CannaRoyalty Closes Acquisition of FloraCal

Published: July 3, 2018

CannaRoyalty Closes Acquisition of FloraCal

CannaRoyalty Corp., a North American cannabis products and brands company, announced today that it 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, CEO 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 ultra-premium position in the California market, with THC numbers testing up to 33% and a selling price of up to US$17.00 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 1stthe 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, CEO 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 license 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 kg, 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 kg.
  • Capital cost for construction during Phase I and II is estimated to be US$7.5MM and Phase III has an anticipated budget of US$4MM for construction.

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