RWBYF - Red White & Bloom Exits Illinois Cuts Headcount
Red White & Bloom Brands Inc. ( CSE: RWB and OTC: RWBYF ) announced a series of transaction and operational decisions to strengthen the balance sheet and provide significant cost reductions in 2022. The changes included selling the Illinois property, paying down debt, reducing its headcount, and focusing on its own brands.
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.”
Illinois Facility Sale
Red White & Bloom closed on the sale of its Granville, Illinois greenhouse, associated real estate, and certain greenhouse equipment to New Branches of California for a total cash purchase price of C$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.
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.
“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 the potential for additional synergies as we integrate the PharmaCo operations into the organization.”
It is anticipated that all Illinois operations for the company shall be reduced to a sales and marketing initiative focusing on the distribution of its Platinum Vape branded product portfolio going forward, which will provide the company with annualized operating cost reductions in excess of C$13 million.
Focus on Wholly Owned Brands
With the strategic pivot of Illinois complete, and due to a number of factors, RWB has decided to prioritize the growth of its Platinum Vape (PV) branded product portfolio. As a result of the restructure and new focus on its own brands, RWB expects 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.
Headcount Reductions
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.