TORONTO – Canopy Rivers Inc. (“Canopy Rivers” or the “Company”) (TSXV: RIV) is pleased to announce it has, through its wholly-owned subsidiary Canopy Rivers Corporation, entered into an incremental funding agreement with its joint venture partner PharmHouse Inc. (“PharmHouse”) and amended the terms of the Company’s global non-competition agreement with joint venture partner, 2615975 Ontario Limited (the “Joint Venture Partner”), to include additional rights in favour of the Company in the event the Joint Venture Partner commences operations in the U.S. cannabis market.
“When we initially created the PharmHouse joint venture, we established a partnership with thought leaders and operators from one of the world’s leading commercial agriculture and produce companies. With this incremental funding commitment and amendment to our non-competition agreement, we have fortified what is now a truly global partnership with our joint venture partner; a team that already has experience, infrastructure, and distribution network relationships in many of the world’s most appealing prospective cannabis markets,” said Bruce Linton, Chairman and Acting Chief Executive Officer of Canopy Rivers.
Under the terms of the agreement, the Company will provide up to C$40 million of secured debt financing (the “Loan”) 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.
In connection with the Loan, the Company and the Joint Venture Partner have agreed to extend the scope of the existing global non-competition agreement to include additional rights in favour of the Company in the event the Joint Venture Partner commences operations in the U.S. market. The non-competition agreement further aligns interests among the parties to pursue regulated cannabis opportunities together on a global scale. As international cannabis regulations continue to evolve, PharmHouse will be able to enter international markets with the benefits of the Company’s portfolio of specialists throughout the cannabis value chain, combined with the Joint Venture Partner’s extensive U.S., Mexican, and international contract manufacturing, brand development, and distribution relationships and expertise.
“We are thrilled to fortify our partnership with Canopy Rivers and expand the opportunity set to include what we believe will be the largest cannabis market in the world,” said Tony Abbas, General Manager of PharmHouse. “As new regulatory developments continue to unfold, as we recently saw in Mexico, we believe that working with the team at Canopy Rivers, along with their portfolio of cannabis industry specialists, positions PharmHouse ideally to pursue opportunities in emerging legalized markets in a manner that leverages our already developed resources and experience operating in many of these jurisdictions.”
In May 2018, the Company entered into a strategic joint venture with the Joint Venture Partner, a company formed by the leading principals and operators of a North American greenhouse produce conglomerate, to form PharmHouse. PharmHouse was established to leverage the cannabis insight and expertise from the Company’s ecosystem of investments, with the global commercial agriculture, marketing, and distribution expertise and relationship networks of the Joint Venture Partner. The PharmHouse initial facility was constructed in 2017 using the latest in commercial agriculture technology and agronomic platforms.
The facility is approximately 1.3 million square feet and has a height of seven metres with diffused glass and features modern infrastructure including a fully-enclosed irrigation system and an autonomous cart system to support inventory and facility logistics.
The infrastructure at the PharmHouse facility is currently being supplemented for compliance with Good Manufacturing Practices (“GMP”), which is intended to facilitate optimized and standardized output for both domestic and international distribution under globally recognized and mandated quality assurance requirements.
In addition, pending the receipt of a license from Health Canada, PharmHouse has already secured multiple offtake agreements with purchase orders in place for an aggregate 30% of the production capacity until December 31, 2020.
The Joint Venture Partner’s family-owned and operated affiliated entities have been cultivators and distributors of greenhouse grown vegetables, including tomatoes, peppers and cucumbers under a household name for more than 60 years, and boast more than $1.5 billion in annual sales. With a focus on innovation, new technologies and sustainable cultivation practices, they have become one of the largest greenhouse operators in North America and have experience managing more than 4,000 productive acres of agriculture operations under both an owned/operated and contract manufacturing basis throughout Canada, the U.S., Mexico, Panama, Guatemala and more. While the Joint Venture Partner’s affiliated entities remain focused and committed to their commercial agriculture business separate from any and all cannabis ventures, the leaders and principals from these global agriculture platforms are collaborating with Canopy Rivers and PharmHouse to share collective insight and acumen in pursuit of a new global opportunity in cannabis.
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.
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 and includes information regarding the use of the proceeds of the Loan, the business and operations of PharmHouse, cannabis regulatory reform, the size of the U.S. cannabis market, the pursuit of opportunities in emerging legalized markets; the effect on the output through compliance with GMP; and other 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; constructions, development and associated financing risks; the ability of PharmHouse to obtain a license under applicable legislation in Canada; the actual operating and financial performance of PharmHouse; the global commercial agriculture, marketing, and distribution expertise and relationship networks of the Joint Venture Partner; 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; public opinion and perception of the cannabis industry; as well as the risk factors set out in 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 issuer 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.
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Sr. Director, Investor Relations & Communications
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