Origin House to Acquire Cub City - Craft Cannabis Production Facility and Operational Team - to Expand Brand Accelerator Program

Published: December 4, 2018

Origin House to Acquire Cub City - Craft Cannabis Production Facility and Operational Team - to Expand Brand Accelerator Program

CannaRoyalty Corp. d/b/a Origin House, a leading North American cannabis products and brands company, today announced that the Company has signed a binding term sheet to purchase and acquire certain business assets of California-based cannabis cultivator, Cub City LLC for total consideration of US$7,025,000.

Afzal Hasan, President and General Counsel of Origin House commented, “This Acquisition was a logical next step for Origin House, led by the needs of our brand partners as we execute on our brand support and acceleration strategy. Access to bespoke third-party cultivation is critical for new flower brands that want an authentic brand promise from seed to consumption. The existing alternative for brands is to use undifferentiated and mass produced biomass available on the market. Cub City was co-founded by a team that included our partners Drew and Karen Duval of FloraCal. The facility and team have produced flower for some of the top packaged flower brands in California, as well as a prominent pre-roll brand. Furthermore, being just minutes away from our current Santa Rosa facility provides natural efficiencies and synergies. We are excited to continue growing our infrastructure and team to unlock further opportunities for growth that we have been cultivating with brand partners in California.”

Strategic Rationale

  • Attractive Valuation: Origin House will pay US$7.025 million to acquire a state-of-the-art craft cultivation facility (the “Facility”) with annual production capacity of up to 1,400 kg of ultra-premium flower, implying a purchase price of US$5 per gram of funded capacity.
  • Expands Brand Acceleration Platform: Both current and potential brand partners have highlighted desire for bespoke exotic cannabis cultivation. The Acquisition further expands Origin House’s brand support and acceleration platform and will allow the Company to close pipeline opportunities with promising brands in California.
  • Experienced Team: Cub City’s experienced team will join Origin House, under the supervision of Origin House employees Drew and Karen Duval. This team will leverage its expertise and Cub City’s proprietary production techniques into an ultra-premium flower and pre-roll offering for the Company’s current and prospective brand partners.
  • Strategic Location: The Facility is strategically located in close proximity to FloraCal’s 62,000 sq. ft. facility. The additional 24,600 sq. ft. cultivation capacity will be focussed on third party cultivation.

Construction Loan Facility

  • Under current Cub City management, the Facility is undergoing construction with an estimated completion date of March 31, 2019. Upon the completion of construction, the Facility will be composed of a two-storey building with 11,000 sq. ft of cultivation space, and 7,400 sq. ft of distribution, processing and packaging space in addition to 6,200 sq. ft of office space, storage and common area.
  • Within 30 days, Origin House will provide a construction loan facility (the “Loan”) to Cub City in an amount of up to USD$1,700,000. Funds advanced under the Loan will bear simple interest at 12% per annum and mature two years from the date of the first advance. The Loan proceeds will be used for construction and equipment for the Facility.
  • The Loan will be secured by a first-ranking security interest on all present and future assets of Cub City and guaranteed by each of the members of Cub City on certain conditions.


  • The closing date for the Acquisition is projected to be March 31, 2019 (the “Closing Date”), when construction of the Facility is scheduled to be completed.
  • Some of the key assets, among others, to be purchased in the Acquisition include:
    • Cub City’s 20-year lease of the 24,600 sq. ft Facility; and
    • A 5-year local permit to cultivate, process, package and distribute cannabis. On Closing, Origin House will also have access to two state licenses: (a) a cannabis Type 11 Distribution License; and (b) a Small Indoor Cultivation license that may be used for future operations.
  • The total purchase price (the “Purchase Price”) for the Acquisition assets shall be $7,025,000 payable as follows:
    • Forgiveness of the principal and interest accrued under the Loan (the “Loan Balance”);
    • $3,525,000 less the Loan Balance, in immediately available funds on Closing Date;
    • $3,500,000 on the one-year anniversary of the Closing Date (“Holdback Disbursement Date”). Cub City will have the option to receive the second payment in cash, shares of Origin House, or a combination of both but not less than 50% in shares.