Comprehensive income of $67.3 million for fiscal year
Strong balance sheet following successful
monetization of three portfolio assets
Closing of milestone transaction with Canopy
Growth positions Company to execute strategic pivot to U.S.
cannabis market
Company fully settles obligations pursuant to
PharmHouse Credit Facility
TORONTO, June 3, 2021 /CNW/ - RIV Capital Inc. ("RIV
Capital" or the "Company") (TSX: RIV) (OTC: CNPOF) today
released its financial results for the fourth quarter ("Q4
2021") and fiscal year ended March 31,
2021 ("FY 2021").
"Our quarter and fiscal year were highlighted by the closing of
our milestone transaction with Canopy Growth, paving the way for
RIV Capital to launch into the U.S. market," said Narbé
Alexandrian, President and CEO, RIV
Capital. "This transaction returned several multiples on
invested capital and provided us with the strategic flexibility
needed to pivot our business model. With a revitalized balance
sheet and our new strategy in place, we have been actively sourcing
opportunities in the world's largest and most exciting cannabis
market, and continue to believe that this next chapter will create
significant value for our shareholders in the quarters to
come."
CGC Transaction
On February 23, 2021, the Company
closed its previously-announced milestone transaction with Canopy
Growth Corporation ("Canopy Growth"), in which the Company
disposed of certain financial assets held in TerrAscend Corp.
("TerrAscend"), TerrAscend Canada Inc. ("TerrAscend
Canada"), The Tweed Tree Lot Inc. ("Tweed Tree Lot"),
and Les Serres Vert Cannabis Inc. ("Vert Mirabel") in exchange for $118.4 million in cash, approximately 3.65
million common shares of Canopy Growth, and the cancellation of the
multiple voting shares and subordinated voting shares of the
Company held by Canopy Growth (collectively, the "CGC
Transaction"). As a result of the completion of the CGC
Transaction, the Company's dual class share structure was
eliminated.
The proceeds received from the CGC Transaction represented a
substantial return on invested capital for the Company. The total
fair value of the consideration received was measured at
$335.9 million upon closing of the
CGC Transaction. The Company's financial results for Q4 2021
reflect the impact of fair valuing the disposed assets based on the
fair value of the consideration received for each asset, as well as
the derecognition of the disposed assets and the corresponding
recognition of the consideration received.
As previously communicated, upon completion of the CGC
Transaction, RIV Capital formally shifted its strategic focus to
pursue potential material investments in, or acquisitions of,
operating businesses in the U.S. cannabis market. The Company
believes that as a result of the relative size of the addressable
market and favourable industry trends, as well as unique current
regulatory and capital markets conditions, deploying capital in the
U.S. cannabis sector represents the greatest value creation
opportunity for its shareholders. As the Company's potential future
investments in, or acquisitions of, U.S. cannabis businesses may be
inconsistent with the policies of the Toronto Stock Exchange (the
"TSX"), the Company anticipates that it will de-list its
securities from the TSX and list its securities on a stock exchange
that does not prohibit such investments or acquisitions. The
Company expects to provide an update on the de-listing in due
course.
Since the announcement of the CGC Transaction in December 2020, the Company has aimed to maximize
its available cash on hand in order to enhance its relative
advantage in pursuing potential opportunities in the U.S. cannabis
market, where access to capital continues to be constrained
relative to more mature sectors with fewer regulatory obstacles.
Accordingly, during Q4 2021, the Company commenced the process of
divesting the Canopy Growth shares received as consideration in the
CGC Transaction. As of the date of this press release, the Company
has sold all 3.65 million Canopy Growth shares for net proceeds of
approximately $110.0 million.
