FinCanna Capital (CALI.C) is building a portfolio of royalty investments in U.S. cannabis companies, with a focus on California.
Well established in the mining business, royalty companies are a relatively new concept in the world of weed.
In the commodities world, royalty companies give cash to miners in exchange for a share of the mine’s future production.
It’s like lending someone $10,000 to build a bakery – with the baker agreeing to give you a percentage of his future bread revenue.
If the bakery never opens, you lose. If the bakery produces bread for 30 years, you win. If the price of bread triples, you win. If the bakery increases production, you win.
The FinCanna business model – dumbed down – is this:
- Money – a percentage of revenue – regardless of productions costs
- Minimal ongoing cash costs – Initial investment only.
- Low burn rate – small number of employees
- Diversification – multiple projects across multiple sub-sectors
The diversification of royalty companies can create investor-relations messaging challenges.
It’s one thing to say: “We manufacture oil-extraction machinery”.
Or “We own a grow-op in Kelowna”.
Or “We sell vape pens”.
It’s another thing to tell the market, “We have a stake in the future revenues of a diverse galaxy of sector-related businesses.”
[We faced that challenge with Metalla (MTA.V), a kick-ass royalty company with investments in eight projects, spanning three continents.]
FinCanna’s first investment in California is in Cultivation Technologies (CTI) – providing “infrastructure, technology, and branding to the licensed medical cannabis industry.”
CTI’s major project is in Coachella, California, which will span 6-acres featuring cultivation centers, extraction and manufacturing facilities, a testing lab, a distribution hub, and a centralized processing center.
On June 04, 2018 FinCanna announced that Coachella Premium brand of cannabis concentrates and vape cartridges is expanding its retail presence, securing distribution in 10 dispensaries across California.
Coachella Premium gets craft cannabis from artisan licensed cultivators to produce high-quality California concentrates.
It’s aiming to be The Cadillac of California Cannabis.
The 10 new locations include the following dispensaries, Connected Cannabis (multiple locations), Lighthouse (Coachella), 420 Central (Santa Ana), and From the Earth (Santa Ana).
“Concentrate and Vape sales generate high margin revenue for FinCanna and its shareholders,” stated CEO of FinCanna, Andriyko Herchak, “These leading dispensaries, choose only the highest quality, premium brands. We see an incredible future for CTI while it continues to expand its brand presence across California, the largest market in North America.”
The Coachella Premium line of products features all the major concentrate types including diamonds, sauce, shatter, batter, and sugar, with an ongoing list of strains.
Coachella Premium vape cartridges feature organic fruit terpenes and all-natural cannabis-derived terpenes for extraordinary flavors. Initial market feedback gathered during the product development phase indicates that Coachella Premium brand vape cartridges offer a unique proposition within the vaporizer sector – one of the fastest growing verticals in the cannabis market.
Coachella Manufacturing produces THC concentrates through BHO extraction to create custom formulations at its state-of-the-art, licensed lab.
- CIT’s interim facility can process an estimated 6,000 pounds of biomass per month translating to approximately 3.7 million grams of raw cannabis oil per year, with room for expansion.
- CTI has established an interim medical cannabis extraction facility (the “Interim Facility”) on the Coachella Property in accordance with CTI’s Conditional Use Permit.
- This lab will produce licensed medical cannabis products before the permanent extraction facility at the Coachella Project is completed.
- FinCanna is entitled to receive 50% of the profits from the Interim Facility.
FinCanna is entitled to complete its funding to CTI in exchange for a Royalty of 14% of CTI’s revenues from the complete Coachella Project. It also has the right to finance CTI’s next 2 licensed cannabis facility projects on the same terms as the Coachella Project.
FinCanna has earned these rights by lending CTI USD $6 million, which is earning interest at 20% per annum.
In an April 16, 2018 press release, FinCanna Comments on President Trump’s Hands-Off Approach to Legalized Marijuana, CALI claimed that the company “is strongly positioned to benefit from advancements in federal legislation.”
“While a bill has not yet been finalized, we feel these words of commitment from President Trump to a hands-off approach on states that legalized marijuana is extremely positive and should continue to create further comfort and momentum for investors looking to be a part of the licensed cannabis movement in the United States,” stated Herchak.
The June 4, 2018 news was greeted enthusiastically by the market.
FinCanna rose 14.5% to .43 on 1.6 million shares trades.
The current valuation of FinCanna is $30 million. It’s a small company chasing a very big prize.
Full Disclosure: FinCanna is an Equity Guru marketing client and we also own stock.