way in which the intangible asset will likely generate future economic benefits;</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_75" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_74"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Adequate technical, financial or other resources are available to complete the development and to use
or sell the intangible asset; and</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_76" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_75"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The Group is able to reliably measure the disbursement attributable to the intangible asset during its
development.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_77" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_76"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The expenses incurred in developing new pharmaceutical
technologies, combination of active ingredients and formulation improvements meet the conditions of the previous paragraph, usually from
the beginning of pilot batches (completion of the experimental batch stage), at which point Management considers that achieving regulatory
approval (sanitary records) is a legal formality.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_78" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_77"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amount initially recognized for an internally
generated intangible asset will be the sum of the disbursements incurred once the element meets the recognition conditions. When an internally
generated intangible asset cannot be recognized, development disbursements are charged through profit or loss in the period in which they
are incurred.</p></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_79" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_78"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subsequent to initial recognition, an internally
generated intangible asset will be accounted for at cost less accumulated amortization and the accumulated amount of impairment losses,
on the same basis as intangible assets that are acquired separately.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 19 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_80" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_79"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.7.2 Disposal of intangible assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_81" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_80"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_13" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An intangible asset is written off at the time
of its disposal, or when future economic benefits of its use or disposal are not expected. Gains or losses arising from the write-off
of an intangible asset, measured as the difference between the net proceeds from the sale and the carrying amount of the asset, are recognized
through profit or loss when the asset is written off.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_82" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_81"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_14" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.7.3 Impairment of definite-lived tangible
and intangible assets and intangibles not yet available for use, and other assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_83" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_82"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_15" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the end of each reporting period, the Group
evaluates the carrying amounts of its definite-lived tangible and intangible assets in order to identify any indication that these assets
have been impaired. In such a case, the recoverable amount of the asset is calculated in order to determine the extent of the impairment
loss (if any). Intangible assets not yet available for use are tested for impairment annually to determine if an impairment loss should
be recognized. When it is not possible to estimate the recoverable amount of an individual asset, the Group calculates the recoverable
amount of the cash generating unit to which the asset belongs. When a reasonable and consistent basis of distribution is identified, the
common assets are also allocated to the individual cash generating units or distributed to the smallest group of cash generating units
for which a reasonable and consistent distribution base can be identified.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_84" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_83"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_16" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The recoverable amount is the higher of the fair
value less disposal costs and the value in use. When estimating the value in use, the estimated future cash flows are discounted to the
present value, using a pre-tax discount rate that reflects the current market valuations with respect to the time value of money and the
specific risks for the asset for which the future cash flow estimates have not been adjusted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_85" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_84"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_17" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the recoverable amount of an asset (or cash-generating
unit) calculated is less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. Impairment losses are recognized immediately through profit or loss. If an impairment loss is subsequently reversed, the carrying
amount of the asset (or cash-generating unit) increases to the revised estimated value of its recoverable amount, so that the increased
carrying amount does not exceed the carrying amount that would have been calculated if the impairment loss had not been recognized for
said asset (or cash-generating unit) in previous years. The reversal of an impairment loss is automatically recognized through profit
or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_86" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_85"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_18" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.7.4 Amortization of internally generated
intangibles</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_87" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_86"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_19" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Internally-generated intangible assets such as
licenses, bioequivalence studies, new platforms, tablet improvements, combinations and concentrations, and soft gel capsule improvements,
among others, are of finite useful lives and their amortization period will begin only when the following two milestones are met:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_88" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_87"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_20" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The pre-industrial batch is completed with satisfactory results.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_89" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_88"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_21" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The regulatory body approves the corresponding sanitary records.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_90" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_89"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_22" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When these milestones are met, the capitalized
developments will have met the necessary conditions to generate economic benefits in accordance with management&#8217;s expectations,
so the amortization of the assets begins using the straight-line method through profit or loss during the minimum projected time of generated
economic benefits.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_91" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_90"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_23" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amortization will also cease at the earliest
of either the date when the asset is classified as held for sale or the date when the asset is derecognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 20 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_92" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_91"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_24" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.7.5 Useful lives of intangibles</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_93" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_92"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_25" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following useful lives are used to calculate
amortization:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 23.75pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_94" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_93"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfUsefulLivesOfIntangibleAssetsExplanatory"><ix:continuation id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="width: 81%"><span style="font-size: 10pt">Trademarks and sanitary records</span></td>
    <td style="text-align: center; width: 19%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c84" format="ixt-sec:duryear" name="ifrs-full:UsefulLifeMeasuredAsPeriodOfTimeIntangibleAssetsOtherThanGoodwill">3</ix:nonNumeric> &#8211; <ix:nonNumeric contextRef="c85" format="ixt-sec:duryear" name="ifrs-full:UsefulLifeMeasuredAsPeriodOfTimeIntangibleAssetsOtherThanGoodwill">20</ix:nonNumeric> years </span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-size: 10pt">Licenses, customers and agreements</span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_95" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_94"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.8. <ix:nonNumeric contextRef="c0" continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_1" escape="true" name="pgsa:FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock">Financial liabilities and equity
instruments</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_96" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_95"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_2" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.8.1 Classification as debt or equity</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_97" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_96"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_3" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Debt and equity instruments are classified as
financial liabilities or equity in accordance with the substance of the contractual agreement and definitions of financial liability and
equity instrument.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_98" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_97"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_4" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.8.2 Equity instruments</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_99" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_98"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_5" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An equity instrument consists of any contract
that evidences a residual interest in the assets of an entity, after deducting all of its liabilities. Equity instruments issued by a
Group entity are recognized for income received, net of direct issue costs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_100" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_99"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_6" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The repurchase of equity instruments of the Group
is recognized and deducted directly in equity. No gain or loss is recognized through profit or loss, arising from the purchase, sale,
issue or cancellation of the equity instruments of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_101" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_100"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_7" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.8.3 Financial liabilities</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_102" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_101"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_8" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Financial liabilities are classified at their
inception at fair value minus transaction costs directly attributable to the transaction through profit or loss and subsequently measured
at amortized cost, using the effective interest amortization method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_103" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_102"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_9" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.8.4 Warrant liabilities</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_104" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_103"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_10" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group has warrants that are initially recognized
at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of
each reporting period. Gains and losses will be recorded in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_105" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_104"><ix:continuation continuedAt="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_11" id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.8.5 Shares held in escrow</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_106" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_105"><ix:continuation id="pgsa_FinancialLiabilitiesAndEquityInstrumentsPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The shares to be delivered, in an escrow, are
initially recognized at fair value of the equity instruments granted for services received in an equity-settled share-based payment determined
at grant date, and they are subsequently remeasured to their fair value at the end of each reporting period until they are released from
escrow or are forfeited.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 21 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_107" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_106"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.9. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory">Trade and other payables	</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_108" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_107"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Trade and other payables are recognized when the
Group has a legal or a constructive obligation, as a result of a past event, and it is probable that there may be an outflow of resources
embodying economic benefits to settle the obligation and the obligation can be measured reliably. These amounts represent liabilities
for goods and services provided to the Group prior to the end of financial year which are unpaid. The average credit period for purchases
is between 90 and 180 days, including cases in which the invoices have been assigned by the supplier to third parties. Other payables
correspond mainly to employment obligations and provisions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_109" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_108"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Reverse factoring</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_110" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_109"><ix:continuation id="_DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Suppliers of the Group initiate and enter into
reverse factoring arrangements in which the Group participates. Under such arrangements suppliers sell or assign their receivables from
the Group to third parties (i.e., &#8216;the factor&#8217;), after which the Group pays and settles the underlying invoices directly with the factors.
Provided that certain conditions are met, the invoices sold or assigned to factors remain classified within trade and other payables.
The criteria are that: 1) the assignment is contractually initiated and decided by the supplier, 2) it does not extend the period in which
the Group regularly pays the supplier, 3) the amount of the invoices is not modified, and there are no charges in this regard by third
parties. Otherwise, the Group reclassifies those balances as a financial liability, other term loans with a corresponding reclassification
from operating cash flows to financing cash flows, for the amount paid to factors.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_111" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_110"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.10. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory">Taxes </ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_112" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_111"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Income tax expense represents the sum of current
income tax payable and deferred tax.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_113" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_112"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.10.1 Current tax</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_114" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_113"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current tax is based on the taxable income registered
during the year. The taxable income differs from the income reported in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income, due to the items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible.
The liabilities of the Group for current tax purposes are calculated using the tax rates enacted or substantially approved at the end
of the respective reporting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_115" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_114"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.10.2 Deferred tax</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_116" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_115"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax is recognized on temporary differences
between the carrying amount of the assets and liabilities included in the Consolidated Financial Statements and the corresponding tax
basis used to determine the taxable income. The deferred tax liability is generally recognized for all temporary tax differences. A deferred
tax asset will be recognized, as a result of all deductible temporary differences, to the extent that it is likely that each entity will
have future taxable income against which to charge those deductible temporary differences. These assets and liabilities are not recognized
if the temporary differences arise from the initial recognition (rather than through a business combination) of other assets and liabilities
in an operation that does not affect the taxable income or the accounting income. In addition, deferred tax liabilities are not recognized
if the temporary difference arises from the initial recognition of goodwill.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_117" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_116"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A deferred liability should be recognized for
taxable temporary differences associated with investments in subsidiaries and joint ventures, and interests in joint ventures, except
for those in which the Group is able to control the reversal of the temporary difference and when there is a possibility that it cannot
be reversed in the near future. Deferred tax assets arising from the deductible temporary differences associated with such investments
and participation are only recognized to the extent that it is likely that each entity will have future taxable profits against which
to charge those temporary differences and when there is the possibility that these can be reversed in the near future.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_118" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_117"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amount of a deferred tax asset must
be reviewed at the end of each reporting period and reduced, to the extent that it is likely that it will not have sufficient taxable
income in the future to allow all or part of the asset to be recovered.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_119" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_118"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax assets and liabilities should be
measured using the tax rates expected to be applied in the period in which the asset is realized or the liability is settled, based on
the rates (and tax laws) enacted or substantively enacted at the end of the respective reporting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 22 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_120" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_119"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The measurement of deferred tax liabilities and
deferred tax assets will reflect the tax consequences that would arise based on each Group company&#8217;s expectations, at the end of the reporting
period, to recover or settle the carrying amount of their assets and liabilities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_121" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_120"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and relate to taxes levied by the same tax authority
on the same taxable entity, or on different taxable entities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_122" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_121"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.10.3 Current and deferred taxes</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_123" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_122"><ix:continuation id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current and deferred taxes should be recognized
through profit or loss, except when they relate to items listed in other comprehensive income or directly in equity, in which case the
current or deferred tax is also recognized though other comprehensive income or directly in the equity, respectively. In cases of business
combinations, when the current tax or deferred tax arises from the initial accounting of the business combination, the tax effect is considered
within the accounting of the business combination.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_124" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_123"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.11. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory">Provisions </ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_125" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_124"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Provisions are recognized when (i) the Group has
a present legal or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and (iii) a reliable estimate of the amount of the obligation can be made. Provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_126" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_125"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.11.1 Disputes and litigation</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_127" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_126"><ix:continuation id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A provision for disputes and litigation is recognized
when it is more likely than not that the Group will be required to make future payments as a result of past events, such items may include
but are not limited to claims, lawsuits and actions relating to employment related disputes and claims from tax authorities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_128" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_127"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.12. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory">Employee benefits </ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_129" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_128"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Note 3.12.1. Retirement and termination benefit
costs</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_130" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_129"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Payments to defined contribution retirement benefit
plans are recognized as an expense when employees has rendered service entitling them to the contributions. Payments made to state-managed
retirement benefit plans are accounted for as payments to defined contribution plans where the Group&#8217;s obligations under the plans
are equivalent to those arising in a defined contribution retirement benefit plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_131" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_130"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For defined benefit retirement benefit plans,
the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the
end of each annual reporting period. Remeasurements for actuarial gains and losses are recognized immediately in the Consolidated Statement
of Financial Position with a charge or credit to other comprehensive income in the period in which they occur. Remeasurements recognized
in other comprehensive income are not reclassified. Past service cost is recognized in profit or loss when the plan amendment or curtailment
occurs or when the Group recognizes related restructuring costs or termination benefits, if earlier. Gains or losses on settlement of
a defined benefit plan are recognized when the settlement occurs. Net interest is calculated by applying a discount rate to the net defined
benefit liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_132" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_131"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Defined benefit costs are split into three categories:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_133" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_132"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">service cost, which includes current service cost, past service cost and gains and losses on curtailments
and settlements;</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_134" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_133"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">net interest expense; and</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_135" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_134"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">remeasurements.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 23 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_136" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_135"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The retirement benefit obligation recognized in
the Consolidated Statement of Financial Position represents the deficit or surplus in the Group&#8217;s defined benefit plans. Any surplus
resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_137" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_136"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A liability for a termination benefit is recognized
at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related
restructuring costs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_138" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_137"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Discretionary contributions made by employees
or third parties reduce service cost upon payment of these contributions to the plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_139" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_138"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group recognized a net interest expense within
finance costs for the year ended December 31, 2022 of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OutOfPeriodInterestExpense" scale="3" unitRef="usd">268</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OutOfPeriodInterestExpense" scale="3" unitRef="usd">67</ix:nonFraction>, 2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OutOfPeriodInterestExpense" scale="3" unitRef="usd">60</ix:nonFraction>) while remeasurements of the calculations are reflected
in the Statement of Other Comprehensive Income. Remeasurements of the calculations represented a decrease of $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlans" scale="3" unitRef="usd">222</ix:nonFraction> (decrease 2021: $<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlans" scale="3" unitRef="usd">195</ix:nonFraction>
and increase 2020: $<ix:nonFraction contextRef="c30" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlans" scale="3" unitRef="usd">47</ix:nonFraction>).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_140" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_139"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_13" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the preparation of the Consolidated Financial
Statements for the year ended December 31, 2022, the Group identified an understatement in Other Liabilities in prior periods for unrecorded
long-term employee benefits corresponding to seniority premiums and retirement bonuses. Management assessed the materiality of the error
on all the prior periods presented and determined that the error was not material to any of the periods and that a restatement of previously
issued financial statements was not required. Under SEC Staff Accounting Bulletin (SAB) No. 108, prior periods misstatements may be corrected
in the current year provided that such correction does not result in a material misstatement to the current year financial statements.
As such, the Group corrected the misstatement in the Consolidated Financial Statements for the year ended December 31, 2022 as an out-of-period
adjustment, increasing non-current other liabilities by $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherCurrentNonfinancialLiabilities" scale="3" unitRef="usd">2,329</ix:nonFraction> and current other liabilities by $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherNonfinancialLiabilities" scale="3" unitRef="usd">185</ix:nonFraction> and increasing cost of sales by $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostOfSalesOutOfPeriodAdjustments" scale="3" unitRef="usd">1,639</ix:nonFraction>,
sales and marketing expense by $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:SalesAndMarketingExpenses" scale="3" unitRef="usd">232</ix:nonFraction>, and administrative expense by $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdministrativeExpense" scale="3" unitRef="usd">643</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_141" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_140"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_14" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Note 3.12.2. Short-term and other long-term
employee benefits</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_142" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_141"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_15" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A liability is recognized for benefits accruing
to employees in the form of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted
amount of the benefits expected to be paid in exchange for that service.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_143" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_142"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_16" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Liabilities recognized in respect of short-term
employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_144" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_143"><ix:continuation id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Liabilities recognized in respect of other long-term
employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect
of services provided by employees up to the reporting date. As of December 31, 2022, the Group recognized employee benefits costs within
profit or loss as cost of sales of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostsOfDefinedBenefitPlans" scale="3" unitRef="usd">28,494</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostsOfDefinedBenefitPlans" scale="3" unitRef="usd">25,051</ix:nonFraction> and 2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostsOfDefinedBenefitPlans" scale="3" unitRef="usd">27,421</ix:nonFraction>), $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdministrativeExpenses" scale="3" unitRef="usd">41,329</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdministrativeExpenses" scale="3" unitRef="usd">31,973</ix:nonFraction> and 2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdministrativeExpenses" scale="3" unitRef="usd">29,139</ix:nonFraction>) as administrative
expenses and $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:MarketingandAdvertisingExpense" scale="3" unitRef="usd">36,304</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:MarketingandAdvertisingExpense" scale="3" unitRef="usd">30,227</ix:nonFraction> and 2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:MarketingandAdvertisingExpense" scale="3" unitRef="usd">19,774</ix:nonFraction>) as sales and marketing expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_145" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_144"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.13. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue">Revenue recognition</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_146" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_145"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_2" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group recognizes revenues from the sale of
pharmaceutical products and the provision of services primarily related to product development projects.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_147" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_146"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_3" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue is measured based on the consideration
specified in a contract with a customer and excludes balances collected on behalf of third parties. The Group recognizes revenue when
transferring control of a product or service to a customer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_148" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_147"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_4" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.13.1 Sale of goods</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_149" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_148"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_5" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from the sale of goods is recognized when
the control of the goods is transferred (both in export and domestic operations) and the performance obligations have been fulfilled by
the Group, which occurs when the product is delivered to the location specified by the customer, according to the negotiating conditions
agreed upon. Revenues are reduced by discounts or rebates and other similar allowances estimated for customers.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_150" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_149"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_6" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.13.2 License revenues</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_151" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_150"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_7" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from the sale of intellectual property
(licenses) is recognized based on the evaluation of whether an entity&#8217;s commitment to grant a license provides the customer with
a right of access to intellectual property, which is transferred over time, or a right to use the intellectual property of an entity,
which is transferred at a point in time.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_152" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_151"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_8" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The license is a commitment to provide a right
of access to the entity&#8217;s intellectual property if all the following criteria are met:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_153" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_152"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_9" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">the contract requires, or the customer reasonably expects, that the entity carries out activities that
significantly affect the intellectual property to which the customer is entitled;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                           </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_154" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_153"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_10" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">the rights granted by the license directly expose the customer to the positive or negative effects of
the entity&#8217;s activities identified in subsection a above; and</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                             </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_155" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_154"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_11" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">those activities do not result in the transfer of a good or service to the customer as such activities
take place.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.25pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_156" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_155"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_12" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If these criteria are not met, the license grants
the customer a right to use the license, and the transaction is recognized when the license is granted to the customer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_157" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_156"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_13" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.13.3 Service provision</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_158" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_157"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_14" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from service contracts is recognized based
on the status of completion of the contract. If the Group transfers control of a service to satisfy the performance obligation over time,
it then recognizes revenue over time, if one of the following criteria is met:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_159" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_158"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_15" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">the customer simultaneously receives and consumes the benefits provided by the entity&#8217;s performance
as the entity performs;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                 </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_160" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_159"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_16" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">the entity&#8217;s performance creates or enhances an asset that the customer controls as it is created or enhanced;
or</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
            </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_161" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_160"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_17" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">the entity&#8217;s performance does not create an asset with an alternative use for the entity and the entity
has an enforceable right to payment for performance that has been completed to date.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_162" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_161"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_18" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.13.4 Sale of trademarks and sanitary records</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_163" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_162"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_19" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from contracts for the sale of a trademark
or sanitary records is recognized at the point of the transfer of possession, use, enjoyment and other real and personal rights at the
price agreed in the contract, fulfilling the following conditions:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_164" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_163"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_20" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The customer has the right to all the benefits of the commercial use of the trademark or sanitary records.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                                                         </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_165" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_164"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_21" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The customer can redirect the use of the trademark or sanitary records.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                      </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_166" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_165"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_22" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The customer is responsible for sales, marketing and advertising activities.</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                           </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_167" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_166"><ix:continuation id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">The customer obtains control of the trademark or sanitary records, which
includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, the trademark or sanitary records.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 25 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_168" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_167"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.14. <ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory">Segment reporting</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_169" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_168"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An operating segment is a component that engages
in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the other components, and for which discrete financial information is available. The Group is engaged in the business of developing,
producing and marketing pharmaceutical solutions and related activities and is considered an integrated international healthcare and pharmaceutical
company across the three core therapeutic areas: hospitals/clinics, pharmacies (prescription) and over-the-counter (non-prescription).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_170" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_169"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s customer revenue recognition (external
revenue) policy has been consistent with inter-segment revenue generated.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_171" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_170"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s business is organized and managed
through a combination of geographical regions and business units through 40 legal entities, of which 23 are operating entities, divided
in five strategic divisions, which are its operating segments. These divisions offer different products and services and are managed separately
as they require different technology and marketing strategies. The five operating segments correspond to each of its five reportable segments
for financial reporting purposes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_172" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_171"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summary describes the operations
of each reportable segment:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_173" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_172"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfTheOperationsOfEachReportableSegmentExplanatory"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="border-bottom: Black 1.5pt solid; width: 29%"><span style="font-size: 10pt"><b>Reportable segment</b></span></td>
    <td style="padding-bottom: 1.5pt; width: 1%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; width: 70%; text-align: center"><span style="font-size: 10pt"><b>Operations</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td><span style="font-size: 10pt">NextGel</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; vertical-align: bottom"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c89" name="pgsa:Operations">Development and manufacturing of Softgel and related technologies in
USA, Brazil and Colombia</ix:nonNumeric></p></td></tr>
  <tr style="background-color: white">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_174" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_173"><ix:continuation id="_DescriptionOfAccountingPolicyForSegmentReportingExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s chief executive officer reviews
the internal management reports of each division at least quarterly.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_175" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_174"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 3.15. <ix:nonNumeric contextRef="c0" continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_1" escape="true" name="pgsa:PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock">Principles of consolidation and equity accounting</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_176" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_175"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_2" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Non-controlling interests in the results and equity
of subsidiaries are shown separately in the Consolidated Statement of Profit or loss and Other Comprehensive Income, Consolidated Statement
of Changes in Equity and Consolidated Statement of Financial Position respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_177" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_176"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_3" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.15.1. Joint ventures</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_178" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_177"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_4" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Joint ventures are arrangements whereby the Group
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in one joint venture and the Group holds <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="pgsa:VotingRightsPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of the voting rights and management board representation. Investments in joint ventures are
accounted for using the equity method of accounting, after initially being recognized at cost.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 26 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_179" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_178"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_5" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.15.2. Equity method</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_180" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_179"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_6" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the equity method of accounting, the investments
are initially recognized at cost and adjusted thereafter to recognize the Group&#8217;s share of the post-acquisition profits or losses
of the investee in profit or loss, and the Group&#8217;s share of movements in other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from joint ventures are recognized as a reduction in the carrying amount of the investment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_181" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_180"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_7" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where the Group&#8217;s share of losses in an
equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group
does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_182" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_181"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_8" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unrealized gains on transactions between the Group
and its joint ventures are eliminated to the extent of the Group&#8217;s interest in these entities. Unrealized losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_183" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_182"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_9" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounting policies of equity-accounted investees
have been changed where necessary to ensure consistency with the policies adopted by the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_184" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_183"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_10" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amount of equity-accounted investments
is tested for impairment in accordance with the policy described in <i>3.7.3 Impairment of definite-lived tangible and intangible assets
and intangibles not yet available for use, and other assets.</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_185" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_184"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_11" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>3.15.3. Changes in ownership interests </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_186" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_185"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_12" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group treats transactions with non-controlling
interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results
in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in
the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received
is recognized in a separate reserve within equity attributable to owners of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_187" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_186"><ix:continuation continuedAt="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_13" id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When the Group ceases to consolidate or equity
account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is
remeasured to its fair value, with the change in carrying amount recognized in profit or loss. This fair value becomes the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified
to profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_188" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_187"><ix:continuation id="pgsa_PrinciplesOfConsolidationAndEquityAccountingPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the ownership interest in a joint venture or
an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognized
in other comprehensive income are reclassified to profit or loss where appropriate.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 27 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_189" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_188"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3.16. <ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerShareExplanatory-c0_cont_1" escape="true" name="ifrs-full:EarningsPerShareExplanatory">Earnings Per Share</ix:nonNumeric></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_190" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_189"><ix:continuation continuedAt="_EarningsPerShareExplanatory-c0_cont_2" id="_EarningsPerShareExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Earnings per share was computed by dividing basic
net income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding. Diluted income per ordinary
share is computed by dividing diluted net income attributable to ordinary shareholders by the weighted-average number of ordinary shares
outstanding plus dilutive potential ordinary shares, if any. Dilutive potential ordinary shares include outstanding warrants or other
contracts to issue ordinary stock and are determined by applying the treasury stock method or if-converted method, as applicable, if dilutive.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_191" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_190"><ix:continuation continuedAt="_EarningsPerShareExplanatory-c0_cont_3" id="_EarningsPerShareExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022, 2021 and
2020 no dilutive effect has been identified.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_191"><ix:continuation id="_EarningsPerShareExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Number of shares prior to the Transaction is retrospectively
adjusted as a capital restructuring for the equivalent number of shares received and on a pro rata basis for prior reporting periods.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 4. Critical accounting judgements and key sources of estimation
uncertainty</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_2" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the application of the accounting policies,
which are described in Note 3. Summary of significant accounting policies, management must make judgments, estimates and assumptions about
the carrying amounts of the assets and liabilities that are not readily observable in other sources. The estimates and underlying assumptions
are based on historical experience and other relevant factors. Actual results may differ from these estimates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_3" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Estimates and underlying assumptions are reviewed
regularly. Changes to accounting estimates are recognized in the period of the review, if the change only affects that period, or in future
periods if the change affects both the current and subsequent periods.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_4" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 4.1. Critical accounting judgements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_5" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.1.1 Reverse factoring </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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whether a liability under a reverse factoring arrangement is in essence a continuation of an operating liability or a derecognition of
the operating liability and recognition of a financing liability. The Group evaluates the requirements under IFRS 9 and applies judgment
to the facts and circumstances as a whole. Specifically, whether interest charged from the suppliers to the Group creates a substantial
change in the amount payable, i.e., financing.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_7" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.1.2 Factoring</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_8" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group enters into factoring arrangements where
it sells or assigns certain trade receivables to third parties under both recourse and non-recourse programs. Similar, to reverse factoring,
significant judgment is required under IFRS 9 to assess whether the Group has substantially transferred all risk and rewards incidental
to the trade receivables to the factor. Specifically, whether or not the factor has the right to collect the unpaid invoice amount from
the transferor (seller).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_9" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.1.3 Going Concern </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_10" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Refer Note 2.1. Going concern for judgements related to going concern.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_11" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 4.2. Key sources of estimation uncertainty</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_12" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.1 Goodwill impairment</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_13" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Determining whether goodwill has been impaired
involves calculating the value in use of the cash generating units to which the goodwill has been assigned. The calculation of value in
use requires the entity to determine the future cash flows that should arise from the cash-generating units and an appropriate discount
rate to calculate the present value. When actual future cash flows are less than expected, an impairment loss may arise.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 28 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_14" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill impairment testing relies on a number
of critical judgments, estimates and assumptions. Goodwill is tested for impairment at the cash generating unit level. The Group tests
at least annually whether goodwill have suffered any impairment by calculating the recoverable amount of the cash generating unit and
comparing this to its carrying value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_15" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group&#8217;s impairment testing methodology
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_16" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The value in use calculations primarily use cash
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_17" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management prepared the financial projections
reflecting actual and prior year/period performance and market development expectations. Judgement is required to determine key assumptions
adopted in the cash flow projections and changes to key assumptions can significantly affect these cash flow projections and therefore
the results of the impairment reviews. Refer Note 12. Goodwill for further information on the goodwill exposure and estimates applied.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_18" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.2 Useful life of property, plant and equipment
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_19" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group reviews the estimated useful lives of
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_20" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.3 Provisions for contingencies, litigation
and lawsuits</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_21" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The litigation and lawsuits to which the Group
is exposed are managed by appropriate legal personnel and are primarily related to labor, civil and administrative disputes. The Group
considers that a past event has given rise to a present obligation if there is no realistic alternative to settling the present obligation,
independent of future events, considering all the evidence available at the reporting date. It is understood that the probability of an
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obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one to more
uncertain future events that are not entirely under the control of the Group are not recognized in the Consolidated Statement of Financial
Position, but are disclosed as contingent liabilities. The occurrence or non-occurrence of events that are deemed remote are not recorded
or disclosed. The Group utilizes the professional judgment of internal and external specialists to determine the possibility of the occurrence
of a present obligation. In the estimation of the provision for litigation and lawsuits, Management considers assumptions such as appraisal
of the attorneys, estimated duration of the litigation or lawsuit and statistical information of litigation or lawsuits with similar characteristics,
among others.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_22" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.4 Impairment of accounts receivable</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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receivable by the expected credit loss model where it determines its value based on the probability of default, the loss due to default
(i.e., the extent of the loss in case of default) and the exposure in the default. The assessment of the probability of default and the
loss due to default is based on historical data adjusted by prospective information. Further details of other judgments are in Note 3.
Summary of significant accounting policies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 29 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_24" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.5 Useful lives of right-of-use assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_25" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Right-of-use assets depreciate during the shorter
of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a purchase option, the asset related to the right of use depreciates during
the useful life of the underlying asset. Depreciation begins at the commencement of the lease.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_26" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.6 Recognition of deferred tax assets</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_27" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax assets are recognized for all deductible
temporary differences only to the extent that it is probable that taxable profit will be available against which the deductible temporary
difference can be utilized. In determining whether it is probable that taxable profit will be available to realize the Group&#8217;s deferred
tax assets, the management considered the following sources of taxable income:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_28" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                        </table></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_29" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Future taxable profit excluding reversal of temporary differences</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                                                                                                </table></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_30" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Tax planning opportunities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_31" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.7 Reverse reorganization</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_32" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The excess between the fair value of the shares
and equity instruments issued and the net assets acquired is treated as an expense under IFRS 2 (the &#8216;listing expense&#8217;) and it includes
certain elements of judgement and estimation. This centers around the estimation of the fair value of OpCo prior to the Transaction and
the fair value of the private warrants. Refer to Note 26.1. Reverse reorganization for further information related to the Transaction.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_33" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fair value of OpCo was estimated using a combination
of a market and income approach under IFRS 13 where the Group forecasted an annual adjusted EBITDA. A market based multiple, as negotiated
amongst the independent parties to the Transaction, was then applied to the adjusted EBITDA to arrive at the enterprise value which was
then adjusted for OpCo&#8217;s net debt.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_34" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.8 Private warrants </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_35" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The private warrants are recorded as financial
liabilities on the Consolidated Statement of Financial Position and are remeasured on each reporting date. In assessing the fair value
of the private warrants, a Black-Scholes option pricing formula for European calls was used since the warrants are not publicly traded.
The model requires the input of subjective assumptions, including the volatility of its own ordinary shares, the expected life, and strike
price of the warrants. Any changes in these assumptions can significantly affect the estimate of the fair value of the warrants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_36" id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>4.2.9 Shares held in escrow</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfAccountingJudgementsAndEstimatesExplanatory-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant judgement is involved to evaluate
whether a contract that may be settled in the issuer&#8217;s own equity instruments meets the equity or liability classification. The shares
to be delivered in an escrow are recorded as financial liabilities on the Consolidated Statement of Financial Position and are remeasured
on each reporting date. In assessing the fair value of the shares, Monte Carlo simulation was applied in a risk-neutral framework assuming
a Geometric Brownian Motion for the future stock price. This model is consistent with the Black-Scholes option pricing framework, and
was used to account for the path-dependent + 20 out of 30 day features.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 30 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 5. New and amended IFRS Standards that
are effective for the current year</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_2" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group adopted the following accounting standard
amendments from January 1, 2022. The evaluation performed by management determined that these amendments did not result in a significant
impact in relation to the Group as of December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_3" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Reference to the Conceptual Framework &#8211;
Amendments to IFRS 3 - Effective January 1, 2022</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_4" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_3"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Minor amendments were made to IFRS 3 Business Combinations to update
the references to the Conceptual Framework for Financial Reporting and add an exception for the recognition of liabilities and contingent
liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 21 Levies. The amendments also
confirm that contingent assets should not be recognized at the acquisition date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_5" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No business combinations were consummated for
the year ended December 31, 2022 and therefore, this amendment has not impacted the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_6" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Onerous Contracts &#8211; Cost of Fulfilling a Contract - Amendments
to IAS 37 - Effective January 1, 2022</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_7" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_6"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The amendment to IAS 37 clarifies that the direct costs of fulfilling
a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling
contracts. Before recognizing a separate provision for an onerous contract, the entity recognizes any impairment loss that has occurred
on assets used in fulfilling the contract.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_8" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to the nature of contractual arrangements
with customers, this amendment has not impacted the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_9" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Property, Plant and Equipment: Proceeds before
Intended Use (Amendments to IAS 16) - Effective January 1, 2022</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_10" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendment to IAS 16 Property, Plant and Equipment
(&#8220;PP&amp;E&#8221;) prohibits an entity from deducting from the cost of an item of PP&amp;E any proceeds received from selling items
produced while the entity is preparing the asset for its intended use. It also clarifies that an entity is &#8216;testing whether the
asset is functioning properly&#8217; when it assesses the technical and physical performance of the asset. The financial performance of
the asset is not relevant to this assessment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_11" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Entities must disclose separately the amounts
of proceeds and costs relating to items produced that are not an output of the entity&#8217;s ordinary activities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_12" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group did not sell any items produced by PP&amp;E
while the entity was preparing such asset for its intended use and therefore, this amendment has not impacted the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_13" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Annual Improvements to IFRS Standards 2018-2020
- Effective January 1, 2022</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_14" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following improvements were finalized in May 2020:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_15" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">IFRS 9 <i>Financial Instruments</i> &#8211; clarifies
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 31 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_16" id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">IFRS 16 <i>Leases</i> &#8211; amendment of illustrative
example 13 to remove the illustration of payments from the lessor relating to leasehold improvements in order to remove any confusion
about the treatment of lease incentives. No payments were received from lessors related to leasehold improvements during the year ended
December 31, 2022 and therefore, this amendment has not impacted the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DescriptionOfInitialApplicationOfStandardsOrInterpretations-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The evaluation performed by Management determined
that there was not significant impact in relation to the Group as of December 31, 2022.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_2" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain new accounting standards and interpretations
have been published that are not mandatory for the year ended December 31, 2022 and have not been early adopted by the Group. These standards
are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_3" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the issue date of these Consolidated Financial
Statements, the following new and revised IFRS standards have been issued, but are not yet effective:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_4" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>IFRS 17 Insurance Contracts - Effective January
1, 2023</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_5" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">IFRS 17 provides the first comprehensive guidance
on accounting for insurance contracts under IFRS accounting standards. Its objective is to increase transparency and reduce diversity
in the accounting for insurance contracts. The Group does not have insurance contracts, as such, this new standard is not applicable to
the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_6" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Disclosure of Accounting Policies (Amendments
to IAS 1 and IFRS Practice Statement 2) - Effective January 1, 2023</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_7" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The IASB has issued amendments to IAS 1 <i>Presentation
of Financial Statements</i> and an update to IFRS Practice Statement 2 <i>Making Materiality Judgements</i> to provide further clarification
on the applying the concept of materiality and to help companies provide useful accounting policy disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_8" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The key amendments to IAS 1 include:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_9" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                   </table></ix:continuation><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_10" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">clarifying that accounting policies related to immaterial transactions, other events or conditions are
themselves immaterial and as such need not be disclosed; and</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                      </table></ix:continuation><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_11" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">clarifying that not all accounting policies that relate to material transactions, other events or conditions
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</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_12" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The IASB also amended IFRS Practice Statement
2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_13" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Group is in the process of performing its
assessment of the impacts of the new amendment and anticipate a change in the disclosure of accounting policies upon adoption. However,
early adoption was not elected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_14" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Definition of Accounting Estimate (Amendments
to IAS 8) - Effective January 1, 2023</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_15" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendments introduce a new definition for
accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_16" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set
out by an accounting policy. The distinction between the two is important because changes in accounting policies are applied retrospectively,
whereas changes in accounting estimates are applied prospectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 32 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_17" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_16"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Group is in the process of performing its assessment of the impacts
of the amendment to IAS 8 <i>Accounting Policies, Changes in Accounting Estimates and Errors</i>, but does not anticipate a significant
change in its accounting estimates upon adoption. However, early adoption was not elected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_18" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_17"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction &#8211; Amendments to IAS 12 Income Taxes - Effective January 1, 2023</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_19" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Targeted amendments to IAS 12 <i>Income Taxes</i>
clarify how companies should account for deferred tax on transactions such as leases and decommissioning provisions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_20" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendments narrow the scope of the initial
recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As
a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial
recognition of a lease and a decommissioning provision.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_21" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For leases and decommissioning liabilities, the
associated deferred tax asset and liabilities will need to be recognized from the beginning of the earliest comparative period presented,
with any cumulative effect recognized as an adjustment to retained earnings or other components of equity at that date. The Group is in
the process of performing its assessment of the impacts of the new standard and anticipate a change in the recognition of deferred assets
and liabilities upon adoption. However, early adoption was not elected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_22" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Classification of Liabilities as Current or
Non-current and Non-current Liabilities with Covenants (Amendments to IAS 1) - Effective January 1, 2024</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_23" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The narrow-scope amendments to IAS 1 <i>Presentation
of Financial Statements</i> clarify that liabilities are classified as either current or non-current, depending on the rights that exist
at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date
(e.g. the receipt of a waiver or a breach of covenant).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_24" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendments also clarify what IAS 1 means when
it refers to the &#8216;settlement&#8217; of a liability. The amendments could affect the classification of liabilities, particularly
for entities that previously considered management&#8217;s intentions to determine classification and for some liabilities that can be
converted into equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_25" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the amendments also indicate that
a company should classify a liability as non-current if it has a right to defer settlement for at least 12 months after the reporting
date. This right may be subject to a company complying with conditions (covenants) specified in a loan arrangement. Covenants with which
the company must comply after the reporting date (i.e., future covenants) do not affect a liability&#8217;s classification at the reporting
date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose information to help users
understand the risk that those liabilities could become repayable within 12 months after the reporting date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_26" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amendments must be applied retrospectively
in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The Group is in the
process of performing its assessment of the impacts of the new standard and anticipate a change in the classification of warrants and
shares held in escrow upon adoption from non-current to current liabilities. However, early adoption was not elected.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_27" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Lease
Liability in a Sale and Leaseback (Amendments to IFRS 16) - Effective January 1, 2024</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_28" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0; margin-right: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amendments require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize
any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from
recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. The Group is in the process of
performing its assessment of the impacts of the new standard. However, early adoption was not elected.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_29" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>IFRS
10 and IAS 28 - Amendments - Sales or contributions of assets between an investor and its associate or joint venture.</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_30" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
IASB has made limited scope amendments to IFRS 10 <i>Consolidated financial statements</i> and IAS 28 <i>Investments in associates and
joint ventures</i>.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_31" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amendments clarify the accounting treatment for sales or contributions of assets between an investor and its associates or joint ventures.
They confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture
constitute a &#8216;business&#8217; (as defined in IFRS 3 Business Combinations).</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_32" id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Where
the non-monetary assets constitute a business, the investor will recognize the full gain or loss on the sale or contribution of assets.
If the assets do not meet the definition of a business, the gain or loss is recognized by the investor only to the extent of the other
investor&#8217;s interests in the associate or joint venture. The amendments apply prospectively.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="pgsa_RecentAccountingPronouncementsNotYetAdoptedTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
effective date of the amendments has been deferred indefinitely by the IASB; however, early application of the amendments is permitted.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfRevenueExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
7. Revenue</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_2" id="_DisclosureOfRevenueExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group recognizes its revenues from the transfer of goods and services to the fulfillment of its performance obligations. The Group&#8217;s
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_3" id="_DisclosureOfRevenueExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Products</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_4" id="_DisclosureOfRevenueExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group primarily engages in developing, producing and marketing pharmaceutical solutions. It is considered an integrated international
healthcare and pharmaceutical company across the three core therapeutical areas: hospitals/clinics, pharmacies (prescription) and over-the-counter
(non-prescription).</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_5" id="_DisclosureOfRevenueExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group&#8217;s main products for the years ended December 31, 2022, 2021 and 2020 are:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>



</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_6" id="_DisclosureOfRevenueExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Business
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_7" id="_DisclosureOfRevenueExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Nextgel</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>





</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_8" id="_DisclosureOfRevenueExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">i.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Softgel:
Integrated CMDO, soft gelatin capsules, softgels, gummy-gels and GTabs.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_9" id="_DisclosureOfRevenueExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Business
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_10" id="_DisclosureOfRevenueExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Procaps
Colombia, CAN and CASAND</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_11" id="_DisclosureOfRevenueExplanatory-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_12" id="_DisclosureOfRevenueExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 1in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">i.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Clinical
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_13" id="_DisclosureOfRevenueExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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                                            Branded prescription drugs.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>
</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Page; Sequence: 34 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_14" id="_DisclosureOfRevenueExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Diabetrics</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_15" id="_DisclosureOfRevenueExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_16" id="_DisclosureOfRevenueExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Disaggregation
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_17" id="_DisclosureOfRevenueExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Revenue
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</div><div>

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    <td colspan="2">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRevenueExplanatory-c0_cont_20" id="_DisclosureOfRevenueExplanatory-c0_cont_19"><ix:continuation id="_DisclosureOfDisaggregationOfRevenueFromContractsWithCustomersExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>




</div><div>

</div><ix:continuation id="_DisclosureOfRevenueExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Revenue
recognized from goods transferred at a point in time include revenues related to &#8220;sales of goods&#8221; and &#8220;sales of trademarks
and sanitary records&#8221;. Revenue recognized from services transferred over time include revenues related to &#8220;intellectual property
licensing&#8221; and &#8220;dossier generation&#8221;. Revenues, other than sales of goods, are not material to the Group.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 35 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
8. Segment reporting</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_2" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Segment
information is presented at a combination of geographical segments and business units, consistent with the information that is available
and evaluated regularly by the chief operating decision maker.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_3" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group operates its business through five segments which are its reportable segments for financial reporting purposes: Procaps Colombia,
Central America North (&#8220;CAN&#8221;), Central America South and North Andes (&#8220;CASAND&#8221;), NextGel and Diabetrics. Segment
management, the respective Vice Presidents, are responsible for managing performance, underlying risks and operations. Management uses
a broad set of performance indicators, to measure segment performance and to make decisions around resource allocation.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_4" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group&#8217;s customer revenue recognition (external revenue) policy has been consistent with inter-segment revenue generated.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_5" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfCustomerRevenueRecognitionExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_7" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_6"><ix:continuation continuedAt="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_3" id="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>



</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 36 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.35pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_8" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_7"><ix:continuation continuedAt="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_4" id="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; padding-left: 0.125in; text-indent: -0.125in; vertical-align: bottom; font-weight: bold; text-align: left">Year
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_9" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_8"><ix:continuation continuedAt="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_5" id="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_10" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_9"><ix:continuation continuedAt="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_6" id="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_11" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_10"><ix:continuation id="pgsa_DisclosureOfCustomerRevenueRecognitionExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contribution
Margin is determined by subtracting sales and marketing expenses from gross profit. The Group&#8217;s customer revenue recognition (external
revenue) policy has been consistent with inter-segment revenue generated.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_13" id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfExpensesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
9. Finance income (expenses), net</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_2" id="_DisclosureOfExpensesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfFinanceExpensesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FeeAndCommissionExpense" scale="3" unitRef="usd">8,498</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FeeAndCommissionExpense" scale="3" unitRef="usd">2,263</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Other financial expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OtherFinancialExpenses" scale="3" unitRef="usd">1,033</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OtherFinancialExpenses" scale="3" unitRef="usd">354</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Net fair value gain of warrant liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:NetFairValueGainOfWarrantLiabilities" scale="3" unitRef="usd">12,196</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:NetFairValueGainOfWarrantLiabilities" scale="3" unitRef="usd">5,851</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-202">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Net fair value gain of shares held in escrow</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:NetFairValueGainOfSharesHeldInEscrow" scale="3" unitRef="usd">61,795</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:NetFairValueGainOfSharesHeldInEscrow" scale="3" unitRef="usd">4,506</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-203">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Interest expense</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpense" scale="3" unitRef="usd">25,762</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpense" scale="3" unitRef="usd">85,320</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpense" scale="3" unitRef="usd">52,632</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total income (expense)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TotalIncomeexpense" scale="3" unitRef="usd">37,917</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TotalIncomeexpense" scale="3" sign="-" unitRef="usd">78,636</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TotalIncomeexpense" scale="3" sign="-" unitRef="usd">54,489</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_3" id="_DisclosureOfExpensesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:BankFees" scale="3" unitRef="usd">6,076</ix:nonFraction> of the bank fees relate to the amortization of upfront and commitment fees incurred under the Bridge Credit Agreement which
was subsequently terminated, as mentioned in Note 1. General Company Information and Note 28. Events after the reporting period. The
upfront and commitment fees are amortized using the straight-line method over the commitment period.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_4" id="_DisclosureOfExpensesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 25. Warrant Liabilities, Note 26.1. Reverse reorganization and Note 27. Financial instruments for further information related
to net fair value gains for the years ended December 31, 2022 and 2021.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_5" id="_DisclosureOfExpensesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the years ended December 31, 2021 and 2020, interest expense includes the finance expense related to the obligation to repurchase the
Group&#8217;s ordinary shares from IFC and Hoche under the Put Option Agreements and is measured using the effective interest rate method,
inclusive of eligible transaction costs. The amount of interest expense, related to the put options recognized in 2021 and 2020, amounts
to $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:InterestExpenseRelatedToThePutOptionAmortization" scale="3" unitRef="usd">23,506</ix:nonFraction> and $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:InterestExpenseRelatedToThePutOptionAmortization" scale="3" unitRef="usd">27,344</ix:nonFraction>, respectively. Additionally, an extinguishment loss of $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:RenegotiatedOfTheObligationsWithHoche" scale="3" unitRef="usd">35,920</ix:nonFraction> was recognized in 2021, reflecting the re-negotiated
commencement date for the annual return of the obligation under the Put Option Agreement with Hoche. On the effectiveness of the Transaction,
September 29, 2021, both Put Option Agreements were terminated in exchange for ordinary shares issued by Holdco. The termination of the
put option resulted in the associated liabilities to be reclassified into Company&#8217;s equity.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_6" id="_DisclosureOfExpensesExplanatory-c0_cont_5"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, interest on lease liabilities amounted to $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpenseOnLeaseLiabilities" scale="3" unitRef="usd">1,033</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpenseOnLeaseLiabilities" scale="3" unitRef="usd">720</ix:nonFraction>, 2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpenseOnLeaseLiabilities" scale="3" unitRef="usd">601</ix:nonFraction>). Refer to Note 3.3. Leases - Right-of-use assets &amp;
lease liabilities for method of recognition of interest expense applied by the Group.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfExpensesExplanatory-c0_cont_7" id="_DisclosureOfExpensesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, interest expense includes an extinguishment loss of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestExpenseOnBonds" scale="3" unitRef="usd">1,601</ix:nonFraction>, as a result of the substantially modified terms of the Senior Notes.
Refer to Note 19. Borrowings for further information related to the debt extinguishment.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfExpensesExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
fair value gains recognized in Finance income (expenses), net during 2022 and 2021 are unrealized. The Group did not realize any significant
finance income during 2020.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_2" id="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfOtherExpensesExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfOtherExpensesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_3" id="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_2"><ix:continuation continuedAt="pgsa_DisclosureOfOtherExpensesExplanatory-c0_cont_2" id="pgsa_DisclosureOfOtherExpensesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_4_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Corresponds
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by dilutive effect of shares held in escrow at a weighted average fair value per share. Refer to Note 26.1. Reverse reorganization for
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</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation id="_DisclosureOfOtherOperatingExpenseExplanatory-c0_cont_3"><ix:continuation id="pgsa_DisclosureOfOtherExpensesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfIncomeTaxExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_2" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_3" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfIncomeTaxRecognizedThroughProfitOrLossExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_4" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Reconciliation
of effective tax rate</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_5" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureReconciliationOfEffectiveTaxRateExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the year ended December 31</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TaxEffectOfRevenuesExemptFromTaxation2011" scale="3" unitRef="usd">7,754</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Effect of different tax rates of subsidiaries operating in other jurisdictions</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TaxEffectOfForeignTaxRates" scale="3" unitRef="usd">1,249</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TaxEffectOfForeignTaxRates" scale="3" unitRef="usd">9,423</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_6" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">The
tax rate used for 2022 represents the corporate tax rate of </span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:TaxRateEffectFromChangeInTaxRate" scale="-2" unitRef="pure">17</ix:nonFraction>%
<span style="background-color: white">(2021: <ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:TaxRateEffectFromChangeInTaxRate" scale="-2" unitRef="pure">17</ix:nonFraction>%, 2020: <ix:nonFraction contextRef="c6" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:TaxRateEffectFromChangeInTaxRate" scale="-2" unitRef="pure">35</ix:nonFraction>%) from Luxembourg on the taxable income payable by the Group, in accordance
with the tax laws of said jurisdiction. Income tax for other jurisdictions is calculated based on the substantially enacted nominal tax
rates prevailing in the respective jurisdictions. After effectiveness of the Transaction on September 29, 2021, the Group&#8217;s corporate
tax jurisdiction changed from Malta to Luxembourg where the corporate tax rate is <ix:nonFraction contextRef="c182" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:TaxRateEffectFromChangeInTaxRate" scale="-2" unitRef="pure">17</ix:nonFraction>%. </span></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_7" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">On
September 14, 2021, Colombia&#8217;s President approved the Social Investment Law (Ley de Inversi&#243;n Social, or the &#8220;2021
Colombian Tax Reform&#8221;), which includes certain tax measures intended to generate additional tax revenues to fund social programs
for purposes of mitigating the impact of the COVID-19 pandemic. The 2021 Colombian Tax Reform took effect beginning in 2022 and, among
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and branches.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_8" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">On
December 13, 2022, the Colombian President enacted Law 2277 of 2022, which contains the tax reform proposals previously approved by congress.
The purpose of the amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These
tax measures include, among other things, c</span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">orporate
tax rate to remain unchanged at <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="pgsa:CorporateTaxRate" scale="-2" unitRef="pure">35</ix:nonFraction>%. However, a new net tax rate will be introduced, under which Colombian companies, including free
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on financial net profit, in accordance with the OECD Pillar Two global minimum tax rules. Some changes that alter substantial matters
concerning periodic taxes enter into force as from January 1, 2023, and certain other provisions enter into force on a date specified
in the legislation. The Group is evaluating the potential impact of this tax reform and cannot anticipate the impact it may have on the
Group.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_9" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Current
tax assets and current tax liabilities:</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_10" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfCurrentTaxAssetsAndCurrentTaxLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:IncomeTaxWithholding" scale="3" sign="-" unitRef="usd">8,982</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_11" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2022 and 2021, the following is the detail of the tax losses of the Group that have not been used and on which no active
deferred tax has been recognized:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfIncomeTaxExplanatory-c0_cont_11"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfTaxLossesAndExcessPresumptiveIncomeOfTheCompanyThatHaveNotBeenUsedAndOnWhichNoActiveDeferredTaxHasBeenRecognizedExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfGoodwillExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
12. Goodwill</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_2" id="_DisclosureOfGoodwillExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfReconciliationOfChangesInGoodwillExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_3" id="_DisclosureOfGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group completed its annual impairment test for goodwill for the years ended December 31, 2022 and 2021 and concluded that no impairment
charge was warranted for Procaps S.A. de C.V. and Biokemical S.A. de C.V. cash generating units. However, as of December 31, 2022 an
impairment loss was recognized for the Rymco cash generating unit (in regards to prior periods, goodwill impairment losses hadn&#8217;t previously
been recognized). The Group cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect
the value of the asset reported. The Group believes that all of its estimates are reasonable and are consistent with the Group&#8217;s
internal reporting and reflect management&#8217;s best estimates.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_4" id="_DisclosureOfGoodwillExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Allocation
of goodwill to cash generating units</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_5" id="_DisclosureOfGoodwillExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the purpose of impairment testing, goodwill has been allocated to the following cash-generating units, which belong to different reportable
segments:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Reportable segment</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 55%; text-align: left">Procaps S.A. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 20%; text-align: center">CAN</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">549</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">549</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Biokemical S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center">CAN</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,242</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,242</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_6" id="_DisclosureOfGoodwillExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group has three cash generating units - <i>Procaps, S.A, de C.V.,</i> is engaged in the manufacturing and distribution of pharmaceutical
products, <i>Biokemical S.A. de C.V.</i> which also manufactures and distributes pharmaceutical products, and <i>Rymco,</i> a manufacturer
and seller of syringes, needles, and infusion equipment.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_7" id="_DisclosureOfGoodwillExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
determine the recoverable amount for each of these cash generating units, a value-in-use calculation was conducted using cash flow projections
from approved financial budgets over a specific period, along with an annual discount rate. For cash flows beyond the number of years
used in projection, a fixed annual growth rate was used to extrapolate the projections. The chosen period for the cash flow projection
represents the stable long-term position, and hence, the cash flows were extrapolated using a steady growth rate in the second stage.
The sales growth rate and fixed gross margins were used as inputs for the cash flow projections during the budgeted period, and the directors
estimated the growth rate based on past performance and their expectations of market development. The following key assumptions and inputs
were considered in the calculation of projected the cash flows of the cash generating units:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_9" id="_DisclosureOfGoodwillExplanatory-c0_cont_8"><ix:continuation continuedAt="pgsa_DisclosureOfKeyAssumptionsAndInputsUsedToExtrapolateCashFlowProjectionsTableExplanatory-c0_cont_2" id="pgsa_DisclosureOfKeyAssumptionsAndInputsUsedToExtrapolateCashFlowProjectionsTableExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_6_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
rate is consistent with the growth of the pharmaceutical and medical supplies markets in the current and potential operating areas of
the cash-generating units.</span></ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_10" id="_DisclosureOfGoodwillExplanatory-c0_cont_9"><ix:continuation continuedAt="pgsa_DisclosureOfKeyAssumptionsAndInputsUsedToExtrapolateCashFlowProjectionsTableExplanatory-c0_cont_3" id="pgsa_DisclosureOfKeyAssumptionsAndInputsUsedToExtrapolateCashFlowProjectionsTableExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>2</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_7_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fixed
gross margins were used in the cash flow projections for Procaps S.A. de C.V.</span></ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_11" id="_DisclosureOfGoodwillExplanatory-c0_cont_10"><ix:continuation id="pgsa_DisclosureOfKeyAssumptionsAndInputsUsedToExtrapolateCashFlowProjectionsTableExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>3</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management
considers that the planned growth of market share for the next five to eight years is reasonably achievable.</span></ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_12" id="_DisclosureOfGoodwillExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
table below indicates the amount by which estimated recoverable amount of the cash generated units exceeded its carrying amount:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Reportable segment</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 55%; text-align: left">Procaps S.A. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 20%; text-align: center">CAN</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">11,863</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Biokemical S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center">CAN</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7,205</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,932</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Rymco</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(11,741</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,766</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_13" id="_DisclosureOfGoodwillExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
impairment in Rymco is due to the decrease in sales and declining market conditions. During 2021, the production capacity of Rymco&#8217;s
manufacturing facilities was expanded to meet the increased demand for its products that helped reduce the spread of the COVID-19 virus.
However, during 2022, due to the end of the COVID-19 epidemic, the demand for those products significantly declined and, as a result,
so did the selling prices due to oversupply in the marketplace.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 42 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_14" id="_DisclosureOfGoodwillExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the impairment identified as of December 31, 2022, the Group assessed the assets within Rymco subject to IAS 36 and recognized
an impairment loss up to the greater of the recoverable amount of the individual assets or zero. The recoverable amount of the assets
is its individual Level 2 fair value less costs of disposal, which is calculated based on observable market prices for similar assets.
Therefore, a total impairment loss expense of $<ix:nonFraction contextRef="c186" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ImpairmentLoss" scale="3" unitRef="usd">6,018</ix:nonFraction>, which was allocated to the non-financial assets of Rymco as follows:</span></p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_15" id="_DisclosureOfGoodwillExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_16" id="_DisclosureOfGoodwillExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_17" id="_DisclosureOfGoodwillExplanatory-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_18" id="_DisclosureOfGoodwillExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfGoodwillExplanatory-c0_cont_19" id="_DisclosureOfGoodwillExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
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</div><div>

</div><ix:continuation id="_DisclosureOfGoodwillExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
impairment losses are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as Other expenses, net.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfIntangibleAssetsExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_2" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfReconciliationOfChangesInIntangibleAssetsExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfReconciliationOfChangesInIntangibleAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Trademarks and <br/> sanitary records</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 43 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_3" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_2"><ix:continuation id="pgsa_DisclosureOfReconciliationOfChangesInIntangibleAssetsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency exchange</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Balance as of December 31, 2022</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_4" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the years ended December 31, 2022, 2021 and 2020 amortization expenses are recognized within the Consolidated Statement of Profit or
Loss and Other Comprehensive Income as administrative expenses.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_5" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
currency exchange corresponds to the effect of translating the intangible asset amounts attributable to the subsidiaries of the Group
whose functional currencies are different from that of the Group.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
14. Property, plant and equipment, net</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 44 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_3" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_2"><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Depreciation expense</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Transfers</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_4" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_3"><ix:continuation id="_DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8216;<ix:footnote id="ix_9_footnote" xml:lang="en-US">Other&#8217;
includes computer equipment and other office furniture and equipment.</ix:footnote></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_5" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2022, depreciation expense was recognized as follows: $<ix:nonFraction contextRef="c251" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CostOfSales" scale="3" unitRef="usd">4,504</ix:nonFraction> was recognized as Cost of sales (2021: $<ix:nonFraction contextRef="c252" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CostOfSales" scale="3" unitRef="usd">4,382</ix:nonFraction>), for manufacturing
costs, and $<ix:nonFraction contextRef="c251" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:SellingGeneralAndAdministrativeExpense" scale="3" unitRef="usd">1,152</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c252" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:SellingGeneralAndAdministrativeExpense" scale="3" unitRef="usd">1,690</ix:nonFraction>) within Administrative expenses.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_6" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_7" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Financial
Commitments</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_8" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of year-end 2022, the Group has commitments to acquire capital expenditures fo<span style="background-color: white">r $<ix:nonFraction contextRef="c253" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CapitalCommitments" scale="3" unitRef="usd">2,304</ix:nonFraction></span> (2021:
$<ix:nonFraction contextRef="c254" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CapitalCommitments" scale="3" unitRef="usd">3,585</ix:nonFraction>).</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_9" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Asset
Acquisition of a Pharmaceutical Production Facility </i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c251" name="pgsa:AssetPurchaseAgreementDescription"><ix:continuation id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2021 the Group acquired an 86,000 sq. ft. pharmaceutical production facility. The purchase price allocated to property,
plant and equipment based on the estimated fair value of the assets acquired at the date of the asset acquisition was $1,487. Please
refer to Note 26.2. Asset acquisition - Pharmaceutical production facility.</span></p></ix:continuation></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfLeasesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
15. Leases</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_2" id="_DisclosureOfLeasesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group has leases of office and warehouse buildings, land, vehicles, machinery and computer hardware. Rental contracts are for fixed terms
varying between one and seven years.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_3" id="_DisclosureOfLeasesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Information
about leases for which the Group is a lessee is presented below.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 45 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_4" id="_DisclosureOfLeasesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration:underline">Right-of-use
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_5" id="_DisclosureOfLeasesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Reconciliation
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_6" id="_DisclosureOfLeasesExplanatory-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_7" id="_DisclosureOfLeasesExplanatory-c0_cont_6"><ix:continuation id="_DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_10_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Includes
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_8" id="_DisclosureOfLeasesExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
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administrative costs (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DistributionAndAdministrativeExpense" scale="3" unitRef="usd">3,633</ix:nonFraction>) and $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostOfGoodsSold" scale="3" unitRef="usd">1,786</ix:nonFraction> </span>(2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CostOfGoodsSold" scale="3" unitRef="usd">590</ix:nonFraction>) within cost of goods sold, related to plant leases.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_9" id="_DisclosureOfLeasesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_10" id="_DisclosureOfLeasesExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2021 the Group assumed rights
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from Strides Pharma, Inc. Refer to Note 26.2. Asset acquisition - Pharmaceutical production facility.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_11" id="_DisclosureOfLeasesExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Lease
Liabilities</i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_12" id="_DisclosureOfLeasesExplanatory-c0_cont_11"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group&#8217;s lease liabilities are guaranteed by the lessor&#8217;s title to the leased assets. As of December 31, 2022 and 2021, the Group
maintains the following opened balances:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_13" id="_DisclosureOfLeasesExplanatory-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfLeaseLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 76%">Non-current</td><td style="width: 1%">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentLeaseLiabilities" scale="3" unitRef="usd">9,053</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="font-weight: bold; padding-bottom: 1.5pt">Total</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_14" id="_DisclosureOfLeasesExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
remaining contractual maturity and repayment periods of the Group&#8217;s leases liabilities are exhibited in Note 27. Financial instruments.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_15" id="_DisclosureOfLeasesExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Carrying
amounts of lease liabilities are included in Borrowings&#8217; balance, refer to Note 19. Borrowings.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_16" id="_DisclosureOfLeasesExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2021 the Group assumed all
obligations and liabilities undertaken as sublessee under the Sublease Agreement with a pending balance of $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AcquisitionTransactionPendingBalance" scale="3" unitRef="usd">4,533</ix:nonFraction> that were part of the
asset acquisition transaction of a pharmaceutical production facility that was purchased from Strides Pharma, Inc. Refer to Note 26.2.
Asset acquisition - Pharmaceutical production facility.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>
</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 46 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_17" id="_DisclosureOfLeasesExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Amounts
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_18" id="_DisclosureOfLeasesExplanatory-c0_cont_17"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfLeasesRelatedCostsRecognizedInTheConsolidatedStatementOfProfitOrLossExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_19" id="_DisclosureOfLeasesExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Amounts
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</div><div>

</div><ix:continuation id="_DisclosureOfLeasesExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfJointVenturesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_2" id="_DisclosureOfJointVenturesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfCarryingAmountOfTheCompanysInterestInPromedicalSAExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfCarryingAmountOfTheCompanysInterestInPromedicalSAExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_3" id="_DisclosureOfJointVenturesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Promedical
S.A. is accounted for using the equity method in these Consolidated Financial Statements. Pursuant to a shareholder agreement, the Group
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_4" id="_DisclosureOfJointVenturesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_5" id="_DisclosureOfJointVenturesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
other summary information that precedes the reconciliation to the Group&#8217;s carrying amount represents amounts included in the IFRS financial
statements of the joint venture, not the entity&#8217;s share of these amounts, although they are adjusted to reflect fair value adjustments
upon acquisition or accounting policy alignments.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfJointVenturesExplanatory-c0_cont_6" id="_DisclosureOfJointVenturesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Summarized financial information of Promedical
S.A is set out below. The summarized financial information below represents amounts in the Promedical S.A.&#8217;s financial statements
prepared in accordance with IFRS Standards, adjusted by the Group for equity accounting purposes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:continuation><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 47 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><div>

</div><ix:continuation id="_DisclosureOfJointVenturesExplanatory-c0_cont_7"><ix:continuation id="pgsa_DisclosureOfCarryingAmountOfTheCompanysInterestInPromedicalSAExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Other adjustments</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:OtherAdjustment" scale="3" sign="-" unitRef="usd">774</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Carrying amount of the Group&#8217;s interest in Promedical S.A.</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InvestmentsInSubsidiariesJointVenturesAndAssociates" scale="3" unitRef="usd">2,443</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table></ix:continuation></ix:continuation><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfInventoriesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
17. Inventories, net</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_2" id="_DisclosureOfInventoriesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfInventoryExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Raw materials and supplies</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Products in process</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:WorkInProgress" scale="3" unitRef="usd">7,412</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:WorkInProgress" scale="3" unitRef="usd">6,240</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Finished products and merchandise</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FinishedGoodsAndMerchandise" scale="3" unitRef="usd">41,492</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FinishedGoodsAndMerchandise" scale="3" unitRef="usd">31,791</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Inventory in transit</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentInventoriesInTransit" scale="3" unitRef="usd">11,531</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentInventoriesInTransit" scale="3" unitRef="usd">9,645</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 1.5pt">Subtotal</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CurrentGrossInventories" scale="3" unitRef="usd">103,136</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CurrentGrossInventories" scale="3" unitRef="usd">85,700</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Less: Provision</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherShorttermProvisions" scale="3" unitRef="usd">6,303</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherShorttermProvisions" scale="3" unitRef="usd">6,270</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 1.5pt">Total</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InventoriesTotal" scale="3" unitRef="usd">96,833</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InventoriesTotal" scale="3" unitRef="usd">79,430</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_3" id="_DisclosureOfInventoriesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inventories
recognized as cost of goods sold during the year ended December&#160;31, 2022 amounted to $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CostOfInventoriesRecognisedAsExpenseDuringPeriod" scale="3" unitRef="usd">170,351</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CostOfInventoriesRecognisedAsExpenseDuringPeriod" scale="3" unitRef="usd">174,029</ix:nonFraction>). Inventories used
as samples for the year ended December&#160;31, 2022 amounted to $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:InventoriesRecognizedAsMarketingExpenses" scale="3" unitRef="usd">6,659</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:InventoriesRecognizedAsMarketingExpenses" scale="3" unitRef="usd">3,867</ix:nonFraction>) were recognized as marketing expenses.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfInventoriesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Write-downs
of inventories to net realizable value and obsolescence adjustments amounted to $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:WritedownToNetRealizableValue" scale="3" unitRef="usd">5,717</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:WritedownToNetRealizableValue" scale="3" unitRef="usd">5,391</ix:nonFraction>), were recognized within sales expenses
during the year ended December&#160;31, 2022.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note
18. Trade and other receivables, net</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_2" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfTradeAndOtherReceivableExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfTradeAndOtherReceivableExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December 31</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trade receivables, net of discounts <sup>1</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" id="ix_106_fact" name="ifrs-full:CurrentTradeReceivables" scale="3" unitRef="usd">126,456</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" id="ix_107_fact" name="ifrs-full:CurrentTradeReceivables" scale="3" unitRef="usd">111,071</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other receivables</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherReceivables" scale="3" unitRef="usd">15,211</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherReceivables" scale="3" unitRef="usd">16,408</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impairment of trade and other receivables <sup>2</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" id="ix_108_fact" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossTradeReceivables" scale="3" unitRef="usd">12,065</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_109_fact" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossTradeReceivables" scale="3" unitRef="usd">10,030</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Trade receivables, net of discounts and impairment</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherCurrentReceivables" scale="3" unitRef="usd">129,602</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherCurrentReceivables" scale="3" unitRef="usd">117,449</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_3" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_2"><ix:continuation continuedAt="pgsa_DisclosureOfTradeAndOtherReceivableExplanatory-c0_cont_2" id="pgsa_DisclosureOfTradeAndOtherReceivableExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_11_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Discount
and return provision amounts to $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:DiscountProvisionAmounts" scale="3" unitRef="usd">13,443</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:DiscountProvisionAmounts" scale="3" unitRef="usd">7,345</ix:nonFraction>).</span></ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_4" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_3"><ix:continuation id="pgsa_DisclosureOfTradeAndOtherReceivableExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>2</sup></span></td><td style="text-align: justify"><ix:footnote id="ix_12_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Refer
to Note 27. Financial instruments for the Group&#8217;s disclosures on credit risk management and expected credit losses.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 48 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_5" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Refer to Note 27. Financial instruments for the
Group&#8217;s disclosures on credit risk management and expected credit losses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group has entered into factoring arrangements
to sell certain trade receivables to third parties under recourse programs, retaining all risk and rewards incidental to the trade receivables,
so no derecognition of the financial assets has been performed. Trade receivables which collateralize factoring obligations as of December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfBorrowingsExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 19. Borrowings </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_2" id="_DisclosureOfBorrowingsExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfUnsecuredBorrowingAtAmortizedCostExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfUnsecuredBorrowingAtAmortizedCostExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Bank overdrafts (5)</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" id="ix_121_fact" name="pgsa:SeniorNotes1" scale="3" unitRef="usd">112,857</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_3" id="_DisclosureOfBorrowingsExplanatory-c0_cont_2"><ix:continuation id="pgsa_DisclosureOfUnsecuredBorrowingAtAmortizedCostExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_13_footnote" xml:lang="en-US">Borrowings at amortized cost are unsecured, with the exception
of factoring obligations which are collateralized by trade receivables. Refer to Note 18. Trade and other receivables, net.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_4" id="_DisclosureOfBorrowingsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Information about the Group&#8217;s exposure to interest
rate, foreign currency and liquidity risk is included in Note 27. Financial instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_5" id="_DisclosureOfBorrowingsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><i>1.</i></td><td style="text-align: justify"><i>Syndicated term loan</i></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_6" id="_DisclosureOfBorrowingsExplanatory-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfFinancialLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: center; padding-left: 2.65pt"><ix:nonNumeric contextRef="c354" name="ifrs-full:BorrowingsOriginalCurrency">USD</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: center; padding-left: 2.65pt"><ix:nonNumeric contextRef="c354" name="ifrs-full:BorrowingsInterestRateBasis">Libor+ 4.8% (Variable)</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonNumeric contextRef="c354" name="ifrs-full:BorrowingsMaturity">2022</ix:nonNumeric></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-254">&#8212;&#160;&#160;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c356" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:SyndicatedTermLoan" scale="3" unitRef="usd">7,850</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Amortized cost</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_7" id="_DisclosureOfBorrowingsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On November 20, 2018, Procaps S.A. entered into
a syndicated term loan agreement the &#8220;Syndicated Loan Agreement&#8221;) with the following banks: Portion in Colombian pesos (COP)
- Davivienda and Bancolombia; US dollar portion (USD) - Banco de Credito del Peru, Bancolombia Panama and Banco Sabadell. The total value
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as the agent of the loan. C.I. Procaps S.A., Procaps S.A. de C.V, Biokemical S.A., Pharmarketing S.A. (Panama), Pharmarketing Salvador
S.A. de C.V., Pharmarketing S.A. (Guatemala S.A.), C.D.I. Salvador S.A. de C.V., C.D.I. Nicaragua S.A., C.D.I. Guatemala S.A., Pharmarketing
Dominicana SRL, and Pharmarketing Costa Rica S.A., act as co-debtors, while Pharmayect S.A., Inversiones Crynssen S.A.S., Inversiones
Ganeden S.A.S., Inversiones Henia S.A.S., Inversiones Jades S.A.S., and Industrias Kadima S.A.S., act as guarantors.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 49 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_8" id="_DisclosureOfBorrowingsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The resources obtained were used for advance payment
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_9" id="_DisclosureOfBorrowingsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The loans received by Banco de Cr&#233;dito
del Peru and Banco Sabadell were precanceled during the month of November 2021, due to the improvement in terms and conditions under the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_10" id="_DisclosureOfBorrowingsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The significant covenants required by the Syndicated
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_11" id="_DisclosureOfBorrowingsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Financial covenants</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_12" id="_DisclosureOfBorrowingsExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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term, must be less than or equal to 3.5 times. If the indicator is greater than 3.0 and less than 3.5, it proceeds to the extent that
this value is originated by causes other than additional debt and the justification of the increase must be presented to the agent.</ix:continuation></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_13" id="_DisclosureOfBorrowingsExplanatory-c0_cont_12"><ix:continuation continuedAt="pgsa_FinancialCommitmentsOfDescription-c0_cont_3" id="pgsa_FinancialCommitmentsOfDescription-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Short-term leverage ratio must be less than 1.0 on the last day of each semester.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_14" id="_DisclosureOfBorrowingsExplanatory-c0_cont_13"><ix:continuation id="pgsa_FinancialCommitmentsOfDescription-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_15" id="_DisclosureOfBorrowingsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Other covenants</span></p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_16" id="_DisclosureOfBorrowingsExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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the express, prior and written authorization of the agent, will refrain from incurring any type of financial debt when the proforma indebtedness
indicator, once acquired the additional financial debt, is greater than 3.0 times and maintaining any type of financial debt when the
pro forma indebtedness indicator, once the national debt is acquired, is greater than 3.5 times.</ix:continuation></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_17" id="_DisclosureOfBorrowingsExplanatory-c0_cont_16"><ix:continuation continuedAt="pgsa_OtherCommitmentsOfDescription-c0_cont_3" id="pgsa_OtherCommitmentsOfDescription-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Each of the joint obligated parties, except with express, prior and written authorization of the agent
to do otherwise, will refrain from contracting finance and/or operating lease obligations with purchase option with a joint balance payable
greater than $85,000,000 (Eighty-Five Billion Pesos, local currency) or its equivalent in another currency. For purposes of clarity, the
reclassification of obligations as financial lease obligations by application of the accounting standards will not consume the balance
set forth herein and may not be renewed.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_18" id="_DisclosureOfBorrowingsExplanatory-c0_cont_17"><ix:continuation id="pgsa_OtherCommitmentsOfDescription-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_19" id="_DisclosureOfBorrowingsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Syndicated Loan Agreement establishes that,
in the event of breach of covenants by the debtor, the lenders shall be entitled to declare early maturity of the indebtedness thereunder.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_20" id="_DisclosureOfBorrowingsExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">As mentioned
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Loan Agreement. As a result, the $<ix:nonFraction contextRef="c341" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:LiabilityForUnpaidClaimsAndClaimsAdjustmentExpensesIncurredClaims" scale="3" unitRef="usd">19,665</ix:nonFraction> unpaid principal balance previously classified as a noncurrent borrowings, has been </span>reclassified
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</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_21" id="_DisclosureOfBorrowingsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On May 2, 2023 the Group obtained a waiver for the loan covenant breaches
described above. Under the terms of the waiver, the lenders agreed to waive the event of default as of December 31, 2022. In addition,
the Group negotiated an additional waiver to adjust the covenant ratios as noted within Note 28. Events after the reporting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 50 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>&#160;</i></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_22" id="_DisclosureOfBorrowingsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>2. Other term loan</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_23" id="_DisclosureOfBorrowingsExplanatory-c0_cont_22"><ix:continuation continuedAt="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_2" id="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_24" id="_DisclosureOfBorrowingsExplanatory-c0_cont_23"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">On June 28, 2022, Procaps, S.A. entered into a credit agreement with
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as follow:</p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_25" id="_DisclosureOfBorrowingsExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DescriptionOfBTGCreditAgreement-c0_cont_1" name="pgsa:DescriptionOfBTGCreditAgreement">&#9679;</ix:nonNumeric></td><td><ix:continuation continuedAt="pgsa_DescriptionOfBTGCreditAgreement-c0_cont_2" id="pgsa_DescriptionOfBTGCreditAgreement-c0_cont_1">Consolidated Indebtedness Indicator (Indebtedness / EBITDA) must not be greater than 3.5 times.</ix:continuation></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_26" id="_DisclosureOfBorrowingsExplanatory-c0_cont_25"><ix:continuation id="pgsa_DescriptionOfBTGCreditAgreement-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Consolidated EBITDA/Finance expense must not be less than 3 times.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_27" id="_DisclosureOfBorrowingsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="background-color: white">As mentioned
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_28" id="_DisclosureOfBorrowingsExplanatory-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On March 28, 2023 the Group obtained a waiver
for the loan covenant breach. Under the terms of the waiver, BTG Pactual agreed to waive the event of default as of December 31, 2022.
In addition, the Group negotiated an additional waiver to adjust the covenant ratios as noted within Note 28. Events after the reporting
period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_29" id="_DisclosureOfBorrowingsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Along with the <span style="background-color: white">BTG
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_30" id="_DisclosureOfBorrowingsExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Additionally, the Group entered multiple USD based
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 51 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_31" id="_DisclosureOfBorrowingsExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>3. Lease liabilities</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_32" id="_DisclosureOfBorrowingsExplanatory-c0_cont_31"><ix:continuation continuedAt="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_3" id="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font-weight: bold; text-align: center">Currency</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Maturity Year</td>
    <td>&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_33" id="_DisclosureOfBorrowingsExplanatory-c0_cont_32"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
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related party WM Partners, LP.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_34" id="_DisclosureOfBorrowingsExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>4. Factoring obligations</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_35" id="_DisclosureOfBorrowingsExplanatory-c0_cont_34"><ix:continuation continuedAt="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_4" id="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_36" id="_DisclosureOfBorrowingsExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>5. Bank overdraft</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_37" id="_DisclosureOfBorrowingsExplanatory-c0_cont_36"><ix:continuation continuedAt="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_5" id="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_38" id="_DisclosureOfBorrowingsExplanatory-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>6. Notes</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_39" id="_DisclosureOfBorrowingsExplanatory-c0_cont_38"><ix:continuation id="_DisclosureOfFinancialLiabilitiesExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="vertical-align: top; text-align: center; padding-left: 2.65pt"><ix:nonNumeric contextRef="c408" name="ifrs-full:BorrowingsOriginalCurrency">USD</ix:nonNumeric></td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_40" id="_DisclosureOfBorrowingsExplanatory-c0_cont_39"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On November 12, 2021, the Group closed the private
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 52 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_42" id="_DisclosureOfBorrowingsExplanatory-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Debt issuance costs related to the Senior Notes
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</div><div>

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</div><div>

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financial ratios:</p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_45" id="_DisclosureOfBorrowingsExplanatory-c0_cont_44"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_46" id="_DisclosureOfBorrowingsExplanatory-c0_cont_45"><ix:continuation continuedAt="pgsa_DescriptionOfFinancialRatios-c349_cont_3" id="pgsa_DescriptionOfFinancialRatios-c349_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_47" id="_DisclosureOfBorrowingsExplanatory-c0_cont_46"><ix:continuation continuedAt="pgsa_DescriptionOfFinancialRatios-c349_cont_4" id="pgsa_DescriptionOfFinancialRatios-c349_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 53 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_52" id="_DisclosureOfBorrowingsExplanatory-c0_cont_51"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">As of December 31, 2022, the Group did not draw
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</div><div>

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</div><div>

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</div><div>



</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>
</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_55" id="_DisclosureOfBorrowingsExplanatory-c0_cont_54"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_2" id="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_56" id="_DisclosureOfBorrowingsExplanatory-c0_cont_55"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_3" id="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_57" id="_DisclosureOfBorrowingsExplanatory-c0_cont_56"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_4" id="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c443" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:PaymentCashFlows" scale="3" sign="-" unitRef="usd">903</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Notes</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-260">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total liabilities from financing activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c30" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:BorrowingBeginningBalance" scale="3" unitRef="usd">454,518</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:PaymentCashFlows" scale="3" sign="-" unitRef="usd">281,155</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_141_fact" name="ifrs-full:NewLiabilitiesContingentLiabilitiesRecognisedInBusinessCombination" scale="3" unitRef="usd">336,216</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" id="ix_148_fact" name="pgsa:OtherChanges" scale="3" sign="-" unitRef="usd">256,213</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:BorrowingEndingBalance" scale="3" unitRef="usd">253,366</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="margin-top: 0; margin-bottom: 0"></p></ix:continuation></ix:continuation><div>

</div><div>



</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>


</div><ix:continuation continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_58" id="_DisclosureOfBorrowingsExplanatory-c0_cont_57"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_5" id="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_16_footnote" xml:lang="en-US">New liabilities include non-cash activities for invoices
from suppliers financed via reverse factoring $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherAdjustmentsForNoncashItems" scale="3" unitRef="usd">48,138</ix:nonFraction> and acquisition of right-of-use assets $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdditionsToRightofuseAssets" scale="3" unitRef="usd">7,283</ix:nonFraction>.</ix:footnote></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfBorrowingsExplanatory-c0_cont_58"><ix:continuation id="pgsa_DisclosureOfReconciliationOfLiabilityArisingFromFinancingActivitiesExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>2</sup></td><td style="text-align: justify"><ix:footnote id="ix_17_footnote" xml:lang="en-US">Other changes include exchange differences and the termination
of the put option agreements in exchange for new equity instruments in Procaps Group, S.A.</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 54 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfDeferredTaxesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 20. Deferred tax</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_2" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The deferred tax assets and liabilities by type
of temporary difference are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_3" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfDeferredTaxAssetsAndLiabilitiesByTypeOfTemporaryDifferenceExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfDeferredTaxAssetsAndLiabilitiesByTypeOfTemporaryDifferenceExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Net deferred tax asset (liability)</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Trade and other receivables</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c447" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TradeAndOtherReceivable" scale="3" sign="-" unitRef="usd">449</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TradeAndOtherReceivable" scale="3" unitRef="usd">1,357</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Inventories</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c447" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Inventories" scale="3" unitRef="usd">3,930</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Property, plant and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c447" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PropertyPlantAndEquipment" scale="3" unitRef="usd">4,019</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PropertyPlantAndEquipment" scale="3" unitRef="usd">3,486</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Intangibles</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IntangibleAssetsAndGoodwill" scale="3" unitRef="usd">875</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Borrowings and Trade and other payables</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:BorrowingsAndTradeAndOtherCurrentPayables" scale="3" unitRef="usd">3,639</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Provisions and Other liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c447" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ProvisionsAndOtherLiabilities" scale="3" unitRef="usd">1,780</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Others<sup> 1</sup></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c447" decimals="-3" format="ixt:num-dot-decimal" id="ix_149_fact" name="pgsa:Others" scale="3" sign="-" unitRef="usd">523</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" id="ix_150_fact" name="pgsa:Others" scale="3" sign="-" unitRef="usd">1,071</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_4" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_3"><ix:continuation id="pgsa_DisclosureOfDeferredTaxAssetsAndLiabilitiesByTypeOfTemporaryDifferenceExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_5" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfNetDeferredTaxAssets"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_7" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_6"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfChangesInDeferredTaxLiabilityAssetExplanatory-c0_cont_2" id="pgsa_DisclosureOfReconciliationOfChangesInDeferredTaxLiabilityAssetExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_19_footnote" xml:lang="en-US">Deferred tax related to employee defined benefit plans.</ix:footnote></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_8" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_7"><ix:continuation id="pgsa_DisclosureOfReconciliationOfChangesInDeferredTaxLiabilityAssetExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>2</sup></td><td style="text-align: justify"><ix:footnote id="ix_20_footnote" xml:lang="en-US">Deferred tax related to the purchase price acquisition of
intangible assets in Procaps S.A. de C.V.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDeferredTaxesExplanatory-c0_cont_9" id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The deferred tax assets are ordinary in character and comprised of
temporary differences primarily related to the impairment of trade receivable for financial reporting purposes, differences in the financial
statement carrying amount and tax basis of inventories, property, plant and equipment, intangibles, borrowings, provisions, and others.
Given the expected near-term reversal of the deductible temporary differences giving rise to deferred tax assets, it is probable that
future taxable profit will be available as a result of reversing taxable temporary differences to realize the tax benefit of the deferred
tax assets either in the year of reversal or within the twelve-year carryforward period permitted by Colombian income tax law.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfDeferredTaxesExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">There was a deferred tax asset that would have been recognized for
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fiscal losses. However, this asset was not recognized because the Group&#8217;s management considers that there is no certainty of future
taxable income available for compensation. Likewise, no deferred tax liabilities have been recognized from those entities in which the
Group has control and in the foreseeable future it is not expected that the same will be carried out.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTradeAndOtherPayablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 21. Trade and other payables</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DisclosureOfTradeAndOtherPayablesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfTradeAndOtherPayableExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_2" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfCurrentProvisionsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_3" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Provisions</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_4" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group recognizes provisions for contingencies
that are probable of requiring an outflow of resources due to adverse effects. The Group recognized the estimated probable losses against
the company for labor, administrative and ligation, which are calculated based on the best estimate of the disbursement required to cancel
the obligation at the date of preparation of the Consolidated Financial Statements. Such contingencies are disclosed with possible adverse
effects for the entity, as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_5" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Legal provisions</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_6" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Softcaps legal proceedings </i>&#8211; The
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of December 31, 2021, the balance also included </span>$<ix:nonFraction contextRef="c450" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TaxLitigation" scale="3" unitRef="usd">347</ix:nonFraction> (2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TaxLitigation" scale="3" unitRef="usd">368</ix:nonFraction>) for tax litigation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_7" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The remaining balance of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:LabourLitigations" scale="3" unitRef="usd">62</ix:nonFraction> (2021: $<ix:nonFraction contextRef="c451" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:LabourLitigations" scale="3" unitRef="usd">42</ix:nonFraction>) is for
labor litigation in the following entities: <i>Procaps, S.A., Unimed del Per&#250;, and Rymco Medical.</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_8" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Tax provisions</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_9" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Transfer pricing Procaps, S.A.</i> &#8211;
The Procaps, S.A. and CI Procaps companies used to recognize provisions for the impact of transfer pricing in an amount of 2020: $<ix:nonFraction contextRef="c452" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:TransferPricing" scale="3" unitRef="usd">354</ix:nonFraction>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_10" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>Contingencies</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_11" id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Procaps SA de CV legal proceedings - The General
Tax Directorate of El Salvador (DGII), determined that the company failed to declare taxable and presumed income from revenue obtained
and loans made to non-domiciled companies in 2018, the proposed tax charge and sanction amounts to $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ProposedSanctionAmount" scale="3" unitRef="usd">1,087</ix:nonFraction>. Also, the DGII determined that
the company incurred in the infraction of non-intentional evasion due to the incorrect filing of the &#8220;VAT&#8221; declarations for
2019. The proposed tax charge and penalty amounts to $<ix:nonFraction contextRef="c453" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ProposedTaxChargeAmount" scale="3" unitRef="usd">348</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">However, the Group&#8217;s external advisor indicates
that it is not probable for this claim to proceed, therefore, there is no provision for the effect of this contingency.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 23. Shareholder&#8217;s equity</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_2" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>Note 23.1. Authorized and issued shares</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_3" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The authorized shareholder&#8217;s equity is represented
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Also, <ix:nonFraction contextRef="c454" decimals="0" format="ixt:num-dot-decimal" name="pgsa:StockIssuedDuringPeriodSharesTreasuryStock" scale="0" unitRef="shares">4,000,000</ix:nonFraction> Redeemable A Shares are issued and held in treasury by the Group and <ix:nonFraction contextRef="c455" decimals="0" format="ixt:num-dot-decimal" name="pgsa:StockIssuedDuringPeriodSharesTreasuryStock" scale="0" unitRef="shares">4,500,000</ix:nonFraction> Redeemable B Shares are issued and held
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_4" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>Reconciliation of share capital and share premium related to the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_5" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Capital restructuring of Crynssen (1:33.4448 exchange ratio) (b)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Subtotal - restructured</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Acquisition of Union Acquisition Corp. II (c)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c463" decimals="INF" format="ixt:num-dot-decimal" id="ix_163_fact" name="pgsa:AcquisitionOfUnionAcquisitionCorporationIIInShares" scale="0" unitRef="shares">20,195,494</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Escrowed shares (d)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c463" decimals="INF" format="ixt:num-dot-decimal" id="ix_166_fact" name="pgsa:EscrowSharesToBeDeliverInShares" scale="0" sign="-" unitRef="shares">11,714,612</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c464" decimals="INF" format="ixt:num-dot-decimal" id="ix_167_fact" name="pgsa:EscrowSharesToBeDeliversInShares" scale="0" sign="-" unitRef="shares">117</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Redemption of redeemable shares (e)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c463" decimals="INF" format="ixt:num-dot-decimal" id="ix_169_fact" name="pgsa:RedemptionOfRedeemableShareInShares" scale="0" sign="-" unitRef="shares">4,500,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c464" decimals="INF" format="ixt:num-dot-decimal" id="ix_170_fact" name="pgsa:RedemptionOfRedeemableShareInThousands" scale="0" sign="-" unitRef="shares">45</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c465" decimals="INF" format="ixt:num-dot-decimal" id="ix_171_fact" name="pgsa:RedemptionOfRedeemableShareInThousands" scale="0" sign="-" unitRef="shares">44,955</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 1.5pt">As of December 31, 2021</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c463" decimals="INF" format="ixt:num-dot-decimal" name="pgsa:BalanceRestructuredInShares" scale="0" unitRef="shares">101,109,572</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c464" decimals="INF" format="ixt:num-dot-decimal" name="pgsa:BalanceRestructuredInThousands" scale="0" unitRef="shares">1,011</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_6" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_5"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_2" id="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">a.</td><td style="text-align: justify"><ix:footnote id="ix_21_footnote" xml:lang="en-US">On the effectiveness of the Transaction, September 29, 2021, the put option agreements were terminated
in exchange for new equity instruments in Procaps Group SA.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_7" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_6"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_3" id="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">b.</td><td style="text-align: justify"><ix:footnote id="ix_22_footnote" xml:lang="en-US">On completion of the Transaction, each of the OpCo Shareholders, contributed its respective OpCo Ordinary
Shares to Holdco in exchange for Holdco Ordinary Shares, and, in the case of IFC for Holdco Ordinary Shares and <ix:nonFraction contextRef="c455" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:DilutiveEffectOfShareOptionsOnNumberOfOrdinaryShares" scale="0" unitRef="shares">4,500,000</ix:nonFraction> Holdco Redeemable
B Shares, subscribed for by each OpCo Shareholder. The OpCo Shareholders were issued <ix:nonFraction contextRef="c456" decimals="0" format="ixt:num-dot-decimal" name="pgsa:ShareIssued" scale="0" unitRef="shares">97,128,690</ix:nonFraction> new shares in the Group (<ix:nonFraction contextRef="c457" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:WeightedAverageShares" scale="0" unitRef="shares">92,628,689</ix:nonFraction> Holdco
Ordinary Shares and <ix:nonFraction contextRef="c458" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:DilutiveEffectOfConvertibleInstrumentsOnNumberOfOrdinaryShares" scale="0" unitRef="shares">4,500,000</ix:nonFraction> Holdco Redeemable B Shares) in exchange of the <ix:nonFraction contextRef="c459" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesOutstanding" scale="0" unitRef="shares">2,904,146</ix:nonFraction> outstanding OpCO ordinary Shares. The resultant
share exchange ratio being 33.4448.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_8" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_7"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_4" id="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">c.</td><td style="text-align: justify"><ix:footnote id="ix_23_footnote" xml:lang="en-US">SPAC Ordinary Shares outstanding (including those held by the PIPE Investors and Union Group International
Holdings Limited and Union Acquisition Associates II, LLC (the &#8220;SPAC Sponsors&#8221;) were exchanged with Holdco for Holdco Ordinary
Shares pursuant to a share capital increase of HoldCo.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_9" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">New Shares were issued for an aggregate
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_10" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Aggregate subscription price is as
follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_11" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureAggregateSubscriptionPriceExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_12" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Cost-basis of the exchange reflects:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_13" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfCostBasisOfTheExchangeExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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 premium</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_14" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_13"><ix:continuation continuedAt="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_5" id="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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to certain Opco Shareholders in connection with the Transaction are subject to an escrow arrangement that is applicable to both SPAC Sponsors
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_15" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_14"><ix:continuation id="pgsa_DisclosureOfReconciliationOfShareCapitalAndSharePremiumsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">e.</td><td style="text-align: justify"><ix:footnote id="ix_25_footnote" xml:lang="en-US">Immediately following the Exchange, the Group redeemed <ix:nonFraction contextRef="c461" decimals="0" format="ixt:num-dot-decimal" name="pgsa:PartnersCapitalAccountUnit" scale="0" unitRef="shares">4,500,000</ix:nonFraction> Holdco Redeemable B from IFC for a total
purchase price of $<ix:nonFraction contextRef="c462" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:RedeemablePurchasePrice" scale="3" unitRef="usd">45,000</ix:nonFraction> in accordance with that certain share redemption agreement entered into by and between the Group and IFC on
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_16" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_15"><p style="margin-left: 0.25in; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Refer to Note 26.1. Reverse reorganization
for further information related to the Transaction.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_17" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>Note 23.2. Reserves</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_18" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_19" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_18"><ix:continuation continuedAt="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_2" id="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_20" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_19"><ix:continuation continuedAt="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_3" id="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><i><sup>1</sup></i></td><td style="text-align: justify"><ix:footnote id="ix_26_footnote" xml:lang="en-US"><i>Legal Reserve - </i>Includes the appropriate values from
net income to comply with legal provisions related to asset protection according to applicable jurisdictions with cumulative earnings.</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_20"><ix:continuation id="_DisclosureOfReservesAndOtherEquityInterestExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><i><sup>2</sup></i></td><td style="text-align: justify"><ix:footnote id="ix_27_footnote" xml:lang="en-US"><i>Reserves for working capital &#8211;</i> These are eventually
used to transfer earnings from the retained earnings for appropriation purposes.</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEarningsPerShareExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEarningsPerShareExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>Note 24. Earnings Per Share</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEarningsPerShareExplanatory-c0_cont_2" id="_DisclosureOfEarningsPerShareExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group reports net earnings per share in accordance
with <i>IAS 33 - Earnings Per Share</i>. The income/(loss) per share is calculated by dividing the income/(loss) for the year attributable
to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding in the year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEarningsPerShareExplanatory-c0_cont_3" id="_DisclosureOfEarningsPerShareExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The income/(loss) per fully diluted share shall
be calculated based on the income/(loss) for the year divided by the weighted average number of fully diluted shares. No dilutive effect
has been identified for the years ended December 31, 2022, 2021 and 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEarningsPerShareExplanatory-c0_cont_4" id="_DisclosureOfEarningsPerShareExplanatory-c0_cont_3"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfCalculationEarningsPerShareExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfCalculationEarningsPerShareExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Assumed exercise of share equivalents</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

