TORONTO, Aug. 14, 2020 /CNW/ – Canopy Rivers Inc. (the “Company” or “Canopy Rivers“) (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, 2020 (“Q1 2021“).
Canada’s licensed producers and brands catch up to consumer demand for the gummy product format,” said Narbé Alexandrian, President and CEO, Canopy Rivers. “We also continued to work closely with our portfolio companies to help resolve some of the unique macroeconomic challenges that emerged inside and outside of the cannabis sector. While PharmHouse faces some immediate challenges, we continue to believe that it has the potential to become a key component of the Canadian supply chain for low-cost, high-quality cannabis, especially as the value segment of dry flower becomes more prominent.”
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Table 1 |
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Select Summary of Quarterly Results |
Three months |
Three months |
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30-Jun-20 |
30-Jun-19 |
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Operating income (before equity method investees and fair value changes) |
$ |
2,662 |
$ |
2,141 |
|
Operating expenses |
2,669 |
5,767 |
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Net operating loss (before equity method investees and fair value changes) |
(7) |
(3,626) |
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Equity method investees and fair value changes |
(2,355) |
544 |
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Net operating loss |
(2,362) |
(3,082) |
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Net loss |
(3,426) |
(2,966) |
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Other comprehensive income (loss) (net of tax) |
10,701 |
(5,784) |
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Total comprehensive income (loss) |
7,275 |
(8,750) |
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Basic earnings (loss) per share (“EPS”) |
$ |
(0,02) |
$ |
(0,02) |
|
Diluted EPS |
$ |
(0,02) |
$ |
(0,02) |
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Cash flows used in operating activities |
(807) |
(2,788) |
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Cash flows used in investing activities |
(1,927) |
(12,702) |
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Cash flows provided by (used in) financing activities |
(78) |
57 |
Eddie Lucarelli, CFO, Canopy Rivers. “With an optimized operating expense profile established, our focus in the coming quarters remains on our other core priorities – the successful operational ramp-up of our larger assets and key monetization events within our portfolio – while continuing to execute on strategic investments in companies that we believe are positioned for success in the global cannabis sector.”
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Table 2 |
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Three months |
Three months |
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|
30-Jun-20 |
30-Jun-19 |
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Royalty, interest, and lease income |
$ |
2,667 |
$ |
2,141 |
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Provision for credit losses |
(5) |
– |
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Operating income |
$ |
2,662 |
$ |
2,141 |
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Consulting and professional fees |
$ |
376 |
$ |
492 |
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General and administrative expenses |
1,342 |
1,547 |
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Share-based compensation |
909 |
3,686 |
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Depreciation and amortization expense |
42 |
42 |
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Operating expenses |
$ |
2,669 |
$ |
5,767 |
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Net operating loss |
$ |
(7) |
$ |
(3,626) |
Canopy Rivers reported a nominal net operating loss (before equity method investees and fair value changes) for the quarter.
$2.7 million. This includes income 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 The Tweed Tree Lot Inc., as well as interest income recognized on the Company’s $40.0 million shareholder loan agreement with PharmHouse Inc. (“PharmHouse“), among other items.
$2.7 million for the quarter, of which $0.9 million (or approximately 33% of the total) related to share-based compensation, a non-cash expense. Excluding non-cash items, operating expenses decreased by approximately 16% from the comparative period last year. Operating expenses included $1.3 million of general and administrative expenses relating to employee and director compensation, marketing and business development, and other public company costs, as well as $0.4 million of professional fees relating to legal, audit, tax, accounting, and other regulatory advisory fees.
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Table 3 |
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Three months |
Three months |
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30-Jun-20 |
30-Jun-19 |
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Share of loss from equity method investees |
$ |
(3,985) |
$ |
(968) |
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Net change in fair value of financial assets at FVTPL |
1,630 |
1,512 |
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Equity method investees and fair value changes |
$ |
(2,355) |
$ |
544 |
$4.0 million for the quarter. This includes the Company’s equity interests in Canapar Corp. (“Canapar“), 10663522 Canada Inc. d/b/a/ Herbert (“Herbert“), High Beauty, Inc. (“High Beauty“), LeafLink Services International ULC (“Leaflink“), PharmHouse, and Radicle. The Company expects these equity method investees to continue to generate net losses in the near term due to the early-stage nature of these businesses as they continue to ramp-up operationally.
$1.6 million for the quarter. The net increase was primarily driven by the positive change in the fair value of the Company’s investments in TerrAscend Canada Inc., Les Serres Vert Cannabis Inc. (“Vert Mirabel“), and Dynaleo Inc. (“Dynaleo“).
$2.4 million for the quarter.
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Table 4 |
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Three months ended 30-Jun-20 |
Three months ended 30-Jun-19 |
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JWC |
$ |
(976) |
$ |
(3,629) |
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TerrAscend |
3,000 |
(10,000) |
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Vert Mirabel |
9,500 |
9,381 |
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Eureka |
– |
(1,085) |
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YSS |
– |
(762) |
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Headset |
(200) |
(83) |
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Zeakal |
(600) |
(400) |
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Gross change in fair value of financial assets at FVTOCI |
$ |
10,724 |
$ |
(6,578) |
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OCI income tax expense (recovery) |
– |
(883) |
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Net change in fair value of financial assets at FVTOCI(1) |
$ |
10,724 |
$ |
(5,695) |
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(1)In addition to the fair value change noted above, net change in fair value of financial assets at FVTOCI also includes FX |
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gains/losses related to equity method investees denominated in USD currency |
$10.7 million, net of tax, for the quarter, which includes a $10.7 million, net of tax, increase in the fair value of financial assets that are reported at fair value through other comprehensive income (“FVTOCI“). The net increase was primarily attributable to the positive change in the fair value of the Company’s investments in Vert Mirabel and TerrAscend Corp. (“TerrAscend“).
