Wednesday, May 20, 2015 8:22:21 AM
NHMD DD - For New Investors Updated: 20/5/2015
Nates Food Company: “Real product, real company, real background in selling this product“ – Nate Steck, CEO
http://www.nateshomemade.com/
Fully Reporting Company. In the future there is plans for a Quarterly dividend of $0.025 - $0.10 per can of product sold as well as a 22.7M share buyback program. Non-dilutive financing. Most financing is coming from Joseph Wade at SouthCorp Capital & W.B Partners at 0%. Nate’s officer has also loaned financing at 0%. A recent $110,000 finance deal from Vista Capital @ 10%, if unable to pay will issue stock to cover it. Company has issued shares as payment for services. See financing section below for further details of all financing deals and share issuances. Additionally the company stated that they have been approached by outside investors who wished to make a $400k direct investment; the company turned down the offer due to already being adequately capitalized. Monthly burn rate/cash flow: No overhead, only overhead is filing requirements. Rest Is variable per can basis, overhead 7/8k per month. Everyone else gets paid when the can get paid. As of February 28, 2015, total liabilities were $173,758, which consists of $141,508 in loans from our shareholder,$3,000 in accounts payable and $29,250 in deferred revenue from a related party.
The company has 1PM industries with Joseph Wade as their online distributor with sales that commenced on May 14th 2015. Nate's Homemade Pancake and Waffle Batter and the Gourmet Syrups are available from the online store http://www.nateshomemadestore.com/ .
As per the 8-K released on May 15th: http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=10702256
The Company's online distributor will begin taking orders on May 14, 2015. Initial deliveries will be scheduled for the week of May 30, 2015 as production is ramped up and to allow for an orderly process for the expected high demand. The Company is concurrently ramping up its production and fine tuning the fulfilment process with its online distributor.
The Company received confirmation on May 13 that the equipment has been installed and has begun cycling cans. The Company will commence production and ship cans to its online distributor in Los Angeles.
Further to online sales, Sales from big box retailers will go directly to NHMD. As stated in the Jan 30th Conference call the main aim is not directly about online sales and it is intended to be used as a way to have the product available to people who are already interested in the product. The company stated that they will not spend a large amount of resources on the online distribution channel.
As per the Jan 30th Conference call, Nate gave indication that online distribution was not his most favorite model due to shipping costs and over all pricing being higher. Cost per can will be lower in the retail stores. The company posted on a 10-Q released April 14th:
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
As stated on the company’s conference call Jan 30th, financing for the purchase orders come from a financing partner, the following information was provided:
Financing: Purchase order form store, we go to the financing partner, we got to fill this order, they will fund up to 80% on day one of the purchase order. They keep 5-8% as their profit margin.
Further to this, the company gave indication that big box retailers would be their main goal versus online distribution. The reason for this was that volumes are much higher. They can use the Costco model for demos and to create brand awareness. With establishing brand awareness at Costco, when the company decides to move into their second tier retailers such as Walmart, Korger etc they already have brand awareness set-up and this reduces the cost of external marketing.
Brand awareness this time round is important as with Batter blaster IRI data showed that out of the pressurized can pancakes and waffle category only 0.6% of the people were aware of batter blaster. It seems a goal of the company is to improve the awareness of the product this time round. I believe this is the reason why the company likes the Costco model for demos and also using QVC to demo and sell the product, these platforms show how the product works, how fun it is and this helps with product education. The re-buy number was 98.9% which is a great number.
The company is in green light status with regards to moving into retailers. The company already has the capability to meet the volume demand of the retailer’s source: Jan 30th CC. Communication is already established between Costco and Kroger. Nate would prefer getting into Costco first, this was the route he took with Batter Blaster. Costco Southern California and mimicking what was successful. The conference call illuminates what went wrong with Batter blaster with regards to expanding too quick, can design, raw material selection, profit margins and other experiences that moving forward Nate has developed a strategy to improve on as well as also improving on the design of the pressurized can. The previous Batter blaster can lost 2oz per can, the current can has an improved mechanism which produces larger yields per can. This can and delivery method is patented. More details of this can be found on the following pages.
Costco is the first port of call with retailers then moving into their second tier retailers. They have an internal sales broker to aid with this. The March 5th 8-K stated: The Company has hired an internal sales broker to manage the national and international sales channels. As such, the company has terminated one of its broker relationships to consolidate the sales efforts.
Sinclair Group, LLC (Now terminated) was the sales and marketing partner for its retail grocery placement. Nate had a 16 year relationship with them.
The company has institutional ownership:
Embarr Downs, Inc. 9.98% stake. Shares: 6,700,000
Rocky Mountain Holdings (Lance Larsen) & Ravine Trading Limited
9.66% stake. Cumulative Shares: 6,892,000
Lawson M. Kerster (Sandringham Investments Limited) and Ingeborg L. Kerster
7.34% stake. Cumulative Shares: 5,235,000.
Total Shares: 18,827,000
Insiders are in at an average cost of: 0.094 per share with a total cumulative investment of: $18,928.31
Share Structure: (as of May 6, 2015)
Authorized: 300,000,000
Common Shares Outstanding: 77,250,000
Market Cap 5.7M
Float 38.4M
Recent Milestones:
Company's online distributor began taking orders on May 14, 2015
The Company received confirmation on May 13 that the equipment has been installed and has begun cycling cans at ABCO labs.
Future plans include:
Up list to OTCQX with further aims of moving to NYSE or Nasdaq Exchanges.
Dividend and 22.7M share buyback program.
Own flagship factory in Indiana with aims of producing 400 cans per minute with 5 lines. Joseph Wade… See potential Indiana facility on the following pages.
Near Term:
SHAREHOLDER MEETING - JUNE 16, 2015 at 1:00 pm - New York City Courtyard New York Manhattan/Midtown East located at 866 3rd Ave
Branding: Nate’s Homemade. Goal: Expand the Company's product line to include up to 10 products sold under the nates homemade brand.
Facebook Group Page: https://www.facebook.com/groups/579286718880431/
Current Product Line:
Nate's Homemade Pancake and Waffle Batter $ 9.99
Nate’s Homemade Pancake and Waffle Batter delivers a delicious ready-to-cook, pre-mixed batter that makes light and airy pancakes or waffles that are fun for the entire family to make together. With no preparation or cleanup, we’ve made making breakfast easier for your busy mornings.
Each can is:
20oz
Makes approximately 24-3" pancakes
Gluten Free
Ready to Cook
No mess or cleanup
No mixing or preparation
Refrigerated
For Celiac Customers: Click here to review the Gluten Free Certificate of Analysis
Figure 1 Gluten Free Certificate of analysis
Gourmet Breakfast Syrups $ 5.99
Our Gourmet Breakfast Syrups are the absolute ultimate in quality. Our fruited syrups contain natural fruit puree and flavors and deliver the finest taste. Excellent on pancakes, waffle and blintzes. We offer Strawberry, Blueberry, and Boysenberry.
FDA Certification:
The Company contracted Mérieux NutriSciences to perform nutritional labelling testing to make sure it was compliant with FDA regulations. This review was completed in March 2015 and the Company’s labelling is complaint with FDA. Nutritional labelling is designed to provide a system for conveying information about the nutrient content of food in a standardized format. It is essential to confirm the nutritional content of food products by laboratory analysis. Mérieux NutriSciences is the Gold standard in food safety and quality control, and one of very few companies that the government and retail chains will accept certification from.
Upcoming Products:
Flavour Extension. By increasing the product line of Nate's Pancakes to include flavour extensions, the Company would expect to triple its total distributions points and thereby increasing sales by 200%-300%.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
ABCO labs do the blending. Signed off flavours: Strawberry, blueberry and banana. Longer list of flavours developed for oat meal line which can translate to the batter mix. Working with those flavour profiles for our product.
Additional Holiday Flavours: When they secure club store business they plan to have holiday flavours. They don’t want to go into a store for 6 months then lose space for other Christmas items. Nate’s aim is to be a 365 day product in retailers. There will be Christmas and thanksgiving flavours/branding so they can stay in stores.
One-Minute Omelet. The Company has begun developing the One-Minute Omelet. The United States produces nearly 100 Billion eggs per year with sales in excess of $8.5 Billion per year. If the Company is able to have the same revenue penetration as Batter Blaster it would generate in excess of $300 Million in revenue.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
Nate worked on the one minute omelette for subway in 2007, made good headway.
Guacamole. The Company has begun developing a guacamole product line. The market for avocados and guacamole is approximately $3.5 Billion and in the United States nearly 1.3 Billion avocados are consumed on Super Bowl weekend alone. If the Company is able to have the same revenue penetration as Batter Blaster it would generate in excess of $129 Million in revenue.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
Hold the guacamole in a can to eliminate the oxygen that oxidizes it, it was a guacamole spread. Nate worked on that for a big company and plans to develop this further.
ABCO labs develop the pre development products: Brownie, cookie and cake. Keep gluten free going depending on the formulations.
Management:
CEO: Nate Steck:
Entrepreneur and trained French Chef and with over 20 years experience in Product Development and Food Production. Developed over 30 successful products from concept to shelf with National distribution for consumer brands and private labels, cumulative sales of 175M. Co-founder of Batter Blaster, Elena’s Food Specialties and Founder of Elite foods.
Launched in 2007, Batter Blaster was the only organic refrigerated pancake and waffle batter in a pressurized can. Reached national distribution and retails sales of 30M. Batter Blaster won Grocery Manufactures Association Award for Innovation and Creativity. Batter Blaster garnered media attention from The Today Show, Regis and Kelly, Sunday Morning, The Food Network’s Unwrapped, as well as 7000 blog mentions. Oversaw all product development and plant management. Created a “new food category” using traditional products in a modern delivery system.
Source: https://www.linkedin.com/pub/nate-steck/34/1b6/94
Marc Kassoff:
Vice-President, CFO, Director
Mr. Kassoff is currently the President and CEO Meyer, Christian and Associates, Inc. a healthcare subrogation firm. This has been my position for the last 17 years. Mr. Kassoff is also on the Board of the Effect and Encompass which serves the South Orange County community as a Drug and Alcohol Recovery Program.
