Cannabis acquisition and investment firm RIV Capital Inc. (CSE: RIV) (OTC: CNPOF) posted its financial results for the three months and nine-month transition period ending Dec. 31, 2023, showing incremental revenue alongside a sizable net loss.
The company, which recently changed its fiscal year-end, reported a big net loss of $47.3 million, largely due to a $48.7 million impairment charge related to its acquisition of Etain, its New York operator.
The impairment charge, which mainly affected goodwill and intangible assets, was driven by lower-than-anticipated cash flow projections for Etain’s New York operations. Slower market development and competition from the illicit market were cited as the main factors contributing to the revised projections.
RIV also posted revenue of $2.1 million for the quarter, a modest increase from the $1.9 million recorded in the same quarter of the previous year.
Despite the challenging results, RIV remains optimistic about its future in the New York market. Management has previously said that the goal in New York is to compete on wholesaling and brand-building, not retail.
“During the quarter, RIV achieved a crucial milestone thanks to the years of dedicated efforts of the Etain team in a market we consider to be one of the most promising and significant in the country,” COO and interim CEO Mike Totzke said in a statement.
“As one of the inaugural legal operators in New York, Etain has proudly served the state’s medical cannabis patients since 2015. We are proud to say that Etain received CCB approval to be one of the first six registered organizations to officially transition to an adult-use license in New York, and Etain has commenced both adult-use retail and wholesale sales.
In December, Etain received approval to transition to an adult-use cannabis license. The company also celebrated the opening of its first co-located adult-use and medical dispensary in White Plains.
However, the company’s gross profit took a hit, with a reported gross loss of $600,000 versus a gross profit of $800,000 in the prior year’s quarter.
The decline was mainly attributed to higher costs associated with scaling operations at Etain’s expanded Chestertown Facility, which the company said has yet to optimize its production capacity. Totzke also told investors last August that the facility would be standing by mid-2024.
“As our adult-use rollout begins in New York, we believe we have the balance sheet and capital management discipline necessary to support our growth strategy,” CFO Eddie Lucarelli said. “We intend to maintain a measured approach to identify strategic opportunities to further expand our operations and grow in line with this emerging market.”
The post RIV Capital stung by $47 million loss as Etain goes adult-use appeared first on Green Market Report.
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