Strong financial position with $47 million cash on hand and no debt
Commenced operational ramp-up at 1.3 million
sq.ft. flagship joint venture
Expanded ag-tech exposure in portfolio
Significant corporate milestones, including
graduation to the TSX and launch of Strategic Advisory
Board
TORONTO, June 3, 2020 /PRNewswire/ - Canopy Rivers
Inc. (the "Company" or "Canopy Rivers") (TSX: RIV)
(OTC: CNPOF), a venture capital firm specializing in cannabis,
today released its audited consolidated financial statements for
the fiscal year ended March 31, 2020
("FY 2020") and management's discussion and analysis
("MD&A") for the three and twelve months ended
March 31, 2020.
"The global economic uncertainty brought on by COVID-19 capped
off a volatile and challenging year for the cannabis sector.
Despite these challenges, I am pleased with what our team achieved
last year. However, we were not immune to this volatility, and
following a strategic and operational review of our business, we
recently announced a number of changes aimed at strengthening our
financial discipline and positioning Canopy Rivers for sustained
success moving forward," said Narbé Alexandrian, President and CEO
of Canopy Rivers. "Reflecting on the past year, there were several
significant achievements that make me optimistic for fiscal year
2021. First, our portfolio companies reached new milestones,
including the licensing of PharmHouse, the expansion of
TerrAscend's U.S. operations, and ZeaKal's successful trials of its
PhotoSeed™ technology. Second, our graduation to the TSX and the
launch of our Strategic Advisory Board signalled our company's
continued maturation. Finally, we made four new investments,
including two in ag-tech, which we believe is a critical component
of the value chain that is poised to disrupt the cannabis
sector."
"While headwinds persist, we remain positive as we evaluate new
opportunities that we believe will ultimately create value for our
shareholders and help build the cannabis industry of tomorrow,"
added Alexandrian.
Q4 2020 Financial
Results1
Table
1
|
|
|
|
|
|
Select Summary of
Quarterly Results
|
Three months
ended
|
Three months
ended
|
|
31-Mar-20
|
31-Mar-19
|
Operating income
(before equity method investees and fair value changes)
|
$
|
2,589
|
$
|
2,558
|
Operating
expenses
|
|
3,484
|
|
7,512
|
Net operating loss
(before equity method investees and fair value changes)
|
|
(895)
|
|
(4,954)
|
Equity method
investees and fair value changes
|
|
(30,671)
|
|
3,524
|
Net operating
loss
|
|
(31,566)
|
|
(1,430)
|
Net loss
|
|
(30,515)
|
|
(1,826)
|
Other comprehensive
income (loss) (net of tax)
|
|
(6,280)
|
|
22,418
|
Total comprehensive
income (loss)
|
|
(36,795)
|
|
20,592
|
|
|
|
|
|
Basic earnings (loss)
per share ("EPS")
|
$
|
(0.16)
|
$
|
(0.01)
|
Diluted
EPS
|
$
|
(0.16)
|
$
|
(0.01)
|
|
|
|
|
|
Cash flows used in
operating activities
|
|
(686)
|
|
700
|
Cash flows used in
investing activities
|
|
(2,378)
|
|
(33,047)
|
Cash flows provided
by financing activities
|
|
110
|
|
89,601
|
|
|
|
|
|
Select Summary of
Annual Results
|
Twelve months
ended
|
Twelve months
ended
|
|
31-Mar-20
|
31-Mar-19
|
Operating income
(before equity method investees and fair value changes)
|
$
|
11,922
|
$
|
4,867
|
Operating
expenses
|
|
19,303
|
|
30,450
|
Net operating loss
(before equity method investees and fair value changes)
|
|
(7,381)
|
|
(25,583)
|
Equity method
investees and fair value changes
|
|
(34,576)
|
|
33,610
|
Net operating income
(loss)
|
|
(41,957)
|
|
8,027
|
Net income
(loss)
|
|
(40,566)
|
|
3,918
|
Other comprehensive
loss (net of tax)
|
|
(77,560)
|
|
(34,271)
|
Total comprehensive
loss
|
|
(118,126)
|
|
(30,353)
|
|
|
|
|
|
Basic EPS
|
$
|
(0.22)
|
$
|
0.03
|
Diluted
EPS
|
$
|
(0.22)
|
$
|
0.02
|
|
|
|
|
|
Cash flows used in
operating activities
|
|
(7,666)
|
|
(2,633)
|
Cash flows used in
investing activities
|
|
(50,915)
|
|
(129,614)
|
Cash flows provided
by financing activities
|
|
1,122
|
|
190,131
|
|
1 The financial highlights
in this summary are presented in CA$ thousands.
