Red White & Bloom Delivers Solid Quarter, Debt Remains A Big Problem

Red White & Bloom Brands Inc. (OTCQX: RWBYF) delivered its third-quarter 2021 earnings with revenue increasing 93% to C$11.8 million versus last year’s C$6.1 million. The company reported a net loss of C$5.5 million down from last year’s net loss of C$9.5 million. RWB said that the change in net loss was primarily a result of the revaluation of its Call/Put options, as well as rightsizing compensation and achieving economies of scale.

Big Debt

RWB though is still facing a huge debt problem that it warned investors about last quarter. The company said this time that it is in advanced discussions with a number of funds to restructure the current debt of $115 million due in 2022 into a more advantageous long-term debt solution. . As of September 30, 2021,  RWB has accumulated losses of $106,414,495 since inception, and for the nine-month period ended September 30, 2021, the company incurred a net loss of $ 73,809,205, and net cash used in operations was $25,950,800. As of September, the company is down to $10.5 million in cash and cash equivalents. On a positive note, the company has been successful in obtaining financing to date, and believes it will be able to obtain sufficient funds in the future and ultimately achieve profitability.

“In the third quarter, we made excellent progress in laying additional building blocks in our core operating states of Florida, Michigan, and California to become more vertically integrated where it will be most profitable,” stated Brad Rogers, RWB Chairman & CEO. “This will help drive increased revenue and margins for the Company. Simultaneously, we are gaining significant market share with our premium Platinum Vape (PV) and exclusively licensed High Times branded products in select markets as evidenced by ArcView/Greentank’s 2021 Q3 Industry Vape Report, which named Platinum Vape as the #1 brand vape cartridge in Michigan.”

The company also said that most of its revenue comes from sales of cannabis finished products through third party wholesaling to retailers. RWB said it will be vertically integrated upon the closing of the pending acquisition of the Michigan investee. RWB anticipates this will leverage cost-sharing and other economies of scale to further improve margin.

CFO Chris Ecken said, “RWB is being very strategic in pursuing vertical integration only when there is value to be added. We aim to be asset-light and brand rich. Our strategy is to support the brands in the most profitable way. We have been putting the teams in place to support this strategy in each state where we operate. As RWB integrates vertically in multiple states, we anticipate that our margins will dramatically increase, enabling us to move toward profitability.”

Michigan 

Red White & Bloom’s acknowledged that the RWB Michigan LLC acquisition was taking longer than expected. The company said that it finalized the revised structure for the closing on its purchase of its Michigan Investee and received Adult-Use (recreational use) prequalification status. RWB said it has continued to work closely with Michigan’s Marijuana Regulatory Agency and is making progress on the closing of the acquisition of the Michigan facilities, which include active and planned dispensaries; cultivation facilities; and significant company-owned real estate holdings. “These Michigan facilities generated $93 million in revenue in 2020. At this time, no investee revenue or expenses (other than expenses related to transaction costs) are included in the RWB financial results.”

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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