</div><ix:continuation id="_DisclosureOfEarningsPerShareExplanatory-c0_cont_4"><ix:continuation id="pgsa_DisclosureOfCalculationEarningsPerShareExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><i>*</i></td><td style="text-align: justify"><ix:footnote id="ix_28_footnote" xml:lang="en-US"><i>Includes <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="pgsa:EarningsPerSharesHeldUnderPutOption" scale="0" unitRef="shares">903,075</ix:nonFraction> shares held under put option before the
transaction as such ordinary shareholders were entitled to receive dividends.</i></ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfWarrantLiabilityExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 25. Warrant Liabilities</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_2" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosuresOfWarrantLiabilityExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosuresOfWarrantLiabilityExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Public warrants</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_3" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_2"><ix:continuation id="pgsa_DisclosuresOfWarrantLiabilityExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><i><sup>1</sup></i></td><td style="text-align: justify"><ix:footnote id="ix_29_footnote" xml:lang="en-US"><i>Private warrants include <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="pgsa:PrivateWarrantsShares" scale="0" unitRef="shares">2,875,000</ix:nonFraction> held by the former
SPAC sponsors deposited in an escrow account.</i></ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_4" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 25.1. Public warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_5" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfPublicWarrantLiabilityExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-269">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:PublicWarrantLiability" scale="3" unitRef="usd">16,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 59 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_6" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Public warrants were issued by the SPAC to certain
shareholders whereas prior to the Transaction such public warrants (together with the private warrants issued to the SPAC sponsors) were
exchanged, on a one per one basis, for warrants in the Group&#8217;s ordinary shares. The public warrants have the following terms:</p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_7" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_WarrantPerShareDescription-c0_cont_1" name="pgsa:WarrantPerShareDescription">&#9679;</ix:nonNumeric></td><td style="text-align: justify"><ix:continuation continuedAt="pgsa_WarrantPerShareDescription-c0_cont_2" id="pgsa_WarrantPerShareDescription-c0_cont_1">Each whole warrant entitles the holder to purchase one ordinary share at an exercise price of $11.50</ix:continuation></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_8" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_7"><ix:continuation continuedAt="pgsa_WarrantPerShareDescription-c0_cont_3" id="pgsa_WarrantPerShareDescription-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The warrant is exercisable post Transaction and expires on the earlier of:</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_9" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_8"><ix:continuation continuedAt="pgsa_WarrantPerShareDescription-c0_cont_4" id="pgsa_WarrantPerShareDescription-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">&#8211;</td><td style="text-align: justify">5 years after the completion of the Transaction, i.e., September
29, 2026</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_10" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_9"><ix:continuation continuedAt="pgsa_WarrantPerShareDescription-c0_cont_5" id="pgsa_WarrantPerShareDescription-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">&#8211;</td><td style="text-align: justify">the Redemption Date, or</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_11" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_10"><ix:continuation id="pgsa_WarrantPerShareDescription-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">&#8211;</td><td style="text-align: justify">the liquidation of the Group.</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_12" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The Group may redeem the outstanding warrants, in whole and not in part, at a price of $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="pgsa:PerWarrant" scale="0" unitRef="usdPershares">0.01</ix:nonFraction> per warrant
at any time while the warrants are exercisable upon a minimum of 30 days prior written notice of redemption:</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_13" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">&#8211;</td><td style="text-align: justify">if, and only if, the last sales price of the common stock
equals or exceeds $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="pgsa:ExceedsPerShare" scale="0" unitRef="usdPershares">18.00</ix:nonFraction> per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) on
each of twenty (20) trading days within any thirty (30) trading day period ending on the third trading day prior to the date on which
notice of redemption is given.</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_14" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.25in; text-align: left">&#8211;</td><td style="text-align: justify">however, that if and when the Public Warrants become redeemable
by the Group, the Group may not exercise such redemption right if the issuance of Ordinary Shares upon exercise of the Public Warrants
is not exempt from registration or qualification under applicable state blue sky laws or the Group is unable to effect such registration
or qualification.</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_15" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">The Public Warrants may be exercised, for cash (or on a &#8220;cashless basis&#8221;) at any time after
notice of redemption shall have been given by the Group and prior to the Redemption Date.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_16" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Public Warrants are redeemable on the occurrence
of change in control (merger, re-organization, tender offer, exchange), and the Group does not have an unconditional right to avoid delivering
cash, the Public Warrants meet the criteria for classification as a financial liability. In addition, Warrants may be settled in a variable
number of shares in case of cashless basis of exercise. Therefore, the Public Warrants meet the criteria for classification as financial
liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_17" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Additionally, Public Warrants also meet the definition
of a derivative, which may be settled other than by the exchange of a fixed amount of cash for a fixed number of the entity&#8217;s shares.
Therefore, Public Warrants are derivatives that are classified as financial liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_18" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The public warrants were traded on Nasdaq and
the closing trade price on 29 September, 2021 was used to measure their initial fair value. On September 30, 2021, the warrants had a
fair value of $<ix:nonFraction contextRef="c468" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:WarrantsFairValue" scale="3" unitRef="usd">21,600</ix:nonFraction> (<ix:nonFraction contextRef="c468" decimals="0" format="ixt:num-dot-decimal" name="pgsa:WarrantsShares" scale="0" unitRef="shares">20,000,000</ix:nonFraction> warrants valued at $<ix:nonFraction contextRef="c468" decimals="2" format="ixt:num-dot-decimal" name="pgsa:WarrantsPerShare" scale="0" unitRef="usdPershares">1.08</ix:nonFraction> each).</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_19" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 25.2. Private warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_20" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_19"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfPrivateWarrantLiabilityExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold">As of January 1</td><td style="width: 1%; font-weight: bold">&#160;</td>
    <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 9%; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:PrivateWarrantLiability" scale="3" unitRef="usd">7,112</ix:nonFraction></td><td style="width: 1%; font-weight: bold; text-align: left">&#160;</td><td style="width: 1%; font-weight: bold">&#160;</td>
    <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 9%; font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-270">&#8212;</div></td><td style="width: 1%; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Acquired private warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-271">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_21" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Simultaneously with the closing of the initial
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Combination Agreement, the Group entered into an Assignment, Assumption and Amendment Agreement with SPAC and the Warrant agent to amend
and assume SPAC&#8217;s obligations under the existing Warrant Agreement and to give effect to the conversion of SPAC public warrants
and SPAC Private Placement Warrants to Holdco public warrants and Holdco private warrants (the &#8220;Private Warrants&#8221;), respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 60 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->60<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_22" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Additionally, immediately prior to the consummation
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Transaction, placed <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="pgsa:PrivateWarrantsInEscrowShare" scale="0" unitRef="shares">2,875,000</ix:nonFraction> Private Warrants in escrow.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_23" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Private Warrants have the following terms:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_24" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Each warrant entitles the holder to purchase <ix:nonFraction contextRef="c4" decimals="0" format="ixt-sec:numwordsen" name="pgsa:WarrantPurchaseOfOrdinaryPerShare" scale="0" unitRef="shares">one</ix:nonFraction> ordinary share at an exercise price of $<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ExercisePriceOfOutstandingShareOptions2019" scale="0" unitRef="usdPershares">11.50</ix:nonFraction> per share.
Only whole warrants are exercisable.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_25" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Exercisable post Transaction and expires on the earlier of:</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_26" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.75in"></td><td style="width: 0.25in">&#8211;</td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="pgsa:BusinessCombinationExpires">5</ix:nonNumeric> years after the completion of the Transaction,</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_27" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_26"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.75in"></td><td style="width: 0.25in">&#8211;</td><td style="text-align: justify">the Redemption Date, or</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_28" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.75in"></td><td style="width: 0.25in">&#8211;</td><td style="text-align: justify">the liquidation of the Group.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_29" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Redemption for cash shall not apply.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_30" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Private Warrants are redeemable on the occurrence
of change in control (merger, re-organization, tender offer, exchange), and the Group does not have an unconditional right to avoid delivering
cash, the Private Warrants meet the criteria for classification as a financial liability. In addition, Warrants may be settled in a variable
number of shares in case of cashless basis of exercise. Therefore, the Private Warrants meet the criteria for classification as a financial
liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_31" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Additionally, Private Warrants are classified
as derivatives and financial liabilities, these shall be initially measured at fair value, with subsequent changes in fair value recognized
in profit or loss. Refer to Note 9. Finance income (expenses), net.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_32" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Warrants in escrow</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_33" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On March 31, 2021, concurrently with the execution
of the Business Combination Agreement, the SPAC, Holdco, OpCo, certain OpCo Shareholders and certain shareholders of the SPAC prior to
the consummation of the Transaction (including the SPAC Sponsors), entered into the Transaction Support Agreement, pursuant to which the
SPAC Sponsors agreed to forfeit <ix:nonFraction contextRef="c469" decimals="0" format="ixt:num-dot-decimal" name="pgsa:SponsorsAgreedToForfeitOfPrivatePlacementWarrants" scale="0" unitRef="shares">2,875,000</ix:nonFraction> of their Private Placement Warrants immediately prior to the Merger and to subject certain of
their Holdco Ordinary Shares and Private Warrants to certain restrictions by depositing such securities in an escrow account.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_34" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Warrants in Escrow shall be treated as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_35" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_34"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">First Level Release Target: The escrow agent shall hold <ix:nonFraction contextRef="c470" decimals="0" format="ixt:num-dot-decimal" name="pgsa:SponsorPrivateWarrantShares" scale="0" unitRef="shares">1,437,500</ix:nonFraction> SPAC Sponsor Private Warrants (the &#8220;First
Level Sponsor Escrow Warrants&#8221;) in escrow until the earlier to occur of (a) the date on which the closing price of the Holdco Ordinary
Shares on the Nasdaq Stock Market equals or exceeds $<ix:nonFraction contextRef="c471" decimals="2" format="ixt:num-dot-decimal" name="pgsa:ExceedsOrdinaryPerShares" scale="0" unitRef="usdPershares">12.50</ix:nonFraction> per Holdco Ordinary Share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-day trading period, or (b) the date that is the fifth (5th) anniversary
of the closing of the Transaction (the &#8220;<ix:nonNumeric contextRef="c470" format="ixt-sec:durwordsen" name="pgsa:ExpirationDate">Five Year</ix:nonNumeric> Expiration Date&#8221;).</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_36" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_35"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Second Level Release Target: The escrow agent shall hold <ix:nonFraction contextRef="c472" decimals="0" format="ixt:num-dot-decimal" name="pgsa:SponsorPrivateWarrantsShares" scale="0" unitRef="shares">1,437,500</ix:nonFraction> SPAC Sponsor Private Warrants (the
&#8220;Second Level Sponsor Escrow Warrants&#8221;) in escrow until the earlier to occur of (a) the date on which the closing price of
the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $<ix:nonFraction contextRef="c473" decimals="2" format="ixt:num-dot-decimal" name="pgsa:ExceedsOrdinaryPerShares" scale="0" unitRef="usdPershares">13.00</ix:nonFraction> per Holdco Ordinary Share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-day trading period, or (b) the
Five-Year Expiration Date.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Page; Sequence: 61 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_37" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_36"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Automatic Release: if Group shall consummate a liquidation, merger, stock exchange or other similar transaction
which results in all of the holders having the right to exchange their Holdco Ordinary Shares for cash, securities or other property,
then the escrow agent shall (subject to customary escrow notification provisions) promptly release all the First Level Sponsor Escrow
Warrants and Second Level Sponsor Escrow Warrants to the SPAC Sponsors.</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_38" id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_37"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: justify">Cancellation: On the <span style="-sec-ix-hidden: hidden-fact-272">Five</span>-Year Expiration Date, any First Level Sponsor Escrow Warrants and Second Level
Sponsor Escrow Warrants that have not been released and remain in escrow, shall be released by the escrow agent to the Group for cancellation.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="pgsa_DisclosureOfWarrantLiabilityExplanatory-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Private Warrants issued by the Holdco which are
deposited in escrow and are subject to cancellation if certain conditions are not met are recorded as contingent consideration and therefore
initially measured at fair value. Further, since they are liability classified instruments, subsequent changes in fair value are recognized
in profit or loss as a Finance Income/Expense. Refer to Note 9. Finance income (expenses), net.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfAssetAcquisitionExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>Note 26. Acquisitions</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_2" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 26.1. Reverse reorganization</b></p><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_3" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">As further outlined in Note 2.3, the Group underwent
a reverse reorganization as a result of the Transaction consummated on September 29, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_4" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The amount of the net identifiable assets of $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IdentifiableAssetsAcquiredLiabilitiesAssumed" scale="3" unitRef="usd">131,086</ix:nonFraction>
acquired on the date of Transaction, were as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_5" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfReverseReorganizationTransactionExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

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acquirer and the merger between Procaps Group, S.A. and SPAC was accounted for as an asset acquisition under IFRS, considering SPAC was
not considered a business. Therefore, IFRS 2 was applied to recognize the value of equity interests issued in excess of the assets received.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_7" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_6"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfTransactionsValueOfEquityInterestExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfTransactionsValueOfEquityInterestExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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Redemption</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_8" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_7"><ix:continuation id="pgsa_DisclosureOfTransactionsValueOfEquityInterestExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><i>*</i></td><td style="text-align: justify"><ix:footnote id="ix_30_footnote" xml:lang="en-US"><i>The deem cost of the shares was estimated based on the
fair value of the OpCo issued shares (legacy Crynssen Pharma Group Limited) prior to the merger with SPAC and Holdco.</i></ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 62 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_9" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The IFRS 2 &#8216;listing expense&#8217; per above, has been
recognized in profit or loss within O<i>ther expenses, net </i>for the year ended December 31, 2021. Refer to Note 10. Other expenses,
net.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_10" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">As a result of the transaction, prepaid expenses
of $<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentPrepaidExpenses" scale="3" unitRef="usd">4,602</ix:nonFraction> have been recognized in Other current assets as of December 31, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_11" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i><span style="text-decoration:underline">Shares in an escrow</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_12" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Holdco Ordinary Shares in an escrow are subject
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issued to certain Opco Shareholders.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_13" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Certain market conditions will be required to
be met after the Transaction for these securities in escrow to be released to the eligible securities owners. If the market conditions
wouldn&#8217;t be met within a defined time period (five years for warrants in escrow and ten years for Holdco Ordinary Shares in escrow),
such securities in escrow would be forfeited.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_14" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>a) Sponsors&#8217; Holdco Ordinary Shares in
escrow</b>: <ix:nonNumeric contextRef="c476" name="pgsa:DescriptionOfSharesInEscrow">On the closing of the Transaction, 1,250,000 Holdco Ordinary Shares received in exchange for the equivalent number of SPAC
Ordinary Shares upon the consummation of the Merger (the &#8220;Sponsor Escrowed Securities&#8221;) held by the SPAC Sponsors were deposited
in escrow. Fifty percent (50%) of the Sponsor Escrowed Securities will be released to the SPAC Sponsors if the closing price of the Holdco
Ordinary Shares on the Nasdaq Stock Market equals or exceeds $12.50 per Holdco Ordinary Share for any 20 trading days within any 30-day
trading period, and the remaining 50% of the Sponsor Escrowed Securities will be released to the Sponsors if the closing price of the
Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $13.00 per Holdco Ordinary Share for any 20 trading days within any
30-day trading period (in each case, subject to any applicable lock-up restrictions under the Registration Rights and Lock-Up Agreement
or any other applicable escrow arrangement).</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_15" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>b) Eligible Procaps Shareholders Holdco Ordinary
Shares in escrow</b>: <ix:nonNumeric contextRef="c477" name="pgsa:DescriptionOfSharesInEscrow">On the closing of the Transaction, 10,464,612 Holdco Ordinary Shares received in the Exchange (the &#8220;ECS Escrowed
Securities&#8221;) by certain OpCo Shareholders were deposited in escrow. Fifty percent (50%) of the ECS Escrowed Securities will be released
to such OpCo Shareholders if the closing price of the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $12.50 per Holdco
Ordinary Share for any 20 trading days within any 30-day trading period, and the remaining 50% of the ECS Escrowed Securities will be
released to such OpCo Shareholders if the closing price of the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $13.00
per Holdco Ordinary Share for any 20 trading days within any 30-day trading period.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_16" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">If the market conditions wouldn&#8217;t be met
within a defined time period (ten years for ordinary shares in escrow), such securities in escrow would be forfeited. All dividends payable,
whether in cash, stock or other non-cash property with respect to the Sponsor Escrowed Securities and the ECS Escrowed Securities while
such securities are held in escrow will be delivered to the escrow agent to hold and distribute in the same manner as the Sponsor Escrowed
Securities and the ECS Escrowed Securities held in escrow.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_17" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">If Holdco consummates a liquidation, merger, stock
exchange or other similar transaction which results in all of its shareholders having the right to exchange their Holdco Ordinary Shares
for cash, securities or other property, then all Sponsor Escrowed Securities and the ECS Escrowed Securities will be released to the SPAC
Sponsors and those certain OpCo Shareholders. Any Sponsor Escrowed Securities and the ECS Escrowed Securities not released from escrow
within ten years from the date of the closing of the Transaction will be released by the escrow agent to Holdco for cancellation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 63 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->63<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_18" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Shares held in escrow subject to cancellation
if certain conditions are not met, are recorded as contingent consideration and therefore, initially measured at fair value. Because the
shares held in escrow will be settled in a variable number of the Group&#8217;s own equity instruments, they are classified as a liability.
As a result, subsequent changes in fair value are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive Income
as <i>Finance income (expenses), net</i>. Refer to Note 9. Finance income (expenses), net.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_19" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_18"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_20" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">As of December 31, 2022, shares held in escrow
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_21" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 26.2. Asset acquisition - Pharmaceutical production facility</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_22" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">On November 5, 2021, Procaps Group entered into
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_23" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The pharmaceutical production facility was purchased
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asset acquisition includes several soft gelatin capsule (&#8220;Softgel&#8221;) encapsulation lines, new critical support systems, automated
packaging line capabilities, as well as development facilities including pilot and scale up capabilities. Softgels are designed to deliver
high precision dosage by achieving homogeneity of ingredients. The Softgel capsules are well recognized in the supplement, OTC, and the
prescription market for improving patient adherence to the drug and therapy by facilitating swallowing due to the texture of its shell.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_24" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The purchase price for the purchased assets is
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</div><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_25" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The fair value of the identifiable assets acquired
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_26" id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The following table summarizes the final allocation
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</div><div>

</div><ix:continuation id="pgsa_DisclosureOfAssetAcquisitionExplanatory-c0_cont_26"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfTheFinalAllocationOfThePurchasePriceBasedOnTheEstimatedFairValuesOfTheAssetsAcquiredAndLiabilitiesAssumedAtTheDateOfAcquisitionExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_2" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>27.1 Accounting classification and fair value</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_3" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Fair value is the price that would be received
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_4" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_5" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-288">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Borrowings</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-293">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-294">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Amounts owed to related parties</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-295">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-296">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c494" decimals="-3" format="ixt:num-dot-decimal" id="ix_200_fact" name="ifrs-full:TradeAndOtherPayablesToRelatedParties" scale="3" unitRef="usd">8,450</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total financial liabilities not measured at fair value</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-297">&#8212;</div></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c496" decimals="-3" format="ixt:num-dot-decimal" id="ix_201_fact" name="pgsa:Totalfinancialliabilities" scale="3" unitRef="usd">379,035</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c498" decimals="-3" format="ixt:num-dot-decimal" id="ix_202_fact" name="pgsa:Totalfinancialliabilities" scale="3" unitRef="usd">347,196</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_9" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_8"><ix:continuation continuedAt="pgsa_DisclosureOfClassesOfFinancialAssetsAndLiabilitiesExplanatory-c0_cont_2" id="pgsa_DisclosureOfClassesOfFinancialAssetsAndLiabilitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_31_footnote" xml:lang="en-US">The fair value is comprised of $<ix:nonFraction contextRef="c486" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FairValueOfTheExhibitedFigures" scale="3" unitRef="usd">9,200</ix:nonFraction> level 1 and $<ix:nonFraction contextRef="c487" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FairValueOfTheExhibitedFigures" scale="3" unitRef="usd">41,780</ix:nonFraction>
level 3 as of December 31, 2022 (2021: $<ix:nonFraction contextRef="c488" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FairValueOfTheExhibitedFigures" scale="3" unitRef="usd">16,000</ix:nonFraction> and $<ix:nonFraction contextRef="c489" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:FairValueOfTheExhibitedFigures" scale="3" unitRef="usd">108,971</ix:nonFraction>, respectively).</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_10" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_9"><ix:continuation id="pgsa_DisclosureOfClassesOfFinancialAssetsAndLiabilitiesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>2</sup></td><td style="text-align: justify"><ix:footnote id="ix_32_footnote" xml:lang="en-US">The amortized cost approximates fair value as of December
31, 2022 and 2021, respectively.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_11" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>27.2 Measurement of fair values</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

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unobservable inputs used.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_14" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><b>27.3 Financial risk management</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_15" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group has exposure
to the following risks arising from financial instruments:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_16" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Credit risk</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_17" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Liquidity risk</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_18" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Market risk, including: currency and interest rate risk</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_19" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>27.3.1. Risk management framework</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_20" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">The Group analyzes each of these risks individually as well as on a
combined basis and defines strategies to manage the economic impact on the Group&#8217;s performance in line with its financial risk management
policy. The Group does not subscribe or negotiate hedging instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_21" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group&#8217;s Financial Administrative Unit
(&#8220;UAC&#8221;) supports, monitors and manages financial risks through internal reports, which are analyzed individually in each country
depending on the degree and magnitude of the risks thereof. The financial UAC periodically reports to the shareholders the conclusions
of such risk monitoring and proposes the plans and policies necessary to mitigate exposures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_22" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>27.3.2. Credit risk</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_23" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Credit risk refers to the risk that one of the
parties fails to comply with its contractual obligations, resulting in a financial loss for the Group. As a corporate policy, the Group
conducts business only with strong financial institutions and credit institutions with renowned national and international prestige. For
banks, only independently rated parties with a minimum rating of &#8216;A&#8217; are accepted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_24" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group only makes transactions with financial
entities that have risk certifications and/or that are monitored by the relevant authorities in each country. The information provided
by rating agencies is consistently monitored and, if not available, the Group uses other available financial information and its own business
records to qualify its main customers and finance providers. Before accepting any new customer, the Group uses a rating system to assess
the credit quality of the potential customer and defines the credit limits for each customer. Limits and ratings attributed to customers
are reviewed twice a year. Trade accounts receivable that are not past due or impaired have the best credit rating according to the credit
rating system used by the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 66 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_25" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Exposure to credit risk</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_26" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The carrying amount of financial assets represents
the maximum credit exposure of the Group. The carrying amount is presented net of impairment losses. None of the receivable balances as
of December 31, 2022 or 2021 constitutes a significant concentration of credit risk. There are no other single customers representing
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_27" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Expected credit losses</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_28" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The average credit period on the sale of medicines
is 60 to 120 days. In some cases, depending on market conditions and strategy, longer payment periods are granted. No interest surcharge
is made on commercial accounts receivable. Refer to Note 3.4. Financial Instruments for further information on financial instruments significant
accounting policies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_29" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group has recognized a provision for doubtful
accounts. The Group evaluates the impairment of its accounts receivable for the expected credit loss model, where it determines its value
based on the probability of default, the loss due to default (i.e., the extent of the loss in case of default) and the exposure, by the
application of the &#8216;simplified method&#8217; for trade receivables without a significant financing component. The assessment of
the probability of default and the loss due to default is mainly based on historical data and adjust historical loss rates to reflect
information about current conditions and reasonable and supportable forecasts of future economic conditions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_30" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The following table provides information about
the exposure to credit risk and expected credit losses for Trade and other receivables and Amounts owed by related parties as of December
31, 2022 and 2021:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_31" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_30"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfAssessmentOfTheProbabilityOfDefaultAndTheLossDueToDefaultIsMainlyBasedOnHistoricalDataAndAdjustHistoricalLossRatesExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfAssessmentOfTheProbabilityOfDefaultAndTheLossDueToDefaultIsMainlyBasedOnHistoricalDataAndAdjustHistoricalLossRatesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_32" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_31"><ix:continuation id="pgsa_DisclosureOfAssessmentOfTheProbabilityOfDefaultAndTheLossDueToDefaultIsMainlyBasedOnHistoricalDataAndAdjustHistoricalLossRatesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">December 31, 2021</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">31-60 days<br/> past due</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">61-90 days<br/> past due</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 30%; text-align: left">Weighted-average loss rate</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 7%; text-align: right"><ix:nonFraction contextRef="c514" decimals="4" format="ixt:num-dot-decimal" name="pgsa:WeightedaverageLossRates" scale="-2" unitRef="pure">0.60</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_33" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, additions of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:AdditionsOfImpairmentLossAllowance" scale="3" unitRef="usd">2,673</ix:nonFraction> (2021:
reversal of $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ReversalOfImpairmentLoss" scale="3" unitRef="usd">818</ix:nonFraction>, 2020: reversal of $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ReversalOfImpairmentLoss" scale="3" unitRef="usd">1,915</ix:nonFraction>) to the impairment loss allowance were recognized within Sales and marketing expenses. As of
December 31, 2022, this amount includes $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:ImpairmentLossesRelatedToRelatedParties" scale="3" unitRef="usd">195</ix:nonFraction> of impairment losses recognized for balances in connection with related parties. In addition,
an allowance exists from prior periods for open balances related to goods sold to <i>Industrias Intercaps de Venezuela C.A</i> and <i>Laboratorios
Vivax Pharmaceuticals C.A.</i>, due to the critical political and social situation that the location country of precedence is experiencing,
See Note 29. Related party transactions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 67 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->67<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_34" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>27.3.3. Market risk</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_35" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Foreign currency risk</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_36" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group carries out transactions denominated
in foreign currency, mainly imports, exports and indebtedness; thereby generating exposures to exchange rate fluctuations. The Group does
not usually cover exposures to the exchange rate, but rather monitors frequently the foreign exchange market as a strategy to prevent
significant loss in the short- and medium-term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_37" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The carrying amounts of the Group&#8217;s foreign
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_38" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_37"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfCarryingAmountsOfTheGroupsForeignCurrencyDenominatedMonetaryAssetsAndMonetaryLiabilitiesExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfCarryingAmountsOfTheGroupsForeignCurrencyDenominatedMonetaryAssetsAndMonetaryLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_39" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The following table details sensitivity per company
to a <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="pgsa:PercentageOfIncreaseAndDecreases" scale="-2" unitRef="pure">10</ix:nonFraction>% increase and decrease in the U.S. dollar against the relevant foreign currencies. The sensitivity analysis includes only the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_40" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_39"><ix:continuation id="pgsa_DisclosureOfCarryingAmountsOfTheGroupsForeignCurrencyDenominatedMonetaryAssetsAndMonetaryLiabilitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_41" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_40"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Interest rate risk </span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_42" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group is exposed to interest rate risks because
it borrows money at both fixed and variable interest rates connected with Secured Overnight Financing Rate (&#8220;SOFR&#8221;) and IBR/DTF
(according to its Spanish acronym of &#8220;<i>Indicador bancario de referencia</i>&#8221; which is the benchmark banking indicator, in
Colombia). The risk is managed by the Group, by monitoring the macroeconomic variables that determine the variation of the interest rates
and generating an appropriate mix between fixed rate and variable rate loans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_43" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_42"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">A fundamental reform of major interest rate benchmarks
is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates.
In 2022, the Group undertook amendments to its financial obligations with contractual terms indexed to IBORs such that they incorporate
new benchmark rates. As of December 31, 2022, the Group modified all of its variable rate liabilities indexed to LIBOR to reference SOFR.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 68 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_44" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_43"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The following sensitivity analyzes have been determined
based on exposure of financial liabilities to the highlighted variable interest rates:</p><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_45" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_44"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfSensitivityAnalyzesHaveBeenDeterminedBasedOnExposureOfFinancialLiabilitiesToTheHighlightedVariableInterestRatesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_46" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_45"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">$<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:InterestAtAVariableRate" scale="3" unitRef="usd">102,799</ix:nonFraction> or <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="pgsa:InterestAtAvailableRatePercentage" scale="-2" unitRef="pure">35.95</ix:nonFraction>% as of December 31, 2022 and
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_47" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_46"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>27.3.4. Liquidity risk</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_48" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_47"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group&#8217;s Financial UAC has ultimate responsibility
for the liquidity management of each of the companies and has established an appropriate framework so that Management can make decisions
on short-, medium- and long-term financing, as well as liquidity management. The Group manages liquidity risk by maintaining reserves,
adequate financial and loan facilities, continuously monitoring projected and actual cash flows, and reconciling the maturity profiles
of financial assets and liabilities. In the same sense, financial assets to afford obligations represent cash and trade receivables intended
to be collected in short term, net of the expectations of recoverability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_49" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_48"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">As part of other liabilities within borrowings,
the Group includes obligations to factors associated with factoring and reverse factoring arrangements. Ordinary payment terms with suppliers
range between 60 and 90 days but may be extended through reverse factoring arrangements up to 180 days in aggregate.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_50" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_49"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group&#8217;s obligations to individual factors
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_51" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_50"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The following table details the most representative
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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_53" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_52"><ix:continuation continuedAt="pgsa_DisclosureOfTheMostRepresentativeRemainingContractualMaturityAndRepaymentPeriodsOfTheGroupFinancialLiabilitiesExplanatory-c0_cont_2" id="pgsa_DisclosureOfTheMostRepresentativeRemainingContractualMaturityAndRepaymentPeriodsOfTheGroupFinancialLiabilitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_33_footnote" xml:lang="en-US">As mentioned in Note 19. Borrowings, $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:CurrentBorrowingsRelatesToTheLoanBreach" scale="3" unitRef="usd">139,155</ix:nonFraction> in the aggregate,
is classified as payable in less than 1 year as a result of a breach in certain covenants included under the NPA, the Syndicated Loan
Agreement, and BTG Credit Agreement. Refer to Note 28. Events after the reporting period for the Group&#8217;s executed waivers with the lenders
mentioned above.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_54" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_53"><ix:continuation continuedAt="pgsa_DisclosureOfTheMostRepresentativeRemainingContractualMaturityAndRepaymentPeriodsOfTheGroupFinancialLiabilitiesExplanatory-c0_cont_3" id="pgsa_DisclosureOfTheMostRepresentativeRemainingContractualMaturityAndRepaymentPeriodsOfTheGroupFinancialLiabilitiesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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revolving credit lines with other lending parties.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><!-- Field: Page; Sequence: 69 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_56" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_55"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Capital risk management </span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_57" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_56"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The Group manages its capital to ensure that it
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</div><div>

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are subject to covenants that obligate it to comply with a series of financial indicators, primarily financial leverage (Debt/EBITDA),
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_59" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_58"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The executive members of the UAC of the Group,
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_60" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_59"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="text-decoration:underline">Indebtedness Index</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify"><ix:footnote id="ix_35_footnote" xml:lang="en-US">Defined as short-term assets plus long-term assets</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_63"><ix:continuation id="pgsa_DisclosureOfIndebtednessIndexExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>2</sup></td><td style="text-align: justify"><ix:footnote id="ix_36_footnote" xml:lang="en-US">Defined as short-term liabilities plus long-term liabilities</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>Note 28. Events after the reporting period</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_2" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><span style="background-color: white">Management
has considered subsequent events through the date these Consolidated Financial Statements were issued and identified the following events
that require disclosure. </span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_3" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i><span style="text-decoration:underline">Grupo Somar and Pearl Mexico Acquisition</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_4" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Refer to Note 1. General Company Information for
background information on the Acquisition of Grupo Somar and Pearl Mexico. The time required for resolution of the lien remains uncertain
and is not in the Group&#8217;s control. Following the failure of the transaction to close on December 31, 2022, the Group provided the Sellers
a formal notice on January 1, 2023 terminating the SPA in accordance with the terms thereof.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_5" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i><span style="text-decoration:underline">Bridge Loan Credit Agreement </span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_6" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Following the Group&#8217;s termination of the SPA,
by delivering the notice of termination, the Group advised the joint arrangers and book runners on January 1, 2023 of its desire to terminate
the transaction documents (including, without limitation, the commitments under the Bridge Credit Agreement and, for the avoidance of
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_7" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i><span style="text-decoration:underline">Waiver for Breach of Indebtedness Covenants
</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_8" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Refer to Note 2.1. Going concern and Note 19. Borrowings for background
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breaches under the NPA, the Syndicated Loan Agreement, and the BTG Credit Agreement. Under the terms of the waivers, the lenders agreed
to waive the event of default as of December 31, 2022. In addition, the Group negotiated with the lenders for additional waivers to adjust
the covenant ratios as noted below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_9" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>BTG Credit Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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the waiver negotiations, the lenders agreed to adjust the convent ratios as noted below (the covenants will return to the original terms
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_11" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_13" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Syndicated Loan Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_16" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_15"><ix:continuation continuedAt="pgsa_DescriptionOfIndicativeFactsOfIndebtednessAndLeverageRatioAtCp-c580_cont_3" id="pgsa_DescriptionOfIndicativeFactsOfIndebtednessAndLeverageRatioAtCp-c580_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_21" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_20"><ix:continuation continuedAt="pgsa_DescriptionOfTotalConsolidatedDebtOfTheGroupAndTheInterestCoverageRatioAndFinallyTheIndebtednessRatio-c581_cont_3" id="pgsa_DescriptionOfTotalConsolidatedDebtOfTheGroupAndTheInterestCoverageRatioAndFinallyTheIndebtednessRatio-c581_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_22" id="_DisclosureOfEventsAfterReportingPeriodExplanatory-c0_cont_21"><ix:continuation id="pgsa_DescriptionOfTotalConsolidatedDebtOfTheGroupAndTheInterestCoverageRatioAndFinallyTheIndebtednessRatio-c581_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_6" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_5"><ix:continuation id="_DisclosureOfTransactionsBetweenRelatedPartiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>1</sup></span></td> <td style="text-align: justify; font-size: 10pt"><ix:footnote id="ix_37_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Group corrected the disclosure of transactions with related parties&#160;for the years ended December 31, 2021 and 2020 to conform with the current period presentation. The modification includes the disclosure of sales that are performed through an agent with Industrias Intercaps de Venezuela C.A. and Laboratorios Vivax Pharmaceuticals C.A. in the amount of $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:SalesThroughAnAgent" scale="3" unitRef="usd">1,803</ix:nonFraction> for the year ended December 31, 2021 (2020: $<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="pgsa:SalesThroughAnAgent" scale="3" unitRef="usd">1,826</ix:nonFraction>) and does not impact the results presented in the prior period.</span></ix:footnote></td></tr> </table><p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>
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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_10" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022 and 2021, the Group's
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Procaps Group, S.A. and subsidiaries (The Group)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Consolidated Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2022, 2021
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands of United States Dollars, unless
otherwise stated)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_11" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_10"><ix:continuation id="pgsa_DisclosureOfNetAmountsOwedToRelatedPartiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-322">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_12" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">For the year ended December 31, 2022 donations
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_13" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Goods and services were sold or provided parties
during the year based on the price lists in force and terms that would be available to third parties.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_14" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">All outstanding balances with these related parties
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are secured. No expense has been recognized in the current year or prior year for bad or doubtful debts in respect of amounts owed by
related parties.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_15" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Loans to and from related parties</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_16" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_15"><ix:nonNumeric contextRef="c0" continuedAt="pgsa_DisclosureOfLoansToAndFromRelatedPartiesExplanatory-c0_cont_1" escape="true" name="pgsa:DisclosureOfLoansToAndFromRelatedPartiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_17" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_16"><ix:continuation id="pgsa_DisclosureOfLoansToAndFromRelatedPartiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_18" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">The loans to and from related parties are repayable
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_19" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">No loss allowance was recognized in expense in
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_20" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">For 2021, put option agreements with IFC and Hoche
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_21" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><i>Transactions with directors and executive board
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_22" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">Total management compensation included in the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_23" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_22"><ix:nonNumeric contextRef="c0" escape="true" name="pgsa:DisclosureOfTotalManagementCompensationIncludedInTheConsolidatedStatementOfProfitOrLossExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></p><div>