|
"Looking back on FY 2020, it is clear that cannabis companies
encountered challenging conditions in the capital markets over
those 12 months, and the impact of this shows in our financial
results for the fiscal year," said Eddie
Lucarelli, CFO of Canopy Rivers. "However, we believe that
this is more of a function of the slower-than-expected pace of
development of the cannabis economy, rather than its long-term
potential, which we continue to believe is significant. Based on
our available cash resources and deep sector insights, we believe
we are well-positioned to capitalize on the current market
conditions and strengthen our portfolio of cannabis
disruptors."
Table
2
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
Three months
ended
|
|
31-Mar-20
|
31-Mar-19
|
Royalty, interest,
and lease income
|
$
|
2,858
|
$
|
2,558
|
Provision for credit
losses
|
|
(269)
|
|
-
|
Operating
income
(before equity method investees and fair value
changes)
|
$
|
2,589
|
$
|
2,558
|
|
|
|
|
|
Consulting and
professional fees
|
$
|
866
|
$
|
1,046
|
General and
administrative expenses
|
|
1,330
|
|
1,900
|
Share-based
compensation
|
|
1,246
|
|
4,566
|
Depreciation and
amortization expense
|
|
42
|
|
-
|
Operating
expenses
|
$
|
3,484
|
$
|
7,512
|
|
|
|
|
|
Net operating
loss
(before equity method investees and fair value
changes)
|
$
|
(895)
|
$
|
(4,954)
|
|
|
|
|
|
|
Twelve months
ended
|
Twelve months
ended
|
|
31-Mar-20
|
31-Mar-19
|
Royalty, interest,
and lease income
|
$
|
12,191
|
$
|
4,867
|
Provision for credit
losses
|
|
(269)
|
|
-
|
Operating
income
(before equity method investees and fair value
changes)
|
$
|
11,922
|
$
|
4,867
|
|
|
|
|
|
Consulting and
professional fees
|
$
|
3,470
|
$
|
2,833
|
General and
administrative expenses
|
|
6,630
|
|
3,132
|
Share-based
compensation
|
|
9,033
|
|
24,485
|
Depreciation and
amortization expense
|
|
170
|
|
-
|
Operating
expenses
|
$
|
19,303
|
$
|
30,450
|
|
|
|
|
|
Net operating
loss
(before equity method investees and fair value
changes)
|
$
|
(7,381)
|
$
|
(25,583)
|
Canopy Rivers reported a net operating loss (before equity
method investees and fair value changes) of $0.9 million for the quarter.
Royalty, interest, and lease income was $2.6 million, net of a $0.3 million provision for expected credit
losses. This includes income from the Company's royalty and
debenture agreements with Agripharm Corp., 10831425 Canada Ltd.
d/b/a/ Greenhouse Juice Company, Radicle Medical Marijuana Inc.
("Radicle"), and The Tweed Tree Lot Inc., as well as
interest income on the Company's $40.0
million shareholder loan agreement with PharmHouse Inc.
("PharmHouse"), among other items.