Tim Denton:
Secretary/Director
Timothy Denton has practiced law in California since 1981, and during that time he has represented and assisted dozens of start-up companies and other businesses, handling both matters involving transactional business as well as civil litigation. For the past 12 years he has been the Supervising Attorney at The Firm of Meyer Christian & Associates, primarily representing hospitals and medical provider groups, working with his clients to ensure regulatory compliance with state and federal laws and agencies. He has continued to work with business development issues for a number of start-up businesses throughout this period, including assisting in the development of Nate's Foods, Inc.
Jeremy Kaplan:
Vice-President of Marketing and Branding
Mr. Kaplan is a marketing executive and designer with over 17 years experience in retail marketing, branding and design. He has overseen marketing and creative projects that led to the rollout of new product and services for Bloomingdale’s, Ralph Lauren, Donna Karen, Acura, Samsung, Sun Microsystems and NapaStyle. Jeremy has managed marketing campaigns in support of store openings for Bloomingdale’s, and has held roles designing fixtures and furniture for Lexus, Philz Coffee, and Sessions snowboarding and outerwear.
Nate's Newport Beach conference call January 30th 2015
Photos of conference call: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=110445220
Conference Call Link Youtube: https://www.youtube.com/watch?v=979YLpz09IU&feature=youtu.be
Conference Call Highlights: General overall strategy, future products and openly talks about Batter Blasters Failure and new improvements, key points follow:
Two labs. ABCO Labs is the development lab. Silliker labs, heavy duty microbiology labs.
Packing and production: Southern California is a co-pack facility, Nate has been there since 2005, manufactured 9million cans batter blaster there, Nate installed equipment in 2006. 40 cans per minute at that facility. ABCO is in Fairfield. They are the formulator and good friends of Nates, building production room currently, wiring, draining etc being installed. Equipment is 600k to 1m dollars to do 90 cans per minute. Putting shell together and refrigeration together. QA/QC good.
Indiana: Own flagship factory, 400 cans per minute, 5 lines. Joseph Wade… See potential Indiana facility details below.
2017: ultimate goal, two facility’s… need something in middle of country.
Sales/marketing: Programs = demo demo with no sliding fees, no shelf fees or coupons. Demos… no one knows what the product is… numbers were.. IRI data showed 0.6% knew about batter blaster in pressurized waffle/pancake can batter category. 98.9% re-buy… amazing re-buy numbers. Education of product is necessary.
Nates relationship with the buyers: The buyers remember the category and they remember how much money they made with batter blaster. They are really enabled.
Online sales: Better price to send to send product through the mail. First round was expensive. Lets come up with a better plan. Online sales are not really what we are all about. 99% about getting into retailer that is where the volume is.
Marketing for online sales: Need to have the online sales for people who already interested in the product. Not going to be where they are going to be spending a lot of resources, most resources for club stores and retailers. We see ourselves down the road getting the product on amazon, established infrastructure versus selling the product on our own.
Brokers/ resellers: Hired brokerage group who Nate has known for 16 years… food broker network… gave them guidance on where we want to be, they set up the connections then they do the presentations.. Sinclair Group, LLC, Chris riser is the local guy (Note: March 5th 8-K Stated terminated relationship and now have an internal sales broker)
Joseph Wade: Online sales: All internal, setting up store then Nate supplies him. No conflict.. Pricing is so much higher due to cost of shipping, not favourite model… but have it available for people to get it in their hands
Retailers: Box store: Costco, Sams: Main reason: volume, already have facilities to handle volume, thousand oaks 400k cans a month to get started. Volume is wanted to get started, better for us to go on a bigger model versus smaller chains, better for factory and us in general. Box stores can promote with demos, huge demo program, the visual in club store you have the whole pallet of product in store, the visual is huge, rather than retail chain where have 3 phase.. on shelf but have to market externally to get people to know what it is… club store, get a following then go into the Safeway the Kroger in a second tier.
Nate: Not going to go after every chain out there and everyone that says yes, not going to go to the chains unless we have 30% more money to fund that shelf.
If cant fund the shelf space then do go into it, we are not going to make that mistake as what BB did.
Financing: Purchase order form store, we go to the financing partner, we got to fill this order, they will fund up to 80% on day one of the purchase order. They keep 5-8% as their profit margin.
Mistake with Batter Blaster: Didn’t use custom can, couldn’t get all the product out, lost 2oz in every can… people still think product is in there… with BB they gassed right into the batter. Now only gassing the piston, getting bigger yield out of each can.
Stores: No deals, nothing over 30 days, set pricing. Store pricing then a distributor pricing on a 12 pack.
Good to go into stores. Fixed can, fixed spray rates. Green light for Kroger and costco.
Competition: When running batter blaster and do you see competition with this once it hits the shelves? Nate worked with general mills. They put out a squeeze bottle, it went no-where. There is no fun and no novelty. Terrible presentation. Mom and pop frozen batter, batter world. Any waffle batter is competition. We compare ourselves on a oz to oz to the organic waffles. Huge market and its good to have that options.
Pricing: Twin pack at costco 9.99 or 10.99. Retail is 5.99 for a single. Profit margin on that? Try sell it for A 30% profit margin to the buyer. Later 10-Q suggests 10% net profit per can.
Share buyback: Where will get the money from? 22M shares Over 3 years.
Talk of China Nov 18: Something they were looking at, we were hoping that US distribution would kick off sooner… step back and focus on the club stores, get product in from a financing stand point, per can cost… focus.. Get it out to southern CA up to northern CA… Nevada.. Then grow out through Costco distribution centres.
What is the exit strategy? Grow and sell? Or grow the co. and keep it going long term? Strategy was working up to the Nasdaq… up listing is exit strategy for a lot of people, once on the Nasdaq you are a massive entity… may be bought out.. Or it becomes its own.. Move up to Nasdaq.. Start picking off smaller food co.s and growing the margins, top and bottom. Goal is NYSE or Nasdaq, whichever is looks better. If giant co. comes in and cant pass up the offer may take it. First the interested companies merger and acquisition contacts you to see if you will be a good fit.
Torrent Energy (Now 1PM Industries): Syrups over there and working together. Different ideas outside of the can. Online store. Look at those for retail side.
Costco first in Southern CA. Kroger. First opportunity with Costco Southern California, Nate had big success there. West coast.. then add central and east states.
Nate: One success story in one region.. then your green light good to go. Canada and Mexico. Well phased map.
Costco: Will be in refrigerator, full pallet refrigerator, open boxes, colourful 2 packs.. Behind the doors. Strive for end caps… pay for the end caps it’s worth it.. End caps and the demos on the same day so it’s right there.
Distribution into big chains: Green light from the brokers. Club store first then Kroger. Kroger 32 hundred stores, it would be a region in Kroger. Nate: I’m over the testing I Sold 9M of testing, not going down that route, large orders, club stores and demos.
Coscto model: Demo marketing, cost effective, as grow into Walmart, target or Kroger, using that brand recognition that developed in Costco in those stores without creating market and brand.
Nate: All for me is for production purposes, I want to know every week what I’m producing so can staff it.
Do big guys first, money coming in, distribution down then pick off the other retailers.
Outside of the can product Development: I’m able to develop things for wade, develop more products at 1000 oaks location, if products doesn’t fit Nate’s genre, make for online sales.
What do you believe the first purchase order would look like? First order 50-70k cans. Just Southern CA one division, initial launch, just initial fill the shelf. Might be twice that because trying to fill the shelf for 30 days.
They will be producing now for 2 months ahead. Fertile for growth. Two divisions we jump.
Current production: small runs to test equipment: Larger test coming up for finished goods.
Monthly burn rate/cash flow: No overhead, only overhead filing requirements. Rest Is variable per can basis, overhead 7/8k per month. Everyone else gets paid when the cans get paid.
How big is the factory in the valley? The total factory is 125k sq feet. The building I’m in is 17k sq feet, production is 3700 sq feet (the line) biggest issue is space for incoming supplies and outgoing. The intermediate where you run production is really fast and compact and it cranks. 10 employees to do 30k cans per day.
Who is online distributor? Wade: Torrent (now 1PM Industries) and wade. Us taking it off Nate’s plate we handle logistics of doing that, not going to be used as marketing or sales tool.
Wade: We buy the cans for what same rate it costs and re sell it on. Nate: I deliver to him and go about my business.
24 pack is really heavy case for Costco. Nate: I am mimicking what I did before that was successful.
What is the difference between the former product and this one? Main difference is Batter Blaster was organic, it was a detriment for Nate, it was great to offer, but because of the uncontrollable microbe loads and the supplier chain, I had fluctuations in the pricing all the time and the price was what he said it was as it was his only supplier. You had to suck it up and lose money and not going to do that again. To be successful you need to have commercially available products and even commodity as it holds pricing.
I pay a price to ABCO labs, sign off on it. We do a blanket order… 100lbs…. commercially viable stuff, not one supplier dictating price… more competitive pricing… ABCO making 30% margin.
So what I am hearing there could be additional margin when you open up your own factory?
Everyone has huge margin for what they are doing for us. Just because of start-up, need volume to bring cost down, factory pass down the cost only on volume, a lot of margin in powder, everyone is making margin on powder, then 20-30% on blending the product… volume cuts a lot of that down. Wade: first 12 months, margins non-existent, stabilize growth.. 3-5 year forecast. The pricing we go out to stores with might not be the pricing they will sign off on, they have their targets and we want to hold stand on our margins. Nate: How are we going to move more product? Is it a cost issue or a marketing issue? We sold Batter Blaster too low and don’t want to do that again.
