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CannaRoyalty (CRZ.C) snares $15 million financing deal

01/20/2017

North America’s first cannabis roll-up branding play, CannaRoyalty (CRZ.C) has dropped news that a syndicate of underwriters led by Canaccord Genuity are raising $15 million on a bought deal basis for the company, at a price of $3 per  share.

The deal will bring those taking part one common share and a half-warrant (at an exercise price of $4.50), which kick over automatically if the stock hits $6 for 15 consecutive trading days.

CRZ will be putting the dough toward acquisitions, continued financing of existing holdings, and general corporate and working capital purposes.

What does this mean for the market?

Well, in the short term, it’s meant a bunch of big hands selling their $3.15 stock to raise funds to buy into the financing. A $0.15 discount and a half warrant is a good deal, even with a four month hold, if you think the stock is going to fly.

And that’s the important thing to note here: The conventional wisdom that those warrants are going to be in the money some time soon.

Also, people connected with the company are saying the book on the deal is already heading towards $30 million, while others have told me the financing has sucked the wind out of some other deals.

Why would the stock fly? Because here is the list of CannaRoyalty assets:

Research Assets:

  • BAS Research – medical cannabis manufacturing and research group based in California
    • Secured convertible loan outstanding
    • Strategic partnership agreement
  • Bodhi Research – researching the use of cannabis in the treatment of concussion and post-concussive syndrome. Based in Toronto, Ontario.
    • Strategic seed capital investment in return for an equity position in Bohdi with an option to increase equity stake

Consumer Brands:

  • Greenrock Botanicals – manufacturer and distributor of vape pens and cartridges in the U.S. (located in California)
    • CannaRoyalty owns 100% equity interest in Greenrock Botanicals’ parent company, DreamCatcher Labs
  • Soul Sugar Kitchen – manufacturer and distributor of gourmet quality cannabis edibles that operates in both California and Washington markets
    • CannaRoyalty holds 100% equity interest in Soul Sugar Kitchen
  • Lucy’s Pre-rolls – provider of pre-rolled smoke-ready marijuana products using an innovative machine-rolled method. (California)
    • CannaRoyalty holds an equity position in Lucy’s parent company, Wagner Dimas
  • Rockets Mini Pre-rolls – provider of single use pre-rolls based out of California
    • CannaRoyalty holds an equity position in Rockets’ parent company, Wagner Dimas
  • Rich Extracts – producer and distributor of cannabis extractions such as distillates, shatter and rosin concentrates based out of Oregon
    • CannaRoyalty has signed a term sheet for a JV partnership
  • Dermaleaf Skincare – manufacturer of cannabis infused topical lotions for pain relief based out of California
    • Holds a majority equity interest in DermaLeaf
  • Freya Intimacy Spray – manufacturer and distributor of an all-natural, sensual enhancement product designed for women.
    • CannaRoyalty holds 100% equity interest in Freya
  • Best Buds Animal Health – Manufacturer and distributor of all-natural CBD-infused dog treats
    • CannaRoyalty holds 100% equity interest in Best Buds
  • MUV – manufacturer and distributor of innovative delivery systems as well as high-quality topicals and concentrates based out Florida
    • CannaRoyalty earns a royalty on gross revenue
  • Absolute Extracts – provider of pure, safe and potent cannabis extract products based out of California
    • CannaRoyalty has a licensing agreement with Absolute in Washington and Canada
  • Care by Design – provider of CBD-rich cannabis in easy-to-use sprays, gel caps, vaping products and edibles based out of California
    • CannaRoyalty has a licensing agreement with Care by Design in Washington and Canada

Devices and Intellectual Property:

  • Resolve Digital Health – developer of proprietary smart technology for the cannabis industry with the company’s smart inhaler, the Breeze Inhaler System.
    • CannaRoyalty holds an equity interest in Resolve
  • DreamCatcher Labs – manufacturer of industrial filling systems for high-quality extract cartridges based out of California
    • CannaRoyalty holds 100% equity interest in DreamCatcher
  • Wagner Dimas – provider of innovative equipment and proprietary processes for the value enhancement of raw cannabis
    • CannaRoyalty holds an equity interest in Wagner Dimas

Strategic Investments:

  • Cascadia Holdings – provider of turnkey facilities for licensed cannabis businesses. Based in Washington
    • CannaRoyalty earns a royalty on gross revenue
  • Alternative Medical Enterprises – a Florida-based consultancy firm bringing pharmaceutical industry-based science and integrated business know-how to the medical marijuana marketplace.
    • CannaRoyalty is an equity shareholder
  • Eureka Management Services – manager of Magnolia Wellness Collective in Oakland, California
    • Dispensary with 30,000 registered patients
    • CannaRoyalty holds an equity stake as well as a secured US convertible loan agreement
  • Three Leaf Holdings Corporation – provider of advanced logistics and fulfillment focused exclusively on the cannabis industry. Based in California
    • CannaRoyalty earns a royalty on gross revenue

Wait, there’s more:

December 20, 2106 – CannaRoyalty completes royalty agreement with Natural Ventures

  • CannaRoyalty signed term sheet regarding royalty financing arrangement with Natural Ventures
  • Natural Ventures located in San Juan, Puerto Rico and is the first and largest licensed cultivation and manufacturing medical cannabis companies including a 100,000-square foot indoor cultivation facility
  • One of two companies to have received a manufacturer’s license for its 30,000-square foot facility.
  • Natural Ventures is committed to granting CannaRoyalty a 2.5% royalty on Natural Ventures’ net profits.
  • A further 10% referral royalty on revenue generated from products licensed by Natural Ventures from CannaRoyalty for the Puerto Rican market over a 10-year term
  • Marc Lustig quote, “Through this royalty financing arrangement, we will be able to offer CannaRoyalty investors a foothold in the newly opened, sizeable marketplace in Puerto Rico. We welcome this opportunity to work with the team at Natural Ventures and are pleased to be able to offer CannaRoyalty’s portfolio of brands and products.”

Jan 9, 2017 – CannaRoyalty signs LOI to acquire 20% of Anandia Labs

  • Anandia Labs is a cannabis bio-tech company providing analytical testing services and developing cannabis strains.
  • Anandia has been issued a Health Canada Dealers License which allows them to analyze and extract cannabis and cultivate cannabis for breeding and strain improvement
  • Marc Lustig quote, “Our partnership with Anandia Labs exemplifies our approach of acquiring interests in high-value, strategic assets in the North American cannabis sector. As the only independent Canadian testing facility specializing exclusively in cannabis, Anandia Labs is clearly well positioned given how crucial independent testing of cannabis products is to the future of the cannabis sector in Canada. In addition, the value that we expect to help create through Anandia Labs’ Dealers License for the extraction of derivatives – together with Anandia’s impressive patent portfolio of genetics – gives CannaRoyalty shareholders exciting exposure to rapid and sustainable growth areas in Canada’s dynamic cannabis sector.”

— Chris Parry

FULL DISCLOSURE: The author owns stock in CannaRoyalty and the company is an Equity.Guru marketing client

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Comments 1

  1. Simon says:

    Hi Chris,

    Why do you mention a four month hold? I don’t see that in the news-release.

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