Deland, Forida – Fast on the heels of the company’s recent $150 million funding announcement, RM2 International, Inc. is back in the news, this time with further details of the financing arrangement, executive appointments and a declaration that it once again intends to insource its pallet production. RM2 positions itself as the leader of the smart pallet revolution with autonomous IoT sensor technology embedded in its logistically-optimized, hygienic and eco-friendly BLOCKPal™ composite pallets.
Executive Appointments
RM2 has announced hiring Ross Staffel as its Chief Financial Officer and Wayne Cochran as its Chief Operating Officer. Stael brings to RM2 a solid background in finance for complex manufacturing operations and logistics, with a keen eye for efficiency and process improvement and experience in both entrepreneurial and large corporations. Staffel holds an MBA from Texas Christian University and a BA from the University of Colorado, Boulder.
Cochran has demonstrated achievement in business development and operational execution, P&L ownership, manufacturing operations, technology development, new product introduction and programs with complex supply chains across multiple geographies. Cochran holds an MBA from Arizona State University’s WP Carey School of Business and a BSEE from the Missouri University of Science and Technology.
“I am pleased to welcome the talent and energy of Ross and Wayne to the RM2 management team,” said Kevin Mazula, CEO of RM2. “These appointments reinforce our strong team and will provide additional expertise and capacity as we enter a substantial and well-capitalized growth phase.”
RM2 to Bring Pallet Production Inhouse
RM2 also announced that it has entered into a Transition Agreement with Jabil Inc. to insource manufacturing of pallets. For the past six years, production has been outsourced to Jabil. RM2 is assuming the lease for the production facility and the existing staff to ensure uninterrupted pallet production. It also noted benefits related to efficiency and oversight. RM2 previously ran a pallet production facility in Woodbridge, Ontario, Canada. I toured it in 2016.
The pultrusion production of the RM2 pallet is a fascinating process. As I outlined in a 2016 article in Pallet Enterprise:
The RM2 pallet production process includes four steps. These include pultrusion, milling, assembly, and the gelcoat application designed to deliver an appropriate coefficient of friction.
Three main inputs combine to form the durable pallet material that is pultruded. These include glass string, glass roving, and polyurethane resin, which enter the die and are subjected to heat. The glass string comes spooled on bobbins, which are placed side by side on shelves in metal carts. The string from one bobbin is tied to the next, throughout the cart, and onto the next cart, so there is no disruption in production as the string is drawn into the pultrusion die. There are numerous strings that are drawn at the same time, and they converge into the die.
The roving looks somewhat like a strip of gauze. It unravels from a roll and is also drawn into the die. The glass is impregnated with resin and heat is applied. The pultrusion equipment pulls the profile from the outbound end of the die, and the profile slowly emerges. After a length is drawn out, it is cut to approximate length and accumulated in a cart.
The extruded profiles are then rolled to the nearby milling area where they are cut to precise length and notched as necessary. One of the things that sticks out to the visitor is the number of robots involved in the process – both in milling and assembly. ABB robots provide precise waterjet cutting of the components, which are then manually stacked and moved to the assembly area. The waterjet process prevents the creation of excessive glass dust during milling.
The assembly is widely automated with the aid of ABB robots and Kuka robots for automated placement of components and application of adhesive. There is still some manual placement of elements in jigs required in the current system, although there is the potential to automate this task as volume increases.
Completed pallets are taken to the gelcoating room for application of the anti-slip gelcoat to top deck boards, as well as the underside of some components to ensure good contact is established with fork tines. The gelcoat provides a superior coefficient of friction.
Details of Latest Funding Arrangement
On June 30, 2023, RM2 entered into a secured credit agreement with Orion Infrastructure Capital (OIC) providing for up to $150 million to finance the production of pallets. At the closing, RM2 drew an initial loan in the amount of $45 million (the “Initial Draw”). In connection with the Initial Draw, RM2 issued to OIC an initial tranche of 3,447,256 penny warrants. A further 3,447,256 penny warrants may be issued under the terms of the credit agreement, in conjunction with further drawdowns under the credit facility.
In addition to the production of pallets to significantly increase the size of its pallet pool, the Initial Draw is being used to pay fees and expenses in connection with this facility and to repay a portion of outstanding bridge notes which had financed pallet production since early this year. Other bridge notes were converted to a total of 5,761,349 newly issued shares. A further 11,191,936 shares are subject to 10-year warrants with a strike price of $0.8935 per share that were issued in connection with the bridge notes. Upon completion of the new financing and giving effect to the transactions listed above, the outstanding share capital of the Company consists of 145,147,675 shares on a fully diluted basis, taking into account 108,219,820 issued shares, all warrants and employee stock options.