Procaps Group CEO issues letter to shareholders amid independent investigation

Procaps Group issued a letter to shareholders from CEO Jose Antonio Vieira, providing updates on the company’s independent investigation, financial restatement and governance enhancements. “…Our approach centers on four key areas of improvement: 1. Completing the Independent Investigation. The independent investigation led by our Audit Committee, supported by external advisors, to address historical accounting matters remains ongoing. As disclosed in our recent 6-K filing, the preliminary findings underscore challenges from past practices; however, we have made considerable progress toward resolution and are focused on implementing the necessary steps to strengthen Procaps for the future. As part of this process, we have confirmed the need for applicable historical financial statements to be restated. While we aim to progress the restatement process and finalize the 2023 20-F as promptly as possible, we recognize that, given the complexity of this effort, our timeline to do so will extend significantly beyond our original expectations. We are focused on ensuring our disclosures are complete, accurate, and aligned with required standards. 2. Addressing Financial Discrepancies and Financial Restatement. The independent investigation has identified certain historical transactions that were improperly accounted for and other accounting errors, as described in our most recent 6-K filing. These transactions, although they originated prior to our listing on Nasdaq, have had a continuing impact our financial statements. We are working diligently to address these matters, including through the restatement of our financials and enhancements to our internal controls. Our commitment to integrity and transparency is unwavering, and we will continue to take all necessary steps to rectify these issues. 3. Governance and Compliance Enhancements. To strengthen oversight and in response to the findings of the ongoing independent investigation, we are implementing a comprehensive remediation plan designed to strengthen governance and compliance across all levels. Key elements of this plan include: Board and Management Oversight: To strengthen governance at the highest levels, we are implementing a multi-year plan to transition to an independent board that includes independent search for directors – led by the Nomination and Governance Committee – with expertise in SOX compliance, corporate governance, and industry knowledge and any other key capabilities essential to Procaps’ strategic goals. Following the recent resignation of a Board member, the Board is actively working to identify a qualified successor who will support our commitment to enhanced governance and alignment with long-term objectives. Strengthening Internal Controls: As part of our remediation Plan, we are redesigning our finance and supporting functions, such as centralizing oversight of all finance areas, launching training programs focused on internal controls and SOX compliance, and enhancing the oversight role of our Audit Committee. These measures are intended to prevent future issues and restore the trust of our stakeholders. Enhanced Financial Controls and Compliance: We are reinforcing financial reporting processes and SOX compliance by implementing automated controls, improved monitoring systems, and regular SOX compliance training for all relevant teams. These improvements are already underway and will be further strengthened as necessary in response to the findings of the investigation. Thorough Personnel and Contract Review: We are conducting a comprehensive review of all other personnel potentially involved in the transactions being investigated and assessing existing related party contracts for alignment with our governance standards. Culture of Ethics and Transparency: We are launching targeted training programs to promote ethics and compliance across all organizational levels, reinforcing a culture of integrity and accountability. These initiatives are designed to reinforce ethical governance across every level of the organization, with a commitment to ensuring that Procaps operates in accordance with the highest industry standards. 4. Restructuring Plan and Financial Stability. We recognize the critical importance of a stable financial foundation. In conjunction with our remediation plan, we are also pursuing a long-term restructuring plan that involves exploring new funding sources and other strategies to support the long-term sustainability of our operations. This includes proactive engagement with our lenders, shareholders, and strategic partners to secure new capital and resources aligned with our strategic goals…”