Mr. Marc Lustig reports

CANNAROYALTY CLOSES ACQUISITION OF FLORACAL, A PREMIUM CRAFT CANNABIS PRODUCER

CannaRoyalty Corp. has closed the previously announced acquisition of FloraCal Farms, a licensed premium craft cannabis producer located in Sonoma county, California.

"The evolution of our relationship with FloraCal to the close of the acquisition today is directly aligned with the strategic framework we have outlined for shareholders and is a model that we intend to replicate in a targeted fashion across key verticals of the California market in the coming years," said Marc Lustig, chief executive officer of CannaRoyalty. "As one of the state's largest third party cannabis consumer brand distributors, we are strategically positioned to foster the growth of both our retailer and brand customers' businesses, while generating proprietary market data and consumer insights to ensure we are in a position to acquire or otherwise partner with brand leaders in the space as they establish themselves."

Afzal Hasan, president and general counsel of CannaRoyalty, added: "FloraCal occupies an ultrapremium position in the California market, with THC numbers testing up to 33 per cent and a selling price of up to $17 (U.S.) per gram. This demonstrates that even in a relatively mature flower market, craft branded flower is able to capture and maintain premium prices and margins. We are confident that between a measured increase in capacity and access to CannaRoyalty's distribution platform, the brand can reach new heights in the California market. In addition, as of July 1 the California market has officially exited the grey market, requiring retailers to cease carrying non-compliant cannabis products. We anticipate this may lead to short-term supply disruption, further increasing the value of compliant brand players like FloraCal, to our network. We look forward to working with Drew, Karen and their team to bring the FloraCal story to a wider audience across California and to leverage FloraCal's IP and premium brand into Canada and other legal jurisdictions."

"We are very excited to join the CannaRoyalty team to continue to drive growth in the FloraCal business," said Drew Duval, chief executive officer of FloraCal. "We are focused on delivering top quality cannabis products to California's discerning consumer base and are confident that CannaRoyalty's platform will give us access to a best-in-class distribution and manufacturing network that will enable FloraCal to scale prudently and efficiently."

FloraCal has a temporary medium indoor cultivation licence from the State of California, as well a Type 6 non-volatile manufacturing permit in Sonoma county.

FloraCal is building its Sonoma county facility in three phases and has been designed to comply with cGMP* (current good manufacturing process) standards.

• Phase I is licensed and in commercial production, with 15,000 square feet of purpose-built indoor growing in a 64,200-square-foot facility.
• Phase II has been licensed and will increase the facility size to 42,200 square feet and targeted annual production of 3,700 kilograms, with construction expected to be completed by Q1 2019.
• Phase III is under option and would allow further expansion to the full facility size of 64,200 square feet, with targeted annual production of 5,500 kilograms.
• Capital cost for construction during phase I and II is estimated to be $7.5-million (U.S.) and phase III has an anticipated budget of $4-million (U.S.) for construction.

Transaction summary

Pursuant to a purchase agreement dated July 2, 2018, the company has acquired 100 per cent of FloraCal for a total consideration of $1-million (U.S.) in cash, subject to a working capital adjustment, and 35,088 CannaRoyalty Class A compressed shares (2), as well as up to an additional $3-million (U.S.) in cash and 35,088 compressed shares to be paid over three years, based on the completion of certain milestones, and other considerations.

(1) This financial information has not been audited.

(2) Each Class A compressed share is convertible into 100 common shares of CannaRoyalty, subject to certain conditions, and carries the right to one vote for each common share into which it can be converted into. Class A compressed shares are entitled to vote, together with holders of common shares, with respect to any question upon which holders of common shares have the right to vote.

The ability to convert the Class A compressed shares into common shares is subject to a restriction that the aggregate number of common shares and Class A compressed shares held of record, directly or indirectly, by residents of the United States (as determined in accordance with rules 3b-4 under the Securities Exchange Act of 1934, as amended), may not exceed 40 per cent of the aggregate number of common shares and Class A compressed shares issued and outstanding after giving effect to such conversions. The Class A compressed shares are subject to a further conversion restriction whereby the corporation shall not effect a conversion of Class A compressed shares to the extent that after giving effect to any such conversion, a holder thereof would beneficially own greater than 9.99 per cent of the issued and outstanding common shares. The corporation is issuing compressed shares to minimize the proportion of the outstanding voting securities of CannaRoyalty that are held by U.S. persons for purposes of determining whether CannaRoyalty is a foreign private issuer for purposes of United States securities laws.

About FloraCal Farms

FloraCal Farms is located in Sonoma county. FloraCal Farms produces hand-grown flowers in small batches. The cultivation facility practices sustainable cultivation techniques and is 100 per cent powered by renewable energy. FloraCal's team of master cultivators strives to create beautiful consistent cannabis products with a smooth finish, believing it all starts from the seed, and isdedicated to hand selecting the finest genetics. Their natural farming techniques allow FloraCal to consistently produce top-shelf flowers at the highest quality for its customers.

About CannaRoyalty Corp.

CannaRoyalty is a North American cannabis consumer product company currently focused on building a leading distribution business in California, the world's largest regulated cannabis market. By building a world-class logistics platform and supporting contract manufacturing assets, the company intends to support the growth of new and established cannabis brands. The company believes California, home to some of the world's most discerning consumers and a nexus of information and trends, will be the point of inception for the global cannabis brands of the future. CannaRoyalty has developed a diversified portfolio of assets within the cannabis sector, including research, infrastructure and intellectual property to support its existing brands, partner products and distribution networks.

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