</div><ix:continuation id="_DisclosureOfRelatedPartyExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify">The Group corrected the disclosure of short-term employee
benefits and consulting fees for the year ended December 31, 2021 and 2020. The correction does not impact the results presented in the
prior period.</td>
</tr></table></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">F-73</p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0; margin-bottom: 0; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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<ix:nonFraction contextRef="c126" id="hidden-fact-168" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c143" id="hidden-fact-169" name="ifrs-full:RevenueFromContractsWithCustomers" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c144" id="hidden-fact-180" name="ifrs-full:FinanceIncomeCost" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c144" id="hidden-fact-185" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c163" id="hidden-fact-189" name="ifrs-full:GeneralAndAdministrativeExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c165" id="hidden-fact-190" name="ifrs-full:GeneralAndAdministrativeExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c168" id="hidden-fact-191" name="ifrs-full:GeneralAndAdministrativeExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c162" id="hidden-fact-193" name="ifrs-full:FinanceIncomeCost" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c163" id="hidden-fact-194" name="ifrs-full:FinanceIncomeCost" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c165" id="hidden-fact-195" name="ifrs-full:FinanceIncomeCost" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c168" id="hidden-fact-196" name="ifrs-full:FinanceIncomeCost" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c161" id="hidden-fact-197" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c162" id="hidden-fact-198" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c163" id="hidden-fact-199" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c165" id="hidden-fact-200" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c168" id="hidden-fact-201" name="ifrs-full:MiscellaneousOtherOperatingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:footnote id="ix_3_footnote" xml:lang="en-US">Contribution margin is determined by subtracting sales and marketing expenses from gross profit. The Group&#8217;s customer revenue recognition (external revenue) policy has been consistent with inter-segment revenue generated.</ix:footnote><!--Text not found in footnote sections assigned to Schedule of customer revenue recognition (external revenue)-->
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<ix:nonFraction contextRef="c6" id="hidden-fact-203" name="pgsa:NetFairValueGainOfSharesHeldInEscrow" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c0" id="hidden-fact-204" name="pgsa:ListingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c6" id="hidden-fact-205" name="pgsa:ListingExpense" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c5" id="hidden-fact-206" name="ifrs-full:ImpairmentLossOnFinancialAssets" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c6" id="hidden-fact-207" name="ifrs-full:ImpairmentLossOnFinancialAssets" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c0" id="hidden-fact-208" name="pgsa:TaxEffectOfUtilizationOfTaxLossesNotPreviouslyRecognized" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c5" id="hidden-fact-209" name="pgsa:TaxEffectOfUtilizationOfTaxLossesNotPreviouslyRecognized" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c5" id="hidden-fact-210" name="pgsa:ImpairmentLossOnGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c211" id="hidden-fact-211" name="ifrs-full:AdditionsOtherThanThroughBusinessCombinationsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c209" id="hidden-fact-212" name="pgsa:AdditionsFromInternalDevelopmentsIntangibleAssetOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c209" id="hidden-fact-214" name="ifrs-full:DisposalsAndRetirementsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c211" id="hidden-fact-215" name="ifrs-full:DisposalsAndRetirementsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c212" id="hidden-fact-216" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c219" id="hidden-fact-217" name="ifrs-full:AdditionsOtherThanThroughBusinessCombinationsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c218" id="hidden-fact-219" name="pgsa:AdditionsFromInternalDevelopmentsIntangibleAssetOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c217" id="hidden-fact-220" name="ifrs-full:DisposalsAndRetirementsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c229" id="hidden-fact-221" name="ifrs-full:DisposalsAndRetirementsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c231" id="hidden-fact-222" name="ifrs-full:DisposalsAndRetirementsIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c232" id="hidden-fact-223" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c239" id="hidden-fact-224" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c262" id="hidden-fact-225" name="ifrs-full:DisposalsPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c272" id="hidden-fact-226" name="ifrs-full:DisposalsPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c282" id="hidden-fact-227" name="ifrs-full:PropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c287" id="hidden-fact-228" name="ifrs-full:DisposalsPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c287" id="hidden-fact-229" name="ifrs-full:DepreciationPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c287" id="hidden-fact-230" name="ifrs-full:IncreaseDecreaseThroughNetExchangeDifferencesPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c287" id="hidden-fact-231" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c292" id="hidden-fact-232" name="ifrs-full:PropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c295" id="hidden-fact-233" name="ifrs-full:DisposalsPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c297" id="hidden-fact-234" name="ifrs-full:DisposalsPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c295" id="hidden-fact-236" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossIntangibleAssetsOtherThanGoodwill" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c297" id="hidden-fact-237" name="ifrs-full:IncreaseDecreaseThroughNetExchangeDifferencesPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c295" id="hidden-fact-238" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c297" id="hidden-fact-239" name="ifrs-full:IncreaseDecreaseThroughTransfersAndOtherChangesPropertyPlantAndEquipment" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c317" id="hidden-fact-240" name="pgsa:AdditionToRightofuseAsset" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c318" id="hidden-fact-241" name="pgsa:AdditionToRightofuseAsset" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c318" id="hidden-fact-244" name="pgsa:IncreaseDecreaseThroughTransfersAndOtherChangesRightofuseAssets" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c317" id="hidden-fact-245" name="pgsa:IncreaseDecreaseThroughNetExchangeDifferencesRightofuseAssets" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c326" id="hidden-fact-249" name="pgsa:DerecognitionOfContract" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c325" id="hidden-fact-251" name="pgsa:impairmentLossOnROUAsset" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c430" id="hidden-fact-256" name="ifrs-full:NewLiabilitiesContingentLiabilitiesRecognisedInBusinessCombination" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c433" id="hidden-fact-257" name="ifrs-full:NewLiabilitiesContingentLiabilitiesRecognisedInBusinessCombination" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c441" id="hidden-fact-258" name="ifrs-full:NewLiabilitiesContingentLiabilitiesRecognisedInBusinessCombination" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c443" id="hidden-fact-259" name="ifrs-full:NewLiabilitiesContingentLiabilitiesRecognisedInBusinessCombination" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:footnote id="ix_18_footnote" xml:lang="en-US">As of December 31, 2022, includes a deferred tax asset of $380 related to Procaps S.A. tax losses generated during the year. As of December 31, 2021, the deferred tax asset balance does not comprise unused tax losses.</ix:footnote><!--Text not found in footnote sections assigned to Schedule of deferred tax assets and liabilities by type of temporary -->
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<ix:nonFraction contextRef="c0" id="hidden-fact-262" name="pgsa:AssumedExerciseOfShareEquivalents" unitRef="shares" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c0" id="hidden-fact-271" name="pgsa:AcquiredPrivateWarrants" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c493" id="hidden-fact-280" name="ifrs-full:CashAndCashEquivalents" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c493" id="hidden-fact-284" name="ifrs-full:FinancialAssets" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c492" id="hidden-fact-285" name="ifrs-full:NoncurrentWarrantLiability" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c492" id="hidden-fact-289" name="ifrs-full:FinancialLiabilities" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c494" id="hidden-fact-290" name="ifrs-full:FinancialLiabilities" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c493" id="hidden-fact-292" name="ifrs-full:Borrowings" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c491" id="hidden-fact-293" name="ifrs-full:TradeAndOtherCurrentPayables" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c493" id="hidden-fact-294" name="ifrs-full:TradeAndOtherCurrentPayables" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c491" id="hidden-fact-295" name="ifrs-full:TradeAndOtherPayablesToRelatedParties" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c493" id="hidden-fact-296" name="ifrs-full:TradeAndOtherPayablesToRelatedParties" unitRef="usd" xsi:nil="true"></ix:nonFraction>
<ix:nonFraction contextRef="c495" id="hidden-fact-297" name="pgsa:Totalfinancialliabilities" unitRef="usd" xsi:nil="true"></ix:nonFraction>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
☐
REGISTRATION STATEMENT PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended
December 31
,
2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to
___________
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
______________
Commission file number
001-38354
PROCAPS GROUP, S.A.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Grand Duchy of
Luxembourg
(Jurisdiction of incorporation or organization)
Ruben Minski
9 rue de Bitbourg
,
L-1273
Luxembourg
Grand Duchy of
Luxembourg
R.C.S. Luxembourg: B253360
Tel : +
356
7995-6138
Email:
ir@procapsgroup.com
(Name, Telephone, E-mail and/or Facsimile number and Address Company Contact Person)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
Trading Symbol
Name of each exchange in which registered
Ordinary Shares, U.S.$0.01 nominal value per share
PROC
The
Nasdaq
Stock Market LLC
Warrants
PROCW
The
Nasdaq
Stock Market LLC
Securities registered pursuant to Section 12(g)
of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of
each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
112,824,183
Ordinary Shares, as of December
31, 2022
23,375,000 Warrants to purchase Ordinary Shares,
as of December 31, 2022
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
No
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
☐ Yes ☒
No
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
☒
Yes
☐ No
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Yes
☐ No
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of "large
accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer
☒
Non-accelerated filer ☐
Emerging growth company
☒
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange
Act.
☐
†
The term "new or revised financial accounting standard"
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards
as issued
by the International Accounting Standards Board ☒
Other ☐
If "Other" has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
☒
No
TABLE
OF CONTENTS
FREQUENTLY USED TERMS
ii
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING
    STATEMENTS
v
CERTAIN CONVENTIONS
x
CURRENCY PRESENTATION
x
PRESENTATION OF FINANCIAL INFORMATION
x
PRESENTATION OF INDUSTRY AND MARKET DATA
xi
Item 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
    AND ADVISERS
1
Item 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
Item 3.
KEY INFORMATION
1
Item 4.
COMPANY INFORMATION
34
Item 4A.
UNRESOLVED SEC STAFF COMMENTS
60
Item 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
60
Item 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
92
Item 7.
MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
101
Item 8.
FINANCIAL INFORMATION
105
Item 9.
THE OFFER AND LISTING
106
Item 10.
ADDITIONAL INFORMATION
106
Item 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING
    MARKET RISK
120
Item 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
121
Item 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
121
Item 14.
MATERIAL MODIFICATIONS
    TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
121
Item 15.
CONTROLS AND PROCEDURES
122
ITEM 16.
RESERVED
124
Item 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
124
Item 16B.
CODE OF ETHICS
124
Item 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
124
Item 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
125
Item 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
125
Item 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
125
Item 16G.
CORPORATE GOVERNANCE
125
Item 16H.
MINE SAFETY DISCLOSURE
126
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
    INSPECTIONS
126
Item 17.
FINANCIAL STATEMENTS
126
Item 18.
FINANCIAL STATEMENTS
126
Item 19.
EXHIBITS
127
SIGNATURES
129
i
FREQUENTLY
USED TERMS
In this Annual Report:
"1915 Law" means
the Luxembourg law of August 10, 1915 on commercial companies, as amended.
"Adjusted EBITDA"
means EBITDA further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs
incurred in connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination,
certain costs related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance
costs and other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time.
"Annual Report"
means this annual report on Form 20-F for the fiscal year ended December 31, 2022.
"Board of Directors"
means the board of directors of the Company.
"Business Combination"
means the transactions consummated pursuant to the Business Combination Agreement.
"Business Combination
Agreement" means the Business Combination Agreement, dated as of March 31, 2021, as amended on September 29, 2021, by and among
Union, Crynssen, the Company and Merger Sub.
"Closing" means
the consummation of the Business Combination.
"Closing Date"
means September 29, 2021.
"Code" means
the Internal Revenue Code of 1986, as amended.
"Company" means
Procaps Group, S.A., a public limited liability company (
société anonyme
) governed by the laws of the Grand Duchy
of Luxembourg, having its registered office at 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg, and registered with
the Luxembourg Trade and Companies' Register (
Registre de Commerce et des Sociétés, Luxembourg
) under number
B 253360.
"COVID-19" means
the novel coronavirus known as SARS-CoV-2 or COVID-19, and any evolutions, mutations thereof or related or associated epidemics, pandemic
or disease outbreaks.
"Crynssen" means
Crynssen Pharma Group Limited, a private limited liability company registered and incorporated under the laws of Malta and, particularly,
the Companies Act Cap. 386 with company registration number C 59671.
"Crynssen Ordinary Shares"
means ordinary shares of Crynssen, with a nominal value of $1.00 per share.
"Crynssen Shareholders"
means the shareholders of Crynssen prior to the consummation of the Business Combination.
"Deseja" means
the Deseja Trust, a trust organized under the laws of the State of Delaware and a Crynssen Shareholder.
"EBITDA" means
profit (loss) for the year before interest expense, net, income tax expense and depreciation and amortization.
"Exchange Act"
means the Securities Exchange Act of 1934, as amended.
"FDA" means the
United States Food and Drug Administration.
"GAAP" means
generally accepted accounting principles in the United States of America.
ii
"IASB" means
the International Accounting Standards Board.
"IFC" means the
International Finance Corporation, an international organization established by Articles of Agreement among its member countries, and
a Crynssen Shareholder.
"IFC Redemption Agreement"
means that certain Share Redemption Agreement entered into by and between the Company and IFC on March 31, 2021, and subsequently amended
on September 29, 2021, pursuant to which the Company agreed to redeem 4,500,000 Redeemable B Shares from IFC for a total purchase price
of $45,000,000 in accordance with the terms thereunder.
"IFRS" means
the International Financial Reporting Standards, as issued by the IASB.
"IPO" means Union's
initial public offering of units, consummated on October 22, 2019.
"INVIMA" means the Colombian
Instituto Nacional de Vigilancia
de Medicamentos y Alimentos
(National Food and Drug Surveillance Institute).
"JOBS Act" means
the U.S. Jumpstart Our Business Startups Act of 2012, as amended.
"Merger" means
the merging of Merger Sub with and into Union pursuant to the laws of the Cayman Islands, with Union surviving the Merger as a wholly
owned subsidiary of the Company.
"Merger Effective Time"
means the time at which the merger certificate was filed on September 29, 2021.
"Merger Sub"
means OZLEM Limited, an exempted company incorporated under the laws of the Cayman Islands with registration number 373625.
"Nasdaq" means
The Nasdaq Stock Market LLC.
"Nomination Agreement"
means that certain nomination agreement by and among the Company, certain Crynssen Shareholders and the Sponsors dated September 29,
2021.
"Ordinary Shares"
means the ordinary shares of the Company, nominal value $0.01 per share.
"PIPE" means
the private placement pursuant to which the PIPE Investors purchased 10,000,000 SPAC Ordinary Shares, for a purchase price of $10.00
per share, which were converted into Ordinary Shares in connection with the Closing.
"PIPE Investors"
means persons that entered into Subscription Agreements with the SPAC to purchase SPAC Ordinary Shares which were subsequently converted
into Ordinary Shares in connection with the consummation of the Business Combination on the Closing Date.
"Redeemable A Shares"
means the redeemable A shares of the Company, nominal value $0.01 per share.
"Redeemable B Shares"
means the redeemable B shares of the Company, nominal value $0.01 per share.
"Registration Rights
and Lock-Up Agreement" means that certain registration rights and lock-up agreement entered into on September 29, 2021 by and among
the Company, the Sponsors, certain other shareholders of Union and the Crynssen Shareholders.
"SEC" means the
U.S. Securities and Exchange Commission.
"Securities Act"
means the Securities Act of 1933, as amended.
"Simphony" means
the Simphony Trust, a trust organized under the laws of the State of Delaware and a Crynssen Shareholder.
iii
"Sognatore" means
the Sognatore Trust, a trust organized under the laws of New Zealand and a Crynssen Shareholder.
"SPAC" or "Union"
means Union Acquisition Corp. II, a Cayman Islands exempted company limited by shares with registration number 345887.
"SPAC Ordinary Shares"
means the ordinary shares of Union, par value $0.0001 per share.
"SPAC Warrants"
means warrants to purchase SPAC Ordinary Shares as contemplated under the Warrant Agreement, with each warrant exercisable for the number
of SPAC Ordinary Shares stated in the applicable SPAC Warrant at an exercise price per SPAC Ordinary Share of $11.50.
"Sponsors" means
Union Group International Holdings Limited and Union Acquisition Associates II, LLC.
"Subscription Agreements"
means the subscription agreements entered into by Union and a number of qualified institutional buyers and institutional and individual
accredited investors, in connection with the execution of the Business Combination Agreement, pursuant to which such investors agreed
to purchase, and Union agreed to sell to such investors, an aggregate of 10,000,000 SPAC Ordinary Shares for a purchase price of $10.00
per share and an aggregate purchase price of $100,000,000, which SPAC Ordinary Shares were automatically converted into Ordinary Shares
upon Closing.
"Transaction Support
Agreement" means the Transaction Support Agreement, dated as of March 31, 2021, by and among Union, Crynssen, the Company, certain
Crynssen Shareholders, the Sponsors, certain other shareholders of Union prior to the Closing of the Business Combination and certain
officers and directors of Union, as amended, modified or supplemented from time to time.
"Warrant Amendment"
means that certain Assignment, Assumption and Amendment Agreement entered into on September 29, 2021 by the Company, Union and Continental
Stock Transfer & Trust Company as warrant agent.
"Warrant Agreement"
means the warrant agreement, dated October 17, 2019, by and between Union and Continental Stock Transfer & Trust Company, as warrant
agent, governing Union's warrants.
"Warrants" mean
the former warrants of Union converted at the Merger Effective Time into a right to acquire one Ordinary Share on substantially the same
terms as were in effect immediately prior to the Merger Effective Time under the terms of the Warrant Agreement, which was assigned to
and assumed by the Company pursuant to the Warrant Amendment.
iv
CAUTIONARY
STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This Annual Report contains
forward-looking statements about our expectations, beliefs and intentions regarding, among other things, our products and services, development
efforts, business, financial condition, results of operations, strategies, plans and prospects. Forward-looking statements can be identified
by the use of forward-looking words such as "believe," "expect," "intend," "plan," "may,"
"should," "could," "might," "seek," "target," "will," "project,"
"forecast," "continue" or "anticipate" or their negatives or variations of these words or other comparable
words or by the fact that these statements do not relate strictly to historical matters. Forward-looking statements relate to anticipated
or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters
that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to
differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual
activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but
not limited to, the factors listed below:
●
the
financial performance of Procaps following the Business Combination;
●
changes
to our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
●
our
ability to develop and launch new products and services;
●
our
ability to successfully and efficiently integrate future acquisitions or execute on dispositions;
●
the
availability of raw materials used in our products and our ability to source such raw materials, or find adequate substitutes, in a cost-effective
manner;
●
our
product development timeline and estimated research and development ("R&D") costs;
●
developments
and projections relating to our competitors and industry;
●
our
expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
●
the
impact of the COVID-19 pandemic on our business;
●
changes
in applicable laws or regulations; and
●
the
outcome of any known and unknown litigation and regulatory proceedings.
We believe these forward-looking
statements are reasonable; however, these statements speak only as of the date of this Annual Report and are subject to known and unknown
risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from those anticipated by the forward-looking statements. We discuss these risks in this Annual
Report in greater detail under Item 3.D. "Risk Factors." Given these uncertainties, you should not rely upon forward-looking
statements as predictions of future events.
Unless required by law, we
undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or developments
or otherwise.
v
As a result of a number of
known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied
by these forward-looking statements. Some factors that could cause actual results to differ include:
●
changes in
    applicable laws or regulations;
●
any identified material
    weaknesses in our internal control over financial reporting which, if not corrected, could adversely affect the reliability of our
    financial reporting;
●
the effects
    of the COVID-19 pandemic on our business;
●
the ability to implement
    business plans, forecasts, and other expectations after the completion of any future acquisition, and identify and realize additional
    opportunities;
●
the risk of
    failure or delay in the development of new pharmaceutical products and the costs involved;
●
the risk that delays in
    regulatory reviews and approvals of new products could delay our ability to market such products, and that post-approval requirements,
    including additional clinical trials, could result in increased costs;
●
the risk associated with
    the markets and countries in which we operate, including, Colombia, El Salvador and Brazil;
●
our ability to identify
    and materialize acquisition opportunities;
●
the risk associated with
    fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active pharmaceutical
    ingredients, excipients, purchased components, and raw materials;
●
failure to comply with
    existing or future regulatory requirements, standards and ethical expectations, including environmental, tax, labor, anticorruption,
    health and safety regulations;
●
the risk associated with
    global supply chain crisis could interfere with the operations of certain of our direct or indirect suppliers;
●
our ability to adequately
    enhance our products and services or introduce new technology;
●
the risk of a change in
    demand for our products and services, consumer preferences and the possibility of rapid technological change in the highly competitive
    industry in which we operate;
●
the risk associated with
    the loss of, or failure to attract and retain, our key employees and specialized sales representatives;
vi
●
the risk that
    changes to price control regulations could negatively affect our margins and its ability to pass on cost increases to our customers;
●
the dependency of our integral
    contract development and manufacturing organization services on customer's research and success of their products;
●
the risks associated
    with the effect of our products on our customers and potential exposure to product and other liability risks;
●
the risk of disruption
    at any of our manufacturing facilities or disruption of the relationship with our key customers;
●
the risks associated with
    exchange rate volatility of the currencies in which we do business;
●
the risk of any breach,
    disruption or misuse of our, or our external business partners', information systems or cyber security efforts;
●
the risk of changes in
    market access or healthcare reimbursement for, or public sentiment towards our, or our customers', products, or other changes
    in applicable policies regarding the healthcare industry;
●
the risk that we or our
    customers are unable to secure or protect our respective intellectual property or that we or our customers may infringe on the intellectual
    property rights of others;
●
the loss of customers'
    confidence in the integrity of pharmaceutical products due to illegal trade;
●
the possibility that we
    may be adversely affected by other economic, business, and/or competitive factors; and
●
other risks and uncertainties
    described in this Annual Report, including those under the heading "Risk Factors" in Item 3.D of this Annual Report.
vii
SUMMARY
OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and
uncertainties, including those described in "Item 3.D—Key Information—Risk Factors" in this Annual Report. You
should carefully consider these risks and uncertainties when investing in our Ordinary Shares. The principal risks and uncertainties
affecting our business include the following:
●
The
                                            development of new pharmaceutical products is a complex, risky and lengthy process involving
                                            significant financial, research and development and other resources, which may be delayed
                                            due to various factors. Such delays can result in increased costs or the emergence of competing
                                            products, which may have a material adverse effect on Procaps' business, financial
                                            condition and results of operations.
●
Procaps
                                            is subject to strict controls on the commercialization processes for its pharmaceutical products,
                                            including their development, manufacture, distribution and marketing, which vary by country
                                            and by region. Any delays in regulatory reviews or approvals could delay Procaps' ability
                                            to market our products, which could have a material adverse effect on its business, financial
                                            condition and results of operations.
●
Procaps'
                                            future results of operations are subject to fluctuations in the costs, availability, and
                                            suitability of the components of the products it manufactures, including active pharmaceutical
                                            ingredients, excipients, purchased components, and raw materials. In addition, the COVID-19
                                            pandemic may interfere with the operations of certain of Procaps' direct or indirect
                                            suppliers or with international trade for these supplies, which could raise Procaps'
                                            costs or reduce the productivity or slow the timing of its operations, which could have a
                                            material adverse effect on its business, financial condition and results of operations,
●
A
                                            disruption at any of Procaps' main manufacturing facilities could materially and adversely
                                            affect its business, financial condition and results of operations.
●
Procaps'
                                            independent registered public accounting firm has included an explanatory paragraph relating
                                            to Procaps' ability to continue as a going concern in its report on Procaps'
                                            Annual Audited Consolidated Financial Statements included elsewhere in this Annual Report.
●
Procaps
                                            has identified a material weakness in its internal control over financial reporting. If Procaps
                                            is unable to develop and maintain an effective system of internal control over financial
                                            reporting, it may not be able to accurately report its financial results in a timely manner,
                                            which may adversely affect investor confidence in Procaps and materially and adversely affect
                                            its business and results of operations.
●
Procaps
                                            is an international company with operations primarily in Latin America and is subject to
                                            the market risks of the countries in which it manufactures and/or sells its products, and
                                            to risks associated with foreign exchange rates.
●
If
                                            Procaps does not enhance its existing products and services, or introduce new technology
                                            or service offerings in a timely manner, its products and services may become uncompetitive
                                            over time, or customers may not buy its products or buy less of them, which could have a
                                            material adverse effect on Procaps' business, financial condition and results of operations.
●
The
                                            demand for OTC products may be impacted by changes in consumer preferences. If Procaps is
                                            unable to adapt to these changes, it may lose market share and its net sales may be negatively
                                            impacted, which could have a material adverse effect on Procaps' business, financial
                                            condition and results of operations.
●
Procaps'
                                            business depends upon certain customers for a significant portion of its sales, therefore,
                                            a disruption of Procaps' relationship with these customers or any material adverse
                                            change in these customers' businesses could have a material adverse effect on Procaps'
                                            business, financial condition and results of operations.
●
Procaps
                                            depends on key personnel to operate and grow its business and to develop new and enhanced
                                            offerings and technologies and the loss of, or the failure to attract and retain, such key
                                            personnel could adversely affect its operations.
●
Procaps
                                            may be unable to identify acquisition opportunities and successfully execute and close acquisitions,
                                            which could limit its potential for growth.
●
Procaps
                                            may not be able to realize the benefits of business acquisitions and divestitures it enters
                                            into, including being unable to successfully and efficiently integrate acquisitions or execute
                                            on dispositions, which could have a material adverse effect on its business, financial condition
                                            and results of operations.
●
The
                                            demand for Procaps' iCDMO services depends in part on its customers' research
                                            and development and the clinical and market success of their products. In the event Procaps'
                                            customers spend less on, or are less successful in, these activities for any reason, including
                                            as a result of decrease in spending due to the COVID-19 pandemic or recessionary economic
                                            conditions caused in whole or in part by the pandemic, Procaps' business, financial
                                            condition, and results of operations may be materially adversely affected.
viii
●
Procaps
                                            participates in a highly competitive market, and increased competition may adversely affect
                                            its business, financial condition and results of operations.
●
Changes
                                            in market access or healthcare reimbursement for, or public sentiment towards Procaps, or
                                            its customers', products in Latin America, the United States and other countries in
                                            which Procaps operates, or other changes in applicable policies regarding the healthcare
                                            industry, could adversely affect Procaps' financial condition and results of operations
                                            by affecting demand for Procaps' products and services.
●
The
                                            illegal trade in pharmaceutical products, including counterfeiting, theft and illegal diversion,
                                            is widely recognized. Public loss of confidence in the integrity of pharmaceutical products
                                            as a result of illegal trade could materially adversely affect Procaps' reputation,
                                            financial condition and results of operation.
●
Procaps
                                            and its customers depend on patents, copyrights, trademarks, know-how, trade secrets, and
                                            other forms of intellectual property protections, but these protections may not be adequate.
●
Procaps'
                                            products and services, or its customers' products, may infringe on the intellectual
                                            property rights of third parties and any such infringement could have a material adverse
                                            effect on Procaps' business.
●
A
                                            significant portion of medication on the market, including Procaps', is subject to
                                            price control regulations. This control may limit Procaps' margins and its ability
                                            to pass on cost increases to its customers, which could have a material adverse effect on
                                            Procaps' business, financial condition and results of operations.
●
Procaps
                                            may be held liable if a consumer has an adverse health reaction to a product it sells or
                                            manufactures.
●
Procaps
                                            is subject to product and other liability risks that could exceed its anticipated costs or
                                            adversely affect its results of operations, financial condition, liquidity, and cash flows.
●
Failure
                                            to comply with existing and future regulatory requirements could adversely affect Procaps'
                                            business, financial condition and results of operations, or result in claims from customers.
●
Procaps'
                                            global operations are subject to economic, political, and regulatory risks, including the
                                            risks of changing regulatory standards or changing interpretations of existing standards
                                            that could affect its financial condition and results of operation or require costly changes
                                            to its business.
●
Procaps
                                            is subject to governmental export and import controls that could impair its ability to compete
                                            in international markets and subject it to liability if Procaps is not in compliance with
                                            applicable laws.
ix
CERTAIN
CONVENTIONS
The Company was incorporated
under the laws of the Grand Duchy of Luxembourg on March 29, 2021. The Company owns no material assets other than its direct ownership
of the issued share capital in Crynssen, a private limited liability company registered and incorporated under the laws of Malta. Except
where the context otherwise requires or where otherwise indicated, all references to "Procaps," "we," "us"
and "our" refer to the Company and its consolidated subsidiaries, as well as those businesses we account for using the equity
method.
Trademarks and Trade Names
This Annual Report contains
references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred
to in this Annual Report, including logos, artwork and other visual displays may appear without the ® or TM symbols, but such references
are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their
rights thereto. We do not intend our use or display of other companies' trade name or trademarks to imply a relationship with,
or endorsement or sponsorship of us by, any other companies.
CURRENCY
PRESENTATION
In this Annual Report, unless
otherwise specified or the context otherwise requires:
●
"U.S.$",
    "$" and "U.S. dollar" each refers to the United States dollar;
●
"COP"
    and "Colombian Peso" refers to the Colombian peso, the lawful currency of Colombia; and
●
"Reais",
    "R$" and "Brazilian Real" refers to the Brazilian real, the lawful currency of Brazil.
We have translated some of
the local currency amounts contained in this Annual Report into U.S. dollars for convenience purposes only. The U.S. dollar-equivalent
information presented in this Annual Report is provided solely for convenience and should not be construed as implying that the amounts
represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate.
Certain numbers and percentages
included in this Annual Report have been subject to rounding adjustments. Accordingly, figures shown for the same category presented
in various tables or other sections of this Annual Report may vary slightly, and figures shown as totals in certain tables may not be
the arithmetic aggregation of the figures that precede them.
PRESENTATION
OF FINANCIAL INFORMATION
This Annual Report contains
the annual audited consolidated financial statements of Procaps Group, S.A. as of December 31, 2022 and 2021, and for the years ended
December 31, 2022, 2021 and 2020 (the "Annual Audited Consolidated Financial Statements").
The Annual Audited Consolidated
Financial Statements have been prepared in accordance with the IFRS as issued by the IASB and in its presentation currency of the U.S.
dollar.
Our Annual Audited Consolidated
Financial Statements are presented in U.S. dollars. Our fiscal year ends on December 31 of each year. Accordingly, all references to
a particular year are to the year ended December 31 of that year.
Non-IFRS Information
Our management uses certain
non-IFRS financial information to assess our operating performance across periods and for business planning purposes. We believe the
presentation of these non-IFRS financial measures is useful to investors as it provides additional information to facilitate comparisons
of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency
on how we evaluate our business.
We use non-IFRS financial
measures to budget, make operating and strategic decisions, and evaluate our performance. Below is a description of the non-IFRS financial
measures we have used in this Annual Report, including any adjustments to the IFRS financial measures derived therefrom. We believe the
non-IFRS measures should always be considered along with the related IFRS financial measures. We have provided the reconciliations between
the IFRS and non-IFRS financial measures in Item 5.A. of this Annual Report under the heading "Operating and Financial Review and
Prospects—Operating Results––Non-IFRS Financial Measures."
x
The primary non-IFRS financial
measures utilized by our management is described below and reflects how we evaluate our current and prior-year operating results. As
new events or circumstances arise, our management may alter the definitions of such measures to better reflect our financial performance
or adopt new measures in the future. In the event any of these definitions change, or if new non-IFRS financial measures are adopted
by our management, we will provide the updated definitions and present the related non-IFRS historical results on a comparable basis.
Use of Constant Currency
As exchange rates are an
important factor in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results
on a constant currency basis in addition to the IFRS reported results helps improve investors' ability to understand our operating
results and evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial information
that compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency
basis as one measure to evaluate our performance. We currently present revenue, cost of sales, gross profit, sales and marketing expenses,
administrative expenses, Contribution Margin and Adjusted EBITDA on a constant currency basis. We calculate constant currency by calculating
year-end period results using prior-period foreign currency exchange rates. We generally refer to such amounts calculated on a constant
currency basis as excluding the impact of foreign exchange. These results should be considered in addition to, not as a substitute for,
results reported in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly
titled measures used by other companies and are not measures of performance presented in accordance with IFRS.
For more information, see
the discussion on constant currency in Item 5.A of this Annual Report under the heading "Operating and Financial Review and Prospects—Operating
Results––Non-IFRS Financial Measures––Use of Constant Currency."
EBITDA, Adjusted EBITDA, and Adjusted EBITDA
Margin
We define EBITDA as profit
(loss) for the year before interest expense, net, income tax expense and depreciation and amortization. We define Adjusted EBITDA as
EBITDA further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs incurred
in connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination, certain costs
related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance costs and
other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time. Adjusted EBITDA is one
of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance compared to other companies in
the pharmaceutical industry, as similar measures are commonly used by companies in this industry. We also report Adjusted EBITDA as a
percentage of revenue as an additional measure so investors may evaluate our Adjusted EBITDA margins on revenue.
For more information and
a reconciliation of profit (loss) for the year to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, see Item 5.A of this Annual Report
under the heading "Operating and Financial Review and Prospects—Operating Results––Non-IFRS Financial Measures––EBITDA,
Adjusted EBITDA, and Adjusted EBITDA Margin."
Contribution Margin
We define Contribution Margin
as gross profit less selling expenses. Contribution Margin is one of the key performance indicators we use in evaluating our profitability.
We believe Contribution Margin is useful to investors in evaluating our operating performance compared to other companies in the pharmaceutical
industry, as similar measures are commonly used by companies in this industry.
For more information and
a reconciliation of gross profit to Contribution Margin, see Item 5.A of this Annual Report under the heading "Operating and Financial
Review and Prospects—Operating Results––Non-IFRS Financial Measures–– Contribution Margin."
PRESENTATION
OF INDUSTRY AND MARKET DATA
In this Annual Report, we
rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain
economic and industry data and forecasts used in this Annual Report were obtained from internal surveys, market research, governmental
and other publicly available information and independent industry publications. Industry publications, surveys and forecasts generally
state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness
of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable, but we have not
independently verified them and cannot guarantee their accuracy or completeness.
Certain market share information
and other statements presented herein regarding our position relative to our competitors are not based on published statistical data
or information obtained from independent third parties, but reflects our best estimates. We have based these estimates upon information
obtained from publicly available information from our competitors in the industry in which we operate.
xi
ITEM 1.
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER
STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
KEY
INFORMATION
A. Reserved
B. CAPITALIZATION
AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
You should carefully consider
the risks and uncertainties described below, together with the other information contained in this Annual Report, before making any investment
decision. Any of the following risks and uncertainties could have a material adverse effect on our business, prospects, results of operations
and financial condition. The market price of our Ordinary Shares and Warrants could decline due to any of these risks and uncertainties,
and you could lose all or part of your investment. The risks described below are those that we currently believe may materially affect
us.
Risks Related to Product Development and Manufacturing
The development of new pharmaceutical products
is a complex, risky and lengthy process involving significant financial, research and development and other resources, which may be delayed
due to various factors. Such delays can result in increased costs or the emergence of competing products, which may have a material adverse
effect on our business, financial condition and results of operations.
We develop advanced pharmaceutical
oral delivery systems technologies primarily in the form of soft gelatin capsules ("Softgel") that are used in the manufacturing
of prescription pharmaceutical drugs ("Rx") and over the counter ("OTC") pharmaceutical products, as well as
high-complexity drugs for hospital use, personal protective equipment, immunosuppressant, oncology and analgesics products and syringes,
among other products. The development of new pharmaceutical products, including our advanced oral delivery systems, is a complex, inherently
risky and lengthy process involving significant financial, R&D and other resources, and may not result in a commercially viable product.
We must successfully develop, test, manufacture and launch our products as well as successfully register our products in each relevant
jurisdiction, in advance of our competitors. A project may be delayed at any stage of the process due to various factors, including failure
to obtain the required regulatory approvals for the product being developed or for its manufacturing facilities in a timely manner. Our
products currently under development, if and when fully developed and tested, may not perform as we expect, or competitors may already
occupy the market opportunity.
Decisions on the launch of
a new oral delivery system and the timing of such launches are primarily driven by our R&D development team. Once the development
of the product is completed and the results and appropriate documentation is submitted to the applicable health authority, investments
made in the manufacture of pre-launch product, marketing materials and sales force training, may result in additional expenses if the
product is not approved in a timely manner. Additionally, other factors such as price negotiation, large-scale natural disasters or global
pandemics, and competitor activity may significantly delay the launch of a new product.
1
All of our products must
meet and continue to comply with regulatory and safety standards and receive regulatory approvals in each of the markets in which they
are to be commercialized. If health or safety concerns arise with respect to a product, we may be forced to withdraw it from the market
and could face legal action if any harm came from the use of our products.
Significant delays in the
development and anticipated launch dates of new products could hinder our achievement of development targets, adversely affect the reputation
of our R&D capabilities, allow our competitors to bring competing products to the market before we do, significantly reduce the return
on costs incurred in preparing for the launch of seasonal products that are launched off-season, and result in increased costs if marketing
and sales efforts need to be rescheduled, which could materially adversely affect our business, financial condition and results of operations.
In addition, product development
requires the accurate assessment of market trends and market acceptance among consumers and the medical community, particularly physicians
and hospitals, in each of our target markets. Although hospitals often use generic products to reduce their costs, procurement departments
of hospitals may not purchase our products. Physicians may not prescribe or recommend our products to patients, and pharmacists may not
respect the prescription. Despite our track record of success in certain markets, the acceptance of any of our products among the medical
community depends upon several factors, including the reputation of the brand, the safety and efficacy of the product, the effectiveness
of our sales force, the product's price, the product's perceived advantages and disadvantages relative to competing products
or treatments, and the prevalence and severity of side effects. Our overall profitability depends on, among other things, our ability
to introduce new products in a timely manner, to differentiate our products with innovative formulations, to continue to manufacture
products cost-efficiently and to manage the life cycle, including market acceptance, of our product portfolio.
We are subject to strict controls on the
commercialization processes for our pharmaceutical products, including their development, manufacture, distribution and marketing, which
vary by country and by region. Any delays in, or rejections of, regulatory reviews, approvals or permits could delay our ability to market
our products, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to strict
controls and approvals on the commercialization processes for our pharmaceutical products, including their development, manufacturing,
distribution and marketing. The criteria for establishing safety, efficacy and quality, which are essential for securing marketing approvals,
vary by country and by region. Obtaining approval for our products and manufacturing processes requires us to submit a dossier in respect
of each international non-proprietary name ("INN") and each formulation and dosage variation for such INN in each country
in which we wish to market such product. Regulators may delay approvals and require additional data before approval is granted, or reject
approvals requested, even though the pharmaceutical products may already be approved or launched in other countries.
Certain factors, including
advances in science and technology, evolving regulatory science and new laws and policies, can result in delays in the approval of new
pharmaceutical products, including new advanced oral delivery systems. While we seek to manage most of these risks, unanticipated and
unpredictable policymaking by governments and regulators, limited regulatory authority resources or conflicting priorities can often
lead to delays in regulatory approvals. Any such delays in regulatory reviews and approvals could delay the marketing of our products,
resulting in increased costs as described above, which may have a material adverse effect on our business, financial condition and results
of operations.
Our future results of operations are subject
to fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active pharmaceutical
ingredients, excipients, purchased components, and raw materials. In addition, global supply chain crisis may interfere with the operations
of certain of our direct or indirect suppliers or with international trade for these supplies, which could raise our costs or reduce
the productivity or slow the timing of our operations, which could have a material adverse effect on our business, financial condition
and results of operations.
We depend on various active
pharmaceutical ingredients, components, compounds, raw materials, and energy supplied primarily by others for our offerings. This includes,
but is not limited to, pharmaceutical and biologic ingredients, gelatin, starch, and iota carrageenan for our Softgel products, packaging
films for our Rx and OTC products, and glass vials and syringes for injectable fill-finish for certain of our Rx and Diabetrics (as defined
below) products. Also, certain of our customers provide to us their active pharmaceutical or biologic ingredient for formulation or incorporation
in the finished product and may supply other raw materials as well. It is possible that any of our or our customers' supplier relationships
could be interrupted due to changing regulatory requirements, import or export restrictions, natural disasters, international supply
disruptions, whether caused by pandemics or otherwise, geopolitical issues, operational or quality issues at the suppliers' facilities,
and other events, or could be terminated in the future.
2
For example, gelatin is a
critical component in most of our Softgel products produced by our NextGel segment. Gelatin is available from only a limited number of
sources. In addition, much of the gelatin we use is bovine-derived. Past concerns of contamination from bovine spongiform encephalopathy
("BSE"), have narrowed the number of possible sources of particular types of gelatin. If there were a future disruption in
the supply of gelatin from any one or more key suppliers, we may not be able to obtain an adequate alternative supply from our other
suppliers. If future restrictions were to emerge on the use of bovine-derived gelatin due to concerns of contamination from BSE or otherwise,
any such restriction could hinder our ability to timely supply our customers with products and the use of alternative non-bovine-derived
gelatin could be subject to lengthy formulation, testing, and regulatory approval.
A disruption at any of our main manufacturing
facilities could materially and adversely affect our business, financial condition and results of operations.
Our manufacturing operations
are concentrated in seven locations throughout Colombia, Brazil, El Salvador and the United States, including the first FDA-approved
pharmaceutical plant in South America and Central America and our first U.S.-based Softgel production facility and R&D center which
began operations in May 2022. A significant disruption at one or more of these facilities, whether it be due to fire, natural disaster,
power loss, intentional acts of vandalism, climate change, war, terrorism, insufficient quality, cyber-attacks, or pandemic could materially
and adversely affect our business.
Additionally, regulatory
authorities routinely inspect all of our manufacturing facilities for compliance with applicable laws, rules, regulations and practices.
If a regulatory authority were to identify serious adverse findings not corrected upon follow up inspections, we may be required to issue
product recalls, shut down manufacturing facilities, pay fines, and take other remedial actions. Also, if the lessor under any leased
facility identifies any breach thereto, it may have the right to terminate the lease in advance. If any manufacturing facility were forced
to cease or limit production, our business, financial condition and results of operations could be materially adversely affected.
Risks Related to Our Business and Financial
Condition
Our independent registered public accounting
firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our Annual Audited
Consolidated Financial Statements included elsewhere in this Annual Report.
Our Annual Audited Consolidated Financial Statements
were prepared assuming that we will continue as a going concern. However, the report of our independent registered public accounting
firm included elsewhere in this Annual Reports contains an explanatory paragraph on our consolidated financial statements stating there
is substantial doubt about our ability to continue as a going concern, meaning that we may not be able to continue in operation for the
foreseeable future or be able to realize assets and discharge liabilities in the ordinary course of operations. Such an opinion could
materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no
assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The perception that we
may not be able to continue as a going concern may also make it more difficult to raise additional funds or operate our business due
to concerns about our ability to meet our contractual obligations. Any inability to raise additional funds, when needed, could materially
adversely affect our business, financial condition and results of operations. For more information regarding management's assessment
regarding its ability to continue as going concern. See "Item 5. Operating and Financial Review and Prospects—Operating Results—Going
Concern Update" and Note 2.1 Note 2.1 to our Annual Audited Consolidated Financial Statements, included elsewhere in this Annual
Report.
3
We have identified material weaknesses
in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor
confidence in us and materially and adversely affect our business and results of operations.
In connection with the audit
of our Annual Audited Consolidated Financial Statements, we identified material weaknesses in our internal controls related to (i) our
manual consolidation process which lacks the appropriate internal controls to prevent or detect material misstatements in a timely manner
and to ensure that financial data recorded was complete and accurate, (ii) our information technology controls not being sufficiently
designed and implemented to address certain information technology risks, (iii) the sufficiency of technical accounting resources with
an appropriate level of technical experience required for timely and accurate financial reporting in accordance with IFRS, (iv) lack
of system controls and effective processes to ensure that all manual journal entries are properly reviewed and approved prior to posting
to the general ledger, and (v) our controls and monitoring activities not being effective to ascertain whether the components of our
internal control are present and functioning. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements
will not be prevented or detected on a timely basis.
Our remediation activities
are ongoing, and we will continue to implement our initiatives to effectively implement our internal controls over financial reporting
and further document our policies, procedures and internal controls, including, among others, (i) implementation and deployment of a
plan for the business planning and consolidation module, which includes improving existing controls and adjusting policies and procedures
and implementing automated consolidation, (ii) design, implementation, and operation of the segregation of duties model, for which the
project is being executed with the support of an external advisor, and on ensuring the proper implementation and operation of controls,
(iii) recruiting additional personnel in our finance and accounting departments to ensure that we have a sufficient complement of personnel
with the appropriate level of knowledge and experience required for the timely and accurate financial reporting in accordance with IFRS,
(iv) designing and implementing procedures over the preparation and review of journal entries to establish that manual journal entries
are properly prepared, supported by adequate documentation, and independently reviewed and approved, and (v) implementing actions to
strengthen the monitoring activities of internal controls. However, if our remedial measures are insufficient to address the material
weaknesses, or if additional material weakness or significant deficiencies in our internal control are discovered or occur in the future,
our financial statements may contain material misstatements. If our financial statements are not accurate, investors may not have a complete
understanding of our operations. Likewise, if our financial statements are not filed on a timely basis in the future, we could be subject
to sanctions or investigations by Nasdaq, or any other stock exchange on which the Ordinary Shares are listed, the SEC or other regulatory
authorities. Either case could adversely affect investor confidence in us and materially and adversely affect our business and results
of operations. For a discussion on our remedial measures, see Item 15.B under the heading "Management's Annual Assessment
of Internal Control Over Financial Reporting –– Remediation Efforts" in this Annual Report.
We have indebtedness, which may increase
risk to our business and your investment in us.
As of December 31, 2022,
we had $285.9 million of outstanding indebtedness, including under our Senior Notes, Syndicated Loan, and other indebtedness,
including under the Additional Loan Agreement. Our ability to make scheduled payments of the principal of, to pay cash interest on,
our indebtedness, including the Senior Notes, Syndicated Loan and Additional Loan Agreement, or to refinance such indebtedness, or
any other indebtedness we may incur, depends on our future performance, which is subject to economic, financial, competitive and
other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our
debt and make necessary capital expenditures. The NPA, Syndicated Loan and Additional Loan Agreement contain customary restrictive
covenants that limit our ability to engage in activities that may be in our long-term best interest. Those covenants include
restrictions on our ability to, among other things, incur additional debt and issue disqualified stock; create liens; pay dividends,
acquire shares of capital stock, or make certain investments; issue guarantees; sell certain assets and enter into transactions with
affiliates. The NPA, Syndicated Loan and Additional Loan Agreement also each contain certain financial ratio covenants that we must
comply with at certain measurement dates.  Our failure to comply with any of those covenants could result in an event of
default which, if not cured or waived, could result in the acceleration of our debt issued under the applicable agreement. For
example, we were not in compliance with certain of these financial ratios under the NPA, Syndicated Loan and Additional Loan
Agreement as of December 31, 2022, and we entered into the Waivers where the applicable parties under the Waivers (i) waived our
noncompliance as of December 31, 2022 and (ii) agreed to prospectively waive any noncompliance with these certain financial
ratio covenants for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, if applicable, provided that we meet
certain agreed upon adjusted ratio thresholds as specified in each Waiver under the applicable financial ratio covenants. Any such
event of default or acceleration could have an adverse effect on the trading price of our Ordinary Shares. Furthermore, the terms of
any future debt we may incur could have further additional restrictive covenants. We may not be able to maintain compliance with
these covenants in the future, and in the event that we are not able to maintain compliance, we cannot assure you that we will be
able to obtain waivers from the lenders or amend the covenants. For additional details on our indebtedness and the Waivers see
"Item 5.B—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt Financing and
Borrowings."
4
If we are unable to generate
such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional
debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will
depend on the capital markets, contractual restrictions and our financial condition at such time. We may not be able to engage in any
of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition,
any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our
failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration
of our debt.
If we do not enhance our existing products
and services, or introduce new technology or service offerings in a timely manner, our products and services may become uncompetitive
over time, or customers may not buy our products or buy less of them, which could have a material adverse effect on our business, financial
condition and results of operations.
The healthcare industry is
characterized by rapid technological change. Demand for our Rx and OTC pharmaceutical products, Diabetrics products and services, and
our integral contract development and manufacturing organization ("iCDMO") services may change in ways we may not anticipate
because of evolving industry standards as well as a result of evolving customer needs that are increasingly sophisticated and varied
and the introduction by others of new offerings and technologies that provide alternatives to our products and services. To the extent
that such technologies are protected by patents, their related offerings may become subject to competition as the patents expire. Without
the timely introduction of enhanced or new products and services, and technologies, our offerings may become uncompetitive over time,
in which case our revenue and operating results would suffer. For example, if we are unable to respond to changes in the nature or extent
of the technological or other needs of our pharmaceutical customers through enhancing our pharmaceutical products and services offerings,
our competition may develop offerings that are more competitive than ours and we could find it more difficult to renew or expand existing
agreements or obtain new agreements. Potential innovations intended to facilitate enhanced or new offerings generally will require a
substantial investment before we can determine their commercial viability, and we may not have financial resources sufficient to fund
all desired innovations.
The success of enhanced or
new pharmaceutical products and services will depend on several factors, including our ability to:
●
properly
anticipate and satisfy customer needs, including increasing demand for lower cost products;
●
enhance,
innovate, develop, and manufacture new offerings in an economical and timely manner;
●
differentiate
our products and services from competitors' offerings;
●
achieve
positive clinical outcomes for our and our customers' new products;
●
meet
safety requirements and other regulatory requirements of governmental agencies;
●
obtain
valid and enforceable intellectual property rights; and
●
avoid
infringing the proprietary rights of third parties.
5
Even if we succeed in creating
enhanced or new pharmaceutical products and services from these innovations, they may still fail to result in commercially successful
offerings or may not produce revenue in excess of the costs of development, and they may become uncompetitive due to changing customer
preferences or the introduction by our competitors of offerings embodying new technologies or features. Finally, innovations may not
be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice, the need for regulatory
clearance, and uncertainty over market access or government or third-party reimbursement.
The demand for OTC products may be impacted
by changes in consumer preferences. If we are unable to adapt to these changes, we may lose market share and our net sales may be negatively
impacted, which could have a material adverse effect on our business, financial condition and results of operations.
Consumer preferences related
to health concerns may change, which could negatively impact demand for our OTC products or cause us to incur additional costs to change
our OTC products or product packaging. The success of certain our OTC products such as gastrointestinal, skin care and vitamins, minerals
and supplements, is dependent on the continued growth in demand for overall health related products. If demand for products in this category
decreases, our financial condition and results of operations would be negatively impacted.
Furthermore, our OTC consumer
products customers may request changes in packaging to meet consumer demands, which could cause us to incur inventory obsolescence charges
and redesign costs, which in turn could negatively impact our results of operations.
We may be unable to identify acquisition
opportunities and successfully execute and close acquisitions, which could limit our potential for growth.
We have made several acquisitions
in recent years, such as the U.S.-based Softgel production facility and R&D center located in West Palm Beach, Florida we acquired
in January 2022, and expect to actively seek new acquisitions that management believes will provide meaningful opportunities for growth
by increasing our existing capabilities and expanding into new areas and markets of operations. However, we may not be able to identify
suitable acquisition candidates or complete acquisitions on acceptable terms and conditions. For example, on May 16, 2022, the Company
entered into a definitive agreement to acquire Grupo Somar (including Grupo Farmacéutico Somar, S.A.P.I de C.V., Química
y Farmacia S.A. de C.V., Gelcaps Exportadora de Mexico S.A. de C.V. and related entities) which acquisition (the "Acquisition")
was terminated following its failure to close by December 31, 2022.
Other companies in our industry
have similar investment and acquisition strategies to ours, and competition for acquisitions may intensify. If we are unable to identify
acquisition candidates that meet our criteria, or complete acquisitions on acceptable terms and condition, our potential for growth may
be restricted. Additionally, because we may pursue acquisitions around the world and may actively pursue a number of opportunities simultaneously,
we may encounter unforeseen expenses, complications and delays in connection with identifying or acquiring suitable acquisition targets.
We may not be able to realize the benefits
of business acquisitions and divestitures we enter into, including being unable to successfully and efficiently integrate acquisitions
or execute on dispositions, which could have a material adverse effect on our business, financial condition and results of operations.
We engage from time to time
in acquisitions and other transactions that may complement or expand our business or in divestments of non-strategic businesses or assets.
These transactions, including our acquired U.S.-based Softgel production facility and R&D center, which began operations in May 2022,
are accompanied by risks, many of which are beyond our control, and any one of them could result in increased cost, decreased net sales
and diversion of management's time and energy, any or all of which could materially impact our business, financial condition, and
results of operations. Such risks include, among others, risks relating to our ability to successfully and efficiently integrate acquisitions
or execute on dispositions and realize anticipated benefits therefrom.
6
In order to implement our
growth strategy, we evaluate opportunities to buy or otherwise acquire rights to other businesses or technologies, enter into joint ventures
or otherwise enter into strategic arrangements with business partners that could complement, enhance, or expand our current business
or offerings and services or that might otherwise offer us growth opportunities, or divest assets or an ongoing business. We may face
competition from other companies in pursuing acquisitions and similar transactions in the pharmaceutical industry. Our ability to complete
transactions may also be limited by applicable antitrust and trade laws and regulations in the jurisdictions in which we or the operations
or assets we seek to acquire carry on business. To the extent that we are successful in making acquisitions, we expend substantial amounts
of cash, incur debt, or assume loss-making divisions as consideration. We or the purchaser of a divested asset or business may not be
able to complete a desired transaction for any number of reasons, including a failure to secure financing.
Any acquisition that we are
able to identify and complete may involve a number of risks, including, but not limited to (i) the diversion of management's attention
to integrate the acquired businesses or joint ventures, (ii) the possible adverse effects on our operating results during the integration
process, (iii) the potential loss of customers or employees in connection with the acquisition, (iv) delays or reduction in realizing
expected synergies, (v) unexpected liabilities, (vi) exposure to compliance, intellectual property, environmental, legal or other issues,
not uncovered by a limited due diligence review of the target or otherwise, and (vii) our potential inability to achieve our intended
objectives for the transaction.
To the extent that we are
not successful in completing desired divestitures, as such may be determined by future strategic plans and business performance, we may
have to expend substantial amounts of cash, incur debt, or continue to absorb the costs of loss-making or under-performing assets. Any
divestiture, whether we are able to complete it or not, may involve a number of risks, including diversion of management's attention,
a negative impact on our customer relationships, costs associated with maintaining the business of the targeted divestiture during the
disposition process, and the costs of closing and disposing of the affected business or transferring remaining portions of the operations
of the business to other facilities.
Our business depends upon certain customers
for a significant portion of our sales, therefore, a disruption of our relationship with these customers or any material adverse change
in these customers' businesses could have a material adverse effect on our business, financial condition and results of operations.
Sales to the five largest
economic groups that form part of our customer base comprised approximately 25% and 26% of our net sales for the years ended December
31, 2022 and 2021, respectively. No other customer individually comprised more than 5.7% and 6.5% of net sales for the years ended December
31, 2022 and 2021, respectively. If our relationship with one of the five largest economic groups that form part of our customer base,
including the terms of doing business with such customers, changes significantly, it could have a material adverse impact on our business,
financial condition and results of operations.
Many of our customers, which
include major global, national, and regional retail drug, supermarket, and mass merchandise chains, major wholesalers, sourcing groups,
hospitals and grocery stores located primarily in Latin America and the United States, continue to merge or consolidate. Such consolidation
has provided, and may continue to provide, customers with additional purchasing leverage, and consequently may increase the pricing pressures
we face. The emergence of large buying groups representing independent retail pharmacies enable those groups to extract price discounts
on our products.
Additionally, if we are unable
to maintain adequately high levels of customer service over time, customers may choose to obtain alternate sources for products and/or
end their relationships with us.
7
We depend on our executive officers and
other key personnel to operate and grow our business and to develop new and enhanced offerings and technologies and the loss of, or the
failure to attract and retain, such key personnel could adversely affect our operations.
We depend on our executive
officers and other key personnel, including our technical personnel, to operate and grow our business and to develop new and enhanced
products, services and technologies. The loss of any of these officers or other key personnel or a failure to attract and retain suitably
skilled technical personnel could adversely affect our operations.
In addition to our executive
officers, we rely on seven senior vice presidents and senior management personnel to lead and direct our business. The members of the
senior leadership team hold positions in areas such as corporate finance, audit and internal controls, human resources, corporate and
legal affairs, international marketing and R&D, investor relations and mergers and acquisitions. Furthermore, each of our business
segments (NextGel, Procaps Colombia, CAN (as defined below), CASAND (as defined below) and Diabetrics) is managed by an executive that
reports directly to the Chief Operating Officer.
With respect to our technical
talent, we employ more than 300 scientists, technicians and skilled personnel in R&D and innovation as of December 31, 2022. Many
of our facilities are located in competitive labor markets like those in which our Colombia, Brazil, El Salvador and United States facilities
are located. Global and regional competitors and, in some cases, customers and suppliers compete for the same skills and talent as we
do.
We depend on our specialized sales representatives
to generate the net sales and the levels of product and brand name awareness we desire.
We rely on our network of
specialized sales representatives to create greater awareness of our products and brand names. As a result, our operations involve certain
risks, including that our sales representatives may fail to comply with local requirements, to devote the resources necessary to achieve
physician confidence or loyalty, to otherwise effectively market our products, and/or to provide us with accurate or timely information
about product sales. In addition, we invest in the formation and specialization of each sales representative and have no assurance of
their continued employment with us. Our future growth and profitability will depend in part on the effectiveness and efficiency of our
sales force.
Inflation could adversely affect our
business and results of operations.
While
inflation in the United States and global markets has been relatively low in recent years, during 2021 and 2022, the economy in the United
States and global markets encountered a material increase in the level of inflation. The impact of COVID-19, geopolitical developments
such as the Russia-Ukraine conflict and global supply chain disruptions continue to increase uncertainty in the outlook of near-term and
long-term economic activity, including whether inflation will continue and how long, and at what rate. Increases in inflation raise our
costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure
these on reasonable terms may adversely impact our financial condition. A sustained increase in inflation may continue to increase these
costs. Our efforts to recover inflation-based cost increases from our customers may be delayed or capped as a result of our contracts
as well as the competitive industry and economic conditions in which we operate. The rate and scope of these various inflationary factors
may continue to increase our operating costs and capital expenditures materially and may have a material adverse impact on our on our
costs, profitability and financial results. Additionally, increases in inflation, along with the uncertainties surrounding COVID-19, geopolitical
developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty
about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure
to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
8
General inflation
and increases in the minimum wage and general labor costs have affected and may continue to adversely affect our business, financial
condition and results of operations.
Labor
is a significant portion of our cost structure and is subject to many external factors, including minimum wage laws, prevailing wage
rates, unemployment levels, health insurance costs and other insurance costs and changes in employment and labor legislation or other
workplace regulation. Most companies experienced an increase in labor costs in 2022 and expect additional increases in 2023, primarily
in response to raising rates of inflation. As the cost of labor and statutory minimum wage rates increase or related laws and regulations
change, we will need to continue to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other
hourly or salaried employees. Increases in the cost of our labor could have an adverse effect on our business, financial condition and
results of operations, or if we fail to pay such higher wages we could suffer increased employee turnover. Increases in labor costs generally
could force us to increase prices for other customers, which could adversely impact our sales.
For
some customers with multi-year fixed pricing contracts, increases in the minimum wage could decrease our profit margins or result in
losses and could have a material adverse effect on our business, financial condition and results of operations.
The impact of worldwide economic conditions
may adversely affect our business, operating results, and financial condition.
Our
financial performance is subject to worldwide economic conditions, including adverse economic conditions caused by the continuing effects
of the COVID-19 pandemic, rising inflation and interest rates, the continued conflict between Russia and Ukraine, and supply chain disruptions.
We
are currently operating during a period of economic uncertainty and cannot predict the timing, strength, or duration of economic downturns.
To the extent general macroeconomic conditions remain uncertain or worsen, our business may be harmed. Inflation has the potential to
adversely affect our liquidity, business, operating results, and financial condition by increasing our overall cost structure, particularly
if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has
resulted in, and may continue to result in, higher interest rates and capital costs, increased costs of labor, fluctuations in foreign
currency exchange rates, and other similar effects. As a result of inflation, we have experienced, and may continue to experience, cost
increases, which could materially and adversely affect our business, operating results, and financial condition.
Adverse developments affecting the financial
services industry, such as actual events or concerns involving liquidity, defaults or nonperformance by financial institutions or transactional
counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.
Actual events involving limited
liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or
other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events
of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Inflation and rapid
increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates
below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program
to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions
to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity
needs of financial institutions for immediately liquidity may exceed the capacity of such program. There is no guarantee that the U.S.
Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure
of other banks or financial institutions, or that they would do so in a timely fashion.
9
Although we assess our banking
relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate
to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect
us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These
factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various
types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or
financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors
could involve financial institutions or financial services industry companies with which we have financial or business relationships,
but could also include factors involving financial markets or the financial services industry generally.
The results of events or
concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected
business operations and our financial condition and results of operations.
In addition, investor concerns
regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest
rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby
making it more difficult for us to acquire financing on acceptable terms or at all. Any of these impacts, or any other impacts resulting
from the factors described above or other related or similar factors not described above, could have material adverse impacts on our
liquidity and our current and/or projected business operations and financial condition and results of operations.
Our business, financial condition, and
results of operations may be adversely affected by global health epidemics, including the COVID-19 pandemic.
Our business, financial condition,
and results of operations have been and may continue to be adversely affected by global health epidemics, including the COVID-19 pandemic.
In January 2020, the World
Health Organization declared the COVID-19 pandemic to be a "Public Health Emergency of International Concern." COVID-19 has
spread across the globe and is affecting worldwide economic activity. Any public health epidemic, including the COVID-19 pandemic, may
affect our operations and those of third parties on which we rely, including our customers and suppliers. Our business, financial condition,
and results of operations may be affected by disruptions in our customers' abilities to fund, develop, or bring to market products
as anticipated; delays in or disruptions to the conduct of clinical trials; cancellations of contracts or confirmed orders from our customers;
decreased demand for categories of products in certain affected regions; and inability, difficulty, or additional cost or delays in obtaining
key raw materials, components, and other supplies from our existing supply chain; among other factors caused by the COVID-19 pandemic.
In 2021, a new delta variant of the COVID-19 surged which was significantly more virulent than other virus variants, resulting in a significant
increase in COVID-19 cases and related deaths. By December 2021, the then new omicron variant also started to spread. With improved vaccination
rates, however, its impact was less severe than of previous waves. Moving forward, there continues to be significant uncertainty relating
to the further progression of other waves and variants.
In addition, the COVID-19
pandemic may affect the operations of INVIMA, the FDA, and other drug regulatory authorities, which could result in delays of inspections,
reviews, and approvals of our customers' products. Our operations could be disrupted if our employees become ill or are otherwise
absent from work as a result of the COVID-19 pandemic. Governmental restrictions, including travel restrictions, quarantines, shelter-in-place
orders, business closures, new safety requirements or regulations, or restrictions on the import or export of certain materials, or other
operational issues related to the COVID-19 pandemic have had, and may continue to have, an adverse effect on our business, financial
condition and results of operations. Additionally, while the potential economic impact brought by and the duration of the COVID-19 pandemic
are difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access
capital, which could negatively affect our short- and long-term liquidity.
10
The COVID-19 pandemic has
had a negative impact on our business. It has caused complications in logistics and personnel transport during mandatory quarantine periods.
Also, we had to hire additional personnel to substitute unavailable staff due to quarantine for potential exposure to COVID-19. We also
incurred additional expenses by purchasing COVID-19 vaccines from the Colombian government for our employees, implementing a bus fleet
to transport our employees to and from the plants, implementing COVID-19 testing, contracting third parties to substitute unavailable
personnel and purchasing personal protective equipment. Price changes in raw materials also impacted our business, however, we were able
to mitigate the impact of these effects by launching new products, training our sales forces to capitalize on opportunities, implementing
fewer discount promotions, generating demand in markets such as Colombia and Central America, and by growing our generic drug business.
However, the extent to which COVID-19 may affect our future results will depend on future developments that are highly uncertain, including
the duration of the pandemic, new information that may emerge concerning the severity of the virus, and the actions governments, the
pharmaceutical industry, competitors, suppliers, customers, patients, and others may take to contain or address its direct and indirect
effects. The COVID-19 pandemic and associated mitigation measures may also have an adverse impact on healthcare systems, global economic
conditions, or economic conditions in one or more regions where we or our customers operate, which could have an adverse effect on our
business and financial condition.
During the COVID-19 pandemic,
the Colombian government implemented several mitigation measures, including, among others, a strict quarantine imposed to most industries,
except indispensable and health related industries. As of the date this Annual Report, such measures have been fully lifted and terminated.
Despite these restrictions, we were allowed to continue full operation of its business and facilities.
In addition, the impact of
the COVID-19 pandemic could exacerbate other risks we face, including those described elsewhere in "Risk Factors." For more
information on the impact of the COVID-19 pandemic on us, see Item 4.B under the heading "Recent Developments."
Any breach, disruption or misuse of our,
or our external business partners', information systems or cyber security efforts could have a material adverse effect on our business,
financial condition and results of operations.
We are increasingly dependent
upon information technology systems to operate our business. Our systems, information and operations are highly complex and interrelated
with our external business partners. These systems may contain confidential information (including personal data, trade secrets or other
intellectual property, or proprietary business information). The nature of digital systems, both internally and externally, makes them
potentially vulnerable to disruption or damage from human error and/or security breaches, which include, but are not limited to, ransomware,
data theft, denial of service attacks, sabotage, industrial espionage, and computer viruses. Such events may be difficult to detect,
and once detected, their impact may be difficult to assess and address.
We and our external business
partners have been subject to cyber-attacks in the past, and we have experienced immaterial business disruption and data loss as a result
of phishing, business email compromise and other types of attacks on our information technology systems and those of our external business
partners. While we continue to employ resources to monitor our systems and protect our infrastructure, these measures may prove insufficient
depending upon the attack or threat posed, and that could subject us to significant risks, including ransomware attacks, other cyber
breaches and disruptions that (i) cause system issues, (ii) cause the loss, misappropriation or unauthorized access, use or disclosure
of confidential information, including personal data, (iii) impair our operations, (iv) cause us to lose customers or experience lower
sales volume, or (v) causes us to incur significant liabilities or expenses to remediate such risks, which, individually or collectively,
could result in financial, legal, business or reputational harm to us and could have a material adverse effect on our business, financial
condition and results of operations.
In addition, our information
technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters,
power outages, systems failures and viruses. If we are unable to execute our disaster recovery and business if our plans prove insufficient
for a particular situation or take longer than expected to implement in a crisis situation, it could have a material adverse effect on
our business, financial condition and results of operations, and our business interruption insurance may not adequately compensate us
for losses that may occur.
11
We are also subject to numerous
laws and regulations designed to protect personal data, such as the European national laws implementing the Regulation (EU) 2016/679
of the European Parliament and the Council dated April 27, 2016 related to the protection of individuals with respect to processing of
personal data and usage of such data, Brazil's General Data Protection Law (
Lei Geral de Proteção de Dados
)
and Colombia's Law 1581 of 2012 (
Ley de Proteción de Datos Personales
). These data protection laws introduced more
stringent data protection requirements and significant potential fines, as well as increased our responsibility and potential liability
in relation to personal data that we process. For instance, failure to comply with data protection regulations in Colombia may result
in the impositions of sanctions against us, such as: fines, temporary suspensions of all personal data processing-related activities,
temporary or permanent closure or blocking of personal data processing operations or business units (when authorities have previously
ordered corrective measures and such measures are not being fully complied). We have put mechanisms in place designed to ensure compliance
with applicable data protection laws but there can be no guarantee of their effectiveness.
The demand for our iCDMO services depends
in part on our customers' research and development and the clinical and market success of their products. In the event our customers
spend less on, or are less successful in, these activities for any reason, including as a result of decrease in spending due to the COVID-19
pandemic or recessionary economic conditions caused in whole or in part by the pandemic, our business, financial condition, and results
of operations may be materially adversely affected.
The demand for our iCDMO
offerings depends in part on our customers' research and development and the clinical and market success of their products. Our
business, financial condition, and results of operations may be negatively affected if our customers spend less on, or are less successful
in, these activities. In addition, customer spending may be affected by, among other things, the COVID-19 pandemic or recessionary economic
conditions caused in whole or in part by the pandemic.
Our customers are engaged
in research, development, production, and marketing of pharmaceutical, biotechnology, and consumer health products. The amount of customer
spending on research, development, production, and marketing, as well as the outcomes of such research, development, and marketing activities,
have a large impact on our sales and profitability, particularly the amount our customers choose to spend on our iCDMO offerings. Our
customers determine the amounts that they will spend based upon, among other things, available resources and their need to develop new
products, which, in turn, are dependent upon a number of factors, including their competitors' research, development, and production
initiatives, and the anticipated market uptake, clinical, and reimbursement scenarios for specific products and therapeutic areas. In
addition, consolidation in the industries in which our customers operate may have an impact on such spending as customers integrate acquired
operations, including research and development departments and their budgets. Our customers finance their research and development spending
from private and public sources. A reduction in spending by our customers, for these reasons or because of the COVID-19 pandemic or its
direct or indirect effects, could have a material adverse effect on our business, financial condition, and results of operations. If
our customers are not successful in attaining or retaining product sales due to market conditions, reimbursement issues, or other factors,
our results of operations may be materially adversely affected.
Certain proposed amendments to tax directives
may impact our current tax treaties benefits.
The EU Commission published
a proposal for a Council Directive which included rules to prevent the misuse of shell entities for tax purposes and amending Directive
2011/16/EU dated December 22, 2021. These new rules would mainly apply to EU entities (i) deriving passive income, (ii) engaged in cross-border
transactions and (iii) which outsourced the administration of day-to-day operations and the decision-making on significant functions.
EU entities that meet these three conditions would need to declare in their annual tax returns whether they meet indicators of minimum
substance and provide related documentary evidence (unless they benefit from an automatic exemption). Entities not meeting those indicators
of minimum substance and that cannot rely on an automatic exemption will be presumed not to have sufficient substance for tax purposes
(unless they can rebut this presumption by providing evidence (i) of the business activities which they perform to generate their passive
income or (ii) that they do not serve the objective of obtaining a tax advantage). In this case and in the absence of rebuttal of the
presumption, such EU entities would not be allowed to benefit from the provisions of double tax treaties or certain EU Directives (such
as the Interest and Royalties EU Directive). In addition, they would not be entitled to a certificate of tax residence to the extent
that such certificate serves to obtain the benefit of the aforementioned provisions. If the Directive is determined to be applicable
to the Company, it may have an impact on our current tax treaties benefits.
12
We have previously restated our financial
statements for several prior periods, which may affect investor confidence, the price of our securities, our ability to raise capital
in the future, our results of operations and financial condition, and which may result in stockholder litigation.
We previously filed restated
financial statements for several prior periods in our Annual Report on Form 20-F for the year ended December 31, 2021. Such restatement
may have the effect of eroding investor confidence in the Company and our financial reporting and accounting practices and processes,
and may negatively impact the trading price of our securities, could have a material adverse effect on our business, financial condition
and results of operations, and may make it more difficult for us to raise capital on acceptable terms, if at all. The restatement and
related material weaknesses in our internal control over financial reporting may also result in stockholder litigation that could ultimately
have a negative adverse effect on our results of operations.
Risks Related to our Industry
We participate in a highly competitive
market, and increased competition may adversely affect our business, financial condition and results of operations.
We operate in a market that
is highly competitive. We compete with multiple companies as to each of our offerings and in every region of the globe in which we operate,
including competing with other companies that offer advanced delivery technologies, outsourced dose form, or development services to
pharmaceutical and consumer health companies based in North America, South America, Europe, and the Asia-Pacific region. We also compete
in some cases with the internal operations of those pharmaceutical, biotechnology, and consumer health customers that also have manufacturing
capabilities and choose to source these services internally.
We face substantial competition
in each of our markets. Competition is driven by proprietary technologies and know-how, capabilities, consistency of operational performance,
quality, price, value, responsiveness, and speed. Some competitors have greater financial, R&D, operational, and marketing resources
than we do. Competition may also increase as additional companies enter our markets or use their existing resources to compete directly
with ours. Expanded competition from companies in low-cost jurisdictions, such as India and China, may in the future adversely affect
our results of operations or limit our growth. Greater financial, research and development, operational, and marketing resources may
allow our competitors to respond more quickly with new, alternative, or emerging technologies. Changes in the nature or extent of our
customers' requirements may render our offerings obsolete or non-competitive and could adversely affect our business, financial
condition and results of operations.
Changes in market access or healthcare
reimbursement for, or public sentiment towards our, or our customers', products in Latin America, the United States and other countries
in which we operate, or other changes in applicable policies regarding the healthcare industry, could adversely affect our financial
condition and results of operations by affecting demand for our products and services.
The healthcare industry has
changed significantly over time, and we expect the industry to continue to evolve. Some of these changes, such as ongoing healthcare
reform, adverse changes in governmental or private funding of healthcare products and services, legislation or regulations governing
patient access to care and privacy, or the delivery, pricing, or reimbursement approval of pharmaceuticals and healthcare services or
mandated benefits, may cause healthcare industry participants to change the amount of our products and services that they purchase or
the price they are willing to pay for these offerings. In particular, there is significant uncertainty about the likelihood of changes
to the Affordable Care Act (the "ACA") in the United States and healthcare laws in general in the United States, including
future legislation that may affect or put a cap on future pricing of pharmaceutical products. Similarly, Colombian sanitary regulations
change significantly over time. For instance, the Colombian Ministry of Health has recently issued Decree No. 334/2022 which provides
new provisions and requirements for renewal, modification and suspension of sanitary registrations for chemically synthesized medicines,
medicinal gases, biological and homeopathic products, information and advertising of medicines and phototherapeutic products. Additionally,
some external factors have increased delay in medicine approval timeframes. While we are unable to predict the likelihood of changes
to healthcare legislation, any substantial revisions in these legislations, including in the ACA, could have a material adverse effect
on the demand for our or our customers' products, which in turn could have a negative impact on our business, financial condition
and results of operations. Changes in the healthcare industry's pricing, selling, inventory, distribution, or supply policies or
practices, or in public or government sentiment for the industry as a whole, could also significantly reduce our revenue and results
of operations. In particular, volatility in individual product demand may result from changes in public or private payer reimbursement
or coverage.
13
Our Rx products business
in particular could be materially adversely impacted by measures taken by governmental entities or private payers to restrict patients'
access to our products or increase pressure on drug pricing, including denial of price increases, prospective and retrospective price
decreases, and increased mandatory discounts or rebates. These actions may drive us and our competitors to decrease prices or may reduce
the ability of customers to pay for our products, which could materially negatively impact our Rx products business' results of
operations.
The illegal trade in pharmaceutical products,
including counterfeiting, theft and illegal diversion, is widely recognized. Public loss of confidence in the integrity of pharmaceutical
products as a result of illegal trade could materially adversely affect our reputation, financial condition and results of operation.
The illegal trade in pharmaceutical
products is widely recognized by the industry, non-governmental organizations and governmental authorities to be increasing. Illegal
trade includes counterfeiting, theft and illegal diversion (that is, when our products are found in a market where we did not send them
and where they are not approved to be sold). There is a risk to public health when illegally traded products enter the supply chain,
as well as associated financial risk. Authorities and the public expect us to help reduce opportunities for illegal trade in our products
through securing our supply chains, surveillance, investigation and supporting legal action against those found to be engaged in illegal
trade.
Public loss of confidence
in the integrity of pharmaceutical products as a result of illegal trade could materially adversely affect our reputation and financial
performance. In addition, undue or misplaced concern about this issue may cause some patients to stop taking their medications, with
consequential risks to their health.
If we are found liable for
breaches in our supply chains, authorities may take action, financial or otherwise, that could adversely impact the distribution of our
products. Counterfeit and/or illegally diverted products replacing sales of genuine products in a market can have a direct financial
impact on our global markets as well as being a risk to patient safety.
Risks Related to our Intellectual Property
We and our customers depend on patents,
copyrights, trademarks, know-how, trade secrets, and other forms of intellectual property protections, but these protections may not
be adequate.
We rely on a combination
of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual property laws, nondisclosure and other contractual
provisions, and technical measures to protect many of our products, services and intangible assets. These proprietary rights are important
to our ongoing operations. There can be no assurance that these protections will provide uniqueness or meaningful competitive differentiation
in our offerings or otherwise be commercially valuable or that we will be successful in obtaining additional intellectual property or
enforcing our intellectual property rights against unauthorized users. Our exclusive rights under certain of our products and services
are protected by patents, some of which will expire in the near term. When patents covering a product or service expire, loss of exclusivity
may occur, which may force us to compete with third parties, thereby negatively affecting our revenue and profitability. We do not currently
expect any material loss of revenue to occur as a result of the expiration of any patent currently protecting our business.
Our proprietary rights may
be invalidated, circumvented, or challenged. We may in the future be subject to proceedings seeking to oppose or limit the scope of our
patent applications or issued patents. In addition, in the future, we may need to take legal actions to enforce our intellectual property
rights, to protect our trade secrets, or to determine the validity or scope of the proprietary rights of others. Legal proceedings are
inherently uncertain, and the outcome of such proceedings may be unfavorable to us.
14
Any legal action regardless
of outcome might result in substantial costs and diversion of resources and management attention. Although we use reasonable efforts
to protect our proprietary and confidential information, there can be no assurance that our confidentiality and non-disclosure agreements
will not be breached, our trade secrets will not otherwise become known by competitors, or that we will have adequate remedies in the
event of unauthorized use or disclosure of proprietary information. Even if the validity and enforceability of our intellectual property
is upheld, an adjudicator might construe our intellectual property not to cover the alleged infringement. In addition, intellectual property
enforcement may be unavailable or practically ineffective in some countries. There can be no assurance that our competitors will not
independently develop technologies that are substantially equivalent or superior to our technology or that third parties will not design
around our intellectual property claims to produce competitive offerings. The use of our technology or similar technology by others could
reduce or eliminate any competitive advantage we have developed, cause us to lose sales, or otherwise harm our business.
We have applied in the United
States, Colombia and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered or issued, and also claim common law rights in various trademarks and service marks. In the past, third parties have occasionally
opposed our applications to register intellectual property, and there can be no assurance that they will not do so in the future. It is
possible that in some cases we may be unable to obtain the registrations for trademarks, service marks, and patents for which we have
applied, and a failure to obtain trademark and patent registrations in the United States, Colombia or other countries could limit our
ability to protect our trademarks and proprietary technologies and impede our marketing efforts in those jurisdictions. See Item 4.B.
of this Annual Report under the heading "Business Overview—Intellectual Property."
License agreements with third
parties control our rights to use certain patents, software, and information technology systems and proprietary technologies owned by
third parties, some of which are important to our business. Termination of these license agreements for any reason could result in the
loss of our rights to this intellectual property, causing an adverse change in our operations or the inability to commercialize certain
offerings.
In addition, many of our
branded pharmaceutical customers rely on patents to protect their products from generic competition. Because incentives exist in some
countries, including Colombia and the United States, for generic pharmaceutical companies to challenge these patents, pharmaceutical
and biotechnology companies are under the ongoing threat of challenges to their patents. If the patents on which our customers rely were
successfully challenged and, as a result, the affected products become subject to generic competition, the market for our customers'
products could be significantly adversely affected, which could have an adverse effect on our business, financial condition and results
of operations. We attempt to mitigate these risks by making our offerings available to generic manufacturers and distributors in the
United States, as well as branded manufacturers and distributors world-wide, but there can be no assurance that we will be successful
in marketing these offerings.
Our products and services, or our customers'
products, may infringe on the intellectual property rights of third parties and any such infringement could have a material adverse effect
on our business.
From time to time, third
parties have asserted intellectual property infringement claims against us and our customers, and there can be no assurance that third
parties will not assert infringement claims against either us or our customers in the future. While we believe that our products and
services do not infringe in any material respect upon proprietary rights of other parties, and that meritorious defenses would exist
with respect to any assertion to the contrary, there can be no assurance that we could successfully avoid being found to infringe on
the proprietary rights of others. Patent applications in the United States, Colombia and certain other countries are generally not publicly
disclosed until the patent is issued or published, and we and our customers may not be aware of currently filed patent applications that
relate to our or their products, services, or processes. If patents later issue on these applications, we or they may be found liable
for subsequent infringement. There has been substantial litigation in the pharmaceutical industry with respect to the manufacture, use,
and sale of products that are the subject of conflicting patent rights.
15
Any claim that our products,
services or processes infringe third-party intellectual property rights (including claims arising through our contractual indemnification
of our customers), regardless of the claim's merit or resolution, could be costly and may divert the efforts and attention of our
management and technical personnel. We may not prevail against any such claim given the complex technical issues and inherent uncertainties
in intellectual property matters. If any such claim results in an adverse outcome, we could, among other things, be required to:
●
pay
                                            substantial damages (potentially including treble damages in the United States);
●
cease the manufacture,
    use, or sale of the infringing offerings or processes;
●
discontinue the use of
    the infringing technology;
●
expend
                                            significant resources to develop non-infringing technology;
●
license
                                            technology from the third-party claiming infringement, which license may not be available
                                            on commercially reasonable terms or at all; and
●
lose
                                            the opportunity to license our technology to others or to collect royalty payments based
                                            upon successful protection and assertion of our intellectual property against others.
In addition, our customers'
products may be subject to claims of intellectual property infringement and such claims could materially affect our business if their
products cease to be manufactured or they have to discontinue the use of the infringing technology.
Any of the foregoing could
affect our ability to compete or have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to the Countries We Operate
In
We are an international company with operations
primarily in Latin America and are subject to the market risks of the countries in which we manufacture and/or sell our products, and
to risks associated with foreign exchange rates.
We currently maintain production
facilities in Colombia, Brazil, El Salvador and recently in the United States. On December 31, 2021 we acquired an FDA approved 86,000
square feet pharmaceutical production facility located in West Palm Beach, Florida; our first U.S.-based Softgel production facility
and R&D center, which began operations in May 2022. Our ability to conduct and expand our business and our financial performance
are subject to the risks inherent to international operations, such as currency controls, currency fluctuations, trade barriers, increases
in duties, taxes and governmental royalties, nationalization, forced negotiation, changes in local labor conditions, labor strikes, price
instability, interest rates, modification of existing contracts and changes in local laws and policies, regulation, taxation, social
instability and other political, social and economic developments affecting the countries in which we operate. We have no control over
these factors and they may have an adverse effect on our business, financial condition, results of operations and prospects.
We report our financial results
in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated
in foreign currencies. These currencies include, among others, the Colombian Peso, the Brazilian Real, and the Peruvian Soles. Approximately
45% of our revenue for the year ended December 31, 2022 was U.S. dollar denominated. Our results of operations and, in some cases, cash
flows, have in the past been, and may in the future be, adversely affected by movements in exchange rates. Although a significant portion
of our operating costs are denominated in foreign (non-U.S.) currency, naturally reducing our exposure to changes in certain foreign
currency exchange rates, we may implement currency hedges or take other actions intended to further reduce our exposure to changes in
foreign currency exchange rates. If we are not successful in mitigating the effects of changes in exchange rates on our business, any
such changes could materially impact our results.
16
Additionally, our operations
may be adversely affected by trade barriers, increases in duties, taxes and governmental royalties, social unrest, labor strikes, expropriation,
nationalization, forced negotiation or modification of existing contracts, and changes in the local laws and policies of the countries
in which we conduct our business. We are also exposed to risks related to social instability and other political, economic or social
events in these countries, which could have an adverse effect on our business, financial condition and results of operations, as well
as our ability to comply with our financial obligations in a timely manner.
In addition, several emerging
market economies are particularly vulnerable to the impact of rising interest rates, inflationary pressures, higher oil and other commodity
prices, and large external deficits. Risks in one country can limit our opportunities for portfolio growth and negatively affect our
operations in another country or countries. As a result, any such unfavorable conditions or developments could have an adverse impact
on our operations.
Many of our assets are located in, and
a large part of our income is earned in, Colombia and, thus, we are dependent on economic and political conditions in Colombia.
Several of our subsidiaries,
such as Procaps, S.A., organized as a capital stock corporation (
sociedad anónima
) ("Procaps S.A."), and Diabetrics
Healthcare S.A.S., organized as simplified stock corporation (
sociedad por acciones simplificada
) ("Diabetrics Healthcare"),
are organized under the laws of Colombia. Many of our assets are located in Colombia and a portion of our income is earned in Colombia.
Our assets and income are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization,
renegotiation or voiding of existing contracts, currency exchange restrictions and international monetary fluctuations. Accordingly,
our financial condition and results of operations depend significantly on macroeconomic and political conditions prevailing in Colombia.
In Colombia, inflation rates
have fluctuated significantly in recent years. The inflation rate reached 13.1% and 5.62% for the years ended December 31, 2022 and 2021,
respectively. We cannot assure you that inflation rates will remain stable or that inflation rates will not increase significantly in
the future.
Changes in economic policies in Colombia
could affect our business, financial condition and results of operations.
Our financial condition and
results of operations may be adversely affected by changes in the political climate of Colombia to the extent that such changes affect
the economic policies, growth, stability, outlook or regulatory environment.
The Colombian Government
has historically exercised influence on the local economy, and governmental policies are likely to continue to have an important effect
on companies operating in Colombia like us, market conditions and the prices of securities of issuers operating in Colombia, including
the Notes. The President of Colombia has considerable power to determine governmental policies and actions relating to the economy and
may adopt policies that may negatively affect us. Colombia held presidential elections on May 29, 2022, with runoffs on June 19, 2022.
Gustavo Francisco Petro Urrego was elected president and took office on August 7, 2022. The new government has announced a tax pension,
labor, justice and health reform bill. As of the date of this Annual Report, these bills have not been published, except tax reform enacted
on December 13, 2022. Therefore, we cannot predict which policies will be adopted by the new government and whether those policies would
have a negative impact on the Colombian economy, on the pharmaceutical or healthcare industry or on our business, financial performance
and results of operations.
We cannot provide any assurances
that political or social developments in Colombia over which we have no control, will not have an adverse effect on our respective economic
situations and will not adversely affect the business, financial condition and results of operations of our subsidiaries and their ability
to pay dividends or make other distributions to us. This could have a material adverse effect on our business, results of operations,
financial condition and ability to make payments on the Notes.
We cannot predict which policies
will be adopted by the Colombian Government and whether the policies would have a negative impact on the Colombian economy, on the pharmaceutical
or healthcare industry or on our business, financial condition and results of operations. Furthermore, there can be no assurance that
the Colombian Peso will not depreciate or appreciate relative to the U.S. dollar and other currencies in the future.
