NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES
TORONTO, Nov. 26, 2018 (GLOBE NEWSWIRE) — Canopy Rivers Inc. (the “Company” or “Canopy Rivers”) (TSXV: RIV) today released its financial results for the three and six months ended September 30, 2018. The Company’s full Management’s Discussion and Analysis and unaudited condensed interim consolidated financial statements for the three and six months ended September 30, 2018 are available on SEDAR (www.sedar.com) and posted on the Company’s website at www.canopyrivers.com/financials. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
“The second quarter was highlighted by several key milestones for Canopy Rivers, including the closing of our private placement financing, our go public transaction and listing on the TSX Venture Exchange, our first European investment, and several new developments from our existing portfolio companies,” said Bruce Linton, Chairman and CEO of Canopy Rivers. “With increasingly progressive global sentiment towards cannabis, a rapidly evolving regulatory landscape, and the increased volatility we have observed in the capital markets since legalization, the conditions are there for significant potential gains. With our strong balance sheet, we believe Canopy Rivers is poised to make highly accretive investments in this robust sector.”
Q2 and Year to Date Fiscal 2019 Financial Highlights:
| Select Summary of Quarterly Results (Expressed in Canadian Dollars in Thousands) | ||||
| As at | 30-Sep-18 | 31-Mar-18 | ||
| Cash | 105,845 | 46,299 | ||
| Total Assets | 385,168 | 209,139 | ||
| Total Liabilities | 18,509 | 16,909 | ||
| Total Equity | 366,659 | 192,230 | ||
| Three months ended | 30-Sep-18 | 30-Sep-17 | ||
| Operating Income | 23,273 | 147 | ||
| Operating expenses | 8,959 | 2,322 | ||
| Net operating income (loss) | 14,314 | (2,175 | ) | |
| Net income (loss) | 10,949 | (2,119 | ) | |
| Other comprehensive income (net of tax) | 26,630 | – | ||
| Total comprehensive income (loss) | 37,579 | (2,119 | ) | |
| Basic earnings (loss) per share (“EPS”) | 0.08 | (0.02 | ) | |
| Diluted EPS | 0.07 | (0.02 | ) | |
| Cash provided by (used in) operating activities | (832 | ) | (416 | ) |
| Cash provided by (used in) investing activities | (13,166 | ) | (8,699 | ) |
| Cash provided by (used in) financing activities | 99,705 | – | ||
| Six months ended | 30-Sep-18 | 30-Sep-17 | ||
| Operating Income | 24,017 | 147 | ||
| Operating expenses | 16,306 | 2,896 | ||
| Net operating income (loss) | 7,711 | (2,749 | ) | |
| Net income (loss) | 4,321 | (2,703 | ) | |
| Other comprehensive income (net of tax) | 24,259 | – | ||
| Total comprehensive income (loss) | 28,580 | (2,703 | ) | |
| Basic earnings (loss) per share (“EPS”) | 0.03 | (0.04 | ) | |
| Diluted EPS | 0.03 | (0.04 | ) | |
| Cash provided by (used in) operating activities | (1,705 | ) | 219 | |
| Cash provided by (used in) investing activities | (39,242 | ) | (8,719 | ) |
| Cash provided by (used in) financing activities | 100,493 | 55,113 | ||
“While we are a newly listed public company, we are fortunate to be operating from a position of financial strength,” said Eddie Lucarelli, Chief Financial Officer. “We have a team of technical and financial professionals with years of directly relevant cannabis and investment experience. As we continue to evaluate a pipeline of global opportunities, we remain committed to taking a disciplined approach to investment decisions with long-term value creation in mind. With our pool of capital resources and strategic relationship with the largest cannabis company in the world, Canopy Growth, we believe Canopy Rivers to be well positioned for continued success.”
