TORONTO - RIV Capital Inc. (the “Company”) (CSE: RIV) (OTC: CNPOF), a cannabis packaged goods company with a focus on establishing one of the strongest portfolios of brands in key strategic U.S. markets, acting through its wholly owned indirect subsidiary, RIV Capital US Real Estate LLC (“RIV Real Estate”, together with the Company, collectively, “RIV Capital”), and Etain, LLC (“Etain”) announced that RIV Capital has entered into a lease agreement with Zephyr, a leading California-based developer, for the development and operation of a planned new flagship cannabis cultivation and manufacturing facility in Buffalo, New York (the “Flagship Facility”). RIV Capital will sublease the Flagship Facility to Etain upon receipt of necessary regulatory approvals.
Under the lease agreement, Zephyr will develop and lease to RIV Capital two buildings totaling
approximately 75,000 square feet. Total development costs for the project are expected to be approximately $30 million, of which RIV Capital will be responsible for $4.5 million. RIV Capital will pay base rent to the Landlord over the term of the lease based on what the company believes is a favorable cap rate applied to the developer's portion of the project costs. The initial term of the lease is for 15 years. RIV Capital and Etain also have the option to expand the leased premises to include additional building(s) of added manufacturing and cultivation space.
The terms of the lease include conditions related to receipt of regulatory and other necessary approvals, including completion of any environmental remediation pursuant to the New York State Brownfield Program. Etain’s operation of the Flagship Facility is also subject to receipt of regulatory approval from the New York Cannabis Control Board and the New York State Office of Cannabis Management (the “NY Regulators”).
Following receipt of regulatory and other necessary approvals and completion of the Flagship Facility, Etain will have access to a state-of-the-art cannabis cultivation and manufacturing facility that RIV Capital and Etain believe will increase the diversity, breadth, and volume of Etain’s product offerings, improve affordability and access for New York patients and consumers, and provide a platform to bring successful, authentic cannabis brands to New York. RIV Capital and Etain also intend to work with Zephyr to implement robust diversity, social equity, and inclusion goals consistent with the legislative intent and objectives of New York’s Marihuana Regulation and Taxation Act. This includes construction of a building that can be used for cultivation and/or manufacturing, which will be located within the premises of the leased site and made available to social equity applicants. Such social equity applicants will share in the secure infrastructure comprising the leased premises and will benefit from proximity to Etain, an established New York operator.
As previously announced, the Company entered into definitive agreements on March 30, 2022, to acquire ownership and control of Etain and Etain IP LLC (collectively, the “Etain Companies”), owners and operators of legally licensed cannabis cultivation and retail dispensaries in the State of New York (the “Acquisition”). The Company acquired the non-regulated portion of the Etain Companies in the Acquisition’s first closing on April 22, 2022. The second and final closing of the Acquisition is planned to occur following receipt of all required regulatory approvals, including from the NY Regulators.
RIV Capital is building a leading cannabis packaged goods company, with a focus on establishing one of the strongest portfolios of 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 the announced Acquisition. Through its strategic relationship with The Hawthorne Collective, Inc. (“The Hawthorne Collective”), a subsidiary of The ScottsMiracle-Gro Company (“ScottsMiracle-Gro”), RIV Capital is The Hawthorne Collective’s preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.
Etain is a vertically integrated legally licensed cannabis company operating in the State of New York. It was founded as a women-owned and women-led private company in 2015. Since its founding, Etain has strived to improve the quality of life for customers every day with an absolute commitment to integrity – both in Etain’s products and operations.
This news release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of RIV Capital, Etain and RIV Capital’s portfolio companies with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding the Company’s investment in Etain, including the timing for completion of the final closing of the Acquisition; RIV Capital’s expectations regarding regulatory approval of the Acquisition and the Flagship Facility; the Company’s expectations regarding the completion of the Flagship Facility; expected development costs of the Flagship Facility; expectations regarding base rent; RIV Capital’s and Etain’s expectations regarding the anticipated benefits of the Flagship Facility, including on Etain’s product offerings and medical patients more generally; RIV Capital’s and Etain’s option to expand the leased premises; the Company’s and Etain’s intention to implement robust diversity, equity and inclusion goals consistent with the objectives of the Marihuana Regulation and Taxation Act, and the expected benefits related thereto; the Company’s expectations regarding its growth and the outcome of future partnerships; the Company’s expectation that it will be ScottsMiracle-Gro’s preferred vehicle for investments not under the purview of other ScottsMiracle-Gro subsidiaries; and expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although RIV Capital believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of RIV Capital or its portfolio companies.
Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the timing and likelihood for receipt of all required regulatory and other approvals, as applicable, for the Flagship Facility and Acquisition; the satisfaction of other conditions to closing in respect of the Acquisition; the Company’s ability to execute its go-forward strategy, including in respect of the Flagship Facility; stock market volatility; changes in the business activities, focus and plans of the Company, Etain and the Company’s investees and the timing associated therewith; the timing of any changes to federal laws in the U.S. to allow for the general cultivation, distribution, and possession of cannabis; regulatory and licensing risks; changes in cannabis industry growth and trends; changes in general economic, business and political conditions, including changes in the financial markets; litigation risks; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation, including RIV Capital’s interpretation of such regulation; public opinion and perception of the cannabis industry; divestiture risks; and the risk factors set out in RIV Capital’s most recent management’s discussion and analysis and annual information form filed with the Canadian securities regulators and available on RIV Capital’s profile on SEDAR at www.sedar.com.
The Company has invested in and acquired, and intends to in the future invest in and/or acquire, companies that are involved in the manufacture, possession, use, sale, and distribution of cannabis in the recreational and medicinal cannabis marketplace in the United States. Local state laws where such operations occur permit such activities, however, investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the U.S. Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.
While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with recreational and medicinal cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. The enforcement of federal laws in the United States is a significant risk to the business of the Company and any proceedings brought against the Company thereunder may adversely affect the Company's operations and financial performance.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although RIV Capital has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. RIV Capital does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
SOURCE RIV Capital Inc.
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