By Gary Anderson –
CannaRoyalty Corp. (CNNRF): Unique Business Model a Big Winner in Cannabis Space
- CannaRoyalty Corp. (CNNRF) and (CSE:CRZ), has a unique business model in the cannabis space that minimizes risk and maximizes reward
- CannaRoyalty holds 22 strategic, diverse cannabis assets throughout North America
- Just one $850,000 investment in one cannabis asset now valued at $7.1M
- Exceptionally strong management team and board of directors positioning company to capitalize on high-growth cannabis market
This article will provide an overview of CannaRoyalty’s intriguing business model and distinguished management team, and identify the company’s diversified cannabis assets.
A future article will take closer look at the CannaRoyalty assets and determine a valuation range for the company.
CannaRoyalty Corp. at a glance:
Tickers: (OTC:CNNRF), (CSE:CRZ)
Shares outstanding: 42.5 million
Closing price 3/31/17: $2.21 USD
Market cap: $94 million
Float: 31.4 million
Insider ownership: 20%
Web site: CannaRoyalty.com
CannaRoyalty Corp. is a fully integrated, active investor and operator in the legal cannabis sector. The Company’s focus is to build and support a diversified portfolio of growth-ready assets in key segments of the cannabis sector, including research, consumer brands, devices and intellectual property. CannaRoyalty’s management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt and licensing agreements.
CannaRoyalty was formed in late 2014 and began trading publicly on December 8th of 2016.
CannaRoyalty’s $850,000 Investment in Resolve Digital Health Grows to $7.1M Asset
CannaRoyalty’s December 2015 $850,000 investment in Resolve Digital Health is a perfect example of an early win for CannaRoyalty and the company’s business model.
Resolve Digital is launching the world’s first smart inhaler for medical cannabis to help patients suffering from cancer, arthritis, migraine headaches, chronic pain and other diseases. The company’s Breeze Smart Inhaler connects with the user’s smart phone to deliver fully integrated patient care.
The system uses color-coded, modular Smart Pods with preloaded extracts or dried herb tuned to users’ specific health condition. Together, the Breeze Smart Inhaler and Smart Pods create a complete system that patients and health care professionals can rely on to assure well-monitored, well-informed and holistic cannabis treatments.
In late March, Resolve Digital Health announced the completion of a $5M Series A financing that values the company at just over $25.6 million CAD. See also “Resolve Digital Health Lands $5M to Launch First Smart Inhaler for Medical Cannabis.”
As a result, CannaRoyalty’s $850,000 investment in Resolve Digital Health back in December of 2015 now has an implied value of $7.1M, with CannaRoyalty owning 27.2% of existing shares.
Marc Lustig, CEO of CannaRoyalty stated:
“We are thrilled about participating in the closing of this financing. It provides third party validation of our initial investment in Resolve at a significantly higher valuation. It is an example of the success of our business model that includes identifying high-value cannabis assets, partnering through investment and assisting in the growth and commercialization of brands, products and devices – while increasing value for our shareholders.”
Resolve Digital is launching the Smart Breeze medical device this spring at exclusive dispensary partners in California before expanding into additional key markets across the U.S. and Canada throughout 2017 and into 2018.
The North American Cannabis Market: High Growth with High Risk
The North American cannabis market is expected to achieve a whopping compound annual growth rate of 25% thru 2021 when the market will top $20 billion, according to a January 2017 article in Business Insider. This growth estimate is bolstered by recent news that the Canadian government is beginning work on legislation that will legalize recreational marijuana by July 1, 2018, if not sooner. In the U.S., meanwhile, recent additions of populous states like Florida, New York, Illinois, Pennsylvania, and Ohio, mean almost 200 million Americans live where they may qualify to use cannabis as medicine. That’s well over 60 percent of the US population, with multiple states still expected to either begin or expand medicinal and/or recreational marijuana legalization this year.
I believe this is a space that’s perfect for the risk-tolerant investor, however, pitfalls abound. Not only do companies in the cannabis space face the same risks as companies in other industries (competition, financial, market forces, product/service efficacy, etc.) but cannabis companies must deal with varying legal and compliance risks across state and national borders.
Moreover, due to the flood of licensed producers, wholesale marijuana prices declined from $2,500 to $1,000 per pound last year, with some dispensaries offering recreational ounces as low as $65 according to Forbes. With margins squeezed thin, non-pharmaceutical grade marijuana is rapidly becoming another commodity, like corn or wheat.
