|1||Our Galloping Goose Canadian whisky is a popular double-gold and 4x gold-medal award winner|
|2||Our sales are increasing month on month, and year-on-year growth is over 200%|
|3||We have raised $747,000 with 19 accredited and sophisticated investors under SEC's Reg D 506(b)|
|4||Our gold-medal Summer Gin No. 5 rates higher than national brands from Chicago, Virginia and the UK|
|5||Our gins are listed for export in the UK, Canada, South Africa & 4 Asian countries by USDA & others|
|6||Our strong team includes top level bankers, advisers and industry experts, both in the US and abroad|
Ernest has a solid business plan with developed exit strategies, something that is often lacking in craft beverages. He understands that as well as a passion, this is a business. Before investing, I spent time looking at his background, his research, and did some bench-marking of my own. Having my own experience in craft beverage, both hands on and as an investor, I was confident that James Bay would be an excellent band and exceptional company to be a part of.
We started in 2014 - in Virginia! After searching for a location in Canada in Alberta & British Columbia, we're excited to be at Paine Field, in Everett, WA since 2018. We're at an ideal spot for production and sales, export ventures and close to a community that understands and favors organic, authentic, honestly crafted fine spirits.
In 2014, we soon found that many distilleries from New York to Georgia had a vision of bourbon and moonshine. Well, we like those spirits but we wanted a less crowded market with more growth potential. We looked for a location suitable for international, export-quality spirits. We found that ideal spot, in the Pacific Northwest, in the region bounded by British Columbia and Washington State.
In 2015 we looked at Alberta, Canada due to the relatively open market in the province. By 2016 we had focused on British Columbia due to their preferential tax advantages.
In 2017, we received Canadian work permits, and moved to BC to get this project going! At that time we also filed our initial Reg D 506(b) paperwork with the SEC and took in our first investors.
In early 2018 we found Paine Field in Everett, WA to be the ideal spot for us. Our hard work searching paid off! We leased our site, and started the typical 21 months of Federal and state permitting!
We sold our first whisky in September 2019 in conjunction with "Tanktoberfest," with our neighbors at the museum driving and firing real tanks along the runway!
Also in 2018, we took steps to comply with IRS Code Section 1202 - which means all of investors' capital gains are tax free at exit or acquisition. Let's read that again: free of capital gains taxes. "Some restrictions apply," of course, as is often the case, but we are well-advised by CPAs.
While working on US Federal permits, we also obtained UK permits to import bulk scotch and create our own blends of scotch whisky - from the more sweet and floral to the heavily peated and phenol. As far as we know, we're the only craft distillery on the west coast with that permit from "Her Majesty's Revenue & Customs Office."
Since September 2019 when we released 88-proof Galloping Goose Canadian Whisky, our bourbon recipe single-grain whisky, the "Goose" has earned four gold medals. Our Cadboro organic chocolate infused whisky has a gold- and a silver-medal, and both our Lochside Summer Gin No. 5 and Gintrigue Barrel-aged gins have medals also! In fact Lochside Summer Gin No. 5 is rated more highly than some notable regional and national gins (and UK gins too!).
Sales are based on superior quality spirits which are fun and easy to use, full of taste. From the start, we made a commitment to produce only top-shelf, super-premium spirits, given that we can compete on quality, but smaller companies lack the scale of economy to compete on price. That means we don't make any well products, and no discount spirits. Our goal is that each spirit carries its weight as a sipping whisky or gin. All are great served neat or over ice. Mixers are not required, but with superior spirits, our cocktails are also very tasty. Here's two fun recipes:
In February 2020, we took the same COVID hit which many producers have, but since then we have seen sales continue to grow.
We now sell 3 products at Total Wine (all 12 stores in Washington State), 2 products through the Virginia ABC Store system and through local Everett area liquor stores. Our spirits are carried by SpiritHub and are listed on Drizly. We are actively soliciting new accounts in the Puget Sound region. Of course, we sell online direct-to-consumer with the Spirits360 platform, and ship to Washington State, Alaska, Nevada, North Dakota and the District of Columbia. (You can order a bottle today!) We are currently also in talks with a distributor in Texas, and discussing export contracts in Asia. Naturally, we sell at the distillery, offer tastings and cocktails - we have never closed during COVID, and still followed all the rules. We have space for several groups up to 6-persons each, and can host tastings by appointment after our normal hours of 12-5pm, Tuesday-Saturday.
We are now at that mid-point in a startup's growth, where we have significant third-party validation, a dozen or more awards, established distribution and true proof of concept. It is time to keep expanding distribution in the US and through exports. We have initiated export outreach in Taiwan, Japan, Korea, Vietnam and China using resources of our local Department of Agriculture. Our Lochside Summer Gin No. 5 is now in Toronto, London and South Africa for export promotion with the USDA and the Distilled Spirits Council of the US. We are discussing terms with two Canadian importers.
Potential for market growth with the right quality:
We think there is excellent capacity for growth in this market based on the quality of our spirits and third-party analysis of the craft spirits markets through the end of this decade-- 8% to 35% CAGR, depending on the region. Each of our spirits is authentic, produced in small batches and contains organic ingredients whenever available. For example, the cacao used in our Cadboro whisky is not only organic, but also sustainable, renewable and traceable. We could visit the farm in Ecuador where it came from if we wished!
