Tidal Royalty Corp. (CSE: RLTY.U) has entered into a letter of intent as of July 8, 2018, with an established licensed operator based in Las Vegas, Nev. (referred to as the Nevada cannabis company) to finance the expansion of the company's operations in the state.
The Nevada Cannabis Company is led by a seasoned management team with experience in the cannabis industry, as well as deep ties to the music industry. As part of the transaction, the company will implement a newly-developed cultivation technology that will effectively double the available cultivation canopy (from 20,000 sq. ft. to 40,000 sq. ft.) in its central Las Vegas facility. The Nevada Cannabis Company distributes its products through its wholly-owned dispensary in Las Vegas, as well as through a network of 3rd party dispensaries throughout Nevada.
Pursuant to the LOI, Tidal Royalty will provide the Nevada Cannabis Company with up to US $15MM to finance the company's expansion plans and to establish a new processing facility that will enable it to bring a broader range of products to market. In return, the Nevada Cannabis Company will pay Tidal Royalty 15% of net sales generated by all operations in Nevada in perpetuity. This includes both net sales generated from existing cultivation and dispensary sales, as well as incremental sales generated by the planned expansion.
"We are excited to announce this LOI," said Paul Rosen, CEO & Chairman of Tidal Royalty. "The combination of existing profitable operations, marketing expertise, sophisticated cultivation technology and a proven ability to win market share gives us great confidence that this company will experience continued growth and success in one of the largest cannabis markets in the US and the world. It is an archetypical company that we look to support with our innovative financing model, and it stands to benefit significantly from Tidal Royalty's financial support."
With over 40MM tourists visiting the state each year &#8212; in addition to a population of 3MM &#8212; Nevada has the potential to be one of the largest adult-use markets in the US. According to Marijuana Business Daily, the state's adult-use market is expected to grow to US$600MM by the end of the 2018. The vast majority of that revenue is expected to be generated in Las Vegas.
The LOI includes an exclusivity period during which the Nevada Cannabis Company will not negotiate with any other party. It further provides Tidal Royalty with a right of first refusal on any future financing with respect to the company or any of its affiliates. Closing of the transaction contemplated by the LOI is subject to, among other things, the satisfactory completion of Tidal Royalty's diligence investigation, which is currently underway. Tidal Royalty expects to announce further details in respect to the contemplated transaction with the Nevada Cannabis Company upon the execution of a definitive agreement between the parties and the receipt of necessary regulatory approvals.
This is the 3rd letter of intent that Tidal Royalty has announced in the past 2 weeks. With this LOI, the company has entered into letters of intent for expansion projects in California, Nevada and Massachusetts. In addition, Tidal Royalty is in the process of evaluating multiple additional opportunities across the U.S., including in California, Florida, Arizona, Ohio, Michigan, New York and Nevada. Tidal Royalty intends to provide further information on those discussions when the parties reach an agreement and execute an LOI.
Tidal Royalty has raised approximately $40MM to date by way of private placements, which it intends to use primarily for royalty financings and for general corporate purposes. The company was founded by experienced cannabis industry executives and provides expansion financing to licensed U.S. operators across multiple verticals, including cultivation, processing and manufacturing, dispensing, and ancillary services. Tidal Royalty directs interested stakeholders to visit its website at www.tidalroyalty.com to view the company's corporate presentation and the CSE's website to view the company's listing statement.
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