MJAR Holdings Corp., Sumtra Diversified Inc. and Sumtra Diversified (USA) Inc. Announce Definitive Agreement for Reverse Take-Over Transaction

TORONTO–(BUSINESS WIRE)–Sumtra Diversified Inc. (“Sumtra” or the “Company”) (TSX-V: SDV.H) is pleased to announce that it, along with its direct wholly owned subsidiary, Sumtra Diversified (USA) Inc. (“Subco”), has entered into a definitive arm’s length transaction agreement (the “Agreement”) dated September 10, 2018 with MJAR Holdings Corp., a private company incorporated under the general corporation law of the state of Delaware (“Holdings”) whereby Holdings will merge with Subco to become a direct, wholly-owned subsidiary of Sumtra and will undertake a reverse takeover of Sumtra (the “RTO Transaction”).

In connection with the RTO Transaction, Sumtra will change its name (the “Name Change”) to “MJardin Group, Inc.” (the “MJardin Group”) and have its common shares delisted from the TSX Venture Exchange (“TSX-V”). MJardin Group has applied to have its common shares listed and posted for trading on the Canadian Securities Exchange (the “CSE”) upon completion of the RTO.

Completion of the RTO Transaction is subject to certain conditions including the approval of shareholders of Holdings (“Holdings Shareholders”) of the RTO Transaction and the approval of shareholders of Sumtra (“Sumtra Shareholders”) of certain matters related to the RTO Transaction as detailed below, and is expected to close no later than November 30, 2018. Matters to be approved by Sumtra Shareholders will be described in further detail in a management information circular (the “Circular”) of Sumtra relating to an annual and special meeting of Sumtra Shareholders expected to be held in October.

In connection with the RTO Transaction and subsequent listing of the common shares of the MJardin Group, Holdings has entered into an engagement letter with Canaccord Genuity Corp. pursuant to which it is anticipated that, prior to the completion of the RTO Transaction, Holdings will complete an equity private placement of subscription receipts (the “Private Placement”) for aggregate gross proceeds of up to $20 million. Each subscription receipt issued under the Private Placement will entitle the holder to receive one common share of Holdings which, upon completion of the RTO Transaction, will be exchanged, for no additional consideration, for one common share in the capital of MJardin Group.

About the Parties

Holdings is the direct or indirect parent of all companies belonging to the MJardin Group (“MJardin”), a highly specialized professional operating company that operates licensed cultivation, processing and retail cannabis facilities throughout North America. MJardin provides turnkey cannabis cultivation, processing and distribution solutions including licensure support, facility design, systems implementation, facility ramp‐up and the day‐to‐day operational management required in a large‐scale, professionally managed cannabis facility. MJardin is headquartered in Denver, Colorado with an additional office in Toronto, Ontario. For more information, please visit MJardin.com.

Sumtra was incorporated on August 30, 1978 and operated as an investment holding company, with investments in real estate and publicly traded securities. In 2001, Sumtra’s shares were listed on the TSX-V under the symbol “SDV” and then began trading on the NEX, a separate board of the TSX-V, when it failed to meet the ongoing listing standards of the TSX-V. Sumtra ceased active business operations in 2014 and on October 11, 2016, a trading halt was imposed on Sumtra’s shares, which continues to remain in effect.

The RTO Transaction

As of the date hereof, Sumtra has 6,237,400 common shares (“Sumtra Shares”) issued and outstanding. Prior to the closing of the RTO Transaction, Sumtra Shares will undergo a consolidation on the basis of one post-consolidation Sumra Share for every 31.5 Sumtra Shares outstanding immediately before the consolidation (the “Consolidation”). Additionally, and prior to the closing of the RTO Transaction, Sumtra shall make an offer to each Holdings Shareholder who is either a resident in Canada for the purposes of the Income Tax Act (Canada) (“ITA”), or a partnership with at least one partner who is a resident in Canada for the purposes of the ITA, to purchase all of their Holdings Shares in consideration for the number of Sumtra Shares that is equal to the number of Holdings Shares held by such Holdings Shareholder at the effective time of the RTO Transaction multiplied by the Exchange Ratio (as defined below).

The RTO Transaction, pursuant to the terms of the Agreement, will involve the merger of Subco with Holdings and the merged corporation (“Mergeco”), which will be a direct wholly-owned subsidiary of MJardin Group. All of the property and assets of each of Subco and Holdings will become the property and assets of Mergeco and Mergeco will be liable for all of the liabilities and obligations of each of Subco and Holdings.

Following the foregoing, the issued and outstanding common shares of Holdings (the “Holdings Shares”) will automatically be converted into common shares of the MJardin Group (the “MJardin Group Shares”) on a one for one basis (the “Exchange Ratio”), unless a Holdings Shareholder makes an election to have their Holdings Shares converted into Class A Shares of the MJardin Group (the “Class A Shares”), in which case each such electing Holdings Shareholder will receive 1 Class A Share for every 1,000 Holdings Shares converted pursuant to the election. The Class A Shares will be convertible into MJardin Group Common Shares on a 1:1000 basis, subject to certain restrictions, and prior to conversion shall be entitled the vote on the same basis. In addition, each outstanding warrant of Holdings will be cancelled and exchanged for warrants of the MJardin Group in accordance with the Exchange Ratio.

Each issued and outstanding Holdings Share owned by Sumtra is to be converted into one common share of Mergeco. All of the common shares of Subco prior to the consummation of the RTO Transaction are to be converted into a single common share of Mergeco.

Following the completion of the RTO Transaction, it is expected that there will be approximately 31,226,701 MJardin Group Shares and 15,705 Class A Shares outstanding (calculated on a non-diluted basis and assuming the completion of the Private Placement).

Conditions of Completion:

Completion of the RTO Transaction is subject to a number of conditions. There can be no assurance that the RTO Transaction will be completed as proposed, or at all.

Conditions to the completion of the RTO Transaction include, but are not limited to:

the approval of the Holdings Shareholders of the RTO Transaction and of Sumtra Shareholders of certain related matters in connection with the RTO Transaction, including the Name Change, Consolidation and an amendment to its articles to create the Class A Shares;

the delisting of Sumtra Shares from the TSX-V and the approval of the CSE for the listing of MJardin Shares on the CSE;

Sumtra not being in default of the requirements of the TSX-V, the CSE and any securities commission and no order having been issued that would prevent the RTO Transaction or the trading of the Sumtra Shares;

Sumtra having have a minimum cash balance of $100,000 or lower amount acceptable to Holdings immediately prior the closing of the RTO Transaction; and

the completion of the Private Placement.

Further Information:

Further details about the RTO Transaction and the MJardin Group will be provided in the Circular.

Investors are cautioned that, except as disclosed in the Circular or filing statement to be prepared in connection with the RTO Transaction, any information released or received with respect to the RTO Transaction may not be accurate or complete and should not be relied upon.

Neither of the TSX-V nor the CSE has passed upon the merits of the RTO Transaction or approved or disapproved the contents of this press release.

Original press release

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