Redfund Capital

Providing Financing to Medical Cannabis Companies Around the Globe

This profile is part of a paid investor education campaign.*

Overview

Redfund Capital Corporation (CSE:LOAN) is a Canadian merchant bank that provides medical cannabis companies across the globe with funding solutions.

The cannabis industry’s annual report for 2017 estimated that $4.75 billion would be spent on medical cannabis by 2018 and $6 billion on recreational cannabis by 2023. Both forms of cannabis will make approximately $24 billion by 2025. However, federally regulated banks in Canada are reluctant to do business with cannabis companies and revenue producing cannabis companies have difficulties obtaining loans from most banks. Additionally, the US federal government still treats cannabis as an illegal substance and banks can be accused of money laundering for assisting cannabis companies.

As a merchant bank for the medical cannabis industry, Redfund provides an alternative source of capital through loans to help cannabis companies finance themselves, build their valuation and grow their businesses without diluting their equity prematurely. Merchant banks predominantly provide international finance services by offering business loans and underwriting. Additionally, merchant banks sometimes provide the same services as investment banks do, but they generally don’t deal with the public.

Redfund’s portfolio consists of 10 to 15 companies that are currently generating a revenue of $2 million or more.

Additionally, Redfund expects to have a return on investment (ROI) of approximately $54.7 million by 2019 on five of their initial clients.

Redfund’s CEO Meris Kott has been helping companies go public for over 25 years. Additionally, management owns approximately 15 percent of the shares in the company.

Company Highlights

  • Invest in medical cannabis companies around the world that are currently generating $2 million or more in revenue.
  • Nine Step screening process and collateral requirements de-risk the company’s investment in their clients.
  • Fourteen percent compounded interest on fixed two year term loans.
  • Loans conversions on valuation estimates on initial loans of approximately $54.7 million by 2019 on five initial clients alone.
  • Management holds approximately 15 percent of the company shares.

Redfund’s Solution for a Growing Medical Cannabis Market

Understanding the financing needs for the growing medical cannabis industry, Redfund is providing cannabis companies an alternative source of capital by offering loan facilities without diluting their equity. Redfund invests in companies that are currently generating over $2 million in revenue or have sales in their pipelines. Loans are offered to successful applicants in fixed two year terms and are compounded monthly by 14 percent.

Successful applicants are also required to collateralize their loan with strong assets that are two to three times more than the value of the loan. Additionally, Redfund has the option to convert the loan, in its entirety or in part, at a 10 percent discount to previous financing and retains the right of first refusal on all financing of debt or equity for the term of the loan. Finally, Refund assists companies wishing to be listed on a public market.

Redfund’s Application Process

Redfund is committed to investing in medical cannabis companies that are already generating revenue. However, applicants must also pass the company’s rigorous nine-step screening process:

  1. Each application provides the banking committee with a business plan and current financials for review and approval.
  2. Once approved, terms are provided.
  3. Upon signing of the terms, the company provides potential assets as collateral and provides document stating how the proceeds will be used.
  4. Asset list is reviewed and forwarded to counsel for vetting.
  5. After review by counsel and a legal opinion has been offered on collateral, the banking committee reviews the materials a second time.
  6. Upon approval, a promissory note is issued to the company.
  7. Promissory note is signed by the applicant and is placed escrow with counsel.
  8. A final review of the assets is done by counsel and closing documents are drawn.
  9. Closing and funding of the loan is completed with the signing of the contract. Applicants are required to submit a monthly report to Redfund.

The company’s due diligence in their screening process de-risks the investment they are making in the applicants and adds value to the applicant. The applicant’s debt or loan has the potential to be sold off to another bank as well.

ROI Results

Based on materials submitted by clients, Redfund estimates that for its five initial clients it will see a conversion rate of over 200 percent totalling approximately $54.7 million by 2019.

Management

Meris Kott — CEO & Director

Meris Kott has been in international Investment Banking & Financial Consultancy with a focus on targeting companies for investment and acquisition purposes for large multinational corporations. Kott has continued providing global bridges for public companies for 25 years and she believes all companies should create global footprints. Presently, she is a managing partner at Ludgate Hill Partners in Vancouver, Canada. Kott has an economics degree from McGill University.

Ryan Cheung — CFO

Ryan Cheung is the founder and managing partner of MCPA Services Inc., chartered professional accountants, in Vancouver, B.C. Cheung serves as a director and/or officer or consultant for public and private companies providing financial reporting, taxation and strategic guidance.

Eugene Hodgson — Director

Eugene Hodgson is an accomplished Senior Executive and has worked in the public sector with both the BC and NWT Governments. Hodgson served on the Board of Directors of various companies including Grandfield Pacific Corporation, Arimex Resources Inc., Sea Breeze Power Corp., Silvermex Resources Inc., Chair of Pacific Cascade Minerals and Director of Timmins Gold Corp. He graduated from the University of Calgary with a BA in Political Science.

Amanda de Freitas — Director

Amanda de Freitas is a Toronto based regulatory compliance executive and lobbyist and specializes in Canadian cannabis legislation. She is the CEO of Cannaceutical Canada Ltd, a management consulting firm that focuses on global medical cannabis supply transactions and deal development. Amanda is also President and founder of CannaBizSolutions Company, a firm that’s primary  focus is on domestic medical and adult use cannabis businesses, helping assist them with their regulatory compliance, licensing, corporate and product development strategies. She is a frequent panelist and speaker at Canadian Medical Cannabis conferences.


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