Dow Jones 13491.84 +50.71 8:26 am PDT, May 25, 2007 NASDAQ 2553.52 +15.60 For info, visit access.smallcapnetwork.com S & P 500 1514.39 +6.88 Change your subscription status here Russell 2000 829.53 +5.73 VOLUME 07 : ISSUE 52 New Organic Line, Non-Organic Growth When I first saw this morning's news regarding Clearly Canadian (OTCBB: CCBEF), I knew right away I wanted to get something out to our readers - I think it's a big deal. But, having learned to skim headlines just to maintain my bigger picture market view, something else caught my eye shortly after that. In some ways it has nothing to do with Clearly Canadian. In other ways it has everything to do with Clearly Canadian. Either way, the company's investors have something to really chew on today.  First things first though. If you've been around our site for more than a few weeks, then you probably already know Clearly Canadian isn't just water anymore. In January they launched their Enhanced Daily Waters line. In February they started to offer water in a grocery-friendly 1-liter bottle, and then turned around and bought DMR Food Corporation - an organic snack food producer. Later the same month, we learned Canada's largest food distributor would be taking care of this new organic food line. In March the company told us their newest line of enhanced waters was going to start showing up on the shelves of some major chain stores.  In other words, they're expanding. No surprises there - it's exactly what President Brent Lokash said was going to happen back in mid-January.  Today's news is more of the same...Clearly Canadian is becoming further entrenched in the fast-growing organic ('good for you') market. The latest salvo in the battle is the acquisition of My Organic Baby Inc. As you may have guessed, they produce a full line of organic baby foods, and happen to be one of Canada's biggest in the category.    The Deal So what's the big deal about yet another acquisition? From an investor's perspective, I see two positives behind the deal.  The first upside is the obvious one....top line growth. Whatever My Organic Baby was doing in revenue last year, now Clearly Canadian will be adding to its revenue tally. More sales = more cash flow and flexibility, so this has the potential to allow other doors to be opened for the company in the future.  The follow-up question is (or I think at least should be), how does the enhancement of the top line affect the bottom line? My answer to the question also happens to be the second positive I see for Clearly Canadian and its shareholders.  The acquisition cost a modest $400,000 (CDN) in cash, 615,000 shares (which is currently worth about $1.5 million), and 3.7 million warrants with an exercise price of $4.00. This is where the deal gets sweet - it's a win/win scenario. The company has also guaranteed My Organic Baby Inc. a $600,000 (CDN) profit on the stock within two years, and guaranteed a $3.7 million (CDN) profit on the warrants within two years. However, since the size of the deal is intrinsically linked to the stock's price, the better the stock performs, the lower Clearly Canadian's acquisition cost becomes. If CCBEF hits about $5.00 within a year (or two, for the warrants) the deal basically becomes self-financing.  See the upside? If shares hit $5.00 then My Organic Baby pockets the original amount of the deal. But, if CCBEF moves to - let's just say $7.00 - then the stock and the warrants will be worth $13.8 million to My Organic baby.....yet won't cost Clearly Canadian one additional dime - it's all built into the stock's gains. (And don't forget, Clearly Canadian will be raising nearly $15 million from the exercise of the warrants.)  This is one of those rare cases where the buyer, the buyee, and the shareholders all actually want the same thing - for the stock to go higher. The higher it goes, the better everybody does. The way I see it, it's just a very effective way of financing a deal without putting one party at a disadvantage.    The Chart: Half Empty, or Half Full? Don't think I haven't been seeing what's going on with Clearly's stock - I have. A month or so ago I figured $2.40 would serve as a floor, having seen it successfully retested twice. When that level finally broke after the third retest, CCBEF tumbled all the way down to $2.20 before it managed to pick itself up by its bootstraps. And, at $2.54 again, I'm feeling slightly better.  Of course I'm not exactly thrilled with recent results from the stock - nor do I entirely understand them. The issue I'm really struggling with though is whether or not it's safe to get back in the water. Generally speaking, I believe it is.  This story has been a good one, and the company has made no secret of top line growth being the priority right now (as opposed to a bigger bottom line). I personally have no problem with that. Building a cash flow can be much harder than squeezing profits out of sales, so I'm actually glad to see the expansion effort taking shape.  In the meantime, I think the bounce around the $2.20 area may have highlighted longer-term support around that level. This was about where we made several lows in the fall of last year, and could be the 'not going to get much better than that' point for bargain shoppers.  Simultaneously though, I have to say I'd like the CCBEF opportunity a whole lot better if it was above $3.00. A friend of mine says (and he's right) Wall Street is the only place where people buy less of something when it goes on sale, and more of it when the price is inflated. I guess that has to do more with momentum and certainty, but hey - that's the nature of the game. I just feel Clearly Canadian is a good company, and is on the right track - whether or not the recent chart says the same. Are you a trader or an investor? I guess that's the ultimate question. I still like CCBEF as an investment.    The 'Other' News I mentioned above some news that may or may not have an impact on your thoughts about Clearly Canadian, but I know it did on mine. This morning, Coca-Cola (NYSE: KO) announced they had acquired bottled-water maker Glaceau - for $4.1 billion. Glaceau is the maker of Vitaminwater, Fruitwater, Smartwater and Vitaminenergy. Does any of that seem familiar to you? Clearly Canadian pretty much has the same product line.  So? Here's the 'so'......when Coke shells out $4 billion dollars just to gain a foothold in this segment of the market, that says a lot to me about the strength of that market. Per the press release, "Glaceau is an attractive acquisition for Coca-Cola because of its position in the enhanced water and energy drink categories, which Coca-Cola is betting will make up a large portion of the beverage industry's volume and gross profit growth in North America through 2010."  