Red White & Bloom Archives - Green Market Report

Debra BorchardtApril 20, 2022
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Red White & Bloom Brands Inc. (CSE: RWB and OTC: RWBYF)  announced a series of transaction and operational decisions to strengthen the balance sheet and provide significant cost reductions in 2022. The changes included selling the Illinois property, paying down debt, reducing its headcount, and focusing on its own brands.

Brad Rogers, RWB CEO, stated, “Having recently obtained full operational control of our intellectual property, brands and operations across all assets, we’ve expeditiously mobilized our teams to optimize our strategy for the current and anticipated market conditions to maximize shareholder value. We are very pleased with the significant balance sheet and operational improvements we have made in a relatively short period of time. Today’s announcement is the culmination of an in-depth review and rationalization of assets and operations. We have reduced well over $100 million of liabilities without any dilution to our shareholders and have exited the one state that had not contributed any revenue from THC operations to our results since our inception.”

Illinois Facility Sale 
Red White & Bloom closed on the sale of its Granville, Illinois greenhouse, associated real estate, and certain greenhouse equipment to New Branches of California for a total cash purchase price of C$56.1 million. In connection with the closing, the company has repaid its secured lender $51.7 million from the proceeds and certain other accrued liabilities totaling approximately $3.8 million.

In addition, the company has decided to pivot to an asset-light, brand-rich, model in the State of Illinois and will no longer pursue its own THC license through its previously announced definitive agreement to acquire a cultivation license in Shelbyville, Ill.

“We still believe that Illinois could be a great market for us, and will look to pursue it from an asset-light approach through licensing of our own brands,” Rogers noted. “We strengthened RWB further with the reduction of $6+ million of interest expense and the streamlining of our operations. We see the potential for additional synergies as we integrate the PharmaCo operations into the organization.”

It is anticipated that all Illinois operations for the company shall be reduced to a sales and marketing initiative focusing on the distribution of its Platinum Vape branded product portfolio going forward, which will provide the company with annualized operating cost reductions in excess of C$13 million.

Focus on Wholly Owned Brands
With the strategic pivot of Illinois complete, and due to a number of factors, RWB has decided to prioritize the growth of its Platinum Vape (PV) branded product portfolio. As a result of the restructure and new focus on its own brands, RWB expects an intangible asset of approximately $77 million as well as a license liability of $60 million, as reported as of the end of Q3 2021, will be eliminated from the balance sheet.

Headcount  Reductions
Lastly, RWB has made a series of strategic changes over the last several weeks, including the reduction of headcount and rationalization of various suppliers and consultants. The company has eliminated over $2.5 million through these reductions on an annualized basis and expects similar cost savings through its strategic review of consultants and contractors.


Debra BorchardtNovember 30, 2021
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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.”


StaffSeptember 27, 2021
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Cannabis companies are continuing to make money moves in this capital hungry industry. This week is kicking off with two companies making announcements.

RWB

Red White & Bloom Brands Inc. (CSE: RWB and OTC: RWBYF)reported that it has completed a refinancing of an aggregate principal amount of $18.6 million debentures (plus accrued interest to September 1, 2021) previously issued to an arm’s-length investor . The Prior Debentures were replaced with a new debenture in the principal amount of $19.3million. The New Debenture is unsecured, bears interest at the rate of 10% per annum, which accrues and is payable on the maturity date of January 21, 2023. The New Debenture is payable in full on a change of control.

Audacious

Australis Capital Inc., operating as Audacious (CSE: AUSA) (OTC: AUSAF)  announced that it has retained DelMorgan & Co., an internationally recognized investment banking firm, to assist it with its $15 million capital raise.

Terry BoothAUSA CEO, said, “DelMorgan is a highly regarded name with broad access to institutional investors active in the cannabis industry, our target audience for this raise. The funds will largely go to initiatives that we believe will enable us further to accelerate growth. We have a number of potential transactions and partnerships on our radar screen. These funds will help to capitalize on these opportunities and take AUSA to the next level. We look forward to working with the DelMorgan team on this fund raise and potentially other initiatives.”

Industry Capital

According to Viridian Capital as of the week ending September 17, the total capital raised year-to-date in 2021 of $9.36B is now approximately $1.1B lower than the same period in 2019 (the previous peak year); however, U.S. capital raises are far more robust. “U.S. equity raises are up by $448M (12%), and U.S. debt raises are up by $748M (76%) compared to 2019. Canadian raises are off sharply, with equity raises down 49% and debt down 12%,” said Viridian.

