RWBYF - Red White & Bloom Keeps Debt at Bay - For Now
Red White & Bloom Brands Inc. (CSE:RWB) (OTCQX: RWBYF) posted mixed results on Tuesday, with revenue holding steady as the company tries to cut costs and buy more time on paying its looming debt bills.
The company released its financials for the third quarter ending Sept. 30.
Revenue totaled $25.5 million for the third quarter, a 128% increase versus $11.2 million in the same period last year. Despite the company’s cost-cutting efforts, net loss was $8.45 million, versus $5.5 million last year.
“The third quarter also saw the company complete the largest debt restructuring in our history resulting in a marked improvement in near-term liquidity through the extension of loan maturities and new financing,” Colby De Zen, president, said .
In September, RWB restructured the terms of some outstanding debentures issued by the company worth $70 million and C$2.1 million and issued a new convertible debenture in the principal amount of C$17 million. Restructuring also occurred in the executive offices, with RWB tapping Colby De Zen as president and director and appointing Gabriel Bianchi to the board of directors. William Dawson resigned from the company’s board.
At the time, 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.”
Gross profit before fair value adjustments for biological assets was $9.67 million, up 65% from $5.34 million in the same quarter last year. The quarter performance was also up 102% sequentially. Operating expenses saw a 56% decrease versus $22.8 million during the same time last year.
General and administrative expenses totaled $3.18 million, down 73% versus $11.9 million in the same period last year . RWB’s SG&A spend was also down 108% sequentially.
Adjusted EBITDA for the quarter was positive $3.3 million.
“The achievement of positive adjusted EBITDA is a great milestone, and there are still significant balance sheet improvements that continue to be implemented in Q4,” De Zen said, adding, “We are achieving operational improvements throughout the organization and have bolstered the management team while reducing headcount throughout the company.”
CEO Brad Rogers said that the company was in “late-stage negotiations with various partners” to expand its Platinum product line in more states.
“We have successfully delivered our components to our partner in Missouri for the launch of Platinum-branded products,” he said. “The Platinum introduction has exceeded our expectations with a significant percentage of the dispensaries in Missouri already carrying the Platinum product with multiple re-orders received by the company in Q4.
Going concern
In its regulatory filings, the company said that it had suffered around $150 million in losses since its inception, with $36 million worth of losses for the year so far alongside a working capital deficiency of $37.4 million.
“As such, there is a material uncertainty related to these events and conditions that may cast significant doubt on the company’s ability to continue as a going concern,” it wrote. “The company’s operations have been historically funded with debt and equity financing, which is dependent upon many external factors and, as such, it may be difficult to rely on additional debt and equity financing 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.”
RWB said it would keep finding funds through debt and equity financing, asset sales, as well as rights offering to existing shareholders.