NewAge, Inc., the Utah-based beverage portfolio company-turned-MLM wellness business, and three of its subsidiaries have filed for Chapter 11 bankruptcy relief in Delaware.
The announcement on Tuesday comes nearly three months after NewAge declared in June that it would commence a review of strategic alternatives to maximize shareholder value, “including available financing alternatives, a potential financial restructuring or a reorganization, merger, sale or other strategic transaction.”
What is NewAge?
NewAge, Inc. is a direct-to-consumer wellness company that also offers direct selling services for brands such as drinks and supplement lines Tahitian Noni, LIMU, Slenderiiz and Nutrifii, among others. The publicly traded company also operates several subsidiaries including ARIIX, Morinda and Morinda Holdings, as well as a DSD distribution business in the Rocky Mountain region.
Originally founded as Washington-based craft brewer American Brewing Company in 2010, New Age has been through multiple stages of evolution over the past decade. Its current iteration started in 2015 when it acquired kombucha brand Bucha and the beer business was sold off.
In 2016, CEO Brent Willis joined the company with the intent to build a national beverage portfolio. The company acquired Aspen Pure and Xing Beverage, both of the DSD businesses and associated brands, and soon added brands like Marley and Coco Libre coconut water. In 2017, the company began trading on the Nasdaq stock market.
In the intervening years, Willis oversaw several major transformations of the business strategy and structure, including the acquisition of Brands Within Reach in 2019 (later divested in 2020 along with Aspen Pure, Bucha and Coco Libre), a merger with noni juice company Morinda in 2018, the divestment of its core beverage portfolio brands, and a 2020 merger with direct selling company ARIIX.
What Led Up to the Bankruptcy Filing?
The company has not filed a quarterly earnings report since its Q3 2021 filing in November and earlier this month received a delinquency notice from the Nasdaq stock market citing its failure to file a Q2 report for the period ending June 30, 2022. NewAge previously received similar notices from Nasdaq in April and May regarding missing Q4 and full year 2021 and Q1 2022 reports.
According to a press release, NewAge submitted a plan of compliance to Nasdaq this summer and was granted an extension to submit its prior reports until September 27, but due to the additional delinquency the deadline was moved up to August 26 or risk delisting. The company has not submitted any reports since.
Beyond inconsistent filings, NewAge has also faced various executive vacancies this year.
In January, Willis resigned from the CEO role and left the company entirely, stepping down from his board seat. In April, he joined Florida-based aerospace company VAYA Space as CEO, according to LinkedIn.
Following his departure, NewAge operated without a chief executive for about two months until March when chairman Ed Brennan was named interim CEO.
In June, the company announced it had begun a restructuring process and last month CFO Kevin Manion left the company after less than a year in the role. Chief Restructuring Officer Lawrence Perkins assumed his role on an interim basis.
In March, the company entered a revolving credit facility (RCF) with East West Bank for $12 million to repay an outstanding loan of $10.6 million under a 8.0% senior secured note from JGB Management that it received in 2020. But on August 8, NewAge received a notice of default from East West Bank for failure to deliver prepared financials for the period ending March 31 2022. According to Seeking Alpha, the RCF is secured by a lien on all of NewAge’s assets, including intellectual property, and a pledge of 100% of its equity interest in ARIIX and Morinda Holdings.
According to its last earnings report for Q3 2021, NewAge’s revenue grew 59% year-over-year to $100 million and gross margin was up 66.3%. The company also reported $46.8 million in cash on hand. The report also noted that cash payments would be used to “settle certain obligations” including lease payments of $8.3 million. Operating losses for the first nine months of 2021 were $43.6 million and cash used in operating activities was $25.6 million. In 2020, NewAge’s operating loss was $34.9 million.
What is the Company’s Plan Now?
According to the bankruptcy filing, NewAge has $310.9 million in assets and total debt of $149.4 million.
The company has entered into a senior secured debtor-in-possession term loan agreement for $16 million, subject to approval by a bankruptcy court, to provide working capital and other expenses which will “be secured by a super-priority security interest in substantially all of the assets of the Company,” according to an SEC filing.
NewAge has also agreed to a stalking horse bid with DIP Financing LLC to sell all assets for $28 million, which would include a transfer of East West Bank’s RCF claim. However, the company will go to auction for competing bids.
More relevant to the broader food and beverage industry is NewAge’s DSD business. Though the core business has been focused around the direct selling and direct-to-consumer model, the DSD house is a significant Rocky Mountain region distributor covering all of Colorado and part of Wyoming. According to its website, the company services over 100 beverage, snack, spirits and beer brands including Perrier, AriZona, CELSIUS, Fiji Water and 5-Hour Energy among others.
Update 7:30 p.m. ET:
The future of NewAge’s distribution business is secure, a company spokesman told BevNET today. According to the company, although it is an owned subsidiary of NewAge, Inc. the DSD business was not included in the Chapter 11 filing and is not currently in a bankruptcy process.
The company said the DSD house is operated as a standalone business and keeps its finances separate from the core direct selling business, however it is counted towards NewAge’s total assets in the bankruptcy filing. The distributor is run through two legal entities – NABC, Inc., which conducts operations, and NABC Properties, LLC, which owns several facilities.
In a letter sent by the distributor to brand partners today, the company said the “DSD business remains a healthy business operation” and that it will continue to operate as normal.
“Most of our stakeholders, including employees, vendors, and key contract counterparties with the entities through which we conduct the DSD business, will be unaffected by this event,” the letter stated.
However, ownership of the distributor is up in the air as NewAge, Inc. goes through the Chapter 11 process. There are several options going forward for the business, including being sold separately from the stalking horse bid or receiving financing from an outside party to continue operations independently.