TORONTO – RIV Capital Inc. (“RIV Capital” or the “Company”) (CSE: RIV) (OTC: CNPOF), 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 provided a regulatory and operational update following the New York State Cannabis Control Board (“CCB”) and New York State Office of Cannabis Management’s (“OCM”) release of revised adult-use (“AU”) cannabis draft regulations.
The revised regulations include a significantly shortened waiting period for Etain’s entry into the retail AU market, now allowing for one co-located store by year end and the second and third co-located stores after June 29, 2024 (compared to the initial draft regulations’ three-year waiting period). Also included are changes to the timing of market entry fees, which would now include $5 million due at the time of licensure, $5 million due within 180 days of opening the 2nd store, $5 million due when $100 million in revenue is achieved, and the last $5 million due when $200 million in revenue is achieved. The fees collected will be used to support social equity applicants.
“Rapidly opening more licensed dispensaries is the most immediate way to encourage a thriving, adult-use market in New York. The adjustments to the proposed waiting period will provide an opportunity to co-locate an adult-use dispensary before the end of this year and give consumers access to safe, high-quality cannabis,” said Mike Totzke, COO and interim CEO of RIV Capital. “While we continue to review the updated regulation package, we believe the revised draft regulations are more reflective of the Marijuana Regulation & Taxation Act’s vision and the diverse and prominent cannabis market New York is set to become. We appreciate that the Cannabis Control Board and Office of Cannabis Management have recognized current market conditions and are preserving patient access to medical cannabis while accelerating access to legal dispensaries for all New Yorkers. In the meantime, we are focused on completing the expansion of our cultivation and processing capabilities to prepare for our entry into the AU market, educating more people on the benefits of medical cannabis, and elevating NY cannabis brands, specifically from women entrepreneurs.”
Yesterday’s passage of the revised New York cannabis market regulations will be followed by a 45-day comment period. With the expectation that the regulations will be finalized shortly thereafter, Etain is planning to commence AU wholesale sales early in the fourth quarter of 2023.
On April 27th, New York governor Kathy Hochul announced an agreement to address key priorities in the fiscal year 2024 state budget, which included efforts to combat the illicit market by expanding the enforcement powers of the OCM and Department of Taxation and Finance to give those agencies the ability to impose a wide array of penalties for engaging in illicit market sales, including closing operations and levying significant fines on illegal cannabis operations.
Mr. Totzke added, “We commend the legislature and governor for striking the right balance between sensible and necessary enforcement against the illicit market. These new measures will help ensure that New Yorkers are consuming safe products while better positioning the legal cannabis market, including its social equity participants, for success.”
For the past six months, the Company has been preparing to become a leading vertically integrated operator in the New York cannabis market. The final phase of construction on the expansion of Etain’s cultivation and production facility in Chestertown, New York has been completed, and planting is underway. The facility enhancement is expected to triple Etain’s original cultivation capacity and support research and development activities to drive product innovation. The Company believes that this significant capacity expansion, alongside other operational improvements and the ongoing construction of its previously announced flagship facility in Buffalo, will optimally position it to enter the AU market and quickly establish a leadership position later this year. The Company looks forward to providing a more comprehensive operational update in the near term.
RIV Capital is 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. 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 Etain Acquisition. Through its strategic relationship with The Hawthorne Collective, Inc. (“The Hawthorne Collective”), a subsidiary of ScottsMiracle-Gro, RIV Capital is The Hawthorne Collective’s preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.
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 and its 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 strategies, objectives, goals, opportunities and plans, including in respect of Etain; the Company’s expectations regarding the regulations for the New York market and its intentions to provide feedback on the recently released New York cannabis market regulations; the Company’s liquidity position, including its ability to finance its long-term expansion plans with cash on-hand; the Company’s expectations regarding the New York cannabis market; expectations regarding the launch of adult-use sales in the state of New York; expectations regarding the timing of the first planting at the Chestertown facility; the Company’s expectations regarding Etain’s position in the New York cannabis market; the Company’s expectations and plans regarding Etain’s business, including its market share, sales, brand, products and locations; the Company’s expectations regarding growth opportunities; challenges faced by the existing U.S. medical cannabis market; 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 Company’s ability to execute its go-forward strategy; stock market volatility; changes in the business activities, focus and plans of the Company; 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 MD&A and AIF 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.
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