CannaRoyalty buys California licensed cannabis producer FloraCal Farms

An Ottawa-based cannabis company has decided to take over a major California producer. CannaRoyalty announced that it’s buying FloraCal Farms

FloraCal (R)Farms, an Ultra-Premium Craft Cannabis (CNW Group/CannaRoyalty Corp.)

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An Ottawa-based cannabis company has decided to take over a major California producer.

CannaRoyalty announced that it’s buying FloraCal Farms in a cash and share swap.

FloraCal has a 15,000-square-foot facility in Sonoma County that produces plants in small batches. It claims that it generates an average selling price of more than US$17 per gram.

According to a joint news release, FloraCal is a sustainable producer relying 100 percent on renewable energy to produce seven cannabis flowers, rosin, and packaged pre-rolls.

The company has declared that it can achieve 28 percent to 32 percent THC content in its plants.

It generated US$6.4 million in revenue in the last fiscal year.

As part of the deal, FloraCal will receive US$1 million and more than 3.5 million CannaRoyalty shares when the deal closes.

That will be followed by CannaRoyalty providing 584,795 shares upon completion of FloraCal’s phase two expansion to create a 42,200-square-foot facility.

Up to 2.9 million CannaRoyalty shares will go to FloraCal 175 days after completion of the expansion, based on FloraCal meeting production targets.

If FloraCal maintains ‘controllable costs’ over the next three years, it could receive up to US$3 million in cash.

CannaRoyalty shares closed at $4.34 today on the Canadian Securities Exchange, up 2.36 percent on the day.

Meanwhile, Canadian securities regulators have paid close attention to how the Trump administration might deal with the cannabis industry in states where the plant has been legalized, like California.

Earlier this year, these Canadian officials updated their disclosure-based approach for Canadian cannabis companies with investments in the United States.

‘The revised notice includes additional disclosure expectations that apply to all issuers with U.S. marijuana-related activities, including those with direct and indirect involvement in the cultivation and distribution of marijuana, as well as issuers that provide goods and services to third parties involved in the U.S. marijuana industry,’ the Canadian securities regulators stated in a news release. ‘Issuers are expected to provide these disclosures in prospectus filings and other required documents, such as their Annual Information Form and Management’s Discussion and Analysis.’

It came in the wake of U.S. attorney general Jeff Sessions’ January 4 decision to revoke the Cole memorandum.

This document from the Obama administration had offered guidance to federal prosecutors, advising a largely hands-off approach for cannabis offences in states where the plant is legal.

Sessions’ memo claimed that Congress views ‘marijuana as a dangerous drug and that marijuana activity is a serious crime’.

What that means for U.S. cannabis producers is anyone’s guess.

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