Med­men fights to keep early in­vestors from sell­ing

U.S. court un­sym­pa­thetic to plea for share dis­po­si­tion

Stockwatch Daily - - FRONT PAGE - Mr. Daniel Yi re­ports

ON JAN. 8, two early in­vestors in MMMG LLC, a pre­cur­sor com­pany to Med­men En­ter­prises Inc., filed a com­plaint in Los An­ge­les Su­pe­rior Court al­leg­ing un­fair treat­ment re­gard­ing the dis­po­si­tion of their in­vest­ment in MMMG.

To­day, a Los An­ge­les Su­pe­rior Court de­nied a re­quest from the plain­tiffs for a tem­po­rary re­strain­ing or­der and a pre­lim­i­nary in­junc­tion.

The plain­tiffs al­leged that they are be­ing un­fairly pre­vented from cash­ing out of their in­ter­est in MMMG, which cur­rently holds ap­prox­i­mately 179 mil­lion shares that are re­deemable and ex­change­able on a

one-for-one ba­sis for Class B sub­or­di­nate vot­ing shares of Med­men En­ter­prises. The shares are locked up, thus pre­vented from trad­ing in the open mar­kets, un­til Nov. 25, 2019.

The fol­low­ing is a state­ment by Daniel Yi, Med­men’s se­nior vice-pres­i­dent of cor­po­rate com­mu­ni­ca­tions: “These are friv­o­lous claims, and it ap­pears the judge agrees. To­day, a Los An­ge­les Su­pe­rior Court de­nied the plain­tiffs’ re­quest for a tem­po­rary re­strain­ing or­der and pre­lim­i­nary in­junc­tion. De­spite the agree­ment reached by an in­de­pen­dent com­mit­tee to safe­guard the best in­ter­ests of our share­hold­ers, in­clud­ing MMMG and the funds, the plain­tiffs; Omar Man­galji and Brent Cox, now seek spe­cial treat­ment. The com­mit­tee de­cided to lock up more than 90 per cent of the shares owned by the three en­ti­ties at least un­til Nov. 25, 2019. The in­ter­ests of all of the stake­hold­ers im­pacted were in­cluded in the process and the feed­back was over­whelm­ingly pos­i­tive. Mr. Man­galji and Mr. Cox have al­ready re­ceived cash dis­tri­bu­tions rep­re­sent­ing a com­plete re­turn of their cap­i­tal plus a sub­stan­tial gain. It’s un­for­tu­nate that Mr. Man­galji and Mr. Cox have cho­sen this path. This is a mer­it­less claim by a mi­nor­ity in­vestor. This is clearly and egre­giously an at­tempt to de­value the shares of the en­ter­prise for their own per­sonal gain at the ex­pense of all other stake­hold­ers. Med­men re­mains fo­cused on build­ing one of the lead­ing cannabis com­pa­nies in the world and we feel con­fi­dent we will pre­vail on that mis­sion and against this mer­it­less com­plaint.”

These are the facts of the case:

• In early 2018, as­sets from MMMG, a cannabis man­age­ment com­pany, and two pri­vate eq­uity funds — Med­men Op­por­tu­nity Fund I LP and Med­men Op­por­tu­nity Fund II LP — were rolled up to a new hold­ing com­pany, Med­men

En­teprises, with the in­tent of tak­ing the com­pany pub­lic.

• In­vestors in the three en­ti­ties — MMMG, Med­men Op­por­tu­nity Fund I and Med­men Op­por­tu­nity Fund II re­ceived shares re­deemable and ex­change­able into Class B sub­or­di­nate vot­ing shares of Med­men En­ter­prises in ex­change for the as­sets con­trib­uted to the new hold­ing com­pany.

• Med­men En­ter­prises went pub­lic on the Cana­dian Se­cu­ri­ties Ex­change on May 29, 2018.

• As of Jan. 9, 2019, as­sum­ing the redemption of re­deemable and ex­change­able shares, and the con­ver­sion, ex­er­cise or redemption of other se­cu­ri­ties con­vert­ible into Class B sub­or­di­nate vot­ing shares, there are cur­rently a to­tal of ap­prox­i­mately 545.3 mil­lion out­stand­ing shares of Med­men En­ter­prises.

• MMMG holds ap­prox­i­mately 179 mil­lion ex­change­able shares. Med­men Op­por­tu­nity Fund I and Med­men Op­por­tu­nity Fund II col­lec­tively hold ap­prox­i­mately 196 mil­lion ex­change­able shares.

• MMMG, Med­men Op­por­tu­nity Fund I, Med­men Op­por­tu­nity Fund II and Med­men En­ter­prises ne­go­ti­ated sep­a­rate lock-ups of their re­spec­tive ex­change­able shares for the ben­e­fit of and to safe­guard the in­ter­ests of all stake­hold­ers in the en­ter­prise. This is a com­mon prac­tice by com­pa­nies when they go pub­lic.

• Last No­vem­ber, an in­de­pen­dent com­mit­tee made up of rep­re­sen­ta­tives from the three en­ti­ties; MMMG, Med­men Op­por­tu­nity Fund I and Med­men Op­por­tu­nity Fund II col­lec­tively de­cided to ex­tend lock-ups on vir­tu­ally all of their Med­men shares un­til Nov. 25, 2019, when the shares will be­come freely trade­able in in­cre­ments over a 12-month pe­riod.

About Med­men En­ter­prises Inc.

Med­men En­ter­prises is a lead­ing cannabis com­pany in the United States with as­sets and op­er­a­tions across the coun­try. Based in Los An­ge­les, Med­men brings ex­per­tise and cap­i­tal to the cannabis in­dus­try and is one of the na­tion’s largest fi­nan­cial sup­port­ers of pro­gres­sive mar­i­juana laws.

Adam Bier­man, Lau­rence Bernard Jr Brown, Stacey Haller­man, Mark Hutchi­son, An­drew Modlin, An­drew K Ray­burn, Ben­jamin Rose, Lisa Sergi Trager, An­to­nio Vil­laraigosa

(MMEN) Shares: 93,448,417

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