- Projecting positive adjusted EBITDA by yearend 2022
- Completes sale of Granville, Illinois facility for $56.1M
- Repays $51.7M of secured debt; eliminating $6.3M of annualized debt servicing
- Pivoting to asset-light, brand-rich model in Illinois, eliminating over $13M in associated annual operating expenses, inclusive of $8 million in cash operating costs
- Streamlines brands, potentially eliminating over $60M in future royalty payment liabilities on the balance sheet as of end of Q3 2021
- Completes headcount, consultant and contractor reductions for over $2.5M in annualized cost savings
- Pays off $3.8M of additional liabilities as well as repayment of secured debt.
TORONTO, April 20, 2022 (GLOBE NEWSWIRE) — Red White & Bloom Brands Inc. (CSE: RWB and OTC:RWBYF) (“RWB” or the “Company”) a multi-state cannabis operator and house of premium brands, announces a series of transaction and operational decisions to strengthen the balance sheet and provide significant operation cost reductions in 2022, including closing the sale of its Granville, Illinois property to New Branches, LLC, and repayment of $51.7 million of secured debt. All monetary figures reported in Canadian dollars (CAD).
Brad Rogers, RWB CEO, stated, “Having recently obtained full operational control of our intellectual property, brands and operations across all assets, we’ve expeditiously mobilized our teams to optimize our strategy for the current and anticipated market conditions to maximize shareholder value. We are very pleased with the significant balance sheet and operational improvements we have made in a relatively short period of time. Today’s announcement is the culmination of an in-depth review and rationalization of assets and operations. We have reduced well over $100 million of liabilities without any dilution to our shareholders and have exited the one state that had not contributed any revenue from THC operations to our results since our inception.”
“We still believe that Illinois could be a great market for us, and will look to pursue it from an asset-light approach through licensing of our own brands,” Rogers noted. “We strengthened RWB further with the reduction of $6+ million of interest expense and the streamlining of our operations. We see potential for additional synergies as we integrate the PharmaCo operations into the organization.”
Rogers emphasized, “We will continue to look for opportunities to grow our revenue through a number of asset-light entries to other states, while focusing on getting to a positive adjusted EBITDA run-rate by the end of 2022.”
Illinois Facility Sale & Future Strategy
Red White & Bloom on April 14, 2022, closed on the sale of its Granville, Illinois greenhouse, associated real estate and certain greenhouse equipment to New Branches LLC of California, an arm’s length purchaser, for a total cash purchase price of $56.1 million. In connection with the closing, the company has repaid its secured lender $51.7 million from the proceeds and certain other accrued liabilities totaling approximately $3.8 million. The repayment represents approximately 80% of the outstanding balance due to its secured lender and eliminates $6.2 million of annual interest expense for the company. RWB is working with the Granville buyer to seamlessly facilitate hiring the Granville facility staff.
In addition, the company has decided to pivot to an asset-light, brand rich, model in the State of Illinois and will no longer pursue its own THC license through its previously announced definitive agreement to acquire a cultivation license in Shelbyville, Ill. It is anticipated that all Illinois operations for the company shall be reduced to a sales and marketing initiative focusing on distribution of its Platinum Vape™ branded product portfolio going forward, which will provide the company with annualized operating cost reductions in excess of $13 million1 )
Focus on Wholly Owned Brands
With the strategic pivot of Illinois complete, and due to a number of factors, RWB has decided to prioritize growth of its Platinum Vape™ (PV) branded product portfolio. As a result of the restructure and new focus on its own brands, RWB expects that an intangible asset of approximately $77 million as well as a license liability of $60 million, as reported as of the end of Q3 2021, will be eliminated from the balance sheet.
Lastly, RWB has made a series of strategic changes over the last several weeks, including the reduction of headcount and rationalization of various suppliers and consultants. The company has eliminated over $2.5 million through these reductions on an annualized basis, and expects similar cost savings through its strategic review of consultants and contractors.
|Debt and Operation Expense Reduction Summary (in million CAD$)
|Repayment of Debt
|Discontinued MAG Operations*
|Reduction of other liabilities
|1based on unaudited 2021 estimates
|* Based on US to CDN rate of $1.2605 to $1.00