Red White & Bloom Brands Inc. (RWB.CN) Earnings Call Transcript & Summary

So Eddie Mattei, it's 8:01 now, so we can go ahead and get started with the meeting if you're ready.

Okay. Thanks, everyone. I'll call this reconvened meeting to order in a few minutes and we'll get started. If you are a registered shareholder or proxy holder have not already registered with Dora Wang of our register and transfer agent, Endeavor Trust Corporation, please do so now. So good morning, ladies and gentlemen. Welcome to the reconvened Annual General Meeting of the Shareholders of Red White & Bloom Brands Inc. My name is Eddie Mattei, and I am the Chief Financial Officer of the company. I will act as Chairman today. This meeting is now called to order. This meeting is a continuation of the meeting originally convened on July 11, 2025, and reconvened today following its adjournment. If there are no objections, I appoint Lea Dion to act as Recording Secretary of the meeting. If there are no objections, I appoint Dora Wang of Endeavour Trust Corporation to act as the scrutineer. In order for your vote to be counted at the meeting, whether you are a shareholder or hold proxies, you must register with the scrutineer. If you have not done so, would you please do so now. A quorum is 1 voting shareholder present in person or by proxy. Will the scrutineer please submit the report on attendance?

Hi, everyone. There are a total of 29,819,849 common shares represented by a total of 27 shareholders present by proxy. This represented approximately 6.35% of companies issue and outstanding share capital as of the meeting's record day. Thank you.

Accordingly, I declare that a quorum of shareholders are present. And as notice of the meeting has been given in the proper manner, I declare this meeting duly called and properly constituted for the transaction of business. The procedures to be followed at this meeting will be governed by the Business Corporations Act of British Columbia and the company's articles. I would ask that you please hold any questions not directed to the formal business of the meeting until the end of the meeting. To facilitate the progress of this meeting, voting shall be conducted by a verbal confirmation. Those in favor of the motion, say aye and those oppose will say, no. Additionally, motions may be moved by any shareholder and are not required to be seconded. It is now in order to proceed to the consideration of the resolutions mentioned in the notice of the original meeting. I am advised that the notice calling this meeting and all proxy-related materials were mailed to the shareholders in accordance with the requirements of the articles of the company and the British Columbia Business Corporations Act. As this is a reconvened meeting, no further notice was required. I have a declaration as to such mailing, which is available for inspection by any shareholder. In view of this, I will dispense with calling for the reading of the notice of the meeting and I ask that the recording secretary to file the declaration of mailing with the minutes of this meeting. The first item of business is to approve minutes of the last Annual General Meeting of the company held on June 14, 2024, which are placed before the meeting. Be it resolved that the reading of the minutes of the meeting of shareholders of the company held on June 14, 2024, be adopted and approved as if read. All in favor? [Voting]

Aye.

Any opposed? [Voting]

Motion carried. The first item of business is to receive the company's annual financial statements for the financial year ended December 31, 2024, and December 31, 2023, and together the auditor's report thereon, which are placed before the meeting. Copies of the annual financial statements are also available under the company's profile on SEDAR+ at www.sedarplus.ca. If there are any questions with respect to the financial statements, I would ask that you hold your questions until the end of this meeting. Sorry.

That's okay.

Does it jump the number of directors? Apologies.

Yes.

Yes. The next item of business is to fix the number of directors to be elected for the ensuing year. Management proposes to fix the number of directors of the company at 6. Accordingly, I move that the following resolution be approved. Be it resolved that the number of directors of the company be fixed at 6 directors. All in favor? [Voting]

Aye.

Any opposed? [Voting]

Motion carried. The next item of business is the election of the directors. The management nominees for directors as disclosed in the management information circular provided to shareholders are hereby nominated from the floor as follows: Brendan Purdy; [indiscernible]; Brad Rogers; Michael Marchese; Colby De Zen; Gabriel Bianchi. Each of the 6 nominees have consented in writing to act as a Director of the company. Are there any further nominations? There being no further nominations I declare nominations closed. I make the motion declaring that it is resolved that the management nominees be and are hereby elected as directors of the company for the ensuing year. All in favor? [Voting]

Aye.

Any opposed? [Voting]

I declare the motion carried. The next item of business is to appoint Williams & Partners LLP as the auditor of the company and authorize the directors to fix the auditor's remuneration. I make the motion to approve the resolution as following: appoint Williams & Partners LLP Charter Public Accountants as the auditor of the company and authorize the directors to fix the auditor's remuneration. I make the motion declaring that it is resolved that Williams & Partners LLP be appointed as auditor of the company until the next Annual General Meeting of the company, and remuneration to be fixed by the directors. All in favor? [Voting]

Aye.

Any oppose? [Voting]

Motion carried. Is there any other business to be brought forward? So there being no other business, I now make the motion to conclude the meeting as follows: Resolved that the reconvened Annual General Meeting of Red White & Bloom Brands Inc. be concluded. All in favor? [Voting]

Aye.

