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MMJ News 16/05/2019

Investment in Volero Brands Inc

Investment in Volero Brands Inc. Canadian manufacturer of the Flyte brand of vape pens and cartridges

MMJ Group Holdings Limited (ASX: MMJ) (“MMJ”) has invested CAD¹2.5m for a 7.3% shareholding in privately-held Volero Brands Inc. (Volero), a private company based in Canada which owns and manufactures the Flyte brand of vape pens and cartridges, as part of their CAD5m seed funding round.

MMJ’s investment consists of 5m shares and 2.5m warrants exercisable at CAD0.65 within three years. MMJ has the right to a further 2.5m warrants exercisable at CAD0.65 in the event that Volero does not generate a liquidity event by May 2020.

MMJ was introduced to Volero by Embark Ventures Inc. (Embark Ventures) which is MMJ’s proposed manager of its investment portfolio. Through Embark Ventures, MMJ’s was able to secure significantly superior terms to those originally proposed.

Based in Alberta, Canada, Volero is building a state-of-the-art extraction and production facility that will produce vaporisers, concentrates and topical solutions. Volero expects the facility to be completed in Q3/19 and have indicated to MMJ that it anticipates the facility will be designed to support generating revenue of more than CAD100m per annum.

Volero is aiming to capitalise on the pending legalisation by the Canadian Federal Government of concentrates and vaporisers in October 2019. In this event, Flyte could become a major player in that market having already established a historical brand and attractive price point.

Following settlement of the Volero investment which is expected before 31 May 2019, MMJ will have cash reserves of AUD26m.

MMJ’s Chairman Peter Wall commented that “Volero provides the opportunity for MMJ to invest in the potentially lucrative segment of concentrates and vaporisers which are expected to be legalised in October 2019. The investment again demonstrates MMJ’s capacity to secure investments in private cannabis businesses which are on a short path to public listing. We are delighted that we could work together with Embark Ventures to find a structure that works for both groups on the first investment originated for MMJ”.

¹ CAD – Canadian dollars

Important Notice

This announcement contains reference to certain intentions, expectations, future plans, strategy and prospects of MMJ. Those intentions, expectations, future plans, strategy and prospects may or may not be achieved. They are based on certain assumptions, which may not be met or on which views may differ and may be affected by known and unknown risks. The performance and operations of MMJ may be influenced by a number of factors, many of which are outside the control of MMJ. No representation or warranty, express or implied, is made by MMJ, or any of its directors, officers, employees, advisers or agents that any intentions, expectations or plans will be achieved either totally or partially or that any particular rate of return will be achieved. Given the risks and uncertainties that may cause MMJ’s actual future results, performance or achievements to be materially different from those expected, planned or intended, recipients should not place undue reliance on these intentions, expectations, future plans, strategy and prospects. MMJ does not warrant or represent that the actual results, performance or achievements will be as expected, planned or intended. Nothing in this material should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities. It does not include all available information and should not be used in isolation as a basis to invest in MMJ. This document does not constitute any part of any offer to sell, or the solicitation of an offer to buy, any securities in the United States or to, or for the account or benefit of any “US person” as defined in Regulation S under the US Securities Act of 1993 (“Securities Act”). MMJ’s shares have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States or to any US person without being so registered or pursuant to an exemption from registration including an exemption for qualified institutional buyers.

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