17
The Colombian Government and the Colombian
Central Bank exercise influence on the Colombian economy. Political and economic conditions may have an impact on our business, financial
condition and results of operations.
The Colombian Government
and the Colombian Central Bank can intervene in Colombia's economy and make significant changes in monetary, fiscal and regulatory
policy, which could result in currency devaluation and the changes in international reserves. Our business, financial condition and results
of operations may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic
developments that may affect Colombia or the international markets. Possible developments include fluctuations in exchange rates, inflation,
instability of prices, changes in interest rates, liquidity of domestic capital and debt markets, exchange controls, deposit requirements
on foreign borrowings, controls on capital flows, and limits on foreign trade.
Although the Colombian Government
has not imposed foreign exchange restrictions since 1990, Colombia's foreign currency markets have historically been extremely
regulated. Colombian law permits the Colombian Central Bank to impose foreign exchange controls to regulate the remittance of dividends
and/or foreign investments in the event that the foreign currency reserves of the Colombian Central Bank fall below a level equal to
the value of three months of imports of goods and services into Colombia. Please see "Exchange Rates and Controls" for actions
the Colombian Central Bank could take to intervene in the exchange market. An intervention that precludes us from possessing, utilizing
or remitting dollars would impair our financial condition and results of operations, and would impair the shareholders' ability
to convert any dividend payments to U.S. dollars.
The Colombian Government
has considerable power to shape the Colombian economy and, consequently, affect the operations and financial performance of businesses.
The Colombian Government may seek to implement new policies aimed at controlling further fluctuation of the
peso
against the U.S.
dollar and fostering domestic price stability. The president of Colombia has considerable power to determine governmental policies and
actions relating to the economy and may adopt policies that are inconsistent with those of the prior government or that negatively affect
us.
Any further downgrade in the credit rating
of Colombia could adversely affect the Colombian economy
In December 2017, S&P
downgraded the rating of its long-term foreign currency sovereign credit ratings on Colombia from "BBB" to "BBB-,"
on the grounds of Colombia's weakened fiscal and external profiles generating diminished policy flexibility. In May 2019, Moody's
changed Colombia's rating outlook from negative to stable and Fitch changed Colombia's rating outlook from stable to negative,
and in March 2020, the outlook of Colombia's credit rating was changed to negative by S&P due to external risks. In April 2020,
Fitch downgraded its long-term foreign currency sovereign credit ratings on Colombia from "BBB" to "BBB-" maintaining
a negative outlook. In July 2021, Fitch downgraded its long-term foreign currency sovereign credit ratings on Colombia from "BBB-"
to "BB+" stabilizing it to the same level given by S&P. As a result of these downgrades, Colombia's long-term debt
denominated in foreign currency is currently rated "BB+" by Fitch, "BB+" by S&P (ratified in January 2023)
and "Baa2" by Moody's. Any further downgrade of Colombia's credit rating could adversely affect the Colombian
economy and our operations.
Certain of our assets are located in, and
a part of our income is earned in, El Salvador and, thus, we are dependent on economic and political conditions in El Salvador
We have two manufacturing
facilities in El Salvador and a large part of our income is earned in El Salvador. The assets and income of our subsidiaries in El Salvador
are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization and renegotiation or
voiding of existing contracts. Accordingly, our financial condition and results of operations depend significantly on macroeconomic and
political conditions prevailing in El Salvador.
An emerging country such
as El Salvador is subject to many different factors that may affect its economic results, including the following:
●
financial regulation in
    the United States;
●
changes in economic or
    tax policies in El Salvador;
18
●
the ability of El Salvador
    to effect key economic reforms;
●
the impact of hostilities
    or political unrest in other countries that may affect international trade, commodity prices and the global economy;
●
internal security issues
    relating to crime and violence; and
●
low GDP growth rate in
    El Salvador.
El Salvador's economy
remains vulnerable to external shocks, including global economic crises that could be caused by future significant economic difficulties
of its major regional trading partners or by more general "contagion" effects, which could have a material adverse effect
on El Salvador's economic growth and therefore our operations in the country.
A significant decline in
the economic growth of any of El Salvador's major trading partners could adversely affect El Salvador's economic growth.
In particular, a decline in economic growth in the United States could affect the level of remittances received in El Salvador, which
in turn could affect El Salvador's balance of payments and domestic demand. In addition, because international investors'
reactions to the events occurring in one emerging market country sometimes appear to demonstrate a "contagion" effect, in
which an entire region or class of investment is disfavored by international investors, El Salvador could be adversely affected by negative
economic or financial developments in other emerging market countries.
There can be no assurance
that any crises such as those described above or similar events will not negatively affect investor confidence in emerging markets or
the economies of the principal countries in Latin America, including El Salvador.
In May 2022, Moody's
Investors Service downgraded the El Salvador's long-term foreign-currency issuer rating and long-term foreign-currency senior unsecured
debt ratings from Caa1 to Caa3. Moody's Investor Service decision to downgrade El Salvador's ratings reflects an increased probability
of a credit event (restructuring, distressed exchange, or default), with relatively high severity, as El Salvador faces a challenging
debt amortization schedule with bond maturities in 2023 and 2025 in a context of continued funding stress and persistently high financing
needs.
Similarly, in February 2022,
Fitch Ratings downgraded El Salvador's long-term foreign currency issuer default rating (IDR) from 'B-' to 'CCC'.
The downgrade reflects heightened financing risks stemming from increased reliance on short-term debt, a U.S.$ 800 million Eurobond repayment
due in January 2023, a still-high fiscal deficit, limited scope for additional local market financing, uncertain access to additional
multilateral funding and external market financing given high borrowing costs. Furthermore, El Salvador's debt to GDP ratio is
expected to rise to 86.9% in 2022 after modest improvement in 2021, increasing concerns around debt sustainability over the medium term.
We have assets in Brazil, and a part of
our income is earned in Brazil and, thus, we are dependent on economic and political conditions in Brazil.
We have a manufacturing facility
in Brazil and part of our income is earned in Brazil. The assets and income of our subsidiaries in Brazil, like many emerging markets,
are subject to political, economic, regulatory and other uncertainties, including expropriation, nationalization, renegotiation or voiding
of existing contracts, currency exchange restrictions and international monetary fluctuations. Accordingly, our financial condition and
results of operations depend significantly on macroeconomic and political conditions prevailing in Brazil and could be materially and
adversely affected if such conditions deteriorate.
19
The Brazilian government has exercised
and continues to exercise significant influence on the Brazilian economy. This influence, as well as Brazilian political and economic
conditions, could adversely affect us.
The Brazilian economy has
been characterized by intervention by the Brazilian government and unstable economic cycles. The Brazilian government has often changed
monetary, taxation, credit and other policies to influence the course of Brazil's economy. The Brazilian government's actions
to control inflation and affect other policies have often involved wage and price controls, depreciation of the real, controls on remittances
abroad, fluctuations of the Brazilian Central Bank's base interest rate, as well as other measures. We do not have any control
over what measures or policies the Brazilian government may adopt in the future and we cannot foresee them. Our business, financial condition,
results of operations, and prospects may suffer from significant changes in policies or regulations involving or affecting factors such
as:
●
expansion
                                            or contraction of the global or Brazilian economy;
●
currency
                                            exchange controls and restrictions on remittances abroad;
●
economic
                                            and social instability;
●
political
                                            elections;
●
import
                                            and export controls;
●
significant
                                            exchange rate fluctuations;
●
changes
                                            in tax regimes and taxation;
●
changes
                                            in labor regulations;
●
liquidity of financial
    and domestic capital markets;
●
interest rates;
●
inflation;
●
monetary policy;
●
the regulatory environment
    applicable to our activities;
●
fiscal policy; and
●
other political, diplomatic,
    social, and economic events that may take place in Brazil or may affect it.
The Brazilian Central Bank
has intervened occasionally to control unstable movements in the foreign exchange rate. We cannot predict whether the Brazilian Central
Bank will continue to let the real float freely. Accordingly, it is not possible to predict what impact the Brazilian government's
exchange rate policies may have on us. We cannot assure that in the future the Brazilian government will not impose a band within which
the real U.S. dollar-real exchange rate could fluctuate or set fixed exchange rates, nor can we predict what impact such an event might
have on our business, financial position or operating results.
Uncertainty regarding the
Brazilian government's implementation of changes in policies or regulations that may affect these or other factors in the future
could contribute to economic uncertainty in Brazil. Such uncertainties and other future developments in the Brazilian economy and governmental
policies in respect of the above may materially and adversely affect us.
Brazilian politics have historically
affected the performance of the Brazilian economy, and past political crises have affected the confidence of investors and the public,
generally resulting in an economic slowdown and volatility of securities issued by Brazilian companies. The impeachment of former President
Dilma Rouseff, investigations into former President Jair Bolsonaro, as well as wide-scale protests throughout Brazil focused on economic
and political reform, have led to a climate of growing uncertainty. Brazilian presidents have substantial power to determine public policy,
as well as to introduce measures affecting the Brazilian economy and the operations and financial results of companies such as ours.
The prior conviction, imprisonment and release of President Luiz Inacio Lula da Silva and his reelection in 2022 has further increased
political and economic instability. There is uncertainty as to which policies and regulations will be adopted by the new government.
We cannot assure you that the new government will maintain policies designed to promote macroeconomic stability, fiscal disciple and
domestic and foreign investments, and failure on the part of the new government to do so or other new or amended policies and regulations
may adversely impact Brazil's economy as well as our business, financial condition and results of operations.
20
The ongoing economic and political instability
in Brazil may have a material adverse effect on our business, operations and financial condition.
The ongoing economic and
political instability in Brazil caused by the COVID-19 pandemic, a slowdown in GDP growth, and uncertainty as to whether the Brazilian
government will enact the necessary economic reforms to improve Brazil's deteriorating fiscal accounts and economy have led to
a decline in market confidence in the Brazilian economy.
Additionally, Brazilian
markets have faced increased volatility due to the uncertainty in relation to ongoing corruption investigations by the Brazilian Federal
Police and the Federal Prosecutor's Office, including under Operation Car Wash (
Operação Lava Jato
), and the
impact of other scandals on the Brazilian economy and political environment. Members of the Brazilian government, including the legislative
and executive branch, as well as senior officials of large corporations have been investigated or prosecuted for corruption. The sum
was used to illegally finance political campaigns and to enrich members of the corruption scheme. As a result, several politicians, including
congressmen and high-profile business executives of public and private companies resigned and/or were arrested.
This scenario has had negative
impacts on the general perception of the Brazilian market. The development of these cases of unethical conduct has materially adversely
affected the Brazilian economy and may continue to do so. We cannot predict the impacts of the investigations on the Brazilian economy.
Moreover, the Brazilian
government may be subject to internal pressure to change its current macroeconomic policies in order to achieve higher rates of economic
growth. We cannot predict what policies will be adopted by the Brazilian government. As has happened in the past, the Brazilian economy
has been affected by the country's political events, which have also affected the confidence of investors and the public in general,
thereby adversely affecting the performance of the Brazilian economy. Furthermore, any indecisiveness by the Brazilian government in
implementing changes to certain policies or regulations may contribute to economic uncertainty in Brazil and any difficulties the Brazilian
government may face establishing a majority in Congress could result in a government impasse, political unrest and mass demonstrations
and/or strikes that could in each case materially adversely affect our operations.
Recent economic and political
instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which
also may adversely affect us and our securities. Any continued economic instability and political uncertainty may have a material adverse
effect on our business.
Inflation and government efforts to control
inflation may have an impact on the Brazilian economy and adversely affect our business and results of operations.
Brazil has experienced extremely
high rates of inflation in the past and has therefore implemented monetary policies that have resulted in one of the highest interest
rates in the world. According to the IGP-M, a general price inflation index, the inflation rates in Brazil were 23.1% in 2020, 17.7%
in 2021 and 5.45% in 2022. In addition, according to the National Extended Consumer Price Index (
Índice Nacional de Preços
ao Consumidor Amplo
), published by the IBGE, the Brazilian price inflation rates were 4.5% in 2020, 10.0% in 2021 and 5.79% in 2022.
The Brazilian government's
measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting availability
of credit and reducing economic growth. Inflation, actions to combat inflation and public speculation about possible additional actions
have also contributed materially to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.
The Brazilian government's measures to fight inflation, principally through the Central Bank, have had and may in the future have
significant effects on the Brazilian economy and our business in Brazil.
21
If Brazil experiences high
inflation rates, the Brazilian federal government may decide to intervene in the economy, including through the implementation of governmental
policies that may have an adverse effect on us and our clients. In addition, if Brazil experiences high inflation rates, we may not be
able to adjust the prices of our products in order to compensate for the effects of inflation in our costs structure, which may have
an adverse effect on us.
Risks Related to Laws and Regulations
A significant portion of medication on
the market, including ours, is subject to price control regulations. This control may limit our margins and our ability to pass on cost
increases to our customers, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to a variety
of legislation that imposes price controls over certain pharmaceutical products that we manufacture and sell. Among these laws are Colombian
regulations that establish price controls for certain drugs or groups of medication, which take into consideration factors such as the
number of manufactures of such drugs and competitors in the market, market concentration, inflation and the impact on the private sector
or commercial channels, as defined by Colombia's National Drug and Medical Devices Pricing Commission (
Comisión Nacional
de Precios de Medicamentos y Dispositivos Médicos
), which applies a methodology based on a comparison between average price
in the Colombian market and prices in certain foreign markets, determined based on criteria such as a geographical proximity to Colombia,
overall economic intervention, membership to the Organisation for Economic Co-operation and Development, and availability of information.
The INVIMA analyzes these factors at least once a year, resulting in annual modifications to the list of drugs and groups of medication
subject to price controls. In Brazil there is legislation which limits price increases and inflation adjustments to once per year, according
to a cap based on the National Broad Consumer Price Index (
Índice Nacional de Preços aos Consumidores Amplo
), a
productivity factor and an adjustment factor, all calculated as percentages per year. These price controls, among others, have resulted
in lower profit margins. We cannot guarantee that we will be able to maintain our profit margins in the future or that the governments
in the jurisdictions in which we operate will not impose additional or more restrictive price controls, which may have a material adverse
effect on our business, financial condition and results of operations. Failure to comply with price controls may lead to the imposition
of fines to us.
We may be held liable if a consumer has
an adverse health reaction to a product we sell or manufacture.
The use or misuse of our
products may result in adverse health reactions in our consumers. Incidents involving our products may have a material adverse effect
on us. Lawsuits, including product liability or administrative cases, may be filed against us claiming that our products were spoiled,
tampered with, contaminated, did not meet the product descriptions, involve false or misleading product labeling, or did not contain
appropriate disclosure information on possible side-effects or risks, among other things. In Colombia, product liability cases may result
in fines for damages. Additionally, administrative cases may result in the imposition of sanctions against us, such as, fines, temporary
or definitive closure of facilities, temporary or definitive prohibition to manufacture, prohibition to distribute or market certain
products, and destruction of products which are considered dangerous to consumers.
These cases may result in
significant expenses due to product recalls, which may be required by regulatory authorities, as well as warnings, fines, suspension
and/or cancellation of the sanitary registration or the sanitary operation license, including temporary or permanent closing of facilities.
Any real or potential health risk associated with our products, including negative publicity, may cause our consumers to lose their trust
in the safety, efficiency and quality of our products. Even if products manufactured by third-parties harm consumers, our industry may
suffer from negative publicity, which could decrease demand for our products. Any claim of this type against our products may have a
material adverse effect on our business, financial condition and results of operations.
We are subject to product and other liability
risks that could exceed our anticipated costs or adversely affect our results of operations, financial condition, and cash flows.
We are subject to potentially
significant product liability and other liability risks that are inherent to the design, development, manufacture, marketing and distribution
of our products and services. We may be named as a defendant in product liability lawsuits, which may allege that our products and services
have resulted or could result in an unsafe condition or injury to consumers. Such lawsuits could be costly to defend and could result
in reduced sales, significant liabilities, and diversion of management's time, attention, and resources. Even claims without merit
could affect our reputation due to adverse publicity and require us to incur in significant legal fees.
22
Furthermore, product liability
claims and lawsuits, regardless of their ultimate outcome, could have a material adverse effect on our business operations, financial
condition, and reputation and on our ability to attract and retain customers. We have historically sought to manage this risk through
the combination of product liability insurance policies and contractual indemnities provisions, together with liability limitations in
our agreements with customers and vendors. The availability of product liability insurance for companies in the pharmaceutical industry
is generally more limited than insurance available to companies in other industries. Insurance carriers providing product liability insurance
to those in the pharmaceutical and biotechnology industries generally limit the amount of available policy limits, require larger self-insured
retentions, and exclude coverage for certain products and claims. We maintain product liability insurance with annual aggregate limits
in excess of $15 million. This insurance policy provides coverage for defense expenses, which according to Colombian law, are payable
in excess of the insured limit. There can be no assurance that a successful product liability or other claim would be adequately covered
by our applicable insurance policies or by any applicable contractual indemnity or liability limitations.
Failure to comply with existing and future
regulatory requirements could adversely affect our business, financial condition and results of operations, or result in claims from
customers.
The healthcare industry is
highly regulated. We, and our customers, are subject to various local, state, federal, national, and transnational laws and regulations,
which include the operating, quality, and security standards of INVIMA, the FDA, Brazil's Health Regulatory Agency (
Agência
Nacional de Vigilância Sanitária,
or "ANVISA"), Health Canada, the United Kingdom's Medicines and
Healthcare products Regulatory Agency (the "MHRA"), Australia's Department of Health Therapeutic Goods Administration
(the "TGA"), Mexico's Federal Commission for the Protection against Sanitary Risk (
Comisión Federal para
la Protección contra Riesgos Sanitarios
, or "Cofepris") and various state boards of pharmacy, state health departments,
and other similar bodies and agencies of the jurisdictions in which we operate, and, in the future, any change to such laws and regulations
could adversely affect us. Among other rules affecting us, we are subject to laws and regulations concerning manufacturing practices,
drug safety, advertising, labelling and packaging. Our subsidiaries may be required to register for permits or licenses, and may be required
to comply, with the laws and regulations of such agencies, boards of pharmacy, health departments, or other comparable agencies in various
jurisdictions around the world, as well as certain accrediting bodies, such as the International Organization for Standardization ("ISO"),
depending upon the type of operations and locations of distribution and sale of the products manufactured or services provided by those
subsidiaries.
The manufacture, distribution,
and marketing of our products and services are subject to extensive ongoing regulation by INVIMA, FDA, ANVISA, Health Canada, MHRA, TGA,
Cofepris and other equivalent local, state, federal, national, and transnational regulatory authorities. Failure by us or by our customers
to comply with the requirements of these regulatory authorities could result in warning letters, product recalls or seizures, monetary
sanctions, injunctions to halt manufacture or distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal
of existing or denial of pending approvals, permits, or registrations, including those relating to products or facilities. In addition,
any such failure relating to the products or services we provide could expose us to contractual or product liability claims as well as
claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, which cost could
be significant.
In addition, any new products
or services classified as pharmaceutical must undergo lengthy and rigorous clinical testing and other extensive, costly, and time-consuming
procedures mandated by the regulatory authorities in the jurisdictions that regulate our products or services. We or our customers may
elect to delay or cancel anticipated regulatory submissions for current or proposed new products or services for any number of reasons.
Although we believe that
we comply in all material respects with applicable laws and regulations, there can be no assurance that a regulatory agency or tribunal
would not reach a different conclusion concerning the compliance of our operations with applicable laws and regulations. For instance,
INVIMA has authority to conduct ex-post reviews, which allows the entity to issue official actions or to initiate ex-officio investigations
to ensure compliance of all regulations. In addition, there can be no assurance that we will be able to maintain or renew existing permits,
licenses, or other regulatory approvals or obtain, without significant delay, future permits, licenses, or other approvals needed for
the operation of our businesses. Any noncompliance by us or our customers with applicable law or regulation or the failure to maintain,
renew, or obtain necessary permits and licenses could have an adverse effect on our business, financial condition and results of operations.
Furthermore, loss of a permit, license, or other approval in any one portion of our business may have indirect consequences in another
portion of our business if regulators or customers adjust their reviews of such other portion as a result or customers cease business
with such other portion due to fears that such loss is a sign of broader concerns about our ability to deliver products or services of
sufficient quality.
23
Failure to comply with municipal zoning
regulations could adversely affect our business, financial condition, and results of operations.
The real estate properties
we utilize in connection with our operations are subject to a variety of zoning regulations of the municipalities where such properties
are located. Those regulations impose zoning and planning requirements that we must comply with and, in certain cases, zoning license
that we need to obtain. For more information, see Item 4.B of this Annual Report under the heading "Business Overview––Manufacturing
and Distribution—Manufacturing Facilities
.
"
For instance, Colombian zoning
authorities (local planning offices and
curadurías
) have the authority to issue zoning licenses required for the construction
of buildings and facilities and for particular use of the land we own. Colombian police officers and judges are also entitled to issue
fines or even shutdown the facilities if they do not comply with the zoning regulations or permits. Therefore, any failure by us to comply
with zoning regulations and permits can result in monetary fines or the shutdown of our facilities and consequently have a material adverse
effect on our business, financial condition, and results of operations.
We are subject to environmental, health,
and safety laws and regulations, which could increase our costs and restrict our operations in the future.
Our operations are subject
to a variety of environmental, health, and safety laws and regulations in each of the jurisdictions in which we operate. These laws and
regulations govern, among other things, air emissions, wastewater discharges, the use, handling, and disposal of hazardous substances
and wastes, soil and groundwater contamination, and employee health and safety. Any failure by us to comply with environmental, health,
and safety requirements could result in the limitation or suspension of production or subject us to monetary fines, civil or criminal
sanctions, or other future liabilities in excess of our reserves. We are also subject to laws and regulations governing the destruction
and disposal of raw materials and non-compliant products, the handling of regulated material included in our products, and the disposal
of our products or their components at the end of their useful lives. In addition, compliance with environmental, health, and safety
requirements could restrict our ability to expand our facilities or require us to acquire costly environmental or safety control equipment,
incur other significant expenses, or modify our manufacturing processes. Our manufacturing facilities may use, in varying degrees, hazardous
substances in their processes. Any contamination at our current facilities, at formerly owned or operated properties, or at any surrounding
property can result in liability to us.
In the event of the discovery
of new or previously unknown contamination either at our facilities or at third-party locations, including facilities we formerly owned
or operated, or the imposition of cleanup obligations for which we are responsible, we may be required to take additional, unplanned
remedial measures for which we have not recorded reserves, which could have a material adverse effect on our business, financial condition
and results of operations.
Failure to meet regulatory or ethical expectations
on environmental impact, including climate change, could affect our ability to market and sell our products if other products with a
better carbon footprint are available.
The physical risks that climate
change poses to our business have been analyzed and we expect exposure to periods of extreme heat, floods and water scarcity to become
more frequent and severe in some regions where we operate, in the medium to longer term. These conditions may pose physical risks to
our business and supply chain. Among our initiatives to mitigate our impact on the planet and the climate crisis, we designed a carbon
neutrality strategy which we launched at the end of 2021. Our strategy has the goal of, among others, (i) calculating our baseline carbon
footprint and comparing it to the footprint of similar businesses to identify a benchmark, (ii) identifying greenhouse gas emissions
mitigation opportunities, and (iii) developing a strategy combining mitigation and offsetting to become carbon neutral by a date to be
determined. There can be no assurance that we will be able to achieve our carbon neutrality strategy and goals and if climate risks continue
to exacerbate, including if global temperatures continue to rise, and we are unable to adapt to such risks, our business and supply chain
may be adversely affected, which could have a material adverse effect on our financial condition and results of operations. For more
information on our carbon neutrality strategy, see Item 4.B under the heading "Corporate Responsibilities and Environmental, Social,
and Governance ("ESG") –– Carbon Neutrality Strategy" in this Annual Report.
24
Furthermore, there is an increasing global focus
from regulators, investors, healthcare providers and broader society regarding measures needed to transition to a low carbon economy
and the impact that this transition will have on businesses. In some markets, regulators or healthcare providers may choose not to approve
or reimburse our products if other products with a better carbon footprint are available. In addition, carbon taxes and fees may be imposed
on us and our suppliers as a way to reduce greenhouse gas emissions.
Environmental, social and governance matters
may impact our business and reputation
.
Increasingly, in addition
to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social
and governance, or ESG, matters, which are considered to contribute to the long-term sustainability of companies' performance.
A variety of organizations
measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized. In addition, investment
in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors
have publicly emphasized the importance of such ESG measures to their investment decisions. Topics taken into account in such assessments
include, among others, the company's efforts and impacts on climate change and human rights, ethics and compliance with law, and
the role of the company's board of directors in supervising various sustainability issues.
In light of investors'
increased focus on ESG matters, there can be no certainty that we will manage such issues successfully. Any failure or perceived failure
by us in this regard could have a material adverse effect on our reputation and on our business, stock price, financial condition, or
results of operations, including the sustainability of our business over time.
In addition, we expect there
will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters. For example, the SEC has
published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic
reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional
internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased
oversight obligations on our management and board of directors. These and other changes in stakeholder expectations will likely lead
to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our
customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may
not be known to us.
Our global operations are subject to economic,
political, and regulatory risks, including the risks of changing regulatory standards or changing interpretations of existing standards
that could affect our financial condition and results of operation or require costly changes to our business.
We conduct our operations
in various regions of the world, including South America, Central America, North America and Europe. Global and regional economic and
regulatory developments affect businesses such as ours in many ways. Our operations are subject to the effects of global and regional
competition, including potential competition from manufacturers in low-cost jurisdictions such as India and China. Local jurisdiction
risks include regulatory risks arising from local laws. Our global operations are also affected by local economic environments, including
inflation and recession. Political changes, some of which may be disruptive, and related hostilities can interfere with our supply chain,
our customers, and some or all of our activities in a particular location. While some of these risks can be hedged using derivatives
or other financial instruments and some are insurable, such mitigating measures may be unavailable, costly, or unsuccessful.
25
Legislative or regulatory initiatives,
such as the 2021 Colombian Tax Reform and the 2021 Colombian Tax Reform, new interpretations or developments concerning existing tax
laws, or challenges to our tax positions could adversely affect our results of operations and financial condition.
We are a large multinational
enterprise with operations in 13 countries throughout the world, including Colombia, Brazil, El Salvador, Peru and the United States,
and we do business with suppliers and customers in over 50 countries. As such, we are subject to the tax laws and regulations of various
jurisdictions, including U.S. federal, state, and local governments.
On September 14, 2021, the
Colombian Congress approved a tax reform by enacting Law No. 2155 (the "2021 Colombian Tax Reform"), which came into force
on January 1, 2022 and implemented certain tax measures intended to mitigate the economic and social effects of the COVID-19 pandemic.
These tax measures included among others, increasing the corporate income tax rate from 31% to 35% as of January 1, 2022 and the public
spending budget.
In addition to the 2021
Colombian Tax Reform, on August 8, 2022, the incoming Colombian Government, under the lead of the recently elected President,
Gustavo Petro, and the minister of Finance and Public Credit, José Antonio Ocampo, submitted to the Colombian Congress for
its consideration a new tax reform bill to collect approximately $25 trillion Colombian Pesos (the "2022 Colombian Tax
Reform"). On December 13, 2022, the Colombian President, Gustavo Petro, enacted Law 2277 of 2022. The purpose of the
amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These tax measures
include an unchanged Corporate Income Tax (CIT) rate of 35%. However, a new net tax rate will be introduced, under which Colombian
companies, including free trade zone (FTZ) users, will be subject to a minimum 15% effective tax rate, calculated based on financial
net profit, in accordance with the OECD Pillar Two global minimum tax rules. CIT rate for qualified FTZ companies will remain at 20%
subject to an annual exportation requirement. Certain non taxable income items, special deductions, exempt income and tax credits
will be capped at 3% of the taxpayer's net income before these detractions. In addition, the capital gains tax rate to rise to
15% (from 10%). For further information on this new tax reform bill, see "
Business–
–
Regulatory
Matters––2021 Colombian Tax Reform
."
We cannot anticipate the
impact of this tax reform nor, the impact of the measures that could be adopted by the incoming government to meet its financial obligations,
which might negatively affect Colombia's economy and, in turn, our business, financial condition and results of operations.
There can be no assurance
that our effective tax rate or tax payments will not be adversely affected by the new tax reform.
In addition, the tax laws
of several of the countries we operate in, including Brazilian and U.S. federal, state and local tax laws and regulations are extremely
complex and subject to varying interpretations. We are subject to regular examination of our income tax returns by various tax authorities.
Examinations or changes in laws, rules, regulations, or interpretations by taxing authorities could result in adverse impacts to tax
years open under statute or to our operating structures currently in place. We regularly assess the likelihood of adverse outcomes resulting
from these examinations or changes in laws, rules, regulations, or interpretations to determine the reasonableness of our provision for
taxes. It is possible that the outcomes from these examinations or changes in laws, rules, regulations, or interpretations by taxing
authorities will have a material adverse effect on our financial condition or results of operations.
We are subject to labor and employment
laws and regulations, which could increase our costs and restrict our operations in the future.
As of December 31, 2022,
we employed more than 5,500 individuals worldwide, primarily in South and Central America. Our management believes that our employee
relations are satisfactory. Employees in our Rymco (2 employees), Funtrition (4 employees), and Softgel (39 employees) manufacturing
facilities are currently represented by industry labor union organizations, representing approximately 0.8% of our total employees. However,
further organizing activities, collective bargaining, or changes in the regulatory framework for employment may increase our employment-related
costs or may result in work stoppages or other labor disruptions. Also, Law No. 2102, enacted in 2021, set forth a progressive reduction
scheme of the maximum legal working schedule from 48 to 42 hours per week, prohibiting any reduction of employees' salaries thereof.
The progressive reduction on the maximum working schedule is expected to become enforceable as of July 15, 2023. Moreover, as employers
are subject to various employment-related claims, such as individual and class actions relating to alleged employment discrimination
and wage-hour and labor standards issues, such actions, if brought against us and successful in whole or in part, may affect our ability
to compete or have a material adverse effect on our business, financial condition, and results of operations.
26
We are subject to governmental export and
import controls that could impair our ability to compete in international markets and subject us to liability if we are not in compliance
with applicable laws.
Our products are subject
to export and import control laws and regulations of the jurisdictions in which we operate. Exports of our products must be made in compliance
with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject
to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on
us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.
In addition, changes in our
products or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of
our products in international markets, prevent customers from using our products or, in some cases, prevent the export or import of our
products to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our products
could adversely affect our business, financial condition and results of operations.
Certain pharmaceutical
products we manufacture contain "controlled substances" and although we only manufacture and sell such products in the jurisdictions
in which we are licensed to do so, the proceeds from the sale of such products could be considered criminal property in other jurisdictions.
Certain
products we manufacture, such as Dronabinol, which contains a synthetic form of tetrahydrocannabinol (THC), contain "controlled
substances" as defined in the Controlled Substances Act, the U.K. Misused of Drugs Regulations 2001, and other similar regulations
in other jurisdictions. We only manufacture and sell products containing "controlled substances" in jurisdictions in which
we are licensed to do so, such as Dronabinol, which we have received FDA approval to manufacture and sell in the United States. However,
the proceeds from the sale of "controlled substances" in jurisdictions in which we are licensed to do so may be considered
"criminal property" in other jurisdictions in which such products have not been licensed, such as the proceeds from the sale
of Dronabinol in the United States, which could be considered criminal property in the United Kingdom under the U.K. Proceeds of Crime
Act 2002.
Although
we are not aware of any cases where regulatory authorities have prosecuted a company, whose primary business in not the manufacturing
and sale of "controlled substances", for the use of criminal property in connection with the use of proceeds from the sale
of "controlled substances" in jurisdictions in which it was licensed to do so, we cannot provide any assurances that the
payments with proceeds derived from the sale of "controlled substances", such as Dronabinol, would not be considered criminal
property under the U.K. Proceeds of Crime Act 2002, or other similar regulations in another jurisdiction.
Failure to comply with the U.S. Foreign
Corrupt Practices Act and similar laws associated with our activities in other jurisdictions could subject us to penalties and other
adverse consequences.
As a substantial portion
of our revenues is, and we expect will continue to be, from jurisdictions outside of the United States, we face significant risks if
we fail to comply with the U.S. Foreign Corrupt Practices Act ("FCPA") and other laws that prohibit improper payments or
offers of payment to governments and their officials and political parties by us and other business entities for the purpose of obtaining
or retaining business. In many countries, particularly in countries with developing economies, some of which represent significant markets
in which we operate, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited
by the FCPA or other laws and regulations. Although we have implemented company policy requiring employees and consultants to comply
with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations. In addition, we
cannot guarantee the compliance by our partners, resellers, suppliers and agents with applicable laws, including the FCPA. Therefore,
there can be no assurance that none of our employees or agents will take actions in violation of our policies or of applicable laws,
for which we may be ultimately held responsible. Any violation of the FCPA and related policies could result in severe criminal or civil
sanctions, which could have a material and adverse effect on our reputation, business, financial condition and results of operations.
27
Risks Related to Our Status as a Publicly
Traded Company
Our management has limited experience in
operating a public company.
Our executive officers have
limited experience in the management of a publicly traded company. Our senior management team may not successfully or effectively manage
our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities
laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage
in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being
devoted to the management and growth of our company. We may not have adequate personnel with the appropriate level of knowledge, experience,
and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the
United States. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards
required of a public company in the United States may require costs greater than expected. It is possible that we will be required to
expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating
costs in future periods.
We are controlled by the Minski Family,
whose interests may conflict with our interests and the interests of our other shareholders.
The Minski Family, through
Deseja, Sognatore and Simphony, owns 59.6% of the issued and outstanding Ordinary Shares, including 10,464,612 Ordinary Shares that is
held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and the related escrow agreement. As long
as the Minski Family owns at least 50% of the outstanding Ordinary Shares, the Minski Family will have the ability to determine all ordinary
corporate actions requiring shareholder approval, including the election and removal of directors and the size of our Board of Directors
(within the limits provided for in the Company's amended and restated articles of association). Our Board of Directors may, without
any approval required by our shareholders, decide upon, under certain circumstances, a sale of substantially all of our assets. If any
shareholder or group of shareholders were to own 2/3 or more of the outstanding Ordinary Shares, such shareholder or group of shareholders
would have the required majority pursuant to Luxembourg law and the Company's amended and restated articles of association to amend
the Company's amended and restated articles of association and take all other shareholder resolutions which require at least 2/3
of the outstanding Ordinary Shares. In addition, pursuant to the Nomination Agreement, the Minski Family has the right to propose for
appointment a majority of the Board of Directors, at least one-half of whom must be independent under Nasdaq rules, and the right to
appoint a director to each committee of the Board of Directors. Such rights of the Minski Family shall terminate upon the earlier of
(i) 20 years from the date of the Nomination Agreement and (ii) the date on which the Minski Family, or its affiliates, cease to beneficially
own, in the aggregate, 30% of the outstanding Ordinary Shares. This could have the effect of delaying or preventing a change in control
or otherwise discouraging a potential acquirer from attempting to obtain control of the company, which could cause the market price of
Ordinary Shares to decline or prevent shareholders from realizing a premium over the market price for Ordinary Shares. The Minski Family's
interests may conflict with our interests as a company or the interests of our other shareholders.
A market for our securities may not continue,
which would adversely affect the liquidity and price of our securities.
The price of our securities
may fluctuate significantly due to the market's reaction to general market and economic conditions. An active trading market for
our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to
general economic conditions and forecasts, our general business condition and the release of financial reports. Additionally, if our
securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation
system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited
than if it were quoted or listed on Nasdaq or another national securities exchange. Shareholders may be unable to sell our securities
unless a market can be established or sustained.
28
If securities or industry analysts cease
publishing research or reports about us, our business, or our market, or if they change their recommendations regarding the Ordinary
Shares adversely, then the price and trading volume of Ordinary Shares could decline.
The trading market for the
Ordinary Shares will be influenced by the research and reports that industry or securities analysts publish about us, our business, our
market, or our competitors. If any of the analysts who cover us change their recommendation regarding the Ordinary Shares adversely,
or provide more favorable relative recommendations about our competitors, the price of the Ordinary Shares would likely decline.
The JOBS Act permits "emerging growth
companies" like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies
that are not emerging growth companies.
We currently qualify as an
"emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012, which we refer to as the "JOBS Act." As such, we take advantage of certain exemptions from various
reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an
emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial
reporting under Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information they
deem important.
We cannot predict if investors
will find the Ordinary Shares less attractive because we rely on these exemptions. If some investors find the Ordinary Shares less attractive
as a result, there may be a less active trading market and the share price for the Ordinary Shares may be more volatile.
We cannot guarantee that our share repurchase
program will be utilized to the full value approved or that it will enhance long-term shareholder value. Repurchases we consummate could
increase the volatility of the price of our Ordinary Shares and could have a negative impact on our available cash balance.
In February 2023, our Board of Directors approved
a share repurchase program for the purchase of up to $5.0 million Ordinary Shares or 2,000,000 Ordinary Shares, whichever is less (the
"Repurchase Program"). Under the Repurchase Program, repurchases can be made from time to time using a variety of methods,
which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC
and other applicable legal requirements. The specific timing, price and size of the purchases will depend on prevailing share prices,
general economic and market conditions, and other considerations consistent with our capital allocation strategy. Share repurchases could
have an impact on our Ordinary Share trading prices, increase the volatility of the price of our Ordinary Shares, or reduce our available
cash balance such that we will be required to seek financing to support our operations. The repurchase program does not obligate us to
acquire a particular amount of Ordinary Shares, and the repurchase program may be suspended or discontinued at any time at our discretion,
which may result in a decrease in the trading prices of our Ordinary Shares. Even if our
share repurchase program
is fully implemented,
it may not enhance long-term shareholder value.
Risks Related to Investment in a Luxembourg
Company and Our Status as a Foreign Private Issuer
As a foreign private issuer, the Company
is exempt from a number of U.S. securities laws and rules promulgated thereunder and will be permitted to publicly disclose less information
than U.S. public companies must. This may limit the information available to holders of the Ordinary Shares.
The Company qualifies as
a "foreign private issuer," as defined in the SEC's rules and regulations, and, consequently, it will not be subject
to all of the disclosure requirements applicable to public companies organized within the United States. For example, the Company is
exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation
of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors
are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related
rules with respect to their purchases and sales of our securities. For example, some of our key executives may sell a significant number
of Ordinary Shares and such sales will not be required to be disclosed as promptly as public companies organized within the United States
would have to disclose. Accordingly, once such sales are eventually disclosed, the price of Ordinary Shares may decline significantly.
Moreover, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S.
public companies. We will also not be subject to Regulation FD under the Exchange Act, which would prohibit us from selectively disclosing
material nonpublic information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly,
there may be less publicly available information concerning us than there is for U.S. public companies.
29
The Company may lose its foreign private
issuer status in the future, which could result in significant additional costs and expenses. This would subject us to GAAP reporting
requirements which may be difficult for it to comply with.
As a "foreign private
issuer," the Company is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange
Act and related rules and regulations. Under those rules, the determination of foreign private issuer status is made annually on the
last business day of an issuer's most recently completed second fiscal quarter, and, accordingly, the next determination will be
made on June 30, 2023.
In the future, the Company
could lose its foreign private issuer status if a majority of the Ordinary Shares are held by residents in the United States and we fail
to meet any one of the additional "business contacts" requirements. Although we intend to follow certain practices that are
consistent with U.S. regulatory provisions applicable to U.S. companies, the loss of our foreign private issuer status would make such
provisions mandatory. The regulatory and compliance costs under U.S. securities laws if we are deemed a U.S. domestic issuer may be significantly
higher. If the Company is not a foreign private issuer, we will be required to file periodic reports and prospectuses on U.S. domestic
issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, we
may be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such
conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain
corporate governance requirements of Nasdaq that are available to foreign private issuers. For example, Nasdaq's corporate governance
rules require listed companies to have, among other things, a majority of independent board members and independent director oversight
of executive compensation, nomination of directors, and corporate governance matters. As a foreign private issuer, we are permitted to
follow home country practice in lieu of the above requirements. We intend to follow Luxembourg practice with respect to quorum requirements
for shareholder meetings in lieu of the requirement under Nasdaq Listing Rules that the quorum be not less than 33 1/3% of the outstanding
voting shares. Under the Company's amended and restated articles of association, at an ordinary general meeting, there is no quorum
requirement and resolutions are adopted by a simple majority of validly cast votes. In addition, under the Company's amended and
restated articles of association, for any resolutions to be considered at an extraordinary general meeting of shareholders, the quorum
shall be at least one half of our issued share capital unless otherwise mandatorily required by law. As long as we rely on the foreign
private issuer exemption to certain of Nasdaq's corporate governance standards, a majority of the directors on our Board of Directors
are not required to be independent directors, our compensation committee is not required to be comprised entirely of independent directors,
and we will not be required to have a nominating committee. Also, we would be required to change our basis of accounting from IFRS as
issued by the IASB to GAAP, which may be difficult and costly for us to comply with. If we lose our foreign private issuer status and
fail to comply with U.S. securities laws applicable to U.S. domestic issuers, we may have to de-list from Nasdaq and could be subject
to investigation by the SEC, Nasdaq and other regulators, among other materially adverse consequences.
If the Company no longer
qualifies as a foreign private issuer, we may be eligible to take advantage of exemptions from Nasdaq's corporate governance standards
if we continue to qualify as a "controlled company." The Minski Family owns 59.6 % of the issued and outstanding Ordinary
Shares, including 10,464,612 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement
and the related escrow agreement. As a result, we are a "controlled company" within the meaning of Nasdaq rules. Under these
rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another
company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including:
●
the
                                            requirement that a majority of its board of directors consist of independent directors;
●
the
                                            requirement that compensation of its executive officers be determined by a majority of the
                                            independent directors of the board or a compensation committee comprised solely of independent
                                            directors with a written charter addressing the committee's purpose and responsibilities;
                                            and
●
the
                                            requirement that director nominees be selected, or recommended for the board's selection,
                                            either by a majority of the independent directors of the board or a nominating committee
                                            comprised solely of independent directors with a written charter addressing the committee's
                                            purpose and responsibilities.
30
If we elect to take advantage
of these exemptions, shareholders would not have the same protections afforded to shareholders of companies that are subject to all the
Nasdaq corporate governance standards.
The Company is organized under the laws
of the Grand Duchy of Luxembourg and a substantial amount of our assets are not located in the United States. It may be difficult for
you to obtain or enforce judgments or bring original actions against us or the members of our Board of Directors in the United States.
The Company is incorporated
under the laws of the Grand Duchy of Luxembourg. In addition, a substantial amount of our assets is located outside the United States.
Furthermore, some of the members of our Board of Directors and officers reside outside the United States and a substantial portion of
our assets are located outside the United States. Investors may not be able to effect service of process within the United States upon
us or these persons or enforce judgments obtained against us or these persons in U.S. courts, including judgments in actions predicated
upon the civil liability provisions of the U.S. federal securities laws. Likewise, it also may be difficult for an investor to enforce
in U.S. courts judgments obtained against us or these persons in courts located in jurisdictions outside the United States, including
judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Awards of punitive damages in actions brought
in the United States or elsewhere are generally not enforceable in the Grand Duchy of Luxembourg.
As there is no treaty in
force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand
Duchy of Luxembourg (the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters
is not yet in force and it has not yet been ratified by the United States),, courts in the Grand Duchy of Luxembourg will not automatically
recognize and enforce a final judgment rendered by a U.S. court. However, a party who received such favorable judgment in a U.S. Court
may initiate enforcement proceedings in the Grand Duchy of Luxembourg (
exequatur
) by requesting enforcement of the U.S. judgment
by the District Court (
Tribunal d'Arrondissement
) pursuant to Section 678 of the New Luxembourg Code of Civil Procedure.
The District Court will authorize the enforcement in Luxembourg of the U.S. judgment if it is satisfied that all of the following conditions
are met:
●
the
                                            U.S. judgment is enforceable (
exécutoire
) in the United States;
●
the
                                            U.S. court awarding the judgment had jurisdiction to adjudicate the applicable matter under
                                            applicable U.S. federal or state jurisdictions rules, and the jurisdiction of the U.S. court
                                            is recognized by Luxembourg private international and local law;
●
the
                                            U.S. court has applied the substantive law as designated by the Grand Duchy of Luxembourg
                                            conflict of laws rules according to certain Luxembourg case law, it is admitted that the
                                            Grand Duchy of Luxembourg courts which are asked to grant an exequatur do not have to verify
                                            whether the substantive law actually applied by the U.S. court awarding the judgment was
                                            the law which would have been applied;
●
the
                                            U.S. judgment does not contravene international public policy or order as understood under
                                            the laws of Luxembourg;
●
the
                                            U.S. court has acted in accordance with its own procedural rules and laws;
●
the
                                            U.S. judgment was granted following proceedings where the counterparty had the opportunity
                                            to appear, and if it appeared, to present a defense; and
●
the
                                            U.S. judgment was not granted pursuant to an evasion of Grand Duchy of Luxembourg law (
fraude
                                            à la loi luxembourgeoise
).
Please note that the Grand
Duchy of Luxembourg case law is constantly evolving. Some of the conditions of admissibility described above may change, and additional
conditions could be required to be fulfilled by the Grand Duchy of Luxembourg courts while other conditions may not be required by Luxembourg
courts in the future.
Subject to the conditions
described above, courts of the Grandy Duchy of Luxembourg tend not to review the merits of a foreign judgment, although such a review
is not statutorily prohibited.
31
If an original action is
brought in the Grand Duchy of Luxembourg, the Grand Duchy of Luxembourg courts may refuse to apply the law designated and applied in
the original action if (i) the choice of such law was not bona fide or if the foreign law was not pleaded or proved or if pleaded and
proved, the foreign law was contrary to the Grand Duchy of Luxembourg mandatory provisions (
lois impératives
) or incompatible
with the Grand Duchy of Luxembourg public policy rules, and (ii) its application is manifestly incompatible with the Grand Duchy of Luxembourg
international policy rules. In an action brought in the Grand Duchy of Luxembourg on the basis of U.S. federal or state securities laws,
the Grand Duchy of Luxembourg courts may not have the requisite power to grant the remedies sought. Also, an exequatur may be refused
if it involves punitive damages.
Litigation in the Grand Duchy
of Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including, with respect to the taking and admissibility
of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in the Grand Duchy of Luxembourg would in principle
have to be conducted in the French or German language, and all documents submitted to the court would, in principle, have to be translated
into French or German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a Grand Duchy of Luxembourg
court predicated upon the civil liability provisions of the U.S. federal securities laws against us, the members of our Board of Directors,
our officers, or the experts named herein. In addition, even if a judgment against us, the non-U.S. members of our Board of Directors,
our officers, or the experts named in this Annual Report based on the civil liability provisions of the U.S. federal securities laws
is obtained, a U.S. investor may not be able to enforce it in U.S. or the Grand Duchy of Luxembourg courts.
Further, in the event of
any proceedings being brought in the Grand Duchy of Luxembourg court in respect of a monetary obligation expressed to be payable in a
currency other than the Euro, a Grand Duchy of Luxembourg court would have power to give judgment expressed as an order to pay a currency
other than the Euro. However, enforcement of the judgment against any party in the Grand Duchy of Luxembourg would be available only
in Euros and for such purposes all claims or debts would be converted into Euros.
Our amended and restated
articles of association adopted in connection with the Business Combination contain specific indemnification provisions stating that
every person who is, or has been, a member of our Board of Directors or officer (
mandataire
) shall be indemnified by us to the
fullest extent permitted by Luxembourg law against liability and against all expenses reasonably incurred or paid by such director or
officer in connection with any claim, action, suit or proceeding in which such director or officer becomes involved as a party or otherwise
by virtue of his or her being or having been a director or officer and against amounts paid or incurred by him or her in the settlement
thereof.
Luxembourg and European insolvency and
bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer our shareholders less protection than
they would have under U.S. insolvency and bankruptcy laws.
As a company organized under
the laws of the Grand Duchy of Luxembourg and with our registered office in the Grand Duchy of Luxembourg, the Company is subject to
the Grand Duchy of Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it including,
among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should
courts in another European country determine that the insolvency and bankruptcy laws of that country apply to us in accordance with and
subject to such European Union ("EU") regulations, the courts in that country could have jurisdiction over the insolvency
proceedings initiated against us. Insolvency and bankruptcy laws in the Grand Duchy of Luxembourg or the relevant other European country,
if any, may offer our shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult
for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.
32
The rights of our shareholders may differ
from the rights they would have as shareholders of a United States corporation, which could adversely impact trading in Ordinary Shares
and our ability to conduct equity financings.
Our corporate affairs are
governed by the Company's amended and restated articles of association and the laws of Luxembourg, including the Luxembourg Company
Law (
loi du 10 août 1915 sur les sociétés commerciales, telle que modifiée
). The rights of our shareholders
and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated
in the United States. For example, under Delaware law, the board of directors of a Delaware corporation bears the ultimate responsibility
for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary
duties of care and loyalty to the corporation and its shareholders. Luxembourg law imposes a duty on directors of a Luxembourg company
to: (i) act in good faith with a view to the best interests of a company; and (ii) exercise the care, diligence, and skill that a reasonably
prudent person would exercise in a similar position and under comparable circumstances. Additionally, under Delaware law, a shareholder
may bring a derivative action on behalf of a company to enforce a company's rights. Under Luxembourg law, the board of directors
has sole authority to decide whether to initiate legal action to enforce a company's rights (other than, in certain circumstances,
an action against members of the board of directors, which may be initiated by the general meeting of the shareholders, or, subject to
certain conditions, by minority shareholders holding together at least 10% of the voting rights in the company). Further, under Luxembourg
law, there may be less publicly available information about us than is regularly published by or about U.S. issuers. In addition, Luxembourg
laws governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg
laws and regulations in respect of corporate governance matters might not be as protective of minority shareholders as are state corporation
laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests in connection with actions
taken by our directors, officers or principal shareholders than they would as shareholders of a corporation incorporated in the United
States. As a result of these differences, our shareholders may have more difficulty protecting their interests than they would as shareholders
of a U.S. issuer.
Non-Luxembourg resident holders of Ordinary
Shares could be subject to adverse Grand Duchy of Luxembourg income tax consequences.
The tax position of the holders
of Ordinary Shares may vary according to their particular financial and tax situation. Our tax structuring and/or our investments may
not be tax-efficient for a particular prospective holder of Ordinary Shares. No assurances can be given that amounts distributed or allocated
to the holders of Ordinary Shares will have any particular characteristics or that any specific tax treatment will apply. Furthermore,
no assurances can be given that any particular investment structure in which we have a direct or indirect interest will be suitable for
all holders of Ordinary Shares and, in certain circumstances, such structures may lead to additional costs or reporting obligations for
some or all of the holders of Ordinary Shares.
Non-Luxembourg resident holders
of Ordinary Shares that have neither a permanent establishment nor a permanent representative in the Grand Duchy of Luxembourg to which
or whom the Ordinary Shares are attributable, are generally not subject to any income tax in the Grand Duchy of Luxembourg on gains realized
upon the sale, repurchase or redemption of the Ordinary Shares.
Non-Luxembourg resident holders
of Ordinary Shares will only be subject to the Grand Duchy of Luxembourg income tax on capital gains in the event they hold a substantial
participation in us (i.e. more than 10% of our issued shares, either alone or together with certain close relatives, at any time during
the five-year period preceding the disposition of Ordinary Shares) and (a) the disposition of Ordinary Shares (including liquidation)
takes place within six months after acquisition or (b) in case of a disposition of Ordinary Shares after six months or more, such holder
had been a Grand Duchy of Luxembourg resident taxpayer for more than fifteen years and has become a non-Luxembourg taxpayer less than
five years before the disposition of Ordinary Shares occurs. Nevertheless, holders should consult their own tax advisors to determine
which double tax treaties concluded by the Grand Duchy of Luxembourg, if any, apply in order to determine which state (residency state
or the Grand Duchy of Luxembourg) has the right to tax any such capital gains.
U.S. Tax Risk Factors
If a United States person is treated as
owning at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.
If a United States person
is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may
be treated as a "United States shareholder" with respect to us. If United States shareholders own more than 50% of the value
or voting power of our shares, then we will be considered a controlled foreign corporation. Additionally, as a result of complex attribution
rules, a direct or indirect subsidiary of us may be considered a "controlled foreign corporation" and a United States shareholder
may be subject to the controlled foreign corporation rules with respect to such subsidiary even if we ourselves are not a controlled
foreign corporation.
A United States shareholder
of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of the
controlled foreign corporation's "Subpart F income" and (in computing its "global intangible low-taxed income")
"tested income" and a pro rata share of the amount of U.S. property (including certain stock in U.S. corporations and certain
tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign
corporation makes any distributions. Failure to comply with these reporting obligations (or related tax payment obligations) may subject
such United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such United
States shareholder's U.S. federal income tax return for the year for which reporting (or payment of tax) was due from starting.
An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain
tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide
any assurances that it will assist holders in determining whether it, or any of our non-U.S. subsidiaries, are treated as a controlled
foreign corporation or whether any holder is treated as a United States shareholder with respect to any of such controlled foreign corporations
or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.
33
ITEM 4.
COMPANY
INFORMATION
The Company makes its filings
in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company's
filings are also available to the public through the Internet at Procaps's website at https://investor.procapsgroup.com. Procaps's
website is provided for informational purposes only and the information contained on its website or that can be accessed through its website
is not part of this Annual Report.
A. HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was incorporated
under the laws of the Grand Duchy of Luxembourg on March 29, 2021 as a public limited liability company (
société anonyme
)
governed by the laws of the Grand Duchy of Luxembourg for an unlimited duration and registered with the Luxembourg Trade and Companies'
Register (
Registre de Commerce et des Sociétés, Luxembourg
) under number B 253360. The Company was incorporated
solely for the purpose of effectuating the Business Combination, which was consummated on September 29, 2021. The Company owned no material
assets other than its interests in Crynssen acquired in the Business Combination and did not operate any business. Crynssen is a private
limited liability company registered and incorporated under the laws of Malta and, particularly, the Companies Act Cap. 386. See Item
5 of this Annual Report under the heading "Operating and Financial Review and Prospects" for a discussion of our principal
capital expenditures and divestitures for the years ended December 31, 2022, 2021 and 2020.
The Company's mailing
address and registered office is 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg, and its telephone number is +356 7995-6138.
The Company's principal website address is https://www.procapsgroup.com. The information contained on, or accessible through, the
Company's websites is not incorporated by reference into this Annual Report, and you should not consider it a part of this Annual
Report.
The Company is subject to
certain of the informational filing requirements of the Exchange Act. Since the Company is a "foreign private issuer", it
is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers,
directors and principal shareholders of the Company are exempt from the reporting and "short-swing" profit recovery provisions
contained in Section 16 of the Exchange Act with respect to their purchase and sale of Ordinary Shares. In addition, the Company is not
required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities
are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing
financial statements audited by an independent accounting firm. The SEC also maintains a website at http://www.sec.gov that contains
reports and other information that the Company files with or furnishes electronically to the SEC.
The Business Combination
On September 29, 2021, the
Business Combination was consummated. As part of the Business Combination, on the Closing Date, pursuant to the Business Combination
Agreement:
●
Merger Sub
    merged with and into SPAC, with SPAC surviving such merger and becoming a direct wholly-owned subsidiary of the Company and, in the
    context of the Merger, (a) all SPAC Ordinary Shares outstanding were exchanged with for Ordinary Shares pursuant to a share capital
    increase, (b) each SPAC Warrant became a Warrant exercisable for Ordinary Shares, on substantially the same terms as the SPAC Warrants,
    and (c) the Company entered into the Warrant Amendment to amend and assume SPAC's obligations under the SPAC Warrant Agreement
    to give effect to the conversion of SPAC Warrants to Warrants;
●
immediately
    following the consummation of the Merger and prior to the Exchange (as defined below), the Company redeemed all 4,000,000 Redeemable
    A Shares held by Crynssen for a total purchase price of $40,000 (corresponding to their nominal value of $0.01 per share);
●
immediately
    following the consummation of the Merger and the redemption of all the Redeemable A Shares, pursuant to those certain individual
    contribution and exchange agreements, each dated as of March 31, 2021, as amended, and entered into by and among the Company, Crynssen
    and each of the Crynssen Shareholders, each of the Crynssen Shareholders, contributed its respective Crynssen Ordinary Shares to
    the Company in exchange for Ordinary Shares, and, in the case of IFC, for Ordinary Shares and 4,500,000 Redeemable B Shares, which
    were subscribed for by each such Crynssen Shareholder (such contributions and exchanges of Crynssen Ordinary Shares for Ordinary
    Shares and, in the case of IFC, Ordinary Shares and Redeemable B Shares, collectively, the "Exchange");
34
●
as
a result of the Exchange, Crynssen became a direct wholly-owned subsidiary of the Company and the Crynssen Shareholders became holders
of issued and outstanding Ordinary Shares and, in the case of IFC, Ordinary Shares and Redeemable B Shares; and
●
immediately
following the Exchange, the Company redeemed 4,500,000 Redeemable B Shares from IFC for a total purchase price of $45,000,000 (corresponding
to a purchase price of $10.00 per Redeemable B Share) in accordance with the IFC Redemption Agreement.
Certain Agreements Related to the Business
Combination
Registration Rights and Lock-Up Agreement
In connection with the Closing
of the Business Combination, Crynssen, the Sponsors, certain other persons and entities ("Original Holders") holding SPAC
Ordinary Shares issued by Union prior to its IPO (the "Founder Shares") and the Crynssen Shareholders entered into the Registration
Rights and Lock-Up Agreement which provides customary demand and piggyback registration rights. Additionally, the Ordinary Shares held
by the Sponsors and the Original Holders which were previously Founder Shares will be locked-up until the earliest of: (i) the date that
is one year from the Closing Date, (ii) the date on which the closing price of the Ordinary Shares on the Nasdaq equals or exceeds $12.50
per Ordinary Share for any 20 trading days within any 30-trading day period commencing 150 days after the Closing Date, or (iii) such
date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our shareholders having
the right to exchange their Ordinary Shares for cash, securities or other property.
The Ordinary Shares held by
the Crynssen Shareholders were also subject to a lock-up which has expired.
The Ordinary Shares and Warrants
began trading on the Nasdaq Global Market under the ticker symbol "PROC" and "PROCW", respectively, on September
30, 2021. A copy of the Business Combination Agreement is included as Exhibit 4.1 to this Annual Report and the amendment to the Business
Combination Agreement, which is included as Exhibit 4.2 to this Annual Report.
Assignment, Assumption and Amendment Agreement
On the Closing Date, the Company
entered into the Warrant Amendment to amend and assume Union's obligations under the existing Warrant Agreement to give effect to
the conversion of SPAC Warrants to Warrants.
Nomination Agreement
On the Closing Date, the Company,
the Sponsors, certain Original Holders and certain Crynssen Shareholders entered into the Nomination Agreement pursuant to which, in connection
with any general meeting at which the Company's directors are to be elected, or any adjournment or postponement thereof, Deseja,
Sognatore and Simphony (collectively, the "Minski Family Shareholders") shall collectively have the right to propose for appointment
a number of directors that equals a majority of our Board of Directors (each, a "Majority Shareholder Director"). For as long
as Hoche Partners Pharma Holding S.A. ("Hoche") owns no less than 7% of the Company's issued and outstanding share capital,
Hoche shall have the right to propose for appointment one director (such director, the "Hoche Shareholder Director" and collectively
with the Majority Shareholder Directors, each a "Shareholder Director" and collectively, the "Shareholder Directors").
Alejandro Weinstein served as the Hoche Shareholder Director for the period from Closing through January 19, 2023, the effective date
of his resignation from the Board of Directors. In connection with Mr. Weinstein's resignation, pursuant to the Nomination Agreement,
Hoche nominated and the Board appointed, Alberto Eguiguren Correa to serve as the Hoche Shareholder Director and fill the vacancy created
by Mr. Weinstein's resignation. In connection with our first two consecutive general shareholders' meetings following September
1, 2021 at which directors are to be elected, or any adjournment or postponement thereof, the Sponsors shall have the right to propose
for appointment Daniel W. Fink and Kyle P. Bransfield as directors of our Board of Directors. At least one-half of the Shareholder Directors
must qualify as independent directors ("Independent Directors") under applicable stock exchange rules, subject to any independence
requirements established by the listing rules of the stock exchange on which the Ordinary Shares are listed that would require a greater
number of Shareholder Directors to qualify as Independent Directors, provided that the Minski Family Shareholders will not be required
to nominate any additional Independent Directors unless and until all of the directors, other than the Majority Shareholder Directors,
qualify as Independent Directors. In addition, for so long as we maintain any committee, such committees shall each include at least one
Majority Shareholder Director so long as he or she is independent. The Nomination Agreement will automatically terminate upon the earlier
of (i) the date on which the Minski Family Shareholders or their affiliates cease to beneficially own, in the aggregate, 30% of our outstanding
shares and (ii) 20 years from the date of the Nomination Agreement.
35
Share Forfeiture Agreement
On the Closing Date, the Sponsors
entered into a share forfeiture agreement by and among the Sponsors, the Company, Crynssen and Union (the "Share Forfeiture Agreement"),
pursuant to which, the Sponsors forfeited a combined 700,000 SPAC Ordinary Shares prior to the consummation of the Business Combination.
Senior Notes Offering
On November 12, 2021, we closed
a private placement offering of $115 million aggregate principal amount of 4.75% guaranteed senior notes (the "Senior Notes")
issued by Procaps, S.A., due November 12, 2031, pursuant to a note purchase agreement (the "NPA") entered into on November
5, 2021 with The Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health
Insurance Company, Inc. and Cigna Health and Life Insurance Company Inc. The Senior Notes are the senior unsecured obligations of Procaps,
S.A. and unconditionally guaranteed by the Company and the following subsidiaries: Crynssen, Procaps, S.A., Diabetrics Healthcare, Pharmayect
S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Indústria e Comércio Ltda., and Sofgen Pharmaceuticals LLC.
The Senior Notes were issued
in a single tranche, with a final maturity of 10 years and a principal amortization schedule of five annual equal payments commencing
on the sixth anniversary of the closing (
i.e.
years 6 to 10), resulting in a weighted average life of 8 years. Procaps, S.A. used
the net proceeds from the issuance of the Senior Notes primarily to repay certain of its and its subsidiaries existing indebtedness in
full, as well as for general corporate purposes. The Senior Notes also contain change-of-control provisions and certain customary affirmative
and negative covenants and events of default. In addition, the Senior Notes require Procaps, S.A., the Company and the other obligors
thereunder to comply with certain financial ratios.
In connection with the expected
closing of the Acquisition and associated borrowings under the Credit Agreement (as defined herein), we intended to prepay in full the
Senior Notes, together with interest accrued thereon to the date of such prepayment and the make-whole amount determined for the date
of such prepayment pursuant to the NPA (the "Notes Payoff"). We previously expected that the closing of the Acquisition would
occur on October 14, 2022, and accordingly, pursuant to the requirements of the NPA, delivered advance notice to the noteholders of the
Notes Payoff to occur on such date. As a result of a delay and subsequent termination in the closing of the Acquisition, the expected
borrowing under the Credit Agreement did not occur, and we were unable to complete the Notes Payoff on the date scheduled, which technically
constituted an event of default under the NPA. The noteholders informed us that they would not exercise any rights or remedies under the
NPA due to such technical default pending entry into an amendment to the NPA formally waiving such default, and we and the noteholders
executed temporary waivers in connection therewith. On November 1, 2022, we and the noteholders entered into an amendment to the NPA (the
"NPA Amendment"), formally waiving the technical default and which also (i) provided us with the ability, until November 30,
2022, to prepay the Senior Notes with two business days' notice, (ii) provided that the make-whole amount under the NPA shall in
no case be less than USD 1,488,204.60, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022, a
waiver fee of 3.75% per annum on the outstanding principal amount of Senior Notes outstanding shall (a) accrue from (and including) October
14, 2022 and (b) be payable to the noteholders on the 12th day of February, May, August and November in each year (commencing on February
12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and payable in
accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022, therefore
triggering the 3.75% per annum waiver fee on the outstanding principal amount of Senior Notes with the terms mentioned above.
For more information on the
Senior Notes, see Item 5.B of this Annual Report under the heading "Liquidity and Capital Resources ––Debt Financing
and Borrowing ––Senior Notes."
36
B. BUSINESS OVERVIEW
Overview:
Founded in 1977 by the Minski
family, we are a leading integrated international healthcare and pharmaceutical company that develops pharmaceutical and nutraceutical
solutions, medicines and hospital supplies. Our customers are located in over 50 countries, in six out of the seven continents, and we
have a direct presence in 13 countries - Colombia, Brazil, El Salvador, United States, Peru, Costa Rica, Guatemala, Honduras, Ecuador,
Bolivia, Panama, Nicaragua and Dominican Republic. We currently have over 5,500 employees working under our sustainable model.
Our business model focuses
on four strategic cornerstones to drive growth. First, we have state-of-the-art manufacturing capabilities that allow us to provide innovative
delivery technologies. Our corporate culture focuses on innovation and R&D, which has enabled us to offer extensive scientific expertise
with more than 300 scientists, technicians and skilled personnel, allowing us to develop an average of over 150 new products per year
over the last three years. Second, our regional footprint and vertical integration enables organic growth opportunities and synergies.
We currently operate six manufacturing facilities in Latin America, including the first FDA-approved pharmaceutical plant in South America
and Central America, and our first U.S.-based Softgel production facility and R&D center, which began operations in May 2022 and sell
and distribute products to over fifty distinct markets. Third, our Rx and OTC pharmaceutical product portfolio is driven by our proprietary
delivery systems, allowing us to focus on the development and sale of high-growth and premium pharmaceutical products which we believe
are subject to less pricing pressures when compared to more generic pharmaceutical products. Finally, we have an extensive track record
of developing new businesses and growing via mergers and acquisitions, which is evidenced by the development of one of our in-house business
incubation, Diabetrics, which took place in 2015, and several successful acquisitions throughout Latin America (including the acquisitions
of Rymco S.A., Laboratorios Lopez and Biokemical S.A. de C.V.) which took place between 2012 and 2016. On September 29, 2021, we consummated
the Business Combination with Union, which resulted in our Ordinary Shares and warrants being listed on the Nasdaq Global Market on September
30, 2021 under the symbols "PROC" and "PROCW", respectively.
We are primarily engaged in
developing, producing and marketing pharmaceutical solutions consisting of the following four products and services categories: (i) iCDMO,
(ii) Rx pharmaceutical products, (iii) OTC products, and (iv) Diabetrics. For more information, see "—Products and Services"
below.
Our Strengths and Competitive Advantages
Innovation in Delivery
Systems.
We are one of the leading global providers of advanced delivery technologies and development and manufacturing solutions
for pharmaceutical and consumer health products. In particular, we are the number one Softgel manufacturer in South and Central America
and top five in the world in terms of Softgel production capacity, according to an independent third-party industry analysis report of
2019. We have extensive expertise in developing and manufacturing Softgel capsules and related dosage forms as evidenced by our development
of an average of over 150 new products per year over the last three years. Our innovative oral delivery mechanisms allow us to transform
branded generics into differentiated products for the pharmaceutical market. For more information, see "–– Research
and Development" and "–– Intellectual Property" below.
Flexibility & Adaptability.
Our NextGel business segment's Softgel iCDMO platform provides an extensive set of solutions designed to serve our clients'
unique needs, with the goal of ultimately improving product time to market, which is primarily accomplished through our ability to adapt
to a diverse set of customer business structures and our experience servicing different markets. For more information, see "––
Products and Services –– iCDMO––NextGel (Softgel band)" below.
37
Cost Competitiveness.
We are able to maintain a competitive price and cost structure due to a combination of the geographic location of our facilities,
our expertise in R&D, our skilled labor force, our ability to manufacture in-house several of the equipment used in the production
of Softgel and the flexible nature of our equipment. These factors allow us to produce a wide variety of products, and to purchase raw
materials at scale. For more information, see "–– Manufacturing and Distribution", "–– Raw Materials
and Material Sourcing", and "–– Research and Development" below.
Specialized Facilities.
Our state-of-the-art facilities are segregated and highly adaptable, enabling Procaps to undertake the manufacturing of highly
complex products. Our manufacturing facilities include the first FDA-approved Rx pharmaceutical plant in South and Central America and
one of only five hormonal Softgel plants in the world. Additionally, our manufacturing facilities are certified, where required, by several
regulatory entities including the FDA, Health Canada, the MHRA, the TGA, Cofepris and ISO. For more information, see "––Manufacturing
and Distribution—Manufacturing Facilities" below.
Integration into Clients'
Value Chain.
We strive to be part of our customers' value chain by adapting to their logistics' processes by adopting
and integrating with our customers' manufacturing resource planning software and other processes. For more information, see "
—Manufacturing
and Distribution—Distribution and Logistics
" below.
Recent Developments
Acquisition Termination
On May 16, 2022, we entered into a Stock Purchase
Agreement (the "SPA") with AI Global Investments PCC Limited (Netherlands), a protected cell company limited by shares organized
under the laws of the Island of Guernsey ("PCC"), acting for and on behalf of the Soar Cell, Triana Capital S.A. de C.V.,
a corporation organized under the laws of Mexico ("Triana"), AI Pearl (Netherlands) B.V., a private limited company (besloten
vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands ("Pearl Holding Seller"), Perrigo
Ireland 7 DAC, a company duly organized and validly existing under the laws of the Republic of Ireland ("Pearl Ireland", and
together with PCC, Triana and Pearl Holding Seller, each a "Seller" and collectively, the "Sellers"), AI Soar
(Netherlands) BV, a (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands ("Somar
Holding Company"), Química y Farmacia S.A. de C.V., a Sociedad Anónima de Capital Variable duly organized and validly
existing under the laws of Mexico ("Quifa"), PDM Acondifarma S.A. de C.V., a Sociedad Anónima de Capital Variable duly
organized and validly existing under the laws of Mexico ("PDM"), Gelcaps Exportadora de México S.A. de C.V., a Sociedad
Anónima de Capital Variable duly organized and validly existing under the laws of Mexico ("Gelcaps", and together with
Quifa and PDM, "Pearl Mexico") and Grupo Farmacéutico Somar S.A.P.I. de C.V., a Sociedad Anónima Promotora de
Inversión de Capital Variable organized under the laws of Mexico ("Somar" and together with Somar Holding Company,
"Grupo Somar", and together with Pearl Mexico, the "Targets") (the "Acquisition").
The Acquisition, which was expected to close in
the fourth quarter of 2022, was delayed indefinitely and subsequently terminated on January 1, 2023 after we were informed by the sellers
that a court in Mexico City issued a precautionary lien affecting a portion of capital stock of Grupo Somar in connection with a pending
dispute that involves an investment by a fund managed by Advent International but that is otherwise unrelated to the sellers, Grupo Somar,
the Group, or the Acquisition.
Bridge Facility Termination
As previously
reported, on October 11, 2022, we and certain of our subsidiaries entered into a credit agreement with Bank of New York Mellon, as administrative
and collateral agent (collectively, the "Agent"), BofA Securities, Inc. ("BofA Securities"), JPMorgan Chase Bank,
N.A. ("JPMorgan") and Morgan Stanley Senior Funding, Inc. ("Morgan Stanley", and together with BofA Securities
and JPMorgan, the "Joint Lead Arrangers and Bookrunners"), as the joint lead arrangers and bookrunners, and the lenders from
time to time party thereto (the "Bridge Facility") to finance the cash portion of the purchase price of the Acquisition, to
pay fees and expenses related to the Bridge Facility, to prepay, refinance and/or redeem certain existing indebtedness, and to the extent
any proceeds remained after applying to the foregoing, to use for working capital and other general corporate purposes.
38
In connection
with the termination of the Acquisition, we advised the Joint Lead Arrangers and Bookrunners under the Bridge Facility of our desire to
terminate the Bridge Facility and related documentation and pay all outstanding obligations owing thereunder, and on January 10, 2023,
the Company and certain of its subsidiaries, the Agent, the Joint Lead Arrangers and Bookrunners, J.P. Morgan Securities LLC ("JPMorgan
Securities"), Morgan Stanley & Co. LLC ("Morgan Stanley & Co") and the lenders party thereto entered into a
termination letter in connection therewith (the "Termination Letter"). Pursuant to the Termination Letter, (i) each of the
loan documents in connection with the Bridge Facility, (ii) the Commitment Letter dated as of May 16, 2022 among Bank of America, N.A.
("Bank of America"), the Joint Lead Arrangers and Bookrunners and the Company and (iii) the Engagement Letter dated as of
May 16, 2022 among Bank of America, BofA Securities, JPMorgan Securities, Morgan Stanley & Co and the Company, were terminated and
all outstanding obligations owed by the Company thereunder were paid in full in the amount of $5,719,426.58.
Senior Notes Amendment
See "Item 4.A. Company Information—History
and Development of the Company—Senior Notes Offering" for a summary of the NPA Amendment, which was entered into in November
2022.
Changes in Board of Directors
On January 19, 2023, Mr. Alejandro Weinstein resigned
from the Company's Board of Directors, effective immediately. In connection with Mr. Weinstein's resignation, Mr. Weinstein
also resigned from his position as a member and Chairman of the M&A Committee of the Board (the "M&A Committee").
In connection with Mr. Weinstein's resignation, and pursuant to the nomination rights of Hoche under the Nomination Agreement, the
Board appointed Alberto Eguiguren Correa as a Director to fill the vacancy created by Mr. Weinstein's resignation, effective immediately
for a period ending at the annual general meeting of shareholders approving the annual accounts for the fiscal year ended December 31,
2022 (which corresponds to the duration of mandate of Mr. Weinstein). The Board determined that Mr. Eguiguren met the definition of "independent
director" for purposes of serving on the Board under applicable Nasdaq Stock Market rules. In addition, in connection with Mr. Weinstein's
resignation from the M&A Committee, the Board appointed existing director José Minski as Chair of the M&A Committee.
On February 13, 2023, Mr. Daniel Fink resigned
from the Board, effective immediately. In connection with Mr. Fink's resignation, Mr. Fink also resigned from his position as a
member of the Audit Committee of the Board (the "Audit Committee"). Mr. Fink will continue as a Board Observer to the Board.
In connection with Mr. Fink's resignation, the Board appointed Mr. Alejandro Weinstein as a Director to fill the vacancy in the
Board created by Mr. Fink's resignation, effective immediately for a period ending at the annual general meeting of shareholders
approving the annual accounts for the fiscal year ended December 31, 2022 (which corresponds to the duration of mandate of Mr. Fink).
The Board determined that Mr. Weinstein met the definition of an "independent director" for purposes of serving on the Board
under applicable Nasdaq Stock Market rules. In addition, in connection with Mr. Fink's resignation from the Audit Committee, the
Board appointed existing director Kyle Bransfield as a member of the Audit Committee.
CEO Succession Planning
On February 13, 2023, Procaps Chief Executive
Officer Ruben Minski announced his expectation to transition from his role as CEO to Executive Chairman of the Company in early 2024.
The Nominating Committee of the Board is leading the succession planning process and is forming a search committee to proactively manage
the selection and transition process. Mr. Minski will work with the rest of the Board to ensure the successful identification of a successor
CEO.
Certain
Debt Waivers
On March 31, 2023, we
entered into the Waiver Agreement (the "NPA Waiver Agreement"), by and among, the Company, in its capacity as the parent
guarantor, Procaps S.A., in its capacity as the issuer of the Senior Notes, the subsidiary guarantors named therein, and each of the
holders (the "Noteholders") of the Senior Notes relating to NPA. On March 28, 2023, we entered into the Waiver Agreement
with respect to certain other indebtedness (the "Additional Loan Agreement"). In addition, on May 2, 2023, we entered
into the Waiver Agreement (the "Syndicated Loan Waiver Agreement"), by and among Procaps S.A., in its capacity as
obligor, the subsidiary co-obligors and guarantors named therein, the lenders named therein and Fiduciaria Bancolombia S.A., as
administrative agent (the "Administrative Agent") relating to Syndicated Loan (as defined herein). The three waivers are
herein after referred to as the "Waivers".
The applicable parties under the Waivers waived
(i) our noncompliance with certain financial ratio covenants under the Note Purchase Agreement, Syndicated Loan and Additional Loan Agreement,
as applicable, as of, and for the year ended, December 31, 2022 In addition, the applicable parties under the Waivers agreed to prospectively
waive, as applicable, any noncompliance with these certain financial ratio covenants for the quarters ended March 31, 2023, June 30, 2023
and September 30, 2023, provided that we meet certain agreed upon adjusted ratio thresholds as specified in each Waiver under the applicable
financial ratio covenants.
39
For additional information
with respect to the Waivers, please see Item 5.B "Operating and Financial Review and Prospects—Liquidity and Capital Resources."
New Products and First Time Launch Products
We consider a product to be
a "first time launch product" if it was reformulated; was a product line extension due to changes in characteristics such
as strength, flavor, or color; had a change in product status from Rx to OTC; was a new store brand or branded launch; or was provided
in a new dosage form, in all cases, within 36 months prior to the end of the period for which net sales are being measured.
We consider a product to be
a "new product" if it was a "first time launch product" (
i.e.
if it was reformulated; was a product line
extension due to changes in characteristics such as strength, flavor, or color; had a change in product status from Rx to OTC; was a new
store brand or branded launch; or was provided in a new dosage form); or if it was sold to a new geographic area with different regulatory
authorities, in all cases, within 36 months prior to the end of the period for which net sales are being measured.
New product sales for the
year ended December 31, 2022 totaled $111.0 million in net revenues, accounting for approximately 27.1% of our net revenue for the period,
and for the year ended December 31, 2021, totaled $96.3 million in net revenue, accounting for approximately 23.5% of our net revenue
for the period.
The table below sets forth
the number of new product applications, and of applications of certain products developed that have not yet been commercialized, that
have been approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.
Number of product applications
approved
for the year ended December 31,
Jurisdiction/Regulatory Agency
2022
2021
2020
Bolivia (AGEMED)
14
6
3
Brazil (ANVISA)
0
1
1
Colombia (INVIMA)
24
29
10
Costa Rica (Health Ministry)
6
3
4
Ecuador (ARSCA)
30
8
14
El Salvador (DNM)
21
20
14
Guatemala (Ministry of Public Health and Social Assistance)
24
32
10
Honduras (ARSA)
26
21
16
Mexico (COFEPRIS)
1
0
0
Nicaragua (Health Ministry)
5
6
6
Panama (National Directorate of Pharmacies and Drugs)
16
8
3
Paraguay (DINAVISA)
12
0
0
Peru (DIGEMID)
14
13
2
Dominican Republic (Health Ministry)
5
13
7
Venezuela (INHRR)
4
1
5
Total
202
162
95
As of December 31, 2022, we
had over 179 drug registrations pending approval.
Products and Services
iCDMO — NextGel (Softigel brand)
Our NextGel business segment,
operated under our Softigel Sofgen, Softcaps and Funtrition brands, is the iCDMO arm of Procaps which offers services specializing in
development and manufacturing in Softgel and related technologies, and operates globally in the B-to-B market, more specifically in Brazil,
Colombia and the United States. We are the top Softgel manufacturer in South and Central America and top five in the world in terms of
Softgel production capacity, according to an independent third-party industry analysis report. The iCDMO agreements with our top-tier
customers range from five to ten-year terms. Our NextGel business segment has over 130 clients across more than 50 countries and the key
products that we manufacture in this segment include Softgel pharmaceutical products such as Advil, Apronax Liquidgels, multivitamins,
Vitamin D and Dolex ActivGel.
40
Through our iCDMO brands,
we provide formulation, development, and manufacturing services for Softgel related technologies and gummy technologies for the global
pharmaceutical and consumer health and nutraceutical markets and supporting ancillary services.
Our Softgel technology was
first commercialized in 1978 with the launch of our Dolofen brand, and we have continually enhanced the platform since then. Softgel capsules
are used in a broad range of customer products, including Rx drugs, OTC medications, dietary supplements, unit-dose cosmetics, and animal
health medicinal preparations. Softgel capsules encapsulate liquid, paste, or oil-based formulations of active compounds in solution or
suspension within an outer shell. In the manufacturing process, the capsules are formed, filled, and sealed simultaneously. We typically
perform encapsulation for a product within one of our Softgel manufacturing facilities, with active ingredients provided by customers
or sourced directly by us. Softgels have historically been used to solve formulation challenges or technical issues for a specific drug,
to help improve the clinical performance of compounds, to provide exact doses, to provide important market differentiation, particularly
for OTC medications, and to provide safe handling of hormonal, highly potent, and cytotoxic drugs. We also participate in the Softgel
vitamin, mineral, and supplement business in selected regions around the world.
Our principal Softgel technologies
include Unigel, Versagel, Chewgels, and G-tabs:
Unigel
:
a smart
Softgel capsule technology which incorporates other delivery systems such as tablets, capsules, microgranules or pellets into one single
Softgel capsule. Our Unigel capsules combine two different active pharmaceutical ingredients ("API") that were not previously
compatible in a tablet dosage form, by use of a barrier that avoids permeation from the liquid phase into the tablet core without affecting
the dissolution rate of the API contained in this dosage form, encapsulating a smaller tablet into a Softgel capsule.
Versagel: versatile plant-based
Softgel shell, that allowed us to extend the Softgel dose form to a broader range of active ingredients that due to their natural potential
of hydrogen (PH) levels, are impossible to encapsule in more traditional gelatin, and serve patient/consumer populations that were previously
inaccessible due to religious, dietary, or cultural preferences.
Chewgels: a chewable Softgel
capsule technology providing a new solution for children and consumers who have difficulty swallowing standard Softgel capsules.
G-tabs: gelatin coated tablets
that are easy to swallow, and we believe, based on current technology, to be impossible to counterfeit. G-tabs are coated with one- or
two-toned color gelatin (which can be printed on not printed) and helps mask unpleasant odors and flavors. In addition, our G-tabs technology
helps enhance product stability, provides protection for photosensitive pharmaceutical ingredients, reduces degradation due to exposure
to air, and is available in a variety of shapes and colors.
Products
The table below sets forth
our primary Softigel products by category and the percentage of the NextGel segment's gross revenue attributed to the sale of such
product for the years ended December 31, 2022 and 2021.
Percentage of NextGel's
gross revenues for the year
ended December 31,
Softigel Product
Category
2022
2021
Gummies
Food/Supplements
23
%
23
%
Advil
Analgesics
11
%
17
%
Isotretinoin
Skin Care
5
%
7
%
Progesterone
Hormonal
3
%
5
%
Umbral
Analgesics
3
%
1
%
Our NextGel segment launched
more than 50 new products in 2022, most notably Kyzatrex (prescription testosterone softgel), OLLY Collagen and Fiber rings (gummies)
Brainiac Gummies, Ogestan Plus (Multivitamin Softgels), Benet Man & Woman Unigels, D´Vida Max (Vitamin D Softgels), Prenavit
DHA Softgels, Umbramil G-Tabs, and 49 new products in 2021, most notably Eye Mojo gummies, Turmeric gummies, Zinc gummies, No Filter sleep
gummies, Mulgatol, Deferol and Fortzkink gummies, Feminis DHA, Provicta D, Ogestan Blues, Vidyn D3, Nutragesta, Novagesic, Lemoflu, Benet
Man & Woman MultiVitamin, and over 45 new products in 2020, most notably Quelatus gest (prenatal multivitamins), Vitamin D3, Lufbem
(Simeticona), Agar immunity gummy, Agar sleep gummy, and Agar stress gummy.
41
Marketing and Sales
The table below sets forth
our primary customers for our iCDMO Softgel technology, including percentage of sales for the years ended December 31, 2022 and 2021 and
average relationship years by category.
Percentage of NextGel
Segment Sales
for the year ended
December 31,
Average
Relationship
Category
2022
2021
Years
(1)
Selected Clients
Big Pharma
(2)
22
%
26
%
19
Bayer, Abbott, Haleon, P&G, Sanofi,
Regional Pharma
(3)
23
%
52
%
9
Eurofarma, Biolab, Roemmers, PharmaScience, Liomont, Consilient Health and Hypera Pharma
Large Suppliers
(4)
54
%
22
%
10
Amway, Unilever and Nestlé
(1)
Average
relationship years is based on revenue weighted average.
(2)
Consists
of pharmaceutical companies that have a global presence and are among the top 30 worldwide in terms of revenues.
(3)
Consists
of pharmaceutical companies that have a presence in more than three countries and are among the top 20 in such markets in terms of revenues.
(4)
Consists
of organizations within the Vitamins, Minerals and Supplements categories that are not pharmaceutical companies.
We seek to establish customer
loyalty through superior customer service by providing a comprehensive assortment of high-quality products; timely processing, shipment
and delivery of orders; assistance in managing customer inventories; and support in managing and building the customer's store brand
business.
We are specialized in advanced
oral drug delivery technologies, particularly Softgel capsules providing integrated, end-to-end solutions from development to delivery
by working closely with customers providing "Idea to Market" solutions, from the initial conception of a product idea to marketing
strategy, sales team training and promotional plans. As a value-added service to product development, we provide sales and marketing assistance
for customers that are not familiar with the pharmaceutical industry, or have a limited presence, in Latin America. In addition to pharmaceutical
clients, our NextGel segment works closely with consumer healthcare and supplement companies on the development and commercialization
of nutritional and health supplements in novel formats.
The sales efforts for our
NextGel segment are focused on assisting and participating in worldwide tradeshows and key industry events for the CDMO segment (such
as CPhI Worldwide, Vitafoods Europe and Supply Side West), as well as by strengthening existing relationships with our B-to-B client base.
The NextGel segment's
product development proposals are highly detailed, involving a significant amount of preparatory work in market and business intelligence,
R&D, manufacturing and marketing efforts. Once a specific opportunity to apply one of our proprietary Softgel technologies is identified
(such as converting an existing product to a Softgel dosage form), the commercial and marketing teams prepare a presentation outlining
the benefits of the Softgel format and illustrating the end-product's "look and feel". The proposal will show the anticipated
pricing impact of the Softgel dosage form on the existing products. Proposals also include concept art on product packaging and illustrative
shelf presence, and occasionally we prepare pilot sample batches of real capsules to present to the clients. In certain cases, our brand
proposals are by Procaps and then transferred to the client.
42
Competition
The market for CDMO services
is highly competitive. Our primary competitors in this area include Catalent, Aenova and Patheon. Procaps is the number one Softgel manufacturer
in South and Central America and top five in the world in terms of Softgel production capacity, according to an independent third-party
industry analysis report of 2019.
Rx Pharmaceutical Products — Farma
Procaps and Clinical Specialties
Our Rx product line comprises
the Farma Procaps and the Clinical Specialties brands/business units, and forms part of three of Procaps' business segments; Procaps
Colombia, CAN and CASAND. For more information on our business segments, see Item 5.A of this Annual Report under the heading "Operating
Results––Business Segments."
Farma Procaps formulates,
manufactures and markets branded prescription drugs. It represents a high growth portfolio that focuses on nine therapeutic areas (feminine
care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system and respiratory).
Clinical Specialties is a
leading provider of high-complexity care treatments to private institutions in the region. Its diverse product portfolio, targets various
in-demand therapeutic areas and develops, manufactures and markets personal protective equipment, high-complexity drugs for hospital use
such as antibiotic, blood clot, immunosuppressant, oncology and analgesics products.
Products
The table below sets forth
our primary Farma Procaps products by category and the percentage of Farma Procaps' gross revenue attributed to the sale of such
product for the years ended December 31, 2022 and 2021.
Percentage of
Farma Procaps'
gross
    revenues for
the year ended
December 31,
Farma Procaps Product
Category
2022
2021
Citragel
Feminine Care
6
%
6
%
Isoface
Skin Care
6
%
7
%
Gestavit Dha
Feminine Care
6
%
6
%
Ezolium
Digestive Health
5
%
5
%
Betaduo
Pain
5
%
5 4
%
The table below sets forth
our primary Clinical Specialties products by category and the percentage of Clinical Specialties' gross revenue attributed to the
sale of such product for the year ended December 31, 2022 and 2021.
Percentage of
Clinical Specialties'
gross revenues for
the year ended
December 31,
Clinical Specialties Product
Category
2022
2021
Clenox
Blood clot
43
%
54
%
Hypodermic needles
Hypodermic
14
%
10
%
Aludel
Oncology
8
%
-
Tapectam
Antibiotic
7
%
6
%
Merobac
Antibiotic
5
%
7
%
43
We launched a number of new
Rx products during the year ended December 31, 2022, most notably Aludel an oncological drug, antibiotics such as Amoxicillin and Ampicillin,
and a new reference drug Mentsii. During the year ended December 31, 2022, new product sales of our Rx products were $38.4 million, representing
18% of the segment's total sales. During the year ended December 31, 2021, we launched a number of new Rx products most notably
Nutrigel, Deferol and Mabal. During the year ended December 31, 2021, new product sales of our Rx products were $45.3 million, representing
21% of the segment's total sales.
The table below sets forth
the number of Rx drug applications approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.
Number of Rx drug applications
approved for the year ended
December 31,
Jurisdiction/Regulatory Agency
2022
2021
2020
Bolivia (AGEMED)
4
3
3
Brazil (ANVISA)
—
—
1
Colombia (INVIMA)
5
11
9
Costa Rica (Health Ministry)
3
—
4
Ecuador (ARSCA)
9
5
11
El Salvador (DNM)
7
6
11
Guatemala (Ministry of Public Health and Social Assistance)
8
17
5
Honduras (ARSA)
4
6
11
Nicaragua (Health Ministry)
3
2
3
Panama (National Directorate of Pharmacies and Drugs)
8
—
3
Paraguay (DINAVISA)
12
—
—
Peru (DIGEMID)
6
2
1
Dominican Republic (Health Ministry)
4
10
6
Venezuela (INHRR)
2
1
5
Total
75
63
73
As of December 31, 2022, we
had 94 Rx drug applications pending approval.
Marketing and Sales
Our Rx pharmaceutical products
customers include Coopidrogas — Cooperativa Nacional de Drogas, Drogueria Cruz Verde S.A.S., Droguerías Colsubsidio, Copservir
Ltda and Unidrogas S.A, among others.
We seek to establish customer
loyalty through superior customer service by providing a comprehensive assortment of high-quality products and timely processing, shipment
and delivery of orders.
Demand for our Farma Procaps
products is largely generated by doctors and physicians. We analyze the doctors and physicians by specialty that we believe would be most
beneficial to directly market our products to and schedule strategic visits once or twice a month to present our product portfolio specifically
targeting their practice. We also offer technical and scientific information on our products and product samples for the exclusive use
of the doctors and physicians to provide to their patients. Our sales force is segmented by medical specialties and receive periodic technical
training on the brands and products we sell, as well as sales and relationship training techniques to better enable them to market and
sell our products.
We directly target our marketing
and sales effort for our Clinical Specialties products to clinics and hospital. We work together with in-hospital medical specialties
to provide primarily medium and high complexity products for use with their patients, which are supported by technical or clinical studies
to guarantee their safety.
Competition
The market for Rx pharmaceutical
products is subject to intense competition from generic drug manufacturers, brand-name pharmaceutical companies launching their own or
generic version of their branded products (known as an authorized generic), manufacturers of branded drug products that continue to produce
those products after patent expirations, and manufacturers of therapeutically similar drugs. Among our primary competitors are Genfar
S.A., Abbott Laboratories — Lafrancol S.A.S, Tecnoquimicas S.A., La Santé Pharmaceutique SA, Bayer AG, Glaxo Corp. and Sanofi
S.A.
44
OTC Products — VitalCare
Our OTC product line primarily
consists of the VitalCare brand/business unit, and forms part of three of Procaps' business segments; Procaps Colombia, CAN and
CASAND. For more information on our business segments, see Item 5.A under the heading "Operating Results––Business Segments"
in this Annual Report.
VitalCare develops, manufactures
and markets OTC consumer healthcare products through an extensive portfolio focused on over eight high-prevalence therapeutic areas (including
gastrointestinal, skin care, cough and cold, analgesics, urological, and vitamin, minerals and supplements) at what we believe to be accessible
and appealing price points. Our Colmed OTC product line, which is part of our VitalCare business unit, consists of products in the following
categories: antibiotics, anti-infective, anti-parasitic, cardiovascular, feminine care, cutaneous antimycotic, pain killers, gastrointestinal,
hormonals, metabolic, endocrine, nervous system, ophthalmic, osteoarticular, respiratory, diet supplements and vitamins and minerals.
We market and sell our OTC
products in the following key regional markets: Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras,
Nicaragua, Panama, Peru, and the United States.
Products
The table below sets forth
our primary VitalCare OTC products by category and the percentage of the VitalCare's gross revenue attributed to the sale of such
product for the year ended December 31, 2022 and 2021.
Percentage of VitalCare's gross revenues for the year ended December 31,
VitalCare Product
Category
2022
2021
Artribion
Pain Relief
7
%
8
%
Esomeprazole
Gastrointestinal
7
%
6
%
Vitamin E
Vitamins
4
%
4
%
Orlistat
Metabolic
3
%
4
%
Foskrol
Vitamins
3
%
3
%
We launched a number of new
OTC products during the year ended December 31, 2022, most notably Deferol K, as well as line extensions for our brands Dolofen, Gummivit
and PROCAPS multivitamins+minerals. During the year ended December 31, 2022, new product sales of our OTC products were $13.0 million,
representing 15% of the segment's total sales. During the year ended December 31, 2021, we launched several new OTC products, most
notably Minoxidil and Betahistina. During the year ended December 31, 2021, new product sales of our OTC products were $10.3 million,
representing 12% of the segment's total sales.
The table below sets forth
the number of OTC drug applications approved per jurisdiction and regulatory agency for the years ended December 31, 2022, 2021 and 2020.
Number of OTC drug applications
approved for the
year ended December 31,
Jurisdiction/Regulatory Agency
2022
2021
2020
Aruba (Health Ministry)
-
1
-
Bolivia (AGEMED)
-
1
-
Colombia (INVIMA)
3
2
1
Ecuador (ARSCA)
4
-
3
El Salvador (DNM)
8
2
3
Guatemala (Ministry of Public Health and Social Assistance)
3
7
2
Honduras (ARSA)
2
6
5
Nicaragua (Health Ministry)
2
4
3
Panama (National Directorate of Pharmacies and Drugs)
1
-
-
Peru (DIGEMID)
-
-
1
Dominican Republic (Health Ministry)
-
1
1
Venezuela (INHRR)
2
Total
25
24
19
As of December 31, 2022, we
had 8 OTC drug applications pending approval.
45
Marketing and Sales
Our OTC products customers
include Coopidrogas — Cooperativa Nacional de Drogas, Pricesmart S.A.S., Drogueria Cruz Verde S.A.S., Olimpica S.A, and Sodimac
Colombia S.A., among others.
Demand for our VitalCare OTC
products and generics is generated by the end consumer. We target the end consumer through traditional advertising means, and increasingly
though social media in order to more specifically target individual end consumer segments in order to highlight the attributes and differentials
of our brands and products. We work with several points of sale customers such as global, national, and regional retail drug, supermarket,
and mass merchandise chains, major wholesalers, sourcing groups, hospitals and grocery stores to ensure the homogeneous distribution of
our products. We seek to establish customer loyalty through superior customer service by providing a comprehensive assortment of high-quality
products and timely processing, shipment and delivery of orders.
Competition
The markets for our OTC products
are highly competitive and differ for each product line and geographic region. Our primary competitors include manufacturers, such as
GlaxoSmithKline plc, Bayer AG, Sanofi S.A., Tecnoquimicas S.A., Pfizer Inc., Lafrancol S.A.S, Genomma Lab Internacional S.A.B. de C.V.,
McKesson Corporation, The Procter & Gamble Company and Abbott Laboratories, among others. The various major categories of our OTC
products each have certain key competitors, such that a competitor generally does not compete across all product lines. However, some
competitors do have larger sales volumes in certain of our categories. Additionally, national brand companies tend to have more resources