Q4 2021 Financial
Results[1]
1 The
financial highlights in this summary are presented in CA$
thousands, unless otherwise noted.
|
|
|
|
Select Summary of
Quarterly Results
|
Three months
ended
|
Three months
ended
|
|
31-Mar-21
|
31-Mar-20
|
Operating income
(before equity method investees and fair value changes)
|
$
748
|
$
2,589
|
Operating
expenses
|
7,890
|
3,484
|
Net operating loss
(before equity method investees and fair value changes)
|
(7,142)
|
(895)
|
Equity method
investees and fair value changes(1)
|
(19,857)
|
(29,656)
|
Other
PharmHouse-related charges
|
2,800
|
(1,015)
|
Net operating
loss
|
(24,199)
|
(31,566)
|
Net loss
|
(21,478)
|
(30,515)
|
Other comprehensive
income (loss) (net of tax)
|
86,324
|
(6,280)
|
Total comprehensive
income (loss)
|
64,846
|
(36,795)
|
|
|
|
Basic earnings (loss)
per share ("EPS")
|
$
(0.13)
|
$
(0.16)
|
Diluted
EPS
|
$
(0.13)
|
$
(0.16)
|
|
|
|
Cash flows used in
operating activities
|
(5,278)
|
(686)
|
Cash flows provided
by (used in) investing activities
|
94,142
|
(2,335)
|
Cash flows provided
by financing activities
|
1,023
|
67
|
|
|
|
|
Twelve
months ended
|
Twelve
months ended
|
|
31-Mar-21
|
31-Mar-20
|
Operating income
(before equity method investees and fair value changes)
|
$
618
|
$
11,922
|
Operating
expenses
|
15,505
|
19,303
|
Net operating loss
(before equity method investees and fair value changes)
|
(14,887)
|
(7,381)
|
Equity method
investees and fair value changes(1)
|
(16,874)
|
(32,323)
|
Other
PharmHouse-related charges
|
(118,681)
|
(2,253)
|
Net operating
loss
|
(150,442)
|
(41,957)
|
Net loss
|
(133,880)
|
(40,566)
|
Other comprehensive
income (loss) (net of tax)
|
201,201
|
(77,560)
|
Total comprehensive
income (loss)
|
67,321
|
(118,126)
|
|
|
|
Basic EPS
|
$
(0.72)
|
$
(0.22)
|
Diluted
EPS
|
$
(0.72)
|
$
(0.22)
|
|
|
|
Cash flows used in
operating activities
|
(8,093)
|
(7,666)
|
Cash flows provided
by (used in) investing activities
|
88,232
|
(50,755)
|
Cash flows provided
by financing activities
|
1,019
|
962
|
|
|
|
(1) Excludes the
Company's share of loss on its investment in PharmHouse common
shares, which is reflected in "PharmHouse-related
charges"
|
"Throughout the fourth quarter, we maintained a dual focus on
successfully closing our milestone transaction with Canopy Growth,
while managing our liability exposure on PharmHouse," said
Eddie Lucarelli, Chief Financial
Officer, RIV Capital. "With the CGC
Transaction complete and the PharmHouse Credit Facility fully
settled, our rejuvenated balance sheet puts us in an advantageous
position to capitalize on the growing momentum in the U.S. cannabis
market."
Operating Income and Expenses
|
|
|
|
Three months
ended
|
Three months
ended
|
|
31-Mar-21
|
31-Mar-20
|
Royalty, interest,
and lease income (before provisions)
|
$
844
|
$
2,858
|
Provision for credit
losses on interest and royalty receivables
|
|
|
PharmHouse
|
-
|
-
|
Other
|
(96)
|
(269)
|
Operating
income
(before equity method investees and fair value
changes)
|
$
748
|
$
2,589
|
|
|
|
General and
administrative expenses
|
$
1,972
|
$
1,330
|
Consulting and
professional fees
|
685
|
866
|
Share-based
compensation
|
500
|
1,246
|
Depreciation and
amortization expense
|
46
|
42
|
Restructuring
costs
|
4,687
|
-
|
Operating
expenses
|
$
7,890
|
$
3,484
|
|
|
|
Net operating
loss
(before equity method investees and fair value
changes)
|
$
(7,142)
|
$
(895)
|
|
|
|
|
Twelve
months ended
|
Twelve
months ended
|
|
31-Mar-21
|
31-Mar-20
|
Royalty, interest,
and lease income (before provisions)
|
$
13,430
|
$
12,191
|
Provision for credit
losses on interest and royalty receivables
|
|
|
PharmHouse
|
(8,939)
|
-
|
Other
|
(3,873)
|
(269)
|
Operating
income
(before equity method investees and fair value
changes)
|
$
618
|
$
11,922
|
|
|
|
General and
administrative expenses
|
$
5,582
|
$
6,630
|
Consulting and
professional fees
|
1,853
|
3,470
|
Share-based
compensation
|
934
|
9,033
|
Depreciation and
amortization expense
|
183
|
170
|
Restructuring
costs
|
6,953
|
-
|
Operating
expenses
|
$
15,505
|
$
19,303
|
|
|
|
Net operating
loss
(before equity method investees and fair value
changes)
|
$
(14,887)
|
$
(7,381)
|
|
|
|
The Company reported operating income (before equity method
investees and fair value changes) of $0.7
million for the quarter. Operating income primarily
consisted of royalty and interest income (before provisions for
expected credit losses) of $0.7
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"), Radicle Medical Marijuana Inc. ("Radicle"), and
Tweed Tree Lot, as well as lease income generated from the
Company's lease agreement with Tweed Tree Lot.
