Red White & Bloom Delivers Solid Quarter, Debt Remains Big Issue

Rouge Blanc & Bloom Brands Inc. (OTCQX: RWBYF) released its third quarter 2021 results with revenue up 93% to C $ 11.8 million from C $ 6.1 million last year. The company reported a net loss of C $ 5.5 million, down from the net loss of C $ 9.5 million last year. RWB said the change in net loss was mainly due to the re-valuation of its call / put options, as well as the adjustment of the compensation and the realization of economies of scale.

Big debt

However, RWB still faces a huge debt problem which it alerted investors to in the last quarter. The company said this time that it was in advanced talks with a number of funds to restructure the current $ 115 million debt owed in 2022 into a more beneficial long-term debt solution. . As at September 30, 2021, RWB had accumulated losses of $ 106,414,495 since its 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 only had $ 10.5 million in cash and cash equivalents left. On a positive note, the company has been successful in securing funding to date and believes it will be able to raise sufficient funds in the future and ultimately achieve profitability.

“In the third quarter, we made excellent progress in laying additional building blocks in our major operating states of Florida, Michigan and California to become more vertically integrated where it will be most cost effective.” , said Brad Rogers, president and CEO of RWB. “This will help increase the company’s revenues and margins. At the same time, we are gaining significant market share with our Platinum Vape (PV) and High Times branded products exclusively licensed in certain markets, as evidenced by ArcView / Greentank’s 2021 Industrial Vape report, which named Platinum Vape like the # 1 branded vape cartridge in Michigan. “

The company also said most of its revenue comes from selling finished cannabis products through third-party wholesale to retailers. RWB said it will be vertically integrated upon closing of the ongoing acquisition of the Michigan-owned business. RWB expects this will take advantage of cost sharing and other economies of scale to further improve the margin.

CFO Chris Ecken said: “RWB is very strategic in pursuing vertical integration only when there is value to add. We aim to be lightweight and brand-rich. Our strategy is to support brands in the most profitable way. We have put in place the teams to support this strategy in each state where we operate. As RWB integrates vertically across multiple states, we expect our margins to increase significantly, allowing us to move towards profitability. “

Michigan

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


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