Operating expenses were $3.5
million for the quarter, of which $1.2 million (or approximately 36% of the total)
related to share-based compensation, a non-cash expense. Excluding
non-cash items, operating expenses decreased by approximately 25%
from the comparative period last year. Operating expenses included
$0.9 million of consulting and
professional fees relating to legal, audit, tax, accounting, and
other regulatory advisory fees, as well as $1.3 million of general and administrative
expenses relating to employee and director compensation, marketing
and business development, and other public company costs. In
response to the novel coronavirus ("COVID-19") pandemic, the
Company is taking measures to manage its cash resources.
Specifically, subsequent to the end of FY 2020, the Company
announced a series of organizational changes focused on generating
net positive cash flows from operations. This includes a material
reduction in its operating cash outflows (driven by a reduction in
headcount, directors' compensation, marketing expenses, and general
corporate expenses) of a targeted minimum of 35% from the Company's
FY 2020 operating cash outflows on a normalized basis.
Table
3
|
|
|
|
|
|
|
Three months
ended
|
Three months
ended
|
|
|
31-Mar-20
|
|
31-Mar-19
|
Share of loss from
equity method investees
|
$
|
(3,198)
|
$
|
454
|
Impairment of equity
method investees
|
|
(11,162)
|
|
-
|
Net change in fair
value of financial assets at FVTPL
|
|
(16,311)
|
|
3,070
|
Equity method
investees and fair value changes
|
$
|
(30,671)
|
$
|
3,524
|
|
|
|
|
|
|
Twelve months
ended
|
Twelve months
ended
|
|
|
31-Mar-20
|
|
31-Mar-19
|
Share of loss from
equity method investees
|
$
|
(6,155)
|
$
|
(2,165)
|
Impairment of equity
method investees
|
|
(11,162)
|
|
-
|
Net change in fair
value of financial assets at FVTPL(2)
|
|
(17,259)
|
|
35,775
|
Equity method
investees and fair value changes
|
$
|
(34,576)
|
$
|
33,610
|
(2) Net
change in fair value of off-market commitment is included in the
net change in fair value of financial assets at
FVTPL for the twelve months
ended March 31, 2019
|
The Company's share of loss from equity method investees was
$3.2 million for the quarter. This
includes the Company's equity interests in Canapar Corp., 10663522
Canada Inc. d/b/a/ Herbert, High Beauty, Inc. ("High
Beauty"), LeafLink Services International ULC, 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.
In addition to the reported share of losses and in connection
with the Company's regular assessment of indicators of impairment
for equity method investees, the Company identified several factors
that indicated that the Company's equity investments in certain
portfolio companies may be impaired. These factors included
economic and regulatory uncertainty caused by COVID-19, a slowdown
in retail distribution in both Canada and the
United States, and a slower-than-expected ramp-up of
commercial activities for certain entities. In total, the Company
recognized impairment charges of $11.2
million 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 $16.3
million for the quarter. This includes a decrease in the
estimated value of certain royalty investments, as the
slower-than-expected growth of the cannabis industry and broader
economic challenges posed by the outbreak of COVID-19 have
increased the risk profiles of the operations of certain
counterparties to these agreements.
After consideration of operating income, operating expenses,
equity method investees, and FVTPL fair value changes, Canopy
Rivers reported a net operating loss of $31.6 million for the quarter.