committed to marketing their products and could in the future manufacture store brand versions of their products at lower prices than
their national brand products. Competition is based on a variety of factors, including price, quality, assortment of products, customer
service, marketing support, and approvals for new products. See Item 3.D of this Annual Report under the heading "Risk Factors—Risks
Related to our Industry—We participate in a highly competitive market, and increased competition may adversely affect our business,
financial condition and results of operations."
Diabetrics Solutions
With approximately 7% of the
global population living with diabetes and 11.5% of global health expenditures spent on diabetes each year, we believe our Diabetrics
business segment, which is comprised of our Diabetrics brand/business unit, is an attractive regional B-to-C diabetes-focused treatment
and management platform that focuses primarily on the Colombian market. It has a unique business model when compared to our competitors,
as it aims to cover the full spectrum of needs of patients with diabetes by providing products and services such as blood glucose meters,
telemonitoring, Rx oral anti-diabetics products, cosmeceuticals (cosmetics that have medicinal properties for diabetic care), insulin
delivery systems and other diabetes solutions.
Procaps currently has a leading
position in the Colombian market in two Diabetrics product categories with over a 60% market share for blood glucose monitors (strips,
meters and lancets) and over a 50% market share for insulin delivery systems (pen needles), based on the total number of patients diagnosed
with diabetes that require insulin in Colombia (all individuals diagnosed with type 1 diabetes and 20% of individuals diagnosed with type
2 diabetes) that use such products.
As part of our Diabetrics
segment's integral product strategy and holistic approach, we offer products in other product categories such as insulin (Glaritus-
Glargine Insulin, launched in the beginning of 2021) and supplements (Cromega and Preventia), among others.
46
Products
The table below sets forth
our primary Diabetrics products by category and the percentage of the Diabetrics segment's gross revenue attributed to the sale
of such product for the year ended December 31, 2022 and 2021.
Percentage of Diabetrics'
gross revenues for
the year ended
December 31,
Diabetrics Product
Category
2022
2021
Glucoquick
(1)
Blood Glucose Monitor
46
%
42
%
Predial Lex
Rx oral anti-diabetics
10
%
17
%
Glucoquick Agujas
Insulin Delivery Systems
15
%
16
%
GMet
Rx oral anti-diabetics
9
%
10
%
Lipotic
Rx oral anti-diabetics
7
%
4
%
(1)
Includes
all Glucoquick blood glucose monitor family products.
We launched two new Diabetrics
products during the year ended December 31, 2022, Dermatonics and Diabetes Prevent. During the year-ended December 31, 2022, new product
sales in the Diabetrics segment did not represent a meaningful portion of the segment's total sales. During the year ended December
31, 2021, we launched several new Diabetrics products, most notably insulin Glaritus (
Glargine Insulin
) and Tiras Diamond (BGMs).
During the year ended December 31, 2021, new product sales in the Diabetrics segments were $4.3 million, representing 15% of the segment's
total sales.
During the year ended December
31, 2022, we received approval from INVIMA for four Diabetrics products and 33 in other countries. During the year ended December 31,
2021, we received approval from INVIMA for six Diabetrics products. As of December 31, 2022, we had 30 Diabetrics products pending approval.
Marketing and Sales
Our Diabetrics products and
services are marketed directly to consumers through a comprehensive offering of innovative products and differentiated services with the
goal of providing the optimal cost-benefit ratio. We also focus our efforts on developing prevention, education and self-management strategies
with our partners in order to provide value-based-healthcare. Our sales efforts are focused on private and governmental channels, and
involve participating in government contract bidding, primarily through Colombia's public health insurance plan (
Entidades Promotoras
de Salud
).
Competition
We market our Diabetrics products
and services primarily in Colombia. Our primary competitors include: (i) F. Hoffmann-La Roche AG, Abbot Laboratories, and Johnson &
Johnson in the blood glucose monitor product category; (ii) Becton, Dickinson and Company, Novo Nordisk A/S and Nortstray Nuart SAS in
the insulin delivery system product category; (iii) Merck & Co. Inc., Pfizer, Inc., Mckesson Corporation and Siegfried Holding in
the Rx oral-anti-diabetics product category; and (iv) Abbot Laboratories in the nutrition products category. We recently entered the insulin
product category and will compete primarily with Sanofi S.A.
Manufacturing and Distribution
We currently operate eight
manufacturing facilities in Colombia, Brazil, El Salvador, and the United States and sales offices throughout 13 different countries,
which coordinate the sale of our products globally.
The map below illustrates
our global geographical footprint, setting forth the location of our manufacturing facilities and sales offices, and the countries in
which we commercialize our products and services.
47
Manufacturing Facilities
Our manufacturing facilities
include the first FDA-approved Rx pharmaceutical plant in South and Central America and one of only five hormonal Softgel plants in the
world. Additionally, our manufacturing facilities are certified, where required, by several regulatory entities including the FDA, Health
Canada, the United Kingdom's MHRA, Australia's TGA, Mexico's Cofepris and the ISO under its 14000 standards.
We believe that our sites
and equipment are in good condition, are well-maintained, and are able to operate at present levels in all material respects; however,
we intend to make additional investments to expand our production capacity in the near future.
Our manufacturing operations
are focused on employee health and safety, regulatory compliance, operational excellence, continuous improvement, and process standardization
across our organization. Our manufacturing operations are structured around an enterprise management philosophy and methodology that utilizes
principles and tools common to a number of quality management programs, including "current Good Manufacturing Practices" ("cGMP"),
ISO under its 9000 and 14000 standards, the Business Alliance for Secure Commerce and Authorized Economic Operator (
Operador Económico
Autorizado
).
Procaps Barranquilla — Barranquilla,
Colombia
Our Procaps Barranquilla manufacturing
facility is located in Barranquilla Colombia, with approximately 35,200 square meters of total built area and approximately 8,200 square
meters of manufacturing plant floor space. This is our primary manufacturing facility and it was the first FDA-approved Rx pharmaceutical
plant in South America and Central America. This facility produces products associated with our Softigel, Farma Procaps and VitalCare
brands, including Softgel capsules, hormonal soft capsules, nutritional products, tablets, powders, blisters, liquids and hard capsule
products. The installed capacity of this facility is approximately 3 billion units of Softgel, 530 million units of tablets, 100 million
units of hormonal products, 73 million units of capsules, and 27 million units of other forms per year.
Our Procaps Barranquilla manufacturing
facility is certified by the FDA, Good Manufacturing Practices (
Buenas Prácticas de Manufactura
, "BPM"), MHRA,
the Business Alliance for Secure Commerce, the Colombian Institute of Technical Standards and Certification (
Instituto Colombiano de
Normas Técnicas y Certificación
, or "ICONTEC"), ANVISA, Cofepris, Health Canada and ISO under its 14000
standard.
Rymco — Barranquilla, Colombia
Our Rymco manufacturing facility
is located in Barranquilla, Colombia on an approximately 10,300 square meter lot, with approximately 11,650 square meters of floor space.
This facility was acquired as part of Procaps' acquisition of Rymco S.A. in 2015 and currently produces products associated with
our Clinical Specialties brand, including single-use medical products such as syringes, needles, infusion equipment, face masks, and surgical
clothing (personal protective equipment). The installed capacity of this facility is approximately 430 million units per year.
Our Rymco manufacturing facility
is certified by Argentine National Administration of Drugs, Foods and Medical Devices (
Administración Nacional de Medicamentos,
Alimentos y Tecnología Médica
), ISO under its 13485 medical standard and TÜV SÜD America.
Funtrition —
Bogotá, Colombia
Our Funtrition manufacturing
facility is located in Bogotá, Colombia, on an approximately 2,900 square meter lot, with approximately 1,400 square meters of
floor space. This facility produces products associated with our Softigel brand, including gummies related technologies for OTC products
and nutraceuticals. The installed capacity of this facility is approximately 960 million units per year.
Our Funtrition manufacturing
facility is certified by INVIMA.
48
Pharmayect — Bogotá, Colombia
Our Pharmayect manufacturing
facility is located in Bogotá, Colombia, on a 18,700 square meter lot, with approximately 13,070 square meters of floor space.
This facility produces associated with our Clinical Specialties brand, including syringes, injection vials, sterilized powder products,
blisters and vials. The installed capacity of this facility is approximately 138 million units per year.
Our Phamayect manufacturing
facility is certified by BPM, ISO under its 9001-2015 standard and ICONTEC.
Softcaps — São Paulo, Brazil
Our Softcaps manufacturing
facility is located in an industrial complex in the city of Cotia, state of São Paulo in Brazil, on a 9,034 square meter lot, with
approximately 5,560 square meters of floor space. There are two buildings; one includes the administrative offices, warehouse and quality
control laboratory and the other includes the production areas and cafeteria. This facility produces products associated with our Softigel
brand, including Softgel capsule products. The installed capacity of this facility is approximately 2 billion units per year.
Our Softcaps manufacturing
facility is certified by ANVISA.
The operating license (
licença
de operação
) in connection with the warehouse and quality control laboratory located at our Softgel manufacturing facility
was denied, however, such facilities are still being permitted to operate by the State of São Paulo's Environmental Agency
(
Companhia Ambiental do Estado de São Paulo
, or "CETESB"). For more information, see Item 8.A under the heading
"Legal Proceedings—Operating License" below.
Procaps SA de CV — El Salvador
Our Procaps SA de CV, which
include both the Procaps Salvador, S.A. de C.V. (formerly Laboratorios López) and Biokemical S.A. de C.V. manufacturing plants,
is located in San Salvador, El Salvador, on an approximately 20,270 square meter lot, with approximately 7,950 square meters of floor
space. This facility was acquired as part of Procaps' acquisition of Laboratorios López and Biokemical S.A. de C.V. in 2014
and currently produces products associated with our Farma Procaps and VitalCare brands, including multiple dosage form products. The installed
capacity of this facility is approximately 218 million units per year.
Our Procaps SA de CV manufacturing
facility is certified by DNM.
Sofgen Facility – West Palm Beach
On December 31, 2021, we completed
the acquisition of an 86,000 square feet pharmaceutical production facility located in West Palm Beach, Florida from Strides Pharma, Inc.
The newly acquired facility, which began operations in May 2022, has an annual production capacity of approximately 1.8 billion capsules
per year. In addition, this facility also has development and analytical testing capabilities. The primary assets included in the acquisition
were several Softgel encapsulation lines, critical support systems, automated packaging line capabilities, as well as development facilities
including pilot and scale up capabilities.
Distribution and Logistics
Our logistics team is centralized
by line of business in order to enable us to better capture the synergies of our businesses and maintain our operational focus. They operate
throughout all countries in which we have a presence and assist us with the transportation of our products.
We use a network of third-party
transportation companies for customized services, which are regulated by INVIMA, ANVISA, the International Air Transport Association,
World Customs Organization (
Organización Mundial de Aduanas
), the International Chamber of Shipping and other applicable
regulatory agencies where we operate.
Our products are stored in
self-owned storages in Barranquilla in Colombia, El Salvador and Brazil, and with third-party storage facilities that meet all of the
requirements of our products in terms of space and environmental conditions.
49
Raw Materials and Material Sourcing
Affordable, high-quality raw
materials and packaging components are essential to all of our business segments due to the nature of the products we manufacture. We
use a broad and diverse range of raw materials in the design, development, and manufacturing of our products. This includes, but is not
limited to, key materials such as gelatin, starch and iota carrageenan for our Softgel products, packaging films for our Rx and OTC products,
and glass vials and syringes for injectable fill-finish for certain of our Rx and Diabetrics products. The raw materials that we use are
sourced externally on a global basis and are generally available from multiple suppliers. Supplies of certain raw materials and product
delivery systems may be more limited, as they are available from one or only a few suppliers and may require extensive compatibility testing
before we can use them. For more information on the risks associated with the raw materials we use and their sourcing, please see Item
3.D of this Annual Report under the heading "Risk Factors—Risks Related to Product Development and Manufacturing—Our
future results of operations are subject to fluctuations in the costs, availability, and suitability of the components of the products
we manufacture, including active pharmaceutical ingredients, excipients, purchased components, and raw materials. In addition, the global
supply chain crisis may interfere with the operations of certain of our direct or indirect suppliers or with international trade for these
supplies, which could raise our costs or reduce the productivity or slow the timing of our operations, which could have a material adverse
effect on our business, financial condition and results of operations."
Globally, our supplier relationships
could be interrupted due to natural disasters and international supply disruptions, including those caused by pandemics or geopolitical
and other issues. For example, commercially usable gelatin is available from a limited number of sources. In addition, much of the gelatin
we use is bovine derived. Past concerns of contamination from BSE have narrowed the number of possible sources of particular types of
gelatin. If there were a future disruption in the supply of gelatin from any one or more key suppliers, there can be no assurance that
we could obtain an alternative supply from our other suppliers. Any future restrictions that were to emerge on the use of bovine-derived
gelatin from certain geographic sources due to concerns of contamination from BSE could hinder our ability to timely supply our customers
with products and the use of alternative non- bovine-derived gelatin for specific customer products could be subject to lengthy formulation,
testing and regulatory approval periods.
We work very closely with
our suppliers to assure continuity of supply while maintaining excellence in material quality and reliability. We continually evaluate
alternate sources of supply, although we do not frequently pursue regulatory qualification of alternative sources for key raw materials
due to the strength of our existing supplier relationships, the reliability of our current supplier base, and the time and expense associated
with the regulatory process. Although a change in suppliers could require significant effort or investment by us in circumstances where
the items supplied are integral to the performance of our products or incorporate specialized material such as gelatin, we do not believe
that the loss of any existing supply arrangement would have a material adverse effect on our business. See Item 3.D of this Annual Report
under the heading "Risk Factors—Risks Related to Product Development and Manufacturing —Our future results of operations
are subject to fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active
pharmaceutical ingredients, excipients, purchased components, and raw materials. In addition, the global supply chain crisis may interfere
with the operations of certain of our direct or indirect suppliers or with international trade for these supplies, which could raise our
costs or reduce the productivity or slow the timing of our operations, which could have a material adverse effect on our business, financial
condition and results of operations."
Research and Development
Our R&D activities are
directed primarily toward the development of new products and services, and the improvement of our manufacturing processes and delivery
technologies. Our R&D platform is decentralized with research centers in Barranquilla, Colombia, Cotia, Brazil, and West Palm Beach,
Florida. We employ more than 300 scientists, technicians and skilled personnel in R&D and innovation. Our main R&D operation is
in the city of Barranquilla, Colombia, which employs over 300 scientists, technicians and skilled personnel in R&D and technological
innovation.
Our R&D capabilities have
led to the development of our Softgel proprietary delivery systems which drives our NextGel business segment and our Rx and OTC product
portfolio, allowing us to focus on the development and sale of high-growth and premium pharmaceutical products which we believe are subject
to less pricing pressures when compared to more generic pharmaceutical products. The NextGel business segment's product development
proposals involve a significant amount of R&D, among other efforts, which enables Procaps to apply its proprietary Softgel technologies
to existing products (such as converting an existing product to a Softgel dosage form). Some of our Softgel technologies include our standard
Softgel capsule; Versagel, our versatile plant-based Softgel shell; Chewgel, a chewable Softgel capsule; Unigel, a smart Softgel capsule
which incorporates other delivery systems into a single Softgel capsule; and G-tabs, gelatin coated tablets that are easy to swallow and
we believe, based on current technology, to be impossible to counterfeit. In addition, our R&D capabilities have allowed us to develop
gummies related technologies for our Funtrition OTC products. For more information on such products and technologies, see "—Products
and Services."
50
Intellectual Property
Our corporate culture focuses
on innovation and R&D. We rely on a combination of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual
property, nondisclosure and other contractual provisions, and technical measures to protect a number of our products, services, processes
and intangible assets.
We have applied in Colombia,
the United States and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered and issued, and also hold common law rights in various trademarks and service marks. As of December 31, 2022, we have
been granted 42 patents and have 34 patents pending approval.
The table below sets forth
the product type/technology for which our granted patents relate, the jurisdiction of registration, the expiration date and the type of
patent. None of our patents listed below have been licensed from third parties or have expired.
Product Type/Technology
Type of Patent
Jurisdiction of
Registration
Expiry Date
Unigel Technology
Patent
Colombia
18/07/2031
Blefadex Composition
Patent
Costa Rica
30/12/2034
Ribbon Printing (used to print capsules in a continuous process)
Utility Model
Colombia
30/07/2027
Isoface Formulation
Patent
Colombia
24/07/2023
Unigel Technology
Patent
Mexico
18/07/2031
Degassing apparatus for dissolution media in analytical process
Utility Model
Colombia
03/06/2026
Cytogel Process
Patent
Colombia
13/04/2025
Unigel Technology
Patent
Europe
18/07/2031
Unigel Technology
Patent
Colombia
18/07/2031
Ribbon Printing (used to print capsules in a continuous process)
Patent
Canada
30/07/2027
Electronic Dosage Dispensing System
Patent
United States
05/25/2023
Extended under 35 U.S.C.154 (b) by 715 days
Unigel Technology
Patent
United States
18/07/2031
Unigel Technology
Patent
United States
07/18/2031
Extended under 35 U.S.C.154 (b) by 97 days
Unigel Technology
Patent
United States
18/07/2031
Ribbon Printing (used to print capsules in a continuous process)
Patent
United States
07/30/2027
Extended under 35 U.S.C.154 (b) by 694 days
Unigel Technology
Patent
Korea
18/07/2031
Unigel Technology
Patent
Japan
18/07/2031
Blefadex Composition
Patent
Colombia
30/12/2034
Cynclor Project
Patent
United States
29/08/2034
Blefadex Composition
Patent
United States
30/12/2034
Unigel Technology
Patent
United States
18/07/2031
Blefadex Composition
Patent
Japan
30/12/2034
Laboratory-scale encapsulation device
Utility Models
Colombia
28/02/2029
Unigel Technology
Patent
Brazil
18/07/2031
Unigel Technology
Patent
Canada
18/07/2031
Blefadex Composition
Patent
Mexico
30/12/2034
Unigel Technology
Patent
Spain
18/07/2031
Unigel Technology
Patent
Germany
18/07/2031
Unigel Technology
Patent
Switzerland
18/07/2031
Unigel Technology
Patent
France
18/07/2031
Unigel Technology
Patent
United Kingdom
18/07/2031
Unigel Technology
Patent
Italy
18/07/2031
Unigel Technology
Patent
Poland
18/07/2031
Unigel Technology
Patent
Portugal
18/07/2031
Unigel Technology
Patent
Sweden
18/07/2031
Cynclor Project
Patent
United States
29/08/2034
Blefadex Composition
Patent
Brazil
30/12/2034
Capsuwash
Utility Model
Colombia
13/08/2031
Device for Gummies
Utility Model
Colombia
09/11/2031
Pooled Sample
Utility Model
Colombia
28/07/2031
Unigel Technology
Patent
DIV-Brazil
18/07/2031
Unigel Technology
Patent
DIV-Japan
18/07/2031
51
The table below sets forth
the product type/technology for which our patent applications relate, the jurisdiction in which the registration was applied for, the
application date and the type of patent.
Product
Type/
Technology
Type of Patent
Jurisdiction of
Registration
Filing Date/
Publication Date
Unigel Technology (Products)
Patent
United States
19/08/2019
Blefadex Composition
Patent
Ecuador
11/23/2016
12/30/2016
Blefadex Composition
Patent
Peru
06/27/2017
09/15/2017
Blefadex Composition
Patent
El Salvador
29/06/2017
Blefadex Composition
Patent
Dominican Republic
06/29/2017
06/15/2019
Blefadex Composition
Patent
Guatemala
03/07/2017
HME Technology
Patent
El Salvador
05/07/2017
HME Technology
Patent
Guatemala
05/07/2017
HME Technology
Patent
Dominican Republic
07/06/2017
11/15/2018
Blefadex Composition
Patent
Europe
07/27/2017
12/06/2017
Vegan Gummies
Patent
PCT
30/08/2019
Unigel Technology (Two Solid)
Patent
United States
13/02/2019
Unigel Technology (Device for feeding)
Patent
United States
13/02/2019
Unigel Technology (Inclined Pockets)
Patent
United States
13/02/2020
SGC Drying System
Patent
United States
01/14/2021
Ivermectin SGC Formula
Patent
PCT
30/09/2020
Face Mask
Patent
United States
30/12/2021
Face Mask
Patent
PCT
06/25/2021
Unigel Products (Diclofenac)
Patent
United States
23/07/2020
Device for Gummies
Utility Model
Colombia
11/09/2021
Ivermectin Oral Solution
Patent
PCT
30/12/2020
Unigel Technology
Patent
United States
19/03/2021
Unigel Technology
Patent
Mexico
05/11/2015
22/06/2021
Poole Sample
Utility Model
Colombia
07/28/2021
Clean Device for Soft gelatin capsules
Utility Model
Colombia
08/13/2021
Vegan Gummies
Patent
Colombia
10/22/2021
Unigel Products (Diclofenac)
Patent
PCT
09/23/2021
Vegan Gummies
Patent
Australia
14/02/2022
Vegan Gummies
Patent
Europe
03/02/2022
Vegan Gummies
Patent
United States
18/02/2022
Vegan Gummies
Patent
Korea
24/03/2022
Vegan Gummies
Patent
Japan
25/03/2022
Unigel Technology (Pre-filling system)
Patent
PCT
17/03/2022
Filled Gummies
Patent
Provisional
07/12/2022
Furthermore, as of December
31, 2022, we hold 5,415 trademarks, and 302 pending approval. Additionally, as of December 31, 2022, we have 202 drug registrations approved,
with over 179 pending approval.
We do not consider any individual
patent, trademark or license to be material to our overall business.
Corporate Responsibilities and Environmental,
Social, and Governance ("ESG")
Compliance Standards
Our facilities and operations
are subject to various environmental laws and regulations. We undergo periodic internal audits relating to environmental, health and safety
requirements in order to maintain compliance with applicable laws and regulations in each of the jurisdictions in which we operate. Additionally,
pursuant to an agreement with one of our shareholders, IFC, we are required to comply with IFC's Performance Standards on Social
& Environmental Sustainability, permit environmental and social representatives of IFC to visit our facilities on an annual basis
and provide IFC with an annual sustainability report, among other requirements. As part of this agreement, we have committed to adhere
to the processes and compliance mechanisms of IFC's Performance Standards on Social & Environmental Sustainability in order
to improve our environmental and social risk management, including the preparation of an Annual Sustainability Report that follows the
Global Reporting Initiative (GRI) standards.
We have made, and continue
to make, expenditures necessary to comply with applicable environmental laws; however, we do not believe that the costs for complying
with such laws and regulations have been or will be material to our business. We do not have any material remediation liabilities outstanding.
52
ESG Commitments and Strategy
We are committed to doing
business in an ethical manner. We have a long history of environmentally sound and efficient operations, safe and healthy working conditions,
and active participation in the communities where we are located. We have sought to strengthen our long-term ESG goals by incorporating
environmental and social management into strategic business decisions, aligned with sustainable development goals with the aim of generating
shared value and a positive impact on the communities we serve.
We seek to strengthen our
value creation in the pharmaceutical industry by addressing the challenges of developing cost-efficient products and providing accessible
products to the population in the regions we operate in, while seeking to reduce the environmental impact of our activities.
Our ESG strategy can be classified into four pillars:
1.
Fundamental: We are building a responsible and financially
sustainable business that is supported by a strong governance structure, compliance with good governance standards, an ethical business
culture, and risk management.
2.
Patients and Society: We are committed to providing an accessible
portfolio of innovative, effective, safe, and high-quality health solutions that contribute to the well-being of society.
3.
People: Human capital is the foundation of our sustainability.
We promote well-being and diversity, and are dedicated to building a vibrant and innovative culture that motivates personal and professional
growth.
4.
Planet: We care for our environment and minimize the impact
of our operations, products, and supply chain by focusing on responsible energy, water, and waste management.
Workforce ESG Commitments
As reflected in our Social
Responsibility, Quality of Life and Integrated Management Policies, we are, and remain, committed to maintaining an environment that motivates
all employees to achieve personal development (physical, mental, social and emotional), acquire new competencies, skills and abilities,
and promote the proper attitudes to improve their interpersonal skills and enhance their future employment prospects in the changing and
competitive market we operate. Our human development, hiring and training process includes:
●
selecting
qualified personnel for each position that show potential for development and that identify with our organizational moto of "Vision,
Mission, Values, Policies, Key Strategic Objectives and Structure;"
●
incorporation
into our corporate culture;
●
training
in processes and procedures;
●
job-specific
training;
●
continuous
training and educational programs on new or updated standards, and key and strategic competencies;
●
promoting
activities and training to improve the health of our employees and protection from occupational risk factors; and
●
encouraging and supporting self-development, self-monitoring,
    individual and collective learning, and promoting continuous self-improvement.
Furthermore, we develop an annual communication
    plan to promote diversity and inclusion. The relations with our employees and other stakeholders are framed by ethical principles and
    values, as set out in our reputation and communication policy that reaches employees in all countries where we operate. We are committed
    to promoting gender equality. Annually, we perform a cross-countries strategy to carry out activities and deploy communications that contribute
    to this goal. We have identified 3 key areas in which we can strengthen equality in our work environment: female leadership, female health,
    and motherhood support.
53
Carbon Neutrality Strategy
In addition, Procaps designed
a carbon neutrality strategy which we officially launched at the end of 2021. Our strategy has the goal of, among others, (i) calculating
our baseline carbon footprint and comparing it to the footprint of similar businesses to identify a benchmark, (ii) identifying greenhouse
gas emissions mitigation opportunities, and (iii) developing a strategy combining mitigation and offsetting to become carbon neutral by
a date to be determined.
The first phase of our strategy
consists of measuring the carbon footprint of our facilities. We began by measuring the carbon footprint of our Barranquilla, Colombia
facility, which has the highest production volume and contribution to greenhouse gas emissions in its three scopes. The results were published
in our 2021 ESG Report.
In 2022, we extended our carbon
footprint measurement to our other facilities in El Salvador and Brazil. We expect to complete it in 2023, and to communicate the results
in our ESG Report. We expect that this information will provide us with a full dimension of our carbon footprint for our business at this
time, with the goal of allowing us to define a corporate baseline.
Based on our progress to date,
we have identified opportunities that we believe are viable for the mitigation of greenhouse gas emissions, some of which are currently
in progress while others are under review for inclusion in our ESG initiatives in 2023. We have classified these opportunities into three
scopes:
Scope 1
: (i) Replacement of refrigerant
gases by less polluting alternative gases; and (ii) replacement of fire extinguishers technology.
Scope 2
: (i) promote energy consumption
efficiency initiatives; and (ii) renewable energy consumption projects (solar panels).
Scope 3
: optimization of transport
routes for raw materials and company products.
Our corporate strategy to
achieve carbon neutrality is still under review. Options have been identified; however we have to calculate a complete baseline in order
to be able to commit to targets and timeframes, which calculation remains ongoing. Once we have the corporate baseline, we intend to define
reduction and compensation goals in order to approve our commitment.
Regulatory Matters
The manufacturing, processing,
formulation, packaging, labeling, testing, storing, distributing, advertising, and sale of our products and services are subject to regulation
by a variety of agencies in the localities in which our products are sold. In addition, we manufacture and market certain of our products
in accordance with standards set by various organizations, including the FDA, Health Canada, MHRA, TGA, Cofepris and ISO. We believe that
our policies, operations, and products comply in all material respects with existing regulations to which we are subject.
The manufacturing, distribution,
and marketing of healthcare products and the provision of certain services for development-stage pharmaceutical products are subject to
extensive ongoing regulation by INVIMA, ANVISA, the FDA, other regulatory authorities in the countries in which we operate.
54
Colombian Regulations
A majority of our products
are manufactured in our four manufacturing facilities in Colombia. INVIMA is the Colombian regulatory authority charged with inspecting
and supervising the marketing and manufacturing of health products, identifying and evaluating the violation of health standards or procedures,
and implementing best practices and providing medical approval for the import and export of products.
INVIMA carries out periodic
inspections of our facilities, processes and products to verify compliance with cGMP and Good Laboratory Practices in accordance with
the regulations established by the World Health Organization ("WHO") in the Technical Report Series 823 — 32
nd
Report of the WHO Expert Committee on Specifications for Pharmaceutical Preparations (the "WHO Report 32"). In addition, our
facilities are also subject to regulation and inspection by the Colombian Agricultural Institute (
Instituto Colombiano Agropecuario
,
or "ICA"), a public entity attached to the Colombian Ministry of Agriculture and Rural Development (
Ministerio de Agricultura
y Desarrollo Rural
), responsible for controlling agricultural health in Colombia. The ICA is charged with inspecting our plants to
verify compliance with cGMP for the production of products for veterinary use, also in accordance with the provisions of the WHO Report
32.
United States Regulations
The FDA has jurisdiction over
certain of our Rx, OTC pharmaceutical products and API. The FDA's jurisdiction extends to the manufacturing, testing, labeling,
packaging, storage, distribution, and promotion of these products. We are committed to consistently provide our customers with high quality
products that adhere to cGMP regulations promulgated by the FDA.
All facilities where Rx and
OTC products are manufactured, tested, packaged, stored, or distributed for the U.S. market must comply with FDA, cGMPs and regulations
promulgated by competent authorities in the countries, states and localities where our manufacturing facilities are located. All of our
drug products destined for the U.S. market are manufactured, tested, packaged, stored, and distributed according to cGMP regulations.
The FDA performs periodic audits to ensure that our FDA registered manufacturing facility remains in compliance with all appropriate regulations.
In addition, certain of our
subsidiaries are subject to other healthcare laws, including the U.S. Federal Food, Drug, and Cosmetic Act, the Public Health Service
Act, the Controlled Substances Act, and comparable state and foreign laws and regulations in certain of their activities.
Third parties develop and
manufacture APIs for use in certain of our pharmaceutical products that are sold in the U.S. and other global markets. API manufacturers
typically submit a drug master file to the regulatory authority that provides the proprietary information related to the manufacturing
process. The FDA inspects the manufacturing facilities to assess cGMP compliance, and the facilities and procedures must be cGMP compliant
before API may be exported to the United States.
Brazilian Regulations
Certain of our products are
manufactured in our Brazil manufacturing facilities. ANVISA is the Brazilian regulatory agency that is responsible for the approval and
supervision of food, cosmetics, tobacco, pharmaceuticals, health services, and medical devices, among other products, and carries out
sanitary control and inspection activities in ports, airports and the border regions.
55
ANVISA is charged with the
protection of the Brazilian population's health through sanitary control over the production and marketing of products and services,
including facilities, processes, materials and technologies related thereto. We may only operate our facilities subject to the jurisdiction
of ANVISA once we have received ANVISA's approval. In addition, all of our pharmaceutical products must be submitted to ANVISA for
approval before being offered to our customers in Brazil. As a governmental agency, ANVISA has police power over sanitary controls, as
a result, in the event an inspection reveals non-compliance with its regulations, it may shut down businesses, suspend the sale of products,
appropriate and seize items, or issue fines.
In addition to approvals from
ANVISA, we also require the approval of CETESB, an agency of the government of the State of São Paulo responsible for the control,
inspection, monitoring and licensing of activities that generate pollution, to operate our facilities in Brazil. CETESB is responsible
for granting operating licenses for our facilities and carries out frequent inspections to assess whether there have been any changes
to the environmental impact caused by our activities. For information on current regulatory proceedings involving CETESB, please see Item
8.A under the heading "
Legal Proceedings—Operating License
."
El Salvador Regulations
Certain of our products are
manufactured in our El Salvador manufacturing facilities. DNM is the El Salvadorian regulatory agency that is responsible for safeguarding
the health of the country's population through the regulation and surveillance of pharmaceutical, cosmetic, hygienic, chemical products,
medical devices and raw materials.
The DNM is the competent health
authority in El Salvador charged with authorizing and registering all pharmaceutical products in El Salvador and is responsible for regulating
the importation and manufacturing of pharmaceutical products, implementing price controls, and controlling of distribution chains. The
DNM acts based on the guidelines established by the Central American Technical Regulation (
Reglamento Técnico Centroamericano
)
which is a guide based on the WHO Report 32, to implement the best practices in the manufacturing, storage, distribution and sale of pharmaceutical
products. The DNM is also responsible for certifying that pharmaceutical laboratories in El Salvador comply with cGMP.
Other Regulatory Requirements
We are also subject to various
federal, state, local, national and transnational laws, regulations, and requirements in Colombia, Brazil, the United States and other
countries in which we operate, relating to safe working conditions, laboratory and distribution practices, and the use, transportation
and disposal of hazardous or potentially hazardous substances. In addition, applicable import and export laws and regulations require
us to abide by certain standards relating to the cross-border transit of finished goods, raw materials and supplies and the handling of
information. We are also subject to various other laws and regulations concerning the conduct of our non-U.S. operations, including FCPA
and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records.
The costs associated with
our continued compliance with the various applicable federal, state, local, national and transnational regulations to which we are subject
could be significant, and the failure to comply with such legal requirements could have an adverse effect on our results of operations
and financial condition. See Item 3.D under the heading "
Risk Factors—Risks Related to Laws and Regulations—Failure
to comply with existing and future regulatory requirements could adversely affect our business, financial condition and results of operations,
or result in claims from customers
" in this Annual Report for additional discussion of the costs associated with complying with
the various regulations.
For the years ended December
31, 2022, 2021 and 2020, we were subject to three regulatory audits by INVIMA and the Saudi Arabia Food and Drug Administration, all of
which were successfully completed.
56
2021 Colombian Tax Reform
On September 14, 2021, Colombia's
President approved the 2021 Colombian Tax Reform, which includes certain tax measures intended to generate additional tax revenues to
fund social programs for purposes of mitigating the impact of the COVID-19 pandemic. These tax measures include, among other things:
(i)
increasing
the corporate tax rate from 30% to 35% for both domestic and foreign entities, permanent establishments and branches;
(ii)
maintaining
the rates for the special tax regime and free-trade zones at 20%;
(iii)
continuing
to limit the amount of turnover tax that taxpayers may claim as a corporate income tax credit to 50% by repealing a previously enacted
law change that would have allowed taxpayers to claim 100% of the turnover tax effectively paid as an income tax credit;
(iv)
increasing
the carry forward period of profits subject to taxation at the corporate level exceeding the profits recorded in the company's
accounting records in the same year, from 5 to 10 years for taxpayers engaged in concession and public-private agreements;
(v)
establishing
a new normalization tax (i.e., tax amnesty) applicable to income taxpayers that did not declare certain assets or claimed non-existent
liabilities for tax purposes, taxing such amounts at a rate of 17%, as of January 1, 2022.; and
(vi)
eliminating
the value added tax ("VAT") exclusion for imports of goods with a value of $200 or less that enter Colombia through postal
services. The exclusion, however, continues for imports from countries with which Colombia has signed a free trade agreement, by virtue
of which the non-collection of VAT has been expressly agreed. For imports from countries with a free trade agreement with Colombia, the
exclusion will not apply if the imports are for commercial purposes.
2022 Colombian Tax Reform Bill
On December 13, 2022, the Colombian President
Gustavo Petro enacted Law 2277 of 2022 (available in Spanish only), which contains the tax reform proposals previously approved by congress.
The purpose of the amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These
tax measures include, among other things:
1.
Corporate Income Tax (CIT) rate to remain unchanged at 35%. However, a new net tax rate (TDD per its acronym
in Spanish) will be introduced, under which Colombian companies, including free trade zone users, will be subject to a minimum 15% effective
tax rate, calculated based on financial net profit, in accordance with the OECD Pillar Two global minimum tax rules.
2.
CIT rate for qualified FTZ companies to remain at 20% subject to an annual exportation requirement.
3.
Certain non-taxable income items, special deductions, exempt income and tax credits to be capped at 3%
of the taxpayer's net income before these detractions.
4.
The capital gains tax rate to rise to 15% (from 10%).
5.
The tax credit provided in article 256 of the Tax Code for investment in research and development, as
determined by the National Council of Science and Technology Tax Benefits, will be increased to 30% (from 25%). However, expenses related
to the investment covered by the tax credit no longer will be deductible. The tax credit currently is not covered by the 3% cap on tax
benefits, but the increased credit will be subject to the cap.
57
6.
The following non-taxable items to become subject to CIT:
a.
Profits on the sale of listed shares on the Colombian Exchange
Market (currently available when shares held by a single individual and do not represent more than 10% of the total outstanding shares
b.
Profits on the trading of financial derivatives the underlying
assets of which are listed shares, index, funds or collective portfolios.
c.
Dividends distributed in shares or capitalization of the revaluation
account.
d.
The distribution in shares or capitalization of the profits
that surpass the threshold of non-taxable income as set out at Sections 48 and 49 of the CTC.
e.
Yields from security bonds.
7.
ICA (municipal tax) tax to become deductible instead of creditable at 50% against CIT.
8.
The following items of exempt incomes to become taxable:
● Orange economy, ● Productivity
incentives for the agricultural industry. ●VIS housing and priority interest, ● New forest plantations, ● River transport
services, ● Literary creations and, ● Cinematography.
9.
The mega-investment regime to be repealed.
10.
Effective Place of Management rules to broaden to consider day to day activities in Colombia as opposed
to testing only the place where decisive and key decisions are taken.
11.
A new form of tax presence for non-residents to apply for a significant economic presence in Colombia,
subject to revenue threshold, use of co. domains or number of customers in the country. WHT to apply at 20% subject to regulations to
define how and when for B2C sales.
12.
Dividend tax for non residents to rise from 10% to 20%. The withholding tax rate on dividends paid by
Colombian companies to Colombian resident entities out of profits taxed at the corporate level will be increased to 10% (from 7.5%).
13.
Dividends received by individuals to be taxed at the general rate of up to 39%.
14.
A wealth tax of up to 1% to apply to individuals and non-resident companies
who are not CIT filers and provided net equity exceeds over USD 700,000.
15.
A tax on single-use plastic products for packing to be introduced.
Certain exemptions to apply for waste and the like.
16.
A tax on the consumption of ultra-processed sweetened beverages to be introduced.
17.
A 10% tax on the consumption of ultra-processed food products with a high content of added sugars, to
be introduced.
58
This information provides an overview of the most
significant amendments under the new act. Most changes will enter into force as from the date of enactment of the legislation; however,
some changes that alter substantial matters concerning periodic taxes became effective on January 1, 2023, and certain other provisions
become effective on a date specified in the legislation.
We are evaluating the potential impact of the
2022 Colombia Tax Reform on our business, financial condition and results of operations. We cannot anticipate the impact that the 2022
Colombia Tax Reform may have, nor the measures that could be adopted by the current administration in order to meet its financial obligations,
which might negatively affect Colombian's economy and, in turn, our business, financial condition and results of operations.
Quality Assurance
We are committed to ensuring
and maintaining the highest standard of regulatory compliance while providing high quality products to our customers. To meet these commitments,
we have developed and implemented a company-wide quality management system. We have approximately 670 employees focusing on quality and
regulatory compliance. Our senior management team is actively involved in setting quality policies and standards, as well as managing
internal and external quality performance. Our quality assurance department provides quality leadership and supervises our quality systems
programs. An internal audit program monitors compliance with applicable regulations, standards, and internal policies. In addition, our
facilities are subject to periodic inspection by the INVIMA, ANVISA, the FDA, and other equivalent local, state, and foreign regulatory
authorities, as applicable, as well as IFC. All INVIMA, ANVISA, FDA and other regulatory inspectional observations have been resolved
or are on track to be completed at the prescribed timeframe provided in commitments to the applicable agency in all material respects.
We believe that our operations are in compliance in all material respects with the regulations under which our facilities are governed.
Environmental Matters
Our operations are subject
to a variety of environmental, health, and safety laws and regulations, including those of the Colombian Ministry of Environment and Sustainable
Development (Ministerio de Ambiente y Desarrollo Sostenible), the Brazilian Institute of the Environment and Renewable Natural Resources
(Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis), the U.S. Environmental Protection Agency (EPA), Ministry
of Environment and Natural Resources (Ministerio de Ambiente y Recursos Naturales) from El Salvador, and equivalent state, local and national
regulatory agencies in each jurisdiction in which we operate.
These laws and regulations
govern, among other things, air emissions, wastewater discharges, the use, handling, and disposal of hazardous substances and wastes,
soil and groundwater contamination, and employee health and safety. Our manufacturing facilities use, in varying degrees, hazardous substances
in their processes.
We believe that our operations
are in compliance in all material respects with the environment, health, and safety regulations applicable to our facilities. Additionally,
we are required to comply with IFC's Performance Standards on Social & Environmental Sustainability, among other requirements.
For more information, see "
—Corporate Responsibilities and Environmental, Social, and Governance (ESG).
"
59
C. ORGANIZATIONAL STRUCTURE
The following diagram reflects
a simplified summary of our organizational structure as May 1, 2023:
(1)
The
diagram above only shows selected subsidiaries of Procaps.
We do not have any established branches.
For a complete list of the Company's subsidiaries, see Exhibit 8.1 to this Annual Report.
ITEM 4A.
UNRESOLVED
SEC STAFF COMMENTS
The Company has no unresolved
comments from the staff of the SEC with respect to its periodic reports under the Exchange Act.
ITEM 5.
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
Our discussion and analysis
of our results of operations and financial condition are based upon our Annual Audited Consolidated Financial Statements, which have been
prepared in accordance with IFRS. Our operating and financial review and prospects should be read in conjunction with our Annual Audited
Consolidated Financial Statements, the accompanying notes thereto and other financial information appearing elsewhere in this Annual Report.
A.
OPERATING RESULTS
Overview
For an overview of our business,
see Item 4.B "Overview" of this Annual Report.
Business Segments
NextGel
Our NextGel business segment,
operated under our Softigel, Sofgen, Softcaps and Funtrition brands, is the iCDMO arm of Procaps which offers services specializing in
development and manufacturing in Softgel and related technologies, and operates globally in the B-to-B market, more specifically in Brazil,
Colombia and the United States. We are the top Softgel manufacturer in South and Central America and top five in the world in terms of
Softgel production capacity, according to an independent third-party industry analysis report. The iCDMO agreements with our top-tier
customers range from five to ten-year terms. Our NextGel business segment has over 130 clients across more than 35 countries and the key
products that we manufacture in this segment includes Softgel pharmaceutical products such as Advil, Apronax Liquidgels, multivitamins,
Vitamin D and Dolex ActivGel.
60
Procaps Colombia, CAN and CASAND
These three business segments
serve each of its respective regional B-to-C markets by offering the following key product lines/business units:
Rx Pharmaceutical Products
Our Rx product line comprises
the Farma Procaps and the Clinical Specialties brands/business units.
Farma Procaps formulates,
manufactures and markets branded prescription drugs. It represents a high growth portfolio that focuses on nine therapeutic areas (feminine
care products, pain relief, skin care, digestive health, growth and development, cardiology, vision care, central nervous system and respiratory).
Clinical Specialties is a
leading provider of high-complexity care treatments to private institutions regionally. Its diverse product portfolio, targets various
in-demand therapeutic areas and develops, manufactures and markets personal protective equipment, high-complexity drugs for hospital use
such as antibiotic, blood clot, immunosuppressant, oncology and analgesics products.
OTC Product Line
Our OTC product line primarily
consists of the VitalCare brand/business unit. VitalCare develops, manufactures and markets OTC consumer healthcare products through an
extensive portfolio focused on over eight high-prevalence therapeutic areas (including gastrointestinal, skin care, cough and cold, analgesics,
urological, and vitamin, minerals and supplements) at what we believe to be accessible and appealing price points. Our Colmed OTC product
line, which is part of our VitalCare business unit, consists of products in the following categories: antibiotics, anti-infective, anti-parasitic,
cardiovascular, feminine care, cutaneous antimycotic, pain killers, gastrointestinal, hormonals, metabolic, endocrine, nervous system,
ophthalmic, osteoarticular, respiratory, diet supplements and vitamins and minerals.
We market and sell our OTC
products in the following key regional markets: Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras,
Nicaragua, Panama, Peru, and the United States.
Procaps Colombia primarily
serves the Colombian market, CAN primarily serves the Honduras, Nicaragua, El Salvador, United States and Guatemala markets, and CASAND
primarily serves the Panama, Costa Rica, Ecuador, Dominican Republic, Peru and Bolivia markets.
Diabetrics
Our Diabetrics business segment
is comprised of our Diabetrics brand/business unit, and we believe is an attractive regional B-to-C diabetes-focused treatment and management
platform that focuses primarily on the Colombian market. It has a unique business model when compared to our competitors, as it aims to
cover the full spectrum of needs of patients with diabetes by providing products and services such as blood glucose meters, telemonitoring,
Rx oral anti-diabetics products, cosmeceuticals (cosmetics that have medicinal properties for diabetic care), insulin delivery systems
and other diabetes solutions.
The Business Combination
On March 31, 2021, Union,
Crynssen, the Company and Merger Sub entered into the Business Combination Agreement, and subsequently amended the Business Combination
Agreement on September 29, 2021. As a result of the transactions contemplated by the Business Combination Agreement, each of Union and
Crynssen became direct wholly owned subsidiaries of the Company and each Crynssen Shareholder and shareholder of Union were issued Ordinary
Shares, and, in the case of IFC, Ordinary Shares and Redeemable B Shares.
Union also entered into separate
Subscription Agreements, each dated March 31, 2021, with the PIPE Investors, pursuant to which, and subject to the terms and conditions
thereto, the PIPE Investors collectively subscribed for an aggregate of 10,000,000 SPAC Ordinary Shares for an aggregate purchase price
of $100,000,000. The PIPE investment was consummated immediately prior to the Closing of the Business Combination, and each SPAC Ordinary
Share subscribed for by the PIPE Investors were exchanged for one Ordinary Share, substantially concurrently with the closing of the Business
Combination.
61
On April 16, 2021, in connection
with the vote to approve the amendment to the then current amended and restated articles of association of Union to extend the date by
which Union was required to consummate its initial business combination from April 22, 2021 to October 22, 2021, certain shareholders
of Union exercised their right to redeem 6,446,836 SPAC Ordinary Shares for cash at a redemption price of approximately $10.07 per share,
for an aggregate redemption amount of approximately $64.9 million.
Prior to the Closing, on September
22, 2021, in connection with the vote to approve the Business Combination and other related proposals, at Union's extraordinary
general meeting, certain shareholders of Union exercised their right to redeem 7,657,670 SPAC Ordinary Shares for cash at a redemption
price of approximately $10.19 per share, for an aggregate redemption amount of approximately $78.0 million.
Additionally, on September
29, 2021, the Sponsors entered into the Share Forfeiture Agreement, pursuant to which, the Sponsors forfeited a combined 700,000 SPAC
Ordinary Shares prior to the consummation of the Business Combination.
For a description of the Business
Combination, see Item 4.A. of this Annual Report under the heading "Company Information––History and Development of
the Company––The Business Combination."
Going Concern Update
As of December 31, 2022, the Company
was in breach of certain of the covenants included under the NPA, the Syndicated Loan and the Additional Loan Agreement. Although none
of the lenders declared an event of default under the applicable agreements, these breaches could have resulted in the lenders requiring
immediate repayment of the applicable indebtedness and as a result, the Company has classified the respective indebtedness, amounting
to approximately $139 million in the aggregate, to current liabilities. As of December 31, 2022, the Company reported a working capital
deficit (which is current assets minus current liabilities) of approximately $70.9 million. These events and conditions, cosidered in
the aggregate, absent the Waivers (as defined and described in this Annual Report), cast substantial doubt upon the Company's ability
to continue as a going concern.
On
March
28, 2023, March 31
, 2023 and May 2, 2023, as applicable, the Company obtained the Waivers. Based on management's
projections over the next 12 months, the Company is expected to be in compliance with the applicable covenants under the NPA, the
Syndicated Loan and the Additional Loan Agreement.
As of December 31, 2022, the Company
had cash of approximately $43.0 million. Currently, the Company maintains financing lines, which, together with the expected internal
generation of funds, will allow it to finance its growth and working capital needs. For the year ended December 31, 2022, the Company
recognized income of approximately $42.5 million. The Company generated approximately $14.1 million of cash from operating activities.
As of December 31, 2022, the Company retains a negative equity position of $1.9 million, and comprehensive income of approximately $36.5
million. As of December 31, 2022, the Company had a net working capital deficit of approximately $71.0 million due to the reclassification
of non-current borrowings to current borrowings and as a result of the breach in loan covenants.
The Company maintains current
short and long-term financing lines, which, together with the expected internal generation of funds through operations, will allow it
to finance its growth and its need for working capital. For the years 2021 and 2022, the Company has been generating cash inflows from
operating activities and projects that operating cash inflows from operating activities will continue during 2023.
Management has evaluated the
Company's capital position and its ability to continue in the normal course of business for the foreseeable future and ability to
meet its financial obligations for the next twelve months. Based on the Company's cash flow projections and improvement in financial
covenant ratios as a result of the Waivers, the Company's management believes the Company will have sufficient funds to repay their
obligations as they fall due and to meet its financial covenants in 2023. However, due to the uncertainty caused by current economic conditions,
including rapid growth in inflation, increasing interest rates, global disruption to the supply chain, volatility in foreign exchange
rates and industry price regulations, there is a risk the Company will not meet its financial covenants. The Company's failure to
comply with such financial covenants could result in an event of default, which if that were to occur would materially and adversely affect
the Company's business, financial condition, liquidity and results of operations. As a result of this material uncertainty, the
Company's management concluded the above conditions and events raise significant doubt about the Company's ability to continue
as a going concern.
The Company has implemented,
or is in the process of implementing, various cost saving and business strategies to mitigate the above mentioned macro risks and resulting
risk of future covenant noncompliance.
62
For more information, including
details regarding the Company's mitigation plan, see Note 2.1 to our Annual Audited Consolidated Financial Statements, included
elsewhere in this Annual Report.
Results of Operations
Comparison of the years ended December 31,
2022 and December 31, 2021
The following table sets forth
historical operating results for the periods indicated:
For the
year ended
December 31,
Increase/ (Decrease)
For the year ended
December 31,
Constant Currency Increase/ (Decrease)
2022
2021
$ Change
% Change
2022-
Constant Currency Adjustment
(2)
2022-
Constant Currency Basis
(2)
$ Change
% Change
(in thousands of U.S. dollars except percentages)
Revenue
409,920
409,742
178
0.0
%
27,834
437,754
28,012
6.8
%
Cost of sales
(170,351
)
(174,029
)
3,678
-2.1
%
(10,404
)
(180,755
)
(6,726
)
3.9
%
Gross profit
239,569
235,713
3,856
1.6
%
17,429
256,998
21,285
9.0
%
Sales and marketing expenses
(93,566
)
(83,057
)
(10,509
)
12.7
%
(6,171
)
(99,738
)
(16,680
)
20.1
%
Administrative expenses
(105,911
)
(82,187
)
(23,724
)
28.9
%
(7,188
)
(113,099
)
(30,912
)
37.6
%
Finance expenses, net
37,917
(78,636
)
116,553
n.a.
Other expenses, net
(25,299
)
(78,991
)
53,692
-68.0
%
(4,146
)
(29,445
)
49,546
-62.7
%
(Loss)/Income before tax
52,710
(87,158
)
139,868
n.a.
111
1
Income tax expense
(10,170
)
(13,705
)
3,535
-25.8
%
Income/ (loss) for the year
42,540
(100,863
)
143,403
n.a.
Adjusted EBITDA
(1)
70,126
99,678
(29,552
)
-29.6
%
5,210
75,336
(24,342
)
-24.4
%
Contribution Margin
(1)
146,003
152,656
(6,652
)
-4.4
%
11,258
157,261
4,605
3.0
%
(1)
Contribution Margin and Adjusted EBITDA are non-IFRS
    measures. We include these metrics as supplemental disclosures because we believe they are useful indicators of our operating performance.
    Contribution Margin and Adjusted EBITDA are well recognized performance measures in the pharmaceutical industry that are frequently used
    by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry. However,
    because Contribution Margin and Adjusted EBITDA are non-IFRS measures and their calculation is not determined in accordance with IFRS,
    such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, our
    calculation of Contribution Margin and Adjusted EBITDA as presented may not be directly comparable to similarly titled measures by other
    companies. For more information on Contribution Margin, Adjusted EBITDA and other non-IFRS financial measures, please see "—Non-IFRS
    Financial Measures" below.
(2)
As exchange rates are an important factor
in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results on a constant currency
basis in addition to the IFRS reported results helps improve investors' ability to understand our operating results and evaluate
our performance in comparison to prior periods. Constant currency information is non-IFRS financial information that compares results
between periods as if exchange rates had remained constant period-over-period. We calculate constant currency by calculating year-end
period results (year ended December 31, 2022) using prior-period (year ended December 31, 2021) foreign currency exchange rates. Results
on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are
not measures of performance presented in accordance with IFRS. For more information on constant currency adjustments, please see "—Non-IFRS
Financial Measures" below.
63
Revenue
Procaps recognizes revenue
from the sale of pharmaceutical products and licensing revenue. Revenue increased by $0.2 million, or 0.0%, from $409.7 million for the
year ended December 31, 2021 to $409.9 million for the year ended December 31, 2022. On a constant currency basis, revenue increased by
$28.0 million, or 6.8%, to $437.8 million for the year ended December 31, 2022.
The increase in revenue for
the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to (i) an increase in demand for our products
and services across three strategic business segments, including: an increase of approximately $4.2 million from Nextgel, an increase
of approximately $12.4 million from CASAND and an increase of approximately 4.5 million from CAN; and (ii) an increase of sales for new
products of approximately $12.0 million, offset mainly by (iii) the currency devaluation in the period of approximately $27.8 million
and (iv) the decrease in sales of the anesthetics portfolio of approximately $25 million due to the slower pace of sales of products for
the intensive care units and higher than usual inventory cycles in the distributors.
Cost of sales and gross profit
The cost of sales represents
the direct costs of producing the goods sold by Procaps, such as cost of the materials and labor directly used to create the goods. Gross
profit is revenue less cost of sales.
Cost of sales decreased by
$3.7 million, or 2.1%, from $174.0 million for the year ended December 31, 2021 to $170.4 million for the year ended December 31, 2022.
On a constant currency basis, cost of sales increased
by $6.7 million, or 3.9%, to $180.8 million for the year ended December 31, 2022
The decrease in cost of sales
for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the currency devaluation of approximately
$10.4 million.
Gross profit increased by $3.9 million, or 1.6%, from $235.7 million
for the year ended December 31, 2021 to $239.6 million for the year ended December 31, 2022.
On a constant currency basis,
gross profit increased by $21.3 million, or 9.0%, to $257.0 million for the year ended December 31, 2022.
The increase in gross profit
for the year ended December 31, 2022 compared to the year ended December 31, 2021 was also primarily attributable to the change of the
product mix sold, brand sales during the first half of 2022 of approximately $3.5 million, and an increase of sales of other services
of approximately $4.9 million.
Sales and marketing expenses
Sales and marketing expenses
include primarily expenses incurred for promotional activities, such as marketing expenses, sales force and logistics expenses. Sales
and marketing expenses increased by $10.5 million, or 12.7%, from $83.1 million for the year ended December 31, 2021, which represents
approximately 20.3% of revenue for the year ended December 31, 2021, to $93.6 million for the year ended December 31, 2022, which represents
approximately 22.8% of the revenue for the year ended December 31, 2022. On a constant currency basis, sales and marketing expenses increased
by $16.7 million, or 20.1%, to $99.7 million for the year ended December 31, 2022.
The increase in sales and
marketing expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to increased marketing
efforts, with the full return of events and travel efforts as the effects of the COVID-19 pandemic continue to lessen. There were also
expenses of approximately $5 million during the year ended December 31, 2022, related to the pre-operative expenses of the West Palm Beach
facility.
64
Administrative expenses
Administrative expenses include
costs incurred for administrative and certain corporate departments, such as payroll, power and utilities, and certain legal and professional
expenses. Administrative expenses increased by $23.7 million, or 28.9%, from $82.2 million for the year ended December 31, 2021 to $105.9
million for the year ended December 31, 2022. On a constant currency basis, administrative expenses increased by $30.9 million, or 37.6%,
to $113.1 million for the year ended December 31, 2022.
The increase in administrative
expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to (i) full year of expenses
related to being a public company, such as increased personnel costs, legal and consulting services which totaled in aggregate of approximately
a $15.6 million and (ii) an increase of approximately $6.1 million in expenses related to M&A activities for the since terminated
acquisition of Grupo Somar and business growth projects.
Finance expenses, net
Finance expenses, net include
certain banking expenses and bank fees, financing interest expenses, interest recognized on the financial liabilities associated with
certain put options held by IFC and Hoche, and a one-time loss on the termination of such put options. On the Closing of the Business
Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement (both as defined below) were cancelled as part of the Business
Combination in exchange for a portion of the Ordinary Shares issued to IFC and Hoche, respectively, in the Exchange. The one-time loss
on termination of the Hoche put option in the amount of $35.9 million was recognized in 2021 aligns the carrying value of such put option
on the termination date to the fair value of the Ordinary Shares issued. In 2022, interest expense includes an extinguishment loss of
$1,600, as a result of the substantially modified terms of the Senior Notes.
Finance expenses, net decreased
by $116.6 million, or 148.2%, from expenses of $78.6 million for the year ended December 31, 2021 to an income of $37.9 million for the
year ended December 31, 2022. The decrease in finance expenses, net was primarily due to (i) the valuation of shares held in escrow with
a net fair value gain of approximately $61.8 million, (ii) the net fair value gain of warrants liabilities of approximately $12.2 million
and (ii) the decrease of interest expense of approximately $59.6 million. In 2021 the net fair value gain related to shares held in escrow
was approximately $4.5 million and the net fair value gain of warrants liabilities was approximately $5.9 million.
Other expenses, net
Other expenses, net include:
(i) currency exchange rate differences, (ii) economic emergency contribution expenses, (iii) fines, penalties, and assumed taxes, (iv)
donations, (v) listing expenses, (vi) the change in the fair value of the warrant liability, and (vii) other expenses.
Other expenses decreased by
$53.7 million, or 68.0%, from $79.0 million for the year ended December 31, 2021 to $25.3 million for the year ended December 31, 2022.
2021 was affected by the recording of non-cash listing expenses of $73.9 million associated with the deemed listing services received
by Procaps from Union, which is the difference between the deemed costs of the Ordinary Shares issued by the Company to Union shareholders
in connection with the Business Combination, in excess of the net assets obtained from Union. This was a one-time listing expense. In
2022, other expenses include approximately $16.2 million of foreign exchange and an impairment charge of Rymco S.A. of approximately $6.0
million.
Income tax expense
Income tax expense includes
two components: (i) current tax and (ii) deferred tax. Current tax is calculated based on the tax rate of each jurisdiction. Deferred
tax corresponds to the differences generated between the accounting figures and tax figures, which can result in a future income or expense.
Income tax expense decreased
by $3.5 million, or 25.8%, from $13.7 million for the year ended December 31, 2021 to $10.2 million for the year ended December 31, 2022.
The decrease in income tax expense was primarily due to (i) decrease in profits in Colombian companies (-51%) added to optimization
of the use of tax credits as well as deferred tax shield with an impact on lower taxes $4.6 million, (ii) increase in profits in Brazil,
as well as adjustments in deferred tax, resulting in $1.3 million in higher tax expenses recognized in the period, (iii) Rymco impairment
adjustment increase by $1.1 million (iv) tax rate reduction from 30% to 10% in El Salvador, resulting in profits from the sale of intangible
assets of $0.9 million and consolidation adjustments and eliminations of approximately $0.4 million. The accounting income effect from
the net fair value of the Warrants' liabilities ($12.2 million) and Ordinary Shares held in escrow ($61.8 million), which increase
accounting profit, did not have an impact with respect to our current or deferred tax expenses.
65
Comparison of the years ended December 31,
2021 and December 31, 2020
The following table sets
forth historical operating results for the periods indicated:
For the year ended
December 31,
Increase/(Decrease)
For the year ended
December 31,
Constant Currency Increase/(Decrease)
2021
2020
$ Change
% Change
2021 -
Constant
Currency
Adjustment
(2)
2021 -
Constant
Currency
Basis
(2)
$ Change
% Change
(in thousands of U.S. dollars except percentages)
Revenue
409,742
331,467
78,275
23.6
%
6,641
416,383
84,916
25.6
%
Cost of sales
(174,029
)
(140,153
)
(33,876
)
24.2
%
(4,224
)
(178,253
)
(38,100
)
27.2
%
Gross profit
235,713
191,314
44,399
23.2
%
2,417
238,130
46,816
24.5
%
Sales and marketing expenses
(83,057
)
(69,629
)
(13,428
)
19.3
%
(817
)
(83,874
)
(14,245
)
20.5
%
Administrative expenses
(82,187
)
(58,631
)
(23,556
)
40.2
%
(959
)
(83,146
)
(24,515
)
41.8
%
Finance expenses, net
(78,636
)
(54,489
)
(24,147
)
44.3
%
Other expenses, net
(78,991
)
(7,716
)
(71,275
)
923.7
%
(Loss)/Income before tax
(87,158
)
849
(88,007
)
10,366.0
%
Income tax expense
(13,705
)
(11,296
)
(2,409
)
21.3
%
Loss for the year
(100,863
)
(10,447
)
(90,416
)
865.5
%
Adjusted EBITDA
(1)
99,678
84,619
15,059
17.8
%
706
100,384
15,765
18.6
%
Contribution Margin
(1)
152,656
121,685
30,971
25.5
%
1,600
154,256
32,571
26.8
%
(1)
Contribution Margin and Adjusted EBITDA are non-IFRS measures.
We include these metrics as supplemental disclosures because we believe they are useful indicators of our operating performance. Contribution
Margin and Adjusted EBITDA are well recognized performance measures in the pharmaceutical industry that are frequently used by investors,
securities analysts and other interested parties in comparing the operating performance of companies in our industry. However, because
Contribution Margin and Adjusted EBITDA are non-IFRS measures and their calculation is not determined in accordance with IFRS, such measures
are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, our calculation
of Contribution Margin and Adjusted EBITDA as presented may not be directly comparable to similarly titled measures by other companies.
For more information on Contribution Margin, Adjusted EBITDA and other non-IFRS financial measures, please see below under the heading
"
—Non-IFRS Financial Measures
" in this Annual Report.
66
(2)
As
exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of certain financial
metrics and results on a constant currency basis in addition to the IFRS reported results helps improve investors' ability to understand
our operating results and evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial
information that compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant
currency by calculating year-end period results (year ended December 31, 2021) using prior-period (year ended December 31, 2020) foreign
currency exchange rates. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures
used by other companies and are not measures of performance presented in accordance with IFRS. For more information on constant currency
adjustments, please see below under the heading "
—Non-IFRS Financial Measures
" in this Annual Report.
Revenue
Procaps recognizes revenue
from the sale of pharmaceutical products and licensing revenue. Revenue increased by $78.3 million, or 23.6%, from $331.5 million for
the year ended December 31, 2020 to $409.7 million for the year ended December 31, 2021. On a constant currency basis, revenue increased
by $84.92 million, or 25.6%, from $331.5 million for the year ended December 31, 2020 to $416.4 million for the year ended December 31,
2021.
The increase in revenue for
the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to an increase in demand for our products
and services across all strategic business segments (Procaps Colombia, NextGel, CAN, CASAND and Diabetrics), including (i) an increase
of approximately $60.7 million in sales from existing brands in several therapeutic categories, such as gastrointestinal, respiratory,
anesthetics and wellness products, among others, and (ii) an increase in revenue from the sales of new products of approximately $17.6
million, or 22.3%, from $78.7 million for the year ended December 31, 2020 to $96.3 million for the year ended December 31, 2021 amounting
to 23.5% of total revenue for the year ended December 31, 2021.
Cost of sales and gross profit
The cost of sales represents
the direct costs of producing the goods sold by Procaps, such as cost of the materials and labor directly used to create the goods. Gross
profit is revenue less cost of sales.
Cost of sales increased by
$33.9 million, or 24.2%, from $140.2 million for the year ended December 31, 2020 to $174.0 million for the year ended December 31, 2021.
Gross profit increased by $44.4 million, or 23.2%, from $191.3 million for the year ended December 31, 2020 to $235.7 million for the
year ended December 31, 2021.
On a constant currency basis,
cost of sales increased by $38.1 million, or 27.2%, from $140.2 million for the year ended December 31, 2020 to $178.3 million for the
year ended December 31, 2021. Gross profit increased by $46.8 million, or 24.5%, from $191.3 million for the year ended December 31, 2020
to $238.1 million for the year ended December 31, 2021.
The increase in cost of sales
for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the strong increase in the volume
of products sold as described in the "Revenue" section above.
The increase in gross profit
for the year ended December 31, 2021 compared to the year ended December 31, 2020 was also primarily attributable to strong increase in
our sales volume of products sold as described above.
Sales and marketing expenses
Sales and marketing expenses
include primarily expenses incurred for promotional activities, such as marketing expenses, sales force and logistics expenses. Sales
and marketing expenses increased by $13.4 million, or 19.3%, from $69.6 million for the year ended December 31, 2020, which represents
approximately 21.0% of revenue for the year ended December 31, 2020, to $83.1 million for the year ended December 31, 2021, which represents
approximately 20.3% of the revenue for the year ended December 31, 2021. On a constant currency basis, sales and marketing expenses increased
by $14.2 million, or 20.5%, from $69.6 million for the year ended December 31, 2020 to $83.9 million for the year ended December 31, 2021.
The increase in sales and
marketing expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the increase
in expenditures in the amount of $12.1 million related to advertising and marketing activities, and an increase in expenses related to
in-person sales events and travel, which returned as the COVID-19 pandemic situation improved worldwide and travel and gathering restrictions
were eased, permitting such events and activities.
67
Administrative expenses
Administrative expenses include
costs incurred for administrative and certain corporate departments, such as payroll, power and utilities, and certain legal and professional
expenses. Administrative expenses increased by $23.6 million, or 40.2%, from $58.6 million for the year ended December 31, 2020 to $82.2
million for the year ended December 31, 2021. On a constant currency basis, administrative expenses increased by $24.5 million, or 41.8%,
from $58.6 million for the year ended December 31, 2020 to $83.1 million for the year ended December 31, 2021.
The increase in administrative
expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to (i) the transaction expenses
incurred in connection with the Business Combination which amounted to $10.2 million for the year ended December 31, 2021, (ii) an increase
in expenditures related to employee safety in connection with the COVID-19 pandemic, such as transportation, personal protection equipment,
COVID-19 testing for employees, vaccination, among other expenditures, in the amount of $3.8 million, (iii) an increase in travel expenses
as most countries relaxed lockdowns and travel restrictions as the situation surrounding the COVID-19 pandemic has gradually improved
during the year ended December 31, 2021, and (iv) an increase in costs and other expenses to accommodate new, emerging roles within the
administrative and finance departments of the Company as a result of our growth and becoming a publicly listed company on the Nasdaq.
In addition, certain of our departments have also initiated a plan to return to work at our facilities, which has also contributed to
the increase in administrative expenses.
Finance expenses, net
Finance expenses, net include
certain banking expenses and bank fees, financing interest expenses, interest recognized on the financial liabilities associated with
certain put options held by IFC and Hoche, and a one-time loss on the termination of such put options. On the Closing of the Business
Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement (both as defined below) were cancelled as part of the Business
Combination in exchange for a portion of the Ordinary Shares issued to IFC and Hoche, respectively, in the Exchange. The one-time loss
on termination of the Hoche put option in the amount of $35.9 million, aligns the carrying value of such put option on the termination
date to the fair value of the Ordinary Shares issued.
Finance expenses, net increased
by $24.1 million, or 44.3%, from $54.5 million for the year ended December 31, 2020 to $78.6 million for the year ended December 31, 2021.
The increase in finance expenses, net was primarily due to the increase of the one-time extinguishment loss of the Hoche put option in
the amount of $35.9 million. The increase was partially offset by (i) a decrease of approximately $3.8 million, or 14.0%, in interest
expenses related to the put options financial liabilities, from $27.3 million for the year ended December 31, 2020 to $23.5 million for
the year ended December 31, 2021, and (ii) a net fair value gain related to warrants liabilities and shares held in escrow.
Other expenses, net
Other expenses, net include:
(i) currency exchange rate differences, (ii) economic emergency contribution expenses, (iii) fines, penalties, and assumed taxes, (iv)
donations, (v) listing expenses, (vi) the change in the fair value of the warrant liability, and (vii) other expenses.
Other expenses increased by
$71.3 million, or 923.7%, from $7.7 million for the year ended December 31, 2020 to $79.0 million for the year ended December 31, 2021.
The increase in other expenses was primarily due to the recording of non-cash listing expenses of $73.9 million associated with the deemed
listing services received by Procaps from Union, which is the difference between the deemed costs of the Ordinary Shares issued by the
Company to Union shareholders in connection with the Business Combination, in excess of the net assets obtained from Union.
68
Income tax expense
Income tax expense includes
two components: (i) current tax and (ii) deferred tax. Current tax is calculated based on the tax rate of each jurisdiction. Deferred
tax corresponds to the differences generated between the accounting figures and tax figures, which can result in a future income or expense.
Income tax expense increased
by $2.4 million, or 21.3%, from $11.3 million for the year ended December 31, 2020 to $13.7 million for the year ended December 31, 2021.
The increase in income tax expense was primarily due to (i) higher profits before taxes in some jurisdictions, and an increase in deferred
tax liabilities due to the increase in the tax rate in Colombia, resulting in an increase in income tax expenses of approximately $1.7
million, and (ii) certain amendments to the tax returns of certain of our subsidiaries during the year ended December 31, 2021, resulting
in $0.7 million in penalties and related nondeductible interest expenses, resulting in higher tax expenses recognized in the period.
Results by Segments After Inter-Segment Elimination,
Excluding Corporate for the years ended December 31, 2022 and December 31, 2021
Reportable segments
Results for the year ended December 31, 2022
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
(in thousands of U.S. dollars)
Revenue
125,065
142,345
55,467
66,330
20,713
Gross profit
64,670
73,504
35,820
57,099
8,475
Contribution Margin
52,445
44,750
16,820
29,471
3,081
Constant currency basis
Revenue
130,011
161,779
55,587
66,862
23,515
Gross profit
67,979
86,137
35,858
57,451
9,573
Contribution Margin
54,617
53,185
16,832
29,730
3,460
Reportable segments
Results for the year ended December 31, 2021
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
(in thousands of U.S. dollars)
Revenue
120,827
155,327
50,937
53,956
28,695
Gross profit
64,879
81,165
33,869
43,236
12,564
Contribution Margin
54,106
51,921
18,536
21,703
6,848
Reportable segments
Comparison of results for the
years ended December 31, 2022 and 2021
NextGel
Procaps Colombia
CAN
CASAND
Diabetics
(in thousands of U.S. dollars)
Revenue
4,238
(12,982
)
4,530
12,374
(7,982
)
Gross profit
(209
)
(7,662
)
1,952
13,864
(4,088
)
Contribution Margin
(1,661
)
(7,171
)
(1,716
)
(7,768
)
(3,767
)
Constant currency basis
Revenue
9,185
6,451
4,649
12,906
(5,180
)
Gross profit
3,099
4,971
1,990
14,216
(2,990
)
Contribution Margin
511
1,264
(1,704
)
8,027
(3,387
)
69
NextGel
Revenue of the NextGel segment
increased by $4.2 million, or 3.5%, from $120.8 million for the year ended December 31, 2021 to $125.1 million for the year ended December
31, 2022, primarily as a result of (i) an increase in product development services with the commencement of operations of the West Palm
Beach facility and the sales of certain product registrations totaling approximately $4.3 million, (ii) the increase in sales of gummy
products totaling approximately $2.7 million,
(iii) an increase of sales from products with current
partners of approximately $5.0 million,
offset by the change of manufacturing site of dronabinol (that leads to a new registration
process) which represented lower sales of approximately $6.6 million and the lower sales of progesterone of approximately $2.9 million
due to the ongoing bioequivalent test.
Gross profit of the NextGel
segment decreased by $0.2 million, or 0.3%, from $64.9 million for the year ended December 31, 2021 to $64.7 million for the year ended
December 31, 2022, primarily impacted by the devaluation of certain currencies, inflation, and the increase in costs of raw materials.
Contribution Margin of the
NextGel segment decreased by $1.7 million, or 3.1%, from $54.1 million for the year ended December 31, 2021, to $52.4 million for the
year ended December 31, 2022, primarily as a result of the increase in sales and marketing and operational expenses due to the hiring
of additional personnel as part of the initiation of operations at the West Palm Beach facility.
On a constant currency basis,
revenue attributable to the NextGel segment increased by $9.2 million, or 7.6%, to $130.0 million for the year ended December 31, 2022.
Gross profit attributable to the NextGel segment increased by $3.1 million, or 4.8% to $68.0 million for the year ended December 31, 2022,
and Contribution Margin attributable to the NextGel segment increased by $0.5 million, or 0.9%, $54.6 million for the year ended December
31, 2022.
Procaps Colombia
Revenue of the Procaps Colombia
segment decreased by $13.0 million, or 8.4%, from $155.3 million for the year ended December 31, 2021 to $142.3 million for the year ended
December 31, 2022, primarily due to (i) the impact of the currency devaluation of approximately $19.4 million and (ii) the decrease in
sales of the Clinical Specialties portfolio of approximately $19.7 million driven by to the slower pace of sales of products for the intensive
care units due to higher than usual inventory cycles in the distributors. The Farma Procaps and VitalCare business units are growing in
sales in 2022 when compared with 2021, primarily due to the demand increase of its leading brands in the market, such as Gestavit, Citragel,
Muvett S, and others, as well as the performance of new products.
Gross profit of the Procaps
Colombia segment decreased by $7.7 million, or 9.4%, from $81.2 million for the year ended December 31, 2021 to $73.5 million for the
year ended December 31, 2022, due to the impact of the decrease in sales described above and the changes in the product portfolio mix.
Contribution Margin of the
Procaps Colombia segment decreased by $7.2 million, or 13.8%, from $51.9 million for the year ended December 31, 20210 to $44.8 million
for the year ended December 31, 2022, due to the impact of the decrease in sales as described above and higher sales and marketing expenses
impacted by currency devaluation and increase in logistics expenses.
On a constant currency basis,
revenue attributable to Procaps Colombia increased by $6.5 million, or 4.2%, to $161.8 million for the year ended December 31, 2022, gross
profit attributable to the Procaps Colombia segment increased by $5.0 million, or 6.1%, to $86.1 million for the year ended December 31,
2022, and Contribution Margin attributable to the Procaps Colombia segment increased by $1.3 million, or 2.4%, to $53.2 million for the
year ended December 31, 2022.
70
CAN
Revenue of the CAN segment
increased by $4.5 million, or 8.9%, from $50.9 million for the year ended December 31, 2021 to $55.5 million for the year ended December
31, 2022, due to (i) sales from new product launches in the amount of approximately $1.0 million, such as Albisec One and Alercet, (ii)
increased sales of the current portfolio, particularly cardiology, feminine care and respiratory lines, and (iii) price increases in Guatemala
(approximately 4% increase), Honduras (approximately 4% increase) and El Salvador (approximately 5% increase).
Gross profit of the CAN segment
increased by $2.0 million, or 5.8%, from $33.9 million for the year ended December 31, 2021 to $35.8 million for the year ended December
31, 2022, primarily as a result of the increase in sales as described above, which was partially offset by higher raw material costs.
Contribution Margin of the
CAN segment decreased by $1.7 million, or 9.3%, from $18.5 million for the year ended December 31, 2021 to $16.8 million for the year
ended December 31, 2022, due to the impact of higher sales and marketing expenses due to an expanding portfolio, especially in gastrointestinal,
cardiovascular, and feminine care therapeutic areas.
On a constant currency basis,
revenue attributable to the CAN segment increased by $4.6 million, or 9.1%, to $55.6 million for the year ended December 31, 2022, gross
profit attributable to the CAN segment increased by $2.0 million, or 5.9%, to $35.9 million for the year ended December 31, 2022, and
Contribution Margin attributable to the CAN segment decreased by $1.7 million, or 9.2%, to $16.8 million for the year ended December 31,
2022.
CASAND
Revenue of the CASAND segment
increased by $12.4 million, or 22.9%, from $54.0 million for the year ended December 31, 2021, to $66.3 million for the year ended December
31, 2022, primarily as a result of (i) an increase of approximately $4.4 million in sales of new products launched during 2022, such as
Fortzink Ultra, Muvett and Dayflu, (ii) an increase of approximately $6.6 million in sales of existing brands, and (iii) an average price
increase of approximately 6% in certain countries in the region, offset by the decrease in sales of the Clinical Specialties portfolio.
Gross profit of the CASAND
segment increased by $13.9 million, or 32.1%, from $43.2 million for the year ended December 31, 2021 to $57.1 million for the year ended
December 31, 2022, primarily as a result of the increase in sales explained above, especially in Dominican Republic and changes in our
portfolio product mix.
Contribution Margin of the
CASAND segment increased by $7.8 million, or 35.8%, from $21.7 million for the year ended December 31, 2021 to $29.5 million for the year
ended December 31, 2022, primarily as a result of the increase in sales explained above, impacted by the return of events and commercial
efforts, especially in Dominican Republic to support top line growth.
On a constant currency basis,
revenue attributable to the CASAND segment increased by $12.9 million, or 23.9%, to $66.9 million for the year ended December 31, 2022,
gross profit attributable to the CASAND segment increased by $14.2 million, or 32.9%, to $57.5 million for the year ended December 31,
2022, and Contribution Margin attributable to the CASAND segment decreased by $8.0 million, or 37.0%, to $29.7 million for the year ended
December 31, 2022.
71
Diabetrics
Revenue of the Diabetrics
segment decreased by $8.0 million, or 27.8%, from $28.7 million for the year ended December 31, 2021 to $20.7 million for the year ended
December 31, 2022, primarily due to (i) the impact of currency devaluation of approximately $3.4 million, (ii) lower sales of Predial
Lex product due to entrance of new competitors with an innovative patented formulation of approximately $3.0 million, and (iii) lower
prices in a few products due to more competitors with an impact of approximately $2.3 million.
Gross profit of the Diabetrics
segment decreased by $4.1 million, or 32.5%, from $12.6 million for the year ended December 31, 2021, to $8.5 million for the year ended
December 31, 2022, due to the impact of inflation and currency devaluation which led to increase in costs.
Contribution Margin of the
Diabetrics segment decreased by $3.8 million, or 55.0%, from $6.8 million for the year ended December 31, 2021 to $3.1 million for the
year ended December 31, 2022, primarily due to the impact of the decrease in sales as described above and a change in our portfolio product
mix.
On a constant currency basis,
revenue attributable to the Diabetrics segment decreased by $5.2 million, or 18.1%, from $28.7 million for the year ended December 31,
2021 to $23.5 million for the year ended December 31, 2022, gross profit attributable to the Diabetrics segment decreased by $3.0 million,
or 23.8%, to $9.6 million for the year ended December 31, 2022, and Contribution Margin attributable to the Diabetrics segment decreased
by $3.4 million, or 49.5%, to $3.5 million for the year ended December 31, 2022.
Results by Segments After Inter-Segment Elimination,
Excluding Corporate for the years ended December 31, 2021 and December 31, 2020
Reportable segments
Results for the year ended December 31, 2021
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
(in thousands of U.S. dollars)
Revenue
120,827
155,327
50,937
53,956
28,695
Gross profit
64,879
81,165
33,869
43,236
12,564
Contribution Margin
54,106
51,921
18,536
21,703
6,848
Constant currency basis
Revenue
123,681
157,890
51,658
54,027
29,081
Gross profit
65,951
81,956
34,205
43,264
12,720
Contribution Margin
54,528
52,025
18,742
21,713
6,923
Reportable segments
Results for the year ended December 31, 2020
(1)
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
(in thousands of U.S. dollars)
Revenue
105,979
114,895
45,613
38,556
22,789
Gross profit
57,577
63,303
29,606
27,331
9,863
Contribution Margin
46,889
42,231
15,521
9,814
5,487
72
Reportable segments
Comparison of results for the
years ended December 31, 2021 and 2020
(1)
NextGel
Procaps Colombia
CAN
CASAND
Diabetics
(in thousands of U.S. dollars)
Revenue
14,848
40,432
5,324
15,400
5,906
Gross profit
7,302
17,862
4,263
15,905
2,701
Contribution Margin
7,217
9,690
3,015
11,889
1,361
Constant currency basis
Revenue
17,702
42,995
6,045
15,471
6,292
Gross profit
8,374
18,653
4,599
15,934
2,857
Contribution Margin
7,639
9,794
3,221
11,900
1,436
(1)
During
the year ended December 31, 2021, we changed our methodology for calculating our internal measurement of segment profit and loss. We
revised how cost of goods sold is measured in our businesses segments by revising the allocation of standard cost inventory variances.
As a result of such changes, the segment results for the year ended December 31, 2020 have been recast to conform with the new methodology
adopted for the year ended December 31, 2021. This change did not have any impact on our consolidated results of operations, EBITDA or
Adjusted EBITDA for the year ended December 31, 2020. For further information, see Note 8 "Segment reporting" to the Annual
Audited Consolidated Financial Statements included elsewhere in this Annual Report.
NextGel
Revenue of the NextGel segment
increased by $14.8 million, or 14.0%, from $106.0 million for the year ended December 31, 2020 to $120.8 million for the year ended December
31, 2021, primarily as a result of (i) an increase in sales in our Funtrition (gummies) product line of approximately $8.8 million due
to increased demand for our immunity gummies and probiotics product lines, the launch of new products such as Kids Multi Pro and an increase
in the numbers of product portfolio offered to important clients such as Olly, Amway, and Trace among others, and (ii) an increase in
sales of approximately $6.0 million of our iCDMO products such as Advil and Dronabinol, as well as an increase in sales in Brazil primarily
due to the launch of new products in the country.
Gross profit of the NextGel
segment increased by $7.3 million, or 12.7%, from $57.6 million for the year ended December 31, 2020 to $64.9 million for the year ended
December 31, 2021, primarily driven by the increase in sales volume and partially offset by changes in our portfolio product mix.
Contribution Margin of the
NextGel segment increased by $7.2 million, or 15.4%, from $46.9 million for the year ended December 31, 2020, to $54.1 million for the
year ended December 31, 2021, primarily as a result of the increase in sales volume described above and improved management of our sales
and marketing expenses.
On a constant currency basis,
revenue attributable to the NextGel segment increased by $17.7 million, or 16.7%, from $106.0 million for the year ended December 31,
2020 to $123.7 million for the year ended December 31, 2021. Gross profit attributable to the NextGel segment increased by $8.4 million,
or 14.5%, from $57.6 million for the year ended December 31, 2020 to $66.0 million for the year ended December 31, 2021, Contribution
Margin attributable to the NextGel segment increased by $7.6 million, or 16.3%, from $46.9 million for the year ended December 31, 2020
to $54.5 million for the year ended December 31, 2021.
Procaps Colombia
Revenue of the Procaps Colombia
segment increased by $40.4 million, or 35.2%, from $114.9 million for the year ended December 31, 2020 to $155.3 million for the year
ended December 31, 2021, primarily as a result of (i) increased demand for existing Rx and OTC products, resulting in an increase in sales
of approximately $21.7 million, including $8.2 million from Clenox, $2.9 million from Tracurion, and $1.6 million from B-Vit, among other
existing brands, and (ii) an increase of approximately $18.7 million in sales from new products, which includes $3.9 million in sales
from new products launched during 2021, such as Minoxidil and Maball.
73
Gross profit of the Procaps
Colombia segment increased by $17.9 million, or 28.3%, from $63.3 million for the year ended December 31, 2020, to $81.2 million for the
year ended December 31, 2021, primarily as a result of the increase in sales volume as described above, which was partially offset by
a change in the product portfolio mix.
Contribution Margin of the
Procaps Colombia segment increased by $9.7 million, or 23.0%, from $42.2 million for the year ended December 31, 2020 to $51.9 million
for the year ended December 31, 2021, as a result of the increase in sales as described above, which was partially offset by an increase
in sales and marketing expenses and a change in the product portfolio mix.
On a constant currency basis,
revenue attributable to Procaps Colombia increased by $43.0 million, or 37.4%, from $114.9 million for the year ended December 31, 2020
to $157.9 million for the year ended December 31, 2021, gross profit attributable to Procaps Colombia increased by $18.7 million, or 29.5%,
from $63.3 million for the year ended December 31, 2020 to $82.0 million for the year ended December 31, 2021, and Contribution Margin
attributable to Procaps Colombia increased by $9.8 million, or 23.3%, from $42.2 million for the year ended December 31, 2020 to $52.0
million for the year ended December 31, 2021.
CAN
Revenue of the CAN segment
increased by $5.3 million, or 11.6%, from $45.6 million for the year ended December 31, 2020 to $50.9 million for the year ended December
31, 2021, due to (i) an increase of approximately $4.2 million in sales of existing brands and new products launched in 2019 and 2020,
which includes an increase of approximately $1.8 million in sales from Testiton and $1.5 million in sales from Artribion, among other
products, and (ii) an increase of approximately $1.1 million in sales of new products launched during 2021, such as Glucoquick, Dolantag
and Alercet.
Gross profit of the CAN segment
increased by $4.3 million, or 14.5%, from $29.6 million for the year ended December 31, 2020 to $33.9 million for the year ended December
31, 2021, primarily as a result of (i) an increase in the revenue described above, (ii) greater inventory turnover of Farma Procaps products,
which yielded a higher margin sales mix as compared to the year ended December 31, 2020 and (iii) increased production efficiencies through
process automation and improvement in batch production management in our El Salvador facilities by standardizing packaging for similar
products, reducing unit manufacturing costs and expenses, and eliminating import tariff duties for most products imported from Colombia.
Contribution Margin of the
CAN segment increased by $3.0 million, or 19.4%, from $15.5 million for the year ended December 31, 2020 to $18.5 million for the year
ended December 31, 2021, as a result of the increase in gross profit described above and improved management of sales and marketing expenses.
On a constant currency basis,
revenue attributable to the CAN segment increased by $6.1 million, or 13.3%, from $45.6 million for the year ended December 31, 2020 to
$51.7 million for the year ended December 31, 2021, gross profit attributable to the CAN segment increased by $4.6 million, or 15.6%,
from $29.6 million for the year ended December 31, 2020 to $34.2 million for the year ended December 31, 2021, and Contribution Margin
attributable to the CAN segment increased by $3.2 million, or 20.9%, from $15.5 million for the year ended December 31, 2020 to $18.7
million for the year ended December 31, 2021.
74
CASAND
Revenue of the CASAND segment
increased by $15.4 million, or 39.9%, from $38.6 million for the year ended December 31, 2020 to $54.0 million for the year ended December
31, 2021, primarily as a result of (i) an increase of approximately $10.5 million in sales of existing brands and new products launched
in 2019 and 2020, (ii) an increase of approximately $2.8 million in sales of new products launched during 2021, such as Tapectam, Ezolium,
Cuticlin and Vitybelle, (iii) an increase in sales of approximately $1.6 million as a result of successful negotiations with distributors
in the Dominican Republic which expanded our business with new product launches and higher profitability in the country, and (iv) an increase
in revenue of approximately $0.5 million as a result of an increase in prices.
Gross profit of the CASAND
segment increased by $15.9 million, or 58.2%, from $27.3 million for the year ended December 31, 2020 to $43.2 million for the year ended
December 31, 2021, primarily as a result of the increase in sales explained above, and successful price negotiations with distributors.
Contribution Margin of the
CASAND segment increased by $11.9 million, or 121.4%, from $9.8 million for the year ended December 31, 2020 to $21.7 million for the
year ended December 31, 2021, primarily as a result of (i) the increase in revenue and gross profit described above, and (ii) our investment
in product launches and digital marketing during the year ended December 31, 2020, which started ramping up during the year ended December
31, 2021, which resulted in decreasing sales and marketing expenses while strengthening our sales for the year ended December 31, 2021.
On a constant currency basis,
revenue attributable to the CASAND segment increased by $15.4 million, or 40.0%, from $38.6 million for the year ended December 31, 2020
to $54.0 million for the year ended December 31, 2021, gross profit attributable to the CASAND segment increased by $16.0 million, or
58.5%, from $27.3 million for the year ended December 31, 2020 to $43.3 million for the year ended December 31, 2021, and Contribution
Margin attributable to the CASAND segment increased by $11.9 million, or 121.6%, from $9.8 million for the year ended December 31, 2020
to $21.7 million for the year ended December 31, 2021.
Diabetrics
Revenue of the Diabetrics
segment increased by $5.9 million, or 25.9%, from $22.8 million for the year ended December 31, 2020 to $28.7 million for the year ended
December 31, 2021, primarily as a result of the increase in the demand for our product portfolio as a result of the expansion of our products
offering in this segment to a more complete diabetes solution focus. In particular, demand for blood glucose meters, Rx, oral antidiabetic
medicine and insulin in the form of Glargine,a new product launched during the year ended December 31, 2021, continue to be our focus
and were the largest growth areas for our Diabetrics segment, enabling us to work with
Entidad Promotora de Salud
, one of the largest
government sponsored health insurance available in Colombia, and reach more patients during the year ended December 31, 2021. Additionally,
we launched diabetes therapeutic solutions and medical devices in El Salvador in April 2021, which contributed to our increased sales
for the year ended December 31, 2021.
Gross profit of the Diabetrics
segment increased by $2.7 million, or 27.3%, from $9.9 million for the year ended December 31, 2020, to $12.6 million for the year ended
December 31, 2021, primarily as a result of a shift in sales to a more profitable product portfolio mix focused on Rx products, which
was partially offset by a devaluation of the Colombian Peso of approximately 15% which we were able to mitigate due to the efficiencies
we were able to generate.
Contribution Margin of the
Diabetrics segment increased by $1.3 million, or 23.6%, from $5.5 million for the year ended December 31, 2020 to $6.8 million for the
year ended December 31, 2021, primarily as a result of the increase in revenue and the shift to a more profitable product mix described
above, which was partially offset by the increase in sales and marketing expenses due to such activities gradually returning to pre-pandemic
levels, as well as the launching of our new insulin product Insulin Glargine (Glaritus).
75
On a constant currency basis,
revenue attributable to the Diabetrics segment increased by $6.3 million, or 27.5%, from $22.8 million for the year ended December 31,
2020 to $29.1 million for the year ended December 31, 2021, gross profit attributable to the Diabetrics segment increased by $2.8 million,
or 28.5%, from $9.9 million for the year ended December 31, 2020 to $12.7 million for the year ended December 31, 2021, and Contribution
Margin attributable to the Diabetrics segment increased by $1.4 million, or 25.9%, from $5.5 million for the year ended December 31, 2020
to $6.9 million for the year ended December 31, 2021.
Non-IFRS Financial Measures
Our management uses certain
non-IFRS financial information to assess our operating performance across periods and for business planning purposes. We believe the presentation
of these non-IFRS financial measures is useful to investors as it provides additional information to facilitate comparisons of historical
operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate
our business. We use non-IFRS financial measures to budget, make operating and strategic decisions, and evaluate our performance. Below
is a description of the non-IFRS financial measures we have used in this Annual Report, including any adjustments to the IFRS financial
measures derived therefrom. We believe the non-IFRS measures should always be considered along with the related IFRS financial measures.
We have provided the reconciliations between the IFRS and non-IFRS financial measures below, and we also discuss our underlying IFRS results
throughout Item 5 of this Annual Report.
The primary non-IFRS financial
measures utilized by our management is described below and reflects how we evaluate our current and prior-year operating results. As new
events or circumstances arise, our management may alter the definitions of such measures to better reflect our financial performance or
adopt new measures in the future. In the event any of these definitions change, or if new non-IFRS financial measures are adopted by our
management, we will provide the updated definitions and present the related non-IFRS historical results on a comparable basis.
Use of Constant Currency
As exchange rates are an important
factor in understanding period-to-period comparisons, we believe the presentation of certain financial metrics and results on a constant
currency basis in addition to the IFRS reported results helps improve investors' ability to understand our operating results and
evaluate our performance in comparison to prior periods. Constant currency information is non-IFRS financial information that compares
results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as
one measure to evaluate our performance. We currently present revenue, cost of sales, gross profit, sales and marketing expenses, administrative
expenses, Contribution Margin (consolidated and by segment) and Adjusted EBITDA on a constant currency basis. We calculate constant currency
by calculating year-end period for the years ended December 31, 2022, 2021 and 2020 using prior-periods (year ended December 31, 2021
and December 31, 2020, respectively) foreign currency exchange rates. The functional foreign currencies for the primary regional markets
where we operate, such as the Colombian Peso and the Brazilian Real, were adjusted on a constant currency basis at the exchange rates
of COP $4,255.44 per U.S. $1.00 and R$5.1655 per U.S. $1.00, respectively, for the year ended December 31, 2022, COP $3,693.36 per U.S.
$1.00 and R$5.1578 per U.S. $1.00, respectively, for the year ended December 31, 2021, and COP $3,281.09 per U.S. $1.00 and R$3.9443 per
U.S. $1.00, respectively, for the year ended December 31, 2020. We generally refer to such amounts calculated on a constant currency basis
as excluding the impact of foreign exchange. These results should be considered in addition to, not as a substitute for, results reported
in accordance with IFRS. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures
used by other companies and are not measures of performance presented in accordance with IFRS.
76
EBITDA, Adjusted EBITDA and Adjusted EBITDA
Margin
We define EBITDA as profit
(loss) for the year before interest expense, net, income tax expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA
further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs incurred in
connection with the Business Combination, certain listing expenses incurred in connection with the Business Combination, certain costs
related to business transformation initiatives, certain foreign currency translation adjustments, and certain other finance costs and
other nonrecurring, nonoperational or unordinary items as the Company may deem appropriate from time to time. Adjusted EBITDA is one of
the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions.
We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance compared to other companies in the
pharmaceutical industry, as similar measures are commonly used by companies in this industry. We also report Adjusted EBITDA as a percentage
of revenue as an additional measure so investors may evaluate our Adjusted EBITDA margins on revenue.
The following table provides
a reconciliation from profit (loss) for the year to EBITDA and Adjusted EBITDA, and Adjusted EBITDA margins for the years ended December
31, 2022 and 2021.
For the year ended
December 31,
Increase/(Decrease)
2022
2021
$ Change
%
Change
(in thousands of U.S. dollars except percentages)
Income/Loss for the year
42,540
(100,863
)
143,403
n.a.
Finance income (expenses), net
(37,917
)
78,636
116,552
n.a.
Income tax expense
10,170
13,705
3,535
-25.8
%
Depreciation and amortization
16,844
15,111
1,733
11.5
%
EBITDA
31,637
6,589
25,049
380.2
%
COVID-19 impact adjustments
(1)
894
3,788
(2,894
)
-76.4
%
Business transformation initiatives
(2)
316
-
316
100
%
Foreign currency translation adjustments
(3)
15,983
4,026
11,957
297.0
%
Other finance costs adjustments
(4)
1,207
696
512
73.5
%
Transactions expenses
(5)
14,071
10,662
3,409
32.0
%
Other expenses
(6)
6,018
73,917
(67.899
)
-91.9
%
Adjusted EBITDA
70,126
99,678
(29.551
)
-29.6
%
Constant Currency Adjustments
5,210
Adjusted EBITDA on Constant Currency Basis
75,336
99,678
(24,342
)
-24.4
%
Adjusted EBITDA margin
17.1
%
24.3
%
Adjusted EBITDA margin (on Constant Currency Basis)
17.2
%
24.3
%
(1)
COVID-19 impact adjustments for the year ended December 31, 2022 primarily include expenses incurred
                                                                              for safety precautions during the pandemic, such as employees' COVID-19 testing, vaccination, office, and production
                                                                              infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the employees, other
                                                                              miscellaneous expenses resulted from COVID-19 pandemic. For the year ended December 31, 2021, these expenses primarily include: (i)
                                                                              $1.7 million expenses incurred for safety precautions during the pandemic, such as employees COVID-19 testing, vaccination, office
                                                                              and production infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the
                                                                              employees, (ii) $0.6 million operating and production expenses incurred in connection with hiring of additional employees and costs
                                                                              paid to third party agencies for such hiring, contractors and production sub-contractors in order to mitigate any decrease in
                                                                              production and operating capabilities of Procaps as a result of employees absenteeism or attrition as a result of the COVID-19
                                                                              pandemic, (iii) $1.2 million expense incurred for certain logistic arrangements to minimize Procaps employees' exposure to
                                                                              COVID-19 through arranging transportation from home to work, lodgings, face masks and PPE, and (iv) $0.4 million of other
                                                                              miscellaneous expenses resulted from COVID-19 pandemic.
(2)
Business transformation initiatives consists of non-recurring
expenses related to the launch of a new patient program platform for Diabetrics (Zutrics) during the year ended December 31, 2022.
(3)
Foreign currency translation adjustments represent the reversal
of exchange losses we recorded due to foreign currency translation of monetary balances of certain of our subsidiaries from U.S. dollars
into the functional currency of those subsidiaries as of December 31, 2022 and 2021.
(4)
Other finance costs adjustments represent non-operating expenses
we incurred, primarily including additional interests incurred due to the withholding tax obligations of certain financial institutions
outside of Colombia.
77
(5)
Transactions expenses for the year ended December 31, 2022 primarily
include: (i) consulting and legal fees and expenses incurred in connection with acquisitions and SPA termination in the amount of 12.3
million, (ii) incremental director and officer policy insurance costs in the amount of $1.0 million in connection with the Business Combination,
(iii) tail policy insurance costs incurred of $0.5 million in connection with the Business Combination, and (iv) incremental audit fees
of approximately $0.3 million incurred in connection with the Business Combination. For the year ended December 31, 2021, these expenses
primarily include: (i) capital markets advisory fees of $4.5 million incurred in connection with the Business Combination, (ii) incremental
audit fees of $2.7 million incurred in connection with the Business Combination, (iii) consulting, accounting and legal expenses of $0.4
million incurred in connection with the Business Combination, (iv) management bonuses of $0.7 million paid in connection with the consummation
of the Business Combination and the listing of the Company on the Nasdaq, (v) tail policy insurance costs incurred of $1.6 million in
connection with the Business Combination, (vi) incremental director & officer policy insurance costs incurred of $0.3 million in
connection with the Business Combination, (vii) incurred audit fees of $0.2 million to comply with the Syndicated Loan (as defined below)
requirements that will not be necessary in the future, and (viii) consulting and legal fees and expenses related to asset acquisitions
and other transaction in the amount of $0.3 million. (6) Other expenses include a write off related to Rymco impairment charge of approximately
$6.0 million for the year ended December 31, 2022. For the year ended December 31, 2021, other expenses include listing expense of $73.9
million associated with the deemed listing services received by Procaps from Union, which is the difference between the deemed costs
of the Ordinary Shares issued by the Company to Union shareholders in connection with the Business Combination, in excess of the net
assets obtained from Union, as required by IFRS 2 Share-based payments.
The following table provides
a reconciliation from profit (loss) for the year to EBITDA and Adjusted EBITDA, and Adjusted EBITDA margins for the years ended December
31, 2021 and 2020.
For the year ended
December 31,
Increase/(Decrease)
2021
2020
$ Change
% Change
(in thousands of U.S. dollars except percentages)
Income/Loss for the year
(100,863
)
(10,447
)
(90,416
)
865
%
Interest expense, net
78,636
54,489
24,147
44
%
Income tax expense
13,705
11,296
2,409
21
%
Depreciation and amortization
15,111
16,477
(1,366
)
(8
)%
EBITDA
6,589
71,815
(65,226
)
(91
)%
COVID-19 impact adjustments
(1)
3,788
5,180
(1,392
)
(27
)%
Business transformation initiatives
(2)
—
1,723
(1,723
)
Foreign currency translation adjustments
(3)
4,026
3,905
121
3
%
Other finance costs adjustments
(4)
696
1,996
(1,300
)
(65
)%
Transactions expenses
(5)
10,662
—
10,662
Listing expense
(6)
73,917
—
73,917
Adjusted EBITDA
99,678
84,619
15,059
18
%
Constant Currency Adjustments
706
—
706
Adjusted EBITDA on Constant Currency Basis
100,384
84,619
15,765
19
%
Adjusted EBITDA margin
24.3
%
25.5
%
Adjusted EBITDA margin (on Constant Currency Basis)
24.1
%
(1)
COVID-19
impact adjustments primarily include: (i) for the year ended December 31, 2021, $1.7 million ($0.5 million for the year ended December
31, 2020) expenses incurred for safety precautions during the pandemic, such as employees COVID-19 testing, vaccination, office and production
infrastructure adaptation to practice social distancing, to maintain a safe work and production environment for the employees, (ii) for
the year ended December 31, 2021, $0.6 million ($1.2 million for the year ended December 31, 2020) operating and production expenses
incurred in connection with hiring of additional employees and costs paid to third party agencies for such hiring, contractors and production
sub-contractors in order to mitigate any decrease in production and operating capabilities of Procaps as a result of employees absenteeism
or attrition as a result of the COVID-19 pandemic, (iii) for the year ended December 31, 2021, $1.2 million ($0.9 million for the year
ended December 31, 2020) expense incurred for certain logistic arrangements to minimize Procaps employees' exposure to COVID-19
through arranging transportation from home to work, lodgings, face masks and PPE, (iv) for the year ended December 31, 2020, $1.4 million
additional costs incurred to acquire certain raw materials that are essential to production due to the lockdowns of suppliers'
factories and ports of entry worldwide, and additional logistic costs due to delays, (v) for the year ended December 31, 2020, $0.9 million
expense of certain one-off financial discounts that Procaps provided to its customers, such as medicine distributors, during the COVID-19
pandemic due to financial and liquidity difficulties and customers' inability to settle invoices as a result of the effects of
the COVID-19 pandemic and governmental restrictions such as lockdowns, and (vi) for the year ended December 31, 2021, $0.4 million ($0.2
million for the year ended December 31, 2020) of other miscellaneous expenses resulted from COVID-19 pandemic.
(2)
Business
transformation initiatives consists of costs and expenses in connection with severance payments made to separate our employees for certain
business transformation initiatives implemented during the year ended December 31, 2020.
(3)
Foreign
currency translation adjustments represent the reversal of exchange losses we recorded due to foreign currency translation of monetary
balances of certain of our subsidiaries from U.S. dollars into the functional currency of those subsidiaries as of June 30, 2022 and
2021.
78
(4)
Other
finance costs adjustments represent non-operating expenses we incurred, primarily including additional interests incurred due to the
withholding tax obligations of certain financial institutions outside of Colombia.
(5)
Transactions
expenses primarily include: (i) capital markets advisory fees of $4.5 million incurred in connection with the Business Combination, (ii)
incremental audit fees of $2.7 million incurred in connection with the Business Combination, (iii) consulting, accounting and legal expenses
of $0.4 million incurred in connection with the Business Combination, (iv) management bonuses of $0.7 million paid in connection with
the consummation of the Business Combination and the listing of the Company on the Nasdaq, (v) tail policy insurance costs incurred of
$1.6 million in connection with the Business Combination, (vi) incremental director & officer policy insurance costs incurred of
$0.3 million in connection with the Business Combination, (vii) incurred audit fees of $0.2 million to comply with the Syndicated Loan
(as defined below) requirements that will not be necessary in the future, and (viii) consulting and legal fees and expenses related to
asset acquisitions and other transaction in the amount of $0.3 million.
(6)
Listing
expense of $73.9 million associated with the deemed listing services received by Procaps from Union, which is the difference between
the deemed costs of the Ordinary Shares issued by the Company to Union shareholders in connection with the Business Combination, in excess
of the net assets obtained from Union, as required by IFRS 2 Share-based payments.
Contribution Margin
We define Contribution Margin
as gross profit less selling expenses. Contribution Margin is one of the key performance indicators we use in evaluating our profitability.
We believe Contribution Margin is useful to investors in the evaluating our operating performance compared to other companies in the pharmaceutical
industry, as similar measures are commonly used by companies in this industry.
The following table provides
a reconciliation from gross profit to Contribution Margin for the years ended December 31, 2022 and 2021.
For the year ended
December 31
Increase / (Decrease)
2022
2021
$ Change
% Change
(in thousands of U.S. dollars except percentages)
Gross Profit
239,569
235,713
3,856
1.6
%
Selling Expenses
(93,566
)
(83,057
)
(10,509
)
12.7
%
Contribution Margin
146,003
152,656
(6,653
)
-4.4
%
Constant Currency Adjustments
11,258
-
-
Contribution Margin (on Constant Currency Basis)
157,261
152,656
4,605
3.0
%