Beyond the risks associated with legitimate cannabis companies, publicly-traded frauds have been launched by crooks and scam artists who will do anything to separate investors from their money. Most recently, the SEC charged a California-based marijuana consulting company formally called Medbox, as a complete fraud. The Medbox stock price ranged from a low of $2.50 to an all-time high of $205 between August 2012 and December 2014…those shares are now at 0.0003. Ouch!
Unfortunately, Medbox wasn’t the first pot stock scam and they certainly won’t be the last
CannaRoyalty’s Unique Business Model Mitigates Risk, Maximizes Reward
There are dozens of cannabis stocks trading in the U.S. and Canada, but only CannaRoyalty features a combination of diversified investments in the cannabis space in both countries that minimizes investment risk while maximizing reward.
With over 20 cannabis assets in the areas of research, devices and intellectual property, early stage strategic investments, and consumer brands, investors in CannaRoyalty have reduced risk exposure to any one company.
Furthermore, the potential for outsized gains originating from multiple assets is very real. The future valuation of Resolve Digital Health as a publicly-traded company is just one potential home run for CannaRoyalty.
Of course, every asset in CannaRoyalty’s portfolio won’t be a home run, but if just a handful of the company’s holdings (outlined below) are successful, investors in the company should reasonably expect to see strong returns on their investment over time.
Management to Successfully Execute Business Model
Having a great business model is meaningless if you don’t have the right people in place to carry it out and drive results. CannaRoyalty’s management team and board of directors possess deep and successful management experience in the areas of finance and capital markets, pharmaceutical development, health care, corporate strategy, marketing, brand development, and more.
This is a group that can not only identify winning assets in the cannabis space, they can provide the necessary support and expertise in key areas of genetics, cultivation, extraction, post-processing and branding for the assets to maximize their potential.
CannaRoyalty is a stakeholder in 22 different diverse, cannabis-related properties in four broad areas:
- Research (3 properties)
- Devices and intellectual property (3 properties)
- Early stage strategic investments (4 properties)
- Consumer brands (12 properties)
CannaRoyalty’s investments in RESEARCH
Research investments target health and wellness applications including:
CannaRoyalty has a 20% equity stake in Anandia.
Anandia Labs is a leader in cannabis testing, extraction and genetics, using genomics and modern plant breeding approaches to develop innovative products and next generation varieties. The company holds key intellectual property positions including cannabinoid pathway patents and is the only independent Canadian testing facility specializing exclusively in cannabis. With its Health Canada dealer’s license in hand, Anandia Labs has the seal of approval to undertake research and development, and to develop products beyond those currently permitted for licensed producers under Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).
Anandia Lab’s expertise in cannabis testing is essential to ensuring that patients are receiving safe and effective products in the Canadian cannabis sector. In combination with the company’s ability to leverage its dealers license to develop its expertise in developing and producing cannabis extracts, Anandia Labs has positioned itself as a leader in the Canadian cannabis industry.
CannaRoyalty has a secured convertible loan outstanding with BAS and has concluded a strategic partnership agreement with BAS, assuring the ability to tailor product to CannaRoyalty’s specific needs.
BAS Research is a science-based company of senior PhD-level researchers and chemists, positioned to leverage its first-mover advantage. BAS is developing pharmaceutical-grade cannabis medications, and advancing quality and safety through its Purity Certified™ testing services. Their unique strengths lie in advanced tissue culture and genetics, as well as ailment specific research and product development. BAS produces high-purity extractions plus innovative post processing.
CannaRoyalty has made a strategic seed capital investment in return for an equity position in Bodhi Research with an option to increase its equity stake.
Bodhi Research is conducting a research trial into the use of cannabis in the treatment of concussion and post-concussive syndrome, under the direction of Dr. Neilank Jha, Neurosurgeon, Editor in Chief of Current Research: Concussion, and Chair of The Konkussion Retreat. Concussions are one of the most common brain injuries. Bodhi Research is conducting trials exploring the use of cannabis to treat concussion and post-concussive syndrome. Trials began in September 2016, using cannabis from a leading Canadian Licensed Producer. Ultimately over 1000 patients are expected to be included in the study.