Table
4
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
Three months
ended
|
|
31-Mar-20
|
31-Mar-19
|
JWC
|
$
|
(2,714)
|
$
|
3,628
|
TerrAscend
|
|
(5,500)
|
|
20,000
|
Vert
Mirabel
|
|
(88)
|
|
3,453
|
Eureka
|
|
(148)
|
|
(2,169)
|
YSS
|
|
(272)
|
|
979
|
Headset
|
|
415
|
|
(84)
|
Zeakal
|
|
1,214
|
|
-
|
Gross change in
fair value of financial assets at FVTOCI
|
$
|
(7,093)
|
$
|
25,807
|
OCI income tax
expense (recovery)
|
|
(609)
|
|
3,424
|
Net change in fair
value of financial assets at FVTOCI(2)
|
$
|
(6,484)
|
$
|
22,383
|
|
|
|
|
|
|
Twelve months
ended
|
Twelve months
ended
|
|
31-Mar-20
|
31-Mar-19
|
JWC
|
$
|
(12,803)
|
$
|
(325)
|
TerrAscend
|
|
(56,500)
|
|
(32,240)
|
Vert
Mirabel
|
|
(14,586)
|
|
(1,331)
|
Eureka
|
|
(2,020)
|
|
(355)
|
YSS
|
|
(2,721)
|
|
(5,213)
|
Headset
|
|
297
|
|
(76)
|
Zeakal
|
|
713
|
|
-
|
Gross change in
fair value of financial assets at FVTOCI
|
|
(87,620)
|
|
(39,540)
|
OCI income tax
expense (recovery)
|
|
(9,959)
|
|
(5,234)
|
Net change in fair
value of financial assets at FVTOCI(3)
|
$
|
(77,661)
|
$
|
(34,306)
|
(3)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
|
Other comprehensive loss was $6.3
million, net of tax, for the quarter, which includes a
$6.5 million, net of tax, decrease in
the fair value of financial assets that are reported at fair value
through other comprehensive income ("FVTOCI"). The primary
factors contributing to this loss were a decrease in the fair
values of the Company's investments in TerrAscend Corp.
("TerrAscend") and James E. Wagner Cultivation Corporation,
the latter of which recently filed for protection under the
Companies' Creditors Arrangement Act. Due to the high levels
of volatility observed in stock prices of publicly-traded cannabis
companies and the market broadly, it is expected that net changes
in fair value of financial assets at FVTOCI will continue to
exhibit volatility in the near-term.
Table
5
|
|
|
|
|
|
|
|
|
|
|
As
at
|
As
at
|
Period
ended
|
31-Mar-20
|
31-Mar-19
|
Cash
|
$
|
46,724
|
$
|
104,183
|
Loan
Receivable
|
|
42,450
|
|
40,000
|
Equity method
investees
|
|
50,543
|
|
64,891
|
Financial assets at
FVTPL
|
|
80,170
|
|
54,705
|
Financial assets at
FVTOCI
|
|
64,599
|
|
137,298
|
Other
assets
|
|
15,899
|
|
18,208
|
Total
assets
|
$
|
300,385
|
$
|
419,285
|
|
|
|
|
|
Total
liabilities
|
|
2,107
|
|
11,099
|
Total shareholders'
equity
|
|
298,278
|
|
408,186
|
Total liabilities
and shareholders' equity
|
$
|
300,385
|
$
|
419,285
|
Outlook
As the Company's equity method investees continue to ramp up
operations, it is expected that in the near term, its comprehensive
income (or loss) will continue to be largely driven by net changes
in the fair value of financial assets at FVTPL or financial assets
at FVTOCI. In turn, the Company expects that these net changes will
continue to be largely dependent upon the regulatory, business, and
capital markets environment in the cannabis industry, as well as
the regulatory, business, and capital markets environment in the
broader economy as a result of the COVID-19 pandemic. Given the
inherent volatility of valuations of investments in the global
cannabis sector and the unknown impact of the COVID-19 pandemic,
the Company anticipates continued volatility in its financial
results.
Q4 2020 Corporate and Portfolio Updates
The following represents a summary of the milestones achieved by
Canopy Rivers and its portfolio companies during the fourth quarter
of FY 2020:
Canopy Rivers
- Canopy Rivers announced the launch of a normal course issuer
bid, signalling management's position that the current share price
does not reflect the Company's underlying value and future
prospects.
Portfolio Updates
- PharmHouse received a licence amendment from Health Canada,
enabling it to ramp up operations across its 1.3 million sq. ft.
automated greenhouse and begin to fulfil its offtake
agreements.
