Cash balance of $212.5 million as at June 30th after completion of multiple monetization events during the quarter
PharmHouse Credit Facility fully settled; Company anticipates receiving ~$6.5 million distribution upon termination of CCAA proceedings
Strategic investment from The Hawthorne Collective announced subsequent to quarter end, further strengthening the Company's balance sheet and allowing for future platform differentiation
Company continues to focus on acquisition and investment opportunities to establish and develop multistate cannabis operating and brand platform
RIV Capital" or the "Company") (TSX: RIV) (OTC: CNPOF) today released its unaudited condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") for the three months ended June 30, 2021 ("Q1 2022").
TORONTO, Aug. 16, 2021 "Throughout the first quarter, we remained focused on identifying and evaluating opportunities in the US cannabis market," said Narbé Alexandrian, President and CEO, RIV Capital. "Last week's announcement of a US$150 million investment in RIV Capital from The Hawthorne Collective, a subsidiary of The ScottsMiracle-Gro Company, was the first step in executing on our growth strategy. It strengthens our balance sheet and leverages RIV Capital's cannabis domain knowledge with ScottsMiracle-Gro's expertise in operations, R&D, sales, and distribution."
"In the coming quarters, we plan to work through our pipeline of near-term prospects with the goal of executing our US launch strategy to provide sustainable, long-term value and contribute to the development of a leading multistate cannabis operator and brand platform," added Alexandrian.
Q1 2022 Financial Results1
Select Summary of Quarterly Results | Three months | Three months | ||
30-Jun-21 | 30-Jun-20 | |||
Operating income (before equity method investees and fair value changes) | $ | 439 | $ | 2,662 |
Operating expenses | 2,510 | 2,669 | ||
Net operating loss (before equity method investees and fair value changes) | (2,071) | (7) | ||
Equity method investees and fair value changes(1) | (36,532) | 2,063 | ||
PharmHouse-related charges (recovery) | (1,935) | 4,418 | ||
Net operating loss | (36,668) | (2,362) | ||
Net loss | (30,421) | (3,426) | ||
Other comprehensive income (loss) (net of tax) | (492) | 10,701 | ||
Total comprehensive income (loss) | (30,913) | 7,275 | ||
Basic loss per share ("EPS") | $ | (0.21) | $ | (0.02) |
Diluted EPS | $ | (0.21) | $ | (0.02) |
Cash flows used in operating activities | (20,247) | (807) | ||
Cash flows provided by (used in) investing activities | 104,816 | (1,927) | ||
Cash flows provided by (used in) financing activities | 1 | (78) | ||
(1) Excludes the Company's share of loss on its investment in PharmHouse common shares, which is reflected in "PharmHouse-related charges (recovery)" | ||||
"One of our primary objectives during the first quarter was optimizing our balance sheet for our strategic shift to the US," said Eddie Lucarelli, Chief Financial Officer, RIV Capital. "With approximately $112.3 million in total proceeds received from monetization events, combined with the additional capital and new strategic partnership we recently announced, we are uniquely positioned to build a differentiated platform in the world's most exciting cannabis market."
________________________ |
1 The financial highlights in this summary are presented in CA$ thousands, unless otherwise noted. |
Operating Income and Expenses
Three months ended | Three months ended | |||
30-Jun-21 | 30-Jun-20 | |||
Royalty, interest, and lease income (before provisions) | $ | 566 | $ | 2,667 |
Provision for credit losses on interest and royalty receivables | (127) | (5) | ||
Operating income | $ | 439 | $ | 2,662 |
General and administrative expenses | $ | 1,666 | $ | 1,342 |
Consulting and professional fees | 394 | 376 | ||
Share-based compensation | 400 | 909 | ||
Depreciation and amortization expense | 50 | 42 | ||
Operating expenses | $ | 2,510 | $ | 2,669 |
Net operating loss | $ | (2,071) | $ | (7) |
The Company reported operating income (before equity method investees and fair value changes) of $0.4 million for the quarter, net of a provision for expected credit losses of $0.1 million. Operating income primarily consisted of royalty and interest income (before provisions for expected credit losses) of $0.5 million generated from the Company's royalty and debenture agreements with Agripharm Corp. ("Agripharm"), 10831425 Canada Ltd. d/b/a/ Greenhouse Juice Company ("Greenhouse Juice"), and NOYA Cannabis Inc. ("NOYA", formerly known as Radicle Medical Marijuana Inc.), as well as lease income of $0.1 million generated from the Company's lease agreement with The Tweed Tree Lot Inc. ("Tweed Tree Lot") related to a property that the Company formerly owned in New Brunswick. During the quarter, the Company closed a definitive purchase and sale agreement to sell the New Brunswick property to Tweed Tree Lot in exchange for cash consideration of approximately $4.0 million.