Q2 Business Highlights:
In a milestone event in the Company’s history, the second quarter was highlighted by the Company’s reverse take-over transaction and listing on the TSX Venture Exchange approximately one month prior to the legalization of adult use cannabis in Canada. The quarter was also highlighted by the closing of the Company’s first international investment in Italy-based Canapar Corp. (“Canapar”). The following is a summary of the Company’s operational milestones for the second quarter:
- The Company completed an oversubscribed private placement of subscription receipts at $3.50 for gross proceeds of approximately $101 million, co-led by CIBC Capital Markets, GMP Securities L.P. and Eight Capital, and a concurrent non-brokered private placement of subscription receipts for gross proceeds of approximately $3.4 million. This ultimately led to the go public transaction on September 17, 2018 and the Company began trading on the TSX Venture Exchange under the symbol “RIV” on September 20, 2018.
- On July 24, 2018, the Company made an investment in equity securities of Canapar of $750,000, representing approximately 35% of the non-diluted common shares of Canapar. Canapar is an organic hemp cultivation, extraction and research & development company based in Italy. This marked the Company’s first investment in Europe, and represents a collaboration with a specialized and well-networked investee headquartered in a strategically located region with a rich agricultural history. Canapar is focused on developing and commercializing Italy’s local hemp cultivation industry through an outsource farming model, supporting farmers with continuing education and establishment of organic cannabis cultivation. Canapar intends to purchase hemp on a wholesale basis from farmers and extract organic cannabidiol (“CBD”) oil from the hemp. The Company and Canapar have been working closely together in advancing Canapar’s post-harvest processing of hemp and extraction capabilities. Canapar further benefits from a strategic relationship with the Department of Agriculture at the University of Catania, which carries out significant research regarding agricultural and food production, including hemp-based cultivation and extraction methodology.
- During the second quarter of fiscal 2019, the Company further bolstered its team with the addition of Narbe Alexandrian as its VP, Business Development. Previously with OMERS Ventures, Alexandrian brings a depth of venture capital experience, specifically in the software and technology sectors.
Portfolio Update:
To date, the Company has made investments in eleven companies, and in doing so has established a diversified portfolio of investments including licensed companies, late stage licence applicants, international hemp cultivators, pharmaceutical formulators, brand developers and distributors, retail networks, and technology and media platforms. The following is an update of selected recent activity of the portfolio companies not already discussed above. For more information regarding the Company’s portfolio investments, please refer to the Management’s Discussion and Analysis of Financial Results for the three and six months ended September 30, 2018 (“MD&A”), filed with Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
- PharmHouse Inc. (“PharmHouse”) is a joint venture between Canopy Rivers and the principals and operators of a leading North American greenhouse produce conglomerate with specialized agricultural, production, contract manufacturing, branding, distribution, and logistics experience. PharmHouse will operate out of 1.3 million square feet of newly constructed modern greenhouse infrastructure in Leamington, Ontario with the intent of becoming a licensed producer of high-quality greenhouse grown cannabis. Subsequent to the end of the quarter, PharmHouse secured an offtake agreement with fellow Canopy Rivers portfolio company TerrAscend Corp. for 20% of the flowering space at its greenhouse facility until December 31, 2021. PharmHouse also entered into an incremental funding agreement and amended its global non-competition agreement with the Company to include the U.S. cannabis market. The Company will provide up to $40 million of secured debt financing with a three-year term and an annual interest rate of 12%, calculated monthly and payable quarterly after receipt of the sales license at PharmHouse’s initial production and processing facility. Proceeds are expected to be utilized to supplement personnel and logistics resources for domestic and international distribution, capital expenditures related to the ongoing upgrade and retrofit of PharmHouse’s nursery, processing, and greenhouse infrastructure, working capital, and other general corporate purposes.
