Well positioned to execute on opportunities for growth with approximately $85 million in cash at period end
Chestertown expansion operational with initial harvest yields and flower quality above expectations; anticipated to begin supplying the adult-use wholesale market before year end
Adult-use retail operations expected to commence in early 2024, pending regulatory approval
TORONTO, Nov. 29, 2023 /PRNewswire/ - RIV Capital Inc. ("RIV Capital" or the "Company") (CSE: RIV) (OTC: CNPOF), an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of brands in key strategic U.S. markets, today released its financial results for the three and six months ended September 30, 2023. As previously announced, due to a change in the Company's fiscal year end from March 31st to December 31st, the Company's current fiscal year consists of three quarters for a total of nine months, which began on April 1, 2023, and will end on December 31, 2023. Further details regarding the change in fiscal year end, including the length and ending dates of the Company's financial reporting periods, are available in the Company's Notice of Change in Year End prepared in accordance with Section 4.8 of National Instrument 48-102 and filed on the Company's SEDAR+ profile at www.sedarplus.com. All financial information in this press release is reported in U.S. dollars unless otherwise indicated.
Management Commentary
"We are incredibly proud to share that we submitted our application to transition to an adult-use license in New York," said Mike Totzke, Interim Chief Executive Officer and Chief Operating Officer of RIV Capital. "We were thrilled to advance this latest step in the process and remain eager to launch adult-use sales in the state. To prepare for our entry, we have significantly bolstered our New York footprint with our Chestertown facility expansion successfully coming online in the quarter."
"As regulatory progress has accelerated over the last few months, we are confident we will benefit from the favorable position we have established in New York. Our strong in-state relationships and foundation have paved the way for us to enter the adult-use market upon receipt of the necessary approvals. We firmly believe that the New York market is poised to become one of the biggest markets in the country and we can't wait to get started."
Eddie Lucarelli, Chief Financial Officer of RIV Capital, added, "Disciplined capital management continues to be at the forefront of our strategy, and with our pending adult-use entry in New York, we believe that we continue to be sufficiently capitalized to execute on our growth strategy. As the market evolves in New York, we intend to remain prudent in our deployment of capital and believe there will be more opportunities for us to further expand our operations to grow in step with the industry."
Regulatory Update
The Company anticipates entering the adult-use wholesale market by year-end, and anticipates that it will open its first adult-use retail dispensary in early 2024, followed by two additional adult-use retail dispensaries on or around July 1, 2024.
The Company views the expanding support for adult-use regulatory reform across the country, the Department of Health and Human Services recommendation that cannabis be rescheduled under the Controlled Substances Act and the Senate Committee on Banking, Housing and Urban Affairs' recent passage of the SAFER banking act to be positive and encouraging developments for the industry. With widespread illicit market issues across many states, the Company views this incremental regulatory progression as a crucial step to combat the unsafe conditions created by the illicit market and the pressure put on the legal cannabis market.
Strategic and Operational Update
Chestertown Greenhouse & Production Enhancements
Since the launch of expanded operations at the Chestertown, New York facility, the Company has yielded five harvests with quality and output above initial expectations. The Company is commissioning advanced equipment and automation technologies in the expanded facility, which it expects to significantly improve its production rate of high-quality flower and extract products. The additional lab and manufacturing capacity is expected to allow the Company to ramp up its research and development activities and capabilities as it focuses on further diversifying its product portfolio. Products produced from the expansion have entered the medical market through the Company's four medical retail locations, as well as third-party medical retail locations across the state.
Flagship Buffalo Facility Construction
Construction continues at the Company's indoor flagship facility in Buffalo, following receipt of regulatory approval from the Office of Cannabis Management (the "OCM") for the site during the quarter. The exterior elements of the structure are nearing completion and focus has shifted to commencing work on tenant improvements. This facility will more than double the Company's current cultivation capacity with the addition of indoor grow rooms specifically dedicated to growing premium flower. The Company will require additional OCM approval before the commencement of commercial operations.
Strategic Growth Committee Initiatives
The Strategic Growth Committee ("SGC") within the Company continues to pursue its mandate to identify initiatives to realize the potential of the Company's unique assets and leverage its robust balance sheet to drive value creation for shareholders. The SGC continues to make progress on these initiatives and looks forward to providing an update at the appropriate time.
Marketing and Product Development
The Company's commitment to growing Etain's brand presence beyond its retail dispensaries has been positive with Etain brand products found in approximately 90% of medical dispensaries in the state. Revenue generated from wholesale transactions grew by 20% quarter-over-quarter, reinforcing Etain's brand position in the New York cannabis market.
With new operational enhancements and technological improvements, the Company is currently undertaking the process of further diversifying its product and brand portfolio to better serve its existing medical customers and for anticipated entry into the adult-use market.
