Financial Archives - Green Market Report

Debra BorchardtSeptember 20, 2022

7min250

Red White & Bloom Brands Inc. (CSE: RWB)(OTC: RWBYF) is pushing out its debt obligations to get some breathing room and making changes at the top of the company. The most pressing problem is the company’s debt payments, which is has kicked to 2024. RWB has restructured the terms of certain outstanding debentures issued by the company $70,040,000 and C$2,120,000 and issued a new convertible debenture in the principal amount of C$17 million.

The stock jumped on the news that RWB had gained some breathing room and popped 46% in trading on Monday as the news was released midday.

Marc Hauser wrote on his website Hauser Advisory Cannabis Musings, “This is a good example of a standard, out-of-court (bankruptcy) restructuring – a borrower giving up a fair amount of equity and control in exchange for the creditors not foreclosing on their debt and taking over the company. The existing shareholders are diluted, but not wiped out – with about 400 RWB million shares outstanding (per their June 30 financials), these convertible rights represent a fair amount of potential dilution to the existing shareholders.”

The company outlined the debt changes as follows:

  • A secured debenture in the principal amount of USD $25,885,000 (“Note 1“). Note 1 matures on September 12, 2024.
  • A series of secured debentures (“Notes 2A, 2B and 2C“), with an aggregate principal amount of USD $9,505,000. Notes 2A, 2B and 2C mature on September 12, 2024.
  • A secured debenture in the principal amount of CDN $2,120,000 (“Note 3“). Note 3 matures on September 12, 2024.
  • A secured promissory note in the principal amount of USD $5,850,000 (“Note 4“). Note 4 matures on September 12, 2024.

CEO and Chairman Brad Rogers said, “After close consultation with various debt holders, we are pleased to have successfully restructured over CAD $100 million of our short-term debt. Today’s announcement is validation that our debtholders share our enthusiasm for long-term opportunities for growth at RWB. By extending the maturity to 2024, we have a significant runway to realize the operational changes we have made and to growth the company is dedicated to achieving.”

Management Changes

In addition to restructuring the debt, RWB appointed Colby De Zen as President and Director of the company effective immediately and appointed Gabriel Bianchi to the Board of Directors. Mr. William (Bill) Dawson resigned from the company’s Board of Directors.

Rogers added, “The addition of Colby to the management team will further allow us to focus on margin growth, operational efficiencies, and balance sheet improvements. I want to welcome Colby to the management team and Board. Gabriel has extensive experience in lease negotiations, optimizing real estate portfolios, and foreseeing market trends. We look forward to Gabriel joining the Board of the Company upon completion of regulatory clearances; his assistance will be invaluable as we move to optimize and expand the significant footprint of locations currently held by the company in Michigan and Florida.”

Mr. De Zen stated, “I am very excited to join the management team at RWB as President. In my new role, I will streamline operations to gain efficiencies across each state, while extensively monitoring and implementing internal controls on financial reporting/planning, direct and indirect expenses and capital expenditures. By Q4, I intend to implement significant balance sheet improvements aggressively. I believe that RWB will be EBITDA positive by no later than Q4 2022 as we scale the Platinum Vape brand and its purchasing power throughout the markets we serve today and through further expansion. As a significant investor in RWB, I am committed to unlocking both current and future value for the Company. As RWB enters its next phase of evolution, I look forward to being part of a profitable growth story that all stakeholders will be proud of. ”
RWB recently reported its earnings noting that sales jumped to $27.4 million in the second quarter over last year’s $12.1 million. The net losses were $17 million, which was also higher than the previous year’s net loss of $11.4 million for the same time period. All figures are in Canadian dollars.
However, the company also stated in its filing that its statements were prepared on a ‘going concern’ basis. The company wrote that it has accumulated losses of $144,443,890 since inception, and for the three and six months ended June 30, 2022, the company has incurred a net loss of $ 17,646,210 and $ 29,403,398 , respectively, (June 30, 2021 – $11,448,650 and $ 68,336,512 , respectively), and had a working capital deficiency of $158,137,863. RWB said it has relied on debt and equity financing to keep it going and might not have enough cash to fund acquisitions and development of assets. The company had just $2.9 million in cash and cash equivalents at the end of June.