The following table provides
a reconciliation from gross profit to Contribution Margin for the years ended December 31, 2021 and 2020.
For the year ended
December 31
Increase / (Decrease)
2021
2020
$ Change
% Change
(in thousands of U.S. dollars except percentages)
Gross Profit
235,713
191,314
44,399
23.2
%
Selling Expenses
(83,057
)
(69,629
)
(13,428
)
19.3
%
Contribution Margin
152,656
121,685
30,971
25.5
%
Constant Currency Adjustments
1,600
—
Contribution Margin (on Constant Currency Basis)
154,256
121,685
32,571
26.8
%
B. LIQUIDITY AND CAPITAL RESOURCES
Our principal source of liquidity
has been cash flow generated from operations, supplemented by credit arrangements with third parties. The principal uses of cash are to
fund operating and capital expenditures, business or asset acquisitions, interest payments on debt, any mandatory or discretionary principal
payment on our debt and investments in R&D.
As of December 31, 2022, our
cash and cash equivalents amounted to $43.0 million. We believe that our existing cash and cash equivalents and cash inflows from operations,
will be adequate to meet our anticipated cash needs for the next twelve months. We routinely monitor current and expected operational
requirements and financial market conditions to evaluate other available financing sources including term and revolving bank credit. In
determining our future capital requirements, we regularly consider, among other factors, known trends and uncertainties, such as the COVID-19
pandemic, and other contingencies.
79
Our ability to generate cash
is subject to our performance, general economic conditions, industry trends and other factors. To the extent that the funds received from
the Business Combination, combined with existing cash and cash equivalents are insufficient to fund our future activities and requirements,
we may need to raise additional funds through public or private equity or debt financing. Although certain of our lenders have made commitments
to make funds available to us in a timely fashion under our revolving credit agreements and overdraft facilities, if economic conditions
worsen, including due to current geopolitical issues, or new information becomes publicly available impacting the institutions'
credit rating or capital ratios, these lenders may be unable or unwilling to lend money pursuant to our existing credit facilities. Should
our outlook on liquidity requirements change substantially from current projections, we may seek additional sources of liquidity in the
future. If we issue equity securities in order to raise additional funds, substantial dilution to existing shareholders may occur. If
we raise cash through the issuance of indebtedness, we may be subject to additional contractual restrictions on our business. We cannot
assure the investor that we would be able to raise additional funds on favorable terms or at all.
Cash
Flow for the years ended December 31, 2022 and 2021
The following table summarizes
our consolidated statements of cash flows from operations for the years ended December 31, 2022 and 2021:
For the year ended
December 31,
Increase/(Decrease)
2022
2021
$ Change
(in thousands of U.S. dollars)
Cash flow provided by operating activities
14,106
37,303
(23,197
)
Cash flow used in investing activities
(28,828
)
(23,703
)
(5,125
)
Cash flow generated from (used in) financing activities
(13,627
)
58,044
(71,671
)
Net increase in cash
(28,349
)
71,644
(99,993
)
Cash flow provided by operating activities
For the year ended December
31, 2022, net cash provided by operating activities was $14.1 million, compared to $37.3 million for the year ended December 31, 2021,
a decrease of $23.2 million. The decrease was primarily the result of (i) (i) a decrease in cash flow from operating activities before
changes in the working capital, impacted by higher operating expenses, (ii) an increase in trade receivables as a result of customers
remitting payments closer to the end of the negotiated payment term due to current economic conditions and (iii) an increase in inventory
held as of December 31, 2022 compared to December 31, 2021 as a result of supply chain challenges.
Cash flow used in investing activities
For the year ended December
31, 2022, net cash used in investing activities was $28.8 million compared to $23.7 million during the year ended December 31, 2021, an
increase of $5.1 million. Net cash used in investing activities for the year ended December 31, 2022 consisted primarily of (i) $20.6
million in cash used in the acquisition of property, plant and equipment for certain strategic capacity expansion, including, the new
Miramar facility for gummy products and equipment and automation improvements in our current facilities, and (ii) $11.0 million in cash
used in the acquisition of intangibles for internal product development.
Cash flow generated from (used in) financing
activities
For the year ended December
31, 2022, net cash used in financing activities decreased by $71.7 million from net cash generated from financing activities of $58.0
million for the year ended December 31, 2021 to net cash used in financing activities of $13.6 million for the year ended December 31,
2022. The decrease was primarily due to (i) the impact of the acquisition in the prior period, resulting in net cash inflows of $85.0
million. The decrease in net cash used in financing activities was partially offset by (i) the decrease in interest paid of $7.4 million,
(ii) the decrease in payment of lease liabilities of $2.2 million, (iii) the decrease in net proceeds from borrowings of $1.7 million
and (iv) the decrease in payments to related parties of $2.0 million.
80
Cash Flow for the years ended December 31,
2021 and 2020
The following table summarizes
our consolidated statements of cash flows from operations for the years ended December 31, 2021 and 2020:
For the year ended
December 31,
Increase/(Decrease)
2021
2020
$ Change
(in thousands of U.S. dollars)
Cash flow provided by operating activities
37,303
70,920
(33,617
)
Cash flow used in investing activities
(23,703
)
(17,091
)
(6,612
)
Cash flow generated from (used in) financing activities
58,044
(40,509
)
98,553
Net increase in cash
71,644
13,320
58,324
Cash flow provided by operating activities
For the year ended December
31, 2021, net cash provided by operating activities was $37.3 million, compared to $70.9 million for the year ended December 31, 2020,
a decrease of $33.6 million. The decrease was primarily the result of (i) an increase in trade receivables together with a reduction in
the collectability of certain trade receivables between the periods, (ii) an increase inventory held as of December 31, 2021 compared
to December 31, 2020 as a result of an increase in production in anticipation of an expected increase in demand, and (iii) a decrease
in other liabilities due to the payment of certain aged payables that became due.
Cash flow used in investing activities
For the year ended December
31, 2021, net cash used in investing activities was $23.7 million compared to $17.1 million during the year ended December 31, 2020, an
increase of $6.6 million. Net cash used in investing activities for the year ended December 31, 2021 consisted primarily of $14.1 million
in cash used in the acquisition of property, plant and equipment for certain strategic capacity expansion, including, the acquisition
of an FDA approved 86,000 square feet pharmaceutical production facility located in West Palm Beach, Florida, which increased when compared
to the year ended December 31, 2020. Furthermore, we invested $8.0 million in R&D during the year ended December 31, 2021.
Cash flow generated from (used in) financing
activities
For the year ended December
31, 2021, net cash generated from financing activities increased by $98.6 million from net cash used in financing activities of $40.5
million for the year ended December 31, 2020 to net cash generated from financing activities of $58.3 million for the year ended December
31, 2021. The increase was primarily due to (i) the closing of the private placement of the Senior Notes in the amount of $112.9 million,
(ii) entering into other term loans in the amount of $193.1 million, and (iii) the consummation of the Business Combination resulting
in gross cash proceeds of $160.0 million as described above. The increase in net cash generated from financing activities was partially
offset by (i) the prepayment of a portion of the Syndicated Loan facility (as defined below) in the amount of $28.2 million, (ii) the
payment of other term loans in the amount of $224.4 million, and (iii) factoring obligations in the amount of $18.8 million.
Financial Resources
Our capital structure consists
of net debt (loans offset by cash and bank balances) and consolidated equity (comprised of issued and paid-in capital, reserves, retained
earnings and non-controlling interests). We are not subject to any externally imposed capital requirement.
81
Our primary indebtedness consists
of the outstanding balance of the Senior Notes and Syndicated Loan (defined below). The Senior Notes, the Syndicated Loan and certain
other loans include certain covenants that obligate the borrower and guarantors thereunder to comply with a series of financial ratios,
consisting of a debt to EBITDA ratio and EBITDA interest coverage ratio as described below under the heading "—Debt Financing
and Borrowings—Senior Notes—Covenants." The Syndicated Loan includes certain covenants that obligate the borrower and
co-debtors thereunder to comply with a series of financial ratios, consisting of a debt to EBITDA ratio, short-term leverage ratio and
EBITDA interest coverage ratio as described below under the heading "—Debt Financing and Borrowings—Syndicated Loan—Covenants."
These financial ratios serve as local management parameters for both arrangements.
We analyze and review our
capital structure on a quarterly basis. As part of this review, we consider the cost of capital and the risks associated with each class
of capital.
As of December 31, 2022, 2021
and 2020 we had total borrowings of $285.9 million, $253.4 million and $454.5 million, respectively.
Debt Financing and Borrowings
The table below summarizes
our outstanding interest-bearing liabilities for year ended December 31, 2022.
For the year
ended
December 31,
2022
(in thousands of U.S. dollars)
Syndicated Loan
38,626
Other term loan
95,720
Lease liabilities
34,192
Factoring obligations
2,317
Bank overdrafts
80
Senior Notes
115,000
Total Interest bearing liabilities
285,935
Syndicated Loan
On November 20, 2018, Procaps S.A. entered into
a syndicated term loan agreement the "Syndicated Loan Agreement") with the following banks: Portion in Colombian pesos (COP)
- Davivienda and Bancolombia; US dollar portion (USD) - Banco de Credito del Peru, Bancolombia Panama and Banco Sabadell. The total value
of the syndicated loan amounts to $200,434 million COP (portion in COP) and $35 million USD (portion in USD), Fiduciaria Bancolombia acts
as the agent of the loan. C.I. Procaps S.A., Procaps S.A. de C.V, Biokemical S.A., Pharmarketing S.A. (Panama), Pharmarketing Salvador
S.A. de C.V., Pharmarketing S.A. (Guatemala S.A.), C.D.I. Salvador S.A. de C.V., C.D.I. Nicaragua S.A., C.D.I. Guatemala S.A., Pharmarketing
Dominicana SRL, and Pharmarketing Costa Rica S.A., act as co-debtors, while Pharmayect S.A., Inversiones Crynssen S.A.S., Inversiones
Ganeden S.A.S., Inversiones Henia S.A.S., Inversiones Jades S.A.S., and Industrias Kadima S.A.S., act as guarantors.
The resources obtained were
used for advance payment and/or novation of certain obligations to be refinanced. The conditions of the loan had a term of 5 years for
installment payments and the interest rates agreed are as follows: IBR + 5.30% for the portion in COP and Libor + 4.80% for the USD portion.
The loans received by Banco
de Crédito del Peru and Banco Sabadell were precanceled during the month of November 2021, due to a new agreement and improvement
in terms and conditions with Senior Notes.
As of December 31, 2022, the
total amount outstanding under the Syndicated Loan was $38.6 million.
Covenants
The Syndicated Loan contains
covenants that, among other things, restrict, subject to certain exceptions, the borrower and co-debtors' ability to change its
line of business; incur additional indebtedness resulting in a Debt/EBITDA Ratio (as defined below) above 3.5; enter into derivative transactions
(except for those in connection with the purchase of raw materials or for the purpose of mitigating interest or exchange rate risks);
sell or transfer title to operating assets; pay dividends and distributions; engage in mergers and consolidations; amend agreements material
to the operations of the borrower and co-debtors; enter into any financial or operating lease obligation with an option to purchase in
an aggregate amount of over COP $85,000,0000,0000; change our fiscal year reporting; engage in certain transactions with affiliates; enter
into any joint venture or similar agreements. For purposes of the Syndicated Loan, EBITDA is calculated as income from sales and services,
less
(i) sales and production costs,
less
(ii) operating expenses,
less
(iii) administrative expenses,
plus
(iv)
depreciation,
plus
(ii) amortizations,
plus
(iii) provisions, and l
ess
(iv) portfolio write-offs.
82
The Syndicated Loan also contains
change-of-control provisions and certain customary affirmative covenants and events of default. The Syndicated Loan also requires compliance
with the following ratios: (i) a pro forma consolidated debt of the borrower and the co-debtors to pro forma consolidated EBITDA for the
last twelve months of the borrower and co-debtors ratio ("Syndicated Loan Debt/EBITDA Ratio") of 3.5 or less, measured every
June 30 and December 30; (ii) a short-term leverage ratio (the "Syndicated Loan Short-Term Leverage Ratio Covenant") (calculated
as the pro forma consolidated short-term debt of the borrower and the co-debtors divided by pro forma consolidated EBITDA for the last
twelve months of the borrower and co-debtors) of less than 1.0, calculated at the end of each semester; and (iii) an EBITDA interest coverage
ratio (the "Syndicated Loan Interest Coverage Ratio") (calculated as the pro forma consolidated EBITDA for the last twelve
months of the borrower and co-debtors divided by the pro forma consolidated financial expenses of the borrower and the co-debtors) of
greater than or equal to 3.0, calculated at the end of each semester.
The Syndicated Loan establishes
that, in the event of breach of covenants by the debtor, the lenders shall be entitled to declare early maturity of the debts.
Syndicated Loan Waiver
On May 2, 2023, we
entered into the Syndicated Loan Waiver Agreement which relates to certain covenant noncompliance under the Syndicated Loan.
Pursuant to the terms of the Syndicated Loan, we informed the lenders that the following events of defaults have occurred and were
continuing as of the date of the of the Syndicated Loan Waiver Agreement (collectively, the "
Specified Syndicated Loan
Defaults
"):
(i)
the event of default arising as a result of the Syndicated Loan Debt/EBITDA Ratio for the twelve months
ending December 31, 2022 being in excess of 3.50:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the "
Syndicated
Loan Debt/EBITDA Ratio Covenant
");
(ii)
the event of default arising as a result of the Syndicated Loan Interest Coverage Ratio for the twelve
months ending December 31, 2022 being less than 3.00:1.00), in default of the applicable covenant set forth in the Syndicated Loan (the
"
Syndicated Loan Interest Coverage Ratio Covenant
");
(iii)
the event of default arising as a result of the Syndicated Loan Short-Term Leverage Ratio being in excess
of 1.00:1. as at December 31, 2022, in default of the covenant set forth in the Syndicated Loan (the "
Syndicated Loan Short-Term
Leverage Ratio Covenant
"); and
(iv)
the event of default arising as a result of our failure to deliver to the lenders, within the time period
specified in the Syndicated Loan, written notice of the events of default described in the foregoing clauses (i) through (iii) as required
by the Syndicated Loan.
Pursuant to the Syndicated Loan Waiver Agreement, the lenders (a) with
effect from December 31, 2022, waived the Specified Syndicated Loan Defaults, (b) prospectively waived our potential non-compliance by
with the Syndicated Loan Debt/EBITDA Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated Loan
Debt/EBITDA Ratio Covenant as at such dates does not exceed 4.50:1.00, (c) prospectively waived our potential non-compliance with the
Syndicated Loan Interest Coverage Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated Loan
Interest Coverage Ratio Covenant as at such dates is not less than 1.80:1.00, and (d) prospectively waived our potential non-compliance
with the Syndicated Loan Short-Term Leverage Ratio Covenant as at June 30, 2023, so long as the ratio calculated pursuant to the Syndicated
Loan Short-Term Leverage Ratio Covenant as at such dates does not exceed 1.60:1.00.
83
The foregoing summary of the
Syndicated Loan Waiver Agreement is qualified in its entirety by the full text of the Syndicated Loan Waiver Agreement, which is filed
as Exhibit 4.17 to this Annual Report.
As a result of our noncompliance
with the aforementioned covenants, the approximately $19.7 million unpaid principal balance previously classified as non-current borrowings
has been reclassified to current borrowings within the consolidated financial statements included in this Annual Report.
Other Term Loans
The table below summarizes
the terms of our other term loans as of December 31, 2022.
Currency
Range of Interest
Maturity Year
Outstanding
Balance for
the year
ended
December 31,
2022
(in thousands of U.S. dollars)
COP
IBR+ 5.0%, DTF+ 3%, 13.99%-25.3%
2022-2025
$
9,549
COP
IBR+2.25%-10.2%
2022-2025
$
21,267
SOL
8.0% - 12.79% (Fixed)
2022-2024
$
6,837
REAIS
9.84% - 18% N.A.
2023-2024
$
2,176
USD
SOFR+ (4.80%-5.80%)
2023
$
23,454
USD
6.36%-16.8%
2022-2025
$
32,437
Total
$
95,720
In June 2022, Procaps, S.A. entered into the Additional
Loan Agreement with a lender to borrow approximately $8.7 million. The Additional Loan Agreement contained certain financial ratio covenants.
As of December 31, 2022, we were not in compliance with certain of
the covenants. On March 28, 2023, we entered into a waiver with the lender where the lender agreed to (i) waive our noncompliance with
the covenant as of December 21, 2022 and (ii) prospectively waive our potential noncompliance with the covenants as of, June 30, 2023.
As a result of our noncompliance
as of December 31, 2022, the $4,490 unpaid principal balance previously classified as a non-current borrowings under the credit agreement
has been reclassified to current borrowings within the consolidated financial statements included in this Annual Report.
Lease Liabilities
We had $34.2 million of lease liabilities
as of December 31, 2022.
Factoring Obligations
We have accounts receivable
factoring arrangements with non-related third-party financial institutions (the "Factors"). Pursuant to the terms of the arrangements,
we sell to the Factors certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. An administrative
fee per invoice is charged on the gross amount of accounts receivables assigned to the Factors, and interest is calculated based on an
annual average variation of USD LIBOR and Colombian DTF, as well as fixed rates, ranging from approximately 7.2% in USD denominated arrangements
to approximately 24.6% in COP denominated arrangements. The total amount factored on a non-recourse basis and excluded from accounts receivable
was $2.3 million as of December 31, 2022.
84
Put Option Agreements
Crynssen and the Minsky Family
granted IFC a put option pursuant to that certain put option agreement entered into in 2017 (the "IFC Put Option Agreement"),
whereby Crynssen and the Minski Family agreed to purchase up to 432,271 Crynssen Ordinary Shares held by IFC upon IFC's delivery
of a put notice for a price sufficient to provide IFC with an internal rate of return of 12% on IFC's investment in Crynssen, beginning
on the eighth anniversary of IFC's subscription of Crynssen Ordinary Shares and ending on the earlier of the eleventh anniversary
of such date or the consummation of a qualified initial public offering.
Crynssen and the Minsky Family
also granted Hoche a put option pursuant to that certain put option agreement dated December 23, 2019 (the "Hoche Put Option Agreement"),
whereby Crynssen and the Minski Family agreed to purchase up to all of Hoche's Crynssen Ordinary Shares upon Hoche's delivery
of a put notice for a price sufficient to provide Hoche with an internal rate of return of 12% on Hoche's investment in Crynssen,
beginning on the eight anniversary of September 1, 2017, and ending on the earlier of the eleventh anniversary of such date or the consummation
of a qualified initial public offering.
We classified and measured
the obligation to buy back Crynssen Ordinary Shares from IFC and Hoche at amortized cost and recognized finance expense using the effective
interest rate method, including transaction costs.
Effective as of September
29, 2021, immediately after the Closing of the Business Combination, the IFC Put Option Agreement and the Hoche Put Option Agreement were
terminated and cancelled. The termination of the put option agreements resulted in the reclassification of the associated liabilities
into the Company's equity, along with a loss in income statement as the difference between such associated liabilities and the fair value
of a portion of the Ordinary Shares received by IFC and Hoche as part of the Business Combination. The one-time loss on termination of
such put options in the amount of $35.9 million aligns the carrying value of such put options on the termination date to the fair value
of the Ordinary Shares issued.
Bank Overdrafts
We have overdraft facilities
available that we use to support our cash management operations. We had approximately $0.1 million of overdrafts and credit card liabilities
outstanding as of December 31, 2022.
Senior Notes
On November 12, 2021, the
Company closed a private placement offering of $115.0 million aggregate principal amount of 4.75% guaranteed senior notes issued by Procaps,
S.A., a subsidiary of the Company, due November 12, 2031, pursuant to a note purchase and guarantee agreement (the "NPA")
entered into on November 5, 2021 with The Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring
Life & Health Insurance Company, Inc. and Cigna Health and Life Insurance Company Inc.
The Senior Notes are the senior
unsecured obligations of Procaps, S.A. and unconditionally guaranteed by the Company and the following subsidiaries of the Company: Crynssen,
Procaps, S.A., Diabetrics Healthcare, Pharmayect S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Indústria e Comércio
Ltda., and Sofgen Pharmaceuticals LLC.
The Senior Notes were issued
in a single tranche, with a final maturity of 10 years and a principal amortization schedule of five annual equal payments commencing
on the sixth anniversary of the closing (
i.e.
years 6 to 10), resulting in a weighted average life of 8 years. We used the net
proceeds from the issuance of the Senior Notes primarily to repay certain of its and its subsidiaries existing indebtedness in full (including
the syndicated loans granted by Banco de Sabadell S.A. Miami Beach and Banco de Crédito del Perú), as well as for general
corporate purposes.
85
In connection with the expected
closing of the Acquisition and associated borrowings under the Credit Agreement (as described below), we intended to prepay in full the
Senior Notes, together with interest accrued thereon to the date of such prepayment and the make-whole amount determined for the date
of such prepayment pursuant to the NPA (the "Notes Payoff"). We previously expected that the closing of the Acquisition would
occur on October 14, 2022, and accordingly, pursuant to the requirements of the NPA, delivered advance notice to the noteholders of the
Notes Payoff to occur on such date. As a result of a delay and subsequent termination in the closing of the Acquisition, the expected
borrowing under the Credit Agreement did not occur, and we were unable to complete the Notes Payoff on the date scheduled, which technically
constituted an event of default under the NPA. The noteholders informed us that they would not exercise any rights or remedies under the
NPA due to such technical default pending entry into an amendment to the NPA formally waiving such default, and we and the noteholders
executed temporary waivers in connection therewith. On November 1, 2022, we and the noteholders entered into an amendment to the NPA (the
"NPA Amendment"), formally waiving the technical default and which also (i) provided us with the ability, until November 30,
2022, to prepay the Senior Notes with two business days' notice, (ii) provided that the make-whole amount under the NPA shall in
no case be less than USD 1,488,204.60, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022, a
waiver fee of 3.75% per annum on the outstanding principal amount of Senior Notes outstanding shall (a) accrue from (and including) October
14, 2022 and (b) be payable to the noteholders on the 12th day of February, May, August and November in each year (commencing on February
12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and payable in
accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022, therefore
triggering the 3.75% per annum waiver fee on the outstanding principal amount of Senior Notes, raising the interest rate from 4.75% to
8.50%.
Covenants
The Senior Notes contain change-of-control
provisions pertaining to Procaps, S.A. and certain customary affirmative and negative covenants and events of default. In addition, the
Senior Notes require us, Procaps, S.A., and the other obligors thereunder to comply with the following financial ratios: (i) consolidated
total debt of the Company, Procaps, S.A., and the other obligors thereunder to consolidated EBITDA for the last twelve months (the "NPA
Debt/EBITDA Ratio") of 3.50:1.00 or less, measured at certain quarterly determination dates and (ii) an EBITDA interest coverage
ratio (the "NPA Interest Coverage Ratio") (calculated as the consolidated EBITDA for the last twelve months of the Company,
Procaps, S.A., and the other obligors thereunder divided by the consolidated interest expenses of the Company, Procaps, S.A., and the
other obligors thereunder) in excess of, or equal to, 3.00:1.00, calculated at certain dates of determination.
The Senior Notes also contain
covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company, Procaps, S.A. and the other obligors
thereunder to change lines of business; incur additional secured indebtedness; permit subsidiaries to incur additional indebtedness; sell
or transfer title to operating assets; pay dividends and distributions; engage in mergers and consolidations; create liens on assets;
guarantee, indemnify or assume the liabilities of third parties; change our fiscal year reporting; or engage in certain transactions with
affiliates. In addition, the Senior Notes contain a covenant that incorporates into the Senior Notes any more restrictive financial, affirmative
or negative covenants, information reporting requirements or events of default from any other credit facilities in excess of $25,000,000
(including from the Syndicated Loan facility, as in effect on February 28, 2022, see "
Liquidity and Capital Resources—Syndicated
Loan
") entered into by the Company, Procaps, S.A., or any of our subsidiaries. For purposes of the Senior Notes, EBITDA is calculated
as income from sales and services, less (i) sales and production costs, less (ii) operating expenses, less (iii) administrative expenses,
plus (iv) depreciation, plus (ii) amortizations, plus (iii) provisions, and less (iv) portfolio write-offs.
Senior Notes Waiver
On March 31, 2023, we entered into the NPA Waiver Agreement which relates
to certain covenant noncompliance under the NPA. Pursuant to the terms of the NPA, we informed the Noteholders that the following events
of defaults have occurred and were continuing as of the date of the of the NPA Waiver Agreement (collectively, the "
Specified
NPA Defaults
"):
(v)
the event of default arising as a result of the NPA Debt/EBITDA Ratio for the twelve months ending December
31, 2022 being in excess of 3.50:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the "
NPA Debt/EBITDA
Ratio Covenant
");
(vi)
the event of default arising as a result of the NPA Interest Coverage Ratio for the twelve months ending
December 31, 2022 being less than 3.00:1.00, in default of the applicable covenant set forth in the Syndicated Loan (the "NPA
Interest
Coverage Ratio Covenant
");
(vii)
the event of default arising as a result of the short-term leverage being in excess of 1.00:1.00 as at
December 31, 2022, in default of the covenant described in, and incorporated into the NPA pursuant to, that certain Most Favored Lender
Notice dated April 7, 2022 and delivered to the Noteholders on or about such date (the "NPA
Short-Term Leverage Ratio Covenant
");
and
(viii)
the event of default arising as a result of our failure to deliver to the Noteholders, within the time
period specified in the NPA, written notice of the events of default described in the foregoing clauses (i) through (iii) as required
by the NPA.
86
Pursuant to the NPA Waiver Agreement, the Noteholders (a) with effect
from December 31, 2022, waived the Specified NPA Defaults, (b) prospectively waived our potential non-compliance by with the NPA Debt/EBITDA
Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated pursuant to the NPA Debt/EBITDA
Ratio Covenant as at such dates does not exceed 4.00:1.00, (c) prospectively waived our potential non-compliance with the NPA Interest
Coverage Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated pursuant to the NPA
Interest Coverage Ratio Covenant as at such dates is not less than 2.20:1.00, and (d) prospectively waived our potential non-compliance
with the NPA Short-Term Leverage Ratio Covenant as at March 31, 2023, June 30, 2023 and September 30, 2023, so long as the ratio calculated
pursuant to the NPA Short-Term Leverage Ratio Covenant as at such dates does not exceed 1.60:1.00.
The foregoing summary of the
NPA Waiver Agreement is qualified in its entirety by the full text of the NPA Waiver Agreement, which is filed as Exhibit 4.18 to this
Annual Report.
As a result of our noncompliance
with the aforementioned covenants, the $115 million unpaid principal balance previously classified as non-current borrowings has been
reclassified to current borrowings within the consolidated financial statements included in this Annual Report.
The table below sets forth
the outstanding balance and certain other information on the Senior Notes as of December 31, 2022.
Currency
Range of
Interest
Maturity
Year
Outstanding
Balance
as of
    December 31,
2022
The Prudential Insurance Company of America
USD
8.50% (Fixed)
2031
$
60,020
Prudential Annuities Life Assurance Corporation
USD
8.50% (Fixed)
2031
$
29,980
Healthspring Life & Health Insurance Company, Inc
USD
8.50% (Fixed)
2031
$
18,350
CIGNA Health and Life Insurance Company
USD
8.50% (Fixed)
2031
$
6,650
Total
$
115,000
Bridge Facility
On October 11, 2022, the Company
and certain of its subsidiaries entered into a credit agreement with Bank of New York Mellon, as administrative and collateral agent (collectively,
the "Agent"), BofA Securities, Inc. ("BofA Securities"), JPMorgan Chase Bank, N.A. ("JPMorgan") and
Morgan Stanley Senior Funding, Inc. ("Morgan Stanley", and together with BofA Securities and JPMorgan, the "Joint Lead
Arrangers and Bookrunners"), as the joint lead arrangers and bookrunners, and the lenders from time to time party thereto (the "Bridge
Credit Agreement") to finance the cash portion of the purchase price of the Acquisition, to pay fees and expenses related to the
Bridge Facility, to prepay, refinance and/or redeem certain existing indebtedness, and to the extent any proceeds remained after applying
to the foregoing, to use for working capital and other general corporate purposes. The Credit Agreement terms are consistent with the
terms of the Commitment Letter. The Credit Agreement provided for a bridge loan of up to $485 million (the "Bridge Facility"),
which would have been guaranteed by each existing and future direct and indirect material subsidiary of the Company, and the target entities
subject to the Acquisition and each of their subsidiaries upon the closing of the Acquisition.
87
In connection with the termination
of the Acquisition, we advised the Joint Lead Arrangers and Bookrunners under the Bridge Facility of our desire to terminate the Bridge
Facility and related documentation and pay all outstanding obligations owing thereunder, and on January 10, 2023, the Company and certain
of its subsidiaries, the Agent, the Joint Lead Arrangers and Bookrunners, J.P. Morgan Securities LLC ("JPMorgan Securities"),
Morgan Stanley & Co. LLC ("Morgan Stanley & Co") and the lenders party thereto entered into a termination letter in
connection therewith (the "Termination Letter"). Pursuant to the Termination Letter, (i) each of the loan documents in connection
with the Bridge Facility, (ii) the Commitment Letter dated as of May 16, 2022 among Bank of America, N.A. ("Bank of America"),
the Joint Lead Arrangers and Bookrunners and the Company and (iii) the Engagement Letter dated as of May 16, 2022 among Bank of America,
BofA Securities, JPMorgan Securities, Morgan Stanley & Co and the Company, were terminated and all outstanding obligations owed by
the Company thereunder were paid in full in the amount of $5,719,426.58.
Contractual Obligations and Commitments
A summary of our enforceable
and legally binding obligations as of December 31, 2022 are set forth in the following table. Some of the amounts included in this table
are based on management's estimates and assumptions about these obligations, including the duration, the possibility of renewal,
anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, the enforceable
and legally binding obligations actually paid in future periods may vary from the amounts reflected in the table.
As of December 31, 2022
(U.S. dollars in thousands)
2023
2024-2025
2026-2027
After 2027
Total
Long-term debt obligations
(1)
276,203
3,642
563
-
280,408
Finance lease obligations
(2)
11,174
6,629
5,962
22,236
46,001
Trade and other payables
90,187
90,187
Amounts owed to related parties
2,914
-
-
-
2,914
Total
380,258
10,271
6,525
22,236
419,290
(1)
Represents gross maturities of our long-term debt obligations, excluding finance lease obligations as of December 31, 2022, including the interest payments. Estimated future interest payments on our variable-rate debt obligations were calculated using the interest rates in effect as of December 31, 2022. As a result of our noncompliance with certain debt ratio covenants as of December 31, 2022, $139,155 is reflected as payable in 2023 and classified as a current liability. Refer to the disclosure above regarding the Waivers as well as Notes 19, 2.1 and 28 in the Annual Audited Consolidated Financial Statements included in this Annual Report for further details regarding the noncompliance and the Waivers.
(2)
Represents maturities of our finance lease obligations included within long-term debt as of December 31, 2022, including interest payments. Estimated future interest payments on our variable-rate debt obligations were calculated using the interest rates in effect as of December 31, 2022.
Deferred tax liabilities were
$4.0 million as of December 31, 2022. This amount is not included in the contractual obligations table above because we believe this presentation
would not be meaningful. Deferred tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities
and their book basis, which will result in taxable amounts in future years when the book basis is settled. The results of these calculations
do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred tax liabilities
as payments due by period could be misleading because this scheduling would not relate to liquidity needs.
Our management believes that
our financial resources and expected future cash flows from operating activities shall be sufficient to satisfy our contractual obligations
and commitments.
Off-Balance Sheet Arrangements
There is no commitments or
obligations, including contingent obligations, arising from off-balance sheet arrangements with unconsolidated entities or persons that
have a material current effect, or that are reasonably likely to have a material future effect, on our financial condition, changes in
financial condition, net sales or expenses, results of operations, liquidity, capital expenditures, or capital resources.
88
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Our R&D activities are
directed primarily toward the development of new products for corporate brands and development services for third parties, as well as
the improvement of our manufacturing processes and delivery technologies. Our R&D platform is decentralized with research centers
in Colombia (Barranquilla and Bogotá), Brazil (Cotia, SP); and Florida, USA (West Palm Beach). We employ over 300 scientists, technicians
and skilled personnel in R&D and innovation. Our main R&D hub at Barranquilla, Colombia, employs over 280 scientists, technicians
and skilled personnel in processes such as formulation, analytical, manufacturing, packaging, as well as technological innovation related
to ingredients, formulas and equipment.
Our corporate culture focuses
on innovation and R&D. We rely on a combination of know-how, trade secrets, patents, copyrights, trademarks, and other intellectual
property, nondisclosure and other contractual provisions, and technical measures to protect a number of our products, services, processes
and intangible assets.
We have applied in Colombia,
the United States and certain other countries for registration of a number of trademarks, service marks, and patents, some of which have
been registered and issued, and also hold common law rights in various trademarks and service marks.
For more information, see "Item
4: Information on the Company."
D. TREND INFORMATION
Impact of COVID-19
The consequences from the
COVID-19 pandemic have continued to affect Latin America through 2022 and 2021, including the pharmaceutical industry. We believe pharmaceutical
companies which offered positive solutions to consumer demands during the COVID-19 pandemic continue to thrive in both local and regional
markets. The personal physician workforce has begun to return to work after periods of quarantine, resulting in an increased demand for
Rx drugs during part of the year ended December 31, 2022, in particular for those related to chronic and certain acute therapies. Sales
of COVID-19 related products declined to pre-pandemic levels during 2022, and other sales of non-COVID-19 related products increased during
the year ended December 31, 2022, such as OTC pharmaceutical products. Although supplements and analgesics continued to thrive, Clinical
Specialties products such as anesthetics and anticoagulants have experienced a decline in sales during 2022.
In-person physician consultations
have returned to pre-pandemic levels during 2022, with much focus on medical training. In-person meetings and events involving physician
groups and associations began in Colombia during the first half of 2021 through in-person medical events, allowing us to exhibit our brands
more effectively. These events were primarily initiated regionally but have an international presence. Nonetheless, continuous efforts
to deploy new technologies such as tele-health and other innovative technological solutions are a priority, for enabling open and better
ways of communication between patients and doctors.
Despite these challenges,
we believe our ability to respond to the changes in consumer demand during the COVID-19 pandemic and its aftermath, efforts to maintain
close communications with physicians, and our reinforcement of key brands has allowed us to increase our market share of certain Farma
Procaps and Colmed OTC products during 2022 in terms of total sales within product category.
89
Research and Development for Pharmaceuticals
Industry
Continued strengthening in
early-stage development pipelines for drugs and biologics, compounded by increasing clinical trial breadth and complexity, support our
belief in the attractive growth prospects for development of delivery solutions. Large companies are in many cases reconfiguring their
R&D resources, increasingly involving the use of strategic partners for important outsourced functions. Additionally, an increasing
portion of compounds in development are from companies that do not have a full R&D infrastructure, and thus are more likely to need
strategic development solutions partners.
We have invested $18.1 million,
$16.0 million and $15.8 million in R&D for the years ended December 31, 2022, 2021 and 2020, respectively,
For more information, see "Item
4: Information on the Company."
Aging Population in Latin America
Aging population demographics
in Latin American countries, combined with health care reforms in many global markets that are expanding access to treatment to a greater
proportion of their populations, will continue to drive increases in demand for pharmaceuticals, biologics, and consumer health products.
Increasing economic affluence in developing regions will further increase demand for healthcare treatments, and we are taking active steps
to allow us to participate effectively in these growth regions and product categories. In accordance with a report by the United Nations
Department of Economics and Social Affairs, in 1975, 41% of the population in Latin America was 14 years of age or younger, 55% was between
15 and 64 years of age and 4% was 65 years of age or older, and in 2000, 31% of the population was 14 years of age or younger, 63% was
between 15 and 64 years of age and 6% was 65 years of age or older. Pursuant to the report, it is estimated that by 2025, 22% of the population
will be 14 years of age or younger, 68% will be between 15 and 64 years of age and 10% will be 65 years of age or older, and by 2050,
16% of the population will be 14 years of age or younger, 63% will be between 15 and 64 years of age and 21% will be 65 years of age or
older.
We believe the market access
and payor pressures our customers face, global supply chain complexity, and the increasing demand for improved treatments will continue
to escalate the need for product differentiation, improved outcomes, and treatment cost reduction, all of which can often be addressed
using our advanced delivery technologies.
Fast Growing Pharmaceuticals Market in Latin
America
We participate in the global
pharmaceutical and biotechnology industry, which has been estimated to generate more than $1 trillion in annual revenue over the next
eight years following 2020, including, but not limited to, the prescription drug and biologic sectors as well as consumer health, which
includes the OTC and vitamins and nutritional supplement sectors. Innovative pharmaceuticals continue to play a critical role in the global
market, while the share of revenue due to generic drugs and biosimilars is increasing in both developed and developing markets. Sustained
developed market demand and rapid growth in emerging economies such as Latin America is driving the consumer health product growth rate
to more than double that for pharmaceuticals. Payors, both public and private, have sought to limit the economic impact of pharmaceutical
and biologics product demand through greater use of generic and biosimilar drugs, access and spending controls, and health technology
assessment techniques, favoring products that deliver truly differentiated outcomes. Additionally, we believe the demand for innovative
delivery systems will increase due to growing healthcare expenditures globally and the implementation of government reforms to improve
the regulatory environment in Latin America and intellectual property protection.
90
Large and Fast-growing CDMO (Contract Manufacturing
Organization) Market
We participate in the CDMO
market which, according to independent third-party industry reports, is estimated to continue its growth of 6.4% over the next four years.
It is also estimated that outsourced pharmaceutical manufacturing will continue its growth of 6.5% over the next four years. We believe
there is a high potential to increase outsourced pharmaceutical manufacturing worldwide since only approximately 26% of global pharmaceutical
manufacturing being outsourced. The CDMO industry is highly fragmented, with the top 10 manufacturers holding less than a 20% market share
in terms of revenue, creating opportunities for inorganic growth through consolidation and entry into adjacent markets.
Healthcare Expenditures
We participate in global pharmaceutical
and biotechnology industry; healthcare expenditure in Latin America is expected to outgrow other markets, including the European and American
pharmaceutical and biotechnology markets. We believe this increase in expenditure is primarily driven by an increasing middle class across
Latin America coupled with a rapidly aging population, with the percentage of individuals over 65 years of age expected to increase from
6% in 2020 to 21% by 2050.
Foreign Exchange Rates
Our operating network is global,
and, as a result, we have substantial revenues and operating expenses that are denominated in currencies other than the U.S. dollar, the
currency in which we report our financial results, and are therefore influenced by changes in currency exchange rates. For the years ended
December 31, 2022 and 2021, approximately 55% and 48% of our revenue, respectively, was generated in currencies other than the U.S. dollar.
Functional foreign currencies for certain regional markets such as the Colombian Peso and Brazilian Real, where we have significant operations,
have experienced significant decrease in value when compared with the U.S. dollar in 2022 and for the year ended December 31, 2021, as
a result of several factors, such as the COVID-19 pandemic, which caused economic distress in those regional markets, significant fluctuation
in oil prices, supply chain challenges, and the political climate and uncertainty in such markets. As a result, the devaluation of the
Colombian Peso and Brazilian Real had a negative impact on our results of operations for the years ended December 31, 2022 and 2021.
E. CRITICAL ACCOUNTING ESTIMATES.
For discussion on our critical
accounting estimates see Note 4 "Critical accounting judgements and key sources of estimation uncertainty" in our Annual Audited
Consolidated Financial Statements, included elsewhere in this Annual Report.
91
ITEM 6.
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
A. Directors and Senior Management
Set forth below is information
concerning our current officers and directors. Our executive officers are appointed by the board of directors to serve in their roles.
Each executive officer is appointed for such term as may be prescribed by the board of directors or until a successor has been chosen
and qualified or until such officer's death, resignation or removal. The business address for each director is provided below.
Name
Age
Position Held
Committees
Ruben Minski
(1)
71
Chairman of the Board
Mergers and Acquisitions
Jose Minski
(2)
64
Director
Mergers and Acquisitions (Chair)
Alberto Eguiguren Correa
(3)
58
Director
Luis Fernando Castro
(4)
56
Director
Compensation (Chair), Nominating (Chair) and Audit
Alejandro Weinstein
(5)
65
Director
Kyle P Bransfield
(6)
38
Director
Mergers and Acquisitions and Audit
David Yanovich
(7)
52
Director
Compensation, Nominating and Audit (Chair)
(1)
The business address of Mr. Ruben Minski is Calle 80 No. 78B-201, Barranquilla, Atlántico, Colombia.
(2)
The business address of Mr. Jose Minski is 21500 Biscayne Boulevard, Suite 600, Aventura, Florida 33180.
(3)
The business address of Mr. Eguiguren is Avenida El Bosque Norte 0177, Oficina 1102, Las Condes, Santiago, Chile.
(4)
The business address of Mr. Castro is Calle 77 No.59-35, Centro Empresarial Las Americas 3, Oficina 1303, Barranquilla, Atlántico, Colombia.
(5)
The business address of Mr. Weinstein is 21 Chesham Place, SW1XHG, London, United Kingdom.
(6)
The business address of Mr. Bransfield is 1425 Brickell Ave., #57B, Miami, FL 33131
.
(7)
The business address of Mr. Yanovich is Calle 80 No. 78B-201, Barranquilla, Atlántico, Colombia.
Background of Our Directors
The following is a brief biography
of each of our directors:
Ruben Minski.
Mr.
Ruben Minski has been our founder and Chief Executive Officer since 1976. Mr. Ruben Minski received a Chemical Engineering degree from
Northeastern University in Boston, Massachusetts. He also participated in the Owners/President Management program at the Harvard Business
School, and the CEOs' II: The Next Step in Strategic Management and the CEOs' Management Programs at Northwestern University's
Kellogg School of Management. Currently, he is a member of our board of directors and the board of directors of Crynssen, Union, Gelco
S.A.S., Descafeinadora Colombiana S.A. — Descafecol and Endeavor Colombia. Ruben Minski is the brother of Jose Minski, a member
of our board of directors and Chairman of our Merger and Acquisition Committee.
Jose Minski.
Mr.
Jose Minski holds a BS in Management Engineering from Worcester Polytechnic Institute and a Certificate in Mergers and Acquisitions from
Northwestern University's Kellogg School of Management. He has more than 35 years of experience working in the health, wellness
and consumer goods sectors. He is a co-founder of WM Partners LP, a middle-market private equity firm focused on the health and wellness
industry. He is a member of our board of directors and Chairman of the Merger and Acquisition Committee. Mr. Minski also serves on the
boards of directors of Gelco S.A.S. and Descafeinadora Colombiana S.A. — Descafecol. He previously served as Chief Executive Officer
of Nutranext LLC. Jose Minski is the brother of Ruben Minski, our Chief Executive Officer and Chairman of our board of directors.
92
Alberto Eguiguren Correa.
Mr. Eguiguren currently is partner at Russi & Eguiguren SpA, a law firm offering broad experience in legal counsel to local
and international clients, such as multinational corporations, private equity firms, and private investors doing business with or in Chile,
a role which he has held since 2002. He also currently serves a director on the board of directors of Sonda S.A., Aguas Nuevas S.A., Aguas
Atacama S.A., Aguas Décima S.A. and Medismart S.A. He previously served on the board of Walmart Chile S.A., CFR Pharmaceuticals
S.A., Laboratorio Chile S.A. and Clínica Las Condes S.A, amongst others. Prior to his time at Russi & Eguiguren SpA, he was
a partner at Carey y Cía Limitada, and as an attorney in the U.S. with Cleary, Gottlieb, Steen & Hamilton and Brobeck, Phleger
& Harrison. He received a Master's in Commercial Law from Duke University School of Law and a Licentiate in Legal Sciences at
Catholic University of Chile.
Luis Fernando Castro
.
Mr. Castro holds a BS in Mathematics from Fordham University, a BS in Industrial Engineering from Columbia University and an MBA from
the Universidad de los Andes Bogota in Colombia. He has 28 years of experience in the financial, construction, infrastructure and agroindustry
sectors. He previously served as Chief Executive Officer of Banco Colombiano de Comercio Exterior S.A., Colombia's development bank
and has been an entrepreneur. Currently, he is fund manager of a private equity fund in the agribusiness sector and serves as a member
of our board of directors, and on the boards of Tecnoglass INC. (TGLS), Castro Tcherassi SA (infrastructure and construction), and Accenorte
S.A.S. and Devimed S.A, both road concessions.
Alejandro Weinstein.
Mr. Weinstein holds a Business Administration degree from the Universidad Catolica de Chile and participated in the Owner/President
Management Program at Harvard Business School. He is a Certified Public Auditor and accountant and has more than 30 years of experience
in the healthcare and wellness industries, both operating and investing. He is a co-founder of WM Partners LP, a middle-market private
equity firm focused on the health and wellness industry. He is also an investor and General Partner of Olive Tree Venture (OTV), an Israel
based venture capital fund, as well as investor and Principal of Vanterra Capital. Mr. Weinstein also serves on our board of directors
and several private companies. Previously, Mr. Weinstein served as Chief Executive Officer of CFR Pharmaceuticals S.A. ("CFR")
for 10 years. As Chief Executive Officer of CFR, he transformed CFR from a local Chilean pharmaceutical company into a global pharmaceutical
player. Mr. Weinstein has been involved in several exit transactions and has extensive M&A transaction experience.
Kyle P. Bransfield
.
Mr. Bransfield is the founder of Union Acquisition Group and has served as its Chief Executive Officer and director since inception. He
has also served as director and Chief Executive Officer of Union Acquisition Corp, and Union Acquisition Corp. II, leading the companies
through successful mergers with Bioceres Crop Solutions (NASDAQ: BIOX) and Procaps Group (NASDAQ: PROC) in March 2019 and September 2021,
respectively. Mr. Bransfield currently serves on the board of Procaps Group and sits on the mergers and acquisitions committee. Following
Lightjump Acquisition Corp's successful business combination with Moolec Science Ltd. (NASDAQ: MLEC) in December 2022, Mr. Bransfield
now serves as a board member on the compensation and audit committees. Mr. Bransfield was a Partner at Exos Technology Financial Partners,
where he established a SPAC Asset Management business through the formation of Exos SPAC Opportunities I and the Morgan Creek-Exos SPAC+
Fund. Mr. Bransfield has over 16 years of experience in direct equity and debt private markets principal investing, public markets portfolio
management, capital raising, and investment banking. Prior to joining Exos, Mr. Bransfield was a partner at Atlantic-Pacific Capital,
leading the firm's global direct private placement and structured investment activities from 2015 to 2019. Prior to Atlantic-Pacific,
Mr. Bransfield was an investment banker in Sagent Advisors' Private Financing Solutions Group from 2014 to 2015. Prior to Sagent,
Mr. Bransfield spent five years as a Principal and General Partner at CS Capital Partners, a Philadelphia-based multi-family office focused
on alternative investments. Mr. Bransfield began his career in the Mergers & Acquisitions Group at Stifel Nicolaus Weisel and received
a B.S. in Business Administration from American University.
David Yanovich
.
Mr. Yanovich holds a master's degree in Economics from the London School of Economics and a BS in Industrial Engineering from Universidad
de Los Andes in Colombia. He has more than 25 years of experience in investment banking and project structuring, particularly in the mining
and energy industries. He currently serves as President at Cerrito Capital S.A.S, an advisory, consulting and investment banking firm
focused on the Colombian market. He previously served as General Manager at Colgener S.A. and as Director of Investment Banking at Corfivalle.
He currently serves as a director on the boards of Oleoducto Central S.A, Proterra S.A., Crynssen Pharma Group Ltd, and Grupo de Inversiones
Suramericana (Grupo Sura). He also volunteers his time and is involved as a director of the Best Buddies Foundation in Colombia.
93
Our Senior Management
Our senior management oversees
our day-to-day operations to ensure that our overall strategic objectives are implemented and reports to our board of directors. The names,
ages, and current positions of our current senior management team are listed in the table below. For biographical information concerning
Mr. Ruben Minski, see "
—Background of Our Directors
" above. The business address for our senior management team
is Calle 80 No. 78B-201, Barranquilla, Atlántico, Colombia.
Name
Age
Position Held
Ruben Minski
71
Chief Executive Officer (CEO)
Dr. Camilo Camacho
49
Chief Operations Officer (COO)
Patricio Vargas Muñoz
50
Chief Financial Officer (CFO)
Carlos Piocuda Russo
38
Vice-President of Corporate Finance
Grethel Moreno Romero
59
Vice-President of Audit and Internal Controls
Marcela Carvajalino Pagano
56
Vice-President of Corporate and Legal Affairs
Mauricio Castañeda Caballero
46
Vice-President of Human Resources
Luis Alberto Palacios Aragon
59
Vice-President of International Marketing and R&D
Dr. Camilo Camacho.
Dr. Camacho has served as our Chief Operating Officer since April 2021. Prior to joining Procaps, Dr. Camacho served as General
Manager at Abbott Laboratories' Established Pharmaceutical Division (EPD) of the Colombia region from 2014 to 2018 and of the North
Latin America region from 2018 to 2021. There he led the integration of Abbott Laboratories in Colombia after its acquisition of CFR Pharmaceuticals,
and after Laboratorio Franco Colombiano Lafrancol S.A.S. ("Lafrancol") was acquired by CFR Pharmaceuticals in Colombia. Previously
he worked for CFR Recalcine Colombia as a General Manager, Lafrancol as Vice President and Novartis de Colombia as Product Manager. He
received his Medical Degree from the
Escuela Colombiana de Medicina
, Colombia, a Specialist in Pharmacology from the
Universidad
Nacional de Colombia
, and an MBA from the INALDE Business School Colombia.
Patricio Vargas Muñoz.
Mr. Vargas serves as our Chief Financial Officer. Mr. Vargas has 24 years of public company experience in finance and business
development with senior executive roles held in multinational corporations. Mr. Vargas previously served as Finance Vice President &
Treasurer at Empresas CMPC S.A. (CMPC.CL), a pulp and paper company with more than $5 billion in revenue that produces and markets solid
wood products, pulp, paper, tissue, personal care and packaging products in Latin America. Prior to that, Mr. Vargas served as Chief Financial
Officer of CMPC Biopackaging S.A. from September 2018 to December 2020 and Chief Executive Officer of Agrofoods Central Valley Chile S.A.,
an international food processor, from November 2015 to October 2017. Prior to that, Mr. Vargas was the Chief Financial Officer of CFR
from August 2010 until January 2015. Mr. Vargas holds an Engineering degree, with specialization in Electrical and Industrial Engineering,
from
Universidad Católica de Chile
, as well as an MBA from
Universidad Adolfo Ibáñez
. Additionally,
Mr. Vargas completed the Advanced Management Program at Harvard Business School.
Carlos Piocuda Russo.
Mr. Piocuda serves as our Vice-President of Corporate Finance. Mr. Piocuda has been a member of our senior management team since
2019. Mr. Piocuda also served as one of our financial managers since 2015. Mr. Piocuda received an MBA from
Universidad del Norte
in
Colombia. Mr. Piocuda has over 12 years of combined experience having held financial and administrative positions in the oil and gas and
pharmaceutical industries.
Grethel Moreno Romero.
Ms. Moreno serves as our Vice-President of Audit and Internal Controls. Ms. Moreno holds a BS in Systems Engineering from
Universidad
del Norte
in Colombia as well as an MBA where she specialized in Finance and Senior Management studies. Her experience of more than
30 years in management positions in the financial and internal audit areas in the oil and gas and pharmaceutical industries has allowed
her to lead project structuring processes, mergers and acquisitions operations, equity sale transactions, syndicated loans with local
and international banks, strategic planning, among other responsibilities. Ms. Moreno has served as Vice-President of Audit and Internal
Controls of Procaps since September 2018 and has led the establishment of corporate guidelines aimed at strengthening Procaps' control
system processes.
94
Marcela Carvajalino
Pagano.
Ms. Carvajalino has served as our Vice-President of Corporate and Legal Affairs since 2013. Ms. Carvajalino is an attorney
with a law degree from
Universidad del Norte
in Colombia where she specialized in Negotiation and Conflict Management, and Senior
Management of Corporate Reputation. Ms. Carvajalino has over 28 years of experience, where she has worked in the industrial and health
sectors, and led processes of organizational transformation, strategic planning and reputational development with an emphasis on legal,
corporate and human resources issues, and defining corporate policies and processes. Ms. Carvajalino has also served as an executive member
of several boards of directors of private organizations and associations.
Mauricio Castañeda
Caballero.
Mr. Castañeda has served as our Vice-President of Human Resources since August of 2014. Mr. Castañeda
holds a degree in Business Administrator from
Universidad de la Sabana
in Colombia. He also holds complimentary studies in specialization
of Strategic Marketing from
Colegio de Estudios Superiores de Administración
in Colombia and an MBA from INALDE Business
School in Colombia. He has over 20 years of experience in the mass retail, insurance, and health sectors, where he has led organizational
planning and transformation processes, strategic planning of human resources with emphasis on the design of succession plans, labor legislation
and complementary reforms, and variable compensation systems, among other projects.
Luis Alberto Palacios
Aragon.
Mr. Palacios has served as our Vice-President of International Marketing and R&D since 2019. Mr. Palacios graduated
from the
Universidad del Pacifico
in Peru with a Business Management degree. He later received a Master in Marketing and Commercial
Management from the American University of Paraguay and leadership training at Northwestern University's Kellogg School of Management.
He has 35 years of varied and extensive experience in the Latin America pharmaceutical sector, performing different commercial functions
managing clients, especially health professionals from different Latin American countries. He has served Procaps for the past six years
as the head of Procaps' Farma Procaps business for Colombian operations, leading commercial management and international marketing
practice, promoting the development of science and innovation.
Management Structure
The
table below shows our management structure.
95
In addition to our executive
officers and our senior management team, each of our business segments (NextGel, Procaps Colombia, CAN, CASAND and Diabetrics) is managed
by a Vice-President that reports directly to the COO.
B. COMPENSATION
Compensation of Directors
Each non-employee member of
our board of directors receives compensation in the amount of $ 56,000 per annum. Members of our board of director who also serve as an
officer of the Company do not receive any additional compensation with respect to their role as a director.
In February 2023, Jose Minski
and Alejandro Weinstein renounced their compensation to be received by them for serving as Directors for the fiscal year ended December
31, 2023. The Board of Directors intends to submit these renunciations to the next general meeting of shareholders of the Company for
acknowledgement.
Compensation of Executive Officers and Senior
Management Team
For the years ended December
31, 2022, 2021 and 2020, our executive officers and senior management team received an aggregate compensation of approximately $3.6 million,
$3.0 million (including a special bonus paid in connection with the Closing of the Business Combination and the listing of the Ordinary
Shares on the Nasdaq), and $2.0 million, respectively. The aggregate compensation paid directly or indirectly to our executive officers
and senior management team consists of: (i) wages paid by our subsidiary, Procaps Group S.A.; (ii) consulting fees paid to certain of
Procaps' executive officers and senior management team members by Horslig GMBH or Pharminter GMBH, indirect subsidiaries of Procaps;
and (iii) employee benefits.
Our executive officers and
members of our senior management team are employed directly by Procaps S.A., or one of our other subsidiaries, and participate in such
company's benefits plan and government pension plan, if any, on the same basis as its other employees. We have a strategic variable
bonus system that grants cash compensation for achievement of both financial and tactical objectives. These bonuses represent approximately
30% of our executive officers' and senior management team's total compensation and are paid on a semi-annual basis.
C. BOARD PRACTICES
Our board of directors consists
of seven directors, including five independent directors. Our board of directors also has an independent audit committee, nominating committee
and compensation committee. Alejandro Weinstein, Kyle P Bransfield, Luis Fernando Castro, Alberto Eguiguren Correa and David Yanovich
are "independent directors," as defined in Nasdaq listing standards and applicable SEC rules.
Board Committees
We have established four committees
under the board of directors: an audit committee, a compensation committee, a nominating committee and a mergers and acquisitions committee.
Each committee's functions are described below. For information on the members and chairs of each committee see "—Directors
and Senior Management" above.
Audit Committee
Our audit committee is responsible
for, among other things:
●
appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
●
discussing with our independent registered public accounting firm their independence from management;
●
reviewing, with our independent registered public accounting firm, the scope and results of their audit;
96
●
approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
●
overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the annual financial statements that we file with the SEC;
●
overseeing our financial and accounting controls and compliance with legal and regulatory requirements;
●
reviewing our policies on risk assessment and risk management;
●
reviewing related person transactions; and
●
establishing procedures for the confidential
anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.
Our audit committee consists
of David Yanovich, as Chairman and Kyle Bransfield and Luis Fernando Castro, as members. Each qualifies as an independent director according
to the rules and regulations of the SEC and Nasdaq with respect to audit committee membership. In addition, all of the audit committee
members meet the requirements for financial literacy under applicable SEC and Nasdaq rules and at least one of the members qualifies as
an "audit committee financial expert," as such term is defined in Item 407(d) of Regulation S-K. The written charter for the
audit committee, is available on our website. The reference to our website address in this Annual Report does not include or incorporate
by reference the information on our website into this Annual Report.
Compensation Committee
Our compensation committee
is responsible for, among other things:
●
reviewing and approving the factors to be considered in determining the compensation (either alone or, if directed by our board of directors, in conjunction with a majority of the independent members of our board of directors) of our Chief Executive Officer, Chief Financial Officer and President, and evaluate the performance of our executive officers in light of these factors, subject to ratification by our board of directors;
●
evaluating, recommending, reviewing and approving, subject to ratification by our board of directors, the executive officer's compensation arrangements (both salary and bonus), plans, policies and programs maintained by Procaps;
●
evaluating, recommending and reviewing any equity incentive awards issued to any executive officers and directors that may be made under any equity-based compensation plan adopted by our board of directors; and
●
meet with the Chief Executive Officer and other executive officers annually to discuss any incentive compensation programs to be in effect for the executive officers for such fiscal year and the basis for evaluating the performance of the executive officers.
Our compensation committee
consists of Luis Fernando Castro, as Chairman and David Yanovich, as a member, and each qualifies as an independent director according
to the rules and regulations of the SEC and Nasdaq with respect to compensation committee membership, including the heightened independence
standards for members of a compensation committee. The written charter for the compensation committee, is available on our website. The
reference to our website address in this Annual Report does not include or incorporate by reference the information on our website into
this Annual Report.
Nominating Committee
Our nominating committee is
responsible for, among other things:
●
evaluating the qualifications of potential directors proposed for appointment pursuant to the Nomination Agreement;
97
●
identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; and
●
periodically reviewing our board of directors' leadership structure and recommending any proposed changes to our board of directors.
Our nominating committee consists
of Luis Fernando Castro, as Chairman and David Yanovich, as a member, and each qualifies as an independent director according to the rules
and regulations of the SEC and Nasdaq with respect to nominating committee membership. The written charter for the nominating committee,
is available on our website. The reference to our website address in this Annual Report does not include or incorporate by reference the
information on our website into this Annual Report.
Mergers and Acquisitions Committee
Our mergers and acquisitions
committee is responsible for, among other things:
●
reviewing and assessing, and assisting our management and board of directors in reviewing and assessing, potential acquisitions, strategic investments and divestitures;
●
providing guidance to our management and board of directors with respect to our acquisition, investment and divestiture strategies;
●
assisting our management and board of directors with identifying acquisition, investment and divestiture opportunities; and
●
overseeing the due diligence process with respect to proposed acquisitions, investments and divestitures by us.
Our mergers and acquisitions
committee consists of Jose Minski, as Chairman and Ruben Minski and Kyle P. Bransfield, as members. The written charter for the mergers
and acquisition committee, is available on our website. The reference to our website address in this Annual Report does not include or
incorporate by reference the information on our website into this Annual Report.
Risk Oversight
Our board of directors is
responsible for overseeing our risk management process. Our board of directors focuses on our general risk management strategy, the most
significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our audit committee is also
responsible for discussing our policies with respect to risk assessment and risk management. Our board of directors believes its administration
of its risk oversight function has not negatively affected our board of directors' ability to fulfill its other duties and obligations.
D. EMPLOYEES
As of December 31, 2022, we
had more than 5,500 full-time and temporary employees worldwide. Employees in our Rymco (2 employees), Funtrition (4 employees), and Softgel
(39 employees) manufacturing facilities are currently represented by industry labor union organizations, representing approximately 0.8%
of our total employees. With respect to our technical talent, we employ more than 300 scientists, technicians and skilled personnel in
R&D and innovation.
We are committed to our continued
efforts to increase diversity and foster an inclusive work environment that supports the global workforce and the communities we serve.
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply
with all laws applicable to discrimination in the workplace. Our diversity, equity and inclusion principles are also reflected in our
employee training and policies. We continue to enhance our diversity, equity and inclusion policies which are guided by our senior management
team.
98
We believe that we provide
robust compensation and benefits to our employees. In addition to salaries, these programs, which vary by country/region, can include
a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, among many
others. We believe that our employee relations are satisfactory.
The table below sets forth
the approximate number of our employees by geographic region as of December 31, 2022.
South
America
Central
America
North
America
Total
Approximate number of employees as of December 31, 2022
4,677
817
70
5,564
In addition to our executive
officers, we rely on the Senior Management team above to lead and direct our business. The members of the Senior Management team hold
positions in areas such as corporate finance, audit and internal corporate controls, human resources, corporate legal and regulatory affairs,
and marketing and R&D.
E. SHARE OWNERSHIP
The following table shows
the beneficial ownership of Ordinary Shares as of May 2, 2023, by:
●
each of our directors and executive officers; and
●
all of our directors and executive officers as a group.
Except as otherwise noted
herein, the number and percentage of Ordinary Shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act,
and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any Ordinary Shares as to which the holder has sole or shared voting power or investment power and also any Ordinary Shares which
the holder has the right to acquire within 60 days of the Closing through the exercise of any option, warrant or any other right.
We have based percentage ownership
on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.
Unless otherwise indicated,
we believe that all persons named in the table below have sole voting and investment power with respect to the Ordinary Shares beneficially
owned by them.
Name and Address of Beneficial Owner
Number
Percentage
Executive Officers and Directors:
Ruben Minski
(2)
31,338,454
(7)
27.
%
Jose Minski
(3)
17,960,146
(8)
15.9
%
Alberto Eguiguren Correa
(4)
-
-
Kyle P. Bransfield
(5)
2,047,500
(9)
1.8
%
Alejandro Weinstein
(6)
15,877,516
14.1
%
All directors and executive officers as a group (five individuals)
67,273,616
59.6
%
Notes:
(1)
Percentages are based on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.
99
(2)
The business address of Mr. Ruben Minski is Calle 80 No. 78B-201, Barranquilla, Atlántico, Colombia.
(3)
The business address of Mr. Jose Minski is 21500 Biscayne Boulevard, Suite 600, Aventura, Florida 33180.
(4)
The business address of Mr. Eguiguren is Avenida El Bosque Norte 0177, Oficina 1102, Las Condes, Santiago, Chile.
(5)
The business address of Mr. Bransfield is 1425 Brickell Ave., #57B, Miami, Florida 33131.
(6)
The business address of Mr. Weinstein is 21 Chesham Place, SW1XHG, London, United Kingdom.
(7)
Represents shares held by the Sognatore Trust, which holds shares for Bricol International Corp., a company wholly owned by Mr. Ruben Minski, as beneficiary. Includes 4,875,868 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.
(8)
Represents shares held by the Simphony Trust, which holds shares for Mr. Jose Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.
(9)
Includes shares held by Union Acquisition Associates
    II, LLC, an entity controlled by Mr. Bransfield, and PENSCO Trust Company, which holds shares for Mr. Bransfield as beneficiary. Includes
    625,000 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow
    agreement.
(10)
Represents shares held by Hoche Partners Pharma Holding S.A., an entity controlled by Mr. Weinstein.
F. DISCLOSURE OF A REGISTRANT'S ACTION TO RECOVER ERRONEOUSLY
AWARDED COMPENSATION.
Not applicable.
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ITEM 7.
MAJOR
SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table shows
the beneficial ownership of Ordinary Shares as of May 2, 2023 by each person known to by us to be the beneficial owner of more than 5%
of the Ordinary Shares.
Except as otherwise noted
herein, the number and percentage of Ordinary Shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act,
and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any Ordinary Shares as to which the holder has sole or shared voting power or investment power and also any Ordinary Shares which
the holder has the right to acquire within 60 days of the Closing through the exercise of any option, warrant or any other right.
We have based percentage ownership on 112,824,183 Ordinary Shares outstanding
as of May 2, 2023.
Unless otherwise indicated,
we believe that all persons named in the table below have sole voting and investment power with respect to the Ordinary Shares beneficially
owned by them.
Name and Address of Beneficial Owner
Number
Percentage
(1)
Five Percent Holders:
Sognatore Trust
(2)
31,338,454
(7)
27.8
%
Simphony Trust
(3)
17,960,146
(8)
15.9
%
Deseja Trust
(4)
17,960,146
(9)
15.9
%
Hoche Partners Pharma Holding S.A.
(5)
15,877,516
(10)
14.1
%
International Finance Corporation
(6)
8,492,427
(11)
7.5
%
Notes:
(1)
Percentages are based on 112,824,183 Ordinary Shares outstanding as of May 2, 2023.
(2)
The business address of the Sognatore Trust is Oficina 503A-02, Edificio Quantum (500) Ruta 8 km. 7.500 Zonamérica, Montevideo, Uruguay.
(3)
The business address of the Simphony Trust is 29 Bancroft Mills Road, Wilmington, Delaware 19806.
(4)
The business address of the Deseja Trust is 29 Bancroft Mills Road, Wilmington, Delaware 19806.
(5)
The business address of Hoche Partners Pharma Holding S.A. is 3A, Val Ste Croix, L-1371 Luxembourg, Grand Duchy of Luxembourg.
(6)
The business address of the International Finance Corporation is 2121 Pennsylvania Avenue, NW, Washington DC, 20433.
(7)
Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Sognatore Trust, which holds shares for Bricol International Corp., a company wholly owned by Mr. Ruben Minski, as beneficiary. Includes 4,875,868 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.
(8)
Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Simphony Trust, which holds shares for Mr. Jose Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.
(9)
Based on a Schedule 13D filed on October 12, 2021. Represents shares held by the Deseja Trust, which holds shares for Mr. Meyer Minski as beneficiary. Includes 2,794,372 Ordinary Shares held in escrow subject to release pursuant to the terms of the Transaction Support Agreement and related escrow agreement.
(10)
Based on a Schedule 13D filed on October 12, 2021. Represents shares held by Hoche Partners Pharma Holding S.A., an entity controlled by Mr. Weinstein.
(11)
Based on a Schedule 13G filed on February 14, 2022.
101
B. RELATED-PARTY TRANSACTIONS
We have engaged in, and
we expect that we will continue to engage in, transactions with related parties, including, without limitation, the transactions described
below. We believe the terms and conditions of these arrangements are generally equivalent to those which we could obtain from an unaffiliated
third party, to the extent there are third parties which could provide comparable goods or services. For more information regarding our
relationships and transactions with related parties, see Note 29 to our Annual Audited Consolidated Financial Statements, included elsewhere
in this Annual Report.
The Board of Directors has
adopted a written related person transaction policy that sets forth certain policies and procedures for the review and approval or ratification
of related person transactions, which comprise any transaction, arrangement or relationship in which the Company or any of its subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have
a direct or indirect material interest. A "related person" for purposes of such policy means: (i) any person who is, or at
any time during the applicable period was, one of the Company's executive officers or one of the Company's directors; (ii)
any person who is known by the Company to be the beneficial owner of more than 5% of the Ordinary Shares; (iii) any immediate family member
of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law) of a director, executive officer or a beneficial owner of more than 5% of
the Company's voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer
or beneficial owner of more than 5% of the Ordinary Shares; and (iv) any firm, corporation or other entity in which any of the foregoing
persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
The table below sets forth
the entities Procaps has engaged in related party transactions with and their relationship to Procaps.
Related Party
Relationship to Procaps
Promedical S.A.
A Bolivian sociedad anónima owned 50% by the Minski Family and measured as an equity method investment.
Fundación Procaps
A Colombian non-profit entity owned 100% by members of the Minski Family.
Industrias Intercaps de Venezuela
A Venezuelan compañía anónima owned 100% by members of the Minski Family and Hoche.
Originates Inc.
A Florida corporation owned 100% by members of the Minski Family.
Gelco S.A.S.
A Colombian sociedad por acciones simplificada that is 18.75% owned
by members of the Minski Family.
Productora de Gelatina S.A.S.
A Colombian sociedad por acciones simplificada that is 18.75% owned
by members of the Minski Family.
Laboratorios Vivax Pharmaceutical S.A.
A Venezuelan compañía anónima owned 100% by members of the Minski Family and Hoche.
C.I. Naturmega S.A.
A Colombian sociedad anónima owned 100% by members of the Minski Family. Mostly a supplier.
Simviel S.A.S.
A Colombian sociedad por acciones simplificada owned 100% by a member of the Minski Family.
Pharma Perspectives S.A.
A Costa Rican sociedad anónima owned 100% by members of the Minski Family and Hoche.
Carlton Mega Inversiones S.A.
A Costa Rican sociedad anónima owned 100% by members of the Minski Family and Hoche.
Sognatore Trust
A trust for the benefit of certain members of the Minski Family.
Deseja Trust
A trust for the benefit of certain members of the Minski Family.
Simphony Trust
A trust for the benefit of certain members of the Minski Family.
Union Acquisition Associates II, LLC
A Florida limited liability company controlled by a member of the Board of Directors.
Productora de Gelatina Do Brazil Ltda.
A Brazilian "limitada" company that is 18.75% owned by members of the Minski Family.
Palo Santo Media LLC
A Florida limited liability company owned and controlled by an immediate family member of a member of the Board of Directors.
WM Partners LP
A Florida private equity firm that is 45% owned by members of the Minski Family and 45% owned by a member of the Board of Directors.
102
Purchase and Sale of Goods and Services and
Commercial Operations
Purchase of Goods and Services
Procaps has purchased goods
and services in the ordinary course of business in arm's length transactions under market terms from several related parties. During
the years ended December 31, 2022, 2021 and 2020, Procaps purchased goods and services from the following companies: (i) C.I. Naturmega
S.A.; (ii) Gelco S.A.S.; (iii) Productora de Gelatina S.A.S.; (iv) Originates Inc.; (v) Simviel S.A.S.; and (vi) Productora de gelatina
Do Brazil ltda, (vii) Wm Partners, L. P.; and (viii) Palosanto Media LLC. Such goods and services consisted primarily of the sale of refined
fish oil, gelatin and other raw materials. During the years ended December 31, 2022, 2021 and 2020, Procaps has purchased a total of $12.3
million, $10.2 million and $11.3 million in goods and services from these companies, respectively.
Sale of Goods
Procaps has sold goods in
the ordinary course of business in arm's length transactions under market terms to several related parties. During the years ended
December 31, 2022, 2021 and 2020, Procaps sold goods to the following companies: (i) Originates Inc.; (ii) C.I. Naturmega S.A., (iii)
Promedical S.A, (iv) Industrias Intercaps de Venezuela C.A. (v) Fundación Procaps and (vi) Laboratorios Vivax Pharmaceutical C.A
.. Such goods consisted primarily of raw materials. During the years ended December 31, 2022, 2021 and 2020, Procaps has sold a total of
approximately $8.0 million, $5.6 million and $5.6 million in goods to these companies, respectively. Amounts previously reported for 2021
and 2020 have been revised to correct for an immaterial misstatement which have no impact on amounts reported in the consolidated financial
statements.
Sale of Services
Procaps has sold services in
the ordinary course of business in arm's length transactions under market terms to several related parties. During the years ended
December 31, 2022, 2021 and 2020, Procaps sold services to the following companies: (i) Promedical S.A.; (ii) Originest and (iii) CI Naturmega
S.A. Such services consisted primarily of technical advisory services. During the years ended December 31, 2022, 2021 and 2020, Procaps
has sold a total of approximately $1.034 thousand, $116 thousand and $87 thousand in services to these companies, respectively.
Commercial Operations
Procaps has conducted commercial
operations in the ordinary course of business in arm's length transactions under market terms with several related parties.
During the years ended December
31, 2022, 2021 and 2020, Procaps maintained balances of commercial operations with the following companies, generating accounts receivables
by: (i) C.I. Naturmega S.A.; (ii) Industrias Intercaps de Venezuela; (iii) Originates Inc.; (vi) Productora de Gelatina S.A.S.; (v) Pharma
Perspectives S.A.; (vi) Carlton Mega Inversiones S.A.; and (vii) Promedical S.A. Such commercial operations consisted primarily of back-office
services, leases, technical advisory and sale of finished products and raw materials. During the years ended December 31, 2022, 2021 and
2020, Procaps generated a total of approximately $14.0 million, $12.4 million and $13.4 million in accounts receivables owed by these
companies, respectively.
103
During the years ended December
31, 2022, 2021 and 2020, Procaps conducted commercial operations with the following companies, generating accounts payable to: (i) C.I.
Naturmega S.A.; (ii) Fundación Procaps; (iii) Originates Inc.; (iv) Gelco S.A.S.; (v) Productora de Gelatina S.A.S.; (vi) Promedical
S.A.; and (viii) Gelco Do Brazil. Such commercial operations consisted primarily of purchase of raw materials, technical advisory and
leases. During the years ended December 31, 2022, 2021 and 2020, Procaps generated a total of approximately $2.8 million, $1.3 million
and $4.8 million in accounts payable to these companies, respectively.
Related Party Donations, Advances, Long-Term
Receivables, Loans and Guarantees
Donations
Procaps S.A. has made donations
to Fundación Procaps in the total amount of approximately $0.5 million, $0.4 million and $0.3 million for the years ended December
31, 2022, 2021 and 2020, respectively.
Advances
Procaps periodically advances
payments for services to be performed by certain related parties, including Simviel S.A.S. As of December 31, 2022, the total amount outstanding
advanced by Procaps to Simviel S.A.S. for services to be performed was $0.
Long-Term Receivables
Procaps sold pharmaceutical
products to Industrias Intercaps de Venezuela and Laboratorios Vivax Pharmaceutical S.A. from 2010 through 2015 which, as of the date
of this Annual Report, have not been paid. Long-term receivables in connection with such past sales outstanding as of December 31, 2022,
owed by Industrias Intercaps de Venezuela and Laboratorios Vivax Pharmaceutical S.A. total approximately $18 million and $5.3 million,
respectively. All such amounts have been provisioned for by Procaps. For more information, see Note 29 to our Annual Audited Consolidated
Financial Statements included elsewhere in this Annual Report.
Loans
On January 13, 2013, Sognatore
made a loan to Procaps on commercially reasonable, arm's length terms, in the total amount of $13.7 million. All amounts owed under
this loan have been paid and as of December 31, 2022, the outstanding balance on such loan is zero.
On May 30, 2018, Tripod Pharma
Hld made a loan to Procaps on commercially reasonable, arm's length terms, in the total amount of $9.5 million. On September 26,
2018, Tripod Pharma Hld made an additional loan to Procaps on commercially reasonable, arm's length terms, in the total amount of
$4.0 million. On January 1, 2020, Tripod Pharma Hld, acting as a nominee for Sognatore, Deseja and Simphony under these loans, assigned
one-third (1/3) of the payment obligations under such loans to each of Sognatore, Deseja and Simphony. All amounts owed under these loans
have been paid and as of December 31, 2022, the outstanding balance on such loans is zero.
Guarantees
Procaps S.A., a subsidiary
of Procaps, is a guarantor under a loan by Banco Colpatria Multibanca Colpatria S.A., as lender, to C.I. Naturmega S.A., as borrower,
the outstanding balance of which as of December 31, 2022 was $0.
Other Relationships
Sofgen Pharmaceuticals LLC,
one of Procaps' indirect subsidiaries, and Originates Inc. share payroll services from ADP and, prior to the closing of the Business
Combination, had a linked employee 401(k) plan sponsored by Originates Inc. in which Sofgen Pharmaceuticals LLC participated as a participating
employer, due to both entities being under common ownership. Prior to the closing of the Business Combination, Sofgen Pharmaceuticals
LLC put in place its own 401(k) plan.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
104
ITEM 8.
FINANCIAL
INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
The Company's Annual
Audited Consolidated Financial Statements are included in Item 18 under the heading "Financial Statements."
Legal Proceedings
We are involved in investigations,
claims, lawsuits and other proceedings arising in the ordinary course of business. These matters involve personnel and employment issues,
regulatory matters, contract, administrative and tax proceedings, among others, arising in the ordinary course of business, involving
total contingencies of $0.1 million as of December 31, 2022. As of December 31, 2022, our total contingencies relating to legal proceedings
in which our external legal counsel has identified the risk of loss as being probable and/or for which a provision had been recorded in
our Consolidated Financial Statement were: (i) $0.1 million related to labor claims, and (ii) $0.04 million related to administrative
claims. For more information our litigation contingencies, see Note 22 to our Annual Audited Consolidated Financial Statements, included
elsewhere in this Annual Report.
Claims may be filed against
us in the future including by, but not limited to, third parties, employees (of our own or made available by service providers) and federal,
state or local bodies due to transactions and procedures carried out by us or companies we acquire in the future.
Other than as described below,
we do not believe that any of our current legal or administrative proceedings could individually cause a material adverse effect on our
business, financial condition or results of operations.
Colombian Social Security and Taxes
Historically, Procaps has
paid certain benefits to its employees that, according to prior interpretation of applicable Colombian labor and tax laws, were not considered
as part of an employee's salary for purposes of calculating taxable employee compensation. In 2012, the interpretation of what constitutes
part of an employee's compensation began to change in Colombia, which resulted in Procaps having to eliminate certain employee benefits
such as transportation assistance and certain performance bonuses, and amend its overall policies relating to performance bonuses, in
order to comply with such change in interpretation. Although Procaps has made considerable efforts to comply with such laws, it is possible
that monetary penalties and additional labor taxes will be imposed on Procaps by the Colombia's Ministry of Finance's Pension
and Parafiscal Management Unit (
Unidad de Gestion Pensional y Parafiscal,
or "UGPP") for the periods prior to the implementation
of such changes to employee benefits instituted by Procaps. Although Procaps has been subject to administrative proceedings by the UGPP
in the past for alleged failures to pay social security benefits, which have resulted in non-material penalties and fines, there can be
no assurances that future proceedings will not be initiated against Procaps which could result in material fines and liabilities.
Operating License
On May 9, 2013, CETESB denied
Colbras Industria e Comercio Ltda. the license to operate (
licença de operação
) the warehouse and quality
control laboratory located at our Softgel manufacturing facility in the city of Cotia, State of São Paulo, Brazil. Such denial
was because of a legal proceeding initiated against Etesco Construcoes e Comercio LTDA ("Etesco"), the developer of the industrial
park where such facilities are located, alleging non-compliance by Etesco with certain environmental requirements related to the distance
of the facilities from the Coitia River and the percentage of "green area" (
área verde
) surrounding the park.
CETESB has allowed our warehouse and quality control laboratory to operate until the proceeding against Etesco is resolved. In the event
such proceeding is resolved negatively against Etesco, CETESB may not grant us a license of operations which could force us to suspend
operations of the warehouse and quality control laboratory located at our Softgel manufacturing facility.
105
Dividend Distribution Policy
From the annual net profits
of the Company, at least 5% shall each year be allocated to the reserve required by applicable laws (the "Legal Reserve").
That allocation to the Legal Reserve will cease to be mandatory as soon and as long as the aggregate amount of the Legal Reserve amounts
to 10% of the amount of the share capital of the Company. The general meeting of shareholders shall resolve how the remainder of the annual
net profits, after allocation to the Legal Reserve, will be disposed of by allocating the whole or part of the remainder to a reserve
or to a provision, by carrying it forward to the next following financial year or by distributing it, together with carried forward profits,
distributable reserves or share premium to the shareholders in proportion to the number of the Ordinary Shares they hold.
The Board of Directors may
resolve that the Company pays out an interim dividend to the shareholders, subject to the conditions of article 461-3 of the 1915 Law
and the Company's amended and restated articles of association. The Board of Directors shall set the amount and the date of payment
of the interim dividend.
Any share premium, assimilated
premium or other distributable reserve may be freely distributed to the shareholders subject to the provisions of the 1915 Law and the
Company's amended and restated articles of association. The dividend entitlement lapses upon the expiration of a five-year prescription
period from the date of the dividend distribution. The unclaimed dividends return to our accounts.
B. SIGNIFICANT CHANGES
There have been no significant
changes since the approval date of our Annual Audited Consolidated Financial Statements included elsewhere in this Annual Report.
ITEM 9.
THE
OFFER AND LISTING
A. OFFER AND LISTING DETAILS
Our ordinary shares trade
solely on the Nasdaq under the symbol "PROC." Our ordinary shares do not trade in any other market.
B. DISTRIBUTION PLAN
Not applicable.
C. MARKETS
Our Ordinary Shares and Warrants
began trading on the Nasdaq Global Market under the ticker symbol "PROC" and "PROCW", respectively, in connection
with the Business Combination, on September 30, 2021.
D. SELLING SHAREHOLDERS
Not applicable.
E. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10.
ADDITIONAL
INFORMATION
A. SHARE CAPITAL
Not applicable.
106
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The following is a summary
of some of the terms of our ordinary shares, based on the Company's amended and restated articles of association. The following
summary is not complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Company's amended
and restated articles of association, and applicable Luxembourg law, including Luxembourg corporate law.
Ordinary Shares
Share Capital
The Company is authorized
to issue 687,175,817 Ordinary Shares and zero Redeemable B Shares under its authorized share capital.
As of May 2, 2023, there were
112,824,183 Ordinary Shares outstanding and issued, 4,000,000 Redeemable A Shares issued and held in treasury by the Company and 4,500,000
Redeemable B Shares issued and held in treasury by the Company. There were also 23,375,000 Warrants outstanding, each entitling the holder
to purchase one Ordinary Share at an exercise price of $11.50 per share.
On September 29, 2021, the
Company redeemed 4,000,000 Redeemable A Shares held by Crynssen for an aggregate price of $40,000 so that, following the Merger and the
Exchange, Crynssen would become a direct wholly owned subsidiary of the Company. Immediately prior to the redemption of the Redeemable
A Shares, the Redeemable A Shares represented 16.53% of the total issued capital stock of the Company.
On September 29, 2021, immediately
following the Exchange, the Company redeemed 4,500,000 Redeemable B Shares held by IFC for an aggregate price of $45,000,000, as negotiated
with IFC in connection with the Business Combination, pursuant to the terms of the IFC Redemption Agreement. Immediately prior to the
redemption of the Redeemable B Shares, the Redeemable B Shares represented 3.71% of the total issued capital stock of the Company.
The Redeemable A Shares and
the Redeemable B Shares will remain issued shares under Luxembourg law until cancelled, but shall have no voting or dividend rights and
shall not be counted for any quorum purposed under Luxembourg law.
Share Issuances
Pursuant to Luxembourg law,
the issuance of Ordinary Shares and Redeemable B Shares requires in principle approval by the extraordinary general meeting of shareholders
subject to necessary quorum and majority requirements. The extraordinary general meeting of shareholders of Company held prior to the
Closing of the Business Combination approved an authorized capital and authorized the Board of Directors to (i) realize for any reason
whatsoever, including any issue in one or several successive tranches of (a) any subscription and/or conversion rights, including warrants
(which may be issued separately or attached to Ordinary Shares, bonds, options, notes or similar instruments), convertible bonds, notes
or similar instruments as well as (b) new Ordinary Shares and Redeemable B Shares, with or without share premium, against payment in cash
or in kind, by conversion of claims on the Company, by way of conversion of available reserves or in any other manner; (ii) determine
the place and date of the issue or the successive issues, the issue price, the terms and conditions of the subscription of and paying
up on the new Ordinary Shares or Redeemable B Shares; and (iii) remove or limit the preferential subscription right of the shareholders
in case of issue against payment in cash of Ordinary Shares, Redeemable B Shares, warrants (which may be separate or attached to Ordinary
Shares, bonds, notes or similar instruments), convertible bonds, notes or similar instruments, up to the maximum amount of such authorized
capital for a maximum period of five years from the date of incorporation or any subsequent resolutions to create, renew or increase the
authorized capital. The extraordinary general meeting of shareholders of the Company may renew or increase such authorized capital and
such authorization to the Board of Directors to issue Ordinary Shares and Redeemable B Shares, each time for a period not exceeding five
(5) years.
In addition, since the adoption
of the amended and restated articles of association of the Company in connection with the Closing of the Business Combination, the Company's
shareholders authorized the Board of Directors to allocate existing shares of the Company without consideration or to issue new shares
("Bonus Shares") paid-up out of distributable reserves (i) to employees of the Company or to certain classes of such employees;
(ii) to employees of companies or economic interest groupings in which the Company holds directly or indirectly at least ten percent (10%)
of the share capital or of the voting rights; (iii) to employees of companies or economic interest groupings which hold directly or indirectly
at least ten percent (10%) of the share capital or of the voting rights of the Company; (iv) to employees of companies or economic interest
groupings in which at least fifty percent (50%) of the share capital or of the voting rights are held, directly or indirectly, by a company
holding itself, directly or indirectly, at least fifty percent (50%) of the share capital of the Company; or (v) to members of the corporate
bodies of the Company or any of the other companies or economic interest groupings referred to under items (ii) to (iv) above, for a maximum
period of five years from the date of incorporation or any subsequent resolutions to create, renew or increase the authorized capital
(such period restriction is only applicable in case of an allotment of newly issued shares). The preferential subscription right of existing
shareholders is, through their authorization to the Board of Directors, automatically waived in case of issuance of Bonus Shares.
107
Currently, no further Redeemable
B Shares may be issued by the Board of Directors under the authorized capital as the maximum amount of Redeemable B Shares authorized
by the extraordinary general meeting of shareholders of the Company held prior to the Closing of the Business Combination has been issued.
The Company recognizes only
one (1) holder per share. In case a share is owned by several persons, they shall appoint a single representative who shall represent
them in respect of the Company. The Company has the right to suspend the exercise of all rights attached to that share, except for relevant
information rights, until such representative has been appointed.
Upon the consummation of the
Business Combination, a delegate of the Board of Directors, who was granted powers pursuant to resolutions of the Board of Directors,
resolved on the issuance of Ordinary Shares out of the authorized capital to Union shareholders. When delegating such powers to the delegate,
the Board of Directors resolved on the applicable procedures and timelines to which such issuance will be subjected. In the event a proposal
of the Board of Directors to issue new Ordinary Shares exceeds the limits of the Company's authorized share capital, the Board of
Directors must then convene the shareholders to an extraordinary general meeting to be held in front of a Luxembourg notary for the purpose
of increasing the issued share capital. Such meeting will be subject to the quorum and majority requirements required for amending the
amended and restated articles of association, it being understood that the amended and restated articles of association may be amended
by a majority of at least two thirds (2/3) of the votes validly cast at such general meeting at which a quorum of more than half (1/2)
of the Company's share capital is present or represented. If no quorum is reached in a meeting, a second meeting may be convened
in accordance with the provisions of Luxembourg law and the amended and restated articles of association of the Company, which may deliberate
regardless of the quorum and at which resolutions are adopted at a majority of at least two thirds (2/3) of the votes validly cast. Abstentions
and nil votes shall not be taken into account. If the capital call proposed by the Board of Directors consists of an increase in the shareholders'
commitments, the Board of Directors must convene the shareholders to an extraordinary general meeting to be held in front of a Luxembourg
notary for such purpose. Such meeting will be subject to the unanimous consent of the shareholders.
Preferential Subscription Rights
Under Luxembourg law and in
accordance with the amended and restated articles of association of the Company, existing shareholders benefit from a preferential subscription
right on the issuance of new shares by the Company for cash consideration. However, since the adoption of the amended and restated articles
of association of the Company pursuant to the terms of the Business Combination, the Company's shareholders authorized the Board
of Directors, within the limits of the Company's authorized share capital and within a period of five years, to remove or limit
any preemptive subscription rights of shareholders in case of issue against payment in cash of Ordinary Shares, Redeemable B Shares, warrants
(which may be separate or attached to Ordinary Shares, bonds, notes or similar instruments), convertible bonds, notes or similar instruments
and the Company can limit or suppress, subject to the quorum and majority for the amendment of the articles of association. Such shares
may be issued above, at, or below market value, and, following a certain procedure, even below the accounting par value, if applicable
per share. New Company shares also may be issued by way of incorporation of available reserves, including share premium.
108
Share Repurchases
The Company cannot subscribe
for its own Ordinary Shares. The Company may, however, repurchase issued Ordinary Shares or have another person acting in his, her or
its own name, but on behalf of the Company, repurchase issued Ordinary Shares, subject to the following conditions:
(1)
prior
authorization by a simple majority vote at an ordinary general meeting of shareholders, which authorization sets forth:
(a)
the
terms and conditions of the proposed repurchase and in particular the maximum number of Ordinary Shares to be repurchased;
(b)
the
duration of the period for which the authorization is given, which may not exceed five years; and
(c)
in
the case of repurchase for consideration, the minimum and maximum consideration per share;
(2)
redemptions,
including shares previously acquired by the Company and held by it in its portfolio and shares acquired by a person acting in his, her
or its own name, but on behalf of the Company, may not result in the net assets as shown in the annual accounts falling below the amount
of the subscribed capital, increased by the reserves which Luxembourg law or the articles of association do not permit to distribute;
(3)
only
fully paid-up Ordinary Shares may be repurchased; and
(4)
the
offer to repurchase must be made on the same terms to all shareholders in the same situation except for repurchases which have been unanimously
decided by a general meeting at which all shareholders were present or represented; similarly, listed companies may purchase their own
Ordinary Shares on the stock exchange without an offer to acquire having to be made to its shareholders.
When the acquisition of the
Company's own Ordinary Shares is necessary to avoid serious and imminent harm to the Company, the prior authorization by a simple
majority vote at an ordinary general meeting of shareholders described in paragraph (1) above shall not apply. In such a case, the Board
of Directors must inform the shareholders at the following general meeting of the reasons for, and purpose of, the redemption, the number
and nominal value, or failing that, such acquired Ordinary Share's accounting par value, the fraction of the subscribed capital
such acquired Ordinary Shares represent, as well as the countervalue of such Ordinary Shares.
The prior authorization by
a simple majority vote at an ordinary general meeting of shareholders described in paragraph (1) above shall also not apply in the case
of Ordinary Shares acquired either by the Company itself or by a person acting in his, her or its own name, but on behalf of the Company,
for distribution to the employees of the Company or to the employees of an affiliate of Company due to a control relationship (i.e., its
subsidiaries or controlling shareholder) or in any of the circumstances listed in article 430-16 of the 1915 Law. The distribution of
such Ordinary Shares must be made within 12 months of the acquisition of those shares.
The authorization will be
valid for a period ending on the earlier of five years from the date of such shareholder authorization and the date of its renewal by
a subsequent general meeting of shareholders. Pursuant to such authorization, the Board of Directors is authorized to redeem all Ordinary
Shares under the conditions set forth in article 430-15 of the 1915 Law. Such purchases and sales may be carried out for any authorized
purpose or any purpose that is authorized by the laws and regulations in force. The purchase price per Ordinary Share to be determined
by the Board of Directors or its delegate shall represent not more than the fair market value of such Ordinary Shares.
Existing Share Repurchase Program
At the occasion of the annual
general meeting of shareholders of the Company held on June 28, 2022 (the "2022 AGM"), the shareholders of the Company authorized
the Board of Directors to acquire up to 10% of the total number of the Company's Ordinary Shares in issue at the date of the 2022 AGM
within a period of 5 years as from the date of the 2022 AGM for a consideration which may not exceed an amount equal to 120% of the reference
price of the shares on the Nasdaq and not less than USD 0.01, the reference price being the weighted average price for the market value
for such Ordinary Shares for the 5 days of trading immediately preceding each date of repurchase.
109
Within the framework approved
at the 2022 AGM, the Board of Directors approved on February 13, 2023 a share repurchase program under Rule 10b-18 of the Exchange Act,
for the purchase of up to $5.0 million Ordinary Shares or 2,000,000 Ordinary Shares, whichever is less (the "Repurchase Program").
The consideration for such repurchase(s) corresponds to the consideration approved by the 2022 AGM.
The Company may purchase Ordinary
Shares from time to time in the open market, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of
the Exchange Act, through privately negotiated transactions, or any other legally permissible method, at management's discretion
based on market and operational conditions, share price, trading volume, legal requirements and other factors.
The Repurchase Program shall
be made in compliance with the parameters approved by the Company's shareholders at the occasion of the 2022 AGM, the rules of the
SEC, and other applicable legal requirements.
The Company is not obligated
to purchase any Ordinary Shares under the Repurchase Program and the Repurchase Program may be suspended or terminated at any time at
management's discretion.
Voting rights
Each Ordinary Share, Redeemable
A Share and Redeemable B Share entitles the holder thereof to one vote. Neither Luxembourg law nor the Company's amended and restated
articles of association contain any restrictions as to the voting of Ordinary Shares, Redeemable A Shares and Redeemable B Shares by non-Luxembourg
residents. The voting rights of the Redeemable A Shares and Redeemable B Shares are currently suspended as they are held in treasury by
the Company.
Meetings
Ordinary General Meeting
In accordance with the 1915
Law and the Company's amended and restated articles of association, there is no quorum requirement at an ordinary general meeting
and resolutions are adopted by a simple majority of validly cast votes of the shareholders present or represented for a given duly convened
ordinary general meeting. Abstentions and nil votes are not taken into account.
Extraordinary General Meeting
Extraordinary resolutions
are required for any of the following matters, among others: (i) an increase or decrease of the authorized or issued capital (except if
made by the Board of Directors under the authorized capital), (ii) a limitation or exclusion of preemptive rights (except if made by the
Board of Directors under the authorized capital), (iii) approval of a statutory merger or de-merger (
scission
), (iv) the Company's
dissolution and liquidation, (v) any and all amendments to the Company's amended and restated articles of association and (vi) change
of nationality. Pursuant to the 1915 Law and the Company's amended and restated articles of association, for any resolutions to
be considered at an extraordinary general meeting of shareholders, the quorum shall be at least half (1/2) of the Company's issued
share capital at a first duly convened meeting, unless otherwise mandatorily required by law. If the said quorum is not reached, a second
meeting may be convened, for which the 1915 Law and the Company's amended and restated articles of association do not prescribe
a quorum. Any extraordinary resolution shall be adopted at a quorate general meeting, except otherwise provided by law, by at least a
two-thirds (2/3) majority of the votes validly cast at such meeting by shareholders. Abstentions and nil votes are not taken into account.
Annual Shareholders Meetings
The annual general meeting
of shareholders must be held in the Grand Duchy of Luxembourg at the registered office of the Company within 6 months of the end of the
preceding financial year.
110
Warrants
Pursuant to the Warrant Amendment,
Union assigned to the Company all of Union's right, title and interest in the Warrant Agreement and the Company assumed, and agreed
to pay, perform, satisfy and discharge in full, as the same become due, all of Union's liabilities and obligations under the Warrant
Agreement arising from and after the Merger Effective Time.
Each Warrant is exercisable
for one Ordinary Share and only whole warrants are exercisable. The exercise price of the Warrants is $11.50 per share, subject to adjustment
as described in the Warrant Agreement. A Warrant may be exercised only during the period commencing on the date of the consummation of
the Business Combination, and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years
after the date the Business Combination was completed, (y) the redemption date as provided in Section 6.2 of the Warrant Agreement, or
(z) the liquidation of the Company. Redemptions of warrants for cash pursuant to the Warrant Agreement, once the Public Warrants become
exercisable, may be redeemed (i) in whole and not in part, (ii) at a price of $0.01 per warrant, (iii) upon not less than 30 days'
prior written notice of redemption to each warrant holder, and (iv) if, and only if, the reported last sale price of the Ordinary Shares
equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before sending the
notice of redemption to each warrant holder. If the Public Warrants are called for redemption for cash, management will have the option
to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis," as described in the Warrant
Agreement.
The Private Placement Warrants
are identical to the Public Warrants, except that the Private Placement Warrants and the shares issuable upon the exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable
(except as mentioned above) so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be
redeemable and exercisable by such holders on the same basis as the Public Warrants.
Dividends
From the annual net profits
of the Company, at least 5% shall each year be allocated to the Legal Reserve. That allocation to the Legal Reserve will cease to be mandatory
as soon and as long as the aggregate amount of the Legal Reserve amounts to 10% of the amount of the share capital of the Company. The
general meeting of shareholders shall resolve how the remainder of the annual net profits, after allocation to the Legal Reserve, will
be disposed of by allocating the whole or part of the remainder to a reserve or to a provision, by carrying it forward to the next following
financial year or by distributing it, together with carried forward profits, distributable reserves or share premium to the shareholders
in proportion to the number of ordinary shares they hold in the Company.
The Board of Directors may
resolve that the Company pays out an interim dividend to the shareholders, subject to the conditions of article 461-3 of the 1915 Law
and the Company's amended and restated articles of association. The Board of Directors shall set the amount and the date of payment
of the interim dividend.
Any share premium, assimilated
premium or other distributable reserve may be freely distributed to the shareholders subject to the provisions of the 1915 Law and the
Company's amended and restated articles of association. The dividend entitlement lapses upon the expiration of a five-year prescription
period from the date of the dividend distribution. The unclaimed dividends return to the Company's accounts.
C. MATERIAL CONTRACTS
With the exception of the
material agreements described in Item 7.B under the heading "Related Party Transactions-Agreements with Major Shareholders"
and those executed in connection with the Business Combination, explained elsewhere in this Annual Report, all contracts concluded by
us during the two years preceding the date of this Annual Report were entered into in the ordinary course of business.
111
D. EXCHANGE CONTROLS
None.
E. TAXATION
The following is a summary
of the material Luxembourg and U.S. federal income tax consequences of the ownership and disposition of our common shares by persons addressed
herein.
Potential investors in our
common shares should consult their own tax advisors concerning the specific Luxembourg and U.S. federal, state and local tax consequences
of the ownership and disposition of our common shares in light of their particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction.
LUXEMBOURG TAX CONSIDERATIONS
The following is a general
description of certain Luxembourg tax considerations relating to the Company and the holders of Ordinary Shares and Warrants. It does
not purport to be a complete analysis of all tax considerations in relation to the Ordinary Shares and Warrants. Prospective purchasers
should consult their own tax advisers as to which countries' tax laws could be relevant to acquiring, holding and disposing of the
securities and the consequences of such actions under the tax laws of those countries. This overview is based upon the law as in effect
on the date of this Annual Report and is subject to any change in law that may take effect after such date, even with retroactive effect.
The summary below is intended
as an overview of certain tax consequences in relation to the Company and the purchase, ownership and disposition of Ordinary Shares and
Warrants under Luxembourg law.
Please be aware that the residence
concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present
section to a tax, duty, levy impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only.
Also, please note that a reference to Luxembourg income tax generally encompasses corporate income tax (
impôt sur le revenu des
collectivités
), municipal business tax (
impôt commercial communal
), a solidarity surcharge (
contribution au
fonds pour l'emploi
) as well as personal income tax (
impôt sur le revenu des personnes physiques
). Corporate taxpayers
may further be subject to net worth tax (
impôt sur la fortune
), as well as other duties, levies and taxes. Corporate income
tax, municipal business tax and the solidarity surcharge invariably apply to most corporate taxpayers' resident in Luxembourg for
tax purposes. Individual taxpayers are generally subject to personal income tax and solidarity surcharge. Under certain circumstances,
where individual taxpayers act in the course of the management of a professional or business undertaking, municipal business tax may apply
as well.
Taxation of the Company
The Company is subject to
Luxembourg tax on its worldwide profits at the current combined ordinary rate of 24.94% for Luxembourg City, including the 17% corporate
income tax, a 6.75% municipal business tax (rate in the municipality of Luxembourg City in 2023) and a solidarity surcharge (together
the "Income Tax").
In principle, dividends and
capital gains realized by the Company are fully subject to Income Tax in Luxembourg.
However, provided the conditions
of the Luxembourg participation exemption regime are met, dividends or capital gains realized by the Company upon the disposal of shares
are not taxable in Luxembourg.
Luxembourg net wealth tax
("NWT") will be due annually by the Company at the rate of 0.5% on its total net asset value below or equal to € 500
million. The tranche above € 500 million will be taxed at a rate of 0.05%. Net worth is referred to as the unitary value (
valeur
unitaire
), as determined at January 1 of each year. The unitary value is in principle calculated as the difference between (i) assets
estimated at their fair market value (
valeur estimée de réalisation
), and (ii) liabilities vis-à-vis third
parties.
112
Shareholdings qualifying for
the Luxembourg participation exemption regime are excluded from the NWT basis provided that, the Company holds a direct shareholding in
a qualifying subsidiary representing at least 10% of the qualifying subsidiary's share capital or having an acquisition cost (including
both share capital and share premium) of at least € 1.2 million; there is no minimum holding period requirement.
Companies for which the sum
of fixed financial assets (i.e., financial assets notably including shares and loans, transferable securities and cash) exceeds 90% of
their total balance sheet and € 350,000 are liable to a minimum annual NWT of € 4,815. Other companies are liable to a minimum
progressive tax (in an amount up to € 32,100), depending on the total assets on their balance sheet.
Withholding taxation
Any dividend distributed by
the Company to its shareholders will in principle be subject to a 15% withholding tax unless an exemption or a reduced treaty rate applies.
Luxembourg taxation of the holders
Luxembourg tax residence of the holders
Holders will not be deemed
to be resident, domiciled or carrying on business in Luxembourg solely by reason of holding, execution, performance, delivery, exchange
and/or enforcement of the Ordinary Shares or Warrants.
Taxation of Luxembourg non-residents
Holders who are non-residents
of Luxembourg and who do not have a permanent establishment, a permanent representative, or a fixed place of business in Luxembourg with
which the holding of the Ordinary Shares or Warrants is connected, are not liable to any Luxembourg income tax, whether they receive payments
upon redemption or repurchase of the Ordinary Shares or Warrants, or realize capital gains on the sale of any Ordinary Shares or Warrants,
unless they sell a participation of more than 10% in the Company within 6 months of its acquisition, or in case of a disposal of Ordinary
Shares or Warrants after 6 months or more, such holder had been a Grand Duchy of Luxembourg resident taxpayer for more than 15 years and
has become a non-Luxembourg taxpayer less than 5 years before the disposal of Ordinary Shares or Warrants occurs.
Taxation of Luxembourg residents
Holders who are Luxembourg
resident individuals will generally be subject to income tax on income derived from the Ordinary Shares and Warrants. Capital gains realized
upon the disposal, sale or redemption of the Ordinary Shares and Warrants by individual resident holders acting in the course of the management
of their private wealth are in principle not subject to income tax (except if the gain has been realized within 6 months of the acquisition
of the Ordinary Shares or Warrants), to the extent they do not hold a participation of more than 10% in the Company.
Holders who are Luxembourg
resident companies (
société de capitaux
) or foreign entities which have a permanent establishment or a permanent
representative in Luxembourg with which the holding of the Ordinary Shares or Warrants is connected, must include in their taxable income
any income (including dividend) and the difference between the sale or redemption price and the lower of the cost or book value of the
Ordinary Shares and Warrants sold or redeemed unless the conditions of the participation exemption regime are satisfied. Under Luxembourg
tax law it is debatable to what extent the Warrants are eligible for the participation exemption regime although certain case law supports
such argumentation in certain circumstances.
If the conditions of the participation
exemption regime are not met, 50% of the dividends distributed by the Company to the Luxembourg resident company, or to the foreign holders
of Ordinary Shares having a permanent establishment or a permanent representative in Luxembourg with which the holding of the Ordinary
Shares is connected, should nevertheless be exempt from income tax.
113
A holder who is a Luxembourg