On September 15, 2021, Glass House Brands Inc. (NEO: GLAS.A.U)(OTCQX: GLASF) closed its acquisition of a 5.5 million square foot greenhouse facility in Southern California. That deal was valued at $233 million or $158 million without earnouts. It was comprised of $93 million upfront cash, $65 million in stock (6.5 million shares valued at $10/ share), $75 million in earn-outs (based on performance for the 12 months commencing 30 months after CAPEX is completed at the facility). The upfront cash consideration was reduced from $118 million to $93 million, preserving an additional $25 million in funds for buildout.

On September 17, 2021, Halo Collective Inc.  (NEO: HALO)(OTCQB: HCANF) closed an at-the-market offering raising approximately $15.6M between May 4, 2021, and September 17, 2021.


Debra BorchardtAugust 31, 2021
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After the market closed on Monday, Red White & Bloom Brands Inc. (OTCQX: RWBYF) (RWB)  reported select second quarter 2021 financial results with revenue rising 13% from the first quarter to $13.3 million and a big improvement over last year’s $1.9 million for the same time period. RWB reported a net loss for the quarter was trimmed to $11.4 million from last year’s net loss of $23 million.

“We continue to make great strides with our branded products and see momentum in Q2, which has teed up Q3 nicely, and will translate into a strong second half,” said CEO Brad Rogers. “In Florida, after closing the acquisition at the end of April, we have made strategic investments that are allowing us to quickly ramp up capacity as well as complete construction for new store openings before the end of 2021. Even with the growth in recognized revenue, it’s important to note that in the second quarter, there were a number of significant raw material inventory purchases made to support growth for Q3 and in anticipation of new branded product line launches; we want to point out that, under IFRS, these purchases reduced recognized revenue for PV in Michigan. We continue to present the Adjusted Sales to assist investors in understanding the growth and demand for our brands in the US cannabis market.”

“The second quarter does not include any operating results from our investee in Michigan. As previously mentioned, we are completing our revised asset purchase of our Michigan investee to bring their revenue as well as adjusted sales into IFRS revenue format before the end of this current quarter. Once those are complete, and the expansion of our Florida operations come on stream, we expect to see strong quarterly results reported for the Company going forward.”

Going Concern

While RWB does seem to be increasing its revenue, the company did note in its filing that it faces a huge mountain of debt that seems to overshadow the level of income that it is generating. The filing stated, “As at June 30, 2021, the Company has accumulated losses of $(100,885,345) since inception, and for the six month period ended June 30, 2020, the company incurred a net loss of $ (68,336,512) and net cash used in operations was $ 24,826,326. The Company’s operations are mainly funded with debt and equity financing, which is dependent upon many external factors and may be difficult to raise additional funds when required. The Company may not have sufficient cash to fund the acquisition and development of assets, therefore, will require additional funding, which if not raised, may result in the delay, postponement, or curtailment of some of its activities.”

As at June 30, 2021, RWB said it had a cash balance of $27,136,817 (December 31, 2020 – $1,146,569) available to apply against short-term business requirements and current liabilities of $208,805,909. (December 31, 2020 -$70,794,116). The company said that all of the liabilities presented as accounts payable and accrued liabilities are due within 120 days of June 30, 2021.

Since the end of the quarter, RWB exercised its option to extend the maturity of its Credit Facility to January 2022, the Company has the option to further extend to July 2022. It retired approximately $10 million of debt and entered into agreements to restructure $20 million of debt, expected to close over the first week of September 2021, which will see the maturity date moved to January 2023.


StaffJuly 27, 2021
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Last week, Red White & Bloom Brands Inc. (OTCQX: RWBYF) delivered its fourth-quarter and full-year results, and today the company has delivered its first-quarter financial results. RWB said that the revenue for the first quarter was $11.8 million which fell from the fourth quarter’s revenue of $15.7 million. The company blamed the decrease as a result of the manner in which it recognizes revenue under IFRS in the state of Michigan for its Platinum Vape branded product sales and a decrease of approximately $1 million due to the strengthening Canadian dollar over the fourth quarter.

RWB said that its adjusted sales for the first quarter were $32.7 million, a sequential increase of 14.5% from the prior quarter’s adjusted sales of $28.6 million in the fourth quarter. The increase was reduced by the strengthening Canadian dollar and would have been about $1 million higher using a constant dollar comparison.

Brad Rogers, Chairman & CEO, said, “This was another great quarter for the Company as we continued to see strong traction for our brands. We are building on that momentum and working towards finalizing our revised asset purchase of our Michigan investee to bring their revenue, as well as adjusted sales into IFRS revenue format before the end of this current quarter. Once complete, and the expansion of our Florida operations come on stream, we can finally report in our quarterly results the strength of what we have built and accomplished thus far.”

