California is well known for its brand dominance—from its Hollywood studios to its Napa Valley wines. As a tastemaker across industries, the state’s cannabis brands are well-positioned to follow in these footsteps and expand across the United States if and when the federal government legalizes cannabis nationwide.
At the same time, manufactured products including gummies, chocolates, tinctures, personal care products, and more, have experienced strong consumer demand and an accelerating growth rate. More and more cannabis brands—in California and across the country— are expanding their product mix to include these new offerings. Contract manufacturers offer the easiest way to do so with minimal capital outlay or expertise required for brands looking to expand their presence on the dispensary shelf.
FinCanna Capital Corp. (CSE: CALI) (OTCQB: FNNZF) has two core portfolio businesses, QVI Inc. and Cultivation Technologies Inc., that provide these critical supply and manufacturing services to cannabis companies. While they’ve launched their businesses in the branding capital, and largest market in the country, they are also positioned to expand nationally as legislation continues to offer the potential for expansion beyond state borders.
Let’s take a look at how California is dominating the cannabis brand landscape and companies that investors may want to consider for exposure, including FinCanna Capital Corp. (CSE: CALI) (OTCQB: FNNZF) and its unique business model.
California’s Tastemaker Market
California is the largest cannabis market in the world with $4.4 billion in retail sales last year, according to Cannabis Business Plans, representing a nearly 50% growth rate over the prior year and nearly a third of all sales across the United States last year. By comparison, Colorado, Washington and Oregon combined represented less than 30% of all sales.
The sheer size of the market and ideal growing conditions have led to the creation of the country’s largest and most successful cannabis brands. The Golden State already supplies the majority of cannabis consumed in the United States and consolidation within the state is creating tomorrow’s industry giants.
While there are many companies offering investors exposure to these brands, FinCanna Capital Corp. has one of the most innovative business models. The company provides equipment and funding to cannabis companies in exchange for a royalty on future sales, generating high-margin recurring income for its shareholders.
Cultivation Tech’s Growing Footprint
Cultivation Technologies Inc., operating under the brand Coachella Manufacturing, is a multi-award-winning extraction and manufacturing enterprise located in Palm Desert, California that provides high-quality Butane Hash Oil (BHO) concentrates as well as higher velocity and higher volume white label manufacturing, toll processing, and packaging services.
The company has a three-year operational history and FinCanna began receiving royalties during the second half of 2020. In February of 2021, FinCanna sold a portion of its unutilized extraction equipment to CTI in order to increase its production capacity by as much as 500% in exchange for an increase in royalty payments.
In addition to the new equipment, the company’s seasoned management team is working on growing the core business and expanding into other large-scale activities that they believe will result in a sizable increase in royalty revenue to FinCanna and its shareholders. The company’s unique facility and long client list paves the way for these opportunities.
Under the new agreement, FinCanna receives a 10% royalty on all revenue generated by CTI with 5% paid in cash every month and 5% deferred until certain trigger events. In addition, FinCanna receives another 10% royalty on all revenue generated by the newly sold extraction equipment, paid each month, until certain milestones are met.
QVI’s Unique Products & Brands
QVI Inc., operating under the brand The Galley, is a cannabis-infused product manufacturer located in Sonoma, California. The company operates a fully-licensed 8,300 sq. ft. facility with a focus on edibles, topicals, tinctures, chocolates, hard candies, gummies, beverages, vapes, pre-rolls and flower packaging.
The company’s goal is to become California’s premier contract manufacturer, and upon success, license products throughout the country and global markets as legalization allows. In addition to being a one-stop-shop to manufacture most high-value products, the company provides access to an outstanding R&D team with the ability to assist brands in launching new products.
The company’s team includes professional formulators and chefs with extensive experience in foods, beverages, candies and confections, as well as skincare and herbal medicine. Leveraging their deep expertise, the team is capable of helping companies with everything from sourcing cannabis to creating original formulations to designing the packaging materials.
QVI is targeting an annual operating capacity of approximately US$45 million with a growing roster of client brands. In February 2021, the company noted accelerating demand from over 30 in-state and out-of-state highly-regarded consumer brands, as well as a steady increase in re-orders from existing clients to generate recurring monthly revenue.
Under the terms of its agreement, FinCanna is scheduled to begin receiving royalty payments in 2021 amounting to 20% of QVI’s revenue paid in cash monthly. FinCanna will also receive annual supplemental payments that ensure that it receives a minimum of 70% of QVI’s annual after-tax net income paid in cash each year and 70% of the proceeds of any change of control or sale of the business.
FinCanna Capital Corp. (CSE: CALI) (OTCQB: FNNZF) has developed a unique business model that provides it with exposure to a growing portfolio of California brands. With royalty income coming on stream in 2020 and 2021, investors may want to take a closer look at the company as it transitions to profitable growth.
The company also recently announced a non-brokered private placement to raise $2 million from accredited investors and institutions. Each of the C$0.125 units will consist of a common share of FinCanna stock and one-half of one common share purchase warrant with an exercise price of C$0.18 and a 24-month expiration date.