Canopy Rivers Reports Fourth Quarter and Fiscal Year 2019 Financial Highlights and Provides Corporate Update
Toronto, Ontario – July 16, 2019 – Canopy Rivers Inc. (the “Company” or “Canopy Rivers”) (TSXV: RIV, OTC: CNPOF) today released its financial results for the three and twelve months ended March 31, 2019. The Company’s audited consolidated financial statements for the twelve months ended March 31, 2019, and its full Management’s Discussion and Analysis (the “MD&A”) for the three and twelve months ended March 31, 2019, are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and 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.
“It was a year full of milestones and significant achievements for Canopy Rivers,” said Narbe Alexandrian, President and Chief Executive Officer of Canopy Rivers. “Anchored by our go public transaction and listing on the TSX Venture Exchange, eight new investments, and landmark transactions for certain portfolio companies, we have strategically positioned ourselves as an accelerator of growth for companies that we believe are situated to be leaders in the cannabis industry. We are excited for the future as we continue to discover, evaluate, and invest in ways that expand our footprint into new channels and markets globally, ultimately creating value for our shareholders,” continued Alexandrian. “With positive global sentiment towards cannabis on the rise, and Canada’s legalization of edibles, extracts, and topicals coming into force in the fall, we are optimistic about the growth potential of the cannabis industry in the coming years.”
Fourth Quarter and Fiscal Year 2019 Financial Highlights:
(Expressed in CDN $000’s, except per share amounts)
|Cash||$ 104,183||$ 46,299|
|Total shareholders' equity||408,186||192,230|
|Three months ended
|Three months ended
|Operating income||$ 6,082||$ 19,543|
|Net operating income (loss)||(1,430)||17,159|
|Net income (loss)||(1,826)||14,590|
|Other comprehensive income (net of tax)||22,418||28,893|
|Total comprehensive income||20,592||43,483|
|Basic earnings (loss) per share (“EPS”)||$ (0.01)||$ 0.12|
|Diluted EPS||$ (0.02)||$ 0.11|
|Cash flows provided by operating activities||700||206|
|Cash flows used in investing activities||(33,047)||(2,972)|
|Cash flows provided by financing activities||89,601||24,905|
|Twelve months ended
|340 days ended
|Operating income||$ 38,477||$ 50,211|
|Net operating income||8,027||42,905|
|Other comprehensive income (loss) (net of tax)||(34,271)||38,603|
|Total comprehensive income (loss)||(30,353)||74,964|
|Basic EPS||$ 0.03||$ 0.37|
|Diluted EPS||$ 0.02||$ 0.36|
|Cash flows provided by (used in) operating activities||(2,633)||128|
|Cash flows used in investing activities||(129,614)||(33,847)|
|Cash flows provided by financing activities||190,131||80,018|
“With more than $195 million in gross proceeds raised from equity financings and more than $115 million of capital deployed into new and existing investments over fiscal 2019, we continue to position ourselves as leading allocators of capital in this new and emerging global industry,” said Eddie Lucarelli, Chief Financial Officer of Canopy Rivers. “This past fiscal year represented a period of significant capacity build-out and operational investment at our portfolio companies. We are excited to see our partners complete their build-out activities over the next few quarters, allowing their underlying businesses to scale and accelerate their individual paths towards the generation of meaningful EBITDA across the Company’s ecosystem.”
Fourth Quarter 2019 Corporate and Portfolio Highlights:
Over the last year, the cannabis industry has continued to evolve, as regulators around the world continue to discuss the benefits of cannabis legalization, sparking interest from large traditional corporate entities and institutional investors alike. The Company expects that, as larger investors enter the sector, cannabis companies will gain more traction, leading to higher valuations and further increasing institutional investor appetite. With public perception around cannabis use shifting and an increasing addressable consumer base, cannabis consumption and demand are exhibiting steady growth. This is creating a global market with potential for operators across dozens of sectors that go beyond traditional plant-touching verticals. Management has observed that operators in the cannabis industry are turning their attention towards the cannabis beverage market, cannabidiol (“CBD”), building brands, and using data to make more informed business decisions.
In particular, in Canada and the United States, fiscal 2019 saw a move away from cultivation assets towards ancillary cannabis businesses and brands. Ancillary businesses provide products and services related to the broader cannabis economy. These businesses are subject to fewer rules and regulations, and, in management’s experience, have historically been easier and less expensive to scale. Cannabis brands are also gaining momentum. Canopy Rivers anticipates that, as cannabis moves from being a product to an ingredient, brands will begin to dominate the industry. Typically, trusted brand products offer stable and reliable user experiences that, in turn, drive customer loyalty and command higher margins.
The cannabis industry is still in its infancy relative to how big the market is expected to become. The combined market capitalization of the three largest public companies in each of the tobacco, pharma, beverage and spirits industries is approximately US$200-600 billion. In comparison, the three largest public companies in cannabis currently have a combined market capitalization of US$40 billion, fueling management’s belief that there continues to be a large opportunity for growth in the cannabis sector.
