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MMJ News 15/11/2021


MMJ Group Holdings Limited (ASX: MMJ) (“MMJ”) is an Australian-listed specialist investment company which concentrates on producing capital growth for shareholders over the medium to long term from investments in listed and unlisted equities and other financial assets. 

MMJ invests CAD1m in Weed Me Inc. 

MMJ has completed a follow-on investment of CAD1m in the unlisted company, Weed Me Inc. (“Weed Me” or the “Company”) based in Ontario Canada. MMJ’s investment is in the form of an unsecured convertible note to fund the Company’s business plan rollout and position Weed Me for a liquidity event (either public listing or sale of the business). The key terms of the convertible note are: 

    1. a cash yield of 8% per annum 
    2. maturity date of 9 May 2023 
    3. conversion at MMJ’s option1 prior to maturity 

MMJ has also been issued 230,415 warrants convertible into 230,415 Weed Me shares each at CAD2.17 with an expiry date of 29 October 2024. 

The investment was made from MMJ’s existing cash reserves. 

Established in 2016, Weed Me is the largest unlisted Canadian licenced producer of cannabis products for the Canadian recreational market. 

The Weed Me brand consists of a complete line of dried flower, pre-rolls, vapes, and gummies products, which have significant market shares in its key Canadian provincial markets. Weed Me has successfully expanded its operations with net sales of CAD6.9m in the year ended 31 December 2020 (FY20) compared to FY19 net sales of CAD2.6m. This rate of growth has increased in FY21 with net sales of CAD14.1m in the nine months ended 30 September 2021 compared to CAD4.1m in the nine months ended 30 September 2020. 

MMJ made its initial investment in Weed Me in December 2017. 

The follow-on investment in Weed Me demonstrates MMJ’s expertise to secure a private negotiated investment in unlisted businesses which are not generally available to Australian retail and institutional investors. The investment in Weed Me will assist the further expansion of Weed Me’s sales growth and maximise the value on the ultimate exit of MMJ’s investment.”, said Mr Wall, MMJ’s Chairman. 

MMJ’s investment in Weed Me now has a current book value of CAD10.5m and comprises: 

    1. 3.64m shares representing approximately 13% of Weed Me’s current issued capital; 
    2. 230,415 warrants each convertible at CAD2.17 with an expiry date of 29 October 2024; and 
    3. CAD1m convertible note (“the Note”) which is unsecured, bears interest at a rate of 8% per annum and is repayable on 9 May 2023. 

As at 31 October 2021, MMJ had generated a total return of 3.4 times on its investment in Weed Me2. 

1 The conversion price depends on the value of Weed Me at the time of conversion using the current number of the issued common and convertible securities – conversion on a liquidity event is at discount to the valuation calculated at a Liquidity event such as sale of the company or a public listing. The size of the discount depends on the valuation attributed by the Liquidity Event.  

2 Based on unrealised market value of investment plus interest received/receivable divided by cash cost of investment.  

Read the full announcement here

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