RIV Capital Reports First Revenue From Etain Acquisition, Cuts Net Loss By 85%

RIV Capital Inc. CNPOF RIV, released its financial results for the three months ended June 30, 2022, revealing revenue, net of excise taxes, of $1.3 million. The company did not report revenue for any reporting periods ended on or prior to March 31, 2022.

Q1 2023 Highlights

• Retail revenue of $1.3 million was generated from Etain, LLC’s dispensaries in Manhattan, Kingston, Syracuse, and Yonkers, and wholesale revenue of $200,000 was generated from sales of Etain-branded products to other registered organizations in New York.

• Gross profit of $500,000 for the three months ended June 30, 2022.

• Net loss of $3.5 million and basic and diluted EPS of $(0.02) for the three months ended June 30, 2022, compared with a net loss of $24.5 million and basic and diluted EPS of $(0.17) for the same period last year.

• Comprehensive loss of $8.0 million for the three months ended June 30, 2022, compared with a total comprehensive loss of $21.3 million for the same period last year.

• Initial closing of acquisition of ownership and control of Etain, LLC and Etain IP LLC completed in April 2022.

• Ongoing integration of the Etain business to optimally position the company for the launch of the adult-use cannabis market in New York

• Approximately $170 million of cash on-hand to support the Etain Acquisition and long-term expansion plans

“Following the initial closing on the unregulated assets of Etain in April 2022, we remain confident that we have selected the ideal platform for growth as the New York market approaches the launch of adult-use sales,” stated Mark Sims, president and CEO of RIV Capital. “While the final transfer of equity interests of Etain, the license-holding entity, is currently under review by New York state regulators, the structure of the acquisition has given us ownership of Etain’s non-regulated assets, and accordingly, we have been diligently working with the Etain team to appropriately scale their existing infrastructure, processes, and systems. We expect a significant increase in Etain’s revenue and cash flow following the launch of adult-use sales in the New York, which Etain plans to support alongside the State’s medical program once legally permissible.”

Etain Acquisition and Integration

In April 2022, RIV Capital announced the completion of the initial closing of its previously disclosed transaction involving Etain, owners and operators of a legally-licensed registered organization with cannabis cultivation and retail dispensaries in the state of New York. Pursuant to the initial closing, RIV Capital acquired the non-regulated portion of the Etain companies. Subject to receipt of the relevant approvals by the New York state regulators, including the New York Cannabis Control Board (the “CCB”) and the New York State Office of Cannabis Management (the “OCM”), the second closing and transfer of the license-holding entity’s equity interests is expected to occur in the second half of calendar year 2022.

Following the initial close, the company has been able to provide various support services, including advising on the implementation of new cultivation and manufacturing best practices, leveraging insights from the technical services team at The Hawthorne Gardening Company, a subsidiary of The Scotts Miracle-Gro Company SMG, RIV Capital’s strategic partner, with the goal of optimizing the design and fit-out of Etain’s Chestertown cultivation facility expansion.

As previously announced, RIV Capital is also in the process of developing a new, state-of-the-art flagship indoor cultivation facility in Buffalo, designed with premier cultivation and production infrastructure specifically tailored to support the premium New York market. RIV Capital expects to break ground on the new flagship facility in the fourth quarter of calendar year 2022. Operation of the flagship facility is also subject to receipt of regulatory approval from the CCB and the OCM.

Growth and Expansion Strategy

The company intends to develop and expand new brands and products designed to resonate with the New York consumer, with plans to offer as one of its core brands Etain’s popular product line, which will include new form factors and SKUs later this year.

Once adult-use sales begin, the company expects a significant ramp in business to occur, with expanded operations coming online to satisfy the growing consumer demand that is expected across the state. The company further believes that adding capacity to Etain’s existing cultivation and manufacturing footprint will allow it to continue efficiently serving New York’s medical market even as adult-use rolls out across the state.

While RIV Capital remains focused on operationalizing its New York platform before undertaking significant expansions elsewhere, the company continues to actively explore M&A opportunities as part of its overall corporate strategy. Amid difficult market conditions, RIV Capital’s strong liquidity puts the company in a favorable position to build its U.S. platform as the broader market evolves. The company intends to take full advantage of its significant cash position when the right opportunity presents itself, and aims to provide updates on its progress as its U.S. operations begin to scale.

Photo by Mackenzie Marco on Unsplash

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