MMJ Group Holdings Ltd Stock Market Press Releases and Company Profile
to Appoint Embark as Asset Manager and Cancel SPP
to Appoint Embark as Asset Manager and Cancel SPP

Perth, April 15, 2019 AEST (ABN Newswire) - MMJ Group Holdings Limited (googlechartASX:MMJ) (googlechartMMJJF:OTCMKTS) ("MMJ") is pleased to advise that MMJ has agreed terms with Embark Ventures ("Embark") to act as asset manager of MMJ's cannabis investment portfolio. The appointment will be for an initial term of three years.

1. MMJ to appoint Embark Ventures as Asset Manager

Embark Ventures is part of the Embark Group which includes Embark Health Inc, a company in which MMJ holds an investment of $3.8m. One of the principals of Embark is Michael Curtis, who is a non-executive director of MMJ and will hold approximately 20% of Embark Ventures and holds 13.2% of Embark Health issued capital respectively.

The MMJ Board believes that MMJ should centre its asset management resource based in Canada to better manage the existing portfolio and access new investment opportunities as we expect the majority of MMJ's investment portfolio to be located in North America. The terms of the proposed appointment of Embark are a cost-effective way to ramp up MMJ's investment operations in the medium term without adding material fixed costs to MMJ's cost structure.

The appointment of Embark comes after an invitational tender and negotiation over several months. MMJ Board has determined that the new operating structure will allow:

- Access to new investment opportunities including unlisted investments

- Add material value to existing investments

- Minimise its fixed cost structure

- Secure a meaningful investment presence in MMJ's key investment market - North America

The appointment of Embark will address these business objectives in a short period of time. The appointment of Embark will remove the immediate need to appoint a replacement chief executive officer as MMJ will have access to Embark's full investment team including Bruce Dawson-Scully, Michael Curtis and Mohan Nair in Toronto. This contribution shall include, but not be limited to, assistance with deal sourcing, due diligence, deal negotiation, investment structuring, portfolio company monitoring and reporting, and representing MMJ on boards at portfolio companies.

Embark will be required to give MMJ priority to invest in opportunities that fit the criteria set out in the MMJ Fund Investment Policy which will be imported in the consulting agreement to be executed between the parties.

The MMJ board will continue to be responsible for the all investment decisions.

The key terms of the proposed agreement with Embark are detailed in Appendix One.

A presentation on Embark Ventures is attached to this announcement (see link below).

a) Embark remuneration

The bulk of Embark's remuneration is linked to material increases in MMJ's share price and net asset value, through the issue of Performance Rights to Embark. The Performance Rights shall convert on a one-forone basis, into MMJ Shares in three (3) equal tranches upon MMJ achieving a simple average of month end net asset (after tax) value per share ("NAVS") and 20 day VWAP share price (together, the "NAVS/SP Average") hurdles which represent the following premiums to the relevant NAVS/SP Average at the date of executing a definitive binding agreement: (see link below)

For example, Tranche A would be issued if the hurdle of 43 cents is achieved within 18 months of Embark's appointment, which represents a net asset value of 53 cents and a MMJ share price of 33 cents(see Note below) if the discount of MMJ share price and NAVS both rise by 35%. MMJ expects the discount to materially narrow through the changes announced today.

Embark will receive a base management fee of approximately $0.44m per annum based on current book value of investment portfolio. This additional cost will be largely offset by the non-replacement of the MMJ CEO and Michael Curtis ceasing to receive a director's fee remuneration. In addition, the 6m performance rights issued to the previous CEO lapsed on 12 April 2019 albeit at higher vesting hurdles than those issued to Embark.

b) Position of MMJ Chief Executive Officer

The appointment of Embark Ventures as portfolio manager will allow the Board to remove the immediate need to appoint a new chief executive officer. MMJ's current Chief Financial Officer and Company Secretary will be responsible for the operational aspects of the business including investor relations. The Board will be responsible for review and approval of investment proposals provided by Embark.

c) Process to complete appointment of Embark

The appointment of Embark will be subject to:

(i) execution of the management agreement between Embark and MMJ (the "Definitive Agreement"):

(ii) satisfactory completion of due diligence by each of the Parties, their counsel and representatives on the business, regulatory, assets, financial condition and corporate records of the other Party, which due diligence process shall be concluded on or before the date of entering into the Definitive Agreements;

(iii) there being no prohibition at law against the completion of the Definitive Agreement; and

(iv) receipt of all required third party and regulatory approvals for the transaction.

It is expected that completion of the Definitive Agreement will occur within four weeks. MMJ will advise the market if there is any material change to this timing.

2. Cancellation of Share Purchase Plan

During the past 3 months, MMJ has taken advantage of improvement in Canadian listed cannabis markets by realising some investments to increase its cash reserves for future investment. MMJ has a cash balance of $11m and more than $70m of its investment portfolio in listed investees. It is expected that this will increase given the stated intention of two of its unlisted investments (Embark Health and BevCanna), to list on the TSXV during 2019.

In the same period, the discount of the MMJ share price to its net asset value has materially increased. As at 31 March 2019, MMJ's share price was 24 cents compared to net asset value of 39 cents.

As such, MMJ does not consider an equity raising, at this time, to be in the best interests of shareholders. The Board has cancelled its intention to proceed with a Share Purchase Plan (SPP) offering which had been approved by MMJ shareholders on 22 February 2019.

It is expected that MMJ's future investments for the foreseeable future will be funded by current cash reserves and realisation of investments in listed investees.

Note: Assumes the share price and NAV equally increase by 35%.

To view the release and the presentation, please visit:
http://abnnewswire.net/lnk/79OS67SI


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:
Jim Hallam
Chief Financial Officer and Company Secretary
E: info@mmjgh.com.au



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