Among these positive regulatory shifts and emerging trends, Canopy Rivers and its portfolio companies reported several significant milestones during the fourth quarter of fiscal year 2019:
PharmHouse Inc. (“PharmHouse”) secured an $80 million syndicated credit facility, led by the Bank of Montreal and Canadian Imperial Bank of Commerce, to fund necessary project equipment and construction costs at a rate of interest that is expected to average in the mid-to-high 5% per annum range over its three-year term.
Canopy Rivers completed a $9 million convertible debenture investment in 10831425 Canada Ltd. d/b/a/ Greenhouse Juice Company (“Greenhouse Juice”), a dynamic plant-based food and beverage company that intends to expand its business model to focus on developing natural health and wellness beverages infused with full-spectrum CBD extracts, pure CBD isolates, and other non-psychoactive cannabinoids.
Canapar SrL, a subsidiary of portfolio company Canapar Corp. (“Canapar”), announced the commencement of construction on a new CBD extraction and processing facility in Sicily, Italy, that is expected to be completed by the end of 2019. Once completed, management anticipates that this facility will be the largest in Europe and believes that the facility will be capable of processing 600 metric tons of hemp biomass annually into CBD isolates and derivative products for distribution in the European market. Also, during the quarter, Canopy Rivers announced it had completed a $9.4 million equity investment in Canapar. The investment represented the second tranche of the $17.4 million investment commitment made in December 2018 and increased Canopy Rivers’ ownership position in Canapar to 49% on a non-diluted basis.
TerrAscend Corp. (“TerrAscend”) (CSE: TER; OTCQX: TRSSF) completed its acquisition of substantially all of the assets of Grander Distribution, LLC (subsequently renamed “Arise Bioscience Inc.”), a leader in the development, manufacture and distribution of innovative hemp-derived products.
Canopy Rivers completed a $1.5 million equity investment in 10663522 Canada Inc. d/b/a Herbert, a unique brand platform that will focus on the adult-use cannabis beverage and edibles market through anticipated commercial relationships with Greenhouse Juice.
Canopy Rivers closed a bought deal prospectus offering of 13,225,000 subordinated voting shares at a price of $4.80 per share. Concurrent with this offering, Canopy Growth Corporation (“Canopy Growth”) (TSX:WEED, NYSE:CGC) purchased 6,250,000 subordinated voting shares on a private placement basis, also at a price of $4.80 per share, increasing its ownership interest in Canopy Rivers to approximately 27.1% of the issued and outstanding shares (including all subordinated voting shares and multiple voting shares) of Canopy Rivers on a non-diluted basis. The aggregate gross proceeds to Canopy Rivers was approximately $93.5 million.
Headset, Inc. (“Headset”) formed a strategic alliance with Nielsen Holdings plc (“Nielsen”) to provide U.S. cannabis market data and analytics to consumer-packaged goods companies monitoring the cannabis industry. Headset also entered an additional strategic alliance with Nielsen and Deloitte LLP to provide data-driven insights related to federally regulated cannabis consumption and sales in Canada.
Canopy Rivers completed a US$2 million equity investment in Leaflink Services International ULC (“Leaflink International”), a joint venture with LeafLink, Inc. (“LeafLink”). Leaflink International brings LeafLink’s dominant business-to-business marketplace and supply chain technology platform to regulated cannabis markets outside of the U.S.
Spot Therapeutics Inc. received a cultivation licence from Health Canada for its Fredericton-based production and distribution facility. The receipt of the license represented a triggering event for Canopy Rivers in the form of a 25-year cash flow stream that is anticipated to be approximately $2.9 million per year and is expected to begin in September 2019.
James E. Wagner Cultivation Corporation (“JWC”) (TSXV: JWCA, OTCQX: JWCAF) received a cultivation licence from Health Canada for approximately 22,000 square feet of its second facility in Kitchener, Ontario, which at full scale will be a 345,000 square foot commercial production and distribution complex. JWC also capitalized on its proprietary technology, GrowthSTORM™, by licensing the system to Wellness Farms Inc. for use in the cultivation of cannabis plants.
Civilized Worldwide Inc. (“Civilized”) entered into several new partnerships with strong brand partners, including: (i) Insight Productions, a Canadian production company; and (ii) Cannabis Club TV (CCTV), an in-dispensary television network. These partnerships are aimed at developing and distributing original digital content. Civilized also acquired The 420 Games and rebranded the event as the Civilized Games.
Subsequent Corporate and Portfolio Updates:
To date, Canopy Rivers has made investments in 18 companies, and in doing so has established a diversified portfolio of cannabis and cannabis-related companies. The Company strives to offer strategic support to its portfolio partners, as well as to facilitate synergies within the Canopy Rivers ecosystem. The following represents a brief summary of certain additional milestones achieved by Canopy Rivers and/or its portfolio companies subsequent to the end of the fourth quarter and fiscal year 2019:
Canopy Rivers appointed Narbe Alexandrian as President and Chief Executive Officer.