Financial Results for the Fiscal Quarter Ended September 30, 2023
The following is a summary of the Company's financial results for three and six months ended September 30, 2023, and 2022. Unless otherwise indicated, all financial highlights summarized in tables in this press release are presented in thousands of dollars, except share and per share amounts. All references to "$" are to United States dollars.
| Summary Operating Results
|
|
| Three months ended
Sep. 30, 2023
| Three months ended
Sep. 30, 2022
| Six months ended
Sep. 30, 2023
| Six months ended
Sep. 30, 2022
|
| Revenue
| $ 1,803
| $ 1,977
| $ 3,704
| $ 3,405
|
| Excise taxes
| (106)
| (124)
| (221)
| (211)
|
| Total revenue, net
| 1,697
| 1,853
| 3,483
| 3,194
|
| Cost of goods sold
| 1,851
| 906
| 3,442
| 1,689
|
| Gross profit excluding fair value items
| (154)
| 947
| 41
| 1,505
|
| Fair value items included in gross profit
| 205
| (58)
| 403
| (94)
|
| Gross profit
| 51
| 889
| 444
| 1,411
|
Selling, general, and administrative expenses
| 4,804
| 4,840
| 10,110
| 10,369
|
| Impairment of goodwill
| -
| 138,937
| -
| 138,937
|
| Operating loss
| (4,753)
| (142,888)
| (9,666)
| (147,895)
|
| Other income (loss)
| (3,785)
| (1,557)
| (8,074)
| 600
|
| Loss before taxes
| (8,538)
| (144,445)
| (17,740)
| (147,295)
|
| Income tax recovery
| (1,152)
| (2,121)
| (1,212)
| (1,497)
|
| Net loss
| $ (7,386)
| $ (142,324)
| $ (16,528)
| $ (145,798)
|
| Other comprehensive income (loss)
| 732
| 390
| 134
| (4,159)
|
| Total comprehensive loss
| $ (6,654)
| $ (141,934)
| $ (16,394)
| $ (149,957)
|
|
|
|
|
|
|
| Loss per share – basic
| $ (0.05)
| $ (0.84)
| $ (0.12)
| $ (0.88)
|
| Loss per share – diluted
| $ (0.05)
| $ (0.84)
| $ (0.12)
| $ (0.88)
|
|
|
|
|
|
|
Summary Cash Flows and Financial Position Data
|
| Six months ended
Sep. 30, 2023
| Six months ended
Sep. 30, 2022
|
|
Net cash flows from operating activities
| $ (8,841)
| $ (7,256)
|
|
Net cash flows from investing activities
| 17,260
| (168,096)
|
|
Net cash flows from financing activities
| (1,173)
| 23,994
|
|
Net increase (decrease) in cash
| $ 7,246
| $ (151,358)
|
|
Effect of foreign exchange rate movements on cash held
| 282
| (1,928)
|
|
Cash, beginning of fiscal period(1)
| 77,468
| 318,706
|
|
Cash, end of fiscal period
| $ 84,996
| $ 165,420
|
|
|
|
|
|
| As at
Sep. 30, 2023
| As at
Mar. 31, 2023
|
|
Current assets
| $ 98,450
| $ 111,906
|
|
Non-current assets
| 152,392
| 149,912
|
|
Total assets
| $ 250,842
| $ 261,818
|
|
|
|
|
|
Current liabilities
| $ 5,351
| $ 6,828
|
|
Non-current liabilities
| 153,075
| 146,143
|
|
Total liabilities
| $ 158,426
| $ 152,971
|
|
|
|
|
|
Total shareholders' equity
| $ 92,416
| $ 108,847
|
|
(1)
| At the beginning of the fiscal period for the six months ended September 30, 2023, the Company had $20.4 million of surplus cash invested in instruments with a maturity of greater than three months, which was classified separate from cash on the Company's consolidated statements of financial position as at March 31, 2023. During the six months ended September 30, 2023, these investments matured and were reclassified to cash upon reinvestment in term deposits with a maturity of less than three months.
|
Summary of Financial Highlights:
- The Company reported revenue, net of excise taxes, of $1.7 million for CQ3 2023, compared to $1.9 million for the three months ended September 30, 2022 ("CQ3 2022"). Retail revenue of $1.5 million was generated from Etain, LLC's dispensaries in Manhattan, Kingston, Syracuse, and Yonkers, and wholesale revenue of $0.3 million was generated from sales of Etain-branded products to other registered organizations in New York. Medical cannabis retail revenue remains under pressure due to the launch of the adult-use market in New York and the proliferation of the illicit market in the State.
- The Company reported cost of goods sold (which excludes unrealized fair value changes included in biological assets and realized fair value changes included in inventory sold) of $1.9 million for CQ3 2023, compared to $0.9 million for CQ3 2022. Cost of goods sold for CQ3 2023 was impacted by the continued expansion and ramp-up of Etain's operations ahead of its anticipated transition to the adult-use market later this year, as well as an inventory write-down on intermediate oils.
