Today FinCanna (CALI.C) closed the final tranche of an oversubscribed placement for total proceeds of $6.8 million, this brings their total outstanding shares to 68,902,842. The stock closed today at $0.29 CAD at a market cap of $19.98M CAD.
FinCanna intends to use the net proceeds from the Private Placement to fund additional royalty investment opportunities and the Company’s ongoing working capital and general corporate purposes.
FinCanna gets paid before everyone else
So far the young company has booked $479,200 USD in revenue (in the nine month period ending January 2018) from interest on their $6M USD loan to Cultivation Technologies Inc. Before dismissing the company for a small amount of revenue, one has to look at the nature of a royalty based business model. FinCanna is acting as the bank. They have designed these agreements to protect themselves from potential poor performance of the ancillary companies they are funding.
FinCanna appears to prefer gross royalties that come right off the top as opposed to net royalties which are paid after expenses. The diversification they have set up across a three companies means that if the companies don’t perform as expected there are still multiple revenue streams for FinCanna.
FinCanna right now
Current Royalty Agreements:
Green Compliance Inc. – Enterprise compliance and point-of-sale software solution (“ezGreen”) for licensed medical cannabis dispensaries and cultivators. FinCanna will provide $3M USD in funding in July/August, 2018 for a 10% royalty on revenue. FinCanna projects the royalty will earn them $3.2M USD per year beginning six months post funding.
Gram Co. – A cannabinoid research and refinement facility based in Oakland, California, focussed on the medical cannabis industry to provide B2B and B2C products and services to licensed medical dispensaries to be operational by end of 2018. This deal is due diligence pending. FinCanna will provide $1-3M USD in funding in July, 2018 for a 7.5-14% royalty on revenue. FinCanna projects the royalty will earn them $2.24M USD per year beginning six months post funding.
Cultivation Technologies Inc. (CTI) – FinCanna provides funding to CTI for its planned, fully-entitled, 111,500 sqft indoor medical cannabis facility to be developed in phases in Coachella, Southern California. They also established an interim medical cannabis extraction facility on the Coachella Property in accordance with CTI’s Conditional Use Permit. This lab is producing and selling licensed medical cannabis products. FinCanna will provide $3M USD in funding in August, 2018 for a 14% royalty on revenue. FinCanna projects the royalty will earn them $1.6M USD per year beginning six months post funding.
There are only a handful of other companies in the cannabis space with similar business models, (notably Auxley XLY.V), making this an underutilized approach. We discussed Auxly and the cannabis royalty model in general back in May.
With FinCanna’s unique business model, combined with its California stronghold (America’s largest market at 39.54 million people), FinCanna has indirect access to more people than the entire population of Canada.
NOTE: An earlier version of this story made a forward looking statement and incorrectly stated that Fincanna is an Equity.Guru marketing client. Fincanna is a former client, but has no commercial connection to EG currently. EG apologizes for the error.