Canopy Rivers Archives - Green Market Report

Canopy Rivers Inc. (OTC: CNPOF) released its unaudited condensed interim consolidated financial statements and management’s discussion and analysis for the third quarter ending December 31, 2020. Canopy Rivers reported an operating income of $3.0 million for the quarter. The company said this included royalty, interest, and lease income (before provisions for credit losses) of $5.9 million. The net income was $1.4 million.  Operating expenses were $3.4 million for the quarter, compared with $3.9 million for the same period last year.

Other comprehensive income was $80.8 million for the quarter, driven by the increase, net of tax, in the fair value of financial assets that are reported at fair value through other comprehensive income. Canopy Rivers reported a gross increase in the fair value of financial assets at FVTOCI of $94.5 million for the quarter, which was primarily attributable to the positive change in the fair value of its investment in TerrAscend. This was driven by a significant increase in TerrAscend’s share price during the quarter and a lower estimate of the liquidity discount used in the exchangeable share valuation due to positive cannabis regulatory reform momentum in the U.S., including support for cannabis legalization at all three levels of government and the success of five cannabis ballot initiatives at the state level. Partially offsetting this material increase was a decrease in the estimated fair value of the Company’s investment in Vert Mirabel common shares of $9.5 million, driven primarily by lower expectations about long-term wholesale cannabis pricing in Canada. This led to a total comprehensive income for the quarter of $82 million.

“Our quarter was highlighted by the announcement of our milestone transaction with Canopy Growth, which we believe will provide substantial value to our shareholders,” said Narbé Alexandrian, President, and CEO, Canopy Rivers. “Our portfolio companies continue to gain momentum, and we are further encouraged by the potential for regulatory reform in the U.S. given recent progress at the state level and the new administration’s position on cannabis reform. We believe that we will have the opportunity to enter the U.S. market at an ideal point in time and that our balance sheet, simplified share structure, strategic flexibility, and deep domain expertise will enable us to deliver value to shareholders as we consider potential material investments or acquisitions in the U.S.”

Canopy Growth

In December Canopy Rivers entered into an agreement with Canopy Growth Corporation  (NASDAQ: CGC) in which Canopy Rivers agreed to sell its interests in TerrAscend and TerrAscend Canada, Vert Mirabel, and Tweed Tree Lot to Canopy Growth for $115.0 million in cash, up to 3.75 million common shares in Canopy Growth, and the cancellation of Canopy Growth’s multiple voting shares and subordinated voting shares of Canopy Rivers. The CGC Transaction represents a return on invested capital of approximately 5.6x and an internal rate of return of approximately 101% as at the time of announcement. Following the anticipated close of the transaction, which is expected to be reflected in the March quarter, Canopy Rivers said it expects to have approximately $310 million in net cash and liquid securities on a pro forma basis.

“After a challenging September quarter during which we recognized material charges on our investment in PharmHouse, we ended the calendar year with significant positive momentum, as evidenced by our financial results,” said Eddie Lucarelli, CFO, Canopy Rivers. “We expect to sustain this momentum during the current quarter as we work towards closing our transformative transaction with Canopy Growth. By redeeming shares at a discount to net asset value and successfully monetizing assets that carried significant liquidity restrictions, the financial merits of the transaction are clear. Fundamentally, we believe that the accretive nature and strategic value of this transaction will unlock substantial value for our shareholders and optimally position the Company to execute on new opportunities in the U.S., the world’s largest cannabis market.”

Canopy Rivers said it expects to use the proceeds from the Canopy Growth deal to invest in more cannabis companies within the U.S. As part of that strategy, the company said it is also starting the process to delist its shares from the TSX so that it can list its securities on an alternate stock exchange that does not prohibit listed Canadian companies to invest in or acquire legal U.S.-based cannabis businesses.

Pharm House

The company also gave an update on the restructuring of Pharm House. Assets were identified for sale and parties that were interested in buying have put forth offers. Day to day operations have continued under DIP financing. Canopy Rivers said no repayments of the principal have occurred and the current outstanding balance remains $90.0 million, with interest payable by PharmHouse monthly.

On February 10, 2021, the company said it received a statement of claim filed by the PharmHouse majority shareholder concerning certain disputes relating to PharmHouse. Canopy Rivers said in a statement, “The claim is substantially similar to a claim previously filed in September 2020, which was subsequently discontinued. The Claim makes a number of allegations against Canopy Rivers, Canopy Growth, TerrAscend, and TerrAscend Canada. As with the previously filed statement of claim, Canopy Rivers views the Claim as it relates to its actions to be completely without merit and intends to vigorously defend its position at the appropriate time and in the appropriate forum.”

