Please forgive any typos, I thought this would be useful for all...
NHYF on Small Cap Rap Live 247 Broadcast Matt Dywer ("MD") - Host Sam Dewar ("SD") - Guest
MD: OK, it is Wednesday August 6, and we're here live and we're going to be speaking with Sam Dewar, CEO of Natural Harmony Foods, ticker symbol NHYF traded on the Pink Sheets. We've got Sam on hold so we're going to go ahead and bring him on now and find out what's going on with the company. Sam, can you hear me good?
SD: Yes I can.
MD: Great. Natural Harmony Foods - a lot of things going on in the news with it lately. Why don't you tell us a little bit about it?
SD: Yes, I'd be happy to. First, if I may, I'd like to read our mission statement. It's very short.
MD: Very Good.
SD: “Our job is to create and market healthy natural versions of popular and convenient foods and to do so with no taste sacrifice.” So, we produce products, grab-n-go products as we call them, which are fully-cooked, microwaveable, and they are similar to products like the ones from Jimmy Dean or from McDonald's or Hot Pockets, except that we typically can reduce the calories by half; we can reduce the fat and saturated fat by 75-80%; we can reduce the cholesterol dramatically; we also use buns that are whole grain buns that have fiber and we try to control the sodium. So, we are the only natural healthy grab-n-go products on the market.
And if I may go on a bit, we're not a new company, we've been around since 2002, and we are not "pie-in-the-sky," you know, "this is what we may do someday." We have been in the market since 2002. We have learned things, and as we've learned things we have implemented those changes. So, we think that we've gotten better every year. And, we think we are really on the mark with the products we've now got in the market and the ones that we've now got in the pipeline.
MD: Since you've been around since 2002, Sam, the products that you've had since then, have you gotten those to the marketplace?
SD: Well, when I say we've learned, what we are doing now - we started off with just plain beef patties and pork patties [with soy protein] and we decided, and it's kind of taken a lesson from the people like Jimmy Dean, to go up the convenience ladder, because people are in a hurry these days, they want grab-n-go products particularly in the morning, when they're rushing off to work. And recently the New England Journal of Medicine said people are 40% more likely to lose weight and keep it off if they have a good breakfast. So, breakfast has become more popular, so we have three breakfast items which we have recently rolled out. And, we've just put in place a national sales director, he’s been with us about 8 months, and he has put together a national broker network. So, we are really just hitting the market with some of these products. But, we are following these products with some additional products this fall and in to early '09.
MD: OK. So basically your line of products I would assume are all microwaveable, you just pop them into the microwave and press the button?
SD: They are all microwaveable and if I may explain a little bit about our share structure: a year ago we were trading at about $.04 a share and we are now down well below that, so we think that we are grossly undervalued. We had to put out some additional shares in the last 12 months to bridge getting these products and getting this broker organization and getting to all of the shows and so forth, that we are doing this year, but we see that as coming to a close. We think that we can probably make it with the 240 million shares that we have authorized. We think we have been overly penalized for the shares we issued in the last 12 months. We think we ought to be looking at a market cap in excess of $10 million.
MD: What's your current float Sam?
SD: We have about a little over 200 million shares O/S.
MD: And how many of those are restricted?
SD: About 80 million.
MD: So you have about 120 million in the float?
SD: That's correct.
MD: And how many shareholders does the company have?
SD: The [report] I got showed about 1600 shareholders.
MD: OK, good.
SD: On average we've been trading over 600,000 per day, and today we are up to almost 4 million shares traded, so we are getting some recognition, finally.
MD: Very good. Now, let's get back to the actual company itself for a second. Revenues prior to this year? Have there been any or have they been kind of meek?
SD: Well, they've been kind of meek. Because, like I said, we had some products into Kroger, and we were doing one or two items, but here's the dramatic thing. A year ago we had 2 products and now we have got 5 in the market, and 8 more in the pipeline! A year ago we had a co-packer who was a huge company that really didn't want our business, they raised our prices 30-40%, and now we've got a smaller co-packer who wants our business! We've got the national sales director and the broker sales force. We are in SuperTargets with our products. We've been approved by Whole Foods Florida. That gets us into Tree of Life and we will be in all of the Tree of Life warehouses across the country--All of their natural warehouses. We've been approved by Central Markets in Texas. We are re-launching our products into the Kroger Stores in the central part of the country, and we've got shows lined up for the rest of the year including Tree of Life Shows, Natural Products Expo East, the American Dieticians Show, so we are getting the word out about our products. We are going to follow this breakfast line with a line of 200 calorie lunch products: a hamburger, a hotdog, a chicken patty sandwich and a salmon patty sandwich. And then we are going to come and attack the fastest growing part of the food industry and that's the gluten-free category. We'll have those products out the beginning of '09!
MD: Now, would you say your foods fall under (because they are all natural) I have heard a term: it's like "green foods"?
SD: Well, "green" I guess means different things to different people.
MD: Right.
SD: I am not going to say we are not using some virgin board in our packaging and things like that... I mean we are not overboard from that standpoint. We ARE overboard in terms of making sure that we don't have artificial ingredients. The meat that we use is no hormones, no antibiotics, fed no animal byproducts. The fish that we use is wild, caught, and certified sustainable. So from that standpoint we are acceptable to the natural food stores, to the natural food industry.
