Red White & Bloom Archives - Green Market Report

StaffNovember 29, 2022
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5min5540

The Daily Hit is a recap of cannabis business news for Nov. 29, 2022.

ON THE SITE

Flowr Corp. Throws in Towel, Looks for Buyers

Toronto-based The Flowr Corp., (TSX.V: FLWR) (OTC: FLWPF) is officially on the market after it reported that it does not have enough of a runway to make it to the end of the third quarter. According to regulatory filings, potential bidders submitted binding offers last Friday, with financial firm Ernst & Young Inc. acting as a monitor. Read more here.

RIV Capital Closing in on New York Acquisition, Loses $142 Million in Q2

RIV Capital Inc. (CSE: RIV) (OTC: CNPOF) posted a $142.3 million loss for its second quarter of fiscal 2023, but most of the losses were chalked up to a “goodwill impairment charge” as part of the upcoming acquisition of New York-based Etain – a deal that RIV Capital leadership said would give the firm a national foundation for future growth. Read more here.

Pritzker Names New Cannabis Chief

Erin Johnson, a lawyer for Amazon and state government veteran, has been named the state’s top cannabis regulator. Johnson is an associate general counsel for Amazon Web Services but was chief of staff at the Illinois Department of Juvenile Justice in the Pritzker administration from 2019 to mid-2021. Previously she was associate general counsel and chief diversity officer from 2016 to 2018 for then-Gov. Bruce Rauner. Read more here.

More Financial Reports:

IN OTHER NEWS

High Times

The owners of High Times magazine have dropped their lawsuit against a former majority shareholder of the publication’s parent company, according to a joint stipulation entered Monday in California federal court. The stipulation notes that the action has been dismissed with prejudice and holds that each party bears their own costs. It makes no mention of a settlement, and counsel for the parties did not immediately respond to requests for comment on Monday. Read more here.

The Valens Company Inc.

Shareholders of the Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS)  voted in favor of the resolution approving the plan for SNDL Inc. to acquire all of the issued and outstanding common shares of Valens on the basis of 0.3334 of a SNDL common share for each outstanding Valens common share. More than 96% of votes cast at the company’s special meeting of shareholders held on Nov. 29 were in favor of the resolution. Read more here.

Rhode Island

As Rhode Island is set to begin recreational marijuana sales Thursday, state regulators are ramping up their staff as they oversee the industry. The state legalized adult recreational cannabis in May, with the planned start of sales on Dec. 1. Read more here.


StaffSeptember 20, 2022
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8min2930

The Daily Hit is a recap of cannabis business news for Sept. 20, 2022.

ON THE SITE

Aurora Cannabis Focuses On Long-Term Value Despite 4Q Loss

Canadian cannabis company Aurora Cannabis (Nasdaq: ACB) (TSX: ACB) reveled in its “long-term value” despite the company stock being at one of its lowest points in the past 12 months after releasing its fourth quarter and fiscal year-end results as of June 30, 2022, on Tuesday. According to a news release, Aurora saw fourth-quarter net revenue for medical cannabis increase 4% year-over-year to $36.6 million, while adult-use cannabis revenue fell 35% year-over-year to $12.6 million. Read more here.

New York Issues More Cannabis Business Licenses, Rules

According to Syracuse.com, the New York Cannabis Control Board awarded conditional business licenses to 19 cultivators and 10 processors, which brings the total number of licensed growers to 261 and the total number of processors to 25. The window for retail license applications opened last month, but thus far no store permits have been granted. Read more here.

Delay for SPAC-Safe Harbor Deal No Reason To Worry, Expert Says

On Monday, Northern Lights Acquisition Corp. revealed that it will need a few extra weeks to deliver the $70 million that it owes Safe Harbor Financial under the terms of a deal signed back in February, with the cash now due on Sept. 28 instead of Aug. 31. But the delay is only due to both parties waiting on approval from the Nasdaq, which is relatively common and doesn’t mean the deal is in danger, Matt Karnes, principal at New York-based GreenWave Advisors, told Green Market Report. Read more here.

Michigan Taps Industry For Suggestions Amid Market Saturation

Michigan cannabis operators’ face shrinking margins amid falling wholesale flower prices and a glut of supply – and the state’s regulatory agency wants to figure out how to help. Between July 2021 and July 2022, the number of active grower licenses has surged by 65%, and the number of active retail licenses has risen 34%. The average retail price for an ounce of flower has fallen 48% in the medical market (from $213.89 to $110.72) and 44% in the adult-use market (from $217.94 to $121.58) in that same span of time. Read more here.

Red White & Bloom Pushes Out Debt To 2024

Red White & Bloom Brands (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 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. Read more here.

Meet Kim James, The Lawyer Behind Detroit’s Cannabis Regulations

When the Detroit City Council finally codified its recreational marijuana codes, it was Kim James who drafted the language. She’s worked in code enforcement for the city most of her career. Now as the director of the office of marijuana ventures and entrepreneurship, James must stand up those codes and get recreational dispensaries licensed. But the city itself is behind, as most of the state’s industry has been selling weed for nearly three years. Read more here.

Zentrela Honored For Most Innovative Tech At Green Market Report Tech Awards

In 2016, Israel Gasperin and Dr. Dan Bosnyak, a neuroscientist at McMaster University, established the foundations of Zentrela, a neurotechnology company using artificial intelligence to analyze EEG data, to eventually compile the world’s largest database of cannabis psychoactive effects. The Green Market Report Tech Awards were presented following the first-ever Green Market Report Tech Summit on Sept. 8 at The Pearl event space in San Francisco. This week, we’ll be providing a closer look at the honorees. Read more here.