Short Q&A With Nate Steck & VP of marketing:
“Real product, real company, real background in selling this product“ – Nate Steck
https://www.youtube.com/watch?v=dDfgmA8hydk
Blog Radio: http://www.blogtalkradio.com/moneyforlunch/2015/02/23/bert-martinez-joined-by-jeanne-bliss-toni-fitzgerald-and-guests
Nate Steck’s Previous Companies:
Nate has created the following products/entities: Elite Foods: Revenue $5 Million (discontinued in 1997); Polenta Pack: Revenue $10 Million (sold to Monterey Pasta in 2000); Elena’a Food Specialties: Revenue $80 Million (sold to ADF Foods in 2001); Nate’s Product Line of Meat Alternative Products: Revenue $50 Million (sold to ADF Foods); Batter Blaster: Revenue $40 Million (discontinued in 2012). From 2002 – 2012, products from Nate generated approximately $185 Million. Nate also was responsible for all product development for Batter Blaster. Sean O’Conner was responsible for the sales and marketing for Batter Blaster. Mr. O’Connor does not have any role with Nate’s Pancakes. Mr. O’Connor was the lead partner in charge of sale and marketing for Batter Blaster and remains friends with Nate Steck; however, Nate has been working separately on developing a shelf stable product since 2011.
Batter Blaster:
Nate Steck was a co-founder of Batter Blaster with Sean O’Connor who have a joint patent for their can technology. Batter Blaster: Revenue $40 Million (discontinued in 2012).
Batter Blaster Article: http://www.fastcompany.com/1182499/how-one-man-confused-grocers-and-won-customers-canned-pancakes
Interview with co-founder of batter blaster: Sean O Connor:
http://www.theatlantic.com/video/archive/2013/03/the-short-lived-brilliance-of-batter-blaster/274105/
Consumer/Investor Pictures and videos:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=108736965
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=108735226
https://twitter.com/amberdiamonds/status/540884088035373058/photo/1
https://www.youtube.com/watch?v=qPdqs7K3YVY&feature=youtu.be
https://www.youtube.com/watch?v=VFhDYB7KZJE&feature=youtu.be
https://www.youtube.com/watch?v=Mzd_9QJQ3bU&feature=youtu.be
https://www.youtube.com/watch?v=IIhnvSMmhAc&feature=youtu.be
https://www.youtube.com/watch?v=HHqxcdK-OF8&feature=youtu.be
Why did Batter Blaster Fail?
According to Nate's Newport Beach conference call January 30th 2015, Batter Blaster failed because the company needed 15M for the next leg. The venture capital fell through and they lost funding. Batter Blaster expanded too quickly and was forced to close the doors. Batter Blaster Revenue: 40M with a 13,000 store presence.
Improvements over Batter Blaster: Notes taken from the above CC Jan 30th.
Can Technology: Redesigned the can to produce a better yield on a per can basis. Batter blaster’s can lost 2oz per can due to the can design and people still thought there was product inside the can. Batter Blaster did not spend the $ on a custom can.
Batter Blaster was an organic product. Batter Blaster used one supplier for the raw materials which had erratic and uncontrollable pricing. Due to the materials being organic, micro bug count levels were difficult to control. The current pancake/waffle mix is gluten and non gluten free, it is a cleaner product with a longer shelf life. The current product is made from commercially available product where pricing is more competitive and more stable.
FORM 8-K Oct 31, 2014: The Company also modified the product to meet the food safety requirements of retailers and to increase the shelf life of the product.
The new formula provides a longer shelf life but results in a thicker batter. As a result, Nate over the past week had developed a new can and delivery system. Nate approved this custom can on October 30, 2014 and the Company began to run product through its new production line. Source: 8-K Filed: October 31, 2014. Link:
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10273830
The Company has begun development of a non-gluten free version of its Pancake and Waffle Batter. The Company began development of the non-gluten free product at the request of international and US retailers. Link: 8-K: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10586493
Batter Blaster also had smaller profit margins and this time round they are opting for a different model. The Company’s variable model is based on a net profit of 10% per-can sold.
Can Technology Patent:
The can technology and method of delivery is protected by a patent. http://patents.justia.com/inventor/nate-steck
Financing Sources:
Nate Homemade’s Officer 0% loan
SouthCorp Capital 0% Loan http://www.southcorpcapital.com/
WB Partners (Joseph Wade), 0% Loan http://www.wb-partners.com/
$110,000 from Vista Capital. The Company expects to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non assessable shares of Common Stock. The Company can repay the note within 90 days with no prepayment penalty an within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price is 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date.
Share Issuance:
On September 29, 2014, the Company issued 6,000,000 shares to a third party for services.
The Company issued 9,500,000 shares of Common Stock and booked an expense related to this stock issuance of $562,000 which represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.
The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $70,181. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
The Company issued 15,000,000 shares of Common Stock and booked an expense related to this stock issuance of $857,000 that represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.
The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $27,000. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
The Company sold product to Torrent Energy (Now 1PM industries) and received $30,000 prior to shipment and delivery of the goods. Torrent Energy is developing various gourmet food products such as the development of compound butter and pancake and waffle syrup. Torrent Energy is owned by WB Partners.
Employee Share Benefit Plan:
Sept 29, 2014 S-8 Form: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10223050
16,000,000 shares of the authorized common stock, par value $0.0001 per share Employee Benefit Plan
DEFINITION of 'SEC Form S-8' : A filing with the Securities and Exchange Commission (SEC) that is used by a publically traded company to register securities that will be offered to its employees via benefit or incentive plans. http://www.investopedia.com/terms/s/sec-form-s-8.asp
From April 14th 2015 10-Q Quarterly Report:
As of February 28, 2015, our total liabilities were $173,758, which consists of $141,508 in loans from our shareholder,$3,000 in accounts payable and $29,250 in deferred revenue from a related party.
Reverse Merger:
The Company selected May 31 as its fiscal year end. On May 19, 2014, the Company completed a reverse merger between with Nate’s Pancakes, Inc., an Indiana Company. Nate’s Pancakes was the surviving Company. In May 2014, the Company changed its name from Capital Resource Alliance (CRRA) to Nate’s Foods Co.
License Agreement:
Nate’s Foods Co., Inc. was incorporated under the laws of the State of Colorado on January 12, 2000. In May 2014, the Company executed a licensing agreement to market and sell the product Nate’s Pancakes. Our license agreement is exclusive throughout the world. The product is currently sold under the name “Nate’s Homemade.”
The license agreement is for a term of twenty (20) years. The Company has the right to renew the license agreement for successive ten (10) year period by paying $1,000,000 for each new term.
Payments/Royalty
The Company shall pay a royalty equal to Three Percent (3%) of the Gross Revenue from the licensed products. Gross revenue is defined as total revenue minus discounts and allowances. The license requires that the Company pay a minimum monthly fee of $7,500 beginning twelve (12) months from the execution of the license agreement which is against the 3% royalty. Thereby the fee shall begin on June 1, 2015.
Product Ordering
The Company is able to purchase the raw materials directly from 3 rd party suppliers and manufacture the product and manufacture the product for sell. The Company may also develop and create additional flavors such as chocolate, blueberry, or strawberry.
Operations
The Company is currently forecasting to sell 3,200,000 cans of product over the initial 18 months. The Company uses this forecast model to estimate cash flow needs and manufacturing expectations. As the Company receives purchase orders from clients it will modify the forecast accordingly.
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.
Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:
• the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
• the last day of the fiscal year following the fifth anniversary of the completion of this offering;
• the date on which we have, during the previous three-year period, issued more than $1 billion in non- convertible debt; and
• the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act.
We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.
The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion on page 13 under “Risk Factors” of the effect on our financial statements of such election
Sales and marketing:
The Company initially expects to market the product through 3 phases:
Phase 1: Infomercials aired on television and radio.
Phase 2: Selling product on QVC
Phase 3: Placement of products in retail and club stores (such as Wal-Mart and Costco)
QVC: Fact Sheet: http://www.qvc.com/AboutQVCFacts.content.html
QVC, Inc., one of the largest multimedia retailers in the world, broadcasts live in the U.S. 24 hours a day, 364 days a year. A wholly owned subsidiary of Liberty Media Corporation attributed to the Liberty Interactive Group (NASDAQ: LINTA), QVC was founded in 1986 by Joseph Segel. Mike George currently serves as the company's president and CEO.
QVC's worldwide corporate headquarters, known as Studio Park, is located in West Chester, PA (30 miles west of Philadelphia). The building sits on 84 acres of land and is roughly the size of 15 U.S. football fields. In 2013, their original facility in West Chester was renamed QVC Founders Park.
QVC is home to one of the most technologically advanced television studios in the U.S. The 165,000-square-foot broadcast operations center enables QVC to produce its live programming, which attracts more than 22,000 on-air guest visits each year and showcases more than 1,000 products every week. There are 18 permanent sets and more than 100 portable scenic elements. Employing more than 17,000 people worldwide, QVC has international broadcast operations in the United Kingdom, Germany, Japan, and Italy. To date, approximately 60 million people have shopped with QVC worldwide. Its online counterpart, QVC.com, was founded in 1996 and attracts more than 6 million unique visitors each month.
Online Sales and Marketing:
http://www.nasdaq.com/press-release/1pm-industries-announces-development-of-print-advertisements-20150507-00707
1PM Industries is the online distributor for Nate's Food Co.
The Company currently is planning to place print advertisements in magazines related to camping/RV, parenting/children, cooking, and industry specific magazines such as High Times. The print advertisement will be coordinated with television advertising, online advertising and physical location advertising. A copy of the print ad can be located at www.nateshomemadestore.com/pages/advertisements
Added Notes depicted from Nate's Newport Beach conference call January 30th 2015:
Not going to spend all resources in the online sales area, it is more for people who are already interested to have access the product.
They made it clear that the online distribution would not be the main avenue and that big box would be number one due to volumes.
Strategic Sales Plan: Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10337164
The Company is currently finalizing its strategic sales plan. The strategic plan is used by the Company to coordinate its sales and marketing functions to drive customers to its products. Currently, the Company is looking at a 3-phase rollout process.
Phase 1: rollout with one division of a membership store (i.e. Costco) and then proceed to expand throughout the other divisions. The Company has internally used Costco as a possible customer for its first phase.
Phase 2: introduce the product to convenient stores such as 7-11. The Company prefers the convenient store model because the number of convenient stores is significantly higher than traditional retail grocery stores. For example, 7-11 has 54,200 stores in 16 countries of which 10,400 are in North America. These stores provide a large footprint in North American but also allow was easy expansion internationally.
Phase 3: This phase consists of placement of the Company’s products in Walmart and/or Target.
