- CannaRoyalty Corp. (CNNRF) and (CSE:CRZ), has a unique business model in the cannabis space that minimizes risk and maximizes reward
- Has 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
Recent Price 4/17/17: $1.82 USD
Market cap: $78.6 million
Float: 31.4 million
Insider ownership: 20%
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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 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. 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. Meanwhile, in the U.S., 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 any risk-tolerant investor should be involved in, 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 many 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).