Operating expenses were $2.5 million for the quarter. General and administrative expenses were $1.7 million for the quarter, primarily attributable to employee compensation and other public company costs. Consulting and professional fees were $0.4 million for the quarter, primarily attributable to legal fees for general corporate and securities matters, and audit, tax, and other professional services.
Equity Method Investees and Fair Value Changes
Three months ended | Three months ended | |||
30-Jun-21 | 30-Jun-20 | |||
Share of income (loss) from equity method investees | ||||
PharmHouse | $ | - | $ | (4,418) |
Other | (347) | 433 | ||
Net change in fair value of financial assets at FVTPL | (36,185) | 1,630 | ||
Other PharmHouse-related charges | ||||
Change in provision for credit losses on financial guarantee liability | 1,935 | - | ||
Equity method investees and fair value changes | $ | (34,597) | $ | (2,355) |
The Company's share of loss from equity method investees was $0.3 million for the quarter. Greenhouse Juice, High Beauty, Inc. ("High Beauty"), LeafLink Services International ULC ("LeafLink International"), and NOYA represented the Company's equity method investees for which a share of income or loss was recognized for the quarter.
The Company also reported a net decrease in the fair value of financial assets that are reported at fair value through profit or loss ("FVTPL") of $36.2 million for the quarter. This decrease was primarily driven by the fair value decrease realized on the disposition of the Company's equity interest in Canopy Growth Corporation ("Canopy Growth"). During the quarter, the Company disposed of approximately 3.6 million shares of Canopy Growth at an average price of $29.96 per share for total proceeds of approximately $106.8 million.
Net Change in Fair Value of Financial Assets at FVTOCI
Three months ended |
Three months ended | |||
30-Jun-21 |
30-Jun-20 | |||
Nova Cannabis | $ | (267) | $ | - |
Headset | (100) | (200) | ||
Zeakal | (200) | (600) | ||
Other | - | 11,524 | ||
Gross change in fair value of financial assets at FVTOCI | $ | (567) | $ | 10,724 |
OCI income tax recovery | (75) | - | ||
Net change in fair value of financial assets at FVTOCI(1) | $ | (492) | $ | 10,724 |
(1) In addition to the fair value change noted above, the historical net change in fair value of financial assets at FVTOCI also includes FX gains/losses related to certain equity method investees denominated in USD currency | ||||
The Company reported a total comprehensive loss of $30.9 million for the quarter, compared with total comprehensive income of $7.3 million for the same period last year. The net change in the fair value of financial assets that are reported at fair value through other comprehensive income ("FVTOCI") was a decrease of $0.5 million for the quarter.
As at | As at | |||
Period ended | 30-Jun-21 | 31-Mar-21 | ||
Cash | $ | 212,452 | $ | 127,882 |
Equity method investees | 7,019 | 7,366 | ||
Financial assets at FVTPL | 27,500 | 164,030 | ||
Financial assets at FVTOCI | 21,200 | 23,218 | ||
Other assets | 14,933 | 12,866 | ||
Total assets | $ | 283,104 | $ | 335,362 |
Financial guarantee liability | $ | - | $ | 3,000 |
Other liabilities | 2,112 | 20,902 | ||
Total shareholders' equity | 280,992 | 311,460 | ||
Total liabilities and shareholders' equity | $ | 283,104 | $ | 335,362 |
RIV Capital ended the quarter with $212.5 million of cash on hand. During the quarter, the Company made a $7.5 million payment in connection with the PharmHouse Credit Facility (see below) and settled a $17.6 million tax liability, which primarily related to the capital gains realized on the transaction between RIV Capital and Canopy Growth (among others) that closed in February 2021. In connection with the disposition of the Canopy Growth shares (discussed above) at an average disposition price that was below the tax basis of said shares, the Company recognized an income tax receivable on its statement of financial position as at June 30, 2021, related to its expected recovery of cash taxes paid due to the capital loss realized on its disposition of Canopy Growth shares.
The Hawthorne Collective Investment Summary
Subsequent to Q1 2022, the Company announced that it entered into a definitive agreement with The Hawthorne Collective, a newly-formed cannabis-focused subsidiary of The Scotts Miracle-Gro Company ("ScottsMiracle-Gro") (NYSE: SMG) for the purchase of a US$150.0 million unsecured convertible note from RIV Capital (the "Investment"). The Investment establishes RIV Capital as The Hawthorne Collective's preferred vehicle for cannabis-related investments not currently under the purview of The Hawthorne Gardening Company, ScottsMiracle-Gro's subsidiary focused on indoor and hydroponic growing supplies. RIV Capital's strategy remains the same, as the Company continues to focus on executing on its previously disclosed plans to acquire, invest in, launch, and/or develop US assets to build a multistate cannabis operating and brand platform.