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Table 5 |
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As at |
As at |
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Period ended |
30-Jun-20 |
31-Mar-20 |
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Cash |
$ |
43,912 |
$ |
46,724 |
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Loan Receivable |
42,450 |
42,450 |
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Equity method investees |
46,535 |
50,543 |
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Financial assets at FVTPL |
83,800 |
80,170 |
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Financial assets at FVTOCI |
75,323 |
64,599 |
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Other assets |
15,930 |
15,899 |
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Total assets |
$ |
307,950 |
$ |
300,385 |
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Total liabilities |
1,533 |
2,107 |
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Total shareholders’ equity |
306,417 |
298,278 |
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Total liabilities and shareholders’ equity |
$ |
307,950 |
$ |
300,385 |
Leamington, Ontario. This enabled PharmHouse to begin planting pursuant to its previously announced offtake agreements with Canopy Growth Corporation (“Canopy Growth“) and TerrAscend. For a variety of reasons, the previously anticipated timeline for PharmHouse to generate cash flows from these offtake agreements was not met, and the ultimate timing and receipt of cash inflows is currently uncertain. Taking into account these factors, as well as broader sector-wide challenges impacting the Canadian cannabis industry, including a slower-than-expected build-up of the market and a general imbalance of supply and demand, the Company believes that PharmHouse may have insufficient liquidity and capital resources to achieve its business objectives and, as a result, that there exists material uncertainty regarding PharmHouse’s ability to meet its financial obligations as they become due.
In furtherance of its mandate, the Special Committee retained a financial advisor to assist it in assessing such strategic alternatives. In addition, based on the determination of the Special Committee, the Company has contributed, and expects that it will continue to contribute, additional capital to finance PharmHouse’s ongoing operations while the Special Committee assesses these strategic alternatives. While the Company is working towards a solution for its investment in PharmHouse that will be acceptable to the PharmHouse joint venture partner, there is no guarantee that a consensus will be reached amongst the parties.
The following represents a summary of key developments at Canopy Rivers and its other portfolio companies during Q1 2021:
www.sedar.com and on the Company’s website at www.canopyrivers.com/investors. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.” data-reactid=”88″>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, 2020, which are available under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.canopyrivers.com/investors. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
www.sedar.com and on the Company’s website at www.canopyrivers.com/investors.” data-reactid=”89″>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.canopyrivers.com/investors.
Canopy Rivers is a venture capital firm specializing in cannabis with a portfolio of 18 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. Our mission is to invest in innovators across the cannabis value chain, help them grow, and ultimately create value by guiding these companies towards a monetization event. Together with our portfolio, we are helping build the cannabis industry of tomorrow, today.” data-reactid=”91″>Canopy Rivers is a venture capital firm specializing in cannabis with a portfolio of 18 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. Our mission is to invest in innovators across the cannabis value chain, help them grow, and ultimately create value by guiding these companies towards a monetization event. Together with our portfolio, we are helping build the cannabis industry of tomorrow, today.
Canada’s licensed producers and brands catch up to consumer demand for gummies; the Company’s belief that cannabis can remain resilient during economic downturns and its expectations regarding the role that the Company’s portfolio companies will play in the cannabis sector; the Company’s expected focus and priorities for the coming quarters; the expectation that certain equity method investees will continue to generate net losses in the near term; the Company’s targeted reduction in operating cash outflows; expectations regarding timing and receipt of cash inflows at PharmHouse, the provision of additional capital to PharmHouse and the strategic alternatives available to PharmHouse, as well as the Company’s belief that PharmHouse may have insufficient liquidity and capital resources to achieve its business objectives and there exists material uncertainty regarding PharmHouse’s ability to meet its financial obligations and that PharmHouse has the potential to become a key component of the Canadian supply chain for low-cost, high-quality cannabis; the Company’s belief that it is well-positioned for U.S. market development through its investment in TerrAscend as well as its expectations regarding the conversion and implied value of its TerrAscend exchangeable shares; Pantry’s plans to expand to Canada; and expectations for other economic, business, and/or competitive factors.
www.sedar.com.” data-reactid=”94″>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 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. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks as set out herein. Our actual financial position and results of operations may differ materially from management’s current expectations. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: risks associated with the termination, renegotiation and enforcement of material contracts; credit, liquidity and additional financing risks for the Company and its investees; stock market volatility; regulatory and licensing risks; cannabis pricing risks; changes in cannabis industry growth and trends; changes in the business activities, focus and plans of the Company and its investees and the timing associated therewith; the Company’s actual financial results and ability to manage its cash resources; changes in general economic, business and political conditions, including challenging global financial conditions and the impact of the novel coronavirus pandemic; competition risks; potential conflicts of interest; the 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 and its investees; changes in applicable laws; compliance with extensive government regulation, including the Company’s interpretation of such regulation; changes in the global sentiment towards, and public opinion of, the cannabis industry; divestiture risks; and the risk factors set out in the Company’s AIF, filed with the Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
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1 |
The financial highlights in this summary are presented in CA$ thousands. |
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