The Grocery Placement Process: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10255560
The process involved with grocery placement is: (1) hire a food broker, (2) meet with buyers, (3) samples supplied to buyer, (4) set up pricing, (5) delivery dates established (typically 1 to 3 months), and (6) begin with a rollout with a region of the stores before full deployment.
Plan For Retail Grocery Placement:
On November 24, 2014, the Company appointed the Sinclair Group, LLC http://www.sinclairgroupllc.com/ as its sales and marketing partner for its retail grocery placement. Stated in form 8-K.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10326898
The March 5th 8-K stated: The Company has hired an internal sales broker to manage the national and international sales channels. As such, the company has terminated one of its broker relationships to consolidate the sales efforts. Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10541216
It is anticipated that any order from a major grocery chain (i.e. WalMart, Costco, Target, Kroger) would be for 70,000 – 90,000 cans per week per chain (or 3.6 Million to 4.7 Million on yearly bases).
Production Line Timeline: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10445514
The Company has agreed to acquire a rotary piston filling can line. The new line will be capable of producing between 8,000,000 and 10,000,000 cans per year and will be installed at the Company’s factory in Fairfield, California within the next 10-12 weeks. The Company has begun moving its production from its Los Angeles co-packer to its factory line in Fairfield. The Company expected the transition to take 12 months but on January 31, 2015, the Company agreed to compete the process in the next 3-4 months. The benefits of moving production from Los Angeles to Fairfield include control over the production line and equipment, a 300% increase in production space, additional storage for raw materials, reduction in freight expenses and an increase in the quality control of the product. The line cost approximately $400,000 and is being financed by WB Partners.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10508926
The Company is expecting the equipment purchased by SouthCorp to be fully installed between April 5 th and 22 nd (which is 8-10 weeks from February 11 when the equipment was purchased). The Company’s goal is to begin having parts installed in the coming weeks to begin production; however, the equipment is being manufactured for our needs and as such don’t want to affect the quality of the equipment.
The Company decided to move its manufacturing to Fairfield from its co-packer in Los Angeles based on the discussions with the co-packer and the desire to have more control and flexibility over the actual manufacturing process. The decision was made that since any purchase order would have an expected lead time of 90 days that this represented the perfect time to make the transition without any impact on the Company’s ability to deliver product.
April 13: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10622452
The equipment purchased for the Company’s facility in Fairfield, CA has been completed and will be shipped the week of April 13, 2015 for installation at ABCO. Once the equipment is installed, the Company can resume production of Nate’s Homemade products. Additional equipment has been ordered which will be completed on or about April 27. The additional equipment will allow the company to increase the CPM (cans produced per minute). Once the Company has installed the equipment, the Company’s online distributor (see 1PM Industries, Joseph Wade Above) will commence selling the Company’s product
Indiana Factory: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10348973
The factory in Indiana is expected to be completed in 2016. It is being built to produce 50 – 100 million cans a year. The Company does not expect to need that level of production within the next 12 months. We expect construction to start shortly after the winter season.
Potential Factory Location DD: Source: Bocephus on Ihub.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=112021259
Q.4. Does the Company produce its own product or does it use a 3 rd party factory?
A.4. Currently the Company uses a 3 rd party factory (the same factory as batter blaster). However, the Company has begun to build its own factory capable of producing 50 Million cans a year.
Institutional Ownership Summary:
Form 13G: Embarr Downs, Inc.
Amount beneficially owned 6,700,000* 9.98% (based on the total of 67,100,000 outstanding shares of Common Stock)
Form 13D Filed: Mar 27, 2015
Lawson M. Kerster (Sandringham Investments Limited) and Ingeborg L. Kerster
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Sandringham (Lawson M. Kerster) 2,135,000 common; Ingeborg L. Kerster 3,100,000
7.34%
SANDRINGHAM INVESTMENTS LIMITED
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,235,000
2.99%
INGEBORG L. KERSTER
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,235,000
4.35%
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10591312
Rocky Mountain Holdings (Lance Larsen) Ravine Trading Limited
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Rocky Mountain 5,692,000
Ravine 1,200,000
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.66%
Rocky Mountain Trust 6,892,000 9.66%
Insider Buying:
Form 4 Filed: Nov 10, 2014:
DENTON TIMOTHY LYNN, Officer
Date: 11/4/2014, Bought: 50000 shares @ $0.043
Date: 11/5/2014 Bought: 4200 shares @ $0.048
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10292603
Form 4 Filed: Nov 13, 2014:
KASSOFF MARC ALAN, Director, 10% Owner
Date: 11/13/2014: 23000 shares $0.1085
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10300531
Form 4 Filed: Nov 19, 2014:
DENTON TIMOTHY LYNN, Officer
Date: 11/13/2013: 450 shares @ $0.106
Date: 11/17/2014: 5600 shares @ $0.175
Date: 11/18/2014: 3700 shares @ $0.165
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10315556
Form 4 Filed: Nov 19, 2014:
KASSOFF MARC ALAN, Director, 10% Owner
Date: 1/19/2014 31000 shares @ $0.15
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10315570
Form 4 Filed: Nov 26, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 11/25/2014 4000 shares @ $0.115
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10332296
Form 4 Filed: Dec 3, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 12/2/2014 15000 shares @ $0.115
Date: 12/2/2014 10000 shares @ $0.118
Date: 2/3/2014 2000 shares @ $0.1
Date: 12/3/2014 2415 shares @ $0.096
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10340072
Form 4 Filed: Dec 30, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 12/26/2014 10000 shares @ $0.05
Date: 12/29/2014 30000 shares @ $0.058
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10383960
Form 4 Filed: Dec 31, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 2/31/2014 10000 shares @ A $0.08
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10386039
Uplisting: Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10389061
Q.7. When does the Company expect to up-list to an exchange?
A.7. The Company expects to up-list in 3-5 years; however, the Company is discussing the value of moving to the OTCQX as a step towards moving up to NYSE.
Dividends: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10342586
The Company’s Board of Directors has approved the establishment of a quarterly dividend of $0.025 - $0.10 per can of product sold. The Board has not established a date the dividends will begin but is currently forecasting March 31, 2015 as the initial record date.
Direct Offers By Investors: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10377231
The Company has received a number of terms sheets from companies offering to make a direct investment into the Company. The amount of the terms sheets and offers was in excess of $400,000. On December 23, 2014, the Company informed these companies that we were rejecting the offers due to the fact that the Company currently has sufficient capital to meet its operating needs and manufacturing requirements.
Share Buy Back Program: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10418307
The Company has agreed to buy back approximately 22,797,000 shares of Common Stock. The shares will be cancelled reducing the Company’s outstanding share count by approximately 31%. The final agreement is expected to be finalized and executed shortly.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10541216
In December 2014, the Company agreed to buy back approximately 22,797,000 shares of Common Stock. With the intent that the shares would be cancelled. The majority of terms had been agreed to including purchase price and term of payment. However, the Company requested that the repurchase be agreed to by the common shareholders at a shareholder meeting. The shares that were to be repurchased are from affiliates of the Company that acquired their shares prior to the reverse merger with Nate’s Food. The Company believes that since the shareholders are deemed affiliates that the transaction should be approved by a majority of the common shareholders. However, the affiliate shareholders of the shares to be repurchased objected to the inclusion of shareholder approval as a condition of the repurchase. As such, the agreement to repurchase the affiliate shares has been terminated
Note: Share buyback has been cancelled but may be back on the table at a later date with the inclusion of shareholder approval.
Valuation:
The Company is currently forecasting to sell 3,200,000 cans of product over the initial 18 months. The Company uses this forecast model to estimate cash flow needs and manufacturing expectations. As the Company receives purchase orders from clients it will modify the forecast accordingly.
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
3,200,000 cans sold at $5.99 per can = 19,168,000
.10 x 19.1M = $1,916,800 net profit
1.9M net profit
Price Target Based on Batter Blaster Revenues (excluding revenue of future products within the brand): Source: http://thestockfreec.com/2014/05/19/quick-nates-pancakes-crra-analysis-target-1-82/
Nate sold $40 mil in Batter Blaster pancake product and this had to be refrigerated, i’ll assume his new product is an improvement and should do as well if not better. Average industry gross margin on food products is 32%. Nates sells direct on internet and QVC so margins should actually be better but i’ll stick to 32%
.32 X $40 mil = 12.8 mil gross revenues
$ 12.8 mil – selling general administrative at 1.28 mil (10%) = 11 mil net profit.
$11 million/120 million shares = .091/share
.091 X 20 p.e. = $1.82 a share !
In sum: Nate’s food company has a proven track record of producing and selling this product. They are learning from the Batter Blaster venture and are making improvements on every level. Not only was batter blaster one product, the company is aiming to sell numerous products under the Nate’s Homemade Brand. The company has goals of owning their own manufacturing facility which will further increase margins. They are green light ready to move into retailers and already have the capacity to meet the volume demand. They have a goal of a per can dividend as well as a share buyback program. They are raising money in a non-dilutive way and with steps like this they are keeping the shareholders’ interests at heart and positively reinforcing the management’s team’s integrity.
Assuming they can achieve the same revenues as batter blaster in the near term, the share price would be approx. $1.82 per share which is a 2175% increase from today’s price. That is just one revenue stream and not even including potential revenues from the rest of their future product line.
With today’s price under .10 cents a share (Market Cap 5.7M) and online sales that begun May 14th with retail placement coming soon; coupled with management’s sound integrity and proven track record I believe NHMD offers a compelling investment opportunity to see growth driven by an improved pancake/waffle batter in an improved redesigned custom can with further future growth driven by numerous products being developed to be sold under the Nate’s homemade brand.
Nates Food Company: “Real product, real company, real background in selling this product“ – Nate Steck, CEO
http://www.nateshomemade.com/
Fully Reporting Company. In the future there is plans for a Quarterly dividend of $0.025 - $0.10 per can of product sold as well as a 22.7M share buyback program. Non-dilutive financing. Most financing is coming from Joseph Wade at SouthCorp Capital & W.B Partners at 0%. Nate’s officer has also loaned financing at 0%. A recent $110,000 finance deal from Vista Capital @ 10%, if unable to pay will issue stock to cover it. Company has issued shares as payment for services. See financing section below for further details of all financing deals and share issuances. Additionally the company stated that they have been approached by outside investors who wished to make a $400k direct investment; the company turned down the offer due to already being adequately capitalized. Monthly burn rate/cash flow: No overhead, only overhead is filing requirements. Rest Is variable per can basis, overhead 7/8k per month. Everyone else gets paid when the can get paid. As of February 28, 2015, total liabilities were $173,758, which consists of $141,508 in loans from our shareholder,$3,000 in accounts payable and $29,250 in deferred revenue from a related party.
