23:38:17 EST Sun 29 Nov 2020
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Fincanna Capital Corp
Symbol CALI
Shares Issued 98,689,734
Close 2020-02-13 C$ 0.095
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Fincanna signs royalty deal with Cultivation Tech

2020-02-13 11:30 ET - News Release

Mr. Andriyko Herchak reports


Fincanna Capital Corp. has signed a new royalty agreement with Cultivation Technologies Inc. of Coachella, Calif., a top-ranked and award-winning cannabis extraction and manufacturer. Further to the agreement, Fincanna has withdrawn its foreclosure proceedings against CTI filed on May 1, 2019, in the California Superior Court for Orange County.

Agreement highlights:

  • Fincanna entitled to receive 10 per cent of CTI's top-line revenue, of which 5 per cent is paid in cash monthly and 5 per cent deferred, subject to certain buyback options;
  • Fincanna will be entitled to 25 per cent to 50 per cent of the gross sale proceeds of any change of control;
  • CTI nearing completion of relocating its fully licensed extraction and manufacturing operations with production expected to recommence immediately after relocation;
  • New CTI location in Palm Desert expected to significantly increase efficiencies and expand capacity to estimated annual production potential of $35-million (U.S.).

Under the new royalty agreement, Fincanna will be entitled to receive 10 per cent of CTI's top-line revenue in perpetuity, subject to certain buyback options, of which 5 per cent is paid in cash monthly and 5 per cent is deferred. The accrued deferred payment will be paid out upon certain triggering events, including a change of control, an initial public offering or certain other specified events of CTI.

Additionally, Fincanna would be entitled to receive 25 per cent to 50 per cent of the gross sales proceeds of any change of control transaction with the final percentage to be determined according to certain predetermined parameters.

CTI commenced operations at its interim extraction facility in Coachella, Calif., in January, 2018, and continued to operate throughout the foreclosure period with Fincanna's full support and continuing discussions toward the best path forward. Over the past two years of operations, CTI has become a top-ranked extraction and manufacturing enterprise focusing on white-labelling services and winning numerous first-place awards for its various cannabis concentrates.

CTI is now near completion of the relocation of its extraction and manufacturing operations from its interim site in Coachella, Calif., to its new permanent facility in Palm Desert, Calif. This new fully licensed 5,200-square-foot Palm Desert facility will include large-scale extraction, distillation and manufacturing of products such as vape oils and cartridges, distillate for edibles and topicals, and concentrates such as diamonds, sauce, sugar and budder. The business will also provide distribution services to manufacturers, dispensaries and other distributors throughout California. All licences and permits required for commercial operations at the new facility are in place and production is expected to resume immediately upon completion of the relocation.

The relocation to the larger Palm Desert facility will also see significant increases in efficiencies and capacity. The new facility is expected to have approximately over three-times the capacity of the former interim facility, with a new estimated annual capacity of approximately $35-million (U.S.).

To facilitate a smooth transition from the interim site in Coachella to launching production at the Palm Desert facility, Fincanna has agreed to provide CTI a bridge loan of up to $250,000 (U.S.) for a term of six months bearing an interest rate of 12 per cent per annum. In addition, Fincanna will receive five-year warrants to acquire 5 per cent of CTI's fully diluted capital at the time of exercise for $250,000 (U.S.).

Andriyko Herchak, chief executive officer of Fincanna Capital, stated: "We are very pleased to finally announce a conclusive and mutually beneficial new royalty agreement with CTI. As our long-standing shareholders know, CTI was our first royalty investment and, for various reasons, we were unable to achieve the positive outcomes we always believed were possible. Until today. I commend the new board and new management team of CTI for all their productive efforts to work with us in finding a mutually beneficial solution while continuing to optimize their operations, secure new customers and develop their new facility in Palm Desert. This new royalty agreement is very much a win-win for both companies' shareholders and we, alongside the new leadership team at CTI, look forward to a very productive and prosperous 2020 and beyond working together in partnership."

CTI is strategically located in California, which is expected to post a record $3.1-billion (U.S.) in licensed cannabis sales for 2019, solidifying its status as the largest legal marijuana market in the world. Legal sales are up approximately 23 per cent from an approximate $2.5-billion (U.S.) in 2018, the first year of licensed cannabis sales in California, according to recent analysis by sales-tracking firms Arcview Market Research and BDS Analytics.

About Fincanna Capital Corp.

Fincanna is a royalty company that provides growth capital to rapidly emerging private companies operating in the licensed U.S. cannabis industry. The company earns its revenue from royalties paid by its investee companies that are calculated based on a percentage of their total revenues. Fincanna's scalable royalty model provides an attractive alternative or complement to debt or equity financing for its investee companies.

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