Quarterly Update
Quarterly Update

Perth, Feb 1, 2017 AEST (ABN Newswire) - MMJ PhytoTech Limited (googlechartASX:MMJ) ("MMJ" or "the Company") is pleased to provide its quarterly activities report for the period ended 31 December 2016.

Highlights:

- Cannabis cultivation commenced at Duncan Facility following securing of all required starter materials - first cannabis harvest expected Q1 2017

- MMJ received superior proposal from Harvest One Capital Corp. to acquire United Greeneries Holdings Ltd and Satipharm AG

- Harvest One proposal includes total consideration for UG assets of C$42 million in comparison to C$40 million outlined in prior proposal

- Harvest Once launches C$15 million equity raising, later increased to C$25 million, to finalise the acquisition of United Greeneries and Satipharm

United Greeneries Commences Cannabis Cultivation

During the quarter, MMJ's Canadian-based subsidiary United Greeneries Ltd ("UG"), received an Import Permit from Health Canada ("HC") and the Canadian Food Inspection Agency ("CFIA"), allowing for the importation of 1kg of cannabis seeds.

MMJ's highly experienced team was able to solve an industry bottleneck in securing legal starter materials - allowing the Company to provide Canadian consumers with a broad range of cannabis varieties.

The receipt of the Import Permit was a major catalyst for MMJ, as it enabled the commencement of growing activities at the Duncan Facility shortly after in December.

As a result, the first cannabis from the Duncan Facility is expected to be harvested in April 2017.

As previously advised, UG is planning a staged expansion of the Duncan Facility, targeting initial production capacity of circa 7,500kg of cannabis by the end of 2017. UG plans to then scale up the production capacity of the Duncan Facility targeting circa 50,000kg by YE 2020.

Update on Listing of Core Cannabis Brands of TSX-V

On 3 November, MMJ advised that it had executed a binding Term Sheet ("Term Sheet") with Canadian-based Harvest One Capital Corp. ("Harvest One") (googlechartCVE:WON.H) for the sale to Harvest One of 100% of the issued shares of United Greeneries Holdings Ltd ("UG") and Satipharm AG ("Satipharm") respectively.

The Harvest One transaction supersedes the binding Term Sheet signed with TSX-V listed company Top Strike Resources Limited (TSX-V:TSR) ("Top Strike").

Harvest One Proposal Key Terms:

- Harvest One will complete a 1.79:1 share consolidation resulting in it having 2,286,659 shares and 223,464 options on issue;

- Harvest One will acquire UG and Satipharm for total consideration of $42M;

o $40M equity (53.3M shares @ $0.75/share) and $2M cash;

o Pro Forma ownership of TSX listed entity based on the initial capital raising terms was 71% versus 69% in TSR deal;

o All other terms are materially consistent with previously outlined TSR deal.

In December, a definitive agreement was signed with Harvest One for the sale of UG and Satipharm. This binding agreement represented another key milestone for MMJ shareholders, who will, based on the recently announced increased scale of the capital raising in Harvest One, gain exposure to a 60% owned publicly listed entity that will have the required flexibility to rapidly expand the UG and Satipharm assets respectively.

Australian Cannabis Market Update

As of November 1 2016, medicinal cannabis has been legalised as a controlled prescription drug following changes to the Australian Commonwealth legislation.

With MMJ being the only ASX listed entity with a medicinal cannabis product that has demonstrated safety under a clinical trial program, the Company is fully supportive of recent amendments to Australian Commonwealth legislation, legalising cannabis-based products for medicinal or research purposes as controlled drugs.

MMJ will initially look to provide the Australian market with its proprietary Gelpell Microgel Capsules, developed and produced by the Company's wholly owned subsidiary, Satipharm AG, in Switzerland.

Canadian Recreational Market Opportunity

In December, the Canadian Federal Government released its Final Report into cannabis legalisation and regulation, based on the findings and recommendations submitted by the Health Canada instigated Task Force.

The Report highlighted the need for a safe and responsible production system, with the development of regulatory framework to support commercial production by the private sector a key focus. The Report also noted that the current federal system of cannabis for medical purposes, could be used as an entry point for a new national system for legalised and regulated cannabis production.

At present, the Canadian medical cannabis market is one of the most highly regulated and favourable operating jurisdictions globally. At present, there are 34 approved companies operating under the current regulatory framework, of which 10 are publicly listed in Canada.

The medical cannabis market in Canada is expected to grow to C$3 billion in annual sales by 2024, with new patient enrolments in 2016 increasing by an average of 5,000 new patients per month - a total of 75,000 patients are enrolled at present.

A significant value catalyst for Licensed Producers will be the anticipated regulation of the Canadian recreational market, which has a conservative estimated value of circa C$5 billion per annum.

The Canadian government has committed to the introduction of the new recreational regulatory system by in the second half of calendar 2017. It is expected that existing LP's under the current regulatory framework will have a strategic first-mover advantage as early stage suppliers to this recreational market.

Corporate Overview

In October, MMJ raised A$4 million (before costs) through the placement of 19,512,196 fully paid ordinary shares ("Placement") to institutional and sophisticated investors at $0.205 per share. The Placement was well supported by a number of well-regarded institutional investors with the Company accepting over-subscriptions of A$2 million, which is a strong endorsement of MMJ's near-term development strategy and underlying value.

In addition, MMJ also advised that it had appointed Canadian-based Mackie Research Capital Corporation ("Mackie Research") as lead manager for the Canadian equity financing component of the proposed TSX-V listing.

MMJ's Managing Director, Andreas Gedeon, commented: "The Company is very pleased with the progress made during the December quarter, in what was another highly productive period for the Company.

The commencement of cannabis cultivation at our state-of-the-art Duncan Facility in December marked a critical milestone for the business, as we build towards becoming a leading low-cost, large-scale producer in the Canadian market.

The Company also continued to make significant inroads towards securing a TSX-V listing for our core cannabis subsidiaries, after receiving a robust offer from Harvest One. The Harvest One deal offers our shareholders a number of compelling advantages, including a materially higher valuation for the United Greeneries and Satipharm assets.

To view the quarterly report, please visit:
http://abnnewswire.net/lnk/R3A83299


About MMJ Group Holdings Ltd

Phytotech Medical ASX:PYL

MMJ Group Holdings Ltd (ASX:MMJ) is a global cannabis investment company. MMJ owns a portfolio of minority investments and aims to invest across the full range of emerging cannabis-related sectors including healthcare, technology, infrastructure, logistics, processing, cultivation, equipment and retail. For MMJ's latest investor presentation and news, please visit: https://www.mmjphytotech.com.au/investors/

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Contact

Investor and Media Enquiries:
Jason Conroy
Chief Executive Officer
T: +61-2-8098-0819
E: info@mmjgh.com.au



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