MD: I think I saw something on the news the other night, they were talking about Natural Foods, the whole business as a whole how it's ramping up dramatically. I think it is supposed to be some $30+ billion this year?
SD: Right.
MD: Which is pretty amazing for the industry, considering I think a few years ago it was like around $1 billion.
SD: It's a growing area. I think people are more and more concerned about two things: one, about the food they eat. You know, we've had these recalls with products from China and so forth, and they are more concerned about the origin of their food. And I think more and more people are concerned about eating healthy and getting some fiber in their diet. Trying to avoid obesity and diabetes and that kind of thing. So we feel like we are on trend from that standpoint.
MD: So would your foods be good for diabetics also?
SD: Absolutely! Absolutely. We basically have very little sugar. We have in the products almost no sugar. We have a little bit in the buns, but not much.
MD: OK. So you have the line of breakfast products. Would you say Jimmy Dean is your biggest competitor there or maybe lean pockets?
SD: Well, Jimmy Dean would be the best known competitor, but they would be mainstream. They are not in the natural foods stores. We, of course, want to be in the natural foods stores. We will bridge over into the mainstream, where mainstream has an interest in natural healthy products. I mean, we are in the SuperTargets, we are in the Kroger Stores. I think that chains like Wegmans and these chains who are putting out ... a lot of them are going into a sort of rating system where they rate the products in their stores on their wholesomeness... and those are the chains we would concentrate on first, because there our products would be appreciated for the naturalness of them and for the nutritional value that they bring. There is another company that has introduced some products similar to ours in the natural foods products category a company called “Vans”. They're known for their waffles. But their product still has 4X the fat and 7X the saturated fat of our products! So, we feel like we've got some really great products and products that are really meritorious and we think that we're on the right track.
MD: Are you guys still with Publix?
SD: We were in Publix with one item, with our beef patties, and they closed the warehouse that delivered medium volume products and suggested we go through a distributor. Our distributor in the South-East is a company called Mainstreet, and of course, Tree of Life is a distributor that serves Publix. And I just got an e-mail today back from the frozen food buyer inviting me back in. To answer your question: we are not in there now, we should be in there now, we have been in there, we’ve got a good relationship with Publix, and I fully expect to have some things going on with them in the next 120 days.
MD: Great! So the next product launch that you were just talking about before, is that to compete against the lean pocket for the snack or lunch type meal?
SD: Yeah, we will take, like I say, we will make a hotdog, we'll make a hamburger, we'll make a chicken patty, and we'll make a salmon patty. These products won't be tiny, tiny servings, they will be 3 1/2 ounces, about 100 grams and they will all come in at 200 calories. You know, you've seen the popularity of the 100 gram packs for Oreos and Fritos and things like that,…
MD: Right...
SD: ... people like portion control. They like to look at something and know, if they are trying to watch what they consume, you know how many calories they are getting. So, we are going to make it easy for them by doing this line of products which all are under 200 calories. And we think that will be popular.
MD: I think it will! So, what do you anticipate, or can you forecast what you believe revenues should be for '08 going into '09?
SD: Well, our revenue in the 2nd Quarter this year is twice what it was in the 2nd Quarter of last year. We will, because we are just ramping up these products, will probably finish this year short of $300,000. But I would expect that before the end of '09 our monthly run rate will be in excess of $300,000.
MD: Great! Beautiful. And what's your burn rate, monthly?
SD: It's in the neighborhood of $15-18,000.
MD: Not too bad at all.
SD: There's a trade-off... to a certain extent... between how fast you grow and your "burn rate", if you will. In other words, if we wanted to go slowly, we could probably get into the black fairly quickly. But if we are going to keep doing shows and if we are going to keep doing demos, and if we are going to keep putting out some couponing and things like that, that cuts into your bottom line.
MD: Right, exactly. So, I'm sorry but you may have answered this Sam: The hotdog, the hamburger, the chicken and the fish... when do you expect those to come to market?
SD: We are going to begin presenting them towards the latter part of this year, around September-October. Unfortunately you get into a time of year, November-December, when people are thinking about the holidays, and you don't see a lot of new products come into the market, but they will definitely be ready to ship by Jan. 1. And we want to expose them at the Natural Products Expo East Show up in Boston in October.
MD: Beautiful. Now, let me ask you this. Do you have like a group of people to give you some feedback?
SD: We don't have deep enough pockets to do what I call sophisticated consumer research. But I've been in the food industry for 40 years. I've worked for Campbell Soup and for Mars, and I know that some of that research is not any better than having 8 or 10 people that you think have good judgment taste your products. So, we rely on, I won't call it strictly “mother-in-law research”, but we rely on talking to... I've got an 8 year old, I've got an 11 year old... So we rely on the people we know... basically to give us feedback and they're pretty frank about what they think about things.
MD: Yeah, usually they are! If it doesn't get spit right out, you know it's pretty good. Good market research there. Well, great Sam, I appreciate the time, exciting things going on for you there. Maybe we'd like to talk to you again next year when you get ready to launch the second product line.
SD: Matt, that would be my pleasure.
MD: Alright, thanks for coming on today, I appreciate the time... and Best of Luck!
SD: Thank you very much, take care!
MD: Have a great day.
SD: You Too.
__________________________________________________________ Disclaimer: This is not a recommendation to buy or sell the stock discussed herein. Please do your own due diligence before buying a stock. And kindly, take my 'opinions' as just that... oh, an
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