08.31.2007

PharmaGap Reaches Agreement with Debenture Holders to extend Maturity Date

Ottawa, Ontario/ August 31, 2007 – PharmaGap Inc. (TSX-V: GAP) (“PharmaGap” or “the Company”), a Canadian biotechnology company developing novel compounds to treat cancer, today announced that it has reached agreement with holders of its Series 2 and 3 Convertible Secured Debentures (“Debentures”), which matured on August 26, 2007, to extend the maturity date of the debentures by 18 months to February 26, 2009.

Robert McInnis, President and C.E.O. of PharmaGap, said:  “This extension provides PharmaGap with the time necessary to complete our program currently underway to generate full value from our drug development technology and lead drug compound, PhG-alpha-1. While this program has taken a full year longer than expected, our confidence level in our technology and in PhG-alpha-1 has never been higher. The agreement of our debenture holders and our Board indicate that they share this confidence.”

A total of $3,297,223 in principal and interest was due on August 26, 2007.

The Debentures are convertible into equity units of PharmaGap consisting of one common share and one common share purchase warrant. In return for the granting of the extension of the maturity date, the conversion price of the Debentures will be reduced from Thirty or Thirty-two and one half Cents ($0.30 and $0.325) to Seventeen and One Half Cents ($0.175), and the warrant exercise price of the Series 2 and 3 Debentures will be reduced from Forty-Five or Forty-Eight and three quarters Cents ($0.45 or $0.4875) to Twenty-Six and One Quarter Cents ($0.2625).

At the revised conversion price and warrant exercise price, the Debentures (excluding interest accruing in the future at 10% per annum) are convertible into 18,841,274 common shares and the same number of warrants. Following conversion of all debentures, total shares outstanding would be 47,715,071 (76,455,522 following full warrant exercise). The Debentures following conversion represent an ownership interest of 39% (49% assuming full warrant exercise).

SC Stormont Holdings Inc. (“Stormont”), a company controlled by Roderick M. Bryden, Chairman of PharmaGap, holds Debentures with total value on August 26, 2007 of $2,923,028. Following conversion of the Debentures, and conversion of $261,726 Series 1 Convertible Secured Promissory Notes at the same conversion price, Stormont would hold 39% of shares outstanding (48.1% assuming full warrant exercise).

PharmaGap’s Board of directors (the “Board”) has considered the related transaction between PharmaGap and Stormont and the Board (and separately, the independent members of the Board comprising an Independent Committee to review and provide guidance to the Board) determined that the related transaction is exempt from the valuation and minority voting requirements of Ontario Securities Commission Rule 61-501 pursuant to section 5.5 paragraph 8 and section 5.7 paragraph 6 of Rule 61-501

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

For information relating to this release, please contact:
Robert McInnis, President & CEO
(613) 990-9551 bmcinnis@pharmagap.com

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