- TerrAscend Corp. (“TerrAscend”) (CSE: TER) is a biopharmaceutical and wellness company providing quality products, brands and services for the global cannabinoid market. TerrAscend has secured supply agreements with the provinces of Ontario, British Columbia, Nova Scotia and PEI and launched a premium cannabis brand, Haven Street, for the Canadian adult-use market. Subsequent to end of the quarter, the Company entered into an arrangement agreement to restructure its investment in TerrAscend to accommodate and obtain exposure to TerrAscend’s plans to leverage its Canadian Securities Exchange listing and U.S. specialty pharmaceutical and finance relationship networks to explore and pursue growth opportunities in the U.S. and other regulated jurisdictions. If the plan of arrangement is approved, the Company will exchange its common shares of TerrAscend for new, non-participating, non-voting conditionally exchangeable shares in the capital of TerrAscend. These new exchangeable shares may only be converted into common shares of TerrAscend upon certain changes in U.S. federal laws or regulatory approaches regarding the cultivation, distribution or possession of cannabis in the U.S., the compliance of TerrAscend with such laws, and the approval of the various securities exchanges. In agreeing to restructure its TerrAscend investment and to remain in compliance with all public exchanges and regulators, the Company opted to trade short-term liquidity for what the Company believes will be significant long-term value. Also subsequent to the end of the quarter, TerrAscend secured an offtake arrangement for 20% of flowering space at PharmHouse’s greenhouse facility. The agreement will supply dried flower and trim for packaging, processing and distribution throughout the TerrAscend logistics platform.
- Radicle Medical Marijuana Inc. (“Radicle”) is a licensed cultivator producing premium indoor small-batch cannabis that is hydroponically grown and processed with a craft methodology and proprietary dry, trim and cure processes. Radicle was one of twenty-six licensed cannabis producers selected by the Ontario Cannabis Store in a highly competitive product call for recreational sale online and one of two entities selected despite only having a licence to cultivate at the time. Subsequent to the end of the second quarter of fiscal 2019, Radicle received its production and sales licence from Health Canada. The receipt of the sales license, for oil and dried flower, was also a milestone event for the Company, as it triggered the conversion of the Company’s outstanding debenture with Radicle into an almost 24% equity stake in Radicle, and set-off against consideration otherwise paid for a royalty interest with a minimum yearly guarantee of $900,000 for the next 20 years. Radicle also recently announced the launch of Gage Cannabis Co., a new brand that offers high-grade craft cannabis through proprietary and sustainable growth methods.
- Les Serres Vert Cannabis Inc. (“Vert Mirabel”), is a joint venture with Canopy Growth and Les Serres Stéphane Bertrand, and is based in Mirabel, Quebec. The greenhouse property has been upgraded and retrofitted, and recently received a licence amendment from Health Canada increasing the greenhouse production footprint from 40,000 to 525,000 square feet licensed operating space available for cannabis production. Vert Mirabel will be a key source of locally-produced cannabis products for the government of Quebec and Canopy Growth has secured a significant supply agreement with the Société des alcools du Québec (SAQ). The greenhouse is organic certified, a value-add differentiator in cannabis brands, and the intent will be to apply the infrastructure and farming expertise to grow organic cannabis flower.
- Agripharm Corp. (“Agripharm”) is a licensed company under the Cannabis Act, and is a joint venture between Canopy Growth and the owners of globally-recognized cannabis brands Green House Seeds (a Netherlands-based portfolio of leading cannabis businesses, including an award-winning genetics portfolio, and pioneer in the development of the European cannabis coffee shop market) and Organa Brands (owner of several market-leading cannabis brands, including OpenVAPE, Bakked, Organa Labs, The Magic Buzz, and District Edibles). Agripharm is building out its extraction capacity, leveraging the experience of their joint venture partner Organa Brands Ltd., a long-standing cannabis extract product innovator in the U.S., to be well-positioned when Canadian regulations allow for new product formats. The indoor growing facility continues to focus on the phenotyping of new strains and benefits from their relationship with Green House Seeds.
- James E. Wagner Cultivation Ltd. (“JWC”) (TSXV: JWCA) is a licensed cultivator focusing on producing clean, consistent cannabis. In August, JWC received its licence approval from Health Canada for the production of formulated cannabis oil. In addition to its already available aeroponically-grown dried flower products, JWC intends to develop and supply cannabis oil products in varying content and size configurations in anticipation of patient and customer demands. Subsequent to the end of the second quarter of fiscal 2019, product from JWC was added to the SpectrumCannabis.com online marketplace through their participation in Canopy Growth’s CraftGrow program. JWC is also expanding into a second facility, which is designed to provide a total of approximately 345,000 square feet of cultivation space.
