NIA.V Q2 Financial Results and MD&A Highlights. Ending February 28th 2015
Price: $0.08
Common Shares: 19,966,032
Insider Holdings: 9,490,076 or 47.5%
ASSETS
Cash: $1,366,014 – $0.07c a share in cash
Receivables: $113,789
Interest Receivable: $3,023
Prepaid Expenses: $49,333
Inventory: $166,704
Goodwill: $990,344
Property: $4,067
Total Assets: $2,693,274
LIABILITIES
Trade Payables: $193,773
Loan Portion: $30,000
Loan: $12,500
Total Liabilities: $236,273
Estimated retail locations that Blu-Dot is already selling in: 1500+ stores across the continent. (464 from the website list, 350 from Loblaws, 700 from the recent deal with VitaminShoppe). This is likely higher and could get to 2000 by summer. I spoke to management and the website is down for maintenance right now.
MD&A Highlights
The Blu-Dot transaction was completed on December 5th, 2014, pursuant to the terms and conditions of a share purchase agreement dated November 24, 2014 entered into between the Corporation and the shareholders of Blu-Dot. All required and relevant disclosures with respect to the closing of this Qualifying Transaction on December 5, 2014 have been filed and are available on SEDAR. With this transaction Niagara Ventures Corporation (NVC) has enabled its longer term strategy as a North American based consumer packaged goods company focused on healthy and better for you consumer beverage and food products. NVC believes that by acquiring and building a portfolio of on trend brands and products, that operational, brand and marketing synergies will enable investee companies the opportunity to grow smarter, faster, more profitably and, with the right risk profile.
To enable this strategy NVC has put together a Board of Directors and Management team with extensive beverage and packaged food business experience combined with expertise for successfully funding and growing emerging growth businesses organically and via acquisitions. Blu-Dot as the first NVC acquisition is a Canadian Corporation based in Oakville, Ontario. Blu-Dot is in the business of providing refreshing, tea based, all natural and organic 2 beverages with protein and fiber content to customers for everyday use in support of a healthy lifestyle without compromising taste or quality. The Blu-Dot beverages are produced using a patent pending formula and process.
The Corporation acquired all of the issued and outstanding common shares of Blu-Dot (“Blu-Dot Shares”), where the equity valuation of Blu-Dot was determined and negotiated at $1,432,500. The Corporation issued 7,162,500 common shares from treasury based on a negotiated valuation of the Corporation’s common shares at a value of $.20 per share in exchange for acquiring the Blu-Dot Shares. The previous shareholders of Blu-Dot have an opportunity to receive an additional number of common shares of the Corporation up to 33% of the shares issued to them at closing based on the achievement of specific revenue and gross profit targets for the Blu-Dot business by December 31, 2015 The cash balance $1,366,014 has reduced from $1,808,934 at December 5, 2014 primarily as a result of the cash deployed to and utilized within the Blu-Dot business (approximately $416,617) and the payment of the transaction costs.
Goodwill arose based on the accounting for the Blu-Dot acquisition being the amount that the net assets and liabilities of Blu-Dot acquired were less than fair value of the share consideration paid. The book value of the Goodwill will be periodically reviewed on an ongoing basis and this balance will not otherwise be amortized. The common stock amount has increased by the value of the common shares issued from NVC treasury pursuant to the Blu-Dot acquisition. As well the Corporation issued 50,000 new common shares from treasury as partial compensation and payment for one of the professional firms that provided services to assist with the closing of the Qualifying Transaction. The cost of these shares has been recorded as a one-time transaction cost of $5,000.
Blu-Dot derives its revenues from sales of its beverage products to distributors and to certain larger retail store customers that it sells directly to. In the fiscal quarter ended February 28,2015 the Blu-Dot revenues were $99,274. To date the majority of Blu-Dot revenues have been to distributors and retail customers in the Canadian market. Within the Canadian market the revenues have a high degree of seasonality with the peak selling months being primarily April through October and the weakest revenues generated in the colder winter months especially December, January and February. The Company has been developing programs and marketing initiatives which it plans to introduce to its distributors and customers to assist in reducing the impact of seasonality on its sales revenues in geographies with colder seasons.
The Blu-Dot business now has listings with 5 Canadian regional distributors that focus on sales of the Blu-Dot product line to independent grocery and nutritional/health food stores in various regions of Canada. As well, Blu-Dot currently has developed direct relationships and listings with Loblaw’s, Longo’s and Sobeys in selected Canadian market segments.
Blu-Dot in the latter half of 2014 has readied for entry into the US market. The longer term US market potential is much more significant in size than the Canadian market and will also have the benefit of: a) less seasonality in the regions with milder/warmer winter seasons and b) enhanced gross profit margins from the positive impact of the US and Canadian dollar exchange rate differential. The Blu-Dot business has successfully initiated and achieved its first listing with one US based direct customer, The Vitamin Shoppe (a specialty national health food retailer) where the initial stocking order was sold and shipped prior to the acquisition by NVC. Ongoing re-orders from this customer are expected in future quarters.
During the quarter Blu-Dot entered a contractual relationship with KeHE Distributors, a large national specialty food and beverage distributor in the US market. The initial sales orders with KeHE will occur in the next fiscal quarter.
Blu-Dot’s revenue growth strategy for the next three years is focused on:
i) gaining ever increasing sales velocity from each existing distributor and customer relationships via “same store” revenue increases from each store that the Blu-Dot product is sold in.
ii) attracting new listings with additional new distributors and direct customers in Canada.
iii) attracting new listings with additional new distributors and direct customers in the USA with a primary focus on the northeast US markets .
Blu-Dot expects its revenues to grow significantly each quarter through the 2015 calendar year resulting from increasing revenues from existing relationships and new listings in both Canada and the USA from new distributors and new direct customers. The Blu-Dot business will monitor its performance in growing revenues in each of the three methods indicated above.
Based on its overall strategic plan, NVC expects to expand its overall business by; the 8 successful organic growth of each of its underlying brands and product lines as well as; acquiring (or investing in) additional brands and product lines, all within the healthy better for you beverage and foods consumer packaged goods sector. As such, as a significant component of its overall corporate strategy, NVC has established a strategic plan and process with the objective of identifying, soliciting, evaluating and closing additional future acquisitions that meet NVC’S objectives and criteria. The Blu-Dot acquisition was the first acquisition as part of this long term plan. NVC is currently and will continue to develop a pipeline of potential suitable acquisition/investment targets. The goal is to be in a position to move forward with the next acquisition within the next 12 to 18 months based on a number of criteria and milestones.