CFN Exclusive Interview with FinCanna CEO Andriyko Herchak
June 14th, 2018
Exclusive, Feature Stories, News
CFN Media recently sat down with FinCanna Capital Corp. (CSE: CALI) (OTCQB: FNNZF) CEO Andriyko Herchak to discuss the company’s royalty investment model, its accomplishments to date, and its strategy going forward.
CFN: Thank you for your time today Mr. Herchak, and congratulations on your recent news. Before we discuss the news, please give us an overview of FinCanna Capital and its royalty model.
Andriyko Herchak: You are welcome, it’s a pleasure to speak with you today. At FinCanna Capital we are building a diversified portfolio of royalty based income by investing in top tier companies in the United States medical cannabis industry, with a focus on California. What is a royalty? Basically, we invest capital in a company and in exchange we receive a percentage of its revenue going forward. It has been a very successful model in other industries and we believe now is the perfect time for this royalty model in the US cannabis space and particularly in California. Our royalty model allows operators and business owners to preserve their ownership stake, not diluting themselves as they would with typical equity financing.
CFN: Why do you think the royalty model makes sense for cannabis companies today, particularly in the United States?
AH: In California right now, basically every company is a startup or running as a startup, many with no history of revenues. If those companies are trying to raise money, equity financing can be massively dilutive, in large part due to the lack of a track record of revenue production. Our model does not look back, but rather forward. Our investment approach allows companies to preserve equity while providing cash to grow their business.
Additionally, cannabis is still federally illegal, which is a major contributing factor for the shortage of capital for cannabis companies across the US. Banks and federally regulated institutions are largely on the sidelines, so debt financing is difficult to find. Equity financing, as I mentioned earlier, often comes with unfavorable terms for the company. So our royalty model fills a void in the market for companies needing capital while operating in the US cannabis space.
CFN: Which companies have you invested in to this point, and why?
AH: Our royalty portfolio is currently comprised of three investments. We invest in management and the underlying business, that’s really our focus and the top criteria for us. The first company we’ve invested in is, Cultivation Technologies Inc., (“CTI”). They have an exceptional management team that has proven itself in other industries. The CEO is a former executive of one of the largest agricultural companies in the world. The company is developing a large medical cannabis campus in Coachella, California. The two main revenue drivers will be cultivation and extraction. They were one of the early movers in California and we’ve been alongside them from the beginning. Its a large scale opportunity and we look forward to great things as the planned cannabis campus project moves forward.
Our second investment is with Green Compliance, a company that offers a HIPAA compliant software solution for cannabis companies. The industry is riddled with problems around data security. To our knowledge, none of the other point of sale (POS) software solutions out there were designed to protect client/patient data at the level to be delivered by Green Compliance and as required under HIPAA. The company offers a POS system that has been proven in the pharmaceutical industry over the last 17 years and is now being repurposed for the cannabis sector. The Green Compliance has the flexibility to integrate as a plug-in with any existing seed-to-sale software or it can operate as a stand-alone point-of-sale system.
Our third investment is in Gram Co, based in Oakland California. The company’s business is to extract high quality cannabis distillate for major brands in California. The Gram Co team are seasoned extractors, highly experienced, and very well connected in the industry. We expect the company to be fully operational later this year.
CFN: Excellent. FinCanna recently announced that your portfolio company, CTI, has secured distribution across California and commenced sales of its Coachella Premium Cannabis product line. Why is this significant for your company?
AH: First of all, we have a 50% profit interest in CTI’s extraction facility. CTI is developing its own premium brand in a market where having your own brand offers the highest revenues available in the vertical. While CTI only commenced operations in late January this year, they have already managed to secure distribution with 10 of the largest dispensaries in California. With California representing the 6th largest economy in the world, we expect a large financial win as the company progresses.
CFN: CTI has infrastructure that really sets the company apart. Can you tell us more about Coachella Manufacturing?
AH: CTI received one of the first solvent extraction permits in California and is one of the first companies to legally extract in the state. CTI has a clear first mover advantage in what amounts to a race to market across California. Their facility includes a state of the art, licensed lab with the latest in cold storage, extraction, and distillation technologies designed to produce premium and unique products for an increasingly discerning marketplace.
CFN: Is California going to be a major focus for FinCanna going forward?
AH: Absolutely. Our ticker symbol is CALI, and that was intentional. California was the first jurisdiction to legalize medical cannabis in North America, thirty years ago. It’s by far the largest legal cannabis market in North America. The new laws that came into effect in the state this year are serving to both open the market but also demands a higher level of regulatory compliance for market participants as the green rush ramps up. There is a great race to market as entrepreneurs see tremendous, once in a generation opportunity. There are a lot of great companies out there that, due to restrictive federal regulations, are not able to obtain adequate financing. So we have this incredible opportunity to pair our attractive royalty financing with great operators to grow top tier businesses.
CFN: How does FinCanna build upon the success you’ve had to this point?
AH: It all comes down to the companies we invest in. We invest in companies we believe have the best opportunity to become leaders in their respective verticals. For companies we’ve invested in to date, we expect them to grow in size and reach without any further investment on our part. We will apply the same methodology to future investments by choosing the top companies that will become leaders in their own verticals. As those companies grow, our royalties grow accordingly. Success comes down to financing the right companies, with the right management, in the right sectors. We think we are well on our way with the companies we’ve financed to date and look forward to expanding our portfolio as opportunities present themselves.
For more information and to read the company’s statement regarding potential risks visit www.fincannacapital.com
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