The company has 1PM industries with Joseph Wade as their online distributor with sales that commenced on May 14th 2015. Nate's Homemade Pancake and Waffle Batter and the Gourmet Syrups are available from the online store http://www.nateshomemadestore.com/ .
As per the 8-K released on May 15th: http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=10702256
The Company's online distributor will begin taking orders on May 14, 2015. Initial deliveries will be scheduled for the week of May 30, 2015 as production is ramped up and to allow for an orderly process for the expected high demand. The Company is concurrently ramping up its production and fine tuning the fulfilment process with its online distributor.
The Company received confirmation on May 13 that the equipment has been installed and has begun cycling cans. The Company will commence production and ship cans to its online distributor in Los Angeles.
Further to online sales, Sales from big box retailers will go directly to NHMD. As stated in the Jan 30th Conference call the main aim is not directly about online sales and it is intended to be used as a way to have the product available to people who are already interested in the product. The company stated that they will not spend a large amount of resources on the online distribution channel.
As per the Jan 30th Conference call, Nate gave indication that online distribution was not his most favorite model due to shipping costs and over all pricing being higher. Cost per can will be lower in the retail stores. The company posted on a 10-Q released April 14th:
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
As stated on the company’s conference call Jan 30th, financing for the purchase orders come from a financing partner, the following information was provided:
Financing: Purchase order form store, we go to the financing partner, we got to fill this order, they will fund up to 80% on day one of the purchase order. They keep 5-8% as their profit margin.
Further to this, the company gave indication that big box retailers would be their main goal versus online distribution. The reason for this was that volumes are much higher. They can use the Costco model for demos and to create brand awareness. With establishing brand awareness at Costco, when the company decides to move into their second tier retailers such as Walmart, Korger etc they already have brand awareness set-up and this reduces the cost of external marketing.
Brand awareness this time round is important as with Batter blaster IRI data showed that out of the pressurized can pancakes and waffle category only 0.6% of the people were aware of batter blaster. It seems a goal of the company is to improve the awareness of the product this time round. I believe this is the reason why the company likes the Costco model for demos and also using QVC to demo and sell the product, these platforms show how the product works, how fun it is and this helps with product education. The re-buy number was 98.9% which is a great number.
The company is in green light status with regards to moving into retailers. The company already has the capability to meet the volume demand of the retailer’s source: Jan 30th CC. Communication is already established between Costco and Kroger. Nate would prefer getting into Costco first, this was the route he took with Batter Blaster. Costco Southern California and mimicking what was successful. The conference call illuminates what went wrong with Batter blaster with regards to expanding too quick, can design, raw material selection, profit margins and other experiences that moving forward Nate has developed a strategy to improve on as well as also improving on the design of the pressurized can. The previous Batter blaster can lost 2oz per can, the current can has an improved mechanism which produces larger yields per can. This can and delivery method is patented. More details of this can be found on the following pages.
Costco is the first port of call with retailers then moving into their second tier retailers. They have an internal sales broker to aid with this. The March 5th 8-K stated: The Company has hired an internal sales broker to manage the national and international sales channels. As such, the company has terminated one of its broker relationships to consolidate the sales efforts.
Sinclair Group, LLC (Now terminated) was the sales and marketing partner for its retail grocery placement. Nate had a 16 year relationship with them.
The company has institutional ownership:
Embarr Downs, Inc. 9.98% stake. Shares: 6,700,000
Rocky Mountain Holdings (Lance Larsen) & Ravine Trading Limited
9.66% stake. Cumulative Shares: 6,892,000
Lawson M. Kerster (Sandringham Investments Limited) and Ingeborg L. Kerster
7.34% stake. Cumulative Shares: 5,235,000.
Total Shares: 18,827,000
Insiders are in at an average cost of: 0.094 per share with a total cumulative investment of: $18,928.31
Share Structure: (as of May 6, 2015)
Authorized: 300,000,000
Common Shares Outstanding: 77,250,000
Market Cap 5.7M
Float 38.4M
Recent Milestones:
Company's online distributor began taking orders on May 14, 2015
The Company received confirmation on May 13 that the equipment has been installed and has begun cycling cans at ABCO labs.
Future plans include:
Up list to OTCQX with further aims of moving to NYSE or Nasdaq Exchanges.
Dividend and 22.7M share buyback program.
Own flagship factory in Indiana with aims of producing 400 cans per minute with 5 lines. Joseph Wade… See potential Indiana facility on the following pages.
Near Term:
SHAREHOLDER MEETING - JUNE 16, 2015 at 1:00 pm - New York City Courtyard New York Manhattan/Midtown East located at 866 3rd Ave
Branding: Nate’s Homemade. Goal: Expand the Company's product line to include up to 10 products sold under the nates homemade brand.
Facebook Group Page: https://www.facebook.com/groups/579286718880431/
Current Product Line:
Nate's Homemade Pancake and Waffle Batter $ 9.99
Nate’s Homemade Pancake and Waffle Batter delivers a delicious ready-to-cook, pre-mixed batter that makes light and airy pancakes or waffles that are fun for the entire family to make together. With no preparation or cleanup, we’ve made making breakfast easier for your busy mornings.
Each can is:
20oz
Makes approximately 24-3" pancakes
Gluten Free
Ready to Cook
No mess or cleanup
No mixing or preparation
Refrigerated
For Celiac Customers: Click here to review the Gluten Free Certificate of Analysis
Figure 1 Gluten Free Certificate of analysis
Gourmet Breakfast Syrups $ 5.99
Our Gourmet Breakfast Syrups are the absolute ultimate in quality. Our fruited syrups contain natural fruit puree and flavors and deliver the finest taste. Excellent on pancakes, waffle and blintzes. We offer Strawberry, Blueberry, and Boysenberry.
FDA Certification:
The Company contracted Mérieux NutriSciences to perform nutritional labelling testing to make sure it was compliant with FDA regulations. This review was completed in March 2015 and the Company’s labelling is complaint with FDA. Nutritional labelling is designed to provide a system for conveying information about the nutrient content of food in a standardized format. It is essential to confirm the nutritional content of food products by laboratory analysis. Mérieux NutriSciences is the Gold standard in food safety and quality control, and one of very few companies that the government and retail chains will accept certification from.
Upcoming Products:
Flavour Extension. By increasing the product line of Nate's Pancakes to include flavour extensions, the Company would expect to triple its total distributions points and thereby increasing sales by 200%-300%.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
ABCO labs do the blending. Signed off flavours: Strawberry, blueberry and banana. Longer list of flavours developed for oat meal line which can translate to the batter mix. Working with those flavour profiles for our product.
Additional Holiday Flavours: When they secure club store business they plan to have holiday flavours. They don’t want to go into a store for 6 months then lose space for other Christmas items. Nate’s aim is to be a 365 day product in retailers. There will be Christmas and thanksgiving flavours/branding so they can stay in stores.
One-Minute Omelet. The Company has begun developing the One-Minute Omelet. The United States produces nearly 100 Billion eggs per year with sales in excess of $8.5 Billion per year. If the Company is able to have the same revenue penetration as Batter Blaster it would generate in excess of $300 Million in revenue.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
Nate worked on the one minute omelette for subway in 2007, made good headway.
Guacamole. The Company has begun developing a guacamole product line. The market for avocados and guacamole is approximately $3.5 Billion and in the United States nearly 1.3 Billion avocados are consumed on Super Bowl weekend alone. If the Company is able to have the same revenue penetration as Batter Blaster it would generate in excess of $129 Million in revenue.
Added Note depicted from Nate's Newport Beach conference call January 30th 2015:
Hold the guacamole in a can to eliminate the oxygen that oxidizes it, it was a guacamole spread. Nate worked on that for a big company and plans to develop this further.
ABCO labs develop the pre development products: Brownie, cookie and cake. Keep gluten free going depending on the formulations.
Management:
CEO: Nate Steck:
Entrepreneur and trained French Chef and with over 20 years experience in Product Development and Food Production. Developed over 30 successful products from concept to shelf with National distribution for consumer brands and private labels, cumulative sales of 175M. Co-founder of Batter Blaster, Elena’s Food Specialties and Founder of Elite foods.
Launched in 2007, Batter Blaster was the only organic refrigerated pancake and waffle batter in a pressurized can. Reached national distribution and retails sales of 30M. Batter Blaster won Grocery Manufactures Association Award for Innovation and Creativity. Batter Blaster garnered media attention from The Today Show, Regis and Kelly, Sunday Morning, The Food Network’s Unwrapped, as well as 7000 blog mentions. Oversaw all product development and plant management. Created a “new food category” using traditional products in a modern delivery system.
Source: https://www.linkedin.com/pub/nate-steck/34/1b6/94
Marc Kassoff:
Vice-President, CFO, Director
Mr. Kassoff is currently the President and CEO Meyer, Christian and Associates, Inc. a healthcare subrogation firm. This has been my position for the last 17 years. Mr. Kassoff is also on the Board of the Effect and Encompass which serves the South Orange County community as a Drug and Alcohol Recovery Program.
Tim Denton:
Secretary/Director
Timothy Denton has practiced law in California since 1981, and during that time he has represented and assisted dozens of start-up companies and other businesses, handling both matters involving transactional business as well as civil litigation. For the past 12 years he has been the Supervising Attorney at The Firm of Meyer Christian & Associates, primarily representing hospitals and medical provider groups, working with his clients to ensure regulatory compliance with state and federal laws and agencies. He has continued to work with business development issues for a number of start-up businesses throughout this period, including assisting in the development of Nate's Foods, Inc.