Operating expenses were $7.9
million for the quarter. General and administrative expenses
were $2.0 million for the quarter,
primarily attributable to employee compensation (including a
variable component that was recognized in Q4 2021) and other
general and administrative activities. Consulting and professional
fees were $0.7 million for the
quarter, primarily attributable to legal fees for general corporate
and securities matters and litigation, as well as audit, tax, and
other professional services. The Company also reported $4.7 million in restructuring costs during the
quarter. These costs primarily related to financial and legal
advisory and other professional fees incurred in connection with
the CGC Transaction.
Equity Method Investees and Fair Value Changes
|
|
|
|
Three months
ended
|
Three months
ended
|
|
31-Mar-21
|
31-Mar-20
|
Share of loss from
equity method investees
|
|
|
PharmHouse
|
$
-
|
$
(1,015)
|
Other
|
(47)
|
(2,183)
|
Impairment of equity
method investees
|
-
|
(11,162)
|
Net change in fair
value of financial assets at FVTPL
|
(19,810)
|
(16,311)
|
Other
PharmHouse-related charges
|
|
|
Provision for credit
losses on loans receivable
|
(1,700)
|
-
|
Provision for credit
losses on financial guarantee liability
|
4,500
|
-
|
Equity method
investees and fair value changes
|
$
(17,057)
|
$
(30,671)
|
|
|
|
|
|
|
|
Twelve
months ended
|
Twelve
months ended
|
|
31-Mar-21
|
31-Mar-20
|
Share of loss from
equity method investees
|
|
|
PharmHouse
|
$
(37,025)
|
$
(2,253)
|
Other
|
(892)
|
(3,902)
|
Impairment of equity
method investees
|
-
|
(11,162)
|
Net change in fair
value of financial assets at FVTPL
|
(16,444)
|
(17,259)
|
Other
PharmHouse-related charges
|
|
|
Provision for credit
losses on loans receivable
|
(53,656)
|
-
|
Provision for credit
losses on financial guarantee liability
|
(28,000)
|
-
|
Gain on disposition
of equity method investee
|
462
|
-
|
Equity method
investees and fair value changes
|
$
(135,555)
|
$
(34,576)
|
|
|
|
The Company's share of loss from equity method investees was
nominal for the quarter, compared to $3.2
million for the same period last year. Greenhouse Juice,
High Beauty, Inc. ("High Beauty"), LeafLink Services
International ULC ("LeafLink International"), and Radicle
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 $19.8
million for the quarter. This decrease was primarily driven
by the negative changes in the fair value of the Canopy Growth
shares received as consideration in the CGC Transaction, and the
TerrAscend term loan and warrants.
