In the case of CannaRoyalty, we provide upfront capital to licensed cannabis businesses in exchange for a royalty on their revenues. The amount of capital provided determines the % royalty charged and the number of years for which the royalty is paid.
Many factors affect the royalty rate. The most common ones include exclusivity of rights, availability of alternatives, risks involved, market demand structure, sustainability of technologies involved, and the level of innovation the product or service provides.
CannaRoyalty invested US$500,000 in NuTrae LLC in exchange for a royalty on the net sales of all MUV products globally for a period of 10 years.
A stock, share or any other security representing an ownership interest in an asset or a business.
In the case of CannaRoyalty, we invest capital in legal cannabis businesses in exchange for shares, or equity, in that business.
CannaRoyalty invested US$1.5 million in Alternative Medical Enterprises LLC at a valuation of US$10 million. AME completed a subsequent equity financing at a valuation of $32 million, thus increasing the value of the CannaRoyalty equity stake, which now equals 8.2%.
A convertible security is an investment that can be changed into another form. The most common convertible securities are convertible bonds, which can be changed into equity or common stock. A convertible security pays a rate of interest (referred to as a coupon rate) for a period until the debt matures or is converted to equity.
A secured convertible security is a debt instrument that is secured by an asset that can be liquidated in the case of default.
In the case of CannaRoyalty, we will provide an investment in the form of a secured convertible debt where a royalty interest is not available and where taking a direct equity stake may not initially be advisable given existing cannabis regulations and/or tax consequences.
CannaRoyalty provided a secured loan to BAS Research that pays a coupon rate of 8%, and is convertible into equity at the sole option of CannaRoyalty at a 20% discount to the valuation of the next round of equity financing to be completed by BAS Research.
A licensing agreement refers to a written agreement entered into by the contractual owner of an asset or property giving permission to another to use that asset or property in a protected territory. The licensing agreement can be real, personal or intellectual. Almost always, there will be some consideration exchanged between the licensor and the licensee.
In the case of CannaRoyalty, we seek strong management teams in legal cannabis jurisdictions, that are fully licensed to operate in that jurisdiction, to license the use of one or more of our brands. The licensing agreement will grant the licensee the right to produce and distribute that brand(s) in a protected territory for a defined period of time in exchange for a fee, typically charged as a % of revenues.
CannaRoyalty signed a license agreement with Crescendo Chocolate for the production and distribution of the Soul Sugar Kitchen line of products in Washington.