- The Company reported a gross profit of $0.1 million for CQ3 2023, compared to a gross profit of $0.9 million for CQ3 2022.
- The Company reported selling, general, and administrative ("SG&A") expenses of $4.8 million for CQ3 2023, in line with SG&A expenses of $4.8 million for CQ3 2022. The Company has maintained operational expense discipline to keep consistent SG&A expenses relative to the comparative period.
- The Company reported other losses of $3.8 million for CQ3 2023, compared with $1.6 million for CQ3 2022, mostly related to non-cash items.
- The Company reported an income tax recovery of $1.2 million for CQ3 2023, compared with an income tax recovery of $2.1 million for CQ3 2022.
- The Company reported a net loss of $7.4 million, and a basic and diluted loss per share of $0.05, for CQ3 2023, compared with a net loss of $142.3 million, and a basic and diluted loss per share of $0.84, for CQ3 2022. The net loss in CQ3 2022 was impacted by the goodwill impairment charge recognized by the Company in that period.
- The Company reported other comprehensive income of $0.7 million for CQ3 2023, compared with $0.4 million for CQ3 2022.
- CQ3 2023 total comprehensive loss was $6.7 million, compared with $141.9 million for CQ3 2022.
An audio-only recording of RIV Capital's conference call will be available on the Company's website at www.rivcapital.com/investors.
This press release should be read in conjunction with the Company's unaudited condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three and six months ended September 30, 2023, which are available under the Company's profile on SEDAR at www.sedarplus.com and on the Company's website at www.rivcapital.com/investors.
For more information regarding the Company and its portfolio companies, please refer to the MD&A and the Company's annual information form ("AIF") dated June 14, 2023, also available under the Company's profile on SEDAR at www.sedarplus.com and on the Company's website at www.rivcapital.com/investors.
About RIV Capital
RIV Capital is an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of brands in key strategic U.S. markets. Backed by in-house expertise and cannabis domain knowledge, RIV Capital aims to grow its own brands and partner with established U.S. cannabis operators and brands to bring them to new markets and build market share. RIV Capital established the foundational building blocks of its active U.S. strategy with its previously announced acquisition of Etain. Through its strategic relationship with The Hawthorne Collective, Inc. ("The Hawthorne Collective"), a subsidiary of The ScottsMiracle-Gro Company ("ScottsMiracle-Gro"), RIV Capital is The Hawthorne Collective's preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.
Forward Looking Statements
This news release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of RIV Capital and its portfolio companies with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding the Company's strategies, objectives, goals, opportunities and plans, including in respect of Etain and its product portfolio; the Company's liquidity position, including its ability to finance its growth objectives in New York and long-term expansion plans; the Company's expectations for creation of multiple avenues to realize shareholder value; the Company's expectations regarding the U.S. cannabis market; expectations regarding legal cannabis market opportunities in New York and the benefits of the New York cannabis market; the ability of the Company to capitalize on its assets, including its balance sheet, strategic partner and vertical licenses in New York; expectations regarding its launch of adult-use sales in the state of New York, including opening of adult-use dispensaries; expectations regarding the expansion of the Chestertown facility, and the impact of the expansion on the existing cultivation and production footprint; expectations regarding timing for the supply of the adult-use wholesale market; plans to update Etain's existing retail locations and the potential to build new locations; the Company's expectations regarding Etain's position in the New York cannabis market; the Company's expectations and plans regarding Etain's business, including its market share, sales, brand, products and locations; the Company's expectations regarding growth opportunities; challenges faced by the existing U.S. medical cannabis market; the Company's expectations with respect to the development of the Buffalo flagship facility and expectations related thereto, including timing for completion thereof and the projected increase in cultivation capacity; the Company's expectations regarding its capital allocation strategy; the benefits of the strategic partnership with The Hawthorne Collective and Scotts Miracle-Gro; and expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although RIV Capital believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of RIV Capital or its portfolio companies.
Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the Company's ability to execute its go-forward strategy; stock market volatility; changes in the business activities, focus and plans of the Company, Etain and the Company's investees and the timing associated therewith; the timing of any changes to federal laws in the U.S. to allow for the general cultivation, distribution, and possession of cannabis; regulatory and licensing risks; changes in cannabis industry growth and trends; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation, including RIV Capital's interpretation of such regulation; public opinion and perception of the cannabis industry; divestiture risks; and the risk factors set out in RIV Capital's MD&A and AIF filed with the Canadian securities regulators and available on RIV Capital's profile on SEDAR+ at www.sedarplus.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although RIV Capital has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. RIV Capital does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
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SOURCE RIV Capital Inc.