Jeremy Kaplan:
Vice-President of Marketing and Branding
Mr. Kaplan is a marketing executive and designer with over 17 years experience in retail marketing, branding and design. He has overseen marketing and creative projects that led to the rollout of new product and services for Bloomingdale’s, Ralph Lauren, Donna Karen, Acura, Samsung, Sun Microsystems and NapaStyle. Jeremy has managed marketing campaigns in support of store openings for Bloomingdale’s, and has held roles designing fixtures and furniture for Lexus, Philz Coffee, and Sessions snowboarding and outerwear.
Nate's Newport Beach conference call January 30th 2015
Photos of conference call: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=110445220
Conference Call Link Youtube: https://www.youtube.com/watch?v=979YLpz09IU&feature=youtu.be
Conference Call Highlights: General overall strategy, future products and openly talks about Batter Blasters Failure and new improvements, key points follow:
Two labs. ABCO Labs is the development lab. Silliker labs, heavy duty microbiology labs.
Packing and production: Southern California is a co-pack facility, Nate has been there since 2005, manufactured 9million cans batter blaster there, Nate installed equipment in 2006. 40 cans per minute at that facility. ABCO is in Fairfield. They are the formulator and good friends of Nates, building production room currently, wiring, draining etc being installed. Equipment is 600k to 1m dollars to do 90 cans per minute. Putting shell together and refrigeration together. QA/QC good.
Indiana: Own flagship factory, 400 cans per minute, 5 lines. Joseph Wade… See potential Indiana facility details below.
2017: ultimate goal, two facility’s… need something in middle of country.
Sales/marketing: Programs = demo demo with no sliding fees, no shelf fees or coupons. Demos… no one knows what the product is… numbers were.. IRI data showed 0.6% knew about batter blaster in pressurized waffle/pancake can batter category. 98.9% re-buy… amazing re-buy numbers. Education of product is necessary.
Nates relationship with the buyers: The buyers remember the category and they remember how much money they made with batter blaster. They are really enabled.
Online sales: Better price to send to send product through the mail. First round was expensive. Lets come up with a better plan. Online sales are not really what we are all about. 99% about getting into retailer that is where the volume is.
Marketing for online sales: Need to have the online sales for people who already interested in the product. Not going to be where they are going to be spending a lot of resources, most resources for club stores and retailers. We see ourselves down the road getting the product on amazon, established infrastructure versus selling the product on our own.
Brokers/ resellers: Hired brokerage group who Nate has known for 16 years… food broker network… gave them guidance on where we want to be, they set up the connections then they do the presentations.. Sinclair Group, LLC, Chris riser is the local guy (Note: March 5th 8-K Stated terminated relationship and now have an internal sales broker)
Joseph Wade: Online sales: All internal, setting up store then Nate supplies him. No conflict.. Pricing is so much higher due to cost of shipping, not favourite model… but have it available for people to get it in their hands
Retailers: Box store: Costco, Sams: Main reason: volume, already have facilities to handle volume, thousand oaks 400k cans a month to get started. Volume is wanted to get started, better for us to go on a bigger model versus smaller chains, better for factory and us in general. Box stores can promote with demos, huge demo program, the visual in club store you have the whole pallet of product in store, the visual is huge, rather than retail chain where have 3 phase.. on shelf but have to market externally to get people to know what it is… club store, get a following then go into the Safeway the Kroger in a second tier.
Nate: Not going to go after every chain out there and everyone that says yes, not going to go to the chains unless we have 30% more money to fund that shelf.
If cant fund the shelf space then do go into it, we are not going to make that mistake as what BB did.
Financing: Purchase order form store, we go to the financing partner, we got to fill this order, they will fund up to 80% on day one of the purchase order. They keep 5-8% as their profit margin.
Mistake with Batter Blaster: Didn’t use custom can, couldn’t get all the product out, lost 2oz in every can… people still think product is in there… with BB they gassed right into the batter. Now only gassing the piston, getting bigger yield out of each can.
Stores: No deals, nothing over 30 days, set pricing. Store pricing then a distributor pricing on a 12 pack.
Good to go into stores. Fixed can, fixed spray rates. Green light for Kroger and costco.
Competition: When running batter blaster and do you see competition with this once it hits the shelves? Nate worked with general mills. They put out a squeeze bottle, it went no-where. There is no fun and no novelty. Terrible presentation. Mom and pop frozen batter, batter world. Any waffle batter is competition. We compare ourselves on a oz to oz to the organic waffles. Huge market and its good to have that options.
Pricing: Twin pack at costco 9.99 or 10.99. Retail is 5.99 for a single. Profit margin on that? Try sell it for A 30% profit margin to the buyer. Later 10-Q suggests 10% net profit per can.
Share buyback: Where will get the money from? 22M shares Over 3 years.
Talk of China Nov 18: Something they were looking at, we were hoping that US distribution would kick off sooner… step back and focus on the club stores, get product in from a financing stand point, per can cost… focus.. Get it out to southern CA up to northern CA… Nevada.. Then grow out through Costco distribution centres.
What is the exit strategy? Grow and sell? Or grow the co. and keep it going long term? Strategy was working up to the Nasdaq… up listing is exit strategy for a lot of people, once on the Nasdaq you are a massive entity… may be bought out.. Or it becomes its own.. Move up to Nasdaq.. Start picking off smaller food co.s and growing the margins, top and bottom. Goal is NYSE or Nasdaq, whichever is looks better. If giant co. comes in and cant pass up the offer may take it. First the interested companies merger and acquisition contacts you to see if you will be a good fit.
Torrent Energy (Now 1PM Industries): Syrups over there and working together. Different ideas outside of the can. Online store. Look at those for retail side.
Costco first in Southern CA. Kroger. First opportunity with Costco Southern California, Nate had big success there. West coast.. then add central and east states.
Nate: One success story in one region.. then your green light good to go. Canada and Mexico. Well phased map.
Costco: Will be in refrigerator, full pallet refrigerator, open boxes, colourful 2 packs.. Behind the doors. Strive for end caps… pay for the end caps it’s worth it.. End caps and the demos on the same day so it’s right there.
Distribution into big chains: Green light from the brokers. Club store first then Kroger. Kroger 32 hundred stores, it would be a region in Kroger. Nate: I’m over the testing I Sold 9M of testing, not going down that route, large orders, club stores and demos.
Coscto model: Demo marketing, cost effective, as grow into Walmart, target or Kroger, using that brand recognition that developed in Costco in those stores without creating market and brand.
Nate: All for me is for production purposes, I want to know every week what I’m producing so can staff it.
Do big guys first, money coming in, distribution down then pick off the other retailers.
Outside of the can product Development: I’m able to develop things for wade, develop more products at 1000 oaks location, if products doesn’t fit Nate’s genre, make for online sales.
What do you believe the first purchase order would look like? First order 50-70k cans. Just Southern CA one division, initial launch, just initial fill the shelf. Might be twice that because trying to fill the shelf for 30 days.
They will be producing now for 2 months ahead. Fertile for growth. Two divisions we jump.
Current production: small runs to test equipment: Larger test coming up for finished goods.
Monthly burn rate/cash flow: No overhead, only overhead filing requirements. Rest Is variable per can basis, overhead 7/8k per month. Everyone else gets paid when the cans get paid.
How big is the factory in the valley? The total factory is 125k sq feet. The building I’m in is 17k sq feet, production is 3700 sq feet (the line) biggest issue is space for incoming supplies and outgoing. The intermediate where you run production is really fast and compact and it cranks. 10 employees to do 30k cans per day.
Who is online distributor? Wade: Torrent (now 1PM Industries) and wade. Us taking it off Nate’s plate we handle logistics of doing that, not going to be used as marketing or sales tool.
Wade: We buy the cans for what same rate it costs and re sell it on. Nate: I deliver to him and go about my business.
24 pack is really heavy case for Costco. Nate: I am mimicking what I did before that was successful.
What is the difference between the former product and this one? Main difference is Batter Blaster was organic, it was a detriment for Nate, it was great to offer, but because of the uncontrollable microbe loads and the supplier chain, I had fluctuations in the pricing all the time and the price was what he said it was as it was his only supplier. You had to suck it up and lose money and not going to do that again. To be successful you need to have commercially available products and even commodity as it holds pricing.
I pay a price to ABCO labs, sign off on it. We do a blanket order… 100lbs…. commercially viable stuff, not one supplier dictating price… more competitive pricing… ABCO making 30% margin.
So what I am hearing there could be additional margin when you open up your own factory?
Everyone has huge margin for what they are doing for us. Just because of start-up, need volume to bring cost down, factory pass down the cost only on volume, a lot of margin in powder, everyone is making margin on powder, then 20-30% on blending the product… volume cuts a lot of that down. Wade: first 12 months, margins non-existent, stabilize growth.. 3-5 year forecast. The pricing we go out to stores with might not be the pricing they will sign off on, they have their targets and we want to hold stand on our margins. Nate: How are we going to move more product? Is it a cost issue or a marketing issue? We sold Batter Blaster too low and don’t want to do that again.
Short Q&A With Nate Steck & VP of marketing:
“Real product, real company, real background in selling this product“ – Nate Steck
https://www.youtube.com/watch?v=dDfgmA8hydk
Blog Radio: http://www.blogtalkradio.com/moneyforlunch/2015/02/23/bert-martinez-joined-by-jeanne-bliss-toni-fitzgerald-and-guests
Nate Steck’s Previous Companies:
Nate has created the following products/entities: Elite Foods: Revenue $5 Million (discontinued in 1997); Polenta Pack: Revenue $10 Million (sold to Monterey Pasta in 2000); Elena’a Food Specialties: Revenue $80 Million (sold to ADF Foods in 2001); Nate’s Product Line of Meat Alternative Products: Revenue $50 Million (sold to ADF Foods); Batter Blaster: Revenue $40 Million (discontinued in 2012). From 2002 – 2012, products from Nate generated approximately $185 Million. Nate also was responsible for all product development for Batter Blaster. Sean O’Conner was responsible for the sales and marketing for Batter Blaster. Mr. O’Connor does not have any role with Nate’s Pancakes. Mr. O’Connor was the lead partner in charge of sale and marketing for Batter Blaster and remains friends with Nate Steck; however, Nate has been working separately on developing a shelf stable product since 2011.