 

 


StaffAugust 2, 2022
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5min270

Pelorus Equity Group closed on a $15.8 million debt financing agreement with TransCanna Holdings Inc. The company said in a statement that the proceeds would be used to refinance and develop TransCanna’s California facility, as well as for construction costs, and the payment of interest on existing debt.

TransCanna was founded by industry pioneer and advocate Bob Blink – with one lamp and a couple of plants 25 years ago. Following medical cannabis legalization in 1996, he was one of the first Cultivator/Distributors on the legal market in California. He converted his operation to serve the recreational cannabis market in 2016, forming Lyfted Farms, Inc. TransCanna Holdings acquired Lyfted Farms in 2019, and now the parent and subsidiary companies are working in tandem to build the enterprise into the largest and most operationally diverse and agile business of its kind in California.

“Successfully sourcing exciting investment opportunities with the cannabis industry’s leading companies is what sets Pelorus apart,” said Dan Leimel, CEO of Pelorus Equity Group and manager of the Pelorus Fund. “I am thrilled to partner with TransCanna to scale their cultivation capabilities and improve the availability of their award-winning products for the California market. I look forward to continuing to work with some of the largest players in the industry and seeing our many partners continue to flourish in this growing market.”

Terms

The $15.8 million debt facility accrues interest at 14% per annum. If certain requirements are met after 18 months, the interest rate will be reduced to 12% per annum. In connection with the loan, Pelorus issued warrants to purchase up to 51,208,682 common shares of the company. No common shares may be issued on exercise of the Loan Warrants if the issue of such shares would cause the holder (and any person acting jointly and in concert with the holder) from holding beneficial ownership or having control or direction over greater than 9.9% of the outstanding common shares. The Loan Warrants are subject to the company’s standard Put/Call Structure.

“In a rapidly evolving industry with many strict regulations and requirements, Pelorus has been influential in providing the capital necessary for continued development,” said Bob Blink, CEO of TransCanna. “We are extremely excited to partner with the Pelorus team as well as to fuel our growth in California.”


StaffJuly 25, 2022
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3min280

Former Cresco Labs co-founder Joseph Caltabiano (OTC: CRLBF) has decided to close his SPAC (special purpose acquisition corp.) Choice Consolidation Corp. (NEO: CDXX.UN.U) (OTCQX: CDXXF) and return the investor’s money. It had raised $172.5 million. The SPAC’s original plan was to target strategically important limited license states, and the company was looking to acquire single-state operators, distressed assets, and rehabilitation licenses. The company released a statement after the market closed on Friday saying that current market conditions favor single-state operators maintaining the status quo until capital is flush to create operating scale. Thus, no appropriate target was found within the timeline for the SPAC.

The SPAC will be wound down and the company’s Class A restricted voting units will be automatically redeemed on or about August 16, 2022. The company’s board of directors has determined that it is in the best interests of the company and its shareholders for the Company to be wound-up as they do not believe that an appropriate qualifying transaction can be identified and completed within the company’s permitted timeline. The SPAC stock began trading on August 1, 2021, on the OTC Marketplace.

“While the creation of the legal and regulated cannabis industry presents the opportunity to harness growth potential of a burgeoning industry, the current shifting market conditions and partisan political gridlock have made our current pathway too unpredictable. After careful review and consideration, we believe it is in the best interest of our shareholders to return their investments at a time when it can be better deployed in other vehicles. Our passion and confidence in the cannabis sector have not waned, and I look forward to unlocking future opportunities in the industry,” said Caltabiano, CEO of Choice Consolidation Corp.

The Choice SPAC did say that when favorable tax benefits are available and cannabis marketing and branding is normalized nationwide, conditions will improve for single-state operators to enter the public market. Viridian Capital Advisors wrote that as of July 15, total equity issuance is off 75.2% y/o/y, with a more significant 78.6% decline in Canadian equity financing.

 


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