Vegalab Inc (OTCMKTS: VEGL) released some pretty big news this morning. The company issued a press release just before the open of the market in which it announced that it has entered into a key distribution agreement. Today, we’ll talk about the distribution agreement, what it means for the company, and what we’ll be watching for ahead.
VEGL Announces Distribution Agreement
As mentioned above, Vegalab released news that it has entered into a key distribution agreement. In the release, the company said that it has entered into a Master Distribution Agreement with Stanislaus Farm Supply. Under the terms of the agreement, Stanislaus will become a master distributor of VEGL products for the California and Nevada markets.
The agreement that was announced this morning became effective on November 1, 2017, and comes with an initial term of 5 years. In total, the contract value comes to $65 million in minimum purchases. This figure represents a minimum volume of product purchases agreed to in the amount of approximately $13 million per year.
According to the release, initial sales of VEGL products by Stanislaus consisted primarily of Nematode Control, Spider Mite Control, Spore Control, and Bactor BoostTM. The company also said that the client ordered an additional 25,000 gallons of Pollen Boost for February delivery. This is important as Pollen Boost is leading the industry in cost to return on investment. In a statement, Nick Biscay, President and CEO at Stanislaus Farm Supply, had the following to offer:
All of us at Stanislaus Farm Supply are excited to be a Master Distributor for Vegalab in California and Nevada and we look forward to the opportunities this provides both of our companies. We are proud to offer their unique, cutting edge products to our customers, which will improve their profitability while being safer than other alternatives on the market today… We made the commitment to bring in Pollen Boost, because of the demand from growers after they learned of its field proven results showing increased yields and returns. More than a simple bee attractant, Pollen Boost also contains nutrients to promote the earliest stages of nut crop development.
The above statement was followed up by Davide Selakovic, CEO at VEGL. Here’s what he had to offer:
This valuable partnership creates major market opportunities for Vegalab products in Nevada and California (the nation’s top producing agricultural State), and Vegalab is very pleased to have added such significant distribution partners to our team. We look forward to working with both Stanislaus and Winfield United as they continue to expand sales of our products through their combined distribution channels. We believe this relationship will enhance the growth and prosperity of both Vegalab and our partners, as we continue expanding our overall business footprints.
What This Means For VEGL
At the end of the day, this is overwhelmingly positive news for Vegalab. Think about it in terms of market capitalization. According to Yahoo! Finance, VEGL has a market cap of just below $100 million. With that said, this contract represents new revenue in the amount of more than 10% of the company’s entire market cap on an annual basis for the next 5 years! At the end of the day, this is a massive win for VEGL and all involved.
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on VEGL. In particular, we’re interested in following the company’s relationship with Stanislaus and watching as the revenue starts to show in quarterly reports. We’re also going to be looking for further agreements, as at this stage, the company could see explosive growth if it signs the right distribution agreements. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
Disclaimer- CNA Finance is NOT an Investment Advisor. Our goal is to bring both news and under-discovered stocks to the attention of investors to assist in making smart decisions in the market. CNA Finance is a for-profit company. That profit is generated through three (3) different types of relationships. First and foremost, we work with pay-per-click and CPM advertisers on banners. We also have affiliate relationships with various companies where we earn a portion of the sales we refer. Finally, we may have relationships with some of the companies or IR firms that represent companies mentioned within our works for which we are compensated in cash and or stock for consulting, investor relations, and press release services. VegaLab paid CNA Finance $3,500 for research and writing services as well as other digital investor relations tasks provided to VegaLab. Therefore, while we do everything in our power to provide true, well-researched, and well-thought-out opinions, in some instances, a potential conflict of interest may exist. CNA Finance encourages all investors to seek professional advice before making any investment decision.