IN OTHER NEWS

Momentum Building For Legalization Of Recreational Marijuana In Hawaii

There’s a huge push underway to allow the recreational use of marijuana, even though the drug is still illegal under federal law. And more lawmakers are supporting legalization than ever before as a way to diversify the economy and bring in more revenue for Hawaii. Read more here.

Medical Marijuana Maker Sues Minnesota Over New THC Edibles Legalization

Vireo Health of Minnesota, one of just two distributors of medical marijuana in Minnesota, is suing the state and local governments over the state’s sudden legalization of hemp-derived THC edibles, arguing that it’s facing unfair regulation over essentially the same product. Read more here.

Aura Risk Management Launches New Cannabis Program

Aura Risk Management, a member of The Liberty Company network of insurance brokers, launched of Indisure, a new insurance program created exclusively for cannabis companies in all 38 legalized U.S. states. Aura’s program offers a complete coverage solution, including general liability, property, products liability and cargo. Read more here.


Debra BorchardtSeptember 20, 2022

7min3340

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.

 

 


Adam JacksonAugust 3, 2022
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5min1970

Red White & Bloom Brands Inc. (CSE: RWB)(OTC: RWBYF) delivered its fourth-quarter and full-year earnings report, as well as its first-quarter report. The news comes after the company postponed the release in May due to multiple delays in their year-end audit. All figures are in Canadian dollars.

First Quarter

RWB said that revenue for the first quarter this year was $28 million, a record gain for the company, who saw revenues rise up from $10.7 million in the fourth quarter. RWB has not released an earnings report since last November’s third-quarter results. The company attributed the increase to vape product sales by Platinum Vape (PV) California, revenue generated by PV Michigan, sales by RWB operations in Florida and revenue from the acquiring PharmaCo in February.

RWB posted a net loss of $11.3 million for the period with an adjusted EBITDA gain of $360,000. The company has around $5 million in working capital and $5 million cash on hand in the first quarter.

RWB said that its gross profits for the first quarter were $9.2 million, a sequential increase of 44% from gross profits of $6.4 million in the same quarter last year. The increase was reduced by $2.45 million on biological assets and a gain of $270,000 in sold inventory.

“With full operational control and a clear road map, Florida closed and certainty of our ability to complete the closing of the Michigan acquisition, we turned our attention to completing a multi-stage restructuring and “right-sizing” of the business to leverage our strategy long term,” CEO Brad Rogers said. “This included exiting Illinois and the sale of our assets in that state, which enabled the company to pay off over $55 million of liabilities in Q2 of 2022 and reduce our operational and interest expenses by over $20 million per year. These reductions of liabilities and expenses will positively impact our results for fiscal 2022 commencing in late Q2 of this year.”

Going Concern Remains

Despite the improvements in revenue, RWB continues to tell investors in its filings that it remains a going concern. It stated, “As at March 31, 2022, the company has accumulated losses of $128,303,346 (December 31, 2021 – $116,877,562) since inception, and for the three months ended March 31, 2022, the company incurred a net loss of $ 11,757,188 (March 31, 2021 – $56,887,862), and had a working capital deficiency of $144,735,705 (December 31, 2021 – working capital deficiency of $55,219,691).” The company has said it may need additional funding.

Full Year Results

The company reported revenue from continuing operations for the year ending December 2021 of $37.3 million. This increased by $17.9 million over the $19.3 million in 2020. The jump in sales was related to vape product sales generated by PV California, packaging revenue generated by PV Michigan and cannabis product sales generated by RWB operations in Florida. The company also delivered a comprehensive loss of $84 million for 2021 versus a loss of $20 million in 2020.

“On the finance front, we have made significant changes to reduce our overall operational costs and reduce debt servicing payments,” Rogers said. “Some of the savings are a result of exiting the state of Illinois, but we have also seen a reduction of operational expenses and as a result, we are no longer incurring the start-up costs associated with scaling initial operations in Florida, one-time expenses associated with the M&A and divestitures we have completed over the last two years and overall greater attention to reduced spend across the organization. With the first half of 2022 now behind us, we are committed to driving profitable growth throughout the organization as we set our eyes to achieving positive EBITDA by the end of this fiscal year.”

 


Adam JacksonJuly 18, 2022
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4min1521

Red White & Bloom Brands Inc. (CSE: RWB)(OTC: RWBYF) slid in late trading on Monday after further auditing delays postponed the release of key financial report cards for the second time this year. The company released the news after the markets closed on Friday and on a week when it was expected to deliver its financial numbers.

The company has seen significant restructuring moves as it looks to balance its sheets and cut down on costs after a looming mountain of debt threatened gains last year. The changes have concentrated on selling its Illinois property, paying down debt, reducing its headcount, and focusing on its own brands – according to RWB CEO Brad Rogers, who oversaw the restructuring of debt worth $115 million due this year.

“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,” he said in an April release.

The company applied to extend its existing MCTO, which prevents management trading after auditing partner Macias Gini & O’Connell LLP informed RWB about the delay. RWB set a new July 29, 2022 expected deadline for the release of their postponed Q1, 2022, and 2021 annual filings.

Signs of Trouble

Back in April, Red White & Bloom announced a series of transaction and operational decisions to strengthen the balance sheet and provide significant cost reductions in 2022. The company sold 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 repaid its secured lender $51.7 million from the proceeds and certain other accrued liabilities totaling approximately $3.8 million.

In addition, the company 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 at the time. “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.”

RWB has made a series of strategic changes, 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 BorchardtApril 20, 2022
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9min1710

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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6min1520

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.”


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