- TerrAscend strengthened its financial position, finalizing a
US$33.5 million non-brokered private
placement and, later in the quarter, its wholly-owned subsidiary
TerrAscend Canada Inc. entered into an $80.5
million loan financing arrangement with Canopy Growth
Corporation.
- TerrAscend also continued to develop its U.S. operations, as
two of its subsidiaries (one in New
Jersey and another in Utah)
received approval for the processing or cultivation of medical
cannabis in their respective states.
- BioLumic Ltd. ("BioLumic") received approval from the
New Zealand government to apply
its proprietary UV light technology to medical cannabis and has
begun conducting medical cannabis commercial trials. BioLumic also
entered into a collaboration with New
Zealand's largest medical cannabis company, Helius
Therapeutics.
- YSS Corp. opened two downtown Calgary flagship stores in January, as well as
its 17th retail location in Grand Prairie, Alberta in February.
- Headset, Inc. ("Headset") and High Beauty both grew
their Canadian presence. Headset launched its Insights product for
the British Columbia cannabis
retail market and High Beauty officially launched in Canadian
retail outlets, including The Bay, Shoppers Drug Mart, and
Indigo.
- ZeaKal Inc. announced research results from multi-year field
trials of its PhotoSeed™ technology. The trials showed an increased
ability to significantly improve both oil and protein composition
in soybeans.
- Canopy Rivers advanced $1.0
million to Radicle pursuant to a convertible debenture,
which is expected to enable Radicle to increase production of its
Gage brand, which is regularly sold out in cannabis retail stores,
and work towards the launch of other popular brands for which it
holds certain exclusive licences.
This press release should be read in conjunction with the
Company's audited consolidated financial statements for FY 2020 and
MD&A for the three and twelve months ended March 31, 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.
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.
About Canopy Rivers Inc.
Canopy Rivers is a venture capital firm specializing in
cannabis. Its unique investment and operating platform is
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 Corporation (TSX: WEED,
NYSE: CGC) 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 portfolio.
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. To
the extent any forward-looking information in this news release
constitutes "financial outlooks" within the meaning of applicable
Canadian securities laws, the reader is cautioned that this
information may not be appropriate for any other purpose and the
reader should not place undue reliance on such financial outlooks.
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 Company's intention to implement changes
aimed at strengthening its financial discipline and positioning it
for future success; the Company's belief that ag-tech is a critical
component of the value chain that is poised to disrupt the cannabis
sector; the Company's evaluation of new opportunities that it
believes will create value for shareholders and help build the
cannabis industry; the Company's belief that challenging conditions
encountered by cannabis companies in FY 2020 were a function of the
slower-than-expected pace of development of the cannabis economy,
rather than its long-term potential, which the Company believes is
significant; the Company's belief that it is well-positioned to
capitalize on current market conditions and strengthen its
portfolio; the expectation that certain equity method investees
will continue to generate net losses in the near term; the
Company's focus on generating net positive cash flows from
operations, including the targeted reduction in its operating cash
outflows; the expectation that net changes in fair value of
financial assets at FVTOCI will continue to exhibit volatility in
the near-term; the Company's expected financial outlook;
management's position that the Company's current share price does
not reflect its underlying value and future prospects; Radicle's
expected use of proceeds; and expectations for other economic,
business, and/or competitive factors.
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: regulatory and licensing risks;
competition 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; stock market
volatility; the Company's actual financial results and ability to
create long-term value for shareholders and manage its cash
resources; changes in general economic, business and political
conditions, including challenging global financial conditions and
the impact of the COVID-19 pandemic; 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 Corporation and its investees; risks associated with
the termination, renegotiation and enforcement of material
contracts; credit, liquidity and additional financing risks;
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.
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 that 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.
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multimedia:http://www.prnewswire.com/news-releases/canopy-rivers-reports-fourth-quarter-and-fiscal-year-2020-financial-highlights-301069952.html
SOURCE Canopy Rivers Inc.