Michigan Impact

RWB noted that it uses a third-party licensee in Michigan and that the revenue it can recognize is product sales less inventory purchases and direct expenses. “As a result, the company’s revenue in Michigan is always understated by inventory purchases made and direct expenses incurred during the period. In the first quarter of 2021, product sales in just Michigan increased by 18% from the prior quarter, and the company significantly increased inventory purchases to secure sufficient inventory which reduced revenue as per the licensing agreement.” This timing difference in revenue will continue until the company becomes fully licensed in Michigan. RWB said that once it is licensed in Michigan, it will be able to recognize full product sales as revenue under IFRS. As such, investors are provided adjusted sales for additional insight into the results of the company’s performance.


Debra BorchardtJuly 23, 2021
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After the market closed on Thursday, Red White & Bloom Brands Inc. (OTC: RWBYF) delivered its fourth quarter and full year 2020 financial results. Revenue for the fourth quarter of 2020 increased 158% to $15.7 million versus $6.1 million in the third quarter of 2020. RWB said the increase in revenue was primarily driven by the reporting of the first full quarter post-closing of the PV acquisition.

For the full year 2020, revenue increased to $23.3 million versus zero in 2019. The company also noted that adjusted sales for the year which excludes RWB Michigan, RWB Florida and RWB Illinois was approximately $37.8 million driven primarily by the Platinum Vape acquisition (the Company recognizes revenue from California and MAG in its entirety and only packaging revenue from Michigan).

RWB also reported that for the full year a net loss of $18.6 million vs $12.5 million in 2019. The company attributed the increase in net loss to the net effect of a number of non-cash items, including an increase of $15.3 million in depreciation and amortization, a one-time listing expense of $31.7 million, a $9.8 million provision in G&A for a possible contingent earn-out payable and an offset in part by a gain of $53.6 million on the revaluation of the company’s put/call agreement with PharmaCo.

Brad Rogers, CEO and Chairman said, “We set out at the beginning of 2020 with a three-year plan for our success; our strategy was to establish a foundation for the overall company and identify the core states to operate in and a plan to scale in those states. We have set the foundation for our core states including Michigan, Illinois, Florida and California. In 2021 we look to expand through an asset light approach in other states, such as Arizona, and complete the integration of our M&A targets while gaining operational synergies from all we have accomplished over the last 18 months. For the balance of 2021 and throughout 2022, the Company will focus on the continued growth of our topline revenue and bottom-line results through expansion of our house of brands that continue to gain momentum, fortification of our vertically integrated businesses, and the synergies from our M&A success.”

Looking Ahead

RWB said that once all of the acquisitions are closed, RWB, and RWB brands will be available in six of the top 10 states in the US, measured by cannabis revenue, with sales in 2020 exceeding $8.8 billion.


StaffJune 7, 2021
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Cannabis companies were getting their houses in order at the start of summer.

Red, White & Bloom

Red White & Bloom Brands Inc. (OTC: RWBYF)  closed on a deal raising approximately $36.8 million of new cash and retired $7.7 million of debt. RWB closed on a private placement of 8,445,426 units at a price of C$1.15 per Unit for gross proceeds of C$9,712,239 (or USD $7,769,792). In addition to the statutory 4-month hold, the investors have agreed to a 12-month lock-up of their shares. In addition, RWB completed a private placement to an arm’s length purchaser of a principal amount $6,500,000 unsecured debenture.

“As evidenced by today’s announcement, we continue to demonstrate our ability to access the needed expansion and working capital, in the least dilutive possible manner to our shareholders, to execute on our strategy. With the previously announced pre-qualification in the State of Michigan and this cash injection, we will now move aggressively towards taking control of our investment in Michigan in which the immediate growth strategy includes rebranding our dispensaries under the High Times banner and preparing for the expansion of cultivation facilities so that we can hit the ground running upon final inspection,” said Brad Rogers, CEO and chairman of RWB, adding: “We also would like to welcome our new strategic investors in Florida. This group of investors have significant design/build capabilities in the State of Florida and will be a welcome addition as we embark on an aggressive expansion in that state.”

On June 4, 2021, RWB’s wholly-owned subsidiary, RWB Florida LLC entered into agreements for an aggregate capital raise of $30,234,224. The raise includes an investment of US $11,337,834 from certain strategic investors directly into RWB Florida. The investors have also advanced an aggregate of $18,896,390 in subordinated debt to RWB Florida at an 8% interest rate due in 36 months.