Any investments or acquisitions in the US cannabis market may be inconsistent with the rules and policies of the Toronto Stock Exchange (the "TSX"). The completion of the Investment is conditional on the Company's ability to delist its common shares from the TSX and list its common shares on the Canadian Securities Exchange (the "CSE"), which it intends to complete prior to the closing of the Investment in order to compliantly execute its go-forward corporate strategy. Accordingly, the Company has submitted an application to voluntarily delist its common shares from the TSX and has received conditional approval to list on the CSE. The Company expects the common shares to be delisted from the TSX at the close of market on August 24, 2021, and for trading on the CSE under the symbol "RIV" to commence on or before August 24, 2021. The Investment is expected to close on or around August 24, 2021, following the completion of the stock exchange transition.
PharmHouse Update
During the quarter, PharmHouse Inc. ("PharmHouse"), through its Sale and Investor Solicitation Process, closed the sale of its greenhouse facility (the "PharmHouse Sale"). Concurrent with the closing of the PharmHouse Sale, the Company made a payment of approximately $7.5 million to the lenders (the "Lenders") of PharmHouse's $90.0 million non-revolving syndicated credit facility (the "PharmHouse Credit Facility"), which the Company had guaranteed. The net proceeds received from the PharmHouse Sale, when combined with this $7.5 million payment and the previously-announced $25.0 million payment made by the Company to the Lenders in March 2021, satisfied all obligations outstanding pursuant to the PharmHouse Credit Facility.
As a result, the PharmHouse Credit Facility was terminated and cancelled, and the Company is entitled to any cash available for distribution upon termination of PharmHouse's proceedings under the Companies' Creditors Arrangement Act ("CCAA"). Accordingly, the Company recognized a financial asset on its statement of financial position as at June 30, 2021, based upon the proceeds expected to be available for distribution of approximately $6.5 million. The Company anticipates the CCAA proceedings to be terminated, and the distribution to be received, in the coming weeks.
Q1 2022 Portfolio Updates
The following represents a brief summary of other developments in the RIV Capital portfolio during and subsequent to Q1 2022:
This press release should be read in conjunction with the Company's unaudited condensed interim consolidated financial statements and MD&A for the three months ended June 30, 2021, which are available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.rivcapital.com/investors. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
For more information regarding the Company and its portfolio companies, please refer to the MD&A and the Company's annual information form dated June 28, 2021 ("AIF"), also available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.rivcapital.com/investors.
About RIV Capital
RIV Capital is an investment and acquisition company specializing in cannabis with a portfolio of 13 companies across various segments of the cannabis value chain. We believe that bringing together people, capital, and ideas raises the potential of the entire cannabis industry. By leveraging our industry insights, in-house expertise, and thesis-driven approach to investing, we aim to provide shareholders with exposure to specialized and disruptive cannabis companies.
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 timing and availability of the financial results of the Company and the Company's earnings call; the Company's expected credit losses; the anticipated termination of the CCAA proceedings relating to the PharmHouse Credit Facility and the proceeds and timing related thereto; the Company's plan to invest in, launch and/or develop U.S. assets to build a multistate cannabis operating and brand platform and the value to be derived therefrom; whether and when the Investment will be consummated; the anticipated benefits of the Investment; the Company's expectation that it will be ScottsMiracle-Gro's preferred vehicle for investments not under the purview of The Hawthorne Gardening Company; the anticipated proceeds from the Investment net of transaction costs; the delisting of the Company's securities from the TSX and the anticipated listing of its securities on the CSE and the timing related thereto; the Company obtaining and/or satisfying customary approvals and conditions; 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 parties' ability to consummate the Investment; the ability of the parties to satisfy, in a timely manner, all conditions to the closing of the Investment; the Company's ability to execute its go-forward strategy; credit, liquidity and additional financing risks for the Company and its investees; the Company's ability to delist from the TSX prior to the completion of the Investment and list its securities on the CSE; stock market volatility; changes in the business activities, focus and plans of the Company and its 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 annual information form for the year ended March 31, 2021 filed with the Canadian securities regulators and available on RIV Capital's profile on SEDAR at www.sedar.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.
| Last Trade: | US$0.08 |
| Daily Change: | -0.01 -13.32 |
| Daily Volume: | 33,804 |
| Market Cap: | US$11.190M |
October 24, 2024 October 16, 2024 October 10, 2024 | |
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