CannaRoyalty’s investments in DEVICES AND INTELLECTUAL PROPERTY
Focus on high quality personal-use technology and advanced measured-dose medical systems. Critical patents, advanced processing and industry-scale production technology.
RESOLVE DIGITAL HEALTH
CannaRoyalty holds a 26% equity interest in Resolve Digital Health
Resolve Digital Health develops proprietary smart technology for the cannabis industry. Resolve’s Breeze Inhaler system is a smart inhaler with metered and monitored dosing technology, plus health program support and health interconnectivity. Breeze Inhaler technology connects with the user’s smart phone via Bluetooth™ to deliver rich information and integrated care. The system uses color-coded modular smart pods, with preloaded extracts or dried herb tuned to users’ specific health condition.
Resolve Digital Health’s Breeze Inhaler advances cannabis treatment options with complete dosage metering and revolutionary progress reporting, sharing and management capabilities. Ease of treatment is assured through symptom-specific color keyed pods. The Breeze Inhaler is a complete system that patients and health care professionals can rely on to assure well-monitored, well-informed and holistic cannabis treatments.
CannaRoyalty holds a 100% equity interest in DreamCatcher Labs
Industrial Filling Systems from DreamCatcher labs produce safe, sealed and high quality extract cartridges for vape pens to meet large-scale mass-market demand.
As the cannabis market matures, demand for industrial-scale production technologies is on the rise. The engineers at DreamCatcher Labs have anticipated this trend, by developing full-scale industrial filling systems, currently used to produce cartridges for their market-leading vape pens. In addition to DreamCatcher’s large scale filling machine, two smaller portable filling machines respond to market needs with transportable cartridge-filling capability, able to produce up to 100,000 units per month.
CannaRoyalty holds an equity interest in Wagner Dimas
Wagner Dimas Inc. has quietly built transformative technology in the Cannabis industry. Their innovative equipment and proprietary processes provide unmatched efficiency, helping increase the value of raw cannabis.
Through processing, packaging, and targeted brands, Wagner Dimas is adding significant value to producers and a premium user experience for customers.
For licensing partners, the Wagner Dimas technology will rapidly scale production to meet the growing demand within a respective market.
Wagner Dimas Inc. continues to develop intellectual property for large scale manufacturing technology in a variety of different applications including:
- Automated Pre-roll manufacturing line. Expected capacity of 30,000 prerolls per 8 hours
- Sterilization process to rid cannabis of unwanted microbials
- Grinder Mill Technology to precision grind cannabis to desired size and consistency
- Advanced rolling machines to mass manufacture paper smoking tubes and cones with printing capabilities and size variations.
CannaRoyalty’s assets in STRATEGIC INVESTMENTS
Focus on expert management and strategic positioning across diverse U.S. cannabis industry sectors.
CannaRoyalty earns a royalty on gross revenue
Washington’s “cannabis campus” is a new twist on a tried and tested idea — a specialized industry-focused campus where licensed cannabis businesses locate in fully turnkey facilities. AltoTerra Capital Corp’s wholly owned subsidiary, Cascade holdings manages these facilities and ensures ongoing compliance with all State regulations.
The current cannabis campus includes a 9,000 sq. ft. facility with a permit granted by the Washington State Liquor and Cannabis Board on March 30, 2016 for full-scale extraction and processing. The campus expanded in September 2016 with 8,500 sq. ft. of additional space in a separately licensed facility. A further 116,000 sq. ft. of expansion space is planned in 2017.
ALTERNATIVE MEDICAL ENTERPRISES
CannaRoyalty is an equity shareholder in AltMed
AltMed is a Florida-based company bringing pharmaceutical industry based science experience and integrated business know-how to the development, production and dispensing of medical cannabis. AltMed and its subsidiaries are building the core elements of a significant national presence in an emerging US cannabis market.
Founded by the former executives of the pharmaceutical industry success story Medimmune, (acquired by Astro Zeneca for over 15 billion dollars) AltMed directs science-based development skills and experienced business acumen to the creation and distribution of nationally-recognized medical marijuana therapies and brands. A planned Florida cultivation, dispensary, laboratory and extract facility will serve the new Florida market. AltMed affiliate NuTrae LLC specializes in delivery systems, including the transdermal patch, metered dose inhaler and vape pens. AltMed North America LLC holds a 90% interest in a 34,000 square foot, indoor licensed cultivation and extraction facility in Arizona, with expansion planned for over 120,000 square feet of greenhouse on 6 acres of owned land. The company also has a 10% interest in the largest U.S. legal outdoor grow in Colorado.
