Flow Beverage Corp. and BioSteel Close Verona Facility Sale and Enter into Co-Manufacturing Agreement

Rhea-AI Summary

Flow Beverage Corp. announces the sale of its Verona, Virginia production facility to BioSteel Sports Nutrition for US$19.5 million. This strategic move aims to enhance the profitability of the Flow brand and simplify its operations by reducing operating expenses. Flow will maintain ownership of its 144-acre spring water source and has secured a co-manufacturing agreement with BioSteel, ensuring continuous production of Flow's branded water. The transaction is expected to improve Flow's operating cash flow and strengthen its balance sheet, facilitating continued revenue growth in the U.S.

Positive

• Transaction improves Flow's balance sheet and reduces operating expenses.
• Co-manufacturing agreement ensures continuity in production of Flow's branded water.
• Ownership of the Virginia spring water source is retained, securing a sustainable supply.

Negative

• None.

• The sale of the Verona Facility allows Flow to focus on the profitable growth of the Flow brand, simplifying its operating structure and improving its balance sheet
• BioSteel’s purchase of the Verona production facility enables vertical integration in support of BioSteel’s rapid growth strategy
• BioSteel and Flow enter into co-manufacturing agreement to support an efficient transition while maximizing facility utilization
• Flow maintains ownership of the 144-acre Verona, Virginia spring water source

TORONTO--(BUSINESS WIRE)-- Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (the “Company” or “Flow”) today announced that it has reached a definitive agreement with an affiliate of BioSteel Sports Nutrition Inc. (“BioSteel”) whereby BioSteel has purchased all the assets of the Company’s production facility located in Verona, Virginia (the “Verona Facility”) for a purchase price of US$19.5 million, comprised of US$13.2 million in cash and US$6.3 million for the repayment of debt and the retirement of lease obligations (the “Transaction”).

To support Verona Facility utilization and an efficient transition for both parties, Flow and BioSteel have also entered into a co-manufacturing agreement (the “CMA”) whereby BioSteel will produce Flow’s portfolio of branded water at the Verona Facility, in addition to the production of BioSteel-branded sports hydration drinks on site. All active employees at the Verona Facility will become employees of BioSteel following a post-closing transition period.

Nicholas Reichenbach, Founder and Chief Executive Officer of Flow, stated: “The sale of the Verona production facility is a major milestone towards achieving profitable growth of the Flow brand. Through a significant reduction in our operating expenses associated with operating Verona and a material reduction in related future lease obligations, we have meaningfully improved our financial position and streamlined our organization. By maintaining ownership of our Virginia artesian spring and securing a co-manufacturing agreement with BioSteel, we expect continuity in our supply chain as we invest in continued revenue growth in the U.S.”

Bruce Jacobson, President of BioSteel, stated: “BioSteel is growing at a record pace, with thousands of new points of distribution added since the beginning of the year, and this acquisition allows us to unlock greater efficiency in our business as we achieve full vertical integration of our U.S. operations. As we move toward the top of the sports drink category, this agreement also supports our ability to consistently supply our premium ready-to-drink sports drinks, packaged in environmentally friendly Tetra Paks, which is a competitive advantage, and support our consumers with the Clean. Healthy. Hydration. that the next generation of athletes demands.”

Strategic Rationale for Flow:

• Accelerating profitability for the Flow brand – the Transaction allows Flow to focus its investments on sales and marketing, accelerating the path towards profitable growth of the Flow brand.
• Improved operating cash flow – the Transaction simplifies Flow’s operating model in the U.S., providing consistent cost of goods sold and improving its balance sheet.
• CMA provides continuity in operations – the long-term CMA helps ensure continuity in the production of Flow’s portfolio of branded water at the production facility.
• Flow retains spring water source – Flow maintains its ownership of the 144-acre Virginia spring, securing local supply of naturally alkaline water from an artesian spring and allowing the Company to maintain its world class ESG practices.

Strategic Rationale for BioSteel:

• Supports rapid growth strategy and expansion of U.S. footprint – as BioSteel continues to grow its distribution in the U.S. at a record pace, this acquisition is a natural next step and provides a unique opportunity to take more control of its own supply chain while creating additional business value.
• Vertical integration – by taking full control of BioSteel ready-to-drink production in the U.S., the brand is taking its next critical step on its path to the top of the sports hydration category. Additionally, the CMA with Flow also facilitates effective facility utilization.
• Commitment to sustainable packaging as a competitive differentiator – BioSteel will ensure security of supply of its ready-to-drink sports drinks that are packaged in eco-friendly Tetra Paks, which are recyclable and feature a plant-based cap, a key differentiator in the sports drink category and a critical element of BioSteel’s better for you (and the planet) value proposition.