Cannabis venture capital firm Canopy Rivers Inc. (OTC: CNPOF) reported its fourth quarter and fiscal year results for the period ending March 31, 2020. Revenue was flat at $2.5 million for the quarter in 2020, while the net losses ballooned to $30 million from 2019’s net income of $3.5 million.

For the full fiscal year, Canopy Rivers reported an operating income of $11.9 million versus 2019’s operating income of $4.8 million. The net loss for the year was $40 million versus last year’s net income of $3.9 million. The basic earnings per share were ($0.22) versus $0.03 for 2019.

“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.”

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. Following the compensation boost,  the company announced a series of organizational changes focused on generating net positive cash flows from operations. This included layoffs, a cut in directors’ compensation, marketing expenses, and general corporate expenses.

“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.

The company’s share of loss from equity method investees was $3.2 million for the quarter. This included equity interests in Canapar Corp.,  Herbert, High Beauty, Inc., LeafLink Services, PharmHouse, and Radicle. Canopy Rivers said it expects these 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.

Canopy Rivers also recognized impairment charges of $11.2 million for the quarter The charges were attributed to 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.

The company also said it took a hit from the decline of share price for its investment in TerrAscend and James E Wagner Cultivation Corporation, the latter of which recently filed for protection under the Companies’ Creditors Arrangement Act.

“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.”

Cannabis venture capital firm Canopy Rivers Inc. (TSX: RIV)(OTC: CNPOF) reported its third-quarter financial results in Canadian Dollars for the three and nine months ending December 31, 2019. The operating income for the quarter was $1.8 million, a big drop from last year’s $8.3 million for the same time period.  The company also delivered a net loss of $2.6 million versus last year’s net income of $1.4 million. The earnings per share were a negative $0.01 versus last year’s earnings per share of $0.01.

“It was a challenging end to 2019 for the valuations of publicly-traded cannabis companies, which naturally impacted our results for the quarter,” said Eddie Lucarelli, CFO, Canopy Rivers. “However, we continue to believe that these headwinds for the cannabis sector are temporary and that the strength of our balance sheet positions us well to weather the storm. A strong pipeline of global investment opportunities, positive trends in supply chain and retail developments in Canada, and impending milestones at our portfolio companies truly excite us for what’s to come in 2020.”

Revenue Sources

The company’s revenue was primarily driven by royalty, interest, and lease income of $5.0 million from Agripharm Corp., 10831425 Canada Ltd. d/b/a/ Greenhouse Juice Company, James E. Wagner Cultivation Corporation, Radicle Medical Marijuana Inc., and The Tweed Tree Lot Inc. In addition to that, revenue came from a loan agreement with TerrAscend Canada Inc., a shareholder loan agreement with PharmHouse, Inc. and a lease agreement with Tweed Tree Lot.

The company noted that the income was partially offset by a $1.9 million net decrease in the fair value of certain financial assets that are reported at fair value through profit or loss. Operating income was further offset by a $1.3 million share of loss from the company’s equity method investees. This share of loss was recorded one quarter in arrears, which includes the company’s common equity positions in Canapar Corp., Herbert, High Beauty, Inc., LeafLink Services International ULC, PharmHouse, and Radicle. The company said that it expects these equity method investees to continue to generate net losses during the remainder of the fiscal year as the companies continue to ramp up operationally.

“In the third quarter, we continued pursuing our goal to become the leading venture capital firm building the cannabis industry of tomorrow,” said Narbé Alexandrian, President & CEO, Canopy Rivers. “We focused primarily on follow-on investments in our existing portfolio of innovative companies, further developing the Canopy Rivers ecosystem through collaborative partnerships, and evaluating where we think the next wave of disruption will come from as the global cannabis market continues to evolve and mature.”

Civilized

Canopy invested $5 million into cannabis media company Civilized and then this past October it gave the company an additional $120,000. This was after Civilized announced that it was being bought by New Frontier Data at the New West Media Summit in San Francisco and at a time when the company was cutting back. Now Canopy Rivers says its current ownership interest is zero. However, there is still a debt. Both the convertible debenture and warrants are currently exercisable and, if exercised, would together represent approximately 26% of the equity of Civilized on a fully diluted basis as of December 31, 2019.

Rivers also stated that it is now expected that the convertible debenture interest receivable will not be recovered until maturity or conversion. “The company no longer recognizes interest receivable on the instrument, which was reported at $629,000 as of March 31, 2019. ”

Even though Rivers says it has no current ownership interest, As of December 31, 2019, the company said it owned 221,239 common share purchase warrants of Civilized (March 31, 2019 – 221,239). The warrants represent a derivative financial instrument that is initially measured at fair value and is subsequently measured at FVTPL. As of December 31, 2019, the warrants were estimated to have a nominal value (March 31, 2019 – $760).