Batter Blaster:
Nate Steck was a co-founder of Batter Blaster with Sean O’Connor who have a joint patent for their can technology. Batter Blaster: Revenue $40 Million (discontinued in 2012).
Batter Blaster Article: http://www.fastcompany.com/1182499/how-one-man-confused-grocers-and-won-customers-canned-pancakes
Interview with co-founder of batter blaster: Sean O Connor:
http://www.theatlantic.com/video/archive/2013/03/the-short-lived-brilliance-of-batter-blaster/274105/
Consumer/Investor Pictures and videos:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=108736965
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=108735226
https://twitter.com/amberdiamonds/status/540884088035373058/photo/1
https://www.youtube.com/watch?v=qPdqs7K3YVY&feature=youtu.be
https://www.youtube.com/watch?v=VFhDYB7KZJE&feature=youtu.be
https://www.youtube.com/watch?v=Mzd_9QJQ3bU&feature=youtu.be
https://www.youtube.com/watch?v=IIhnvSMmhAc&feature=youtu.be
https://www.youtube.com/watch?v=HHqxcdK-OF8&feature=youtu.be
Why did Batter Blaster Fail?
According to Nate's Newport Beach conference call January 30th 2015, Batter Blaster failed because the company needed 15M for the next leg. The venture capital fell through and they lost funding. Batter Blaster expanded too quickly and was forced to close the doors. Batter Blaster Revenue: 40M with a 13,000 store presence.
Improvements over Batter Blaster: Notes taken from the above CC Jan 30th.
Can Technology: Redesigned the can to produce a better yield on a per can basis. Batter blaster’s can lost 2oz per can due to the can design and people still thought there was product inside the can. Batter Blaster did not spend the $ on a custom can.
Batter Blaster was an organic product. Batter Blaster used one supplier for the raw materials which had erratic and uncontrollable pricing. Due to the materials being organic, micro bug count levels were difficult to control. The current pancake/waffle mix is gluten and non gluten free, it is a cleaner product with a longer shelf life. The current product is made from commercially available product where pricing is more competitive and more stable.
FORM 8-K Oct 31, 2014: The Company also modified the product to meet the food safety requirements of retailers and to increase the shelf life of the product.
The new formula provides a longer shelf life but results in a thicker batter. As a result, Nate over the past week had developed a new can and delivery system. Nate approved this custom can on October 30, 2014 and the Company began to run product through its new production line. Source: 8-K Filed: October 31, 2014. Link:
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10273830
The Company has begun development of a non-gluten free version of its Pancake and Waffle Batter. The Company began development of the non-gluten free product at the request of international and US retailers. Link: 8-K: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10586493
Batter Blaster also had smaller profit margins and this time round they are opting for a different model. The Company’s variable model is based on a net profit of 10% per-can sold.
Can Technology Patent:
The can technology and method of delivery is protected by a patent. http://patents.justia.com/inventor/nate-steck
Financing Sources:
Nate Homemade’s Officer 0% loan
SouthCorp Capital 0% Loan http://www.southcorpcapital.com/
WB Partners (Joseph Wade), 0% Loan http://www.wb-partners.com/
$110,000 from Vista Capital. The Company expects to pay off the amount within 90 days from its receipt bearing 10% interest, mature in two years, at any time on or after the issuance date, the holder shall be entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non assessable shares of Common Stock. The Company can repay the note within 90 days with no prepayment penalty an within 180 days with a prepayment penalty equal to 10% of the balance. Conversion price is 65% of the lowest trade occurring during the 20 consecutive trading days immediately preceding the conversion date.
Share Issuance:
On September 29, 2014, the Company issued 6,000,000 shares to a third party for services.
The Company issued 9,500,000 shares of Common Stock and booked an expense related to this stock issuance of $562,000 which represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.
The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $70,181. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
The Company issued 15,000,000 shares of Common Stock and booked an expense related to this stock issuance of $857,000 that represented the fair value of the stock issued. The stock was issued to WB Partners for consulting services rendered to the Company.
The Company issued 26,394 shares of its Series C Preferred Stock in exchange for $27,000 in cash that was used for food development and research and working capital. The Preferred Stock can be converted to common stock, at a conversion rate of 66 common shares for each preferred stock. The Company evaluated the conversion feature and concluded that it did not qualify as a derivative transaction. The Company evaluated the convertible preferred stock under FASB ACS 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $27,000. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
The Company sold product to Torrent Energy (Now 1PM industries) and received $30,000 prior to shipment and delivery of the goods. Torrent Energy is developing various gourmet food products such as the development of compound butter and pancake and waffle syrup. Torrent Energy is owned by WB Partners.
Employee Share Benefit Plan:
Sept 29, 2014 S-8 Form: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10223050
16,000,000 shares of the authorized common stock, par value $0.0001 per share Employee Benefit Plan
DEFINITION of 'SEC Form S-8' : A filing with the Securities and Exchange Commission (SEC) that is used by a publically traded company to register securities that will be offered to its employees via benefit or incentive plans. http://www.investopedia.com/terms/s/sec-form-s-8.asp
From April 14th 2015 10-Q Quarterly Report:
As of February 28, 2015, our total liabilities were $173,758, which consists of $141,508 in loans from our shareholder,$3,000 in accounts payable and $29,250 in deferred revenue from a related party.
Reverse Merger:
The Company selected May 31 as its fiscal year end. On May 19, 2014, the Company completed a reverse merger between with Nate’s Pancakes, Inc., an Indiana Company. Nate’s Pancakes was the surviving Company. In May 2014, the Company changed its name from Capital Resource Alliance (CRRA) to Nate’s Foods Co.
License Agreement:
Nate’s Foods Co., Inc. was incorporated under the laws of the State of Colorado on January 12, 2000. In May 2014, the Company executed a licensing agreement to market and sell the product Nate’s Pancakes. Our license agreement is exclusive throughout the world. The product is currently sold under the name “Nate’s Homemade.”
The license agreement is for a term of twenty (20) years. The Company has the right to renew the license agreement for successive ten (10) year period by paying $1,000,000 for each new term.
Payments/Royalty
The Company shall pay a royalty equal to Three Percent (3%) of the Gross Revenue from the licensed products. Gross revenue is defined as total revenue minus discounts and allowances. The license requires that the Company pay a minimum monthly fee of $7,500 beginning twelve (12) months from the execution of the license agreement which is against the 3% royalty. Thereby the fee shall begin on June 1, 2015.
Product Ordering
The Company is able to purchase the raw materials directly from 3 rd party suppliers and manufacture the product and manufacture the product for sell. The Company may also develop and create additional flavors such as chocolate, blueberry, or strawberry.
Operations
The Company is currently forecasting to sell 3,200,000 cans of product over the initial 18 months. The Company uses this forecast model to estimate cash flow needs and manufacturing expectations. As the Company receives purchase orders from clients it will modify the forecast accordingly.
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.
Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:
• the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
• the last day of the fiscal year following the fifth anniversary of the completion of this offering;
• the date on which we have, during the previous three-year period, issued more than $1 billion in non- convertible debt; and
• the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act.
We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.
The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion on page 13 under “Risk Factors” of the effect on our financial statements of such election
Sales and marketing:
The Company initially expects to market the product through 3 phases:
Phase 1: Infomercials aired on television and radio.
Phase 2: Selling product on QVC
Phase 3: Placement of products in retail and club stores (such as Wal-Mart and Costco)
QVC: Fact Sheet: http://www.qvc.com/AboutQVCFacts.content.html
QVC, Inc., one of the largest multimedia retailers in the world, broadcasts live in the U.S. 24 hours a day, 364 days a year. A wholly owned subsidiary of Liberty Media Corporation attributed to the Liberty Interactive Group (NASDAQ: LINTA), QVC was founded in 1986 by Joseph Segel. Mike George currently serves as the company's president and CEO.
QVC's worldwide corporate headquarters, known as Studio Park, is located in West Chester, PA (30 miles west of Philadelphia). The building sits on 84 acres of land and is roughly the size of 15 U.S. football fields. In 2013, their original facility in West Chester was renamed QVC Founders Park.
QVC is home to one of the most technologically advanced television studios in the U.S. The 165,000-square-foot broadcast operations center enables QVC to produce its live programming, which attracts more than 22,000 on-air guest visits each year and showcases more than 1,000 products every week. There are 18 permanent sets and more than 100 portable scenic elements. Employing more than 17,000 people worldwide, QVC has international broadcast operations in the United Kingdom, Germany, Japan, and Italy. To date, approximately 60 million people have shopped with QVC worldwide. Its online counterpart, QVC.com, was founded in 1996 and attracts more than 6 million unique visitors each month.
Online Sales and Marketing:
http://www.nasdaq.com/press-release/1pm-industries-announces-development-of-print-advertisements-20150507-00707
1PM Industries is the online distributor for Nate's Food Co.
The Company currently is planning to place print advertisements in magazines related to camping/RV, parenting/children, cooking, and industry specific magazines such as High Times. The print advertisement will be coordinated with television advertising, online advertising and physical location advertising. A copy of the print ad can be located at www.nateshomemadestore.com/pages/advertisements
Added Notes depicted from Nate's Newport Beach conference call January 30th 2015:
Not going to spend all resources in the online sales area, it is more for people who are already interested to have access the product.
They made it clear that the online distribution would not be the main avenue and that big box would be number one due to volumes.
Strategic Sales Plan: Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10337164
The Company is currently finalizing its strategic sales plan. The strategic plan is used by the Company to coordinate its sales and marketing functions to drive customers to its products. Currently, the Company is looking at a 3-phase rollout process.
Phase 1: rollout with one division of a membership store (i.e. Costco) and then proceed to expand throughout the other divisions. The Company has internally used Costco as a possible customer for its first phase.
Phase 2: introduce the product to convenient stores such as 7-11. The Company prefers the convenient store model because the number of convenient stores is significantly higher than traditional retail grocery stores. For example, 7-11 has 54,200 stores in 16 countries of which 10,400 are in North America. These stores provide a large footprint in North American but also allow was easy expansion internationally.
Phase 3: This phase consists of placement of the Company’s products in Walmart and/or Target.
