MMJ increases stake in Sequoya

MMJ Group Holdings Limited (ASX: MMJ/OTC: MMJJF), an Australian-listed company that specialises in managing a portfolio of investments along the cannabis value-chain, has agreed to provide a C$2.5 million secured convertible note facility to Sequoya Cannabis Limited.

This may be drawn down in tranches at MMJ’s option.

MMJ has advanced an initial C$350,000 to Sequoya under the convertible note facility.

The company secured this additional investment opportunity by exercising a right secured in July 2019 to invest up to a further C$2.5 million in Sequoya to finance the company’s business plan.

The Initial Advance was funded from the proceeds of the MMJ Share Purchase Plan completed on 24 March, 2020.

Following receipt of the Initial Advance, Sequoya’s Polish subsidiary, Sequoya Europe, is expected to commence production of CBD extracts and isolate in April 2020 at its European Union GMP Certified production facility.

Only EU GMP certified hemp extraction facility in Europe

The Sequoya facility is built from the ground up with the strictest production, quality and safety standards, allowing quick and smooth certification of the entire facility and it marks the only complete end-to-end EU GMP certified hemp extraction facility in Europe.

The facility includes a modern, fully equipped analysis and quality control area, staffed with senior research and development and quality specialists ensuring tight control over producing consistent and highest quality results.

With few regulatory hurdles around CBD in Europe, Sequoya is receiving strong interest from consumer goods manufacturers, namely cosmetics, food, beverage and nutraceutical companies.

With the financial backing of MMJ, Sequoya is now able to move to the next step to become a significant GMP-certified hemp CBD supplier, with longer term plans to expand into the legal medicinal marijuana market across Europe.

MMJ anticipates excellent investment returns

MMJ has identified a number of factors that should result in the Sequoya investment delivering outstanding returns.

Importantly, Sequoya is focusing on extraction, which is the highest value opportunity within the cannabis ecosystem and it has built a large-scale production plant in a low-cost jurisdiction which has easy no-tariff access to high value markets such as Germany and Northern Europe.

As the industry evolves, the ability to produce GMP certified product at a lower cost in Europe will be a strategic advantage for Sequoya.

Poland also provides access to world class technicians and engineers at a substantially lower cost than available elsewhere, some of whom are already working with Sequoya.

MMJ has also secured the rights to make further investments in Sequoya.

These include the exercise of warrants that provide the option for MMJ to acquire a further 1.25 million shares at C0.075 each following conversion of the July 2019 Note for a period of two years following the date of conversion.

MMJ can also exercise warrants that provide it with the option to acquire one share at C0.10 each for each two Sequoya shares received following conversion of the April 2020 Note for a period of two years following the date of conversion.