EUREKA MANAGEMENT SERVICES
CannaRoyalty holds an equity stake as well as a secured US convertible loan agreement
Eureka Management Services manages Magnolia Wellness Collective in Oakland, California – a dispensary with 30,000 registered patients. Eureka has a fully integrated license for cultivation, manufacturing and dispensing.
Magnolia Wellness Centre in Oakland California is a dispensary at the epicenter of evolving cannabis-culture tastes and trends. CannaRoyalty’s preferred supplier relationship with Magnolia assures shelf space for brand testing as well as access to Magnolia’s production facilities.
THREE LEAF HOLDINGS CORPORATION
CannaRoyalty earns a royalty on gross revenue
Logistics and fulfillment are becoming a critical piece for the emerging cannabis industry. Three Leaf Holdings Corporation provides advanced logistics and fulfillment focused exclusively on the cannabis industry. As a sister company of JP Logistics http://www.jpent.com – a global logistics company with operations in North America, Europe and Asia – Three Leaf has the tools and depth of experience to handle the complexities of emerging mass market cannabis logistics.
The fast-growing cannabis industry faces unique logistics and fulfillment challenges. As an agricultural product, harvested cannabis needs to reach processors in a timely manner to assure quality and freshness. Legal compliance with transportation regulations is complex with different jurisdictions adopting different laws. And the high value of the crop means security is always a primary concern. Three Leaf Holdings Corporation is ready to meet these challenges efficiently and effectively, to extend its first mover advantage in the challenging new world of cannabis logistics and fulfillment.
CannaRoyalty’s investments in CONSUMER BRANDS
Consumer brand investments encompass recreation, wellness, cosmetics and animal health, including:
CannaRoyalty holds a 100% equity interest in GreenRock Botanical’s parent company, DreamCatcher Labs.
GreenRock Botanicals vape pens and cartridges are an engineered-in-the-USA vaping solution, designed for the contemporary cannabis market. Greenrock’s vape pens emphasize ease of use, top quality, and reliable performance. GreenRock vape pens use a clean glass cartridge system powered by dual coil ceramic technology. All GreenRock cartridges are loaded with CO2 extracted quality custom distillates. The unique cartridge provides an array of strains that can be delivered through its cool and sleek cartridge and is safe and secure. The product ensures that users have an ability to access a vast array of extracts and oil and can enjoy different types of strains and experience.
SOUL SUGAR KITCHEN
CannaRoyalty holds a 100% equity interest in Soul Sugar Kitchens.
Soul Sugar Kitchen markets its own unique take on gourmet quality cannabis edibles, carefully developed and manufactured by multiple award winning cannabis chef Marcus Lentz. Initial product categories include homemade peanut butter cups, hand formed truffles and premium snack mixes.
The Lucy’s Pre-rolls brand delivers consistency, quality and uniformity in a pre-rolled smoke-ready format using an innovative machine-rolled process.
Lucy’s Prerolls have achieved a high standard of quality and uniformity in pre-rolled joints through an innovative machine-rolled process and perfect packaging system.
The rocket (affectionately known as a “dog walker”) is a single use pre-roll. Each rocket is 7-10 puffs, and is perfectly designed for the new adult use consumer. Available in 10packs (2g) or 70 count cigar boxes containing 1/2 oz.
Rocket Prerolls are a high standard of quality and uniformity in pre-rolled joints through an innovative machine-rolled process and perfect packaging system.
CannaRoyalty has signed a term sheet for a joint venture partnership.
Rich Extracts is an award-winning cannabis extract brand. The company operates a fully licensed lab and production facility producing distillates, shatter and rosin concentrates.
CannaRoyalty holds a majority equity interest in DermaLeaf Skincare.
DermaLeaf Skincare products are cannabis infused lotions formulated with fibroblasts for use in pain relief and other areas.
Expertly formulated DermaLeaf Skincare products target a growing market for topical cannabis-infused skin care and health and beauty products following the discovery of cannabinoid receptors in skin cells. A synergistic formula including fibroblast and high quality healing ingredients make DermaLeaf Skincare an option for Deep Skin Repair, Severe Burns, Scar Repair and Wrinkle Reduction.
