Pulse Provides Q1 Report And Outlook For Remainder Of 2016
DENVER, May 13, 2016 /PRNewswire/ -- The Pulse Beverage Corporation ("Pulse") OTCQX:PLSB, makers of Natural Cabana® Lemonades/Limeades and Coconut Waters, and PULSE® Heart & Body Health functional beverages, today provided its Q1 Report and Outlook for remainder of 2016.
Business Highlights for Q1-2016 to Date:
During Q1-2016 Pulse's overall gross revenues, including all SKU's, increased by $48,000 to $793,000 (Q1-2015 - $745,000), a 6.5% growth. This was mainly due to starting up its Southern California distributorship, Natural Cabana Distribution Inc., in February, 2016. Through this subsidiary Pulse began selling its Natural Cabana® Lemonades/Limeades and Coconut Waters to existing customers in Southern California. On April 30, 2016 Pulse transferred this temporary business over to a new, well established independent distributor in Southern California. Pulse made this decision in order to increase growth more rapidly and decrease its investment in the area. In February and March its gross sales through Natural Cabana Distribution Inc. was $56,000. During Q1-2016 Pulse's overall net sales, after promotional allowances and slotting fees, increased by $38,000 to $743,000 (Q1-2015 - $705,000), a 5.4% growth. Overall its net sales were less than planned as Pulse was delayed in switching over to its new coconut water supplier, and as a result net sales of coconut water did not increase as quickly as planned during Q1-2016. The majority of existing distributors, and recently secured retail chains, delayed ordering until Pulse received this product; the remainder of new accounts secured did not order coconut water until March, April and May so as to kick off new displays in cold sections leading up to the warmer months. Pulse introduced a smaller 11.2oz six-pack coconut water which some big box retailers find easier to sell; this should increase net sales during the remainder of 2016. Pulse expects overall net sales to increase as it expands its markets internationally into Mexico, China and Canada and as it introduces new product lines discussed below.
To conform to changes in food laws in Mexico during the process of shipping product from Asia to Mexico Pulse overlayed Natural Cabana® Coconut Water labels with revised information labels. Our distributor began its initial distribution this month to more than 3,000 stores in Mexico including: Soriana, 7-Eleven, Calimax, Circulo K, Dax, Smart & Final, and Farmacia Roma. Pulse is now planning its next shipment of product in Q2-2016. Robert E. Yates, CEO of Pulse said, "The delay was unfortunate but unavoidable; it pushed our planned sales out somewhat, however Pulse has cleared all of the hurdles in introducing our coconut water into the Mexico market. Pulse is now planning to introduce two new products in the Mexico market; Natural Cabana® Limonada in a 16.9oz glass "PULSE bottle" format.
During Q1-2016 Pulse's efforts were concentrated on new distributors in untapped geographic areas, improving the quality of distributors in existing geographic areas and in securing regional and national chain stores for its distributors to service. During Q1-2016 Pulse began delivering product to chain stores that are placing its brands in the cold box or grocery sections and chain stores that use a warehouse direct distribution system. These efforts have culminated in setting the following retail stores in March, April and the first half of May, 2016: 1,537 retail stores for Natural Cabana® Lemonade/Limeade and 1,093 retail stores for Natural Cabana® Coconut Water (many in both the 16.9oz and 11.2oz sizes) with many more to be set during the remainder of May and into June, 2016.
Beverage companies are often compared on a contribution to fixed expense basis which includes gross profit less variables such as advertising, samples and displays and freight-out. This line item is not GAAP and therefore it is not disclosed separately in our financial statements. During 2016 contribution to fixed expense increased by $16,000 to $135,000 (Q1-2015 - $119,000). As a percentage of net sales, this item increased 1.2% to 18.2% (Q1-2015 – 17%). Excluding the negative contribution of the distribution business of $13,000 contribution to fixed expense increased by $29,000 to $148,000 and, as a percentage of net sales, increased 4.5% to 21.5%. Pulse expects contribution to fixed expenses to increase throughout the remainder of 2016 as it increases both in quantum and as a percentage of net sales, Pulse should grow into profitability.
During Q1-2016 Pulse's working capital was bolstered by an additional advance from its lender, TCA, of $456,000suance costs. On March 22, 2016, Pulse entered into Amendment No. 1 to Senior Secured Revolving Credit Facility Agreement whereby it was approved for an additional $1,000,000 loan. Pulse expects to receive an additional $250,000 before the end of May 2016 and expects to receive the remaining $250,000 at some point in June 2016 upon meeting certain criteria. These additional sources of cash will allow us to meet our working capital needs through to the middle of 2017.
Pulse is in the process of repackaging its flagship product, PULSE® Heart & Body Health functional beverages, into a more attractive package and plans to introduce this brand into the Southern California marketplace and China. This international expansion is good for Pulse as it ships to China directly from Portland, Oregon and the cost ends at that point with no further freight-out or promotional expenses. Pulse's China distributor has also expressed interest in ordering PULSE® Heart & Body Health. Pulse is in the process of setting up its Portland, Oregon co-packer to run this product.
During Q1-2016 Pulse added a number of major beverage brand distributors in new geographic regions as well as replacements for distributors that did not fit its distribution model. The number of distributors Pulse currently uses to distribute its products has not significantly increased in Q1-2016, however the quality of distributors has improved tremendously; just in time for its busy spring/summer ordering season. Pulse has nearly 150 distributors in 47 States, Canada, China and Mexico. Pulse currently distributes its brands through Sysco, The Sygma Network, UNFI and distributors for Anheuser Busch, Miller Coors, Pepsi, Coke, RC/7-Up and Cadbury Schweppes amongst others.
During Q1-2016 Pulse's net loss increased by $50,000 to $557,000, or $0.01 per share, compared with a net loss for Q1-2015 of $507,000, or $0.01 per share. This increase was due to loan interest/fees totaling $120,000 (Q1-2015 - $nil) and due to the net loss incurred in its start-up distributorship in Southern California of $75,000. Excluding these costs Pulse's net loss for Q1-2016 would have decreased by $144,000 to $362,000. Pulse expects its monthly net losses to turn into monthly net income at some point in 2016 due to increased net sales and gross profit and reduced expenses and start-up distributorship losses.
Pulse has recently teamed up with Adam Schneider (aka Epicurean Sales) based out of Golden, Colorado. Adam's extensive natural foods experience in the area of natural food: sales and service management, distribution, manufacturing, retail management/brokerage, brand development, and master broker, as well as owning and managing his own businesses, makes him ideally suited as Pulse's Natural Foods Brand and Sales Manager. Adam will oversee and develop our natural beverage brands throughout the natural food retail and distribution channels. He will enhance Pulse's Natural Cabana brand recognition as well as assist our national sales manager with key account openings where he has solid connections.
Bob Yates, Chief Executive Officer, said, "We are pleased with the overwhelming success of our new coconut water. We have achieved significant operational progress during Q1-2016 which, together with planned new product offerings, will set us up for a breakout next twelve months. We have spent four years establishing our domestic and international distribution systems and have secured product listings at some of the top regional and national retail stores in the country. We are confident in the marketing strategies and the delivery/execution of our growth plan for the next twelve months and are expecting to be profitable at some point in 2016. We look forward to communicating with our shareholders as these growth plans unfold during the remainder of 2016."