Using quality materials produces better spirits:
Premium quality spirits also calls for using exceptional equipment, made in the U.S.A. Our stills, shown below, are produced in Missouri with American labor and inputs. We used a "closed system" where the spirits exit the still directly in a closed pipe to the collection tank. This allows us to hold 240 gallons of spirits in a "zone" instead of the 60-gallon limit in an "open" system where the new make whisky or gin falls through the air into a container. We have four federally-approved zones in which we can store and work on our spirits. We can distill in one zone and also proof, bottle and label in a second area, while our spirits can age and rest in still another area. We reserve one zone for our Scotch whisky projects.
Our next steps also include additional products. For example, we will soon have a barrel-aged Galloping Goose whisky, held for a year in 500-liter Amontillado sherry butts, each of which is 40 years old! We have huge and wonderful flavors in that upcoming release, now pending labels.
And we have more gins, whiskies and some specialty products planned in addition to our Scotch whiskies. We release products when they are ready, and each must meet our same standard: top-shelf, super-premium quality.
We're all business, but we do have fun! Here's our "model employee" and mannequin ready to welcome guests at the front door!
Now we're ready for you to join with us as we expand sales in the US and move into export markets!
We expect 2021 will be a banner year as we move ahead towards our production goals and expansion of markets.
PS: In case you wondered how close we are to the flightline!
James Bay Distillers has financial statements ending December 31 2019. Our cash in hand is $60,018, as of December 2020. Over the three months prior, revenues averaged $5,727/month, cost of goods sold has averaged $150/month, and operational expenses have averaged $9,367/month.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We produce super-premium whiskies and gins, all with gold-, silver- and other awards. All are sipping spirits, perfect neat or over ice - not requiring a mixer. We are expanding wholesale accounts, online sales and export opportunities in 7 countries. We are the only craft distillery to also operate a US-based free-trade zone to benefit from both US and Canadian spirits regulations. We are also the only craft distillery with UK permits to import, blend and bottle our own Scotch releases.
In 5 years, we hope to reach 50,000 cases of production, and plan for acquisition by a major spirits firm to allow an early exit for investors at an expected 10x return. Industry averages for acquisition of craft spirits firms show an 8.7x multiple of final year revenue. Our Year Five estimate for gross revenue is $15 million, and so we anticipate to sell at or about $90 million. We are influenced by venture cap experts and plan for a single raise with no dilution of investor shares. These projections cannot be guaranteed.
James Bay Distillers, Ltd. was incorporated in the State of Virginia in February 2014.
Since then, we have:
Historical Results of Operations
Liquidity & Capital Resources
To-date, the company has been financed with $747,000 in equity.
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 12 months before we need to raise further capital.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 12 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
James Bay Distillers, Ltd. cash in hand is $60,018, as of December 2020. Over the last three months, revenues have averaged $4,500/month, cost of goods sold has averaged $150/month, and operational expenses have averaged $9,367/month, for an average burn rate of $5,017 per month. Our intent is to be profitable in 10 months.
Since the date of our financials, COVID and local closures remain one issue, but we have adapted by introducing online sales, expanding wholesale on- and off-premise sales and actively seeking exports. We host weekly events at the distillery which draw an increasing social media and on-site response with new guests and customers. We anticipate increasing sales, especially in October-December holiday seasons and to secure stable export customers that will provide additional financial stability and lead to an earlier break-even. Revenue for first 11 months of 2020 is 3.9 times all 12-months of 2019.
In the next 3-6 months, we expect to achieve more than double the sales volume, which will cover monthly costs. Specifically, we hope to generate $120,000 in revenue and incur $85,000 in expenses. For example, July was 280% higher than June. Each month is new of course and we are ahead of the curve in September compared to July and August. These projections cannot be guaranteed.
For additional capital outside of this offering, the founders have additional resources that can be called upon.
The US economy may stall and consumers may not continue to purchase whiskies and gins. Preferences may change to low % alcohol drinks, non-alcoholic drinks or simply to avoid high-end premium spirits.
Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
Export sales are a key part of our plan. We do not control foreign exchange rates, and world preference for US products may change, decline or cease.
Key founders are in good health and we anticipate no change in that status. However, the loss of one or both key founders may result in early closure of the company at a loss.
We are located at an airport in a building intended for startup companies. The airport management is a government entity and may change their priorities to allow only aviation related companies. We have no information this may occur but a move would create additional cost.
Additional risks are listed in our Subscription Agreement and all investors must read, sign and agree to these terms. It is possible we have overlooked a key risk or the company may be subject to changes in laws, taxation, zoning.
As in all startup ventures, there is no guarantee of success and all invested funds could be lost. Shares are not publicly traded and you may not be able to exit when you choose.
The current pandemic may continue longer than anticipated, government-imposed restrictions on activities may continue resulting in a slower path to market or no path to sustained operations if government regulations limit our ability to sell products.
Temporary Rule 201(z)(2) provides temporary relief from certain financial information requirements by allowing issuers to omit the financial statements required by Rule 201(t) in the initial Form C filed with the Commission. This offering has commenced in reliance of Temporary Rule 201(z)(2).
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