Baywood International, Inc., ("Company") announces shareholder update and unaudited financial results for the second quarter ended June 30, 2009.
2009 Shareholder Update
On January 15, 2009 the Company announced that Eric Skae, President of the Company's New Leaf Tea division, had been appointed to a new post as President of the Company to lead the thrust into the healthy beverage market. Mr. Skae has spent the past seventeen years in the beverage industry working in senior level sales, marketing and distribution roles helping to grow major brands including Naked Juice, Fresh Samantha, Hansens and Arizona Iced Tea.
On July 9, 2009 New Leaf Brands announced that the June/July 2009 issue of "Everyday with Rachael Ray" Magazine voted New Leaf's Strawberry White Tea as the "best flavored white tea."
On July 30, 2009 the Company announced that it entered into a definitive agreement to sell the assets of its wholly owned subsidiary, Nutritional Specialties, Inc. ("LifeTime"), to Nutra, Inc., a subsidiary of Nutraceutical International Corporation. The purchase price of LifeTime was $8,250,000 in cash, less payment of liabilities and certain pre-closing working capital adjustments. The final closing of the sale should occur in late September 2009. This transaction will make it possible for the Company to initiate a plan to recapitalize its balance sheet and focus on the growth of its beverage business, namely New Leaf Tea, as well as the expansion of new products within the functional drink space.
On August 4, 2009 New Leaf Brands announced that Costco Wholesale is rolling out New Leaf Tea in all 77 stores in Canada starting the first week of this month. The product will be sold in variety packs in both English and French to meet Canada's special label requirements that include 3 bottles of 4 flavors (Plum, Lemon, Ginseng and Honey Dew). The variety pack will be sold to Costco Wholesale through one of Canada's largest and leading beverage distributors that markets beverages in every Canadian province.
On August 19, 2009 New Leaf Brands announced that 7-Eleven is now carrying New Leaf Tea in 280 stores in the Metro New York area including approximately 180 stores in Long Island and 100 stores across Brooklyn, Bronx, Suffern and Queens. The product will reach 7-Eleven through Manhattan Beer Distributors, New York's largest beer distributor that markets beer and non-alcoholic beverages throughout 15 counties in the Metro New York area.
Today, New Leaf beverages are sold in 24 states, through 75 distributors and 14 well known retailers in over 8,000 outlets. The Company sold 138,341 cases of their iced tea in the second quarter of 2009, up over 68% from 82,196 cases in the first quarter of 2009.
Mr. Eric Skae, CEO and President, stated, "As evidenced by our recent distribution milestones that we have been announcing to the market on a regular basis, New Leaf continues to gain new chain authorizations and is continuing a strong track record in our core 'up and down the street' accounts. We are well on our way to becoming a national brand with major distribution agreements announced and others that are to follow shortly. We are very excited about our future as we re-launch our public company as New Leaf Brands and establish a strong buzz on the street for our product."
Second Quarter 2009 Results
Results are being reported net of the Company's nutraceutical business and reflect comparisons based on the Company's acquisition of Skae Beverage International, LLC and the New Leaf brand as of September 2008. There are no comparative figures prior to that period.
Unaudited sales for the three and six months ended June 30, 2009 were $1,189,000 and $1,890,000, respectively, compared to zero for the same periods last year. Sales for the three months ended June 30, 2009 increased 69.4%, or approximately $487,000, as compared to the three months ended March 31, 2009. Gross profit, as a percentage of net sales, was 22.9% and 17.2% for the three and six months ended June 30, 2009, respectively.
Operating expenses for the three month period ended June 30, 2009 were $4,640,000, including $3,494,000 in non-cash charges that consisted mainly of $3,250,000 in impairment of goodwill and other intangible asset charges as part of the Company's sale of its nutraceutical division. Excluding non-cash charges, operating expenses were $1,146,000. For the six month period ended June 30, 2009, operating expenses were $5,880,000, including $3,839,000 in non-cash charges that consisted mainly of $3,250,000 in impairment of goodwill as described above, and $238,000 in depreciation and amortization. Excluding non-cash charges, operating expenses were $2,041,000 for the six month period.
Operating loss from continuing operations for the three and six months ended June 30, 2009 was $4,368,000 and $5,556,000, respectively. Net loss from continuing operations for the three month period was $8,189,000, which reflects other non-cash and non-operational charges including $2,716,000 of derivative expense, $729,000 of amortization of debt discount and debt acquisition cost and $377,000 in interest expense. Net loss from continuing operations without the derivative and non-cash charges would have been $1,118,000 for the quarter. Net loss from continuing operations for the six month period was $10,639,000, which reflects other non-cash and non-operational charges including $2,996,000 of derivative expense, $1,444,000 of amortization of debt discount and debt acquisition cost and $646,000 in interest expense. Net loss from continuing operations without the derivative and non-cash charges would have been $2,359,000 for the six month period.
Mr. Skae continued, "While our financial results for the six month period show a large net loss, our board of directors believes that the changes we are implementing now are necessary to reposition the Company in the exciting healthy beverage industry. Furthermore, as we approach our targeted closing date in late September for the sale of our nutraceutical division and the completion of our restructuring plan, we look forward to seeing a dramatic decrease in the amounts of non-cash charges and a material improvement to our balance sheet before the end of 2009. We believe that this will give all our shareholders the best opportunity for an improvement in our share price so that we are able to create long-term value in the New Leaf brand."
About New Leaf and Baywood International, Inc.:
Founded by Eric Skae in 2004 in Orangeburg, New York, New Leaf was created with the vision of providing healthy beverages for consumers that are great-tasting and made only with high quality ingredients. New Leaf Tea was the company's first product that was born out of that vision and now is available to consumers in 14 unique flavors and in over 8,000 outlets including restaurants, delis, pizzerias and other retail establishments. Currently, Baywood's products are sold under the New Leaf(R) Tea brand. For more information, please visit www.newleafbrands.com.
This press release may contain forward-looking statements, made in reliance upon Section 21D of the Exchange Act of 1934, which involve known and unknown risks, uncertainties or other factors that could cause actual results to differ materially from the results, performance, or expectations implied by these forward-looking statements. The Company's expectations, among other things, are dependent upon general economic conditions, continued demand for its products, the availability of raw materials, retention of its key management and operating personnel, need for and availability of additional capital as well as other uncontrollable or unknown factors which are more fully disclosed in the Company's Form 10-Ks and 10-Qs on file with the United States Securities and Exchange Commission.