Debra Borchardt
Cannabis investing company Canopy Rivers Inc. (TSXV: RIV), (OTC: CNPOF) reported its unaudited financial results for the first quarter ending June 30, 2019, with an operating income of $2.7 million. However, expenses in the quarter totaled $5.8 million leading to a net loss of $2.9 million. The company also said it expects to recognize its share of net losses during the remainder of the fiscal year.
$3.7 million or approximately 64% of the total expenses for the quarter were due to share-based compensation. The company said that “A significant portion of this non-cash expense relates to options granted to non-employees, which occurred at an early stage in the company’s growth and requires remeasurement each period. Other operating expenses, which include consulting and professional fees and other general and administrative expenses, were $2.0 million, representing an increase from last year due to the build-out of the company’s management team and employee base and enhanced public company compliance and regulatory costs.”
The income was mostly derived from royalty, interest, and lease income generated from the following: royalty and debenture agreements with Agripharm, Greenhouse Juice, JWC, and Radicle; a lease agreement with Spot Therapeutics Inc.; and a shareholder loan agreement with PharmHouse; as well as a $1.5 million net increase in the fair value of certain financial assets that are reported at fair value through profit or loss. Canopy Rivers also noted that the income was partially offset by its $1.0 million share of loss from its equity method investees, which includes its common stock shares in Canapar Corp., Radicle, and PharmHouse.
“In Q1 2020, we made several exciting investments in plant sciences and cannabis brands, two areas that we think are primed for real growth in the cannabis sector,” said Narbe Alexandrian, President and Chief Executive Officer of Canopy Rivers. “In addition to our new investments, as lifecycle investors, it was also rewarding to see so much positive news coming from our portfolio companies this quarter. From PharmHouse entering into a significant supply agreement with Canopy Growth to TerrAscend becoming, to our knowledge, the first and, so far, only cannabis company with sales in Canada, the U.S., and the European Union, our portfolio companies were busy creating significant value.”
After The Quarter Close
Canopy Rivers said that it has received conditional approval to graduate to the Toronto Stock Exchange. TerrAscend received an amendment to its license from Health Canada allowing for the sale of cannabis oils, which it will do through its online medical sales platform, Solace Health. TerrAscend also announced the signing of a definitive agreement to acquire Ilera Healthcare, a vertically-integrated cannabis cultivator, processor, and dispensary operator in Pennsylvania, and commenced sales to Europe through its German distribution partner, becoming the first and only cannabis company with sales in Canada, the U.S., and the European Union.
“We continue to maintain financial focus and discipline while looking to seize on exciting opportunities during a period of operational ramp-up in our portfolio and the cannabis sector more broadly,” said Eddie Lucarelli, Chief Financial Officer of Canopy Rivers. “While some of our financial results are linked to the public markets and therefore subject to volatility, we believe that several factors – including significant business catalysts within our portfolio, operational improvements that translate into increased production at our royalty investees, and an operating expense base that is low by cannabis sector standards – position us well to create value for our shareholders in the long term.”
Canopy Rivers stock was lately trading at $1.79, near the bottom of its 52-week range of $1.70 to $7.30.