Any opposed? [Voting]

Motion carried. That concludes the formal business of the meeting. Thank you all for attending. Management will now be available to take questions relating to the company.

Is there anyone on the call here who had any specific questions for Eddie?

Yes. It's [ Ed Eisen ]. I just wondered if you could elaborate a little bit on just why the financial statements were delayed? And was there any issues relating to some of the consolidation of the companies or anything like that, that we should be aware of?

For the most part, the financials, the audit was -- the scope was expanded because we were addressing basically interpretations of IFRS. Again, there was a review with our auditors. Our auditors were appointed last year. And there was some restatements that occurred during the course of this year to better align with the more common interpretations of IFRS around the following areas: foreign exchange, as it relates to wholly owned subsidiaries. As you know, we're a public company, our reporting currency is Canadian dollars. We have a business in Canada acquired last year in January of 2024. The PubCo is denominated from a reporting perspective in Canadian dollars. Our U.S. entities their working currency is U.S. dollars. Their reporting currency needs to be -- when they roll up into the consolidation needs to be Canadian dollars. So there was some differing interpretations on the impact of how -- what rates to use, the currency of the rates, whether it be present or historical at the date of reporting, those were dealt with as part of the restatement. Another element was how we determine our -- what's called our expected credit losses under IFRS. There was one interpretation that between the auditors and ourselves that we ironed out that stated where we have a customer that also represents a vendor. So essentially, where we have AR, accounts relievable and AP from the same entity that those were not permitted to be offset and under IFRS. Practically speaking, we run the business that way in that we do deal with offsets. But from an IFRS perspective, in determining what's called our expected credit losses, for our receivables, we're not able to take the benefit of that offset. So that was another area. Another area was just rolling through the more common definition of cost of inventory and biological assets on our various operations that have both cultivation and processing. And so that was ironed out with the auditors. It did result in some prior year restatements. The full impact of those prior year restatements whether it be the inventory and biological assets, the accounts receivable under ECL or the foreign exchange are all laid out in the financials in a dedicated note that's available for your review. And that was the crux of essentially delays associated with the audit, given the fact that the inventory and biological restatement went back a few years, it took us longer to work through it with the auditors, but we are done, and we're working with -- we continue to work with them collaboratively.

Does that mean that going forward that these issues are sort of resolved and that everything will be on track sort of on a regular basis in that one?

Yes. I think having the benefit of gone through these restatements, I think the benefit is the fact that any -- truly now these statements, I think, represent what's been acceptable from an IFRS perspective. Obviously, we conduct the business every day, it's a dynamic industry. If anything does come up, we're usually collaborating with the auditors in advance of reporting it, just for the fact that we know, ultimately if it's something that we think is going to be, let's say, subject to interpretation under IFRS, we want to get out in front of it. But I think for the most part, the issues that you were dealing with being the foreign exchange for the translation of the U.S.-denominated subsidiaries, the inventory. I think those were 2 big areas that essentially going forward were more aligned with the more common interpretations of IFRS.

Okay. So is Williams, have they been the auditor for the last few years? Or are they coming on new this year or?

Williams was appointed last year, and they obviously have been appointed this year, and we'll continue with [ RWP ] moving forward.

Okay. So if I may, there is a stop trade order on now. How long does it take to get reinstated? Do you have to go through a couple of quarters? Or what is the process involved there?

From a CSE perspective, so trading on the CSE right now, we're working through our Q1 results. Once those Q1 results -- once we have our financials and MD&A for Q1 filed, we can work through getting the CTO listed here in Canada.

Okay. So are those Q1 results coming out imminently or...

We're working through them, given the dynamics associated with the restatements on the year-end, we're aligning to be sure -- even though the statements are unaudited, we're aligning internally to be sure that we're -- our go-forward results for 2025 are aligned with where we ended up from an IFRS perspective in 2024.

Okay. So you're still working on that. So it's going to be, would you say, another month or 2 before you get on that?

Round about, we'll be putting out guidance or communications -- sorry, not guidance, communication as to our progress.

Okay. All right. It just seems like there's been recurring problems going back a few years with these sort of issues. So just hopefully that once you iron out your templates or whatever you need to do to make sure everything is accounted for in the right manner, we don't have these sort of things happening down the road.

Yes. And I think from our perspective, obviously, current management stepped in on our boat like late 2022 fiscal. So we've been trying to align. There was -- obviously, the nature of a start-up is what it is, especially in cannabis. And what we've been trying to do is continue to realign and reset where we can. And I think, obviously, this audit was challenging, but I think now not only the audit, but I think from what you're seeing in terms of the operations, it's becoming more lean, more aligned with strategic initiatives that have been laid out prior. Our Florida retail expansion. Our focus in Michigan by divesting out of retail, focused on Michigan on becoming, again, one of the stronger first movers in distribution, continuing to gain market share back in Canada through our Canadian acquisition that we concluded in January of 2024. Looking at new markets on our licensing arrangements in the U.S., leveraging our brands. I think now we're starting to finally round out and get focused on the execution of these initiatives, and that should translate into what we're hoping is better results to come.

