Herchak shares FinCanna’s ‘twist’ for the cannabis industry – Part I
FinCanna Capital Corp. (CSE: CALI | OTCQB: FNNZF) is one of two publicly traded pure-play Cannabis royalty companies focused in the United States. The market has witnessed other like-minded companies with their own twist, such as, Auxly Cannabis Group Inc. (TSXV: XLY | OTCQX: CBWTF) and Origin House (OH:CSE, ORHOF:OTCQX) do extremely well growing to a combined market cap of $750M CDN.
FinCanna has its financing obligations covered, a large non-dilutive injection of capital expected shortly, and its own unique ‘twist’ for cannabis businesses that it invests in, so I thought the timing would be right to sit down with Andriyko Herchak, CEO of FinCanna to discuss its model, its competitive advantage and where the blue sky sits for investors of FinCanna.
This is the first part of a 5-part interview series with the FinCanna team and its investee companies. Stay tuned for more one-on-ones with management.
Can you define the FinCanna Royalty Model and its advantages for investor?
FinCanna is a Royalty Company, which invests in U.S. licensed cannabis related companies to earn a percentage of their top-line revenues that can generate a high margin income stream for our shareholders.
Our model limits the Company’s downside risk as FinCanna registers a first charge on the assets of our investee companies and correspondingly holds large potential upside as our investee companies successfully mature and their revenues grow. We also have the potential for significant one-time gains, via the repurchase of our royalty, if a buyout of one of our investee companies were to occur.
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All of the companies that we have invested in are privately held, which most investors would not have the opportunity to invest in directly. As FinCanna is a publicly traded company it provides our investors with the benefits of transparency and liquidity typically not associated with private companies. So, we really offer the best of both worlds of investing in a publicly traded company that provides you with indirect investment into a diversified portfolio of private US companies.
What do you see as your key competitive advantage in the burgeoning US market place?
Our competitive edge? I am a Chartered Professional Accountant, as is our CFO Rob Scott. We understand business and we understand how to protect our downside in our investments while positioning the company for exceptional upside as our investee companies mature.
We look down the road to position our shareholders for success. We are financing companies we believe are well positioned to be leaders in their respective sectors in the U.S., which is the largest licenced market in the world. As an early entrant in the U.S we have developed a very strong network and have access to excellent additional opportunities.
What are your cash requirements right now?
We have three active royalty investments in which our obligations are funded. In addition, we are expecting to receive approximately $3.9M USD as an early loan repayment from CTI, one of our investee companies, in December 2018 or January 2019, which we can put to very good use. We have a small burn, a very high margin projected revenue stream and a great pipeline of quality projects that we could potentially invest in, adding to our investment portfolio and expanding our future royalty income.
What can shareholders expect over the next few quarters?
It’s pretty simple. First, we expect our investee companies to begin generating cash flow that funnels its way to our balance sheet. Second, we intend to make additional investments with the non-dilutive funds received from the early loan repayment from CTI. Some of these potential investments would be immediately revenue accretive or have a short path to royalty revenues.
On another note, Canada as we all know, saw major valuation growth in the sector, which has yet to appear in the U.S. markets. We believe we are well positioned to participate in any future large-scale market appreciation in the U.S. as it may occur.
What types of businesses are you looking to finance?
There are numerous ancillary businesses that can be highly lucrative, and we believe there are very strong opportunities excluding growth and cultivation. That said, we have built a diversified portfolio across various verticals in the US cannabis sector, including extraction, manufacturing and technology, and we are looking to add selectively. One should note that the companies that we have invested in are private, which most investors would not have the opportunity to invest in directly, and we believe we represent great value for investors looking to participate in the U.S. licensed cannabis sector.
[Publisher’s Note: Arlen Hansen is the President of Kin Communications Inc. Kin Communications provides investor relations for FinCanna Capital Corp.]
Arlen Hansen is the President and Founder of Kin Communications, an innovative investor relations firm located in the heart of Vancouver’s financial district. Known for ... <Read more about Arlen Hansen>