The Grocery Placement Process: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10255560
The process involved with grocery placement is: (1) hire a food broker, (2) meet with buyers, (3) samples supplied to buyer, (4) set up pricing, (5) delivery dates established (typically 1 to 3 months), and (6) begin with a rollout with a region of the stores before full deployment.
Plan For Retail Grocery Placement:
On November 24, 2014, the Company appointed the Sinclair Group, LLC http://www.sinclairgroupllc.com/ as its sales and marketing partner for its retail grocery placement. Stated in form 8-K.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10326898
The March 5th 8-K stated: The Company has hired an internal sales broker to manage the national and international sales channels. As such, the company has terminated one of its broker relationships to consolidate the sales efforts. Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10541216
It is anticipated that any order from a major grocery chain (i.e. WalMart, Costco, Target, Kroger) would be for 70,000 – 90,000 cans per week per chain (or 3.6 Million to 4.7 Million on yearly bases).
Production Line Timeline: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10445514
The Company has agreed to acquire a rotary piston filling can line. The new line will be capable of producing between 8,000,000 and 10,000,000 cans per year and will be installed at the Company’s factory in Fairfield, California within the next 10-12 weeks. The Company has begun moving its production from its Los Angeles co-packer to its factory line in Fairfield. The Company expected the transition to take 12 months but on January 31, 2015, the Company agreed to compete the process in the next 3-4 months. The benefits of moving production from Los Angeles to Fairfield include control over the production line and equipment, a 300% increase in production space, additional storage for raw materials, reduction in freight expenses and an increase in the quality control of the product. The line cost approximately $400,000 and is being financed by WB Partners.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10508926
The Company is expecting the equipment purchased by SouthCorp to be fully installed between April 5 th and 22 nd (which is 8-10 weeks from February 11 when the equipment was purchased). The Company’s goal is to begin having parts installed in the coming weeks to begin production; however, the equipment is being manufactured for our needs and as such don’t want to affect the quality of the equipment.
The Company decided to move its manufacturing to Fairfield from its co-packer in Los Angeles based on the discussions with the co-packer and the desire to have more control and flexibility over the actual manufacturing process. The decision was made that since any purchase order would have an expected lead time of 90 days that this represented the perfect time to make the transition without any impact on the Company’s ability to deliver product.
April 13: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10622452
The equipment purchased for the Company’s facility in Fairfield, CA has been completed and will be shipped the week of April 13, 2015 for installation at ABCO. Once the equipment is installed, the Company can resume production of Nate’s Homemade products. Additional equipment has been ordered which will be completed on or about April 27. The additional equipment will allow the company to increase the CPM (cans produced per minute). Once the Company has installed the equipment, the Company’s online distributor (see 1PM Industries, Joseph Wade Above) will commence selling the Company’s product
Indiana Factory: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10348973
The factory in Indiana is expected to be completed in 2016. It is being built to produce 50 – 100 million cans a year. The Company does not expect to need that level of production within the next 12 months. We expect construction to start shortly after the winter season.
Potential Factory Location DD: Source: Bocephus on Ihub.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=112021259
Q.4. Does the Company produce its own product or does it use a 3 rd party factory?
A.4. Currently the Company uses a 3 rd party factory (the same factory as batter blaster). However, the Company has begun to build its own factory capable of producing 50 Million cans a year.
Institutional Ownership Summary:
Form 13G: Embarr Downs, Inc.
Amount beneficially owned 6,700,000* 9.98% (based on the total of 67,100,000 outstanding shares of Common Stock)
Form 13D Filed: Mar 27, 2015
Lawson M. Kerster (Sandringham Investments Limited) and Ingeborg L. Kerster
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Sandringham (Lawson M. Kerster) 2,135,000 common; Ingeborg L. Kerster 3,100,000
7.34%
SANDRINGHAM INVESTMENTS LIMITED
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,235,000
2.99%
INGEBORG L. KERSTER
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,235,000
4.35%
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10591312
Rocky Mountain Holdings (Lance Larsen) Ravine Trading Limited
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Rocky Mountain 5,692,000
Ravine 1,200,000
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.66%
Rocky Mountain Trust 6,892,000 9.66%
Insider Buying:
Form 4 Filed: Nov 10, 2014:
DENTON TIMOTHY LYNN, Officer
Date: 11/4/2014, Bought: 50000 shares @ $0.043
Date: 11/5/2014 Bought: 4200 shares @ $0.048
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10292603
Form 4 Filed: Nov 13, 2014:
KASSOFF MARC ALAN, Director, 10% Owner
Date: 11/13/2014: 23000 shares $0.1085
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10300531
Form 4 Filed: Nov 19, 2014:
DENTON TIMOTHY LYNN, Officer
Date: 11/13/2013: 450 shares @ $0.106
Date: 11/17/2014: 5600 shares @ $0.175
Date: 11/18/2014: 3700 shares @ $0.165
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10315556
Form 4 Filed: Nov 19, 2014:
KASSOFF MARC ALAN, Director, 10% Owner
Date: 1/19/2014 31000 shares @ $0.15
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10315570
Form 4 Filed: Nov 26, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 11/25/2014 4000 shares @ $0.115
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10332296
Form 4 Filed: Dec 3, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 12/2/2014 15000 shares @ $0.115
Date: 12/2/2014 10000 shares @ $0.118
Date: 2/3/2014 2000 shares @ $0.1
Date: 12/3/2014 2415 shares @ $0.096
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10340072
Form 4 Filed: Dec 30, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 12/26/2014 10000 shares @ $0.05
Date: 12/29/2014 30000 shares @ $0.058
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10383960
Form 4 Filed: Dec 31, 2014
KASSOFF MARC ALAN, Director, 10% Owner
Date: 2/31/2014 10000 shares @ A $0.08
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10386039
Uplisting: Link: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10389061
Q.7. When does the Company expect to up-list to an exchange?
A.7. The Company expects to up-list in 3-5 years; however, the Company is discussing the value of moving to the OTCQX as a step towards moving up to NYSE.
Dividends: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10342586
The Company’s Board of Directors has approved the establishment of a quarterly dividend of $0.025 - $0.10 per can of product sold. The Board has not established a date the dividends will begin but is currently forecasting March 31, 2015 as the initial record date.
Direct Offers By Investors: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10377231
The Company has received a number of terms sheets from companies offering to make a direct investment into the Company. The amount of the terms sheets and offers was in excess of $400,000. On December 23, 2014, the Company informed these companies that we were rejecting the offers due to the fact that the Company currently has sufficient capital to meet its operating needs and manufacturing requirements.
Share Buy Back Program: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10418307
The Company has agreed to buy back approximately 22,797,000 shares of Common Stock. The shares will be cancelled reducing the Company’s outstanding share count by approximately 31%. The final agreement is expected to be finalized and executed shortly.
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=10541216
In December 2014, the Company agreed to buy back approximately 22,797,000 shares of Common Stock. With the intent that the shares would be cancelled. The majority of terms had been agreed to including purchase price and term of payment. However, the Company requested that the repurchase be agreed to by the common shareholders at a shareholder meeting. The shares that were to be repurchased are from affiliates of the Company that acquired their shares prior to the reverse merger with Nate’s Food. The Company believes that since the shareholders are deemed affiliates that the transaction should be approved by a majority of the common shareholders. However, the affiliate shareholders of the shares to be repurchased objected to the inclusion of shareholder approval as a condition of the repurchase. As such, the agreement to repurchase the affiliate shares has been terminated
Note: Share buyback has been cancelled but may be back on the table at a later date with the inclusion of shareholder approval.
Valuation:
The Company is currently forecasting to sell 3,200,000 cans of product over the initial 18 months. The Company uses this forecast model to estimate cash flow needs and manufacturing expectations. As the Company receives purchase orders from clients it will modify the forecast accordingly.
The Company is currently operating with an overhead of approximately $8,000 per month. The Company’s fix costs are not expected to increase significantly. The Company replaced most of its costs from a fix basis to a variable basis that will be based on a per-can sold model. The Company’s variable model is based on a net profit of 10% per-can sold. This reflects that after all variable per-can costs are paid the Company will make 10% net profit. The Company currently forecasts a break-even point of 300,000 can sold per year.
3,200,000 cans sold at $5.99 per can = 19,168,000
.10 x 19.1M = $1,916,800 net profit
1.9M net profit
Price Target Based on Batter Blaster Revenues (excluding revenue of future products within the brand): Source: http://thestockfreec.com/2014/05/19/quick-nates-pancakes-crra-analysis-target-1-82/
Nate sold $40 mil in Batter Blaster pancake product and this had to be refrigerated, i’ll assume his new product is an improvement and should do as well if not better. Average industry gross margin on food products is 32%. Nates sells direct on internet and QVC so margins should actually be better but i’ll stick to 32%
.32 X $40 mil = 12.8 mil gross revenues
$ 12.8 mil – selling general administrative at 1.28 mil (10%) = 11 mil net profit.
$11 million/120 million shares = .091/share
.091 X 20 p.e. = $1.82 a share !
In sum: Nate’s food company has a proven track record of producing and selling this product. They are learning from the Batter Blaster venture and are making improvements on every level. Not only was batter blaster one product, the company is aiming to sell numerous products under the Nate’s Homemade Brand. The company has goals of owning their own manufacturing facility which will further increase margins. They are green light ready to move into retailers and already have the capacity to meet the volume demand. They have a goal of a per can dividend as well as a share buyback program. They are raising money in a non-dilutive way and with steps like this they are keeping the shareholders’ interests at heart and positively reinforcing the management’s team’s integrity.
Assuming they can achieve the same revenues as batter blaster in the near term, the share price would be approx. $1.82 per share which is a 2175% increase from today’s price. That is just one revenue stream and not even including potential revenues from the rest of their future product line.
With today’s price under .10 cents a share (Market Cap 5.7M) and online sales that begun May 14th with retail placement coming soon; coupled with management’s sound integrity and proven track record I believe NHMD offers a compelling investment opportunity to see growth driven by an improved pancake/waffle batter in an improved redesigned custom can with further future growth driven by numerous products being developed to be sold under the Nate’s homemade brand.
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