Bruce Linton stepped down as Chairman and Director of Canopy Rivers. John Bell has since been appointed as Chairman of the Board of Directors.
Canopy Rivers completed a US$2.5 million investment in High Beauty, Inc., creator of industry-leading cannabis beauty brand high. high is formulated using cannabis sativa seed extracts, which are free of psychoactive substances including THC and CBD, in combination with certified organic plant oils, high-potency antioxidants and pure plant essential oils.
TerrAscend completed several strategic transactions, including the completion of its acquisition of the retail dispensary network known as “The Apothecarium”. TerrAscend also received European Union Good Manufacturing Practice (GMP) certification and announced a sales and distribution agreement with iuvo Therapeutics GmbH, a German pharmaceutical wholesaler with a cannabis-specific import and distribution license for the European Union. TerrAscend successfully completed a $69 million non-brokered private placement and intends to use the proceeds to fund its United States acquisition strategy, working capital and for general corporate purposes. TerrAscend also received an amendment to its licence from Health Canada allowing for the sale of cannabis oils which it will do through its medical marketplace, Solace Health.
PharmHouse entered into a significant supply agreement with Canopy Growth. The agreement commits an incremental 20% of PharmHouse’s flowering space in its 1.3 million square foot modern greenhouse to Canopy Growth over a three-year period. This is in addition to the 10% of capacity that PharmHouse previously committed to Canopy Growth until December 31, 2020.
Canopy Rivers completed a US$1.5 million investment in BioLumic Ltd., creator of a sustainable ultraviolet light crop yield enhancement technology. The investment marked Canopy Rivers’ first in the agriculture technology field.
Agripharm Corp. received its outdoor cultivation licence from Health Canada and began growing its first outdoor crop at its Creemore, Ontario, location using award winning Green House Seed Co. genetics.
JWC announced that both of its facilities are at full production capacity. JWC also received a licence amendment from Health Canada allowing for the sale of formulated cannabis oil from JWC’s pilot facility.
Les Serres Vert Cannabis Inc. (“Vert Mirabel”), a portfolio company of Canopy Rivers and a subsidiary of Canopy Growth, received its final cultivation licence from Health Canada. All 700,000 square feet of operating space at Vert Mirabel’s greenhouse is now licensed for cannabis production.
Canopy Rivers completed a US$10 million equity investment in ZeaKal, Inc., a California-based plant science innovator with a novel plant genetics technology called PhotoSeed™ that increases photosynthesis, improves plant yield, and enhances nutritional profiles for a variety of agricultural crops.
Civilized and ZoomerMedia Limited (“Zoomer”) entered into a collaboration agreement to create educational and entertainment cannabis content for distribution through Zoomer’s media properties on all platforms, including TV, radio, print, digital, and events. Civilized also hosted its second World Cannabis Congress, a two-day conference designed to initiate conversations around policy, corporate social responsibility, research, and emerging trends in the cannabis industry.
Solo Growth Corp. changed its name to YSS Corp. (“YSS”) (TSXV: YSS). YSS acquired a call right and established a licensing agreement with Sweet Tree Modern Apothecary Ltd (“Sweet Tree”). With the addition of Sweet Tree, YSS now has four licensed-operating retail locations in Alberta. YSS has six more Alberta Gaming, Liquor and Cannabis Commission (“AGLC”) licensed stores in Alberta, all of which are expected to be open by end of August 2019, two additional retail locations in Alberta that have passed AGLC inspection and a strategic portfolio of under construction, leased and prospective locations.
For more information regarding the Company and its portfolio, please refer to the MD&A and the Company’s Annual Information Form, which have been filed with the Canadian securities regulators and are available under the Company’s profile on SEDAR at www.sedar.com.
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 identifies 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.
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 including: the global sentiment towards, and public perception of, cannabis; the focus of operators in the cannabis industry; the Company’s strategic positioning and the impact of its investment strategy; the future activities and development of the Company’s portfolio companies; cannabis regulatory reform; the growth of the global cannabis industry and its potential for operators; trends and developments in the cannabis industry; the use of proceeds by PharmHouse under its credit facility and the average rate of interest thereon; the expansion of Greenhouse Juice’s business model; the focus of Herbert on the adult-use cannabis beverage and edibles market; the timing for completion of Canapar SrL’s extraction and processing facility as well as its size and capacity once complete; the timing and amount of the cash flow stream that the Company will receive from Spot; the intended use by TerrAscend of the proceeds from its non-brokered private placement; the Company’s relationship with its portfolio partners; the benefits of ZeaKal, Inc.’s PhotoSeed™ technology; 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; competition; changes in cannabis industry growth and trends; changes in the Company’s strategic positioning and investment strategy; changes in the business of the Company’s portfolio companies; changes in general economic, business and political conditions, including changes in the financial markets; 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 portfolio companies; changes in applicable laws; compliance with extensive government regulation; changes in the global sentiment towards, and public opinion of, the cannabis industry; and the risk factors set out in the Company’s annual information form dated July 15, 2019, 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:
Executive Vice President, Strategy