About Flow

Flow is one of the fastest-growing premium water companies in North America. Founded in 2014, Flow’s mission since day one has been to reduce environmental impacts by providing sustainably sourced naturally alkaline spring water in a recyclable and up to 75% renewable, plant-based pack. Today, the brand is B-Corp Certified with a best-in-class score of 126.5, offering a diversified line of health and wellness-oriented beverage products: original naturally alkaline spring water, award-winning organic flavours, collagen-infused and vitamin-infused flavours in sizes ranging from 330-ml to 1-litre. All products contain naturally occurring electrolytes and essential minerals and support Flow’s overarching purpose to “bring wellness to the world through the positive power of water.” Flow beverage products are available online at flowhydration.com and are sold at over 36,000 stores across North America.

For more information on Flow, please visit Flow’s investor relations site at: investors.flowhydration.com.

About BioSteel

BioSteel is a North American beverage brand committed to delivering premium Clean. Healthy. Hydration™. to consumers and athletes across the globe. Each BioSteel sports drink is sugar-free and comes in an eco-friendly Tetra Pak filled with premium ingredients, natural flavors and essential nutrients needed to support physical activity. Perfect for everyone from health and environmentally conscious consumers to world class athletes, BioSteel hydration products are currently readily available across North America, globally with select retail partners, and direct to consumers online through www.biosteel.com.

Cautionary Statement

This press release may contain “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements include, but are not limited to, information with respect to our objectives and the strategies for achieving those objectives, including profitable growth of the Flow brand and improved operating cash flow as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements are typically identified by the use of words such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, although not all forward-looking statements contain these words. Forward-looking statements are provided for the purposes of assisting the reader in understanding Flow and its business, operations, prospects, and risks at a point in time in the context of historical and possible future developments, and the reader is therefore cautioned that such information may not be appropriate for other purposes. Forward-looking statements are based on assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements. Those risks and uncertainties include the following: impact and spread of COVID-19; ability to achieve and manage growth; failure to expand sales capabilities; changes in consumer preferences; criticism of packaged water; maintain brand image and product quality; constrained or unavailable spring water sources; inability to package products; increased competition; accurately estimating demand; maintaining relationships with distributors and vendors; changing retail landscape; incorrect product design or development; product information misrepresentation; revenues derived entirely from packaged beverages; increases in costs or shortages of materials; fluctuation of quarterly operating results; no assurance of profitability; fluctuations in foreign currency; changes in government regulation; contamination or recalls of ingredients or end products; loss of intellectual property rights; litigation; future tax rates; catastrophic events; climate change; seasonal business; dependence on key information systems and third-party service providers; ability to securely maintain confidential information; maintaining and upgrading information technology systems; conflict of interest; dual class share structure; potential volatility of share price; no assurance of active market for shares; lack of dividends; global financial condition; publication of inaccurate or unfavourable research and reports; operating history; and management and conflict of interests. Consequently, all of the forward-looking statements contained herein are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward looking. statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005344/en/

Flow

Trent MacDonald, Chief Financial Officer

1-844-356-9426

investors@flowhydration.com

Investors:

Marc Charbin

investors@flowhydration.com

Media:

Natasha Koifman

nk@nkpr.net

BioSteel

Rachel Spraker

rachel.spraker@canopygrowth.com

Source: Flow Beverage Corp.

FAQ

What is the purchase price for Flow's Verona production facility?

The purchase price for the Verona production facility is US$19.5 million.

How will the sale of the Verona Facility affect Flow's business?

The sale allows Flow to focus on profitable growth and simplifies its operating structure, improving its balance sheet.

What type of agreement did Flow and BioSteel enter into?

Flow and BioSteel entered into a co-manufacturing agreement to facilitate an efficient transition and maximize facility utilization.

Does Flow still own its spring water source after the sale?

Yes, Flow retains ownership of the 144-acre Virginia spring water source.

How does the sale of the Verona Facility impact Flow's future investments?

The transaction enables Flow to redirect investments towards sales and marketing, accelerating growth.