Red White & Bloom Brands Executes Formal Agreement to Acquire Platinum Vape; Announces Q2 2020 Quarterly Report

Published: September 8, 2020

Red White & Bloom Brands Executes Formal Agreement to Acquire Platinum Vape; Announces Q2 2020 Quarterly Report

Red White & Bloom Brands Inc. announce its first financial report after completing its business combination transaction in April of this year.

Concurrently, the Company also reports that it has entered into a definitive, arms-length, agreement with Platinum Vape on September 1, 2020. As part of the transaction the Company is not assuming any long-term debt and there won’t be a change of control. The transaction is expected to close in approximately 15 days, subject to the satisfaction of customary closing conditions. A finder’s fee will be payable on the transaction.  Platinum Vape are purveyors of 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.

1 subject to certain adjustments

Financial Position:

  • At the end of the quarter RWB had working capital of $48M and the average monthly cash used by operating activities for the quarter were $1.5 M per month. Current assets increased by 180% while current liabilities decreased by 60% from Q4, 2019. Cash balance of $2.6M at the end of the quarter will be bolstered by up to $25M in cash upon closing of the previously announced bought deal financing.

Select Financial Results:

  • Revenues for the period totaled $1.5M which excluded both definitive, funded cannabis acquisitions not yet closed.
  • Gross margin before fair value impacts was 82%.  Strong gross margin performance in quarter attributed to Illinois streamlined operations providing low production cost.
  • Q1 2020 Adjusted EBITDA income of $6.5 M marks an improvement versus loss of $4.7M in the same period in 2019. For the first 6 months of 2020 Adjusted EBITDA was $2.8M, an improvement versus loss of $6.6M in the same period in 2019
  • IFRS Fair value impact: $8.3M of fair value adjustment on biological assets.

“After a year and half of hard work by our team, we are now pulling all the pieces together in order to be the driving force in the high-value States we plan to operate in. With the addition Platinum, who comes with one of the highest quality and hardest working management teams having built one of the strongest brands in cannabis, RWB’s future couldn’t be ‘higher’,” said Chairman & CEO Brad Rogers.

“Also, the expected closing of our Michigan Investee, will provide the ability to report some very compelling numbers.  I’m looking forward to putting our significant cash raise to work; with our upsized $25 million capital raise we will continue on our disciplined path of growing this business, returning the most value to Shareholders and Making America Dope again.”

“Cody and I are so excited that we we’re able to execute on all levels needed, to get this done. To be successful in this space you need a solid team, and that’s exactly what we feel we are part of with RWB. The future growth for Platinum, combined with a company that has solid growth, low debt and great direction, is what’s needed to navigate through this space and that’s what RWB has to offer. We couldn’t be happier with the decision we have made to be a part of the RWB team,” said George Sadler, founder of Platinum Vape.

Details of the Platinum Vape Transaction:

Under the terms of the definitive agreement, a subsidiary of the Company will acquire all of the issued and outstanding equity interests of Platinum Vape in a cash and stock transaction valued at up to US$35 million, comprised of US$7 million in cash payable at closing, a further US$13 million in cash payable 120 days after closing and a US$15 million convertible promissory note payable on the third anniversary of closing (which may be converted into Company stock only after 12 months).  Additional consideration of up to US$25 million, payable either as cash or stock in the Company, may be paid to Platinum Vape securityholders if certain revenue targets and EBIT metrics are achieved by Platinum Vape in 2020 and 2021. Additional details of the transaction shall be provided upon closing.

Adjusted EBITDA Reconciliation:

Q2 2020 Q2 2019 First 6 months
2020
First 6 Months
2019
Net loss and comprehensive loss (23,032,068 ) (5,553,282 ) (20,286,538 ) (7,404,237 )
Add back
Interest expense 2,080,625 4,042,577                      –
Depreciation 1,321,184 1,322,246                      –
Foreign exchange loss (gain) 3,724,549 1,593,599 (4,380,521 ) 1,741,600
Interest income (1,194,523 ) (1,165,818 ) (2,344,483 )        (1,864,340 )
Accretion of loans receivable (758,603 ) (464,230 ) (1,440,946 ) (1,124,015 )
Loss on revaluation of call option (58,246 ) 839,937 1,420,001 2,008,403
Gain on Disposal (149,947 ) (149,947 )                      –
Write off of deposit 1,853,059 1,853,059                      –
Revaluation of investment (91,143 ) (91,143 )                      –
Listing Expense 22,832,281 22,832,281                      –
Adjusted EBITDA 6,527,168 (4,749,794 ) 2,776,586        (6,642,589 )

For full company financial statements and MD&A please see sedar.com

About Red White & Bloom Brands Inc.

The Company is positioning itself to be one of the top three multi-state cannabis operators active in the U.S. legal cannabis and hemp sector. RWB is predominately focusing its investments on the major US markets, including Michigan, Illinois, Massachusetts and California with respect to cannabis, and the US and internationally for hemp-based CBD products.