Mojave Jane (CSE: HC) (OTC: HHPHF) (FSE: OHCN), a California cannabis company, today announced it has signed a binding Letter of Intent (LOI) to acquire 100% of the members’ interests in Pacific Crest 4 LLC (“Pacific Crest”), inclusive of its licenses, property lease, and all extraction equipment, as well as the operations of Pacific Crest, located in Adelanto, California (the “Adelanto Property”). The transaction is anticipated to close late November/early December.

Strategic rationale

• The Adelanto Property has Type 6 and Type 7 licenses, is operational, and has an experienced team that will join Mojave upon completion of the transaction.
• The facility’s high-end volatile extraction operation complements Mojave’s non-volatile capacity and will enable Mojave to enter the market shortly upon completion of the transaction with products such as oil, wax, budder and shatter.
• The building has the appropriate facility and power infrastructure for Mojave to consolidate its supercritical CO₂ extraction and wiped film distillation equipment. This facility will also enable Mojave to deliver the raw materials required for the manufacturing of Caligold bars, expand its product portfolio, as well as launch new brands.
• At 4,000 square feet, the facility provides significant space for future expansion, including licensed production of 3^rd party brands, materials and products, such for Canada-based Health and Innovation (HAI Beverages), with whom the Company has an exclusive arrangement.

Transaction details

In consideration of the transaction, the Company will pay $500,000 in cash up front, as well as enter into a one-year, secured $700,000 convertible debenture note with the sellers, for a total consideration of $1.2 million. The note will carry a 10% per annum interest rate, payable monthly, with the principal convertible into Mojave Jane shares, priced at market on the day prior to the closing of the transaction.

CBAM transaction not to be completed

In June 2019, the Company had announced a proposed transaction whereby Mojave would acquire CB Asset Management. The subsequent due diligence process identified a number of issues that would require Mojave Jane to spend significant additional capital for the CBAM facility to meet the Company’s requirements. Furthermore, new market realities have resulted in a repricing of assets in California at significantly lower valuations than were prevalent during the initial negotiations between Mojave and CBAM. Mojave and CBAM did not come to an agreement that sufficiently reflected these additional spending requirements and new valuation levels. At the same time, Mojave was able to negotiate a significantly superior transaction with Pacific Crest. At a total consideration of $1.2 million, the transaction reflects very significant cost savings compared to the earlier proposed CBAM transaction, which had a proposed consideration of $7.5 million. Consequently, it was deemed in the best interest of the Company and its shareholders not to complete the CBAM transaction and to execute on the Adelanto transaction.

Management commentary

Gary Latham, CEO of Mojave, commented

“The Adelanto transaction, once completed, enables us to rapidly move into the production of high-end concentrates and distillate, and will form a foundational piece in the execution of our strategy as it relates to brands and products. At the same time, we will be able to leverage our part ownership of SpeedWeed to accelerate distribution of our products to the Californian market.”

Mr. Latham added, “While we have lost some time due to the protracted CBAM due diligence and negotiations, we were able to secure a superior and much cheaper option, removing significant potential overhang in the market. With the Adelanto Property, Mojave Jane will be very well positioned to execute on its manufacturing, brands and delivery strategy, quickly generate revenues, and accelerate growth and generate shareholder value going forward.”

SOURCE Mojave Jane Brands Inc.