RIV Capital Inc. CNPOF RIV released its financial results for the three and six months ended September 30, 2022, revealing revenue, net of excise taxes, of $1.9 million, a 46% increase compared to $1.3 million for the previous quarter. (The company did not report revenue for any reporting periods ended on or prior to March 31, 2022).
FQ2 2023 Financial Highlights
Gross profit was $889,000, compared to a gross profit of $500,000 for the previous quarter.
Net loss of $142.3 million, and a basic and diluted loss per share of $0.84 for the three months ended September 30, 2022, compared with a net loss of $1.2 million, and a basic and diluted loss per share of $0.01 for the same period last year.
Total comprehensive loss of $141.9 million for the three months ended September 30, 2022, compared with a total comprehensive loss of $7.8 million for the same period last year.
Received New York State Cannabis Control Board and New York State Office of Cannabis Management approval for Etain, LLC's change of control request, clearing the path for the Company to complete the final closing of the previously announced acquisition of ownership and control of Etain IP LLC and Etain, LLC
Entered into a lease agreement with Zephyr, a California-based developer, for the development and operation of a planned new flagship cannabis cultivation and manufacturing facility in Buffalo, New York
$165 million of cash on-hand to, among other things, support the completion of the Etain acquisition, the expansion and development of Etain's cultivation and processing facilities, and to pursue new growth opportunities
Reported a net loss of $142.3 million, including a goodwill impairment charge of $138.9 million related to the Etain acquisition
"Having cleared all regulatory hurdles, we are eager to complete the final closing of the Etain acquisition before the end of 2022, establishing RIV Capital as a strongly positioned, vertically integrated cannabis operator in New York," stated Mark Sims, president and CEO of RIV Capital. "With the long-awaited drafts of New York cannabis market regulations approved for publication last week, we are looking forward to continuing to work with the State to help create an efficient market where registered organizations can operate effectively. We intend to provide our feedback during the public review period and continue to work with the regulators to support the creation of rules that are mutually beneficial for all stakeholders."
"The draft regulations further support our thesis that there will be a robust wholesale market in New York, where the most successful companies will be those that can build the strongest brands. New York continues to offer us the best platform to launch our brand-focused strategy, and our expanding cultivation footprint designed to support the premium New York market provides RIV Capital with attractive wholesale opportunities."
The company is required to review the carrying value of goodwill and intangible assets annually for impairment or more frequently when there are indicators that impairment may have occurred.
As the company identified indicators that an impairment of its cash generating unit represented by Etain may have occurred, the company conducted an impairment test as at September 30, 2022, by comparing the recoverable amount of the Etain cash generating unit to its carrying amount. The recoverable amount was represented by the estimated fair value of the Etain cash generating unit, which was based upon an updated financial forecast for the business and an updated discount rate applied to projected cash flows to account for the enhanced risk and uncertainty attached to the New York market. Based on the foregoing, the company recognized an impairment charge of $138.9 million for the Etain cash generating unit for FQ2 2023.
While the company remains optimistic about the New York market, the discounted cash flow analysis used for the impairment assessment considered, among other things, the delay in the development of the regulated market for adult-use cannabis in New York relative to initial expectations, as well as increased uncertainty regarding registered organizations' pathway to participation in such market. The company believes that these developments have contributed to proposed transactions involving New York cannabis license holders being abandoned and values implied by recently announced transactions involving comparable businesses being lower than the purchase price paid in the Etain acquisition. In addition, the company believes that market-based perceptions of the value of New York cannabis licenses have also been negatively impacted by the perceived proliferation of the unregulated market that has developed (particularly within New York City) and lack of enforcement to curtail such activities.
The impairment charge is an adjustment that does not affect the company's current cash position or cash flow from operating activities. There is no guarantee as to whether further impairment charges will or will not occur in the future.
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