Net Change in Fair Value of Financial Assets at
FVTOCI
|
|
|
|
Three months
ended
|
Three months
ended
|
|
31-Mar-21
|
31-Mar-20
|
TerrAscend
|
$
109,412
|
$
(5,500)
|
Vert
Mirabel
|
(7,629)
|
(88)
|
Nova
Cannabis
|
468
|
(272)
|
Headset
|
-
|
415
|
Zeakal
|
(100)
|
1,214
|
BioLumic
|
(100)
|
-
|
Other
|
-
|
(2,862)
|
Gross change in
fair value of financial assets at FVTOCI
|
$
102,051
|
$
(7,093)
|
OCI income tax
expense (recovery)
|
15,727
|
(609)
|
Net change in fair
value of financial assets at FVTOCI(1)
|
$
86,324
|
$
(6,484)
|
|
|
|
|
Twelve
months ended
|
Twelve
months ended
|
|
31-Mar-21
|
31-Mar-20
|
TerrAscend
|
$
247,912
|
$
(56,500)
|
Vert
Mirabel
|
(11,029)
|
(14,586)
|
Nova
Cannabis
|
195
|
(2,721)
|
Headset
|
(500)
|
297
|
Zeakal
|
(1,600)
|
713
|
BioLumic
|
(139)
|
-
|
Dynaleo
|
835
|
-
|
Other
|
(976)
|
(14,823)
|
Gross change in
fair value of financial assets at FVTOCI
|
$
234,698
|
$
(87,620)
|
OCI income tax
expense (recovery)
|
33,475
|
(9,959)
|
Net change in fair
value of financial assets at FVTOCI(1)
|
$
201,223
|
$
(77,661)
|
|
|
|
(1) In addition to
the fair value change noted above, net change in fair value of
financial assets at FVTOCI also includes FX gains/losses
related to equity method investees denominated in USD
currency
|
The Company reported total comprehensive income of $64.8 million for the quarter, compared with a
total comprehensive loss of $36.8
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 an increase of
$86.3 million, primarily driven by
the positive change of $109.4 million
in the fair value of the Company's exchangeable shares in
TerrAscend. This was partially offset by a negative change of
$7.6 million in the fair value of the
Company's investment in Vert Mirabel common shares, among other
items.
Financial Position
|
|
|
|
As
at
|
As
at
|
Period
ended
|
31-Mar-21
|
31-Mar-20
|
Cash
|
$
127,882
|
$
46,724
|
Loans
receivable
|
-
|
42,450
|
Equity method
investees
|
7,366
|
50,543
|
Financial assets at
FVTPL
|
164,030
|
80,170
|
Financial assets at
FVTOCI
|
23,218
|
64,599
|
Other
assets
|
12,866
|
15,899
|
Total
assets
|
$
335,362
|
$
300,385
|
|
|
|
Financial guarantee
liability
|
$
3,000
|
$
-
|
Other
liabilities
|
20,902
|
2,107
|
Total shareholders'
equity
|
311,460
|
298,278
|
Total liabilities
and shareholders' equity
|
$
335,362
|
$
300,385
|
|
|
|
PharmHouse Update
On March 3, 2021, the Company
announced that PharmHouse had entered into an asset purchase
agreement to sell its greenhouse facility and certain equipment
located at the facility (the "PharmHouse Sale"). Upon
approval of the PharmHouse Sale by the Ontario Superior Court of
Justice, the Company made a payment of $25.0
million to the lenders (the "Lenders") of
PharmHouse's $90.0 million
non-revolving syndicated credit facility (the "PharmHouse Credit
Facility") relating to the Company's estimated liability in
respect of its guarantee of the PharmHouse Credit Facility (the
"PharmHouse Guarantee"). As a result of this payment, the
Company's liability in respect of the PharmHouse Guarantee, which
had been estimated to be $32.5
million as at December 31,
2020, was reduced by $25.0
million.
As at March 31, 2021, the Company
revised its estimated liability in respect of the PharmHouse
Guarantee. The Company considered the total of: i) the net proceeds
expected to be received pursuant to the PharmHouse Sale; and ii)
the projected cash available for distribution upon termination of
PharmHouse's proceedings under the Companies' Creditors
Arrangement Act ("CCAA"), and compared this total to the
principal amount then-outstanding on the PharmHouse Credit Facility
of $65.0 million. Based on the
foregoing, the Company estimated its remaining financial liability
in respect of the PharmHouse Guarantee to be $3.0 million as at March
31, 2021.
Subsequent to the quarter, the PharmHouse Sale closed, and
PharmHouse used the net proceeds received from the PharmHouse Sale
to reduce the amount owing under the PharmHouse Credit Facility.