resident company benefiting from a special tax regime, such as (i) a specialized investment fund governed by the amended law of February
13, 2007, (ii) a family wealth management company governed by the amended law of May 11, 2007, (iii) an undertaking for collective investment
governed by the amended law of December 17, 2010 or (iv) a reserved alternative investment fund treated as a specialized investment fund
for Luxembourg tax purposes governed by the amended law of July 23, 2016 is exempt from income tax in Luxembourg and profits derived from
the Ordinary Shares and Warrants are thus not subject to Luxembourg income tax.
Net Wealth Tax
A Luxembourg resident as well
as a non-resident who has a permanent establishment or a permanent representative in Luxembourg to which the Ordinary Shares or Warrants
are attributable, are subject to Luxembourg NWT on such Ordinary Shares or Warrants, except if the holder is (i) a resident or non-resident
individual taxpayer, (ii) a securitization company governed by the amended law of March 22, 2004 on securitization, (iii) a company governed
by the amended law of June 15, 2004 on venture capital vehicles, (iv) a professional pension institution governed by the amended law dated
July 13, 2005, (v) a specialized investment fund governed by the amended law of February 13, 2007, (vi) a family wealth management company
governed by the law of May 11, 2007, (vii) an undertaking for collective investment governed by the amended law of December 17, 2010 or
(viii) a reserved alternative investment fund governed by the amended law of July 23, 2016.
However, (i) a securitization
company governed by the amended law of March 22, 2004 on securitization, (ii) a company governed by the amended law of June 15, 2004 on
venture capital vehicles, (iii) a professional pension institution governed by the amended law dated July 13, 2005 and (iv) an opaque
reserved alternative investment fund treated as a venture capital vehicle governed by the amended law of July 23, 2016 remain subject
to minimum NWT.
The minimum NWT tax is levied
on companies having their statutory seat or central administration in Luxembourg. For entities for which the sum of fixed financial assets,
receivables against related companies, transferable securities and cash at bank exceeds 90% of their total gross assets and € 350,000,
the minimum NWT is currently set at € 4,815. For all other companies having their statutory seat or central administration in Luxembourg
which do not fall within the scope of the € 4,815 minimum NWT, the minimum NWT ranges from € 535 to € 32,100, depending
on the company's total gross assets.
Other Taxes
No stamp, value, issue, registration,
transfer or similar taxes or duties will be payable in Luxembourg by shareholders in connection with the issue of the Ordinary Shares
and Warrants, nor will any of these taxes be payable as a consequence of a subsequent transfer, exchange or redemption of the Ordinary
Shares or Warrants, unless the documents relating to the Ordinary Shares or Warrants are (i) voluntarily registered in Luxembourg or (ii)
appended to a document that requires obligatory registration in Luxembourg.
There is no Luxembourg value
added tax payable in respect of payments in consideration for the issuance of the Ordinary Shares or Warrants or in respect of the payment
under the Ordinary Shares or Warrants or the transfer of the Ordinary Shares or Warrants. Luxembourg value added tax may, however, be
payable in respect of fees charged for certain services rendered to the Company if, for Luxembourg value added tax purposes, such services
are rendered or are deemed to be rendered in Luxembourg and an exemption from Luxembourg value added tax does not apply with respect to
such services.
No Luxembourg inheritance
tax is levied on the transfer of the Ordinary Shares or Warrants upon the death of a holder in cases where the deceased was not a resident
of Luxembourg for inheritance tax purposes. Where a holder is a resident of Luxembourg for tax purposes at the time of his death, the
Ordinary Shares and Warrants are included in such holder's taxable estate for inheritance tax assessment purposes. No Luxembourg
gift tax will be levied on the transfer of Ordinary Shares or Warrants by way of gift unless the gift is registered in Luxembourg.
114
U.S. FEDERAL INCOME TAX
CONSIDERATIONS
The following is a discussion
of certain U.S. federal income tax considerations to U.S. holders (as defined below) relating to the acquisition, ownership and disposition
of the Ordinary Shares and Warrants as of the date hereof. The discussion below only applies to the Ordinary Share and Warrants held as
capital assets for U.S. federal income tax purposes and does not describe all of the tax consequences that may be relevant to holders
in light of their particular circumstances, including alternative minimum tax and Medicare contribution tax consequences, or holders who
are subject to special rules, such as:
●
financial
institutions or financial services entities;
●
insurance
companies;
●
government
agencies or instrumentalities thereof;
●
regulated
investment companies and real estate investment trusts;
●
expatriates
or former residents of the United States;
●
persons
that acquired the Ordinary Shares or Warrants pursuant to an exercise of employee share options, in connection with employee share incentive
plans or otherwise as compensation;
●
dealers
or traders subject to a mark-to-market method of tax accounting with respect to the Ordinary Shares or Warrants;
●
persons
holding the Ordinary Shares or Warrants as part of a "straddle," constructive sale, hedging, integrated transactions or similar
transactions;
●
U.S.
holders whose functional currency is not the U.S. dollar;
●
partnerships
or other pass-through entities for U.S. federal income tax purposes or investors in such entities;
●
a
person required to accelerate the recognition of any item of gross income with respect to the Ordinary Shares or Warrants as a result
of such income being recognized on an applicable financial statement;
●
a
person actually or constructively owning 10% or more of the Ordinary Shares (by vote or value); or
●
tax-exempt
entities.
This discussion does not consider
the tax treatment of entities that are partnerships or other pass-through entities for U.S. federal income tax purposes or persons who
hold the Ordinary Shares or Warrants through such entities. If a partnership or other pass-through entity for U.S. federal income tax
purposes is the beneficial owner of Ordinary Shares or Warrants, the U.S. federal income tax treatment of partners of the partnership
will generally depend on the status of the partners and the activities of the partner and the partnership.
This discussion is based on
the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury regulations all as of
the date hereof, changes to any of which subsequent to the date of this Annual Report may affect the tax consequences described in this
Annual Report. This discussion does not take into account potential suggested or proposed changes in such tax laws which may impact the
discussion below and does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes.
Each of the foregoing is subject to change, potentially with retroactive effect. Holders are urged to consult their tax advisors with
respect to the application of U.S. federal tax laws to their particular situation, as well as any tax consequences arising under the laws
of any state, local or non-U.S. jurisdiction.
115
For purposes of this discussion,
a U.S. holder means a beneficial owner of Ordinary Shares or Warrants that is, for U.S. federal income tax purposes:
●
an
individual who is a citizen or resident of the United States;
●
a
corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws
of the United States, any state thereof or the District of Columbia;
●
an
estate whose income is subject to U.S. federal income tax regardless of its source; or
●
a
trust if (1) a U.S. court can exercise primary supervision over the trust's administration and one or more U.S. persons are authorized
to control all substantial decisions of the trust; or (2) the trust has a valid election in effect under applicable Treasury Regulations
to be treated as a U.S. person.
THIS DISCUSSION IS ONLY A
SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE ORDINARY SHARES AND WARRANTS.
EACH HOLDER OF ORDINARY SHARES OR WARRANTS IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH INVESTOR, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND
ANY APPLICABLE TAX TREATIES.
Distributions on Ordinary Shares
Subject to the discussion
below under "
—Passive Foreign Investment Company Rules
", the gross amount of any distribution on Ordinary Shares
that is made out of the Company's current or accumulated earnings and profits (as determined for U.S. federal income tax purposes)
generally will be taxable to a U.S. holder as ordinary dividend income on the date such distribution is actually or constructively received.
Any such dividends generally will not be eligible for the dividends received deduction allowed to corporations in respect of dividends
received from other U.S. corporations. To the extent that the amount of the distribution exceeds the Company's current and accumulated
earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a non-taxable
return of capital to the extent of the U.S. holder's tax basis in its Ordinary Shares, and thereafter as capital gain recognized
on a sale or exchange. Because the Company may not determine its earnings and profits on the basis of U.S. federal income tax principles,
it is expected that distributions on Ordinary Shares will generally be reported to U.S. holders as dividends.
Dividends paid by the Company
generally will be taxable to a non-corporate U.S. holder at the reduced rate normally applicable to long-term capital gains, provided
that the Company is considered a "qualified foreign corporation" and certain other requirements are met. A qualified foreign
corporation includes a foreign corporation that is eligible for the benefits of the income tax treaty between Luxembourg and the United
States (the "Treaty"). A foreign corporation is also treated as a "qualified foreign corporation" with respect
to dividends paid by that corporation on shares that are readily tradable on an established securities market in the United States. U.S.
Treasury Department guidance indicates that the Ordinary Shares, which are listed on the NASDAQ, will be readily tradable on an established
securities market in the United States. There can be no assurance, however, that Ordinary Shares will be considered readily tradable on
an established securities market in later years or that that the Company will be eligible for the benefits of the Treaty. A U.S. holder
will not be able to claim the reduced rate on dividends received from the Company if the Company is treated as a PFIC in the taxable year
in which the dividends are received or in the preceding taxable year. See "
—Passive Foreign Investment Company Rules
"
below.
Subject to certain conditions
and limitations, withholding taxes, if any, on dividends paid by the Company may be treated as foreign taxes eligible for credit against
a U.S. holder's U.S. federal income tax liability under the U.S. foreign tax credit rules. However, as a result of recent changes
to the U.S. foreign tax credit rules, a withholding tax generally will need to satisfy certain additional requirements in order to be
considered a creditable tax for a U.S. holder. The Company has not determined whether these requirements have been met with respect to
any withholding tax that may be imposed on dividends paid by the Company and, accordingly, no assurance can be given that any such tax
will be creditable. For purposes of calculating the U.S. foreign tax credit, dividends paid on Ordinary Shares will generally be treated
as income from sources outside the United States and will generally constitute passive category income. The rules governing the U.S. foreign
tax credit are complex. U.S. holders should consult their tax advisors regarding the availability of the U.S. foreign tax credit under
particular circumstances.
116
Sale, Exchange, Redemption or Other Taxable
Disposition of Ordinary Shares and Warrants
Subject to the discussion
below under "
—Passive Foreign Investment Company Rules
," a U.S. holder generally will recognize gain or loss
on any sale, exchange, redemption or other taxable disposition of Ordinary Shares or Warrants in an amount equal to the difference between
(i) the amount realized on the disposition and (ii) such U.S. holder's adjusted tax basis in such shares and/or warrants. Any gain
or loss recognized by a U.S. holder on a taxable disposition of Ordinary Shares or Warrants generally will be capital gain or loss and
will be long-term capital gain or loss if the holder's holding period in such shares and/or warrants exceeds one year at the time
of the disposition. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. holders (including individuals).
The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder on the sale or exchange of
Ordinary Shares or Warrants generally will be treated as U.S. source gain or loss. Therefore, a U.S. holder may have insufficient foreign
source income to utilize foreign tax credits attributable to any Luxembourg withholding tax imposed on a sale, exchange, redemption or
other taxable disposition. U.S. holders should consult their tax advisors as to the availability of and limitations on any foreign tax
credit attributable to Luxembourg withholding tax.
Exercise or Lapse of a Warrant
Except as discussed below
with respect to the cashless exercise of a Warrant, a U.S. holder generally will not recognize gain or loss upon the acquisition of an
Ordinary Share on the exercise of a Warrant for cash. A U.S. holder's tax basis in a Ordinary Shares received upon exercise of the
Warrant generally should be an amount equal to the sum of the U.S. holder's tax basis in the Warrant exchanged therefor and the
exercise price. The U.S. holder's holding period for a Ordinary Share received upon exercise of the Warrant will begin on the date
following the date of exercise (or possibly the date of exercise) of the Warrant and will not include the period during which the U.S.
holder held the Warrant. If a Warrant is allowed to lapse unexercised, a U.S. holder generally will recognize a capital loss equal to
such holder's tax basis in the Warrant.
The tax consequences of a
cashless exercise of a Warrant are not clear under current tax law. A cashless exercise may be tax-deferred, either because the exercise
is not a gain realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either
tax-deferred situation, a U.S. holder's basis in the Ordinary Shares received would equal the holder's basis in the Warrants
exercised therefore. If the cashless exercise were treated as not being a gain realization event, a U.S. holder's holding period
in the Ordinary Shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of
the Warrants. If the cashless exercise were treated as a recapitalization, the holding period of the Ordinary Shares would include the
holding period of the Warrants exercised therefore.
It is also possible that a
cashless exercise of a Warrant could be treated in part as a taxable exchange in which gain or loss would be recognized. In such event,
a U.S. holder would recognize gain or loss with respect to the portion of the exercised Warrants treated as surrendered to pay the exercise
price of the Warrants (the "surrendered warrants"). The U.S. holder would recognize capital gain or loss with respect to the
surrendered warrants in an amount generally equal to the difference between (i) the fair market value of the Ordinary Shares that would
have been received with respect to the surrendered warrants in a regular exercise of the Warrants and (ii) the sum of the U.S. holder's
tax basis in the surrendered warrants and the aggregate cash exercise price of such warrants (if they had been exercised in a regular
exercise). In this case, a U.S. holder's tax basis in the Ordinary Shares received would equal the U.S. holder's tax basis
in the Warrants exercised plus (or minus) the gain (or loss) recognized with respect to the surrendered warrants. A U.S. holder's
holding period for the Ordinary Shares would commence on the date following the date of exercise (or possibly the date of exercise) of
the Warrants.
Due to the absence of authority
on the U.S. federal income tax treatment of a cashless exercise of warrants, there can be no assurance which, if any, of the alternative
tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. holders should consult
their tax advisors regarding the tax consequences of a cashless exercise of Warrants.
117
Possible Constructive Distributions
The terms of each Warrant
provide for an adjustment to the number of Ordinary Shares for which the Warrant may be exercised or to the exercise price of the Warrant
in certain events. An adjustment which has the effect of preventing dilution generally is not taxable. A U.S. holder of a Warrant would,
however, be treated as receiving a constructive distribution from the Company if, for example, the adjustment increases the holder's
proportionate interest in the Company's assets or earnings and profits (e.g., through an increase in the number of Ordinary Shares
that would be obtained upon exercise of such warrant) as a result of a distribution of cash to the holders of the Ordinary Shares which
is taxable to the U.S. holders of such shares as described under "
—Distributions on Ordinary Shares
" above. Such
constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. holder of such warrant
received a cash distribution from the Company equal to the fair market value of such increased interest.
Passive Foreign Investment Company Rules
A non-U.S. corporation, such
as the Company, will be PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules
with respect to the income and assets of its subsidiaries, either (i) 75% or more of the corporation's gross income is passive income,
or (ii) 50% or more of the value of the corporation's assets in any taxable year (generally based on the quarterly average of the
value of its assets during such year) is attributable to assets, including cash, that produce passive income or are held for the production
of passive income. Passive income generally includes dividends, interest, certain royalties and rents, annuities, net gains from the sale
or exchange of property producing such income and net foreign currency gains.
Based on the expected composition
of the Company's gross assets (including unbooked goodwill as valued based on the market value of the Company's equity) and
income and the manner in which the Company expects to operate its business in future years, the Company does not expect to be classified
as a PFIC for U.S. federal income tax purposes for the Company's current taxable year or in the foreseeable future. Whether the
Company is a PFIC is a factual determination made annually, and the Company's status could change depending, among other things,
upon changes in the composition and relative value of its gross receipts and assets, which may be determined by reference to the price
of Ordinary Shares (which could fluctuate significantly). Based on its current operations, the Company's unbooked goodwill (which
it has valued based on the market value of its equity) may be attributable to the Company's activities that generate active income
and may be treated as an active asset. Because the Company has valued its goodwill based on the market value of its equity, a decrease
in the price of Ordinary Shares may also result in the Company becoming a PFIC.
If the Company were a PFIC
in any year during which a U.S. holder owns Ordinary Shares, subject to the discussion below regarding the mark-to-market or QEF elections,
a U.S. holder generally will be subject to special rules (regardless of whether the Company continues to be a PFIC) with respect to (i)
any "excess distribution" (generally, any distributions received by a U.S. holder on its Ordinary Shares in a taxable year
that are greater than 125% of the average annual distributions received by the U.S. holder in the three preceding taxable years or, if
shorter, the U.S. holder's holding period for the Ordinary Shares) and (ii) any gain realized on the sale or other disposition of
Ordinary Shares. Under these rules (a) the excess distribution or gain will be allocated ratably over the U.S. holder's holding
period, (b) the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which the Company
is a PFIC will be taxed as ordinary income, and (c) the amount allocated to each of the other taxable years will be subject to tax at
the highest rate of tax in effect for the applicable class of taxpayer for that year and an interest charge for the deemed deferral benefit
will be imposed with respect to the resulting tax attributable to each such other taxable year. The application of the PFIC rules to U.S.
holders of Warrants is unclear. Proposed Treasury Regulations issued under the PFIC rules generally treat an "option" (which
would include a Warrant) to acquire the stock of a PFIC as stock of the PFIC. Therefore, it is possible that the proposed Treasury Regulations
if finalized in their current form would apply to cause gain recognized on the disposition of Warrants to be subject to the excess distribution
regime discussed above.
A U.S. holder may be able
to avoid some of the adverse impacts of the PFIC rules described above by electing to mark the Ordinary Shares to market annually. The
election is available only if the Ordinary Shares are considered "marketable stock," which generally includes stock that is
regularly traded in more than de minimis quantities on a qualifying exchange. If a U.S. holder makes the mark-to-market election, any
gain from marking the Ordinary Shares to market or from disposing of them would be ordinary income. Any loss from marking the Ordinary
Shares to market would be recognized only to the extent of unreversed gains previously included in income. Loss from marking the Ordinary
Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark-to-market gains previously
included in income. It is expected that Ordinary Shares, which are listed on Nasdaq, will qualify as marketable shares for the PFIC rules
purposes. No assurance can be given that the Ordinary Shares will be traded in sufficient frequency and quantity to be considered "marketable
stock." A valid mark-to-market election cannot be revoked without the consent of the IRS unless the Ordinary Shares cease to be
marketable stock. In addition, U.S. holders of Warrants will not be able to make a mark-to-market election with respect to their Warrants.
118
A U.S. holder would not be
able to avoid the tax consequences described above by electing to treat the Company as a QEF because the Company does not intend to provide
U.S. holders with the information that would be necessary to make a QEF election with respect to the Ordinary Shares. In any event, U.S.
holders of Warrants will not be able to make a QEF election with respect to their warrants.
A U.S. holder that owns (or
is deemed to own) shares in a PFIC during any taxable year of the U.S. holder generally is required to file an IRS Form 8621 (whether
or not a QEF or mark-to-market election is or has been made) with such U.S. holder's U.S. federal income tax return and provide
such other information as may be required by the U.S. Treasury Department. Failure to file IRS Form 8621 for each applicable taxable year
may result in substantial penalties and result in the U.S. holder's taxable years being open to audit by the IRS until such Forms
are properly filed.
U.S. holders should consult
their own tax advisors concerning the Company's possible PFIC status and the consequences to them, including potential reporting
requirements, if the Company were classified as a PFIC for any taxable year.
Information Reporting and Backup Withholding
Information reporting requirements
may apply to dividends received by U.S. holders of Ordinary Shares, and the proceeds received on the disposition of Ordinary Shares effected
within the United States (and, in certain cases, outside the United States), in each case other than U.S. holders that are exempt recipients
(such as corporations). Backup withholding may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification
number (generally on an IRS Form W-9 provided to the paying agent of the U.S. holder's broker) or is otherwise subject to backup
withholding.
Backup withholding is not
an additional tax. Amounts withheld as backup withholding may be credited against the U.S. holder's U.S. federal income tax liability,
and a U.S. holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate
claim for a refund with the IRS and furnishing any required information.
Certain U.S. holders are required
to report information with respect to Ordinary Shares and Warrants not held through an account with a domestic financial institution to
the IRS. U.S. holders that fail to report required information could become subject to substantial penalties. U.S. holders should consult
their tax advisors regarding these rules and any other reporting obligations that may apply to the ownership or disposition of Ordinary
Shares or Warrants.
F. DIVIDENDS AND PAYING AGENTS.
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
The Company makes its filings
in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company's
filings are also available to the public through the Internet at Procaps' website at https://investor.procapsgroup.com/. Such filings
and other information on its website are not incorporated by reference in this Annual Report. Interested parties may request a copy of
this filing, and any other report, at no cost, by writing to the Company at the following address: Procaps Group, S.A. – 9 rue de
Bitbourg, L-1273, Luxembourg, Grand Duchy of Luxembourg.
1. SUBSIDIARY INFORMATION
Not applicable.
119
ITEM 11.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
We are exposed to cash flow
and earnings fluctuations as a result of certain market risks. These market risks primarily relate to changes in interest rates and foreign
exchange rate changes.
Interest Rate Risk
Procaps is exposed to risks
in interest rates because it borrows money at both fixed and variable interest rates. Procaps manages this risk by constantly monitoring
the macroeconomic variables that determine the variation of the interest rates and to the extent possible, incurring an appropriate combination
between fixed rate and the variable rate loan financing. At the end of each reporting period a sensitivity analysis is performed for interest
rates determined for financial obligations at the Colombian Depósitos Termino Fijo (Fixed Term Deposit Rate, or "DTF"),
the Colombian Indicador Bancario de Referencia (Indicative Benchmark Interest Rate, or "IBR") and the London Inter-bank Offered
Rate ("LIBOR") at the end of the reporting period, raising awareness of an increase or a decrease of 100 points, which represents
management's assessment of the possible reasonable change in interest rates. For the years ended December 31, 2022, 2021 and 2020,
the impact of these potential interest rate variations was deemed to be immaterial to our financial results.
Inflation Risk
Our functional and reporting
currency is the U.S. dollar After a sustained period of relatively low inflation rates, the rates of inflation are above or near recent
historical highs in the United States as well as the other countries in which we operate. High rates of inflation may have a number of
adverse effects on our business. For example, we have experienced an increase in our cost of sales and operating expenses, primarily with
respect to sales, marketing and administrative expenses. For the fiscal year ended December 21, 2022, management has estimated that the
rise in inflation has had an adverse impact on our results of operations of approximately $9.0 million. Our suppliers may also be subject
to material adverse effects as a result of high rates of inflation, including as a result of the impact on their financial conditions,
changes in demand patterns, price volatility, and supply chain disruption. Any increase in the materials supplied to us by our suppliers
could continue to have an effect on our cost of sales. Furthermore, the Company cannot completely offset increased costs due to inflation
by increasing the prices of our products, because, among other things, any such increase would inherently lag behind such cost increases.
Increasing prices may also adversely impact customer demand for our products.
In addition, we incur some
of our expenses in other currencies. As a result, we are exposed to the risk that the rate of inflation in countries in which we are active
other than the United States will exceed the rate of devaluation of such countries' currencies in relation to the dollar or that
the timing of any such devaluation will lag behind inflation in such countries. To date, we have been affected by the exchange rates of
other countries' currencies compared to the dollar, and we cannot assure you that we will not be adversely affected in the future.
Foreign Currency Exchange Risk
Due to the nature of our global
operations, we are exposed to cash flow and earnings fluctuations resulting from foreign exchange-rate variation. These exposures are
transactional and translational in nature. Since we manufacture and sell our products throughout the world, our foreign-currency risk
is diversified. Principal drivers of this diversified foreign-exchange exposure include the Colombia Peso, Brazilian Real, and the Peruvian
Soles. Approximately 45% of our revenue for the year ended December 31, 2022 was U.S. dollar denominated. Our transactional exposure arises
from the purchase and sale of goods and services in currencies other than the functional currency of our operational units. The financial
statements of our operations outside of the United States are measured using the local currency as the functional currency. Adjustments
to translate the assets and liabilities of these foreign operations in Colombian Pesos, Brazilian Reais and the Peruvian Soles are accumulated
as a component of other comprehensive income/(loss) utilizing period-end exchange rates. Foreign-currency transaction gains and losses
calculated by utilizing weighted average exchange rates for the period are included in the statements of operations in other (income)/expense,
net.
120
ITEM 12.
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
A. DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Pursuant to the Warrant Amendment,
Union assigned to the Company all of Union's right, title and interest in the Warrant Agreement and the Company assumed, and agreed
to pay, perform, satisfy and discharge in full, as the same become due, all of Union's liabilities and obligations under the Warrant
Agreement arising from and after the Merger Effective Time.
Each Warrant is exercisable
for one Ordinary Share and only whole warrants are exercisable. The exercise price of the Warrants is $11.50 per share, subject to adjustment
as described in the Warrant Agreement. A Warrant may be exercised only during the period commencing on the date of the consummation of
the Business Combination, and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years
after the date the Business Combination was completed, (y) the redemption date as provided in Section 6.2 of the Warrant Agreement, or
(z) the liquidation of the Company. Redemptions of warrants for cash pursuant to the Warrant Agreement, once the Public Warrants become
exercisable, may be redeemed (i) in whole and not in part, (ii) at a price of $0.01 per warrant, (iii) upon not less than 30 days'
prior written notice of redemption to each warrant holder, and (iv) if, and only if, the reported last sale price of the Ordinary Shares
equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before sending the
notice of redemption to each warrant holder. If the Public Warrants are called for redemption for cash, management will have the option
to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis," as described in the Warrant
Agreement.
The Private Placement Warrants
are identical to the Public Warrants, except that the Private Placement Warrants and the shares issuable upon the exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable
(except as mentioned above) so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be
redeemable and exercisable by such holders on the same basis as the Public Warrants.
C. OTHER SECURITIES
Not applicable.
D. AMERICAN DEPOSITARY SHARES
Not applicable.
ITEM 13.
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14.
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
121
ITEM 15.
CONTROLS
AND PROCEDURES
A. DISCLOSURE CONTROLS AND PROCEDURES
Our management, under the
supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations
promulgated thereunder) as of the end of the fiscal year covered by this Annual Report.
Based on such evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures
were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange
Act were included.
Notwithstanding the conclusion
by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures were not effective as of December
31, 2022, and notwithstanding the material weaknesses in our internal control over financial reporting described below, our Chief Executive
Officer and Chief Financial Officer believe that the consolidated financial statements and related financial information included in this
Annual Report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented,
and for the periods ended on such dates, in conformity with IFRS.
B. MANAGEMENT'S ANNUAL ASSESSMENT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting for Procaps as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB.
Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of Procaps' internal control
over financial reporting based on the framework in Internal Control – Integrated Framework 2013 issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO 2013"). Based on its evaluation, our management concluded that Procaps'
internal control over financial reporting was not effective as of December 31, 2022.
Material Weaknesses in Internal Control Over
Financial Reporting
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely
basis.
122
The
material weaknesses previously disclosed in our annual report for the fiscal year ended December 31, 2021 remain unremediated as of December
31, 2022. These material weaknesses relate to (i) our manual consolidation process which lacks the appropriate internal controls to prevent
or detect material misstatements in a timely manner and to ensure that financial data recorded was complete and accurate, (ii) our information
technology controls not being sufficiently designed and implemented to address certain information technology risks, (iii) the sufficiency
of technical accounting resources with an appropriate level of technical experience required for timely and accurate financial reporting
in accordance with IFRS, (iv) lack of system controls and effective processes to ensure that all manual journal entries are properly reviewed
and approved prior to posting to the general ledger, and (v) our controls and monitoring activities not being effective to ascertain whether
the components of our internal control are present and functioning.
Based on the material weaknesses
identified above, the Company did not fully implement components of the COSO framework, including elements of the control environment,
risk assessment, control activities, information and communication, and monitoring activities components.
Remediation
Efforts
During fiscal year 2022, the
Company began developing and implementing a remediation plan to address the material weaknesses identified.
Management
believes it identified the root causes that gave rise to the material weaknesses, defined remediation actions, and designed new controls
for the internal control over financial reporting process.
Management's remediation efforts
include
the following:
●
Implementing
company-wide policies to transition from local GAAP to IFRS consistently across the organization.
●
Developed
a detailed implementation and deployment plan for the Business Planning and Consolidation tool ("BPC"), which includes improving
existing controls and adjusting policies and procedures related to the manual consolidation process.
●
Migrating
the organization to one instance of enterprise resource planning software ("SAP") to provide a stronger internal control
infrastructure for financial reporting, internal control and improved segregation of duties.
●
Strengthened
the structure of its IT department by hiring an internal control expert and adjusted IT department policies, procedures, and controls.
●
Continuing
to hire qualified tax, technical accounting and financial reporting personnel to implement and perform control activities. Additionally,
the current structure of the accounting team at the subsidiaries is being reviewed to strengthen the team's skills, experience, and operational
capacity.
●
Engaging
consultants to provide technical expertise.
●
Implementing
effective review and approval of manual journal entries recorded in SAP.
●
Continuing
to refine our approach to testing and communicating the results of the operating effectiveness of certain controls over financial reporting.
●
Engaging
third-party specialists to help assess and commence documentation of our internal controls to address the components of the COSO framework.
●
Implementing
entity-level controls to address components of the COSO framework for the control environment, risk assessment, control activities, information
and communication, and monitoring activities components.
As we continue to evaluate
and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine that additional measures or
time are required to address the control deficiencies or that we need to modify or otherwise adjust the remediation measures described
above. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluation of our internal control
over financial reporting.
123
C. ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
This Annual Report does not
include an attestation report of the Company's independent registered public accounting firm because we qualify as an emerging growth
company as such term is defined in the JOBS ACT and as such, we are exempted from such attestation requirement.
D. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Except for the remediation
procedures implemented by the Company as described above, there have not been any changes in our internal control over financial reporting
during the year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 16. RESERVED
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
See Item 6.C above under the heading "
Board
Practices—Board Committees—Audit Committee
" of this Annual Report. Each member of our audit committee is financially
literate and our Board of Directors has determined that Mr. David Yanovich qualifies as an "audit committee financial expert"
as defined in applicable SEC rules.
ITEM 16B.
CODE OF ETHICS
Our Board of Directors adopted a Code of Ethics
applicable to our directors, executive officers and team members that complies with the rules and regulations of Nasdaq and the SEC. The
Code of Ethics is available on the Company's website. In addition, the Company has posted on the Corporate Governance section of
its website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision
of the Code of Ethics. The reference to the Company's website address in this Annual
Report
does not include or incorporate
by reference the information on the Company's website into this Annual Report.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Billed by the Company's
Principal Accountant
In 2022,
Deloitte & Touche
S.A.S
. served as the principal external auditor for the Company. Fees billed by the principal accountant in 2022 and 2021 are detailed
below:
For the Year Ended
December 31
2022
2021
(
in thousands of U.S. dollars
)
Audit fees
2,585
4,724
Audit related fees
130
-
Tax fees
-
-
All other fees
-
-
Total
2,715
4,724
Audit Fees
Audit fees were paid for professional
services rendered by the auditors for the audit of the consolidated financial statements of the Company and the statutory financial statements
of the Company and its subsidiaries.
Audit-Related Fees
Audit-related fees are typically
services that are reasonably related to the performance of the audit or review of the consolidated financial statements and are not reported
under the audit fee item above. This item includes fees for attestation services on financial information of the Company and its subsidiaries
included in their annual reports that are filed with their respective regulators.
124
Tax Fees
Tax fees were paid for tax
compliance and tax advice professional services.
All other fees
All other fees were paid for specific
minor professional services not related to the above categories.
Audit Committee's Pre-approval
Policies and Procedures
The Company's audit
committee is responsible for, among other things, the oversight of the Company's independent auditors. The audit committee has adopted
a policy of pre-approval of audit and permissible non-audit services provided by its independent auditors in its charter.
Under the policy, the audit
committee makes its recommendations through the Board of Directors to the shareholders' meeting concerning the continuing appointment
or termination of the Company's independent auditors. On a yearly basis, the audit committee reviews together with management and
the independent auditor, the audit plan, audit related services and other non-audit services and approves the related fees. Any changes
to the approved fees must be reviewed and approved by the audit committee. In addition, the audit committee delegated to its Chairman
the authority to consider and approve, on behalf of the Audit Committee, additional non-audit services that were not recognized at the
time of engagement, which must be reported to the other members of the audit committee at its next meeting. No services outside the scope
of the audit committee's approval can be undertaken by the independent auditor.
Our audit committee has authorized
all auditing and non-auditing services provided by our independent accountants during the year ended December 31, 2022 and the fees paid
for such services
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
Our corporate governance practices
are governed by Luxembourg Companies Law and our amended and restated articles of association. As a foreign private issuer listed on the
Nasdaq Global Market, the Company is permitted to follow certain Luxembourg corporate governance practices in lieu of certain listing
rules of Nasdaq (the "Nasdaq Listing Rules"). The Company complies with the corporate governance requirements of the Nasdaq
Listing Rules, except that it intends to follow Luxembourg practice with respect to quorum requirements for shareholder meetings in lieu
of the requirement under Nasdaq Listing Rules that the quorum be not less than 33 1/3% of the outstanding voting shares. Under the Company's
amended and restated articles of association, at an ordinary general meeting, there is no quorum requirement and resolutions are adopted
by a simple majority of validly cast votes. In addition, under the Company's amended and restated articles of association, for any
resolutions to be considered at an extraordinary general meeting of shareholders, the quorum shall be at least one half of our issued
share capital unless otherwise mandatorily required by law.
125
For purposes of the Nasdaq
Listing Rules, the Company is a "controlled company." Under Nasdaq Listing Rules, controlled companies are companies of which
more than 50% of the voting power for the election of directors is held by an individual, a group, or another company. The Minski Family
owns 59.6% of the outstanding Ordinary Shares. Accordingly, although the Company will be eligible to take advantage of certain exemptions
from certain Nasdaq corporate governance standards, it currently does not intend to do so except for the quorum requirement discussed
above.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
ITEM 17.
FINANCIAL
STATEMENTS
The Company has responded
to Item 18 in lieu of responding to this item.
ITEM 18.
FINANCIAL
STATEMENTS
(1)
Financial Statements
Procaps Group S.A. and subsidiaries (The Group)
Consolidated Financial Statements for the years ended December
31, 2022, 2021 and 2020
Report of Independent Registered Public Accounting Firm – PCAOB – ID
1183
F-2
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
F-3
Consolidated Statement of Financial Position as of December 31, 2022 and 2021 and 2020 and as of January 1, 2021
F-5
Consolidated Statement of Changes in Equity as of December 31, 2022 and 2021
F-6
Consolidated Statement of Cash Flows for the years ended December 31, 2022, 2021 and 2020
F-7
Notes to Consolidated Financial Statements for the years ended December 31, 2022, 2021 and 2020
F-8
126
ITEM 19.
EXHIBITS
(b) List of Exhibits
The following exhibits are
filed or incorporated by reference as part of this Annual Report:
Exhibit
Number
Description
1.1
Amended and Restated Articles of Association of Procaps Group, S.A., dated as of September 28, 2021 (incorporated by reference to Exhibit 1.1 to Procaps Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
2.1
Specimen Warrant Certificate of Procaps Group, S.A. (incorporated by reference to Exhibit A of Exhibit 4.4 to Procaps Group, S.A.'s Registration Statement on Form F-4/A filed August 17, 2021 (file no. 333-257222)).
2.2
Warrant Agreement, dated October 17, 2019, by and between Union Acquisition Corp. II and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 to Union Acquisition Corp. II's Form 8-K, File No. 001-39089, filed with the SEC on October 21, 2019).
2.3
Assignment,
    Assumption and Amendment Agreement with respect to the Warrant Agreement between Union Acquisition Corp. II, Procaps Group, S.A. and
    Continental Stock Transfer & Trust Company, dated as of September 29, 2021 (incorporated by reference to Exhibit 2.5 to Procaps
    Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
2.4
Description of Securities (incorporated by reference to Exhibit 2.5 to Procaps Group, S.A.'s Amendment No. 1 to Form 20-F, filed with the SEC on May 19, 2022)
.
4.1#
Business Combination Agreement, dated as of March 31, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A. and OZLEM Limited (incorporated by reference to Exhibit 2.1 to Union Acquisition Corp. II's Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).
4.2#
Amendment No. 1 to Business Combination Agreement, dated as of September 29, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A. and OZLEM Limited (incorporated by reference to Exhibit 4.2 to Procaps Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
4.3
Form of Contribution and Exchange Agreement (incorporated by reference to Exhibit 10.1 to Union Acquisition Corp. II's Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).
4.4
Form of Subscription Agreement (incorporated by reference to Exhibit 10.2 to Union Acquisition Corp. II's Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).
4.5
Transaction Support Agreement, dated as of March 31, 2021 by and between Crynssen Pharma Group Limited, Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC, Union Acquisition Corp. II and investors in Union Acquisition Corp. II and Crynssen Pharma Group Limited (incorporated by reference to Exhibit 10.3 to Union Acquisition Corp. II's Form 8-K/A, File No. 001-39089, filed with the SEC on April 2, 2021).
4.6
Registration Rights and Lock-Up Agreement, dated September 29, 2021, by and between Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC and the persons and entities listed on Exhibit A thereto (incorporated by reference to Exhibit 4.7 to Procaps Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
4.7
Nomination Agreement, dated September 29, 2021, by and between Procaps Group, S.A., Union Group International Holdings Limited, Union Acquisition Associates II, LLC, and the persons and entities listed on Exhibit A thereto (incorporated by reference to Exhibit 4.8 to Procaps Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
4.8
Share Forfeiture Agreement, dated as of September 29, 2021, by and among Union Acquisition Corp. II, Crynssen Pharma Group Limited, Procaps Group, S.A., Union Acquisition Associates II, LLC and Union Group International Holdings Limited (incorporated by reference to Exhibit 4.9 to Procaps Group, S.A.'s Form 20-F, File No. 001-40851, filed with the SEC on September 30, 2021).
127
4.9*
Credit Agreement (
English Translation
), dated November 20, 2018, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.
4.10*
Amendment No. 1 to Credit Agreement (
English Translation
), dated December 12, 2018, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.
4.11*
Amendment No. 2 to Credit Agreement (
English Translation
), dated June 15, 2020, by and among Procaps S.A, the Co-Obligors named therein, the Guarantors named therein, the Creditors named therein and Fiduciaria Bancolombia S.A. as Management Agent.
4.12#
Note Purchase and Guarantee Agreement, dated November 5, 2021 by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.1 to Procaps Group, S.A.'s Form 6-K filed with the SEC on November 4, 2022).
4.13
First Amendment to Note Purchase and Guarantee Agreement, dated as of January 12, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.2 to Procaps Group, S.A.'s Form 6-K filed with the SEC on November 4, 2022).
4.14
Second Amendment to Note Purchase and Guarantee Agreement, dated as of February 28, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.3 to Procaps Group, S.A.'s Form 6-K filed with the SEC on November 4, 2022).
4.15
Waiver and Third Amendment to Note Purchase and Guarantee Agreement, dated as of November 1, 2022, by and among Procaps S.A., Procaps Group, S.A., the subsidiary guarantors listed on Annex A thereto, Prudential Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc. and Cigna Health and Life Insurance Company. (incorporated by reference to Exhibit 4.4 to Procaps Group, S.A.'s Form 6-K filed with the SEC on November 4, 2022).
4.16
Credit Agreement entered into as of October 11, 2022, by and among Procaps Group, S.A., each guarantor from time to time party thereto, each lender from time to time party thereto, The Bank of New York Mellon, as administrative agent and collateral agent for the lenders, and BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as the joint lead arrangers and bookrunners. (incorporated by reference to Exhibit 10.1 to Procaps Group, S.A.'s Form 6-K filed with the SEC on November 4, 2022).
4.17*
Syndicated Loan Waiver Agreement (
English Translation)
, dated May 2, 2023, by and among, Procaps S.A., the subsidiary co-obligors and guarantors named therein, the lenders named therein and Fiduciaria Bancolombia S.A., as administrative agent
4.18*
NPA Waiver Agreement, dated March 31, 2023, by and among, the Company, Procaps S.A., the subsidiary guarantors named therein and the Noteholders.
8.1*
List of Subsidiaries.
12.1*
Certification of Ruben Minski, Chief Executive Officer of Procaps, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
12.2*
Certification of Patricio Vargas Muñoz, Chief Financial Officer of Procaps, pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
13.1**
Certification of Ruben Minski, Chief Executive Officer of Procaps, pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
13.2**
Certification of Patricio Vargas Muñoz, Chief Financial Officer of Procaps, pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed
herewith.
**
Furnished
herewith.
#
Certain schedules, annexes and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but will be furnished supplementally to the SEC upon request.
##
Management contract or compensation plan or arrangement.
128
SIGNATURES
The registrant hereby certifies
that it meets all of the requirements for filing Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual
Report on its behalf.
PROCAPS GROUP S.A.
By:
/s/ Ruben Minski
Name:
Ruben Minski
Title:
Chief Executive Officer
Dated: May 12, 2023
129
Procaps Group, S.A.
and subsidiaries (The Group)
Consolidated Financial
Statements for the years ended December 31, 2022, 2021 and 2020
F-
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Procaps Group, S.A.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial
position of Procaps Group, S.A. and subsidiaries (the "Company") as of December 31, 2022 and 2021 and the related consolidated
statements of profit or loss and other comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2.1 to the financial statements, at December 31, 2022, the Company
was not in compliance with covenants related to certain of its loan agreements and does not have sufficient capital to repay such loans
if such loans are called by the lenders in the event of future covenant breaches. This matter raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters are also described in Note 2.1. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche S.A.S.
Barranquilla, Colombia
May 12, 2023
We have served as the Company's auditor since 2013.
F-
2
Procaps Group, S.A. and
subsidiaries (The Group)
Consolidated Statement
of Profit or Loss and Other Comprehensive Income
For the years ended December
31, 2022, 2021 and 2020
(In thousands of United
States Dollars, unless otherwise stated)
For the year ended December 31
Notes
2022
2021
2020
Revenue
7
$
409,920
$
409,742
$
331,467
Cost of sales
(
170,351
)
(
174,029
)
(
140,153
)
Gross profit
239,569
235,713
191,314
Sales and marketing expenses
(
93,566
)
(
83,057
)
(
69,629
)
Administrative expenses
(
105,911
)
(
82,187
)
(
58,631
)
Finance income (expenses), net
9
37,917
(
78,636
)
(
54,489
)
Other expenses, net
10
(
25,299
)
(
78,991
)
(
7,716
)
Income/(loss) before tax
52,710
(
87,158
)
849
Income tax expense
11
(
10,170
)
(
13,705
)
(
11,296
)
Income/(loss) for the year
$
42,540
$
(
100,863
)
$
(
10,447
)
Income/(loss) for the year attributable to:
Owners of the Company
42,540
(
100,863
)
(
10,447
)
Non-controlling interests
—
—
—
Earnings per share:
Basic and diluted, income/(loss) for the year attributable to ordinary equity holders of the Company
24
0.42
(
1.03
)
(
0.11
)
The accompanying notes are an integral part of
these Consolidated Financial Statements.
F-
3
Procaps Group, S.A. and
subsidiaries (The Group)
Consolidated Statement
of Profit or Loss and Other Comprehensive Income
For the years ended December
31, 2022, 2021 and 2020
(In thousands of United
States Dollars, unless otherwise stated)
For the year ended December 31
Notes
2022
2021
2020
Income/(loss) for the year
$
42,540
$
(
100,863
)
$
(
10,447
)
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Remeasurement of net defined benefit liability
(
222
)
195
(
47
)
Income tax relating to items that will not be reclassified subsequently to profit or loss
107
(
58
)
16
Net of Tax
(
115
)
137
(
31
)
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(
5,966
)
(
2,743
)
(
637
)
Exchange difference from liquidated foreign transactions reclassified to profit or loss
—
(
751
)
—
Other comprehensive income/(loss) for the year, net of tax
(
6,081
)
(
3,357
)
(
668
)
Total comprehensive income/(loss) for the year
$
36,459
$
(
104,220
)
$
(
11,115
)
Total comprehensive income/(loss) for the year attributable to:
Owners of the Company
36,456
(
102,503
)
(
11,546
)
Non-controlling interests
3
(
1,717
)
431
The accompanying notes are an integral part of
these Consolidated Financial Statements.
F-
4
Procaps Group, S.A. and subsidiaries (The Group)
Consolidated Statement of Financial Position
As of December 31, 2022 and 2021
(In thousands of United States Dollars, unless
otherwise stated)
As of December 31
Notes
2022
2021
Assets
Non-current assets
Property, plant and equipment, net
14
73,965
72,638
Right-of-use assets, net
15
39,013
40,167
Goodwill
12
5,791
6,803
Intangible assets, net
13
32,208
30,171
Investments in joint ventures
16
1,505
2,443
Other financial assets
210
256
Deferred tax assets, net
20
6,974
7,067
Other assets
3,078
4,531
Total non-current assets
$
162,744
$
164,076
Current assets
Cash
43,003
72,112
Trade and other receivables, net
18
129,602
117,449
Inventories, net
17
96,833
79,430
Amounts owed by related parties, net
29
2,474
1,147
Current tax assets, net
11
21,187
22,082
Other current assets, net
26.1
4,344
5,839
Total current assets
$
297,443
$
298,059
Total assets
$
460,187
$
462,135
Liabilities and Shareholders' Equity (Deficit)
Equity (Deficit)
Share capital
23
1,011
1,011
Share premium
23
377,677
377,677
Reserves
23
45,743
42,749
Accumulated deficit
(
391,513
)
(
431,059
)
Accumulated other comprehensive loss
(
33,859
)
(
27,778
)
Equity (deficit) attributable to owners of the Company
$
(
941
)
$
(
37,400
)
Non-controlling interest
(
937
)
(
940
)
Total equity (deficit)
$
(
1,878
)
$
(
38,340
)
Non-Current liabilities
Borrowings
19
28,410
178,720
Warrant liabilities
25
10,916
23,112
Shares held in escrow
26.1
40,064
101,859
Deferred tax liabilities, net
20
7,821
6,070
Other liabilities
6,480
2,750
Total non-current liabilities
$
93,691
$
312,511
Current liabilities
Borrowings
19
257,525
74,646
Trade and other payables
21
90,187
85,381
Amounts owed to related parties
29
2,914
8,450
Current tax liabilities, net
11
6,133
11,756
Provisions
22
138
501
Other liabilities
11,477
7,230
Total current liabilities
$
368,374
$
187,964
Total liabilities and shareholders' equity (deficit)
$
460,187
$
462,135
The accompanying notes are an integral part of
these Consolidated Financial Statements.
F-
5
Procaps Group, S.A. and subsidiaries (The Group)
Consolidated Statement of Changes in Equity
As of December 31, 2022, 2021 and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Attributable to equity holders of the Company
Share
Capital
Share
premium
Reserves
1
Accumulated
deficit
Other
Comprehensive
Income
Total
Non-controlling
interest
Total
equity
(deficit)
Balance as of January 1, 2020
$
2,001
$
54,412
$
28,681
$
(
305,634
)
$
(
23,753
)
$
(
244,293
)
$
346
$
(
243,947
)
Loss for the year
—
—
—
(
10,447
)
—
(
10,447
)
—
(
10,447
)
Transfer to reserves
—
—
11,216
(
11,216
)
—
—
—
—
Other comprehensive (loss)/income for the year
—
—
—
—
(
1,099
)
(
1,099
)
431
(
668
)
Non-controlling interest
—
—
—
—
431
431
—
431
Other
—
—
—
(
47
)
—
(
47
)
—
(
47
)
Balance as of December 31, 2020
$
2,001
$
54,412
$
39,897
$
(
327,344
)
$
(
24,421
)
$
(
255,455
)
$
777
$
(
254,678
)
Loss for the year
2
—
—
—
(
100,863
)
(
751
)
(
101,614
)
—
(
101,614
)
Transfer to reserves
—
—
2,852
(
2,852
)
—
—
—
—
Other comprehensive (loss)/income for the year
—
—
—
—
(
889
)
(
889
)
(
1,717
)
(
2,606
)
Non-controlling interest
—
—
—
—
(
1,717
)
(
1,717
)
—
(
1,717
)
Termination of put option agreements
903
297,796
—
—
—
298,699
—
298,699
Subtotal
2,904
352,208
42,749
(
431,059
)
(
27,778
)
(
60,976
)
(
940
)
(
61,916
)
Capital restructuring of Crynssen Pharma Group Limited (at exchange ratio of 1:33.4448)
(
1,933
)
1,933
—
—
—
—
—
—
Subtotal - restructured
971
354,141
42,749
(
431,059
)
(
27,778
)
(
60,976
)
(
940
)
(
61,916
)
Acquisition of Union Acquisition Corp. II
202
174,738
—
—
—
174,940
—
174,940
Shares held in escrow
(
117
)
(
106,247
)
—
—
—
(
106,364
)
—
(
106,364
)
Redemption of redeemable shares
(
45
)
(
44,955
)
—
—
—
(
45,000
)
—
(
45,000
)
Balance as of December 31, 2021
$
1,011
$
377,677
$
42,749
$
(
431,059
)
$
(
27,778
)
$
(
37,400
)
$
(
940
)
$
(
38,340
)
Income for the year
—
—
—
42,540
—
42,540
—
42,540
Transfer to reserves
—
—
2,994
(
2,994
)
—
—
—
—
Other comprehensive (loss)/income for the year
—
—
—
—
(
6,084
)
(
6,084
)
3
(
6,081
)
Non-controlling interest
—
—
—
—
3
3
—
3
Balance as of December 31, 2022
$
1,011
$
377,677
$
45,743
$
(
391,513
)
$
(
33,859
)
$
(
941
)
$
(
937
)
$
(
1,878
)
1
Includes the appropriate values from net income to comply with legal provisions related to asset protection according to applicable jurisdictions with cumulative earnings.
2
Includes the OCI related to exchange difference from liquidated foreign transactions reclassified to Other Expenses, net for the year ended December 31, 2021.
The accompanying notes are an integral part of
these Consolidated Financial Statements.
F-
6
Procaps Group, S.A. and
subsidiaries (The Group)
Consolidated Statement
of Cash Flows
For the years ended December
31, 2022, 2021 and 2020
(In thousands of United
States Dollars, unless otherwise stated)
For the year ended December 31
Notes
2022
2021
2020
Operating activities
Income/(loss) for the year
$
42,540
$
(
100,863
)
$
(
10,447
)
Adjustments to reconcile net income/(loss) with cash flow from operating activities before changes in working capital:
Depreciation of property, plant and equipment
14
5,656
6,072
5,900
Depreciation of right-of-use assets
15
6,255
4,223
4,598
Amortization of intangibles
13
4,933
4,816
5,979
Income tax expense
11
10,170
13,705
11,296
Finance (income)/expenses
9
(
37,917
)
78,636
54,489
IFRS 2 Share-based payment expense (listing expense)
10
—
73,917
—
Unrealized currency exchange rate differences
1,652
—
—
Share of result of joint ventures
919
305
(
806
)
Net (gain)/loss on sale of property, plant and equipment
14
(
555
)
(
317
)
134
Net loss on sale or disposal of intangibles
13
203
—
161
Impairment loss on property, plant and equipment
14
4,689
—
—
Impairment loss on right-of-use assets
15
356
—
—
Impairment loss on intangible assets
13
135
—
—
Impairment loss on goodwill
12
838
—
—
Inventory provision
17
5,717
5,391
1,616
Provision/(reversed provision) for bad debt
18
2,673
(
818
)
(
1,915
)
Provisions
22
43
—
761
Cash flow from operating activities before changes in working capital
48,307
85,067
71,766
Changes in working capital:
Trade and other receivables, net
(
16,582
)
(
21,257
)
1,889
Amounts owed by related parties
474
1,387
(
613
)
Inventories, net
(
32,690
)
(
20,536
)
(
898
)
Current tax assets, net
895
(
5,308
)
(
10,077
)
Other current assets, net
1,500
(
5,441
)
(
9,635
)
Trade and other payables
14,210
32,825
11,795
Amounts owed to related parties
1,998
(
3,448
)
1,354
Current tax liabilities, net
(
6,643
)
2,103
7,499
Other liabilities
10,865
(
12,936
)
12,014
Provisions
22
(
415
)
—
(
821
)
Other financial assets
46
505
370
Other assets
710
(
2,699
)
1,256
Cash generated from operations
22,675
50,262
85,899
Interest paid
(
1,261
)
(
1,697
)
(
1,839
)
Dividends received
—
300
—
Income tax paid
(
7,308
)
(
11,562
)
(
13,140
)
Cash flow provided by operating activities
$
14,106
$
37,303
$
70,920
Investing activities
Acquisition of property, plant and equipment
14
(
20,612
)
(
14,122
)
(
7,699
)
Proceeds from sale of property, plant and equipment
2,686
794
632
Acquisition and development of intangibles
13
(
10,963
)
(
10,403
)
(
10,219
)
Proceeds from related parties
29
61
28
195
Cash flow used in investing activities
$
(
28,828
)
$
(
23,703
)
$
(
17,091
)
Financing activities
Proceeds from borrowings
19
134,412
280,795
106,736
Payments on borrowings
19
(
124,202
)
(
272,301
)
(
120,586
)
Advances from related parties
29
61
—
32
Payments to related parties
29
(
7,191
)
(
9,154
)
(
5,856
)
Interest paid on borrowings
(
10,028
)
(
17,428
)
(
15,102
)
Payment of lease liabilities
19
(
6,679
)
(
8,854
)
(
5,733
)
Redeemed shares
23
—
(
45,000
)
—
Cash obtained in acquisition
23
—
129,986
—
Cash flow (used in) generated from financing activities
$
(
13,627
)
$
58,044
$
(
40,509
)
Net (decrease) increase in cash
(
28,349
)
71,644
13,320
Cash at beginning of the year
72,112
4,229
2,042
Effect of exchange rate fluctuations
(
760
)
(
3,761
)
(
11,133
)
Cash at end of the year
$
43,003
$
72,112
$
4,229
Non-cash financing and investing activities
1
$
50,897
$
(
145,286
)
$
40,759
1
For the year ended December 31, 2022, non-cash investing
and financing activities include new lease liabilities $12,647 (2021: $7,283, 2020: 11,022), interest capitalization on property, plant
and equipment under IAS 23 $196 (2021: 571), invoices from suppliers financed via reverse factoring classified as Trade and other payables
$5,696 (2021: $8,288, 2020: 7,311), and invoices from suppliers financed via reverse factoring classified as Borrowings $32,358 (2021:
$48,138 2020: 22,426). For the year ended December 31, 2021, it also included 50% purchase price of acquisition of Pharmaceutical Production
Facility $744, termination of the put option agreements in exchange for new equity instruments in Procaps Group, S.A. $(239,273) (Refer
to Note 23), and conversion of SPAC Warrants to Warrants in Procaps Group, S.A. $28,963.
The accompanying notes are an integral part of
these Consolidated Financial Statements.
F-
7
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 1. General Company Information
Procaps Group, S.A, (the "Company"),
a public limited liability company (société anonyme) governed by the laws of the Grand Duchy of Luxembourg and its subsidiaries
(collectively, the "Group") primarily engages in developing, producing and marketing pharmaceutical solutions. Further information
about the Group's business activities, reportable segments and related party relationships of the Group is included in Note 7. Revenue,
Note 8. Segment reporting and Note 29. Related party transactions, respectively.
The Group's principal subsidiaries as of December
31, 2022, 2021 and 2020 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that
are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country
of incorporation or registration is also their principal place of business.
Place of
Ownership
    interests held by:
business/country
The Group
Non-controlling
    interests
Principal
Name
    of entity
of incorporation
2022
2021
2020
2022
2021
2020
activities
Procaps S.A.
Colombia
100
%
100
%
100
%
—
%
—
%
—
%
Manufacturing and distribution of prescription and over-the-counter pharmaceutical products.
C.I. Procaps S.A.
Colombia
100
%
100
%
100
%
—
%
—
%
—
%
Procaps S.A. de C.V
El Salvador
100
%
100
%
100
%
—
%
—
%
—
%
Softcaps - Colbras
Brazil
100
%
100
%
100
%
—
%
—
%
—
%
Diabetrics Healthcare S.A.S.
Colombia
100
%
100
%
100
%
—
%
—
%
—
%
Diabetes solutions and chronic disease management tool.
There are no significant restrictions on the ability of the Group to
access or use assets and settle liabilities.
The Consolidated Financial Statements of the Group
for the years ended December 31, 2022, 2021 and 2020 comprise the Group and its interest in joint ventures, investments and operations.
The Group prepares and publishes its Consolidated Financial Statements in United States Dollars ("USD"), and the numbers are
rounded to the thousands of USD unless otherwise stated. Foreign operations are included in accordance with the policies set out in Note
2.2. Functional and reporting currency.
The Consolidated Financial Statements were authorized
for issue by the Group's Audit Committee on May 10, 2023.
Reverse reorganization
On March 31, 2021, Union Acquisition Corp. II,
a publicly-traded special purpose acquisition company previously listed on the NASDAQ under "LATNU" domiciled in the Cayman
Islands ("SPAC"), Crynssen Pharma Group Limited, a private limited liability company registered under the laws of Malta ("OpCo"),
Procaps Group, S.A. ("Holdco") and OZLEM Limited, an exempted company incorporated under the laws of the Cayman Islands ("Merger
Sub"), entered into a Business Combination Agreement (the "Business Combination Agreement" or "BCA" or the
"Transaction").
The Transaction was approved at an Extraordinary
General Meeting of LATNU's shareholders on September 22, 2021 and subsequently consummated on September 29, 2021.
F-
8
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
As a result of the consummation of the Transaction,
OpCo and SPAC had become direct wholly-owned subsidiaries of Holdco and the OpCo shareholders and SPAC shareholders became holders of
issued and outstanding Holdco Ordinary Shares: Procaps Group, S.A.
Emerging Growth Company Status
Procaps Group, S.A. is an emerging growth company,
as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). The Group will remain an emerging growth company
until the earliest of:
●
The last day of the first fiscal year (a) following the fifth
anniversary of a public equity offering, (b) in which its annual gross revenue totals at least $
1.235
billion or (c) when the Group is
deemed to be a large accelerated filer, which means the market value of the Group's ordinary shares held by non-affiliates exceeds
$
700.0
million as of the prior June 30th; and
●
The date on which the Group has issued more than $
1.0
billion in non-convertible debt securities during
the prior three-year period.
Grupo Somar and Pearl Mexico Acquisition
On May 16, 2022, Procaps Group, S.A. entered into
a Stock Purchase Agreement (the "SPA") with AI Global Investments PCC Limited (Netherlands), a protected cell company limited
by shares organized under the laws of the Island of Guernsey ("PCC"), acting for and on behalf of the Soar Cell, Triana Capital
S.A. de C.V., a corporation organized under the laws of Mexico ("Triana"), AI Pearl (Netherlands) B.V., a private limited
company (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands ("Pearl Holding Seller"),
Perrigo Ireland 7 DAC, a company duly organized and validly existing under the laws of the Republic of Ireland ("Pearl Ireland",
and together with PCC, Triana and Pearl Holding Seller, each a "Seller" and collectively, the "Sellers"), AI Soar
(Netherlands) BV, a (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands ("Somar
Holding Company"), Química y Farmacia S.A. de C.V., a Sociedad Anónima de Capital Variable duly organized and validly
existing under the laws of Mexico ("Quifa"), PDM Acondifarma S.A. de C.V., a Sociedad Anónima de Capital Variable duly
organized and validly existing under the laws of Mexico ("PDM"), Gelcaps Exportadora de México S.A. de C.V., a Sociedad
Anónima de Capital Variable duly organized and validly existing under the laws of Mexico ("Gelcaps", and together with
Quifa and PDM, "Pearl Mexico") and Grupo Farmacéutico Somar S.A.P.I. de C.V., a Sociedad Anónima Promotora de
Inversión de Capital Variable organized under the laws of Mexico ("Somar" and together with Somar Holding Company,
"Grupo Somar", and together with Pearl Mexico, the "Targets") (the "Acquisition").
The Acquisition, which was expected to close in
the fourth quarter of 2022, was delayed indefinitely and subsequently terminated on January 1, 2023 (refer to Note 28. Events after the
reporting period) after the Group was informed by the Sellers that a court in Mexico City issued a precautionary lien affecting a portion
of capital stock of Grupo Somar in connection with a pending dispute that involves an investment by a fund managed by Advent International
but that is otherwise unrelated to the Sellers, Grupo Somar, the Group, or the Acquisition.
Debt Commitment Letter and Bridge Loan Credit Agreement
Concurrently with the execution of the SPA, the
Group, as borrower, entered into a Commitment Letter with Bank of America, N.A., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and
Morgan Stanley Senior Funding, Inc. ("Commitment Letter") for a bridge loan of up to $
485
million (the "Bridge Loan"),
which would have been guaranteed by each existing and future direct and indirect material subsidiary of the Group, and the Targets and
each of their subsidiaries upon the Closing. The Bridge Loan would have also been secured by a pledge from the Group of its shares in
the Targets. The proceeds of the Bridge Loan would have been used, together with the Group's cash on hand, to finance the cash portion
of the purchase price of the Acquisition (including related fees and expenses) and, in the event necessary, to prepay certain of the Group's
existing debt.
F-
9
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
On October 11, 2022, Procaps Group, S.A. entered
into a Credit Agreement with Bank of America, N.A., BofA Securities, Inc., JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding,
Inc. who are the book runners and joint arrangers (the "Bridge Credit Agreement") for the Bridge Loan. The Bridge Credit Agreement
terms are consistent with the terms of the Commitment Letter. The Bridge Credit Agreement effectively replaced the Commitment Letter upon
its execution.
Refer to Note 28. Events after the reporting period
for further details regarding the Group's termination of the SPA, leading to the termination of commitments under the Bridge Credit Agreement
and the Commitment Letter. For information regarding the financial impact of the Bridge Credit Agreement on the Group's results, refer
to Note 9. Finance income (expenses), net.
Senior Notes Amendment
The Group intended to prepay in full the aggregate
principal amount of the
4.75
% guaranteed senior notes due November 12, 2031 (the "Senior Notes") issued by Procaps, S.A.,
the Group's subsidiary, pursuant to a note purchase agreement (the "NPA") entered into on November 5, 2021, with the noteholders
thereunder (collectively, the "Noteholders"), together with interest accrued thereon to the date of such prepayment and the
make-whole amount determined for the date of such prepayment pursuant to the NPA (the "Notes Payoff"). The Group previously
expected that the closing of the Grupo Somar and Pearl Mexico Acquisition would occur on October 14, 2022, and accordingly, pursuant to
the requirements of the NPA, delivered advance notice to the Noteholders of the Notes Payoff to occur on such date. As a result of a delay
and subsequent termination in the closing of the Grupo Somar and Pearl Mexico Acquisition, the expected borrowing under the Credit Agreement
did not occur, and the Group was unable to complete the Notes Payoff on the date scheduled, which technically constituted an event of
default under the NPA. The Noteholders informed the Group that they would not exercise any rights or remedies under the NPA due to such
technical default pending entry into an amendment to the NPA formally waiving such default, and the Group and the Noteholders executed
temporary waivers in connection therewith. On November 1, 2022, the Group and the Noteholders entered into an amendment to the NPA (the
"NPA Amendment"), formally waiving the technical default and which also (i) provided the Group the ability, until November
30, 2022, to prepay the Senior Notes with two business days' notice, (ii) provided that the make-whole amount under the NPA shall
in no case be less than USD
1,488,204.60
, and (iii) provided that, if the Notes Payoff did not occur on or prior to November 30, 2022,
a waiver fee of
3.75
% per annum on the outstanding principal amount of Senior Notes outstanding shall (a) accrue from (and including)
October 14, 2022 and (b) be payable to the Noteholders on the 12th day of February, May, August and November in each year (commencing
on February 12, 2023), on the maturity date of such Senior Note and on each other date on which interest on such Senior Note is due and
payable in accordance with the terms of the NPA and such Senior Note. The Notes Payoff did not occur on or prior to November 30, 2022,
therefore triggering the
3.75
% per annum waiver fee on the outstanding principal amount of Senior Notes with the terms mentioned above.
Refer to Note 19. Borrowings for further detail on impact of the NPA Amendment.
Ongoing Military Operation in Ukraine and
Related Sanctions
The ongoing military operation in Ukraine and
the related sanctions targeted against the Russian Federation have disrupted international commerce and the global economy. The Group
does not have any direct exposure to Ukraine, Russia or Belarus considering there are not any existing operations or sales in those locations.
Although the Group does not currently operate
in Ukraine or Russia, the duration and severity of the effects on its business and the global economy are inherently unpredictable. Management
will continue to monitor the effects of the war in Ukraine and its potential further impacts, including global supply chain disruptions,
inflation, and rising interest rates, when making certain estimates and judgments relating to the preparation of the Consolidated Financial
Statements of the Group.
F-
10
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 2. Basis of preparation and accounting
The Consolidated Financial Statements of the Group
as of December 31, 2022, 2021 and 2020 have been prepared on a going concern basis in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standard Board ("IASB").
The Consolidated Financial Statements consist
of the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity and Consolidated Statement of Cash Flows and have been prepared under a historical cost basis, except for
certain financial instruments that have been measured at fair value.
The Group opted to present a single Consolidated
Statement of Profit or Loss and Other Comprehensive Income, combining the presentation of profit or loss and comprehensive income in the
same statement. Due to the activities of the Group, costs and expenses presented in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income were classified according to their function.
The Consolidated Statement of Financial Position
has been prepared based on the nature of the Group's operations, distinguishing: (a) current assets from non-current assets, where current
assets are intended as the assets that should be realized, sold or used during the normal operating cycle, or the assets owned with the
aim of being sold in the short term (within 12 months); (b) current liabilities from non-current liabilities, where current liabilities
are intended as the liabilities that should be paid during the normal operating cycle, or over the 12-month period subsequent to the reporting
date.
The Consolidated Statement of Cash Flows has been
prepared using the indirect method.
The Consolidated Financial Statements present
comparative information in respect of the previous periods, 2021 and 2020 for Consolidated Statement of Profit or Loss and Other Comprehensive
Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and related notes. Foreign operations are
included in accordance with the policies set out in Note 2.2. Functional and reporting currency.
The accounting policies set out in Note 3. Summary
of significant accounting policies have been applied in preparing the Consolidated Financial Statements for the year ended December 31,
2022, and the comparative information presented for the years ended December 31, 2021 and 2020.
The Group has applied accounting judgments, estimates
and significant accounting assumptions described in Note 4. Critical accounting judgements and key sources of estimation uncertainty in
preparing the Consolidated Financial Statements.
F-
11
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 2.1. Going concern
Management
identified the following events and conditions which cast significant doubt on the Group's ability to continue as a going concern:
As of December 31, 2022, the Group was in breach
of certain of the covenants included under the NPA, the Syndicated Loan Agreement and the BTG Credit Agreement. Refer to Note 19. Borrowings
for further details regarding the breach of each covenant. Although none of the lenders declared an event of default under the applicable
agreements, these breaches resulted in the lenders having the right to require immediate repayment of the applicable indebtedness and
as a result, the Group has classified the respective indebtedness, amounting to $
139,155
in the aggregate, to current liabilities.
On March 28, March 31 and May 2, 2023 the Group obtained Waiver Agreements
("Waivers" or "Waiver") from each lender under the NPA, the Syndicated Loan Agreement and the BTG Credit Agreement
for the applicable covenant breaches. Under the terms of the Waivers, the lenders permanently waived their rights to accelerate the repayment
of the loans related to the events of default as of December 31, 2022. In addition, the Group executed Waivers with the lenders to adjust
the applicable covenant ratios for the periods ending March 31, June 30, and September 30, 2023, if applicable, as noted further within
Note 28. Events after the reporting period. For the period ending December 31, 2023, the applicable covenant ratios in the original borrowing
arrangements are unmodified.
Working capital
As of December 31, 2022, the Group had a net working
capital deficit of $
70,931
(2021: working capital surplus of $
110,095
, 2020: working capital deficit of $
54,926
), which consists of $
257,525
of current borrowings ($
139,155
of current borrowings relates to the breach in loan covenants), $
90,187
of trade and other payables, $
2,914
of amounts owed to related parties, $
6,133
of current tax liabilities, net, $
138
of provisions, $
11,477
of other liabilities, and $
297,443
of current assets.
Management's assessment
Management assessed the Group's cash flow
projections, ability to meet future covenants and other measures of liquidity for the next twelve months from the balance sheet date.
Based on the Group's cash flow projections and adjusted financial covenant ratios as a result of the Waivers, Management believes
they will have sufficient funds to repay their obligations as they fall due and to meet its financial covenants in 2023. However, due
to the uncertainty caused by current economic conditions, including rapid growth in inflation, increasing interest rates, global disruption
to the supply chain, volatility in foreign exchange rates and industry price regulations, there is material uncertainty regarding the
Group's ability to meet its financial covenants. The Group's failure to comply with such financial covenants would result in an
event of default, which if that were to occur would materially and adversely affect the Group's business, financial condition, liquidity
and results of operations. In that event, the Group would seek additional waivers or alternative financing arrangements. As a result of
these material uncertainties, Management concluded the above conditions and events raise significant doubt about the Group's ability to
continue as a going concern.
Management has implemented or is in the process
of implementing the following plans to mitigate the effect of these events and conditions:
Cost saving and revenue growth
The Group has implemented certain measures with
an aim to reduce its operating costs and generate additional revenue in 2023 including: 1) strict controlling and reducing business marketing
and advertising expenses; 2) reducing headcount across multiple business units; and 3) focus on increasing sales volumes for core products
and sell trademarks and sanitary records to generate additional revenue.
F-
12
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Renegotiation of existing loans
The Group is in the process of renegotiating the
terms of the Syndicated Loan balance with Bancolombia and Davivienda, with the expectation of extending payment terms. In addition, the
Group is in negotiations with BTG to restructure their short-term loan and negotiating their short-term revolving credit facilities. Refer
to Note 27. Financial instruments for details regarding the carrying balance of loans that will be renegotiated as mentioned above. The
Group has historically been successful in their negotiations with lenders to maintain and meet its liquidity needs and requirements. However,
the Group's ability to renegotiate with its lenders is not within the Group's control. As of the date of these financial statements,
the Group cannot assure that it will be able to reach an agreement with its lenders, or to waive any potential non-compliance.
Additional measures
If the above actions do not generate sufficient
liquidity for the Group to meet its contractual obligations, Management has identified additional measures which could be implemented
to further reduce costs and increase total revenues in order to provide sufficient cash flow to meet obligations as they fall due including:
1) reduce discretionary spending on research and development, marketing and capital expenditures; 2) sell additional trademarks and sanitary
records; and 3) further reduce headcount.
Summary
Management has evaluated the Group's capital
position, its ability to continue in the normal course of business for the foreseeable future and ability to meet its financial obligations
for the next twelve months from the balance sheet date. While Management believes that their cost savings, revenue growth and loan renegotiation
will allow the group to be able to meet its financial obligations and finance its growth, there is no assurance that these plans can be
successfully implemented to generate the liquidity required to meet the Group's need. Failure to successfully implement these plans may
have a material adverse effect on the Group's business, results of operations and financial position, and may materially adversely
affect its ability to continue as a going concern. As a result, Management concluded there is material uncertainty related to the events
and conditions noted above that cast significant doubt on the entity's ability to continue as a going concern.
However,
Management believes that the Group will be successful in implementing the above plan and, accordingly, have prepared the financial statements
on a going concern basis. As a result,
the consolidated financial statements do not include any adjustments related to the recoverability
and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary
should the Group be unable to continue as a going concern.
F-
13
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 2.2. Functional and reporting currency
Items included in the financial statements of
each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the
functional currency'). The Consolidated Financial Statements are presented in US Dollars (USD), which is Procaps Group, S.A. functional
and presentation currency.
Note 2.3. Basis of consolidation
The Group's subsidiaries are fully consolidated
from the date on which control is transferred to the Group. Consolidation ceases from the date on which control ends.
All financial results are consolidated with similar
items on a line-by-line basis. If necessary, adjustments are made to the financial statements of the consolidated companies in order to
adapt their accounting policies to those used by the Group.
All transactions, balances, revenues and related
expenses between the consolidated companies are eliminated.
2.3.1. Reverse reorganization
The SPAC did not meet the definition of a business
because it lacked substantive processes as defined by IFRS 3. Thus, the Transaction was accounted for as an asset acquisition in exchange
for a share based payment within the scope of IFRS 2.
The Transaction was treated as a common control
transaction due to the fact both OpCo and Holdco are ultimately controlled by the same party or parties, that are all controlled by the
Minski family, both before and after the Transaction, and that control is not transitory. Management concluded that it would be appropriate
to account for it as a restructuring using book value accounting in Holdco's Consolidated Financial Statements, on the basis that
there has been no business combination between Opco and Holdco.
For purposes of calculating earnings per share,
shareholders' equity of the Group prior to the Transaction was retrospectively adjusted as a capital restructuring for the equivalent
number of shares received and on a pro rata basis for prior reporting periods. Retained earnings and relevant reserves of the Group were
carried forward after the Transaction. Any difference to shareholders' equity of Group arising from the restructuring of share capital
and equity instruments issued was recorded in equity under share premium.
Refer to Note 26.1. Reverse reorganization for
further information related to the accounting and presentation of the Transaction.
For purposes of calculating basic earnings per
share, the ordinary shares associated with Put Option Agreements previous to the transaction were included. Note 24. Earnings Per Share.
Note 3. Summary of significant accounting policies
Note 3.1.
Goodwill
Goodwill arising from the acquisition of a business
is recorded at cost at the acquisition date, less accumulated impairment losses, if any.
Goodwill is stated at cost and not amortized but
is tested for impairment on an annual basis and whenever there is an indicator that the cash-generating unit to which goodwill has been
allocated may be impaired.
F-
14
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3.1.1 Goodwill impairment
Goodwill is tested for impairment annually at
the cash-generating unit level, which is the level at which the assets generate largely independent cash inflows and are monitored for
internal management purposes. An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating
unit exceeds its recoverable amount. Impairment losses are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income.
Impairment losses recognized for cash-generating
units first reduce allocated goodwill and then the carrying amounts of the other non-financial assets in the unit on a pro rata basis.
Refer to Note 12. Goodwill and Note 4. Critical
accounting judgements and key sources of estimation uncertainty or further information on the goodwill exposure and estimates applied,
respectively.
Note 3.2.
Transactions in foreign currency
When preparing the financial statements of the
individual underlying entities of the Group, transactions in a currency other than the functional currency of the entity ("foreign
currency") are recorded using the exchange rates in effect on the transaction date. At the end of each reporting period, monetary
items denominated in a foreign currency are reconverted at the exchange rates prevailing at that date. Non-monetary items calculated in
terms of historical cost, in foreign currency, have not been reconverted.
For purposes of presenting the Consolidated Financial
Statements, the assets and liabilities of the Group's foreign currency transactions are expressed in USD, using the exchange rates
prevailing at the end of the respective reporting period. Revenues and expenses are translated at the average exchange rates for the respective
period. The exchange differences that arise, if applicable, are recognized through other comprehensive income and are accumulated in equity
(attributed to the non-controlling interests when appropriate).
Note 3.3.
Leases - Right-of-use assets &
lease liabilities
The Group assesses whether a contract is or contains
a lease at inception of a contract. The Group recognizes a right-of-use asset and a corresponding lease liability with respect to all
lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and
leases of low value assets (defined as assets with a value less than $
5,000
). For these leases, the Group recognizes the lease payments
as an operating expense on a straight-line basis over the term of the lease, and payments for these leases are presented in the combined
statements of cash flows from operating activities.
The right-of-use assets comprise the initial measurement
of the corresponding lease liability, lease payments made at or before the commencement date, any initial direct costs and less any lease
incentives received. They are subsequently measured at cost less accumulated depreciation and impairment losses. The right-of-use assets
are depreciated starting at the commencement date and over the shorter period of useful life of the underlying asset (in the case the
lease transfers ownership of the underlying asset to the Group by the end of the lease term or cost of the right-of-use assert reflects
that the Group will exercise a purchase option) and lease term.
The lease liability is initially measured at the
present value of the lease payments that are not paid at the commencement date, discounted by using the interest rate implicit in the
lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate specific to the country, term and currency
of the contract. In addition, the Group considers its recent indebtedness as well as publicly available data for instruments with similar
characteristics when calculating the incremental borrowing rates.
F-
15
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Lease payments include fixed payments, less any
lease incentives receivable, variable lease payments that depend on an index or a rate known at the commencement date, and purchase options
or extension option payments if the Group is reasonably certain to exercise these options. Variable lease payments that do not depend
on an index or rate are not included in the measurement of the lease liability and right-of-use asset and are recognized as an expense
in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the year/period in which the event or condition that
triggers those payments occurs.
A lease liability is remeasured upon a change
in the lease term, changes in an index or rate used to determine the lease payments or reassessment of exercise of a purchase option.
The corresponding adjustment is made to the related right-of-use asset.
The lease liability is presented in the 'Borrowings'
line and the right-of-use assets are presented in a single line in the Consolidated Statement of Financial Position. In addition, the
principal portion of the lease payments is presented within financing activities and the interest component is presented within operating
activities in the Consolidated Statement of Cash Flows.
Note 3.4.
Financial Instruments
Financial assets and liabilities are recognized
when an entity of the Group becomes party to the contractual provisions of an instrument.
Financial assets and liabilities are initially
measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities
(other than those designated at fair value through profit or loss) are added to or deducted from the fair value of the financial assets
or liabilities, when appropriate, at initial recognition. Transaction costs directly attributable to the acquisition of financial assets
or liabilities designated at fair value through profit or loss are recognized immediately through profit or loss.
3.4.1 Classification of financial assets
If and when applicable the Group follows the framework
and requirements outlined in IFRS 9 to classify financial assets based on whether:
●
The financial asset is held within a business model whose objective is to collect contractual cash flows
or whose objective is achieved through the collection of contractual cash flows and the sale of financial assets; and
●
The contractual terms give rise to cash flows that are only payments of principal and interest.
By default, all other financial assets are subsequently
measured at fair value through profit or loss.
Trade receivables are amounts due from customers
for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are
therefore all classified as current. Trade receivables are recognized initially at the amount of consideration that is unconditional,
unless they contain significant financing components, when they are recognized at fair value. The Group holds the trade receivables with
the objective of collecting the contractual cash flows and therefore measures them subsequently at amortized cost using the effective
interest method.
F-
16
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3.4.2 Gains and losses in foreign currency
Trade receivables denominated in a currency other
than the subsidiaries' functional currency are determined in that foreign currency and converted to the subsidiaries' functional currency
at the end of each reporting period using the then prevailing spot rate. Exchange differences are recognized through profit or loss and
are classified within other expenses.
3.4.3 Impairment of financial assets
The Group recognizes an impairment for expected
credit losses on trade and other receivables.
The Group applies the 'simplified' approach as
required by IFRS 9 since generally the Group's trade receivables do not include a significant financing component. The Group therefore
recognizes the lifetime expected credit losses over the life of the trade receivables.
Other receivables are generally assessed individually
and a lifetime expected credit loss is estimated based on the receivable and debtor specific facts and circumstances.
3.4.4 Definition of default
The Group considers that an event of default has
occurred when more than
50
% of the customers trade receivable balance is more than 90 days overdue, unless there is reasonable and supportable
information to demonstrate that such default is not in existence.
3.4.5 Impaired trade receivables
A financial asset has been impaired when one or
more events have occurred that have a negative impact on the estimated future cash flows of the trade receivable. The evidence of credit
impairment includes observable data on the following events:
●
significant financial difficulty of the customer;
●
customer enters into or is likely to enter into bankruptcy;
●
a breach of contract, such as an expired event; and
●
for economic or contractual reasons one or more concessions have been granted.
3.4.6 Measurement of impairment
The expected credit losses on trade receivables
are estimated using a methodology where a probability of default is estimated based on historical information, adjusted for current and
forecasted economic conditions, if applicable. If applicable and significant, the Group may adjust the provision based on a probability
weighing of various scenarios and factors in the time value of money:
●
Probability of default ('PD'): The PD is derived by analyzing a rolling dataset of twenty-four months
in which trade receivables are tracked and analyzed as they move through the aging buckets.
●
Loss given default: The Group typically defines the loss given default to be one hundred percent.
●
Exposure at default: The trade receivable balance as of the reporting date, net of advances and credit
notes.
As of the reporting dates presented, the Group
has not deemed these to be significant.
The Group estimates the probability of default
at the pool level and then applies such pool level PD to the trade receivables within that pool. The Group generally defines each pool
within its main subsidiaries as:
●
Domestic
●
Export
●
Government
●
Related parties
The Group recognizes an impairment loss or gain
in the aggregate for all trade receivables as a provision with corresponding amount recognized in
Sales and marketing expenses
.
F-
17
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The Group writes-off individual trade receivables
when uncollected when they become 365 days past due.
3.4.7 Derecognition of financial assets
The Group derecognizes a financial asset only
when the contractual rights to the asset's cash flows expire, or when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party. If the Group does not transfer or substantially retains all risks and rewards
of ownership and continues to control the transferred asset, the Group recognizes its interest retained in the asset and an associated
liability for the amounts to be paid. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognize the financial asset and also recognizes a loan secured by the revenue received.
Upon derecognition of a financial asset measured
at amortized cost, the difference between the carrying amount of the asset and the sum of the consideration received and receivable is
recognized through profit or loss.
The Group also derecognizes a financial asset
when there is information which indicates that the counterparty is in serious financial difficulty and there is no realistic prospect
of recovery. The derecognized financial assets may still be subject to compliance activities in accordance with the Group's recovery
procedures, taking into account legal advice when appropriate. Any recovery is recognized through profit or loss.
Accounts receivable factoring
As part of the regular business and in case of
immediate cash needs, the Group could sell its accounts receivable (i.e., invoices) to a third party (factor) at a discount. The Group
analyzes whether these transactions are
with recourse
or
without recourse
and applies the recognition criteria in IFRS
9 to assess whether the arrangement transfers substantially all risks and rewards to the factor. For arrangements
with recourse,
where substantially all risks and rewards have not been transferred, the cash received from the factor is accounted for as a secured
borrowing. In the case of arrangements
with recourse
, the transferred assets are not derecognized.
Note 3.5.
Inventories, net
Inventories are presented at the lower of acquisition
cost or net realizable value. Cost is determined by the weighted average method. The net realizable value represents the estimated sale
price less all the estimated termination and selling costs. The cost of finished products and products in progress includes the costs
of raw materials, direct labor, other direct costs and the respective direct production expenses (based on normal operating capacity),
excluding borrowing costs. Inventories are presented net of the allowances for obsolescence and, in consolidation, net of eliminations
of unrealized profit on inventories.
Note 3.6. Property, plant and equipment, net
Property, plant and equipment assets are measured
at historical cost less accumulated depreciation and any impairment loss, except for those acquired in a business combination, which are
then recorded at fair value; assets under construction and land are not depreciated. The cost of the property, plant and equipment is
the fair value of the consideration initially provided to acquire or construct the item and prepare it for use. Subsequent costs incurred
for repair and maintenance, are expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income unless these costs
meet the criteria for capitalization (i.e., extension of the useful life). Depreciation commences when the assets are ready for use.
F-
18
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Property, plant and equipment is depreciated based
on the straight-line method over estimated useful lives.
An item of property, plant and equipment will
be derecognized upon disposal or when future economic benefits from the continued use of the asset are no longer expected. The gain or
loss arising from the derecognition is measured as the difference between the net disposal proceeds and the carrying amount of the asset
and is recognized through profit or loss.
The useful lives of property, plant and equipment
are:
Buildings
20
-
40
years
Machinery and equipment
10
-
20
years
Furniture and fixtures
2
-
10
years
Other equipment
2
-
5
years
Note 3.7.
Intangible assets
3.7.1 Intangible assets generated internally
Disbursements originated by research activities
are recognized as an expense in the period in which they are incurred.
An intangible asset generated internally as a
result of development activities (or the development phase of an internal project) is recognized if, and only if, the following conditions
are met:
●
It is commercially and technically feasible to complete the production of the intangible asset so that
it can be available for use or sale;
●
Management intends to complete the intangible asset in question in order to use or sell it or can demonstrate
the way in which the intangible asset will likely generate future economic benefits;
●
Adequate technical, financial or other resources are available to complete the development and to use
or sell the intangible asset; and
●
The Group is able to reliably measure the disbursement attributable to the intangible asset during its
development.
The expenses incurred in developing new pharmaceutical
technologies, combination of active ingredients and formulation improvements meet the conditions of the previous paragraph, usually from
the beginning of pilot batches (completion of the experimental batch stage), at which point Management considers that achieving regulatory
approval (sanitary records) is a legal formality.
The amount initially recognized for an internally
generated intangible asset will be the sum of the disbursements incurred once the element meets the recognition conditions. When an internally
generated intangible asset cannot be recognized, development disbursements are charged through profit or loss in the period in which they
are incurred.
Subsequent to initial recognition, an internally
generated intangible asset will be accounted for at cost less accumulated amortization and the accumulated amount of impairment losses,
on the same basis as intangible assets that are acquired separately.
F-
19
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3.7.2 Disposal of intangible assets
An intangible asset is written off at the time
of its disposal, or when future economic benefits of its use or disposal are not expected. Gains or losses arising from the write-off
of an intangible asset, measured as the difference between the net proceeds from the sale and the carrying amount of the asset, are recognized
through profit or loss when the asset is written off.
3.7.3 Impairment of definite-lived tangible
and intangible assets and intangibles not yet available for use, and other assets
At the end of each reporting period, the Group
evaluates the carrying amounts of its definite-lived tangible and intangible assets in order to identify any indication that these assets
have been impaired. In such a case, the recoverable amount of the asset is calculated in order to determine the extent of the impairment
loss (if any). Intangible assets not yet available for use are tested for impairment annually to determine if an impairment loss should
be recognized. When it is not possible to estimate the recoverable amount of an individual asset, the Group calculates the recoverable
amount of the cash generating unit to which the asset belongs. When a reasonable and consistent basis of distribution is identified, the
common assets are also allocated to the individual cash generating units or distributed to the smallest group of cash generating units
for which a reasonable and consistent distribution base can be identified.
The recoverable amount is the higher of the fair
value less disposal costs and the value in use. When estimating the value in use, the estimated future cash flows are discounted to the
present value, using a pre-tax discount rate that reflects the current market valuations with respect to the time value of money and the
specific risks for the asset for which the future cash flow estimates have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) calculated is less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. Impairment losses are recognized immediately through profit or loss. If an impairment loss is subsequently reversed, the carrying
amount of the asset (or cash-generating unit) increases to the revised estimated value of its recoverable amount, so that the increased
carrying amount does not exceed the carrying amount that would have been calculated if the impairment loss had not been recognized for
said asset (or cash-generating unit) in previous years. The reversal of an impairment loss is automatically recognized through profit
or loss.
3.7.4 Amortization of internally generated
intangibles
Internally-generated intangible assets such as
licenses, bioequivalence studies, new platforms, tablet improvements, combinations and concentrations, and soft gel capsule improvements,
among others, are of finite useful lives and their amortization period will begin only when the following two milestones are met:
●
The pre-industrial batch is completed with satisfactory results.
●
The regulatory body approves the corresponding sanitary records.
When these milestones are met, the capitalized
developments will have met the necessary conditions to generate economic benefits in accordance with management's expectations,
so the amortization of the assets begins using the straight-line method through profit or loss during the minimum projected time of generated
economic benefits.
The amortization will also cease at the earliest
of either the date when the asset is classified as held for sale or the date when the asset is derecognized.
F-
20
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3.7.5 Useful lives of intangibles
The following useful lives are used to calculate
amortization:
Trademarks and sanitary records
3
–
20
years
Licenses, customers and agreements
3
–
10
years
Product development
3
years
Note 3.8.
Financial liabilities and equity
instruments
3.8.1 Classification as debt or equity
Debt and equity instruments are classified as
financial liabilities or equity in accordance with the substance of the contractual agreement and definitions of financial liability and
equity instrument.
3.8.2 Equity instruments
An equity instrument consists of any contract
that evidences a residual interest in the assets of an entity, after deducting all of its liabilities. Equity instruments issued by a
Group entity are recognized for income received, net of direct issue costs.
The repurchase of equity instruments of the Group
is recognized and deducted directly in equity. No gain or loss is recognized through profit or loss, arising from the purchase, sale,
issue or cancellation of the equity instruments of the Group.
3.8.3 Financial liabilities
Financial liabilities are classified at their
inception at fair value minus transaction costs directly attributable to the transaction through profit or loss and subsequently measured
at amortized cost, using the effective interest amortization method.
3.8.4 Warrant liabilities
The Group has warrants that are initially recognized
at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of
each reporting period. Gains and losses will be recorded in profit or loss.
3.8.5 Shares held in escrow
The shares to be delivered, in an escrow, are
initially recognized at fair value of the equity instruments granted for services received in an equity-settled share-based payment determined
at grant date, and they are subsequently remeasured to their fair value at the end of each reporting period until they are released from
escrow or are forfeited.
F-
21
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 3.9.
Trade and other payables
Trade and other payables are recognized when the
Group has a legal or a constructive obligation, as a result of a past event, and it is probable that there may be an outflow of resources
embodying economic benefits to settle the obligation and the obligation can be measured reliably. These amounts represent liabilities
for goods and services provided to the Group prior to the end of financial year which are unpaid. The average credit period for purchases
is between 90 and 180 days, including cases in which the invoices have been assigned by the supplier to third parties. Other payables
correspond mainly to employment obligations and provisions.
Reverse factoring
Suppliers of the Group initiate and enter into
reverse factoring arrangements in which the Group participates. Under such arrangements suppliers sell or assign their receivables from
the Group to third parties (i.e., 'the factor'), after which the Group pays and settles the underlying invoices directly with the factors.
Provided that certain conditions are met, the invoices sold or assigned to factors remain classified within trade and other payables.
The criteria are that: 1) the assignment is contractually initiated and decided by the supplier, 2) it does not extend the period in which
the Group regularly pays the supplier, 3) the amount of the invoices is not modified, and there are no charges in this regard by third
parties. Otherwise, the Group reclassifies those balances as a financial liability, other term loans with a corresponding reclassification
from operating cash flows to financing cash flows, for the amount paid to factors.
Note 3.10.
Taxes
Income tax expense represents the sum of current
income tax payable and deferred tax.
3.10.1 Current tax
Current tax is based on the taxable income registered
during the year. The taxable income differs from the income reported in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income, due to the items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible.
The liabilities of the Group for current tax purposes are calculated using the tax rates enacted or substantially approved at the end
of the respective reporting period.
3.10.2 Deferred tax
Deferred tax is recognized on temporary differences
between the carrying amount of the assets and liabilities included in the Consolidated Financial Statements and the corresponding tax
basis used to determine the taxable income. The deferred tax liability is generally recognized for all temporary tax differences. A deferred
tax asset will be recognized, as a result of all deductible temporary differences, to the extent that it is likely that each entity will
have future taxable income against which to charge those deductible temporary differences. These assets and liabilities are not recognized
if the temporary differences arise from the initial recognition (rather than through a business combination) of other assets and liabilities
in an operation that does not affect the taxable income or the accounting income. In addition, deferred tax liabilities are not recognized
if the temporary difference arises from the initial recognition of goodwill.
A deferred liability should be recognized for
taxable temporary differences associated with investments in subsidiaries and joint ventures, and interests in joint ventures, except
for those in which the Group is able to control the reversal of the temporary difference and when there is a possibility that it cannot
be reversed in the near future. Deferred tax assets arising from the deductible temporary differences associated with such investments
and participation are only recognized to the extent that it is likely that each entity will have future taxable profits against which
to charge those temporary differences and when there is the possibility that these can be reversed in the near future.
The carrying amount of a deferred tax asset must
be reviewed at the end of each reporting period and reduced, to the extent that it is likely that it will not have sufficient taxable
income in the future to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities should be
measured using the tax rates expected to be applied in the period in which the asset is realized or the liability is settled, based on
the rates (and tax laws) enacted or substantively enacted at the end of the respective reporting period.
F-
22
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The measurement of deferred tax liabilities and
deferred tax assets will reflect the tax consequences that would arise based on each Group company's expectations, at the end of the reporting
period, to recover or settle the carrying amount of their assets and liabilities.
Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and relate to taxes levied by the same tax authority
on the same taxable entity, or on different taxable entities.
3.10.3 Current and deferred taxes
Current and deferred taxes should be recognized
through profit or loss, except when they relate to items listed in other comprehensive income or directly in equity, in which case the
current or deferred tax is also recognized though other comprehensive income or directly in the equity, respectively. In cases of business
combinations, when the current tax or deferred tax arises from the initial accounting of the business combination, the tax effect is considered
within the accounting of the business combination.
Note 3.11.
Provisions
Provisions are recognized when (i) the Group has
a present legal or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and (iii) a reliable estimate of the amount of the obligation can be made. Provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability.
3.11.1 Disputes and litigation
A provision for disputes and litigation is recognized
when it is more likely than not that the Group will be required to make future payments as a result of past events, such items may include
but are not limited to claims, lawsuits and actions relating to employment related disputes and claims from tax authorities.
Note 3.12.
Employee benefits
Note 3.12.1. Retirement and termination benefit
costs
Payments to defined contribution retirement benefit
plans are recognized as an expense when employees has rendered service entitling them to the contributions. Payments made to state-managed
retirement benefit plans are accounted for as payments to defined contribution plans where the Group's obligations under the plans
are equivalent to those arising in a defined contribution retirement benefit plan.
For defined benefit retirement benefit plans,
the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the
end of each annual reporting period. Remeasurements for actuarial gains and losses are recognized immediately in the Consolidated Statement
of Financial Position with a charge or credit to other comprehensive income in the period in which they occur. Remeasurements recognized
in other comprehensive income are not reclassified. Past service cost is recognized in profit or loss when the plan amendment or curtailment
occurs or when the Group recognizes related restructuring costs or termination benefits, if earlier. Gains or losses on settlement of
a defined benefit plan are recognized when the settlement occurs. Net interest is calculated by applying a discount rate to the net defined
benefit liability.
Defined benefit costs are split into three categories:
●
service cost, which includes current service cost, past service cost and gains and losses on curtailments
and settlements;
●
net interest expense; and
●
remeasurements.
F-
23
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The retirement benefit obligation recognized in
the Consolidated Statement of Financial Position represents the deficit or surplus in the Group's defined benefit plans. Any surplus
resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.
A liability for a termination benefit is recognized
at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related
restructuring costs.
Discretionary contributions made by employees
or third parties reduce service cost upon payment of these contributions to the plan.
The Group recognized a net interest expense within
finance costs for the year ended December 31, 2022 of $
268
(2021: $
67
, 2020: $
60
) while remeasurements of the calculations are reflected
in the Statement of Other Comprehensive Income. Remeasurements of the calculations represented a decrease of $
222
(decrease 2021: $
195
and increase 2020: $
47
).
During the preparation of the Consolidated Financial
Statements for the year ended December 31, 2022, the Group identified an understatement in Other Liabilities in prior periods for unrecorded
long-term employee benefits corresponding to seniority premiums and retirement bonuses. Management assessed the materiality of the error
on all the prior periods presented and determined that the error was not material to any of the periods and that a restatement of previously
issued financial statements was not required. Under SEC Staff Accounting Bulletin (SAB) No. 108, prior periods misstatements may be corrected
in the current year provided that such correction does not result in a material misstatement to the current year financial statements.
As such, the Group corrected the misstatement in the Consolidated Financial Statements for the year ended December 31, 2022 as an out-of-period
adjustment, increasing non-current other liabilities by $
2,329
and current other liabilities by $
185
and increasing cost of sales by $
1,639
,
sales and marketing expense by $
232
, and administrative expense by $
643
.
Note 3.12.2. Short-term and other long-term
employee benefits
A liability is recognized for benefits accruing
to employees in the form of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted
amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term
employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognized in respect of other long-term
employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect
of services provided by employees up to the reporting date. As of December 31, 2022, the Group recognized employee benefits costs within
profit or loss as cost of sales of $
28,494
(2021: $
25,051
and 2020: $
27,421
), $
41,329
(2021: $
31,973
and 2020: $
29,139
) as administrative
expenses and $
36,304
(2021: $
30,227
and 2020: $
19,774
) as sales and marketing expense.
F-
24
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 3.13.
Revenue recognition
The Group recognizes revenues from the sale of
pharmaceutical products and the provision of services primarily related to product development projects.
Revenue is measured based on the consideration
specified in a contract with a customer and excludes balances collected on behalf of third parties. The Group recognizes revenue when
transferring control of a product or service to a customer.
3.13.1 Sale of goods
Revenue from the sale of goods is recognized when
the control of the goods is transferred (both in export and domestic operations) and the performance obligations have been fulfilled by
the Group, which occurs when the product is delivered to the location specified by the customer, according to the negotiating conditions
agreed upon. Revenues are reduced by discounts or rebates and other similar allowances estimated for customers.
3.13.2 License revenues
Revenue from the sale of intellectual property
(licenses) is recognized based on the evaluation of whether an entity's commitment to grant a license provides the customer with
a right of access to intellectual property, which is transferred over time, or a right to use the intellectual property of an entity,
which is transferred at a point in time.
The license is a commitment to provide a right
of access to the entity's intellectual property if all the following criteria are met:
●
the contract requires, or the customer reasonably expects, that the entity carries out activities that
significantly affect the intellectual property to which the customer is entitled;
●
the rights granted by the license directly expose the customer to the positive or negative effects of
the entity's activities identified in subsection a above; and
●
those activities do not result in the transfer of a good or service to the customer as such activities
take place.
If these criteria are not met, the license grants
the customer a right to use the license, and the transaction is recognized when the license is granted to the customer.
3.13.3 Service provision
Revenue from service contracts is recognized based
on the status of completion of the contract. If the Group transfers control of a service to satisfy the performance obligation over time,
it then recognizes revenue over time, if one of the following criteria is met:
●
the customer simultaneously receives and consumes the benefits provided by the entity's performance
as the entity performs;
●
the entity's performance creates or enhances an asset that the customer controls as it is created or enhanced;
or
●
the entity's performance does not create an asset with an alternative use for the entity and the entity
has an enforceable right to payment for performance that has been completed to date.
3.13.4 Sale of trademarks and sanitary records
Revenue from contracts for the sale of a trademark
or sanitary records is recognized at the point of the transfer of possession, use, enjoyment and other real and personal rights at the
price agreed in the contract, fulfilling the following conditions:
●
The customer has the right to all the benefits of the commercial use of the trademark or sanitary records.
●
The customer can redirect the use of the trademark or sanitary records.
●
The customer is responsible for sales, marketing and advertising activities.
●
The customer obtains control of the trademark or sanitary records, which
includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, the trademark or sanitary records.
F-
25
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 3.14.
Segment reporting
An operating segment is a component that engages
in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the other components, and for which discrete financial information is available. The Group is engaged in the business of developing,
producing and marketing pharmaceutical solutions and related activities and is considered an integrated international healthcare and pharmaceutical
company across the three core therapeutic areas: hospitals/clinics, pharmacies (prescription) and over-the-counter (non-prescription).
The Group's customer revenue recognition (external