Okay. Yes. I just wondered, some of the things you're just saying there are important. Somehow though, it's not getting out there to the shareholders in any sort of regular way or we're not hearing enough about it. Just wondering if there's going to be some communication with shareholders to sort of fill in some of the context there. What's going on? What do you sort of see happening?

Yes. No, I think it's a fair point, Ed. And I think now that we're through the audit and kind of getting down to execution of some of the strategic initiatives that we've laid out in the MD&A. I think that's one point that definitely going to take away in terms of our IR function and communication with our shareholders. So that's already been noted. I think internally, that's something that we'd like to work on as well as.

I don't know if anybody else wants to ask a question. I could ask a few more, but I don't want to monopolize things. Is there anybody else that is waiting to ask a question? All right. Well, I know there's a lot of things going on in the company, but there's also a lot of things going on sort of in the -- from the regulatory perspective in the U.S. and waiting for things to start to happen there, which will obviously help move things forward. But I think one of the things that's very important is that obviously, the industry as a whole has been in the doldrums and won't probably recover until the U.S. changes the regulations. But companies that are going profitability when that happens they are the ones that are going to probably get the biggest lift. And so we're just wondering you got to get to the start line there when things do sort of come around. I just wonder how profitability and how you see things? Are you going to be able to get to a point where your profitability is there, let's say, within the next year? Or what sort of time lines...

Again, aligning -- and it's a good question. And I think the regulatory environment in the U.S. now with the new administration, and you get conflicting reports on which way their views on -- which way they're bending on rescheduling, which way they're bending on legalization. We've heard in Florida that with the next vote, there could be recreational introduced in the largest -- one of the largest states in the U.S., and we've got one of the limited vertically integrated licenses in Florida. So I think if we stay -- our view is, I think that if we stay focused on the strategic initiatives that we're focused on now, obviously, we're in a Canadian sector that's federally legal and taking full advantage of that, not only domestically but internationally, where we're able to export product and having one of the largest outdoor cultivation centers in Canada does help in that regard. So the federal -- the Canadian space was an important move to make. And -- but in the U.S., obviously, it's going to be a challenge. Michigan remains a challenge, given it was a first mover state but it's lots of elements of price compression going on in Michigan. So what we're trying to do is focus the strategic initiatives and with that focus and execution, we believe ultimately the profitability and valuation that are attributed to, as you say, a company that's going to continue to survive in a post-legalization environment. As to specific guidance, I can't give it today. But I think what we're doing is setting the baseline under new management with the strategic initiatives to be able to get there.

Okay. So do you foresee like in the next -- this current year that you're going to be really kind of ready to go, so to speak, your consolidation, your strategic planning.

Yes. A lot of those elements, Ed, are in line and they're in the background and being executed as of today. And they were over the course of this year, even last year. With cannabis, to your point, it is a fluid industry, and it's still developing despite the fact that you've got some larger players in the U.S. that are ultimately able to have the capital to move the company. I don't know if you saw our last -- the first press release when we announced the [ MCTO ], but we have restructured our debt. We're poised to be able to have additional liquidity to execute over the next couple of years. We've got strong support from our lenders, and we want to press forward. So I think from our perspective, the initiatives that we want to put in play are either in play or being ready to put into play. I apologize for the background noise. I'm not sure who...

I think someone hung up and didn't hang up properly.

Well, just thanks, Eddie, for your information there, and we look forward to seeing the company, and we're still very supportive. We want to see things succeed here. We know you guys are trying hard to move things forward in a tough environment and trying to get the company on track and restructured, and there's a lot of work that you've put in. Just the last comment is just wondered, you mentioned you would be communicating a little bit more with shareholders. It seems like we're sort of in the dark a lot of the time. We just really don't know what's going on. I'm just wondering if you could somehow put some sort of meat on the bones there to -- We don't even know what sort of the holdings are, where you're deploying capital, what you're doing, like -- we just don't know enough.

Understood. And that point is taken, and we're going to take that away internally and work on that, Ed. Obviously, if you've been through the MD&A, I think the first few sections of the MD&A kind of lay out the ground the strategic framework of what we're trying to follow. It also provides a brief update on some of the initiatives that we're working on. But again, that point is taken. It's been raised by a few shareholders, and we're going to strive to make that better going forward.

Okay. Well, if that's everything, we'll go ahead and end call then.

All right. Thanks, everyone, for attending.

Thanks, everyone.

Thank you. Bye-bye.