Red White & Bloom Faces Mountain Of Debt, Cites Going Concern In Filing

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 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 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.

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