CannaRoyalty holds a 100% equity interest in Freya Intimacy Oil Spray.
Freya Intimacy Spray is an all-natural, sensual enhancement product exclusively designed for women. Freya makes use of the complex qualities of cannabis to increase relaxation and promote blood flow to create a potent therapeutic aphrodisiac.
With cannabis topicals gaining market recognition and acceptance, woman are discovering the benefits of cannabis infused intimacy oil in enhancing intimate pleasure. The Freya Intimacy Spray speaks to this trend with a sensitively formulated all-natural product.
BEST BUDS ANIMAL HEALTH
CannaRoyalty holds a 100% equity interest in Best Buds Animal Health.
Best Buds CBD-infused all natural dog treats has been developed as a wellness enhancer and a safe alternative for the treatment of pain and anxiety in dogs.
Best Buds pet treats offer pet owners and their pets innovative Cannabidiol (CBD) based alternative medication to help better care for animal health. These medicated treats may have a range of positive benefits for an animal’s overall health and contribute to reduced pain, improved appetite and lower anxiety. The Best Buds brand is an early-entry alternative targeting North America’s growing $60 billion pet industry.
Family of Products
CannaRoyalty earns a royalty on gross revenue.
CannaRoyalty also has Exclusive Rights to License the MüV Transdermal Patch and MüV Metered Dose Inhaler (see 3/30/17 press release).
MüV products aim for up-market quality with product and packaging designed to rigorous pharmaceutical industry standards. The MüV product line presently includes a range of innovative delivery systems such as Transdermal Patch, Metered Dose Inhaler and Rechargeable Vape Pen and Cartridges. The MUV family of products also includes high quality topicals and concentrates. MüV products are developed by NuTrae LLC –a subsidiary of Florida’s Alternative Medical Enterprises LLC (AltMed).
CannaRoyalty has an exclusive license agreement in WA, OR, AZ and Canada.
Stokes Confections is building an award-winning brand in the cannabis edibles market with high quality edible flavors released in a micro-dosed format. Stokes outstanding tastes are created by veteran chefs with experience working in some of San Francisco’s most renowned restaurants.
Stokes Confections “micro-dosed” edibles give cannabis users control over the intensity of their cannabis experience – a distinct plus in a maturing cannabis market. Gourmet taste truffles and tablets, produced and marketed with contemporary chef panache mark Stokes Confections as an emerging California favorite.
CannaRoyalty has a licensing agreement with Absolute Extracts in Washington and Canada.
AbsoluteXtracts is a Northern California cannabis company dedicated to providing pure, safe and potent cannabis extract products. Their industry leading pharmaceutical-grade processing produces extracts with superior quality and taste.
AbsoluteXtracts products include strain specific vape cartridges, sublingual strips, precise dose soft gel caps, cannabis oil applicators for baking needs, sublingual sprays, and extract filled “honey straws”. Innovation and market-leading quality are expected to win a strong place for the brand.
CARE BY DESIGN
CannaRoyalty has a licensing agreement with Care by Design in Washington and Canada.
Care by Design is a medical cannabis company offering CBD –rich cannabis in easy-to-use sprays, gel caps, vaping products, and edibles as well as a convenient applicator for cooking, oral dosing or topical administration.
Care by Design currently offers products with five ratios of CBD-to-THC, from 18:1 to 1:1 giving patients the option of adjusting their cannabis medicine to suit their specific condition. The company recently released results of a landmark survey of medical cannabis use and patient-reported outcomes.
The North American cannabis market is a high-growth, high-risk investment space. CannaRoyalty has a unique business model that can maximize returns while mitigating risks by spreading investments throughout two countries and into 22 (and still counting) assets. The company’s management team perfectly positions the company to identify valuable assets in the cannabis space, invest in them, and support them. An early indicator of success of the business model at CannaRoyalty is the company’s $850,000 investment in Resolve Digital Health now being valued at $7.1 million.
Given the above, CannaRoyalty’s current market cap appears woefully undervalued at just $79 million USD. However, investors can reasonably expect both volume and share prices to increase as CannaRoyalty announces future wins from the company’s diverse cannabis assets.
A deeper look at CannaRoyalty’s assets, adding up the sum of the parts to arrive at valuation range.