TORONTO – RIV Capital Inc., an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of brands in key strategic U.S. markets, today released its financial results for the second quarter ended June 30, 2024 (“Q2 2024”). All financial information in this press release is reported in U.S. dollars unless otherwise indicated.
Management Commentary
“We are very pleased with the ongoing success of our adult-use operations rollout in New York through the second quarter,” said Mike Totzke, COO and interim CEO of RIV Capital. “The customer response has been strong, reflecting the years of dedication and hard work from our team. Additionally, since the appointment of David Vautrin as Chief Retail Officer, we have enhanced our in-store retail shopping experience to best serve our growing cannabis community. We look forward to implementing these strategies further with the expected opening of two additional adult-use retail locations in New York later in 2024.”
Mr. Totzke added, “Since announcing our strategic business combination with Cansortium, we have begun the important work to align our two companies and ensure we are prepared to hit the ground running upon successful completion of the transaction. Cansortium’s best practices and standard operating procedures have been implemented at our New York operations to boost our operational efficiency and elevate quality standards. There are also plans to rapidly introduce Fluent’s brands into the New York market to expand our consumer reach and further bolster national brand recognition. With all that lies ahead, we are incredibly excited about the remainder of 2024 and the promising future of our combined company.”
Regulatory Update
The Company is pleased to note that New York state continues to actively advance its efforts to combat ongoing illicit market activities. At the federal level, the Company continues to monitor developments regarding the rescheduling of cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act (the “CSA”), as rescheduling is anticipated to lead to the removal of 280E taxes and provide support for further potential federal reform. This potential change may expand institutional access to invest in the cannabis sector and accelerate opportunities for research into the medical benefits of cannabis.
Financial Results for the Second Quarter Ended June 30, 2024
The following is a summary of the Company’s unaudited financial results for the three and six months ended June 30, 2024 and 2023. As previously announced, the Company has changed its fiscal year end from March 31 to December 31. Accordingly, the comparative period presented for the six months ended June 30, 2023, had not previously been reported in historical unaudited condensed interim consolidated financial statements published by the Company. Further details regarding the change in fiscal year end, including the length and ending dates of the Company’s financial reporting periods, are available in the Company’s Notice of Change in Year End prepared in accordance with Section 4.8 of National Instrument 48-102 and filed on the Company’s SEDAR+ profile.
Unless otherwise indicated, all financial highlights summarized in tables in this press release are presented in thousands of dollars, except share and per share amounts. All references to “$” are to United States dollars.
Summary Operating Results
Net revenue was $3.8 million for Q2 2024, compared to $1.8 million for the three months ended June 30, 2023 (“CQ2 2023”). Retail revenue of $3.7 million was generated from Etain LLC’s co-located adult-use and medical retail dispensary in White Plains and its medical retail dispensaries in Manhattan, Kingston, and Syracuse, compared with $1.7 million in CQ2 2023 from medical dispensaries only. Wholesale revenue of $0.2 million was generated from sales of Etain-branded adult-use and medical cannabis products to adult-use wholesale customers and medical cannabis dispensaries in New York, compared with $0.2 million in CQ2 2023 from sales of Etain-branded medical cannabis products only to other medical cannabis dispensaries. Net revenue increased relative to the comparative period primarily due to the first full quarter of contribution from the Company’s adult-use retail operations in White Plains.
Cost of goods sold was $4.9 million for Q2 2024, compared with $1.6 million for CQ2 2023. The increase in cost of goods sold relative to the comparative period was attributable to the greater revenue base for Q2 2024, as well as an increase in the Company’s inventory reserve of $2.4 million, of which $2.0 million was related to intermediate oil.
The Company reported an unrealized loss on changes in fair value of biological assets of $0.4 million for Q2 2024, compared to an unrealized gain of $0.2 million for CQ2 2023. The unrealized loss in Q2 2024 was primarily attributable to a reduction in the estimated selling price for bulk flower in New York, partially offset by lower cultivation costs on a per gram basis.
The Company reported a gross profit of $(1.6) million for Q2 2024, compared to a gross profit of $0.4 million for CQ2 2023.
Selling, general, and administrative (“SG&A”) expenses were $5.8 million for Q2 2024, compared with $5.3 million in CQ2 2023. The increase in SG&A expenses relative to the comparative period was primarily attributable to financial, legal, and tax advisory fees related to the Company’s announced business combination with Cansortium Inc., as well as increased selling and marketing activities and public company costs, partially offset by lower expenses related to personnel, non-transaction advisory, and insurance premiums, among other items.
Other loss was $2.6 million for Q2 2024, compared with $4.3 million in CQ2 2023. The expenses included in other loss for Q2 2024 are largely non-cash in nature.
The Company reported a net loss of $8.3 million, and a basic and diluted net loss per share of $0.06, for Q2 2024, compared with a net loss of $9.1 million, and a basic and diluted net loss per share of $0.07, for CQ2 2023.
Other comprehensive loss was $0.4 million for Q2 2024, compared with other comprehensive loss of $0.6 million for CQ2 2023.
Total comprehensive loss was $8.7 million for Q2 2024, compared with total comprehensive loss of $9.7 million for CQ2 2023.
About RIV Capital
RIV Capital is an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of cannabis brands in key strategic U.S. markets. Backed by in-house expertise and cannabis domain knowledge, RIV Capital aims to grow its own brands and partner with established U.S. cannabis operators and brands to bring them to new markets and build market share. RIV Capital established the foundational building blocks of its active U.S. strategy with its acquisition of Etain. Through its strategic relationship with The Hawthorne Collective, Inc., a subsidiary of The ScottsMiracle-Gro Company, RIV Capital is The Hawthorne Collective’s preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.