Civilized was recently called out on The Black List for not paying a writer. In the comment section Civilized’s Terri Riedle, the Co-founder & President allegedly wrote in an email,”Thank you for the patience you’ve afforded Civilized over the last few months. As you may be aware, Civilized is in the process of being acquired by New Frontier Data. As a follow-up to their October announcement to that effect, we’re continuing to work in partnership with them and other advisors on a shared strategic and capital plan for 2020. I wanted to give you a heads-up today that the acquisition due diligence process has led us to the joint conclusion that the best path forward is to suspend Civilized’s day-to-day operations until January 2020. This is news you may catch in the media in the coming weeks. By hitting pause, we’re minimizing costs while we work with New Frontier Data to move into the new year with the resources we need in order to achieve our goals, including honouring our commitments to you. We regret that our vendors are in a difficult position and want to assure you that despite the delays, New Frontier Data prioritizes these important relationships and will be in a position to remedy the situation with vendors as soon as possible. We expect to re-launch a stronger and more powerful media company in a few weeks and appreciate this is an uncomfortable, even if necessary, transition for all. If you have any questions or wish to get in touch with me or New Frontier Data to discuss, we’re available to you.”

The Rise

Apparently Canopy Rivers hasn’t gotten its fill of media. The company has announced its launching its own news site called The Rise, whose Editor-in-Chief will Jameson Berkow. Berkow most recently helped The Globe and Mail launch its cannabis industry coverage. He was previously a senior reporter for BNN Bloomberg (formerly the Business News Network), where he led live daily coverage of major business news from the television station’s Toronto headquarters.

The Rise is described as a publication that will dive into these stories and speak directly to the modern entrepreneur. “Here you will find thoughtful content that strips away the fluff and gets to the heart of what it means to be an entrepreneur: the challenges, journeys, successes, and failures. You’ll find these stories alongside resources, thought leadership, economic insights, and emerging trends.”

There is no launch date as of yet.

Canadian-based venture capital firm Canopy Rivers Inc. (TSX: RIV)(OTC: CNPOF) reported that it generated operating income of $930 thousand in Canadian dollars versus last year’s $23 million for the same time period. The company also delivered a net loss of $4.4 million versus last year’s net income of $10.9 million. The stock dropped over 6% to lately trade at USD$1.

The company said that the income was “primarily driven by royalty, interest, and lease income of $2.2 million from: royalty and debenture agreements with Agripharm Corp., Greenhouse Juice Company, James E. Wagner Cultivation Corporation and Radicle Medical Marijuana Inc. a lease agreement with Spot Therapeutics Inc. and a shareholder loan agreement with PharmHouse, Inc. This income was partially offset by a $559 thousand net decrease in the fair value of certain financial assets that are reported at fair value through profit or loss.”

The company went on to say that the “Operating income was further offset by a $682 thousand share of loss from the Company’s equity method investees. This share of loss was recorded one quarter in arrears, which includes the Company’s common equity positions in Canapar Corp., Herbert Works, High Beauty, Inc., LeafLink Services International ULC, PharmHouse and Radicle.” Canopy Rivers said it also expects to continue to generate losses during the remainder of the year.

“Headlined by our graduation to the TSX, our business matured during the second quarter as we launched our Strategic Advisory Board and continued to work closely with our portfolio companies as they achieved new milestones,” said Narbé Alexandrian, President & CEO, Canopy Rivers. “There were numerous achievements for our portfolio companies this quarter. Several of these companies received licenses and amendments from Health Canada for the sale of cannabis oils, while others made key acquisitions, launched their Canadian business, or brokered agreements with companies both inside and outside of the Canopy Rivers ecosystem.”

Expenses Decline

The company noted that its operating expenses for the quarter were $6.1 million, which dropped from last year’s $8.9 million.  $3.0 million of that was related to share-based compensation. Other operating expenses, which include consulting and professional fees and other general and administrative expenses, were $3.2 million, representing an increase from the comparative quarter last year due to the build-out of the Company’s management team and employee base and enhanced public company compliance, marketing and business development, and regulatory costs.

Other operating expenses also increased from the previous quarter due to certain non-recurring costs relating to the Company’s graduation to the Toronto Stock Exchange and the launch of a formal branding and marketing campaign.

Other comprehensive income, which captures the net changes in fair value of financial assets that are reported at fair value through other comprehensive income, was a loss of $28.3 million, net of tax. The fair values of Canopy Rivers’ investments in Eureka 93 Inc., JWC, YSS Corp., Les Serres Vert Cannabis Inc. and TerrAscend Corp. were negatively impacted by downward trends in public market valuations for cannabis companies during the period.

The company made no mention of its investment in the cannabis media outlet Civilized, which is said to be merging with New Frontier Data. Civilized recently laid off several staff members and moved to smaller offices in California. The rumor is that the planned combination will try to go public, which would attempt to make investors whole.