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Magistral Biotech Announces an Update Regarding its On Going Public Offering, a Change in its Board of Directors and a Bank Financing

Tuesday, September 30, 2003

MONTREAL, Sept. 30 /CNW Telbec/ - Magistral Biotech Inc. ("Magistral") (TSX Venture : MBS) announces that, following the filing of an amended prospectus with the Quebec Securities Commission last September 17th in view of increasing the maximum offering under the current prospectus dated July 16th 2003 to 2 million dollars, it was unable to obtain the required approvals from the Quebec Securities Commission and from the TSX Venture Exchange, primarily due to the significant recent increase in the market price of its shares on the TSX Venture Exchange.

Magistral is therefore considering proceeding with a second closing, before mid-October 2003, of its ongoing public offering pursuant to the current prospectus dated July 16th 2003, which provides for a maximum offering of 6,000,000 units, plus an over allotment option of a maximum of 900,000 units, allowing for a maximum aggregate gross proceeds of $1,380,000 to Magistral. Each unit is comprised of one common share and one tenth of one warrant. Each whole warrant enables its holder to acquire one common share of Magistral at a price of $0.45 per share, at any time during the two years following its issuance. Each unit is offered at a price of $0.20 per unit.

Last August 20th, pursuant to its current prospectus dated July 16th 2003, Magistral closed the issuance of 3,618,150 units, comprised of 3,618,150 common shares and 361,815 warrants. The gross proceeds resulting from the issuance of these units was of $723,630.

Therefore, in order to complete the offering provided for in its prospectus dated July 16th 2003, Magistral is able to issue a further 3,281,850 units, comprised of 3,281,850 common shares and 328,185 warrants, for gross proceeds of $656,370.

In light of the recent strong demand for Magistral's shares, the company's increased visibility and in order to address its future requirements, Magistral will be considering, following closing of the offering under its current prospectus dated July 16th 2003, the possibility of seeking additional financing, in one form or another, based upon the opportunities that may present themselves.

Due to his recent nomination as both Chairman of the Board and President and CEO of Loto-Quebec as well as to the requirements related to his new duties, Mr. Alain Cousineau was compelled to submit his resignation as a director and as Chairman of the Board of Directors of Magistral, with effect as of September 29th, 2003. Magistral wishes Mr. Cousineau the best of luck with his new duties and thanks him for his contribution to the success of Magistral. In order to continue the work of Mr. Cousineau, Magistral is presently considering a number of candidates to fill the vacancy created by his resignation.

Magistral announces that it has received an offer to finance from the National Bank of Canada (the "Bank") providing for the granting of credit facilities totaling $3,350,000.

These facilities can be summarily described as follows:

(a)    a $360,000 term loan, bearing interest at the Bank's Canadian base
       rate plus 1.25%, the proceeds of which will serve to refinance
       certain previously acquired tangible and intangible assets;
(b)    a $1,200,000 term loan, bearing interest at the Bank's Canadian
       base rate plus 3%, the proceeds of which will serve to finance up
       to 75% of the admissible marketing expenses incurred between March
       31st, 2003 and December 31st, 2004;
(c)    a $800,000 demand loan, bearing interest at the Bank's Canadian
       base rate plus 2%, the proceeds of which will serve to finance up
       to 75% of the refundable tax credits for the fiscal years ending
       on December 31st, 2003 and December 31st, 2004;
(d)    a $375,000 term loan, bearing interest at the Bank's Canadian base
       rate plus 2,50%, the proceeds of which will serve to finance up to
       60% of the value of the commercial condominium located at 1060,
       Michèle-Bohec Boulevard, in Blainville, Quebec;
(e)    a $600,000 term loan, bearing interest at the Bank's Canadian base
       rate plus 3%, the proceeds of which will serve to finance 75% of
       the manufacturing equipment acquired between July 1st, 2003 and
       June 30th, 2004;
(f)    a $15,000 credit facility for the use of Mastercard credit cards
       by the managers of Magistral.

With the exception of the $800,000 demand loan, which is to be reimbursed upon receipt by Magistral of the tax credits which this demand loan serves to finance, and of the $15,000 credit card facility, the term loans set out above are reimbursable over periods varying from 3 to 5 years.

The putting of place of these credit facilities remains subject to the satisfaction of certain conditions, including the granting of moveable and immoveable hypothecs by Magistral and obtaining loan guaranties from Investissement Quebec.

Furthermore, the disbursements of the credits provided for in this bank financing are subject to the realization of certain events, including the meeting of certain sales targets of Magistral products and the respect of certain financial ratios.

Profile

Magistral Biotech Inc., a Canadian company, specializes in the development, manufacture and marketing of safe and efficient cholesterol- lowering products and other natural health products which address significant medical conditions afflicting the adult population. The company's focuses on both the dietary supplements and the functional food ingredients markets. Magistral Biotech's shares trade on the TSX Venture Exchange under the symbol MBS.

The TSX Venture Exchange has neither approved nor accepts any
responsibility with respect to the veracity or exactitude of this press
release.

/For further information: Sylvain Archambault, Evolution Corporate Strategies Inc., (514) 816-5001; André Aubé, President and Chief Executive Officer, Magistral Biotech inc., (450) 979-7878/