22nd Century Group

22nd Century Group, Inc. (NYSE American: XXII) entered into a definitive agreement with one institutional investor for the sale of 10 million shares of its common stock at a purchase price of $4.00 per share in a registered direct offering for gross proceeds for $40 million. The offering is expected to close on or about June 9, 2021. “As a result of this important straight common equity financing with one of our long-term institutional investors, 22nd Century will be able to accelerate the Company’s ongoing strategic objectives across all of our plant franchises,” announced James A. Mish, chief executive officer of 22nd Century Group.


Debra BorchardtFebruary 25, 2021
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Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. Acreage Florida is licensed to operate medical marijuana dispensaries, a processing facility, and a cultivation facility in the state of Florida. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

The transaction will be an up-front cash payment of $5 million upon execution of the definitive agreement and an additional $20 million in cash, $7 million in the buyer’s common stock, and $28 million in promissory notes upon closing the transaction. Acreage said it expects to close the deal during the second quarter of 2021.

Brad Rogers, Chief Executive Officer of RWB, said, “Our core strategy has always been to focus on a limited number of markets within which to operate at scale, and Florida has always been one of those targeted markets. Today we have our path to entry into the third-largest market by revenue in the US and are excited with what we can do with the brands we have amassed as well as the skill to execute on our vision.” The company also recently announced an acquisition in Illinois, expanding its presence in the States with limited cannabis licenses. Upon closing of the deal, RWB will have a presence through licensed operations and/or the licensing of its brands in six states.

“The sale of our Florida operations is a significant step in our previously announced operating strategy to focus on those core markets that we believe will accelerate our path to profitability and position us for significant long-term growth and cash generation,” said Peter Caldini, Chief Executive Officer of Acreage Holdings. “The cash proceeds will significantly bolster our balance sheet and position us to accelerate our cultivation expansion projects and open additional dispensaries to support our growth into key adult-use cannabis states such as Illinois and New Jersey.”

Last summer, Acreage had announced it was scaling back from its initial plan to be the cannabis company in the most states to one that was more focused on core-markets in just nine states in the Northeast, Mid-Atlantic, and Midwest. The company said it currently has active operations and licenses in 13 states and continues to pursue divestitures of its remaining non-core state operations and licenses.

In November, Acreage reported revenue of $31.7 million for the third quarter, a 42% increase compared to the same period in 2019. It also was a 17% increase compared to the second quarter this year. Partner revenue was $17 million, which was a drastic increase of 79% compared to the second quarter of 2020. Acreage Holdings reported a net loss of $35.7 million, while adjusted net loss attributable to Acreage was $14.3 million.

 

 


Debra BorchardtJuly 22, 2020
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Red White & Bloom Brands Inc. (RWB) (OTC: RWBYF) is buying a group of California-based companies operating under the name Platinum Vape for approximately $35 million. This is the first acquisition by RWB since going public and also marks its entry into California.

The company is paying $7 million in cash at the closing, another $13 million in cash within 120 days of closing, and a $15 million convertible note, only convertible after 12 months, payable on the third anniversary of closing. In addition to that, the selling security holders of Platinum Vape will be entitled to receive up to another $25 million on the first anniversary of closing, contingent on Platinum Vape achieving certain financial milestones.

George and Cody Sadler, Founders of Platinum Vape, said, “We at Platinum Vape are excited to have done such an amazing deal to integrate PV into the RWB family.  Cody and I have been building the business for nine years so far and feel that RWB is the best place to continue not only the growth of PV for us but for our family as well. We couldn’t be happier with our decision.”

Platinum Vape

Platinum Vape has a full product line of premium cannabis products sold at over 700 retailers throughout Michigan, California, and Oklahoma boasting an 84% rating (4.2/5) on WeedMaps.com.

Platinum was started 9 years ago by father and son duo, George and Cody Sadler. Based on the principles of quality, hard work, and customer service, they grew the business with no outside investors into one of the most successful and storied brands in the space today.

Brad Rogers, Chairman & CEO of RWB, said: “George and Cody, the founders and operators of Platinum Vape, are visionaries in the cannabis market and have done an incredible job in building the pre-eminent vape company in the United States through commitment to quality, education, and the communities they serve. One of the things that struck me is the balance they have achieved in running a profitable successful business, which will add tremendously to RWB’s top and bottom lines, while maintaining their commitment to supporting social issues, both financially and through awareness with the REACT program, they established.”


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