Concurrently, the Company made a $7.5
million cash payment to the Lenders. This payment, when
combined with the net proceeds received from the PharmHouse Sale
and the $25.0 million payment made by
RIV Capital in March 2021, among
other items, satisfied all obligations outstanding pursuant to the
PharmHouse Credit Facility. The PharmHouse Credit Facility has now
been terminated and cancelled. The Company is entitled to any cash
available for distribution upon termination of the CCAA
proceedings.
As previously disclosed, the Company received a new statement of
claim (the "Revised Claim") on February 10, 2021, filed by the PharmHouse
majority shareholder concerning certain disputes relating to
PharmHouse. The Revised Claim is substantially similar to a claim
previously filed in September 2020,
which was subsequently discontinued. As with the previously filed
statement of claim, the Company views the Revised Claim as it
relates to its actions to be completely without merit and intends
to vigorously defend its position at the appropriate time and in
the appropriate forum.
Q4 2021 Portfolio Updates
The following represents a brief summary of other developments
in the RIV Capital portfolio during and subsequent to Q4 2021:
- Subsequent to the quarter, Headset Inc. ("Headset")
launched its Insights Premium platform in Pennsylvania, marking the first time a full
market read of consumer insights has been available for the state.
As part of this launch, Headset noted that Pennsylvania's medical-only market brought in
approximately $909.0 million between
April 2020 and March 2021. Headset also released several reports
highlighting trends and growth in the broader U.S. market. In
April, it projected that cannabis sales in the U.S. will reach
approximately $23.0 billion in
2022.
- YSS Corp. announced that it entered into a business combination
agreement with Alcanna Inc. to form Nova Cannabis Inc (TSXV: NOVC)
("Nova"). This transaction also closed during the quarter.
Subsequent to the quarter, the Company sold all of its common
shares in Nova for net proceeds of approximately $1.4 million.
- Subsequent to the quarter, the Company closed an agreement with
Tweed Tree Lot to sell a property located in Fredericton, New Brunswick in exchange for a
cash payment of $4.0 million. The
Company had previously leased the property to Tweed Tree Lot.
- High Beauty launched the High & Bye CBG Collection, a
collaboration with Lygos, Inc. High Beauty also announced that its
products are now available in Cult Beauty in the United Kingdom and GlossWire. High Beauty's
products are now available at 42 retailers worldwide, accounting
for 2,340 stores in the U.S., Canada, Hong
Kong, United Arab Emirates,
and the European Union.
- Subsequent to the quarter, ZeaKal announced that its PhotoSeed™
technology is the first plant trait proven to enhance the oil
profile of hemp. According to ZeaKal's analytical chemistry data,
PhotoSeed increased oil composition in hemp biomass by up to 50%
relative to controls, comprising up to 8% of the plant's dry
weight.
- Greenhouse Juice announced that it is now a Certified B
Corporation, reflecting its consideration for all stakeholders and
the environment in its business practices. Greenhouse Juice also
began distributing its products to Health Planet in Ontario, and Thrifty Foods and Costco in
British Columbia.
- Dynaleo launched two brands: Sunshower and DYNATHRIVE CBD. Both
brands are available in British
Columbia, Saskatchewan,
Alberta, and Ontario. Subsequent to the quarter, Dynaleo
completed a $9.7 million
oversubscribed equity financing.
This press release should be read in conjunction with the
Company's audited consolidated financial statements and
management's discussion & analysis ("MD&A") for the
three and twelve months ended March 31,
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 2, 2020
("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 12 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 plans,
strategies, and objectives of the Company regarding investment and
acquisition opportunities in the U.S, and the Company's ability to
enter and participate in such opportunities, the impact of U.S.
legislative changes related to cannabis on the ability of the
Company to invest in the U.S., and the potential de-listing of the
Company's securities from the TSX and the subsequent listing of its
securities on a stock exchange that does not prohibit investments
or acquisitions of companies with business activities related to
cannabis operations in the U.S.
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: compliance with
laws; risks related to the U.S. cannabis industry; 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, 2020 and in RIV Capital's management
information circular dated January 15,
2021 in connection with the CGC Transaction, each of which
has been filed with the Canadian securities regulators and are
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.
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SOURCE RIV Capital Inc.