What's that mean to Clearly? If your first thoughts are a buyout, I will tell you I've heard nothing from the company to make me think they're looking for a suitor, (though I guess anything's possible now that M&A has become the norm). The first thing I thought of was validation. When one of the two giants in the beverage industry says there's potential in water, I'm not going to argue them. Looks to me like Clearly Canadian's product line is aimed at the right target market.  By the way, it looks like we have a new company to present to you next week. Not sure which day yet, so stay tuned - they've got a pretty slick little gadget. In the meantime, here's the press release from Clearly.    Clearly Canadian Acquires My Organic Baby Innovative Organic Baby Food Company Emerging as Leader in Fast Growing Sector  VANCOUVER, British Columbia -- Friday May 25 -- CLEARLY CANADIAN (OTCBB: CCBEF), is pleased to announce it has completed the acquisition of My Organic Baby Inc. (www.myorganicbaby.ca), Canada's first full nation wide line of organic baby food.  "My Organic Baby is an incredible opportunity and provides yet another vehicle for top line revenue growth for Clearly Canadian," stated Brent Lokash, President of Clearly Canadian. "Consumer spending on baby products has shown double digit growth during the last five years and more consumers are making the change to organic, especially where their children are concerned. Nothing is more important for a baby's positive development than healthy and nutritious food. With national retail distribution and its wide product offerings, My Organic Baby is in a great position to capture the family's desire for organic products for their children."  My Organic Baby's founders, David Reingold and Orlee Muroff will be joining the Clearly Canadian team and will play a critical role in expanding My Organic Baby. This will include the introduction of an organic product line for toddlers under the name My Organic Toddler and overseeing the roll out of all My Organic Baby's products into the massive U.S. market place.  Mr. Lokash continued, "With its current listings in Canada's leading national retailers of baby food and organic products, My Organic Baby is already establishing strong brand awareness, which is a cornerstone of our company."  In connection with the acquisition of My Organic Baby, the Company has paid $400,000 CDN upon closing of the transaction; 615,000 restricted common shares of the Company, provided, that if a gain of $600,000 CDN is not realized from a sale of these shares within two years months, the Company will pay any shortfall; and 3,750,000 warrants to purchase the Company's common shares at a purchase price of US $4.00 per share, provided that if a gain of $3,750,000 CDN is not realized from a sale of the shares attached to the warrants within one year, the Company will pay any shortfall.  Additionally Clearly Canadian announced that James Dines has stepped down as Chairman of the Advisory Committee. Mr. Dines stated, "I believe the course has been set, and the company fully understands and embraces the exponential benefits available through the continuous branding of Clearly Canadian as a recognizable and trusted name in the organic and natural sector. That was my original goal and with that accomplished I will leave it to this very capable management team to continue to execute the vision we have so diligently laid out for the future of Clearly Canadian."  About Clearly Canadian  Based in Vancouver, B.C., Clearly Canadian Beverage Corporation markets premium alternative beverages, including Clearly Canadian(r) sparkling flavoured waters and Clearly Canadian dailyEnergy, dailyVitamin and dailyHydration Natural Enhanced Waters which are distributed in the United States, Canada and various other countries. Since its inception, the Clearly Canadian brand has sold over 2 billion bottles worldwide. Clearly Canadian's recent acquisition of DMR Food Corporation marks the Company's debut into organic and natural products with a wide range of dried fruit and nut snacks offerings from SunRidge Farms, Naturalife, Sweet Selections, Simply by Nature and Glengrove Organics brands. Additional information about Clearly Canadian may be obtained at www.clearly.ca.  Forward Looking Statements  Statements in this news release that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Words such as "expects," "intends," "plans," "may," "could," "should," "anticipates," "likely," "believes," "estimates," "potential," "predicts," "continue" and words of similar import also identify forward-looking statements. Forward-looking statements are based on current facts and analysis and other information that are based on forecasts of future results, estimates of amounts not yet determined and assumptions of management, including but not limited to, the belief in the growth potential of My Organic Baby. These assumptions are subject to many risks, and actual results may differ materially from those currently anticipated. These risks include, by way of example and not in limitation, general economic conditions, changing beverage consumption trends of consumers, the Company's ability to generate sufficient cash flows to support general operating activities and capital expansion plans, competition, pricing and availability of raw materials, the Company's ability to maintain the current and future retail listings for its beverage products and to maintain favorable supply, production and distribution arrangements, laws and regulations and changes thereto that may affect the way the Company's products are manufactured, distributed and sold and other factors beyond the reasonable control of the Company. Additional information on factors that may affect the business and financial results of the Company can be found in filings of the Company with the U.S. Securities and Exchange Commission and with the British Columbia and Ontario Securities Commissions.  Contact: Clearly Canadian Beverage Corporation  Shareholder Relations:  Steve Cook, 800-983-0993  investor@clearly.ca  or  Marketing:  Carolyn Corcoran, 604-742-5318  ccorcoran@clearly.ca  Source: Clearly Canadian Beverage Corporation   We Value Your Feedback   Got comments, questions or suggestions? Send 'em on over: Email the Editor If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402 San Diego, CA 92130 Subscribe Information is power and timely information is profitable. Become informed and profit from Small Cap Network Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. 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