- Civilized Worldwide Inc. (“Civilized”) is an international modern media company and lifestyle brand focused on elevating cannabis culture. Civilized has a premium digital audience throughout North America and has established an events platform where individuals and industry can communicate and work together to evolve the global perception of cannabis. The Company made an investment in Civilized on April 17, 2018 by means of a convertible debenture and also received warrants to purchase class A common shares of Civilized. In June 2018, Civilized hosted the inaugural World Cannabis Congress in Saint John, New Brunswick, with the goal of promoting conversations that shape and advance the cannabis industry worldwide. Civilized also partnered with comedian Chelsea Handler for a nation-wide speaking tour covering political activism, culture and cannabis.
- Spot Therapeutics Inc. (“Spot”) is a large-scale indoor production and distribution facility located in Fredericton, New Brunswick. The Company is funding the ongoing capital expenditures related to the build-out of the asset in exchange for a long-term royalty and lease obligation. Construction on the retrofit of the facility is complete, and a readiness package has been submitted to Health Canada as part of the licensing process.
- LiveWell Canada Inc. (“LiveWell”) (TSXV: LVWL) is a Canadian hemp and cannabis company focused on advanced research of CBD and other cannabinoids, as well as developing and distributing prescription and consumer health and wellness products. Effective April 2, 2018, the Company executed a strategic agreement to accelerate the development and commercialization of LiveWell’s two large-scale projects for future cannabis production and processing. The Company received an equity interest, representing 5% of the issued and outstanding common shares of LiveWell on a fully-diluted basis, in exchange for strategic support from the Company. On June 17, 2018, LiveWell completed its go public transaction and began trading on the TSX Venture Exchange on June 21, 2018. LiveWell recently secured 1,000 acres of Canadian industrial hemp for the purpose of extracting and producing CBD-based products for distribution in Canada. Subsequent to the end of the second quarter of fiscal 2019, LiveWell entered into an agreement to acquire 100% of Acenzia Inc., a Health Canada and GMP-certified developer and manufacturer of natural health products and therapeutics. These capabilities are intended to further develop LiveWell’s focus on health-related research in cannabis and hemp, as well as fast-track its product development at a lower cost.
- Aldershot Resources Ltd. d.b.a. Solo Growth Corp.™ (“Solo”) is executing on a retail-focused cannabis strategy with store locations branded as “YSS by Solo” led by the principals of Solo Liquor Stores Ltd., a leading Canadian private liquor retailer. The Solo team has been effective in capturing significant liquor market share in the communities they operate by providing a shopping experience and product offering that is customized to each location’s demands. Solo also has a strong understanding of and access to commercial real estate. In Alberta, Solo has 25 license applications pending with the Alberta Gaming, Liquor and Cannabis Commission for retail locations. Solo expects to have 3 to 5 cannabis stores constructed by the end of the year. In Ontario, Canada’s largest provincial cannabis market, Solo has secured 32 leases and has the opportunity to open a maximum of 75 locations.
About Canopy Rivers Inc.
Canopy Rivers is a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. Canopy Rivers works collaboratively with Canopy Growth (TSX: WEED, NYSE: CGC) to identify strategic counterparties seeking financial and/or operating support. Canopy Rivers has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which Canopy Rivers believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.
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 the Company 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; the global sentiment towards cannabis; evolution of the regulatory landscape; conditions for potential gains; market volatility; and expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical facts 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 the Company 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 the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: regulatory and licensing risks; changes in general economic, business and political conditions, including changes in the financial markets; potential conflicts of interest; the Canadian regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; changes in the Company’s relationship with Canopy Growth; changes in applicable laws; compliance with extensive government regulation; public opinion and perception of the cannabis industry; and the risk factors set out in the the joint management information circular of Canopy Rivers Corporation and the Company dated August 8, 2018, filed with Canadian securities regulators and available on the Company’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 the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information:
Canopy Rivers Inc.
www.canopyrivers.com
Karoline Hunter
Sr. Director, Investor Relations & Communications
E-mail: ir@canopyrivers.com
Daniel Pearlstein
Executive Vice President, Strategy
E-mail: daniel@canopyrivers.com