revenue) policy has been consistent with inter-segment revenue generated.
The Group's business is organized and managed
through a combination of geographical regions and business units through 40 legal entities, of which 23 are operating entities, divided
in five strategic divisions, which are its operating segments. These divisions offer different products and services and are managed separately
as they require different technology and marketing strategies. The five operating segments correspond to each of its five reportable segments
for financial reporting purposes.
The following summary describes the operations
of each reportable segment:
Reportable segment
Operations
NextGel
Development and manufacturing of Softgel and related technologies in
USA, Brazil and Colombia
Procaps Colombia
Manufacturing and distribution of prescription and over-the-counter pharmaceutical products in Colombia
CAN
Manufacturing and distribution of prescription and over-the-counter pharmaceutical products in Northern Central America: Salvador, Guatemala, Nicaragua and Honduras
CASAND
Manufacturing and distribution of prescription and over-the-counter pharmaceutical products in Southern Central America (Panama and Costa Rica) and the North Andes District (Ecuador, Peru and Bolivia)
Diabetrics
Diabetes solutions and chronic disease management tool
The Group's chief executive officer reviews
the internal management reports of each division at least quarterly.
Note 3.15.
Principles of consolidation and equity accounting
Non-controlling interests in the results and equity
of subsidiaries are shown separately in the Consolidated Statement of Profit or loss and Other Comprehensive Income, Consolidated Statement
of Changes in Equity and Consolidated Statement of Financial Position respectively.
3.15.1. Joint ventures
Joint ventures are arrangements whereby the Group
maintains joint control of the underlying net assets of the arrangement with the counterparties. The Group holds a single
50
% interest
in one joint venture and the Group holds
50
% of the voting rights and management board representation. Investments in joint ventures are
accounted for using the equity method of accounting, after initially being recognized at cost.
F-
26
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3.15.2. Equity method
Under the equity method of accounting, the investments
are initially recognized at cost and adjusted thereafter to recognize the Group's share of the post-acquisition profits or losses
of the investee in profit or loss, and the Group's share of movements in other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from joint ventures are recognized as a reduction in the carrying amount of the investment.
Where the Group's share of losses in an
equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group
does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealized gains on transactions between the Group
and its joint ventures are eliminated to the extent of the Group's interest in these entities. Unrealized losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of equity-accounted investees
have been changed where necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments
is tested for impairment in accordance with the policy described in
3.7.3 Impairment of definite-lived tangible and intangible assets
and intangibles not yet available for use, and other assets.
3.15.3. Changes in ownership interests
The Group treats transactions with non-controlling
interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results
in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in
the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received
is recognized in a separate reserve within equity attributable to owners of the Group.
When the Group ceases to consolidate or equity
account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is
remeasured to its fair value, with the change in carrying amount recognized in profit or loss. This fair value becomes the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified
to profit or loss.
If the ownership interest in a joint venture or
an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognized
in other comprehensive income are reclassified to profit or loss where appropriate.
F-
27
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 3.16.
Earnings Per Share
Earnings per share was computed by dividing basic
net income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding. Diluted income per ordinary
share is computed by dividing diluted net income attributable to ordinary shareholders by the weighted-average number of ordinary shares
outstanding plus dilutive potential ordinary shares, if any. Dilutive potential ordinary shares include outstanding warrants or other
contracts to issue ordinary stock and are determined by applying the treasury stock method or if-converted method, as applicable, if dilutive.
For the years ended December 31, 2022, 2021 and
2020 no dilutive effect has been identified.
Number of shares prior to the Transaction is retrospectively
adjusted as a capital restructuring for the equivalent number of shares received and on a pro rata basis for prior reporting periods.
Note 4. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the accounting policies,
which are described in Note 3. Summary of significant accounting policies, management must make judgments, estimates and assumptions about
the carrying amounts of the assets and liabilities that are not readily observable in other sources. The estimates and underlying assumptions
are based on historical experience and other relevant factors. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed
regularly. Changes to accounting estimates are recognized in the period of the review, if the change only affects that period, or in future
periods if the change affects both the current and subsequent periods.
Note 4.1. Critical accounting judgements
4.1.1 Reverse factoring
Significant judgement is involved to evaluate
whether a liability under a reverse factoring arrangement is in essence a continuation of an operating liability or a derecognition of
the operating liability and recognition of a financing liability. The Group evaluates the requirements under IFRS 9 and applies judgment
to the facts and circumstances as a whole. Specifically, whether interest charged from the suppliers to the Group creates a substantial
change in the amount payable, i.e., financing.
4.1.2 Factoring
The Group enters into factoring arrangements where
it sells or assigns certain trade receivables to third parties under both recourse and non-recourse programs. Similar, to reverse factoring,
significant judgment is required under IFRS 9 to assess whether the Group has substantially transferred all risk and rewards incidental
to the trade receivables to the factor. Specifically, whether or not the factor has the right to collect the unpaid invoice amount from
the transferor (seller).
4.1.3 Going Concern
Refer Note 2.1. Going concern for judgements related to going concern.
Note 4.2. Key sources of estimation uncertainty
4.2.1 Goodwill impairment
Determining whether goodwill has been impaired
involves calculating the value in use of the cash generating units to which the goodwill has been assigned. The calculation of value in
use requires the entity to determine the future cash flows that should arise from the cash-generating units and an appropriate discount
rate to calculate the present value. When actual future cash flows are less than expected, an impairment loss may arise.
F-
28
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Goodwill impairment testing relies on a number
of critical judgments, estimates and assumptions. Goodwill is tested for impairment at the cash generating unit level. The Group tests
at least annually whether goodwill have suffered any impairment by calculating the recoverable amount of the cash generating unit and
comparing this to its carrying value.
The Group's impairment testing methodology
is in accordance with IAS 36, where the value in use approach is taken into consideration.
The value in use calculations primarily use cash
flow projections. There are a number of assumptions and estimates involved for the preparation of cash flow projections. Key assumptions
include the growth rate, expected market share, expected gross margin and selection of discount rates, to reflect the risks involved.
Management prepared the financial projections
reflecting actual and prior year/period performance and market development expectations. Judgement is required to determine key assumptions
adopted in the cash flow projections and changes to key assumptions can significantly affect these cash flow projections and therefore
the results of the impairment reviews. Refer Note 12. Goodwill for further information on the goodwill exposure and estimates applied.
4.2.2 Useful life of property, plant and equipment
and amortization of intangibles with finite useful lives
The Group reviews the estimated useful lives of
property, plant and equipment and intangibles with finite useful lives at the end of each annual period.
4.2.3 Provisions for contingencies, litigation
and lawsuits
The litigation and lawsuits to which the Group
is exposed are managed by appropriate legal personnel and are primarily related to labor, civil and administrative disputes. The Group
considers that a past event has given rise to a present obligation if there is no realistic alternative to settling the present obligation,
independent of future events, considering all the evidence available at the reporting date. It is understood that the probability of an
event is more likely than not when the probability of occurrence is greater than
50
%, in which case the provision is recorded. The possible
obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one to more
uncertain future events that are not entirely under the control of the Group are not recognized in the Consolidated Statement of Financial
Position, but are disclosed as contingent liabilities. The occurrence or non-occurrence of events that are deemed remote are not recorded
or disclosed. The Group utilizes the professional judgment of internal and external specialists to determine the possibility of the occurrence
of a present obligation. In the estimation of the provision for litigation and lawsuits, Management considers assumptions such as appraisal
of the attorneys, estimated duration of the litigation or lawsuit and statistical information of litigation or lawsuits with similar characteristics,
among others.
4.2.4 Impairment of accounts receivable
The Group evaluates the impairment of its accounts
receivable by the expected credit loss model where it determines its value based on the probability of default, the loss due to default
(i.e., the extent of the loss in case of default) and the exposure in the default. The assessment of the probability of default and the
loss due to default is based on historical data adjusted by prospective information. Further details of other judgments are in Note 3.
Summary of significant accounting policies.
F-
29
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
4.2.5 Useful lives of right-of-use assets
Right-of-use assets depreciate during the shorter
of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a purchase option, the asset related to the right of use depreciates during
the useful life of the underlying asset. Depreciation begins at the commencement of the lease.
4.2.6 Recognition of deferred tax assets
Deferred tax assets are recognized for all deductible
temporary differences only to the extent that it is probable that taxable profit will be available against which the deductible temporary
difference can be utilized. In determining whether it is probable that taxable profit will be available to realize the Group's deferred
tax assets, the management considered the following sources of taxable income:
●
Reversal of taxable temporary differences
●
Future taxable profit excluding reversal of temporary differences
●
Tax planning opportunities
4.2.7 Reverse reorganization
The excess between the fair value of the shares
and equity instruments issued and the net assets acquired is treated as an expense under IFRS 2 (the 'listing expense') and it includes
certain elements of judgement and estimation. This centers around the estimation of the fair value of OpCo prior to the Transaction and
the fair value of the private warrants. Refer to Note 26.1. Reverse reorganization for further information related to the Transaction.
The fair value of OpCo was estimated using a combination
of a market and income approach under IFRS 13 where the Group forecasted an annual adjusted EBITDA. A market based multiple, as negotiated
amongst the independent parties to the Transaction, was then applied to the adjusted EBITDA to arrive at the enterprise value which was
then adjusted for OpCo's net debt.
4.2.8 Private warrants
The private warrants are recorded as financial
liabilities on the Consolidated Statement of Financial Position and are remeasured on each reporting date. In assessing the fair value
of the private warrants, a Black-Scholes option pricing formula for European calls was used since the warrants are not publicly traded.
The model requires the input of subjective assumptions, including the volatility of its own ordinary shares, the expected life, and strike
price of the warrants. Any changes in these assumptions can significantly affect the estimate of the fair value of the warrants.
4.2.9 Shares held in escrow
Significant judgement is involved to evaluate
whether a contract that may be settled in the issuer's own equity instruments meets the equity or liability classification. The shares
to be delivered in an escrow are recorded as financial liabilities on the Consolidated Statement of Financial Position and are remeasured
on each reporting date. In assessing the fair value of the shares, Monte Carlo simulation was applied in a risk-neutral framework assuming
a Geometric Brownian Motion for the future stock price. This model is consistent with the Black-Scholes option pricing framework, and
was used to account for the path-dependent + 20 out of 30 day features.
F-
30
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 5. New and amended IFRS Standards that
are effective for the current year
The Group adopted the following accounting standard
amendments from January 1, 2022. The evaluation performed by management determined that these amendments did not result in a significant
impact in relation to the Group as of December 31, 2022.
Reference to the Conceptual Framework –
Amendments to IFRS 3 - Effective January 1, 2022
Minor amendments were made to IFRS 3 Business Combinations to update
the references to the Conceptual Framework for Financial Reporting and add an exception for the recognition of liabilities and contingent
liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 21 Levies. The amendments also
confirm that contingent assets should not be recognized at the acquisition date.
No business combinations were consummated for
the year ended December 31, 2022 and therefore, this amendment has not impacted the Group.
Onerous Contracts – Cost of Fulfilling a Contract - Amendments
to IAS 37 - Effective January 1, 2022
The amendment to IAS 37 clarifies that the direct costs of fulfilling
a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling
contracts. Before recognizing a separate provision for an onerous contract, the entity recognizes any impairment loss that has occurred
on assets used in fulfilling the contract.
Due to the nature of contractual arrangements
with customers, this amendment has not impacted the Group.
Property, Plant and Equipment: Proceeds before
Intended Use (Amendments to IAS 16) - Effective January 1, 2022
The amendment to IAS 16 Property, Plant and Equipment
("PP&E") prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items
produced while the entity is preparing the asset for its intended use. It also clarifies that an entity is 'testing whether the
asset is functioning properly' when it assesses the technical and physical performance of the asset. The financial performance of
the asset is not relevant to this assessment.
Entities must disclose separately the amounts
of proceeds and costs relating to items produced that are not an output of the entity's ordinary activities.
The Group did not sell any items produced by PP&E
while the entity was preparing such asset for its intended use and therefore, this amendment has not impacted the Group.
Annual Improvements to IFRS Standards 2018-2020
- Effective January 1, 2022
The following improvements were finalized in May 2020:
IFRS 9
Financial Instruments
– clarifies
which fees should be included in the
10
% test for the derecognition of financial liabilities. No significant financial instruments were
modified during the year ended December 31, 2022 and therefore, this improvement has not impacted the Group.
F-
31
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
IFRS 16
Leases
– amendment of illustrative
example 13 to remove the illustration of payments from the lessor relating to leasehold improvements in order to remove any confusion
about the treatment of lease incentives. No payments were received from lessors related to leasehold improvements during the year ended
December 31, 2022 and therefore, this amendment has not impacted the Group.
The evaluation performed by Management determined
that there was not significant impact in relation to the Group as of December 31, 2022.
Note 6. Recent accounting pronouncements not yet adopted
Certain new accounting standards and interpretations
have been published that are not mandatory for the year ended December 31, 2022 and have not been early adopted by the Group. These standards
are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
As of the issue date of these Consolidated Financial
Statements, the following new and revised IFRS standards have been issued, but are not yet effective:
IFRS 17 Insurance Contracts - Effective January
1, 2023
IFRS 17 provides the first comprehensive guidance
on accounting for insurance contracts under IFRS accounting standards. Its objective is to increase transparency and reduce diversity
in the accounting for insurance contracts. The Group does not have insurance contracts, as such, this new standard is not applicable to
the Group.
Disclosure of Accounting Policies (Amendments
to IAS 1 and IFRS Practice Statement 2) - Effective January 1, 2023
The IASB has issued amendments to IAS 1
Presentation
of Financial Statements
and an update to IFRS Practice Statement 2
Making Materiality Judgements
to provide further clarification
on the applying the concept of materiality and to help companies provide useful accounting policy disclosures.
The key amendments to IAS 1 include:
●
requiring companies to disclose their material accounting policies rather than their significant accounting
policies;
●
clarifying that accounting policies related to immaterial transactions, other events or conditions are
themselves immaterial and as such need not be disclosed; and
●
clarifying that not all accounting policies that relate to material transactions, other events or conditions
are themselves material to a company's financial statements.
The IASB also amended IFRS Practice Statement
2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures.
The Group is in the process of performing its
assessment of the impacts of the new amendment and anticipate a change in the disclosure of accounting policies upon adoption. However,
early adoption was not elected.
Definition of Accounting Estimate (Amendments
to IAS 8) - Effective January 1, 2023
The amendments introduce a new definition for
accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty.
The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set
out by an accounting policy. The distinction between the two is important because changes in accounting policies are applied retrospectively,
whereas changes in accounting estimates are applied prospectively.
F-
32
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The Group is in the process of performing its assessment of the impacts
of the amendment to IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
, but does not anticipate a significant
change in its accounting estimates upon adoption. However, early adoption was not elected.
Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction – Amendments to IAS 12 Income Taxes - Effective January 1, 2023
Targeted amendments to IAS 12
Income Taxes
clarify how companies should account for deferred tax on transactions such as leases and decommissioning provisions.
The amendments narrow the scope of the initial
recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As
a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial
recognition of a lease and a decommissioning provision.
For leases and decommissioning liabilities, the
associated deferred tax asset and liabilities will need to be recognized from the beginning of the earliest comparative period presented,
with any cumulative effect recognized as an adjustment to retained earnings or other components of equity at that date. The Group is in
the process of performing its assessment of the impacts of the new standard and anticipate a change in the recognition of deferred assets
and liabilities upon adoption. However, early adoption was not elected.
Classification of Liabilities as Current or
Non-current and Non-current Liabilities with Covenants (Amendments to IAS 1) - Effective January 1, 2024
The narrow-scope amendments to IAS 1
Presentation
of Financial Statements
clarify that liabilities are classified as either current or non-current, depending on the rights that exist
at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date
(e.g. the receipt of a waiver or a breach of covenant).
The amendments also clarify what IAS 1 means when
it refers to the 'settlement' of a liability. The amendments could affect the classification of liabilities, particularly
for entities that previously considered management's intentions to determine classification and for some liabilities that can be
converted into equity.
In addition, the amendments also indicate that
a company should classify a liability as non-current if it has a right to defer settlement for at least 12 months after the reporting
date. This right may be subject to a company complying with conditions (covenants) specified in a loan arrangement. Covenants with which
the company must comply after the reporting date (i.e., future covenants) do not affect a liability's classification at the reporting
date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose information to help users
understand the risk that those liabilities could become repayable within 12 months after the reporting date.
The amendments must be applied retrospectively
in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The Group is in the
process of performing its assessment of the impacts of the new standard and anticipate a change in the classification of warrants and
shares held in escrow upon adoption from non-current to current liabilities. However, early adoption was not elected.
F-
33
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Lease
Liability in a Sale and Leaseback (Amendments to IFRS 16) - Effective January 1, 2024
The
amendments require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize
any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from
recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. The Group is in the process of
performing its assessment of the impacts of the new standard. However, early adoption was not elected.
IFRS
10 and IAS 28 - Amendments - Sales or contributions of assets between an investor and its associate or joint venture.
The
IASB has made limited scope amendments to IFRS 10
Consolidated financial statements
and IAS 28
Investments in associates and
joint ventures
.
The
amendments clarify the accounting treatment for sales or contributions of assets between an investor and its associates or joint ventures.
They confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture
constitute a 'business' (as defined in IFRS 3 Business Combinations).
Where
the non-monetary assets constitute a business, the investor will recognize the full gain or loss on the sale or contribution of assets.
If the assets do not meet the definition of a business, the gain or loss is recognized by the investor only to the extent of the other
investor's interests in the associate or joint venture. The amendments apply prospectively.
The
effective date of the amendments has been deferred indefinitely by the IASB; however, early application of the amendments is permitted.
Note
7. Revenue
The
Group recognizes its revenues from the transfer of goods and services to the fulfillment of its performance obligations. The Group's
annual revenue includes $
7,098
(2021: $
3,637
, 2020: $
2,213
) recognized from intellectual property licensing and dossier generation.
Products
The
Group primarily engages in developing, producing and marketing pharmaceutical solutions. It is considered an integrated international
healthcare and pharmaceutical company across the three core therapeutical areas: hospitals/clinics, pharmacies (prescription) and over-the-counter
(non-prescription).
The
Group's main products for the years ended December 31, 2022, 2021 and 2020 are:
a.
Business
to Business
Nextgel
i.
Softgel:
Integrated CMDO, soft gelatin capsules, softgels, gummy-gels and GTabs.
b.
Business
to Consumer
Procaps
Colombia, CAN and CASAND
a.
VitalCare:
                                            Branded drugs, consumer over-the-counter and generics.
i.
Clinical
Specialties: High-complexity drugs and medical devices.
ii.
Farma:
                                            Branded prescription drugs.
F-
34
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Diabetrics
i.
Diabetrics:
                                            Diabetes solutions and chronic disease management tool.
Disaggregation
of revenue from contracts with customers
Revenue
from contracts with customers is disaggregated by primary geographical market and major products (refer to Note 8. Segment reporting)
and by timing of revenue recognition in the table below.
Reportable segments
For the year ended December 31 2022
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
Corporate
Total
Segment revenue
256,112
145,330
77,928
83,392
34,459
—
597,221
Inter-segment revenue
(
131,047
)
(
2,985
)
(
22,461
)
(
17,062
)
(
13,746
)
—
(
187,301
)
Revenue from contracts with customers
125,065
142,345
55,467
66,330
20,713
—
409,920
Timing of revenue recognition
Goods transferred at a point in time
118,394
142,345
55,467
65,903
20,713
—
402,822
Services transferred over time
6,671
—
—
427
—
—
7,098
Total revenue from contracts with customers
125,065
142,345
55,467
66,330
20,713
—
409,920
Reportable segments
For the year ended December 31 2021
NextGel
Procaps Colombia
CAN
CASAND
Diabetrics
Corporate
Total
Segment revenue
244,791
156,820
67,842
68,242
47,835
—
585,530
Inter-segment revenue
(
123,964
)
(
1,493
)
(
16,905
)
(
14,286
)
(
19,140
)
—
(
175,788
)
Revenue from contracts with customers
120,827
155,327
50,937
53,956
28,695
—
409,742
Timing of revenue recognition
Goods transferred at a point in time
117,190
155,327
50,937
53,956
28,695
—
406,105
Services transferred over time
3,637
—
—
—
—
—
3,637
Total revenue from contracts with customers
120,827
155,327
50,937
53,956
28,695
—
409,742
Reportable segments
For the year ended December 31 2020
NextGel
Procaps
Colombia
CAN
CASAND
Diabetrics
Corporate
Total
Segment revenue
201,294
121,532
44,808
40,094
39,221
2,431
449,380
Inter-segment revenue
(
95,315
)
(
6,637
)
805
(
1,538
)
(
16,432
)
1,204
(
117,913
)
Revenue from contracts with customers
105,979
114,895
45,613
38,556
22,789
3,635
331,467
Timing of revenue recognition
Goods transferred at a point in time
103,766
114,895
45,613
38,556
22,789
3,635
329,254
Services transferred over time
2,213
—
—
—
—
—
2,213
Total revenue from contracts with customers
105,979
114,895
45,613
38,556
22,789
3,635
331,467
Revenue
recognized from goods transferred at a point in time include revenues related to "sales of goods" and "sales of trademarks
and sanitary records". Revenue recognized from services transferred over time include revenues related to "intellectual property
licensing" and "dossier generation". Revenues, other than sales of goods, are not material to the Group.
F-
35
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note
8. Segment reporting
Segment
information is presented at a combination of geographical segments and business units, consistent with the information that is available
and evaluated regularly by the chief operating decision maker.
The
Group operates its business through five segments which are its reportable segments for financial reporting purposes: Procaps Colombia,
Central America North ("CAN"), Central America South and North Andes ("CASAND"), NextGel and Diabetrics. Segment
management, the respective Vice Presidents, are responsible for managing performance, underlying risks and operations. Management uses
a broad set of performance indicators, to measure segment performance and to make decisions around resource allocation.
The
Group's customer revenue recognition (external revenue) policy has been consistent with inter-segment revenue generated.
NextGel
Procaps
    Colombia
CAN
CASAND
Year
    2022
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Revenue
256,112
(
131,047
)
125,065
145,330
(
2,985
)
142,345
77,928
(
22,461
)
55,467
83,392
(
17,062
)
66,330
Contribution
    margin
1
66,752
(
14,307
)
52,445
44,594
156
44,750
18,681
(
1,861
)
16,820
14,602
14,869
29,471
Diabetrics
Corporate
Total
Year
    2022
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Revenue
34,459
(
13,746
)
20,713
—
—
—
597,221
(
187,301
)
409,920
Contribution margin
1
2,965
116
3,081
3,920
(
4,484
)
(
564
)
151,514
(
5,511
)
146,003
Administrative expenses
—
—
—
105,911
—
105,911
105,911
—
105,911
Finance expenses
—
—
—
(
37,917
)
—
(
37,917
)
(
37,917
)
—
(
37,917
)
Other expenses
—
—
—
25,299
—
25,299
25,299
—
25,299
Income (loss) before tax
58,221
(
5,511
)
52,710
NextGel
Procaps
    Colombia
CAN
CASAND
Year
    2021
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Revenue
244,791
(
123,964
)
120,827
156,820
(
1,493
)
155,327
67,842
(
16,905
)
50,937
68,242
(
14,286
)
53,956
Contribution
    margin
1
66,679
(
12,573
)
54,106
51,431
490
51,921
18,767
(
231
)
18,536
9,949
11,754
21,703
F-
36
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Diabetrics
Corporate
Total
Year
    2021
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Revenue
47,835
(
19,140
)
28,695
—
—
—
585,530
(
175,788
)
409,742
Contribution margin
1
6,981
(
133
)
6,848
89
(
547
)
(
458
)
153,896
(
1,240
)
152,656
Administrative expenses
—
—
—
82,187
—
82,187
82,187
—
82,187
Finance expenses
—
—
—
78,636
—
78,636
78,636
—
78,636
Other expenses
—
—
—
78,991
—
78,991
78,991
—
78,991
Income (loss) before tax
(
85,918
)
(
1,240
)
(
87,158
)
NextGel
Procaps
    Colombia
CAN
CASAND
Year
    2020
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Total
Inter-
segment
eliminations
External
Revenue
201,294
(
95,315
)
105,979
121,532
(
6,637
)
114,895
44,808
805
45,613
40,094
(
1,538
)
38,556
Contribution
    margin
1
52,679
(
5,790
)
46,889
43,926
(
1,695
)
42,231
9,197
6,324
15,521
9,001
813
9,814
Diabetrics
Corporate
Total
Year 2020
Total
Inter- segment eliminations
External
Total
Inter- segment eliminations
External
Total
Inter- segment eliminations
External
Revenue
39,221
(
16,432
)
22,789
2,431
1,204
3,635
449,380
(
117,913
)
331,467
Contribution margin
1
6,294
(
807
)
5,487
(
10,157
)
11,901
1,744
110,940
10,745
121,685
Administrative expenses
—
—
—
58,631
—
58,631
58,631
—
58,631
Finance expenses
—
—
—
54,489
—
54,489
54,489
—
54,489
Other expenses
—
—
—
7,716
—
7,716
7,716
—
7,716
Income (loss) before tax
(
9,896
)
10,745
849
1
Contribution
Margin is determined by subtracting sales and marketing expenses from gross profit. The Group's customer revenue recognition (external
revenue) policy has been consistent with inter-segment revenue generated.
Major
customer
The
Group does not have revenue from a single customer comprising more than
ten
percent of its consolidated revenue.
F-
37
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Geographical
information
In
presenting information based on geographical segments, segment revenue is based on the geographical location of the customers.
For the year ended December 31
2022
2021
2020
South America
275,933
284,068
249,983
Central America
86,679
72,188
58,082
North America
37,115
44,857
12,576
Europe
10,193
8,629
10,826
Total
409,920
409,742
331,467
Note
9. Finance income (expenses), net
For the year ended December 31
2022
2021
2020
Banking expenses
$
(
781
)
$
(
1,056
)
$
(
590
)
Bank fees
(
8,498
)
(
2,263
)
(
986
)
Other financial expenses
(
1,033
)
(
354
)
(
281
)
Net fair value gain of warrant liabilities
12,196
5,851
—
Net fair value gain of shares held in escrow
61,795
4,506
—
Interest expense
(
25,762
)
(
85,320
)
(
52,632
)
Total income (expense)
$
37,917
$
(
78,636
)
$
(
54,489
)
In
2022, $
6,076
of the bank fees relate to the amortization of upfront and commitment fees incurred under the Bridge Credit Agreement which
was subsequently terminated, as mentioned in Note 1. General Company Information and Note 28. Events after the reporting period. The
upfront and commitment fees are amortized using the straight-line method over the commitment period.
Refer
to Note 25. Warrant Liabilities, Note 26.1. Reverse reorganization and Note 27. Financial instruments for further information related
to net fair value gains for the years ended December 31, 2022 and 2021.
For
the years ended December 31, 2021 and 2020, interest expense includes the finance expense related to the obligation to repurchase the
Group's ordinary shares from IFC and Hoche under the Put Option Agreements and is measured using the effective interest rate method,
inclusive of eligible transaction costs. The amount of interest expense, related to the put options recognized in 2021 and 2020, amounts
to $
23,506
and $
27,344
, respectively. Additionally, an extinguishment loss of $
35,920
was recognized in 2021, reflecting the re-negotiated
commencement date for the annual return of the obligation under the Put Option Agreement with Hoche. On the effectiveness of the Transaction,
September 29, 2021, both Put Option Agreements were terminated in exchange for ordinary shares issued by Holdco. The termination of the
put option resulted in the associated liabilities to be reclassified into Company's equity.
In
2022, interest on lease liabilities amounted to $
1,033
(2021: $
720
, 2020: $
601
). Refer to Note 3.3. Leases - Right-of-use assets &
lease liabilities for method of recognition of interest expense applied by the Group.
In
2022, interest expense includes an extinguishment loss of $
1,601
, as a result of the substantially modified terms of the Senior Notes.
Refer to Note 19. Borrowings for further information related to the debt extinguishment.
Net
fair value gains recognized in Finance income (expenses), net during 2022 and 2021 are unrealized. The Group did not realize any significant
finance income during 2020.
F-
38
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note
10. Other expenses, net
For the year ended December 31
2022
2021
2020
Currency exchange rate differences
$
15,984
$
4,026
$
3,905
Economic emergency contribution expenses
1,301
1,385
811
Fines, surcharges, penalties and taxes assumed
1,119
775
1,440
Donations
814
720
716
Listing expense
1
—
73,917
—
Impairment loss
2
6,018
—
—
Other
63
(
1,832
)
844
Total
$
25,299
$
78,991
$
7,716
1
Corresponds
to the difference between the fair value of the net assets received through SPAC and the value of the equity interest issued, adjusted
by dilutive effect of shares held in escrow at a weighted average fair value per share. Refer to Note 26.1. Reverse reorganization for
further information related to the Transaction.
2
Refer
to Note 12. Goodwill for further details regarding the impairment loss and to Note 14. Property, plant and equipment, net, Note 13. Intangible
assets and Note 15. Leases for the impairment recognized within each asset group.
Note
11. Income tax
Income
tax recognized through profit or loss
For the year ended December 31
2022
2021
2020
Current year
8,407
12,250
7,491
Current tax expense
8,407
12,250
7,491
Origination and reversal of temporary differences
1,763
1,455
3,805
Deferred tax (income) expense
1,763
1,455
3,805
Total tax expense
10,170
13,705
11,296
F-
39
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Reconciliation
of effective tax rate
For the year ended December 31
2022
2021
2020
Profit/ (loss) before tax
52,710
(
87,158
)
849
Income tax (benefit)/expense
8,961
(
14,817
)
297
Tax effect of expenses that are not deductible in determining taxable profit
27,187
49,442
13,525
Tax effect of income not taxable in determining taxable profit
(
30,292
)
(
8,822
)
(
7,754
)
Effect of different tax rates of subsidiaries operating in other jurisdictions
(
1,249
)
(
9,423
)
1,960
Others - Includes exchange effects for reversal rates of long-term temporary differences, income taxed at differential rates, effect of change in deferred tax rate and tax discounts
5,563
(
2,675
)
3,200
Tax effect of utilization of tax losses not previously recognized
—
—
68
Tax expense for the year
10,170
13,705
11,296
The
tax rate used for 2022 represents the corporate tax rate of
17
%
(2021:
17
%, 2020:
35
%) from Luxembourg on the taxable income payable by the Group, in accordance
with the tax laws of said jurisdiction. Income tax for other jurisdictions is calculated based on the substantially enacted nominal tax
rates prevailing in the respective jurisdictions. After effectiveness of the Transaction on September 29, 2021, the Group's corporate
tax jurisdiction changed from Malta to Luxembourg where the corporate tax rate is
17
%.
On
September 14, 2021, Colombia's President approved the Social Investment Law (Ley de Inversión Social, or the "2021
Colombian Tax Reform"), which includes certain tax measures intended to generate additional tax revenues to fund social programs
for purposes of mitigating the impact of the COVID-19 pandemic. The 2021 Colombian Tax Reform took effect beginning in 2022 and, among
other things, includes a corporate tax rate increase from
30
% to
35
% for both domestic and foreign entities, permanent establishments
and branches.
On
December 13, 2022, the Colombian President enacted Law 2277 of 2022, which contains the tax reform proposals previously approved by congress.
The purpose of the amendments is to promote equality and social justice, as well as to consolidate adjustments to the tax system. These
tax measures include, among other things, c
orporate
tax rate to remain unchanged at
35
%. However, a new net tax rate will be introduced, under which Colombian companies, including free
trade zone users, will
be
subject to a minimum
15
% effective tax rate, calculated based
on financial net profit, in accordance with the OECD Pillar Two global minimum tax rules. Some changes that alter substantial matters
concerning periodic taxes enter into force as from January 1, 2023, and certain other provisions enter into force on a date specified
in the legislation. The Group is evaluating the potential impact of this tax reform and cannot anticipate the impact it may have on the
Group.
F-
40
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Current
tax assets and current tax liabilities:
As of December 31
Current tax assets
2022
2021
Income Tax Advance
9,227
6,081
Surplus in Private Liquidation
9,563
15,732
Other Tax Assets
2,397
269
Total
21,187
22,082
Current tax liabilities
Withholding Income Tax
(
2,274
)
(
8,982
)
Income Tax Payable
(
2,797
)
(
2,652
)
Other Tax Liabilities
(
1,062
)
(
122
)
Total
(
6,133
)
(
11,756
)
As
of December 31, 2022 and 2021, the following is the detail of the tax losses of the Group that have not been used and on which no active
deferred tax has been recognized:
As of December 31
2022
2021
Tax Losses not utilized
4,752
3,242
Total
4,752
3,242
Note
12. Goodwill
2022
2021
Balance as of January 1
$
6,803
$
6,863
Effect of movements in foreign exchange
(
174
)
(
60
)
Impairment losses
$
(
838
)
$
—
Balance as of December 31
$
5,791
$
6,803
The
Group completed its annual impairment test for goodwill for the years ended December 31, 2022 and 2021 and concluded that no impairment
charge was warranted for Procaps S.A. de C.V. and Biokemical S.A. de C.V. cash generating units. However, as of December 31, 2022 an
impairment loss was recognized for the Rymco cash generating unit (in regards to prior periods, goodwill impairment losses hadn't previously
been recognized). The Group cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect
the value of the asset reported. The Group believes that all of its estimates are reasonable and are consistent with the Group's
internal reporting and reflect management's best estimates.
F-
41
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Allocation
of goodwill to cash generating units
For
the purpose of impairment testing, goodwill has been allocated to the following cash-generating units, which belong to different reportable
segments:
As of December 31
Cash-generating unit
Reportable segment
2022
2021
Procaps S.A. de C.V.
CAN
$
549
$
549
Biokemical S.A. de C.V.
CAN
5,242
5,242
Rymco
Procaps Colombia
—
1,012
$
5,791
$
6,803
The
Group has three cash generating units -
Procaps, S.A, de C.V.,
is engaged in the manufacturing and distribution of pharmaceutical
products,
Biokemical S.A. de C.V.
which also manufactures and distributes pharmaceutical products, and
Rymco,
a manufacturer
and seller of syringes, needles, and infusion equipment.
To
determine the recoverable amount for each of these cash generating units, a value-in-use calculation was conducted using cash flow projections
from approved financial budgets over a specific period, along with an annual discount rate. For cash flows beyond the number of years
used in projection, a fixed annual growth rate was used to extrapolate the projections. The chosen period for the cash flow projection
represents the stable long-term position, and hence, the cash flows were extrapolated using a steady growth rate in the second stage.
The sales growth rate and fixed gross margins were used as inputs for the cash flow projections during the budgeted period, and the directors
estimated the growth rate based on past performance and their expectations of market development. The following key assumptions and inputs
were considered in the calculation of projected the cash flows of the cash generating units:
Procaps S.A. de C.V.
Biokemical S.A. de C.V.
Rymco
2022
2021
2022
2021
2022
2021
Post-Tax Discount Rate
16.5
%
12.2
%
16.5
%
13.3
%
17.5
%
11.5
%
No. of years used In projection (In Years)
6
6
6
6
5
5
Fixed annual growth rate
1
3
%
1
%
3
%
1
%
3.0
%
3.1
%
Average sales growth rate
15.0
%
6.2
%
12.6
%
3.8
%
(
3.5
)%
11.6
%
Average gross margin
2
52.6
%
49
%
41.2
%
41.4
%
27.9
%
18
%
Expected market share
3
6.5
%
6.2
%
7.5
%
3.8
%
18.1
%
19.9
%
1
This
rate is consistent with the growth of the pharmaceutical and medical supplies markets in the current and potential operating areas of
the cash-generating units.
2
Fixed
gross margins were used in the cash flow projections for Procaps S.A. de C.V.
3
Management
considers that the planned growth of market share for the next five to eight years is reasonably achievable.
The
table below indicates the amount by which estimated recoverable amount of the cash generated units exceeded its carrying amount:
Cash-generating unit
Reportable segment
2022
2021
Procaps S.A. de C.V.
CAN
$
11,863
$
10,386
Biokemical S.A. de C.V.
CAN
7,205
5,932
Rymco
Procaps Colombia
(11,741
)
5,766
The
impairment in Rymco is due to the decrease in sales and declining market conditions. During 2021, the production capacity of Rymco's
manufacturing facilities was expanded to meet the increased demand for its products that helped reduce the spread of the COVID-19 virus.
However, during 2022, due to the end of the COVID-19 epidemic, the demand for those products significantly declined and, as a result,
so did the selling prices due to oversupply in the marketplace.
F-
42
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
As
a result of the impairment identified as of December 31, 2022, the Group assessed the assets within Rymco subject to IAS 36 and recognized
an impairment loss up to the greater of the recoverable amount of the individual assets or zero. The recoverable amount of the assets
is its individual Level 2 fair value less costs of disposal, which is calculated based on observable market prices for similar assets.
Therefore, a total impairment loss expense of $
6,018
, which was allocated to the non-financial assets of Rymco as follows:
–
Impairment of Goodwill of $
838
, with $
0
remaining carrying amount;
–
Impairment of Property Plan and Equipment of $
4,689
, with a remaining carrying amount of $
1,596
;
–
Impairment of Right-of-use assets of $
356
, with a remaining carrying amount of $
2,744
; and
–
Impairment of Intangible assets of $
135
, with $
0
remaining carrying amount.
After
impairing assets within the scope of IAS 36 by $
6,018
, an unallocated impairment of $
5,723
remained unrecognized by the Group.
The
impairment losses are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as Other expenses, net.
Note
13. Intangible assets
Cost
Trademarks and
sanitary records
Licenses,
customers and
agreements
Product
development
Total
Balance as of January 1, 2021
13,176
17,174
18,272
48,622
Additions
1,672
755
—
2,427
Additions from internal developments
—
—
7,976
7,976
Derecognition of assets
—
(
7
)
—
(
7
)
Foreign currency exchange
(
631
)
(
1,475
)
(
2,986
)
(
5,092
)
Transfers
489
(
512
)
23
—
Balance as of December 31, 2021
14,706
15,935
23,285
53,926
Additions
1,684
566
—
2,250
Additions from internal developments
—
—
8,713
8,713
Derecognition of assets
—
(
49
)
(
154
)
(
203
)
Foreign currency exchange
(
1,180
)
(
1,574
)
(
4,697
)
(
7,451
)
Transfers
233
363
—
596
Balance as of December 31, 2022
15,443
15,241
27,147
57,831
F-
43
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Accumulated amortization and impairment losses
Trademarks and
sanitary records
Licenses,
customers and
agreements
Product
development
Total
Balance as of January 1, 2021
3,481
12,768
4,790
21,039
Amortization expense
787
965
3,064
4,816
Derecognition of assets
—
(
7
)
—
(
7
)
Foreign currency exchange
(
277
)
(
976
)
(
840
)
(
2,093
)
Transfers
241
(
237
)
(
4
)
—
Balance as of December 31, 2021
4,232
12,513
7,010
23,755
Amortization expense
1,205
995
2,733
4,933
Impairment loss
114
21
—
135
Foreign currency exchange
(
495
)
(
1,201
)
(
1,504
)
(
3,200
)
Balance as of December 31, 2022
5,056
12,328
8,239
25,623
As of December 31, 2021
Net book value
10,474
3,422
16,275
30,171
As of December 31, 2022
Net book value
10,387
2,913
18,908
32,208
For
the years ended December 31, 2022, 2021 and 2020 amortization expenses are recognized within the Consolidated Statement of Profit or
Loss and Other Comprehensive Income as administrative expenses.
Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.
Foreign
currency exchange corresponds to the effect of translating the intangible asset amounts attributable to the subsidiaries of the Group
whose functional currencies are different from that of the Group.
Note
14. Property, plant and equipment, net
Cost
Land and
buildings
Machinery and
equipment,
furniture and
fixtures
Projects in
progress
Other
1
Total
Balance as of January 1, 2021
26,819
69,664
9,330
9,478
115,291
Additions
487
4,764
10,019
167
15,437
Disposals
(
289
)
(
350
)
—
(
15
)
(
654
)
Effect of exchange differences in foreign currency
(
1,180
)
(
8,930
)
(
1,130
)
(
515
)
(
11,755
)
Transfers
4,482
6,518
(
7,578
)
(
5,087
)
(
1,665
)
Balance as of December 31, 2021
30,319
71,666
10,641
4,028
116,654
Additions
4,425
2,556
16,055
121
23,157
Disposals
(
2,072
)
(
2,071
)
—
(
2
)
(
4,145
)
Effect of exchange differences in foreign currency
(
1,283
)
(
9,698
)
(
2,008
)
(
512
)
(
13,501
)
Transfers
759
1,667
(
2,872
)
179
(
267
)
Balance as of December 31, 2022
32,148
64,120
21,816
3,814
121,898
F-
44
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Accumulated depreciation and impairment losses
Land and
buildings
Machinery and
equipment,
furniture and
fixtures
Projects in
progress
Other
1
Total
Balance as of January 1, 2021
8,071
32,624
—
4,261
44,956
Disposals
(
70
)
(
91
)
—
(
16
)
(
177
)
Depreciation expense
871
4,653
—
548
6,072
Effect of exchange differences in foreign currency
(
328
)
(
3,743
)
—
(
472
)
(
4,543
)
Transfers
(
907
)
(
587
)
—
(
798
)
(
2,292
)
Balance as of December 31, 2021
7,637
32,856
—
3,523
44,016
Disposals
—
(
2,013
)
—
(
1
)
(
2,014
)
Depreciation expense
775
4,662
—
219
5,656
Impairment loss
—
4,247
403
39
4,689
Effect of exchange differences in foreign currency
508
(
4,648
)
—
(
315
)
(
4,455
)
Transfers
—
39
—
2
41
Balance as of December 31, 2022
8,920
35,143
403
3,467
47,933
As of December 31, 2021
Net book value
22,682
38,810
10,641
505
72,638
As of December 31, 2022
Net book value
23,228
28,977
21,413
347
73,965
1
'
Other'
includes computer equipment and other office furniture and equipment.
As
of December 31, 2022, depreciation expense was recognized as follows: $
4,504
was recognized as Cost of sales (2021: $
4,382
), for manufacturing
costs, and $
1,152
(2021: $
1,690
) within Administrative expenses.
Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.
Financial
Commitments
As
of year-end 2022, the Group has commitments to acquire capital expenditures fo
r $
2,304
(2021:
$
3,585
).
Asset
Acquisition of a Pharmaceutical Production Facility
As
of December 31, 2021 the Group acquired an 86,000 sq. ft. pharmaceutical production facility. The purchase price allocated to property,
plant and equipment based on the estimated fair value of the assets acquired at the date of the asset acquisition was $1,487. Please
refer to Note 26.2. Asset acquisition - Pharmaceutical production facility.
Note
15. Leases
The
Group has leases of office and warehouse buildings, land, vehicles, machinery and computer hardware. Rental contracts are for fixed terms
varying between one and seven years.
Information
about leases for which the Group is a lessee is presented below.
F-
45
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Right-of-use
assets
Reconciliation
of asset balances:
Land and
Buildings
1
Equipment
and
Machinery
Vehicles
Computers
Total
Balance as of January 1, 2021
34,886
6,975
32
1,302
43,195
Addition to right-of-use asset
6,573
709
—
—
7,282
Depreciation
(
3,311
)
(
463
)
—
(
449
)
(
4,223
)
Derecognition of contracts
(
126
)
(
58
)
—
(
86
)
(
270
)
Transfers
559
(
1,155
)
(
32
)
—
(
628
)
Effect of changes in foreign exchange rates
(
4,188
)
(
932
)
—
(
69
)
(
5,189
)
Balance as of December 31, 2021
34,393
5,076
—
698
40,167
Addition to right-of-use asset
6,749
2,293
—
1,219
10,261
Depreciation
(
4,323
)
(
1,343
)
(
7
)
(
582
)
(
6,255
)
Derecognition of contracts
(
437
)
(
33
)
—
—
(
470
)
Impairment loss
—
(
356
)
—
—
(
356
)
Transfers
201
47
61
—
309
Effect of changes in foreign exchange rates
(
3,887
)
(
685
)
1
(
72
)
(
4,643
)
Balance as of December 31, 2022
32,696
4,999
55
1,263
39,013
1
Includes
net right-of-use assets of $
1,373
(2021: $
1,537
) with related party WM Partners, LP.
As
of December 31, 2022 depreciation expense was recognized as follows:
$
4,469
was recognized within
administrative costs (2021: $
3,633
) and $
1,786
(2021: $
590
) within cost of goods sold, related to plant leases.
Impairment
loss recognized in Other expenses, net relates to the Rymco cash-generating unit. Refer to Note 12. Goodwill for further information.
As of December 31, 2021 the Group assumed rights
of use for an amount of $
4,533
that were part of the asset acquisition transaction of a pharmaceutical production facility that was purchased
from Strides Pharma, Inc. Refer to Note 26.2. Asset acquisition - Pharmaceutical production facility.
Lease
Liabilities
The
Group's lease liabilities are guaranteed by the lessor's title to the leased assets. As of December 31, 2022 and 2021, the Group
maintains the following opened balances:
2022
2021
Non-current
$
25,139
$
21,894
Current
9,053
9,853
Total
$
34,192
$
31,747
The
remaining contractual maturity and repayment periods of the Group's leases liabilities are exhibited in Note 27. Financial instruments.
Carrying
amounts of lease liabilities are included in Borrowings' balance, refer to Note 19. Borrowings.
As of December 31, 2021 the Group assumed all
obligations and liabilities undertaken as sublessee under the Sublease Agreement with a pending balance of $
4,533
that were part of the
asset acquisition transaction of a pharmaceutical production facility that was purchased from Strides Pharma, Inc. Refer to Note 26.2.
Asset acquisition - Pharmaceutical production facility.
F-
46
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Amounts
recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended
December 31
2022
2021
Interest on lease liabilities
$
1,033
$
720
Expense relating to leases of low-value assets
115
123
Expense relating to short-term leases
862
1,217
Amounts
recognized in Consolidated Statements of Cash Flows
The
total cash outflow for leases amounts to $
6,679
(2021: $
8,854
). The principal amount of the lease liabilities and estimated interest
payments contractual maturity and repayment periods are included in Note 27. Financial instruments.
Note
16. Investment in joint ventures
Name of joint venture
Principal activity
Place of incorporation and principal place
    of business
Proportion of ownership interest and voting rights held by the Company
As of
December 31,
2022
As of
December 31,
2021
Promedical S.A.
Marketing and pharmaceuticals
Santa Cruz de la Sierra, Bolivia
50
%
50
%
Promedical
S.A. is accounted for using the equity method in these Consolidated Financial Statements. Pursuant to a shareholder agreement, the Group
has the right to cast
50
% of the votes at shareholder meetings of Promedical S.A.
The
financial year end dates of Promedical S.A. are December 31, 2022 and 2021. For the purposes of applying the equity method of accounting,
the financial statements of Promedical S.A. for the years ended December 31, 2022, 2021 and 2020 have been used.
The
other summary information that precedes the reconciliation to the Group's carrying amount represents amounts included in the IFRS financial
statements of the joint venture, not the entity's share of these amounts, although they are adjusted to reflect fair value adjustments
upon acquisition or accounting policy alignments.
Summarized financial information of Promedical
S.A is set out below. The summarized financial information below represents amounts in the Promedical S.A.'s financial statements
prepared in accordance with IFRS Standards, adjusted by the Group for equity accounting purposes.
F-
47
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
As of December 31
2022
2021
Current assets
$
10,107
$
10,324
Non-current assets
2,970
3,136
Current liabilities
8,422
6,231
Non-current liabilities
866
795
Equity
3,789
6,434
Revenue
19,844
23,704
(Loss)/income for the year
(
2,040
)
1,423
Total comprehensive (loss)/income
(
2,040
)
1,423
As of December 31
2022
2021
Net assets of Promedical S.A.
$
3,789
$
6,434
Proportion of the Group's ownership interest in Promedical S.A.
1,895
3,217
Other adjustments
(
390
)
(
774
)
Carrying amount of the Group's interest in Promedical S.A.
$
1,505
$
2,443
Note
17. Inventories, net
2022
2021
Raw materials and supplies
$
42,701
$
38,024
Products in process
7,412
6,240
Finished products and merchandise
41,492
31,791
Inventory in transit
11,531
9,645
Subtotal
103,136
85,700
Less: Provision
(
6,303
)
(
6,270
)
Total
$
96,833
$
79,430
Inventories
recognized as cost of goods sold during the year ended December 31, 2022 amounted to $
170,351
(2021: $
174,029
). Inventories used
as samples for the year ended December 31, 2022 amounted to $
6,659
(2021: $
3,867
) were recognized as marketing expenses.
Write-downs
of inventories to net realizable value and obsolescence adjustments amounted to $
5,717
(2021: $
5,391
), were recognized within sales expenses
during the year ended December 31, 2022.
Note
18. Trade and other receivables, net
As of December 31
2022
2021
Trade receivables, net of discounts
1
$
126,456
$
111,071
Other receivables
15,211
16,408
Impairment of trade and other receivables
2
(
12,065
)
(
10,030
)
Trade receivables, net of discounts and impairment
$
129,602
$
117,449
1
Discount
and return provision amounts to $
13,443
(2021: $
7,345
).
2
Total
impairment balance is comprised of $
10,768
(2021: $
8,755
) for trade receivables and $
1,297
(2021: $
1,275
) for other receivables.
Refer
to Note 27. Financial instruments for the Group's disclosures on credit risk management and expected credit losses.
F-
48
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Refer to Note 27. Financial instruments for the
Group's disclosures on credit risk management and expected credit losses.
The Group has entered into factoring arrangements
to sell certain trade receivables to third parties under recourse programs, retaining all risk and rewards incidental to the trade receivables,
so no derecognition of the financial assets has been performed. Trade receivables which collateralize factoring obligations as of December
31, 2022 amount to $
2,547
(2021: $
11,973
).
Note 19. Borrowings
2022
2021
Borrowings at amortized cost
1
Syndicated term loan (1)
$
38,626
$
46,505
Other term loan (2)
95,720
51,593
Lease liabilities (3)
34,192
31,747
Factoring obligations (4)
2,317
10,609
Bank overdrafts (5)
80
55
Notes (6)
115,000
112,857
Total Interest bearing liabilities
$
285,935
$
253,366
Current
$
257,525
$
74,646
Non- Current
$
28,410
$
178,720
1
Borrowings at amortized cost are unsecured, with the exception
of factoring obligations which are collateralized by trade receivables. Refer to Note 18. Trade and other receivables, net.
Information about the Group's exposure to interest
rate, foreign currency and liquidity risk is included in Note 27. Financial instruments.
1.
Syndicated term loan
Currency
Range of Interest
Maturity Year
2022
2021
Syndicated term loan
COP
IBR+ 5.3% (Variable)
2023-2025
$
39,156
$
39,521
Syndicated term loan
USD
Libor+ 4.8% (Variable)
2022
—
7,850
Amortized cost
COP
N/A
2023
(
530
)
(
866
)
Total Syndicated term loan
$
38,626
$
46,505
On November 20, 2018, Procaps S.A. entered into
a syndicated term loan agreement the "Syndicated Loan Agreement") with the following banks: Portion in Colombian pesos (COP)
- Davivienda and Bancolombia; US dollar portion (USD) - Banco de Credito del Peru, Bancolombia Panama and Banco Sabadell. The total value
of the syndicated loan amounts to $
200,434
million COP (portion in COP) and $
35
million USD (portion in USD), Fiduciaria Bancolombia acts
as the agent of the loan. C.I. Procaps S.A., Procaps S.A. de C.V, Biokemical S.A., Pharmarketing S.A. (Panama), Pharmarketing Salvador
S.A. de C.V., Pharmarketing S.A. (Guatemala S.A.), C.D.I. Salvador S.A. de C.V., C.D.I. Nicaragua S.A., C.D.I. Guatemala S.A., Pharmarketing
Dominicana SRL, and Pharmarketing Costa Rica S.A., act as co-debtors, while Pharmayect S.A., Inversiones Crynssen S.A.S., Inversiones
Ganeden S.A.S., Inversiones Henia S.A.S., Inversiones Jades S.A.S., and Industrias Kadima S.A.S., act as guarantors.
F-
49
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The resources obtained were used for advance payment
and/or novation of some obligations to be refinanced. The conditions of the loan had a term of
5
years for installment payments and the
interest rates agreed are as follows: IBR +
5.30
% for the portion in COP and Libor +
4.80
% for the USD portion.
The loans received by Banco de Crédito
del Peru and Banco Sabadell were precanceled during the month of November 2021, due to the improvement in terms and conditions under the
NPA.
The significant covenants required by the Syndicated
Loan Agreement are as follows:
Financial covenants
●
Indebtedness Indicator (Indebtedness/EBITDA) as of June 30 and December 30 of each year, during the loan
term, must be less than or equal to 3.5 times. If the indicator is greater than 3.0 and less than 3.5, it proceeds to the extent that
this value is originated by causes other than additional debt and the justification of the increase must be presented to the agent.
●
Short-term leverage ratio must be less than 1.0 on the last day of each semester.
●
EBITDA ratio / financial expenses ratio must be greater than or equal to 3.0 on the last day of each semester.
Other covenants
●
The Syndicated Loan Agreement establishes that each of the jointly obligated parties, unless they have
the express, prior and written authorization of the agent, will refrain from incurring any type of financial debt when the proforma indebtedness
indicator, once acquired the additional financial debt, is greater than 3.0 times and maintaining any type of financial debt when the
pro forma indebtedness indicator, once the national debt is acquired, is greater than 3.5 times.
●
Each of the joint obligated parties, except with express, prior and written authorization of the agent
to do otherwise, will refrain from contracting finance and/or operating lease obligations with purchase option with a joint balance payable
greater than $85,000,000 (Eighty-Five Billion Pesos, local currency) or its equivalent in another currency. For purposes of clarity, the
reclassification of obligations as financial lease obligations by application of the accounting standards will not consume the balance
set forth herein and may not be renewed.
●
The payment of dividends is restricted to anyone other than the jointly obligated parties.
The Syndicated Loan Agreement establishes that,
in the event of breach of covenants by the debtor, the lenders shall be entitled to declare early maturity of the indebtedness thereunder.
As mentioned
in Note 2.1. Going concern, as of December 31, 2022, the Group was not in compliance with certain of the loan covenants under the Syndicated
Loan Agreement. As a result, the $
19,665
unpaid principal balance previously classified as a noncurrent borrowings, has been
reclassified
to current borrowings within the Group's Consolidated Statement of Financial Position.
On May 2, 2023 the Group obtained a waiver for the loan covenant breaches
described above. Under the terms of the waiver, the lenders agreed to waive the event of default as of December 31, 2022. In addition,
the Group negotiated an additional waiver to adjust the covenant ratios as noted within Note 28. Events after the reporting period.
F-
50
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
2. Other term loan
Currency
Range of Interest
Maturity Year
2022
2021
Other term loan
COP
IBR+ 5.0%, DTF+ 3%, 13.99%-
25.3% (2021: IBR+ 2.25%-5.0%)
2022-2025
$
9,549
$
9,442
COP
IBR+2.25%-10.2%
(2021: DTF + 6.74%, 10%-30%)
2022-2025
21,267
17,552
Soles
8.0% - 12.79% (Fixed)
(2021: 5.00% - 10.01%)
2022-2024
6,837
5,953
Reales
9.84% - 18% N.A.
2023-2024
2,176
1,762
USD
SOFR+ (4.80%-5.80%)
(2021: Libor + 4.49%)
2023
23,454
739
USD
6.36%-16.8%
(2021: Libor + 2.99% / 6.5% - 8.7%)
2022-2025
32,437
16,145
Total Other term loans
$
95,720
$
51,593
On June 28, 2022, Procaps, S.A. entered into a credit agreement with
BTG Pactual (the "BTG Credit Agreement") to borrow $
8,672
. The financial covenants required by the BTG Credit Agreement are
as follow:
●
Consolidated Indebtedness Indicator (Indebtedness / EBITDA) must not be greater than 3.5 times.
●
Consolidated EBITDA/Finance expense must not be less than 3 times.
As mentioned
in Note 2.1. Going concern, as of December 31, 2022, the Group was not in compliance with the loan covenants related to the BTG Credit
Agreement. As a result, the $
4,490
unpaid
principal
balance previously classified as a non-current
borrowings, has been reclassified to current borrowings within the Group's Consolidated Statement of Financial Position.
On March 28, 2023 the Group obtained a waiver
for the loan covenant breach. Under the terms of the waiver, BTG Pactual agreed to waive the event of default as of December 31, 2022.
In addition, the Group negotiated an additional waiver to adjust the covenant ratios as noted within Note 28. Events after the reporting
period.
Along with the
BTG
Credit Agreement
, the Group borrowed $
19,000
on October 14, 2022 as part of a short-term agreement with BTG Pactual which is payable
in 2023.
Additionally, the Group entered multiple USD based
term loans with a variety of banks which amount to $
13,566
, with a maturity date ranging from one to three years.
F-
51
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
3. Lease liabilities
Currency
Range of Interest
Maturity Year
2022
2021
Lease liabilities
COP
DTF + (5,18% - 10,11%) T.A., IBR+7.5%
2022-2030
$
10,475
$
10,334
COP
DTF+ 4.54%-10.42 T.A.
2022-2025
3,653
6,662
USD
1
0.75%-21.48%
(2021: 8.29% - 21.48% E.A.)
2022-2032
14,787
9,374
COP
1.91%-12.23%, IBR+4.68%
(2021: 8.29% - 21.48% E.A.)
2022-2027
4,703
5,315
Reales
0.70% - 8.72% (Fixed)
(2021: 1.68%)
2023-2024
574
62
Total Lease liabilities
$
34,192
$
31,747
1
Includes lease liabilities of $
1,501
(2021: $
1,632
) with
related party WM Partners, LP.
4. Factoring obligations
Currency
Range of Interest
Maturity Year
2022
2021
Portfolio factoring
COP
DTF+8%
2023
$
1,508
$
1,383
COP
15.0% - 27% N.A.
(2021: DTF+8% / 24.6%)
2023
809
9,226
Total Factoring obligations
$
2,317
$
10,609
5. Bank overdraft
Currency
Range of Interest
Maturity Year
2022
2021
Overdrafts and credit cards
COP
19.68% - 32% E.A. (Fixed)
2023
$
80
$
55
6. Notes
Currency
Range of Interest
Maturity Year
2022
2021
The Prudential Insurance Company Of America
USD
8.50% (Fixed)
(2021: 4.75%)
2031
$
60,020
$
58,906
Prudential Annuities Life Assurance Corporation
USD
8.50% (Fixed)
(2021: 4.75%)
2031
29,980
29,423
Healthspring Life & Health Insurance Company, Inc
USD
8.50% (Fixed)
(2021: 4.75%)
2031
18,350
18,007
CIGNA Health and Life Insurance Company
USD
8.50% (Fixed)
(2021: 4.75%)
2031
6,650
6,521
Total Notes
$
115,000
$
112,857
On November 12, 2021, the Group closed the private
placement offering of $
115
million aggregate principal amount of
4.75
% guaranteed senior notes (the "Senior Notes") issued
by Procaps, S.A., a subsidiary of the Group, due November 12, 2031, pursuant to the NPA entered into on November 5, 2021 with The Prudential
Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc.
and Cigna Health and Life Insurance Company Inc.
F-
52
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The Senior Notes are a senior unsecured obligations
of Procaps, S.A. and unconditionally guaranteed by Procaps Group, S.A. and the following subsidiaries of the Group: C.I. Procaps, S.A.,
Diabetrics Healthcare S.A.S., Pharmayect S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Indústria e Comércio
Ltda., and Sofgen Pharmaceuticals LLC.
Debt issuance costs related to the Senior Notes
of $
2,142
, comprised of commissions payable to the initial purchasers of $
1,390
and attorneys' costs of $
752
, were allocated to the liability
of the Notes based on their relative values. Issuance incremental costs are part of the effective rate and amortized to interest expense
using the effective interest method over the contractual term.
As mentioned in Note 1. General Company Information,
the Notes Payoff did not occur on or prior to November 30, 2022, therefore triggering the
3.75
% per annum waiver fee on the outstanding
principal amount of Senior Notes, raising the interest rate from
4.75
% to
8.50
%. As a result, the Group has treated the rate increase
as a debt extinguishment, derecognised a liability in the amount of $
113,400
, expensed $
1,600
in unamortized transaction costs, and recognized
a new liability in the amount of $
115,000
.
The Senior Notes require Procaps, S.A., the Group
and the following subsidiaries of the Group: C.I. Procaps, S.A., Diabetrics Healthcare S.A.S., Pharmayect S.A., Procaps, S.A. de C.V.,
Biokemical, S.A. de C.V., Colbras Indústria e Comércio Ltda., and Sofgen Pharmaceuticals LLC. to comply with the following
financial ratios:
●
The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated
EBITDA for the last twelve months of 3.50:1.00 or less (Indebtedness Indicator), measured at certain dates of determination and;
●
An EBITDA interest coverage ratio (calculated as the consolidated EBITDA for the last twelve months of
Procaps, S.A., the Group and the other obligors thereunder divided by the consolidated interest expenses of Procaps, S.A., the Group and
the other obligors thereunder) in excess of, or equal to, 3.00:1.00, calculated at certain dates of determination.
●
Short-term leverage ratio equal to or less than 1.00
Complying with the NPA protocols and as a result
of the more favorable provisions of the Syndicated Loan Agreement, the Group gave notice on April 7, 2022 that specific provisions related
to reporting covenants, affirmative covenants, negative covenants, events of default, and mandatory prepayment events, as set forth in
the Syndicated Loan Agreement, shall apply to the Senior Notes.
As mentioned in Note 2.1. Going concern, as of
December 31, 2022, the Group was not in compliance with the financial covenants related to the Senior Notes. As a result, the $
115,000
unpaid principal balance previously classified as a non-current borrowings, has been reclassified to current borrowings within the Group's
Consolidated Statement of Financial Position.
On March 31, 2023 the Group obtained a waiver for the NPA covenant
breaches described above. Under the terms of the waiver, the noteholders agreed to waive the event of default as of December 31, 2022.
In addition, the Group negotiated an additional waiver to adjust the covenant ratios as noted within Note 28. Events after the reporting
period.
F-
53
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
7. Bridge Loan
As of December 31, 2022, the Group did not draw
down funds from the Bridge Loan. Refer to Note 1. General Company Information and Note 28. Events after the reporting period for more
information on the Bridge Loan.
Reconciliation of liabilities arising from
financing activities
January 1,
2022
Payment cash flows
New
liabilities
1
Other
changes
2
December 31,
2022
Syndicated term loan
$
46,505
(
7,850
)
7,923
(
7,952
)
$
38,626
Other term loan
$
51,593
(
93,592
)
143,786
(
6,067
)
$
95,720
Lease liabilities
$
31,747
(
6,679
)
12,647
(
3,523
)
$
34,192
Factoring obligations
$
10,609
(
21,943
)
14,042
(
391
)
$
2,317
Bank overdrafts
$
55
(
817
)
1,019
(
177
)
$
80
Notes
$
112,857
—
—
2,143
$
115,000
Total liabilities from financing activities
$
253,366
$
(
130,881
)
$
179,417
$
(
15,967
)
$
285,935
1
New liabilities include non-cash activities for invoices
from suppliers financed via reverse factoring $
32,358
and new lease liabilities for $
12,647
.
2
Other changes include exchange differences, the write-off
of the Notes unamortized transaction costs of $
1,600
due to the debt extinguishment, and cost amortization of $
360
.
January 1,
2021
Payment cash flows
New
liabilities
1
Other
changes
2
December 31,
2021
Syndicated term loan
$
81,906
(
28,239
)
—
(
7,162
)
$
46,505
Other term loan
$
85,645
(
224,380
)
193,120
(
2,792
)
$
51,593
Lease liabilities
$
36,799
(
8,854
)
7,283
(
3,481
)
$
31,747
Factoring obligations
$
9,993
(
18,779
)
22,956
(
3,561
)
$
10,609
Put option agreement
$
239,273
—
—
(
239,273
)
$
—
Bank overdrafts
$
902
(
903
)
—
56
$
55
Notes
$
—
—
112,857
—
$
112,857
Total liabilities from financing activities
$
454,518
$
(
281,155
)
$
336,216
$
(
256,213
)
$
253,366
1
New liabilities include non-cash activities for invoices
from suppliers financed via reverse factoring $
48,138
and acquisition of right-of-use assets $
7,283
.
2
Other changes include exchange differences and the termination
of the put option agreements in exchange for new equity instruments in Procaps Group, S.A.
F-
54
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 20. Deferred tax
The deferred tax assets and liabilities by type
of temporary difference are as follows:
As of December 31
2022
2021
Net deferred tax asset (liability)
Trade and other receivables
$
449
$
(
1,357
)
Inventories
3,930
3,142
Property, plant and equipment
(
4,019
)
(
3,486
)
Intangibles
(
5,112
)
(
875
)
Borrowings and Trade and other payables
2,648
3,639
Provisions and Other liabilities
1,780
1,005
Others
1
(
523
)
(
1,071
)
Total net deferred tax asset (liability)
$
(
847
)
$
997
1
As of December 31, 2022, includes a deferred tax asset of $
381
related
to Procaps S.A. tax losses of $
1,088
generated during the year. As of December 31, 2021, the deferred tax asset balance does not comprise
unused tax losses.
As of December 31
2022
2021
Deferred Tax Asset
$
6,974
$
7,067
Deferred Tax Liability
(
7,821
)
(
6,070
)
Net Deferred Tax Asset (Liability)
$
(
847
)
$
997
2022
2021
2020
Balance as of January 1
$
997
$
2,879
$
8,556
Recognized in Profit or Loss
(
1,763
)
(
1,455
)
(
3,805
)
Recognized in Other Comprehensive Income
1
107
(
58
)
16
Others
2
(
188
)
(
369
)
(
1,888
)
Balance as of December 31
$
(
847
)
$
997
$
2,879
1
Deferred tax related to employee defined benefit plans.
2
Deferred tax related to the purchase price acquisition of
intangible assets in Procaps S.A. de C.V.
The deferred tax assets are ordinary in character and comprised of
temporary differences primarily related to the impairment of trade receivable for financial reporting purposes, differences in the financial
statement carrying amount and tax basis of inventories, property, plant and equipment, intangibles, borrowings, provisions, and others.
Given the expected near-term reversal of the deductible temporary differences giving rise to deferred tax assets, it is probable that
future taxable profit will be available as a result of reversing taxable temporary differences to realize the tax benefit of the deferred
tax assets either in the year of reversal or within the twelve-year carryforward period permitted by Colombian income tax law.
There was a deferred tax asset that would have been recognized for
$
1,663
as of December 31, 2022 (2021: $
1,135
) for temporary differences of $
4,752
(2021: $
3,242
) related to subsidiary Rymco Medical's
fiscal losses. However, this asset was not recognized because the Group's management considers that there is no certainty of future
taxable income available for compensation. Likewise, no deferred tax liabilities have been recognized from those entities in which the
Group has control and in the foreseeable future it is not expected that the same will be carried out.
F-
55
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 21. Trade and other payables
As of December 31
2022
2021
Trade payables
$
81,477
$
70,167
Other payables
Trade current accounts
808
3,259
Interest payable
3,307
1,870
Withholdings and payroll contributions
2,512
6,619
Others
2,082
3,466
Total other payables
8,709
15,214
Total accounts payable
$
90,187
$
85,381
Note 22. Provisions and contingencies
2022
2021
Provisions and contingencies
Balance as of January 1
$
501
$
1,829
Effect of changes in foreign exchange rates
9
(
209
)
Provisions made
43
—
Provisions used
(
415
)
(
1,119
)
Balance as of December 31
$
138
$
501
Provisions
The Group recognizes provisions for contingencies
that are probable of requiring an outflow of resources due to adverse effects. The Group recognized the estimated probable losses against
the company for labor, administrative and ligation, which are calculated based on the best estimate of the disbursement required to cancel
the obligation at the date of preparation of the Consolidated Financial Statements. Such contingencies are disclosed with possible adverse
effects for the entity, as follows:
Legal provisions
Softcaps legal proceedings
– The
total balance of
$
76
(2021: $
459
) is comprised of labor, administrative, and civil litigation. As
of December 31, 2021, the balance also included
$
347
(2020: $
368
) for tax litigation.
The remaining balance of $
62
(2021: $
42
) is for
labor litigation in the following entities:
Procaps, S.A., Unimed del Perú, and Rymco Medical.
Tax provisions
Transfer pricing Procaps, S.A.
–
The Procaps, S.A. and CI Procaps companies used to recognize provisions for the impact of transfer pricing in an amount of 2020: $
354
However, as of December 31, 2021, those provisions were reversed under the risk analysis carried out by the Group's external advisors.
F-
56
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Contingencies
Procaps SA de CV legal proceedings - The General
Tax Directorate of El Salvador (DGII), determined that the company failed to declare taxable and presumed income from revenue obtained
and loans made to non-domiciled companies in 2018, the proposed tax charge and sanction amounts to $
1,087
. Also, the DGII determined that
the company incurred in the infraction of non-intentional evasion due to the incorrect filing of the "VAT" declarations for
2019. The proposed tax charge and penalty amounts to $
348
.
However, the Group's external advisor indicates
that it is not probable for this claim to proceed, therefore, there is no provision for the effect of this contingency.
Note 23. Shareholder's equity
Note 23.1. Authorized and issued shares
The authorized shareholder's equity is represented
by
800,000,000
(2021:
800,000,000
, 2020:
2,001,071
) ordinary shares with a par value of
one
cent each, of which
112,824,184
(2021:
112,824,184
,
2020:
2,001,071
) are issued and outstanding as of December 31, 2022. Ordinary shares grant
one
vote per share and
one
right to dividends.
Also,
4,000,000
Redeemable A Shares are issued and held in treasury by the Group and
4,500,000
Redeemable B Shares are issued and held
in treasury by the Group.
Reconciliation of share capital and share premium related to the
reverse reorganization:
Ordinary authorized and issued shares
Number of
shares
Share capital
amount
Share
premium
As of January 1, 2021 pre-restructuring
2,001,071
2,001
54,412
Termination of put option agreements (a)
903,075
903
297,796
Subtotal
2,904,146
2,904
352,208
Capital restructuring of Crynssen (1:33.4448 exchange ratio) (b)
94,224,544
(
1,933
)
1,933
Subtotal - restructured
97,128,690
971
354,141
Acquisition of Union Acquisition Corp. II (c)
20,195,494
202
174,738
Escrowed shares (d)
(
11,714,612
)
(
117
)
(
106,247
)
Redemption of redeemable shares (e)
(
4,500,000
)
(
45
)
(
44,955
)
As of December 31, 2021
101,109,572
1,011
377,677
a.
On the effectiveness of the Transaction, September 29, 2021, the put option agreements were terminated
in exchange for new equity instruments in Procaps Group SA.
b.
On completion of the Transaction, each of the OpCo Shareholders, contributed its respective OpCo Ordinary
Shares to Holdco in exchange for Holdco Ordinary Shares, and, in the case of IFC for Holdco Ordinary Shares and
4,500,000
Holdco Redeemable
B Shares, subscribed for by each OpCo Shareholder. The OpCo Shareholders were issued
97,128,690
new shares in the Group (
92,628,689
Holdco
Ordinary Shares and
4,500,000
Holdco Redeemable B Shares) in exchange of the
2,904,146
outstanding OpCO ordinary Shares. The resultant
share exchange ratio being 33.4448.
c.
SPAC Ordinary Shares outstanding (including those held by the PIPE Investors and Union Group International
Holdings Limited and Union Acquisition Associates II, LLC (the "SPAC Sponsors") were exchanged with Holdco for Holdco Ordinary
Shares pursuant to a share capital increase of HoldCo.
F-
57
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
New Shares were issued for an aggregate
subscription price of $
201,955
, corresponding to a total aggregate amount of $
202
to be allocated to the share capital of the Group.
Aggregate subscription price is as
follows:
Number of
shares
Aggregate
value
Public shares
5,895,494
58,955
Founder shares
4,300,000
43,000
PIPE Shares
10,000,000
100,000
20,195,494
201,955
Cost-basis of the exchange reflects:
Share
premium
SPAC net assets
131,086
Transactions costs
(
30,063
)
IFRS 2 Share-based payment expense
73,917
Share Capital issued
(
202
)
174,738
d.
1,250,000
Holdco Ordinary Shares issued to the SPAC Sponsors and
10,464,612
Holdco Ordinary Shares issued
to certain Opco Shareholders in connection with the Transaction are subject to an escrow arrangement that is applicable to both SPAC Sponsors
and to such OpCo Shareholders. On September 29, 2021, considering that the condition to deliver a fixed number of shares for a consideration
that is settled in One's own equity instruments is not met for the
11,714,612
Holdco Ordinary Shares issued to the SPAC Sponsors and certain
Opco Shareholders, the escrow shares were classified as a financial liability with changes in fair value through profit or loss for the
amount of $
106,364
.
e.
Immediately following the Exchange, the Group redeemed
4,500,000
Holdco Redeemable B from IFC for a total
purchase price of $
45,000
in accordance with that certain share redemption agreement entered into by and between the Group and IFC on
March 31, 2021, and subsequently amended on September 29, 2021.
Refer to Note 26.1. Reverse reorganization
for further information related to the Transaction.
Note 23.2. Reserves
As of December 31
2022
2021
Legal
1
$
4,892
$
4,892
Working Capital
2
40,851
37,857
$
45,743
$
42,749
2022
2021
Balance as of January 1
$
42,749
$
39,897
Increase in working capital reserves
2,994
2,852
Balance as of December 31
$
45,743
$
42,749
1
Legal Reserve -
Includes the appropriate values from
net income to comply with legal provisions related to asset protection according to applicable jurisdictions with cumulative earnings.
2
Reserves for working capital –
These are eventually
used to transfer earnings from the retained earnings for appropriation purposes.
F-
58
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 24. Earnings Per Share
The Group reports net earnings per share in accordance
with
IAS 33 - Earnings Per Share
. The income/(loss) per share is calculated by dividing the income/(loss) for the year attributable
to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding in the year.
The income/(loss) per fully diluted share shall
be calculated based on the income/(loss) for the year divided by the weighted average number of fully diluted shares. No dilutive effect
has been identified for the years ended December 31, 2022, 2021 and 2020.
2022
2021
2020
Net income/(loss) of the year
42,540
(
100,863
)
(
10,447
)
Number of ordinary shares issued at December 31*
101,110
101,110
97,129
Weighted average basic number of ordinary shares
101,110
98,143
97,129
Assumed exercise of share equivalents
—
—
—
Weighted average diluted number of shares
101,110
98,143
97,129
Basic and diluted income/(loss) per share in the year
0.42
(
1.03
)
(
0.11
)
*
Includes
903,075
shares held under put option before the
transaction as such ordinary shareholders were entitled to receive dividends.
Note 25. Warrant Liabilities
As of December 31
2022
2021
Public warrants
$
9,200
$
16,000
Private warrants
1
1,716
7,112
$
10,916
$
23,112
1
Private warrants include
2,875,000
held by the former
SPAC sponsors deposited in an escrow account.
Note 25.1. Public warrants
2022
2021
As of January 1
$
16,000
$
—
Acquired public warrants
—
21,600
Fair value remeasurement
(
6,800
)
(
5,600
)
As of December 31
$
9,200
$
16,000
F-
59
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Public warrants were issued by the SPAC to certain
shareholders whereas prior to the Transaction such public warrants (together with the private warrants issued to the SPAC sponsors) were
exchanged, on a one per one basis, for warrants in the Group's ordinary shares. The public warrants have the following terms:
●
Each whole warrant entitles the holder to purchase one ordinary share at an exercise price of $11.50
●
The warrant is exercisable post Transaction and expires on the earlier of:
–
5 years after the completion of the Transaction, i.e., September
29, 2026
–
the Redemption Date, or
–
the liquidation of the Group.
●
The Group may redeem the outstanding warrants, in whole and not in part, at a price of $
0.01
per warrant
at any time while the warrants are exercisable upon a minimum of 30 days prior written notice of redemption:
–
if, and only if, the last sales price of the common stock
equals or exceeds $
18.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) on
each of twenty (20) trading days within any thirty (30) trading day period ending on the third trading day prior to the date on which
notice of redemption is given.
–
however, that if and when the Public Warrants become redeemable
by the Group, the Group may not exercise such redemption right if the issuance of Ordinary Shares upon exercise of the Public Warrants
is not exempt from registration or qualification under applicable state blue sky laws or the Group is unable to effect such registration
or qualification.
●
The Public Warrants may be exercised, for cash (or on a "cashless basis") at any time after
notice of redemption shall have been given by the Group and prior to the Redemption Date.
The Public Warrants are redeemable on the occurrence
of change in control (merger, re-organization, tender offer, exchange), and the Group does not have an unconditional right to avoid delivering
cash, the Public Warrants meet the criteria for classification as a financial liability. In addition, Warrants may be settled in a variable
number of shares in case of cashless basis of exercise. Therefore, the Public Warrants meet the criteria for classification as financial
liability.
Additionally, Public Warrants also meet the definition
of a derivative, which may be settled other than by the exchange of a fixed amount of cash for a fixed number of the entity's shares.
Therefore, Public Warrants are derivatives that are classified as financial liability.
The public warrants were traded on Nasdaq and
the closing trade price on 29 September, 2021 was used to measure their initial fair value. On September 30, 2021, the warrants had a
fair value of $
21,600
(
20,000,000
warrants valued at $
1.08
each).
Note 25.2. Private warrants
2022
2021
As of January 1
$
7,112
$
—
Acquired private warrants
—
7,363
Fair value remeasurement
(
5,396
)
(
251
)
As of December 31
$
1,716
$
7,112
Simultaneously with the closing of the initial
public offering of the SPAC, the SPAC consummated the sale of
6,250,000
warrants (the "SPAC Private Placement Warrants") at
a price of $
1.00
per warrant in a private placement to the SPAC Sponsors, generating gross proceeds of $
6,250
. Pursuant to the Business
Combination Agreement, the Group entered into an Assignment, Assumption and Amendment Agreement with SPAC and the Warrant agent to amend
and assume SPAC's obligations under the existing Warrant Agreement and to give effect to the conversion of SPAC public warrants
and SPAC Private Placement Warrants to Holdco public warrants and Holdco private warrants (the "Private Warrants"), respectively.
F-
60
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Additionally, immediately prior to the consummation
of the Transaction, the SPAC Sponsors forfeited
2,875,000
SPAC Private Placement Warrants and, in connection with consummation of the
Transaction, placed
2,875,000
Private Warrants in escrow.
The Private Warrants have the following terms:
●
Each warrant entitles the holder to purchase
one
ordinary share at an exercise price of $
11.50
per share.
Only whole warrants are exercisable.
●
Exercisable post Transaction and expires on the earlier of:
–
5
years after the completion of the Transaction,
–
the Redemption Date, or
–
the liquidation of the Group.
●
Redemption for cash shall not apply.
The Private Warrants are redeemable on the occurrence
of change in control (merger, re-organization, tender offer, exchange), and the Group does not have an unconditional right to avoid delivering
cash, the Private Warrants meet the criteria for classification as a financial liability. In addition, Warrants may be settled in a variable
number of shares in case of cashless basis of exercise. Therefore, the Private Warrants meet the criteria for classification as a financial
liability.
Additionally, Private Warrants are classified
as derivatives and financial liabilities, these shall be initially measured at fair value, with subsequent changes in fair value recognized
in profit or loss. Refer to Note 9. Finance income (expenses), net.
Warrants in escrow
On March 31, 2021, concurrently with the execution
of the Business Combination Agreement, the SPAC, Holdco, OpCo, certain OpCo Shareholders and certain shareholders of the SPAC prior to
the consummation of the Transaction (including the SPAC Sponsors), entered into the Transaction Support Agreement, pursuant to which the
SPAC Sponsors agreed to forfeit
2,875,000
of their Private Placement Warrants immediately prior to the Merger and to subject certain of
their Holdco Ordinary Shares and Private Warrants to certain restrictions by depositing such securities in an escrow account.
Warrants in Escrow shall be treated as follows:
●
First Level Release Target: The escrow agent shall hold
1,437,500
SPAC Sponsor Private Warrants (the "First
Level Sponsor Escrow Warrants") in escrow until the earlier to occur of (a) the date on which the closing price of the Holdco Ordinary
Shares on the Nasdaq Stock Market equals or exceeds $
12.50
per Holdco Ordinary Share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-day trading period, or (b) the date that is the fifth (5th) anniversary
of the closing of the Transaction (the "
Five Year
Expiration Date").
●
Second Level Release Target: The escrow agent shall hold
1,437,500
SPAC Sponsor Private Warrants (the
"Second Level Sponsor Escrow Warrants") in escrow until the earlier to occur of (a) the date on which the closing price of
the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $
13.00
per Holdco Ordinary Share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-day trading period, or (b) the
Five-Year Expiration Date.
F-
61
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
●
Automatic Release: if Group shall consummate a liquidation, merger, stock exchange or other similar transaction
which results in all of the holders having the right to exchange their Holdco Ordinary Shares for cash, securities or other property,
then the escrow agent shall (subject to customary escrow notification provisions) promptly release all the First Level Sponsor Escrow
Warrants and Second Level Sponsor Escrow Warrants to the SPAC Sponsors.
●
Cancellation: On the
Five
-Year Expiration Date, any First Level Sponsor Escrow Warrants and Second Level
Sponsor Escrow Warrants that have not been released and remain in escrow, shall be released by the escrow agent to the Group for cancellation.
Private Warrants issued by the Holdco which are
deposited in escrow and are subject to cancellation if certain conditions are not met are recorded as contingent consideration and therefore
initially measured at fair value. Further, since they are liability classified instruments, subsequent changes in fair value are recognized
in profit or loss as a Finance Income/Expense. Refer to Note 9. Finance income (expenses), net.
Note 26. Acquisitions
Note 26.1. Reverse reorganization
As further outlined in Note 2.3, the Group underwent
a reverse reorganization as a result of the Transaction consummated on September 29, 2021.
The amount of the net identifiable assets of $
131,086
acquired on the date of Transaction, were as follows:
(Amount in thousands)
2021
Cash held in trust
$
138,046
Cash and cash equivalents
100,000
Redemption liability
(
77,997
)
Warrants liability
(
28,963
)
Total SPAC identifiable net assets at fair value
$
131,086
Procaps Group, S.A. was considered to be the accounting
acquirer and the merger between Procaps Group, S.A. and SPAC was accounted for as an asset acquisition under IFRS, considering SPAC was
not considered a business. Therefore, IFRS 2 was applied to recognize the value of equity interests issued in excess of the assets received.
After
Redemption
Step 1 - Deemed cost of shares issued
Fair value of OpCo
$
926,287
Equity interest in Holdco issued to SPAC shareholders & PIPE investors
19
%
Equity interest in Holdco of Selling shareholders
81
%
Deemed costs of shares issued*
$
213,584
SPAC identifiable net assets at fair value
$
131,086
Deemed cost of shares issued
$
82,498
Step 2 - Dilutive impact of shares held in escrow
Dilutive effect of 945,036 shares held in escrow at a weighted average fair value per share of $9.08
$
8,581
Step 3 - IFRS 2 'listing expense'
$
73,917
*
The deem cost of the shares was estimated based on the
fair value of the OpCo issued shares (legacy Crynssen Pharma Group Limited) prior to the merger with SPAC and Holdco.
F-
62
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The IFRS 2 'listing expense' per above, has been
recognized in profit or loss within O
ther expenses, net
for the year ended December 31, 2021. Refer to Note 10. Other expenses,
net.
As a result of the transaction, prepaid expenses
of $
4,602
have been recognized in Other current assets as of December 31, 2021.
Shares in an escrow
Holdco Ordinary Shares in an escrow are subject
to an arrangement that is applicable to
1,250,000
Holdco Ordinary Shares issued to the SPAC Sponsors and
10,464,612
Holdco Ordinary Shares
issued to certain Opco Shareholders.
Certain market conditions will be required to
be met after the Transaction for these securities in escrow to be released to the eligible securities owners. If the market conditions
wouldn't be met within a defined time period (five years for warrants in escrow and ten years for Holdco Ordinary Shares in escrow),
such securities in escrow would be forfeited.
a) Sponsors' Holdco Ordinary Shares in
escrow
:
On the closing of the Transaction, 1,250,000 Holdco Ordinary Shares received in exchange for the equivalent number of SPAC
Ordinary Shares upon the consummation of the Merger (the "Sponsor Escrowed Securities") held by the SPAC Sponsors were deposited
in escrow. Fifty percent (50%) of the Sponsor Escrowed Securities will be released to the SPAC Sponsors if the closing price of the Holdco
Ordinary Shares on the Nasdaq Stock Market equals or exceeds $12.50 per Holdco Ordinary Share for any 20 trading days within any 30-day
trading period, and the remaining 50% of the Sponsor Escrowed Securities will be released to the Sponsors if the closing price of the
Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $13.00 per Holdco Ordinary Share for any 20 trading days within any
30-day trading period (in each case, subject to any applicable lock-up restrictions under the Registration Rights and Lock-Up Agreement
or any other applicable escrow arrangement).
b) Eligible Procaps Shareholders Holdco Ordinary
Shares in escrow
:
On the closing of the Transaction, 10,464,612 Holdco Ordinary Shares received in the Exchange (the "ECS Escrowed
Securities") by certain OpCo Shareholders were deposited in escrow. Fifty percent (50%) of the ECS Escrowed Securities will be released
to such OpCo Shareholders if the closing price of the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $12.50 per Holdco
Ordinary Share for any 20 trading days within any 30-day trading period, and the remaining 50% of the ECS Escrowed Securities will be
released to such OpCo Shareholders if the closing price of the Holdco Ordinary Shares on the Nasdaq Stock Market equals or exceeds $13.00
per Holdco Ordinary Share for any 20 trading days within any 30-day trading period.
If the market conditions wouldn't be met
within a defined time period (ten years for ordinary shares in escrow), such securities in escrow would be forfeited. All dividends payable,
whether in cash, stock or other non-cash property with respect to the Sponsor Escrowed Securities and the ECS Escrowed Securities while
such securities are held in escrow will be delivered to the escrow agent to hold and distribute in the same manner as the Sponsor Escrowed
Securities and the ECS Escrowed Securities held in escrow.
If Holdco consummates a liquidation, merger, stock
exchange or other similar transaction which results in all of its shareholders having the right to exchange their Holdco Ordinary Shares
for cash, securities or other property, then all Sponsor Escrowed Securities and the ECS Escrowed Securities will be released to the SPAC
Sponsors and those certain OpCo Shareholders. Any Sponsor Escrowed Securities and the ECS Escrowed Securities not released from escrow
within ten years from the date of the closing of the Transaction will be released by the escrow agent to Holdco for cancellation.
F-
63
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Shares held in escrow subject to cancellation
if certain conditions are not met, are recorded as contingent consideration and therefore, initially measured at fair value. Because the
shares held in escrow will be settled in a variable number of the Group's own equity instruments, they are classified as a liability.
As a result, subsequent changes in fair value are recognized in the Consolidated Statement of Profit or Loss and Other Comprehensive Income
as
Finance income (expenses), net
. Refer to Note 9. Finance income (expenses), net.
2022
2021
As of January 1
$
101,859
$
—
Escrowed shares
—
106,364
Fair value remeasurement
(
61,795
)
(
4,505
)
As of December 31
$
40,064
$
101,859
As of December 31, 2022, shares held in escrow
measured at fair value include $
35,789
and $
2,138
(2021: $
90,990
and $
5,434
) owned by the Minski Family and Union Acquisition Associates
II, LLC, respectively, which are related parties.
Note 26.2. Asset acquisition - Pharmaceutical production facility
On November 5, 2021, Procaps Group entered into
an asset purchase agreement to acquire an
86,000
sq. ft. pharmaceutical production facility located in West Palm Beach, Florida with production
capacity of approximately
1.8
billion capsules per year for its CDMO (integrated Contract and Manufacturing Organization) business unit.
The pharmaceutical production facility was purchased
from Strides Pharma, Inc., a U.S. subsidiary of the Indian-based pharmaceutical corporation, the Strides Group. The core assets of this
asset acquisition includes several soft gelatin capsule ("Softgel") encapsulation lines, new critical support systems, automated
packaging line capabilities, as well as development facilities including pilot and scale up capabilities. Softgels are designed to deliver
high precision dosage by achieving homogeneity of ingredients. The Softgel capsules are well recognized in the supplement, OTC, and the
prescription market for improving patient adherence to the drug and therapy by facilitating swallowing due to the texture of its shell.
The purchase price for the purchased assets is
$
1.6
million, and transaction costs of $
213.6
. On the Closing Date, December 31, 2021, the Group paid the amount corresponding to the
50
% of the Purchase Price and the remaining
50
% will be paid on December 31, 2023.
The fair value of the identifiable assets acquired
on December 31, 2021, the date of the Transaction, were of $
1,813
.
F-
64
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The following table summarizes the final allocation
of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed at the date of asset acquisition.
(Amount in thousands)
2021
Property, Plant and Equipment
$
1,487
Inventories
133
Other receivables
193
Right of Use Assets
4,533
Lease Liabilities
(
4,533
)
Total
$
1,813
Note 27. Financial instruments
27.1 Accounting classification and fair value
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring
fair value, the Group uses observable market data whenever possible. Fair values are categorized into different levels in a hierarchy
based on the inputs used in the valuation techniques as follows:
●
Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
●
Level 2: inputs are observable either directly (e.g. as prices) or indirectly (e.g. derived from prices).
●
Level 3: fair value measurements incorporate significant inputs that are based on unobservable market
data.
The following table shows the carrying amounts
of financial assets and financial lia
bilities. The amortized cost basis of the financial assets
and liabilities not measured at fair value approximates their fair value.
As of December 31, 2022
As of December 31, 2021
FVTPL
1
Amortized
cost
2
FVTPL
1
Amortized
cost
2
Financial assets not measured at fair value
Trade and other receivables, net
$
—
$
129,602
$
—
$
117,449
Amounts owed by related parties
—
2,474
—
1,147
Cash
—
43,003
—
72,112
Other financial assets
—
210
—
256
Total financial assets not measured at fair value
$
—
$
175,289
$
—
$
190,964
Financial liabilities measured at fair value
Warrant liabilities
$
10,916
$
—
$
23,112
$
—
Shares held in escrow
40,064
—
101,859
—
Total financial liabilities measured at fair value
$
50,980
$
—
$
124,971
$
—
Financial liabilities not measured at fair value
Borrowings
$
—
$
285,934
$
—
$
253,365
Trade and other payables
—
90,187
—
85,381
Amounts owed to related parties
—
2,914
—
8,450
Total financial liabilities not measured at fair value
$
—
$
379,035
$
—
$
347,196
1
The fair value is comprised of $
9,200
level 1 and $
41,780
level 3 as of December 31, 2022 (2021: $
16,000
and $
108,971
, respectively).
2
The amortized cost approximates fair value as of December
31, 2022 and 2021, respectively.
F-
65
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
27.2 Measurement of fair values
The following table shows the valuation techniques
used in measuring Level 3 fair values for financial instruments in the Consolidated Statement of Financial Position, as well as the significant
unobservable inputs used.
Type
Fair value
Valuation Technique
Significant
unobservable
input
Relationship between significant unobservable input to fair value
Sensitivity of significant unobservable input to fair value
+5%
-5%
Private warrants
$
1,466
The fair value of the Private Warrants is estimated using the Black-Scholes option pricing formula for European calls, since the underlying stock is not expected to pay dividends over the term of the Warrants.
Volatility of 36.6% (2021: 30.0%)
The higher (lower) the volatility, the higher (lower) the fair value.
$
1,883
$
934
Private warrants in escrow
250
The fair value of the Private Warrants is estimated using Monte Carlo simulation in a risk-neutral framework assuming a Geometric Brownian Motion for the future stock price.
Volatility of 37.5% (2021: 30.0%)
The higher (lower) the volatility, the higher (lower) the fair value.
340
165
Shares held in escrow
40,064
The fair value of the shares to be delivered is estimated using Monte Carlo simulation in a risk-neutral framework assuming a Geometric Brownian Motion for the future stock price.
Volatility
of 36.5% (2021: 30.0%)
The higher (lower) the volatility, the higher (lower) the fair value.
43,696
35,905
27.3 Financial risk management
The Group has exposure
to the following risks arising from financial instruments:
●
Credit risk
●
Liquidity risk
●
Market risk, including: currency and interest rate risk
27.3.1. Risk management framework
The Group analyzes each of these risks individually as well as on a
combined basis and defines strategies to manage the economic impact on the Group's performance in line with its financial risk management
policy. The Group does not subscribe or negotiate hedging instruments.
The Group's Financial Administrative Unit
("UAC") supports, monitors and manages financial risks through internal reports, which are analyzed individually in each country
depending on the degree and magnitude of the risks thereof. The financial UAC periodically reports to the shareholders the conclusions
of such risk monitoring and proposes the plans and policies necessary to mitigate exposures.
27.3.2. Credit risk
Credit risk refers to the risk that one of the
parties fails to comply with its contractual obligations, resulting in a financial loss for the Group. As a corporate policy, the Group
conducts business only with strong financial institutions and credit institutions with renowned national and international prestige. For
banks, only independently rated parties with a minimum rating of 'A' are accepted.
The Group only makes transactions with financial
entities that have risk certifications and/or that are monitored by the relevant authorities in each country. The information provided
by rating agencies is consistently monitored and, if not available, the Group uses other available financial information and its own business
records to qualify its main customers and finance providers. Before accepting any new customer, the Group uses a rating system to assess
the credit quality of the potential customer and defines the credit limits for each customer. Limits and ratings attributed to customers
are reviewed twice a year. Trade accounts receivable that are not past due or impaired have the best credit rating according to the credit
rating system used by the Group.
F-
66
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Exposure to credit risk
The carrying amount of financial assets represents
the maximum credit exposure of the Group. The carrying amount is presented net of impairment losses. None of the receivable balances as
of December 31, 2022 or 2021 constitutes a significant concentration of credit risk. There are no other single customers representing
more than
10
% of total gross trade receivables for the years ended December 31, 2022 and 2021.
Expected credit losses
The average credit period on the sale of medicines
is 60 to 120 days. In some cases, depending on market conditions and strategy, longer payment periods are granted. No interest surcharge
is made on commercial accounts receivable. Refer to Note 3.4. Financial Instruments for further information on financial instruments significant
accounting policies.
The Group has recognized a provision for doubtful
accounts. The Group evaluates the impairment of its accounts receivable for the expected credit loss model, where it determines its value
based on the probability of default, the loss due to default (i.e., the extent of the loss in case of default) and the exposure, by the
application of the 'simplified method' for trade receivables without a significant financing component. The assessment of
the probability of default and the loss due to default is mainly based on historical data and adjust historical loss rates to reflect
information about current conditions and reasonable and supportable forecasts of future economic conditions.
The following table provides information about
the exposure to credit risk and expected credit losses for Trade and other receivables and Amounts owed by related parties as of December
31, 2022 and 2021:
December 31, 2022
Current
(not past
due)
1-30 days
past due
31-60 days
past due
61-90 days
past due
91-120 days
past due
More than
120 days
past due
Total
Weighted-average loss rate
0.39
%
3.42
%
4.50
%
14.25
%
19.89
%
83.88
%
14.07
%
Gross carrying amount
124,219
11,816
3,864
1,958
890
26,605
169,352
Impairment loss allowance
(
483
)
(
404
)
(
174
)
(
279
)
(
177
)
(
22,317
)
(
23,834
)
123,736
11,412
3,690
1,679
713
4,288
145,518
December 31, 2021
Current
(not past
due)
1-30 days
past due
31-60 days
past due
61-90 days
past due
91-120
days past
due
More than
120 days
past due
Total
Weighted-average loss rate
0.60
%
2.11
%
2.35
%
3.38
%
3.26
%
67.43
%
14.67
%
Gross carrying amount
98,776
11,265
3,147
1,981
1,843
30,578
147,590
Impairment loss allowance
(
591
)
(
238
)
(
74
)
(
67
)
(
60
)
(
20,620
)
(
21,650
)
98,185
11,027
3,073
1,914
1,783
9,958
125,940
As of December 31, 2022, additions of $
2,673
(2021:
reversal of $
818
, 2020: reversal of $
1,915
) to the impairment loss allowance were recognized within Sales and marketing expenses. As of
December 31, 2022, this amount includes $
195
of impairment losses recognized for balances in connection with related parties. In addition,
an allowance exists from prior periods for open balances related to goods sold to
Industrias Intercaps de Venezuela C.A
and
Laboratorios
Vivax Pharmaceuticals C.A.
, due to the critical political and social situation that the location country of precedence is experiencing,
See Note 29. Related party transactions.
F-
67
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
27.3.3. Market risk
Foreign currency risk
The Group carries out transactions denominated
in foreign currency, mainly imports, exports and indebtedness; thereby generating exposures to exchange rate fluctuations. The Group does
not usually cover exposures to the exchange rate, but rather monitors frequently the foreign exchange market as a strategy to prevent
significant loss in the short- and medium-term.
The carrying amounts of the Group's foreign
currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
Assets
Liabilities
2022
2021
2022
2021
COP
105,048
124,545
(
79,476
)
(
99,371
)
Reales
25,479
7,002
(
9,962
)
(
9,125
)
Quetzales
—
1,946
—
(
4,115
)
Soles
14,667
7,024
(
8,905
)
—
Dominican Peso
1,064
809
(
3,563
)
(
2,869
)
Colones
1,346
1,270
(
2,814
)
(
2,371
)
The following table details sensitivity per company
to a
10
% increase and decrease in the U.S. dollar against the relevant foreign currencies. The sensitivity analysis includes only the
outstanding monetary items denominated in foreign currency and adjusts its conversion at the end of the period for a
10
% change in exchange
rates.
+10% Impact to profit or loss before tax
-10% Impact to profit or loss before tax
2022
2021
2020
2022
2021
2020
COP
(
2,325
)
(
2,289
)
2,262
2,841
2,797
(
2,764
)
Reales
(
1,411
)
193
52
1,724
(
236
)
(
64
)
Quetzales
—
197
(
8
)
—
(
241
)
10
Soles
(
524
)
(
639
)
301
640
781
(
368
)
Dominican Peso
227
187
207
(
278
)
(
229
)
(
253
)
Colones
133
100
107
(
163
)
(
122
)
(
131
)
Interest rate risk
The Group is exposed to interest rate risks because
it borrows money at both fixed and variable interest rates connected with Secured Overnight Financing Rate ("SOFR") and IBR/DTF
(according to its Spanish acronym of "
Indicador bancario de referencia
" which is the benchmark banking indicator, in
Colombia). The risk is managed by the Group, by monitoring the macroeconomic variables that determine the variation of the interest rates
and generating an appropriate mix between fixed rate and variable rate loans.
A fundamental reform of major interest rate benchmarks
is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates.
In 2022, the Group undertook amendments to its financial obligations with contractual terms indexed to IBORs such that they incorporate
new benchmark rates. As of December 31, 2022, the Group modified all of its variable rate liabilities indexed to LIBOR to reference SOFR.
F-
68
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
The following sensitivity analyzes have been determined
based on exposure of financial liabilities to the highlighted variable interest rates:
2022
2021
Carrying
amount
+1%
-1%
Carrying
amount
+1%
-1%
DTF/IBR
79,345
80,138
78,551
67,970
68,650
67,290
SOFR
23,454
23,688
23,219
19,451
19,646
19,256
Total
102,799
103,827
101,771
87,421
88,296
86,546
$
102,799
or
35.95
% as of December 31, 2022 and
87,421
or
34.50
% as of December 31, 2021, of the Group's interest-bearing financial liabilities bears interest at a variable rate.
An increase of
1
% in interest rates for the year ended December 31, 2022 would have decreased profit before tax by $
1,028
in 2022 and
decreased profit before tax by $
875
in 2021. A decrease of
1
% will have an equal and opposite effect on profit before tax. This sensitivity
does not include the balances of financial obligations with a fixed rate.
27.3.4. Liquidity risk
The Group's Financial UAC has ultimate responsibility
for the liquidity management of each of the companies and has established an appropriate framework so that Management can make decisions
on short-, medium- and long-term financing, as well as liquidity management. The Group manages liquidity risk by maintaining reserves,
adequate financial and loan facilities, continuously monitoring projected and actual cash flows, and reconciling the maturity profiles
of financial assets and liabilities. In the same sense, financial assets to afford obligations represent cash and trade receivables intended
to be collected in short term, net of the expectations of recoverability.
As part of other liabilities within borrowings,
the Group includes obligations to factors associated with factoring and reverse factoring arrangements. Ordinary payment terms with suppliers
range between 60 and 90 days but may be extended through reverse factoring arrangements up to 180 days in aggregate.
The Group's obligations to individual factors
typically is less than
5
% of the Group's total indebtedness. The majority of the Group's factoring and reverse factoring obligations
are concentrated with Sufactura S.A, Corredores Asociados S.A. and Banco Serfinansa S.A.
The following table details the most representative
remaining contractual maturity and repayment periods of the Group's financial liabilities. This reflects the undiscounted cash flows of
financial liabilities, considering the date on which the Group must make the final payments.
As of December 31, 2022
Carrying amount
Contractual cash flows
Less
    than 1 year
1, 2
1-2 years
2-3 years
3-5 years
More than 5 years
Non-derivative financial liabilities
Borrowings
$
251,743
$
278,853
$
274,648
$
3,642
$
563
$
—
$
—
Trade and other payables
90,187
90,187
90,187
—
—
—
—
Lease liabilities
34,192
46,001
11,174
6,629
5,962
7,962
14,274
Amounts owed to related parties
2,914
2,914
2,914
—
—
—
—
$
379,036
$
417,955
$
378,923
$
10,271
$
6,525
$
7,962
$
14,274
1
As mentioned in Note 19. Borrowings, $
139,155
in the aggregate,
is classified as payable in less than 1 year as a result of a breach in certain covenants included under the NPA, the Syndicated Loan
Agreement, and BTG Credit Agreement. Refer to Note 28. Events after the reporting period for the Group's executed waivers with the lenders
mentioned above.
2
As mentioned in Note 2.1. Going concern the Group is renegotiating
$
19,000
balance with BTG, and Syndicated balance of $
38,626
with Bancolombia and Davivienda. Additionally, the Group expects to maintain
revolving credit lines with other lending parties.
F-
69
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
As of December 31, 2021
Carrying amount
Contractual cash flows
Less than 1 year
1-2 years
2-3 years
3-5 years
More than 5 years
Non-derivative financial liabilities
Borrowings
$
221,619
$
253,011
$
71,987
$
16,895
$
15,330
$
20,323
$
128,476
Trade and other payables
85,381
85,381
85,381
—
—
—
—
Lease liabilities
31,747
39,904
9,853
7,403
5,333
8,314
9,001
Amounts owed to related parties
8,450
8,450
8,450
—
—
—
—
$
347,197
$
386,746
$
175,671
$
24,298
$
20,663
$
28,637
$
137,477
Capital risk management
The Group manages its capital to ensure that it
will be able to continue as a going concern, while maximizing returns to its shareholders through the optimization of debt and asset balances.
The Group's capital structure consists of net debt (loans offset by cash and bank balances) and Group assets (comprised of issued
and paid-in capital, reserves, retained earnings and non-controlling interests).
The Group is not subject to any externally imposed
capital requirement. The main indebtedness of the Group is associated with the balances of a Syndicated Loan and the Senior Notes, and
are subject to covenants that obligate it to comply with a series of financial indicators, primarily financial leverage (Debt/EBITDA),
short-term leverage ratio and EBITDA on interest expense. These financial indicators serve as local management parameters.
The executive members of the UAC of the Group,
who provide support for the analysis and management of capital risk to the Group, review their capital structure on a quarterly basis.
As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group is
reviewed in an internal administrative manner, with the same covenants that apply to the Syndicated Procaps S.A. The main financial covenant
is determined as the ratio of the debt to the EBITDA generated by the Group.
Indebtedness Index
The indebtedness index for the reporting period
is the following:
2022
2021
Total assets
1
460,187
462,135
Total liabilities
2
462,065
500,475
Liabilities to assets ratio
1.00
1.08
1
Defined as short-term assets plus long-term assets
2
Defined as short-term liabilities plus long-term liabilities
F-
70
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
Note 28. Events after the reporting period
Management
has considered subsequent events through the date these Consolidated Financial Statements were issued and identified the following events
that require disclosure.
Grupo Somar and Pearl Mexico Acquisition
Refer to Note 1. General Company Information for
background information on the Acquisition of Grupo Somar and Pearl Mexico. The time required for resolution of the lien remains uncertain
and is not in the Group's control. Following the failure of the transaction to close on December 31, 2022, the Group provided the Sellers
a formal notice on January 1, 2023 terminating the SPA in accordance with the terms thereof.
Bridge Loan Credit Agreement
Following the Group's termination of the SPA,
by delivering the notice of termination, the Group advised the joint arrangers and book runners on January 1, 2023 of its desire to terminate
the transaction documents (including, without limitation, the commitments under the Bridge Credit Agreement and, for the avoidance of
doubt, any commitments under the Commitment Letter) and pay all outstanding obligations, amounting to $
5,719
, under the Bridge Credit
Agreement and any other transaction document as of January 10, 2023.
Waiver for Breach of Indebtedness Covenants
Refer to Note 2.1. Going concern and Note 19. Borrowings for background
information on breach of Loan Covenants. On March 28, March 31 and May 2, 2023 the Group obtained waivers for the applicable covenant
breaches under the NPA, the Syndicated Loan Agreement, and the BTG Credit Agreement. Under the terms of the waivers, the lenders agreed
to waive the event of default as of December 31, 2022. In addition, the Group negotiated with the lenders for additional waivers to adjust
the covenant ratios as noted below:
BTG Credit Agreement
For the period ending June 30, 2023, as part of
the waiver negotiations, the lenders agreed to adjust the convent ratios as noted below (the covenants will return to the original terms
from December 31, 2023, onwards):
●
The Company's consolidated Indebtedness Indicator (Indebtedness / EBITDA) must not be greater than 4.5x
(original covenant: greater than 3.5x).
●
The Company's consolidated EBITDA/Finance expense must not be less than 1.8x (original covenant: less
than 3.0x)
.
Syndicated Loan Agreement
For the period ending June 30, 2023, as part of
the waiver negotiations, the lenders agreed to adjust the convent ratios as noted below (the covenants will return to the original terms
from December 31, 2023, onwards):
●
Indebtedness Indicator (Indebtedness/EBITDA) must be less than or equal to 4.5 times (original covenant:
less than or equal to 3.5 times). If the indicator is greater than 4.1 and less than 4.3 (original covenant: greater than 3.0 and less
than 3.5), it proceeds to the extent that this value is originated by causes other than additional debt and the justification of the increase
must be presented to the agent.
●
Short-term leverage ratio less than 1.6 (original covenant: less than 1.0).
●
EBITDA ratio / financial expenses greater than or equal to 1.8 (original covenant: greater than or equal to 3.0)
.
F-
71
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
NPA
For the periods ending March 31, June 30 and September
30, 2023, as part of the waiver negotiations, the lenders agreed to adjust the convent ratios as noted below (the covenants. will return
to the original terms from December 31, 2023, onwards):
●
The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated
EBITDA for the last twelve months of 4:00:1.00 or less (original covenant: 3.50:1.00 or less).
●
An EBITDA interest coverage ratio in excess of, or equal to, 2.20:1.00 (original covenant: in excess of,
or equal to, 3.00:1.00).
●
Short-term leverage ratio equal to or less than 2.00:1:00 (original covenant: equal to or less than 1.00:1.00).
Headcount Reduction
During the first quarter of 2023, the Group announced
adjustments to their workforce, which involved an overall reduction in headcount of approximately 200.
Note 29. Related party transactions
Balances and transactions between the Group and
its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between
the Group and its related parties are disclosed below.
Outstanding activities
During the year, the Group entities carried out
the following transactions with joint ventures and other related parties:
For the year ended December 31
2022
2021
1
2020
1
Sale of finished products
$
8,038
$
5,628
$
5,583
Revenue from services and consulting
1,034
116
87
Purchases of raw materials and other services
12,367
10,240
11,339
1
The Group corrected the disclosure of transactions with related parties for the years ended December 31, 2021 and 2020 to conform with the current period presentation. The modification includes the disclosure of sales that are performed through an agent with Industrias Intercaps de Venezuela C.A. and Laboratorios Vivax Pharmaceuticals C.A. in the amount of $
1,803
for the year ended December 31, 2021 (2020: $
1,826
) and does not impact the results presented in the prior period.
For the year ended December 31, 2022 interest
expense derived from related parties amount to $
76
(2021: $
61
, 2020: $
49
).
The following current
amounts were outstanding at the reporting date:
As of December 31
2022
2021
Trade and other receivables by related parties
$
14,028
12,491
Loans owed by related parties
215
276
Less: provisions
(
11,769
)
(
11,620
)
Amounts owed by related parties, net
$
2,474
$
1,147
As of December 31, 2022 and 2021, the Group's
balance for non-current trade and other receivables by related parties is comprised of $
18,060
with Industrias Intercaps de Venezuela
and $
5,333
with Laboratorios Vivax Pharmaceuticals, which are fully provisioned.
F-
72
Procaps Group, S.A. and subsidiaries (The Group)
Notes to Consolidated Financial Statements
For the years ended December 31, 2022, 2021
and 2020
(In thousands of United States Dollars, unless
otherwise stated)
As of December 31
2022
2021
Trade and other payables to related parties
$
2,853
$
1,335
Loans owed to related parties
61
7,115
Amounts owed to related parties
$
2,914
$
8,450
Current
$
2,914
$
8,450
Non-current
$
—
$
—
For the year ended December 31, 2022 donations
to
Fundación Procaps
amount to $
494
(2021: $
427
, 2020: $
325
) and are recognized as other expenses in profit or loss.
Goods and services were sold or provided parties
during the year based on the price lists in force and terms that would be available to third parties.
All outstanding balances with these related parties
are priced on an arm's length basis and are to be settled in cash within two months of the reporting date. None of the balances
are secured. No expense has been recognized in the current year or prior year for bad or doubtful debts in respect of amounts owed by
related parties.
Loans to and from related parties
Loans to related parties
2022
2021
2020
Balance as of January 1
$
276
$
304
$
499
Loans advanced
—
—
—
Loan repayments received
(
61
)
(
28
)
(
195
)
Balance as of December 31
$
215
$
276
$
304
Loans from related parties
2022
2021
2020
Balance as of January 1
$
7,115
$
15,844
$
20,963
Loans advanced
61
—
32
Loan repayments
(
7,191
)
(
9,154
)
(
5,856
)
Interest accrued
76
425
705
Balance as of December 31
$
61
$
7,115
$
15,844
The loans to and from related parties are repayable
between
one year
from the reporting date. The average interest rate on the loans during the year was
6
% (2021:
6
%). Outstanding balances
are unsecured and are repayable in cash.
No loss allowance was recognized in expense in
2022 or 2021.
For 2021, put option agreements with IFC and Hoche
for the right to put back all or some of the ordinary shares they held in Crynssen was presented as a separate financial liability, until
the effectiveness of the Transaction, even though both are related parties. See Note 19. Borrowings for further detail.
Transactions with directors and executive board
management members
Total management compensation included in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income are as follows:
For the year ended December 31
2022
2021
1
2020
1
Short-term employee benefits
$
2,415
$
2,202
$
1,972
Consulting fees
3,357
2,730
1,971
Total
$
5,772
$
4,932
$
3,943
1
The Group corrected the disclosure of short-term employee
benefits and consulting fees for the year ended December 31, 2021 and 2020. The correction does not impact the results presented in the
prior period.
F-73