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MicroCapClub Invitational
January 29, 2014

OTCQB: OPCO
www.ourpets.com
Safe Harbor Statement
This presentation may contain various “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act), which represent our expectations or beliefs concerning future events.
Forward-looking statements generally include words such as “anticipates,” “believes,” “expects,”
“planned,” “scheduled,” or similar expressions and statements. Although we believe these forwardlooking statements are based on reasonable assumptions, statements made regarding future results are
subject to a number of assumptions, uncertainties, and risks that could cause future results to be
materially different from the results stated or implied in this presentation. Uncertainties, risks, and
other factors that may cause actual results or performance to differ materially from any results of
performance expressed or implied by forward-looking statements in this presentation include: (1) our
ability to manage our operating expenses and realize operating efficiencies, (2) our ability to maintain
and grow our sales with existing and new customers, (3) our ability to retain existing members of our
senior management team and to attract additional management employees, (4) our ability to manage
fluctuations in the availability and cost of key materials and tools of production, (5) general economic
conditions that might impact demand for our products, (6) competition from existing or new
participants in the pet products industry, (7) our ability to design and bring to market new products on a
timely and profitable basis, (8) challenges to our patents or trademarks on existing or new products, or
(9) our ability to secure access to sufficient capital on favourable terms to manage and grow our
business. We caution that these risk factors are not exclusive. Additionally, we do not undertake to
update any forward looking statements that may be made from time to time by or on behalf of us
except as required by law.
The OurPet’s Company
• Founded in 1995 by Dr. Steve Tsengas and Dean Tsengas - “Big Dog Feeder”
• Focused on high growth categories in non-food pet products
• Feline waste and odor control solutions ($250 million/year category)
• Interactive cat and dog toys and accessories ($315 million/year category)
• Healthy feeding/storage systems ($100 million/year category)
• Products designed to:
• Satisfy the mental/physical health, safety and comfort of pets
• Satisfy the pet owners pleasure and convenience of owning a pet
• Satisfy the needs of retailers for innovative, upscale, profitable, products

• Strong, diversified product portfolio (approximately 1500 SKUs)
• Solid pipeline of new, innovative products and line extensions (225 patents
issued/pending)
Market Trends
U.S. Pet Industry
•

Third largest consumer market ($60 billion in 2013)

•

Forecasted compound annual growth rate of 4%-5% through 2017

•

68% of households own a pet totaling 82.5 million pet owners

•

Dogs owned by 47% and cats by 37% of households

•

Average annual spending on non-food pet products:
•

•

$1,135 for dogs, $931 for cats

Recession resistant

Pet Accessories and Treats Category
• Represents 19% of U.S. Pet Industry annual sales
• Category sales expected to be $12.5 billion in 2014
• Forecasted compound annual growth rate of 8%-10% through 2017
• Pets are living longer – 40% are “seniors”
Source: Packaged Facts U.S. Pet Market Outlook 2013-2014
Our History
Corporate Timeline & Milestones
Market Acceptance &
Recognition

Market Entrance

Continued Expansion & Acquisition

Founded in
1985 as
Napro Inc.

Founded with
launch of the Big
Dog Feeder

Becomes publically traded
company under the symbol
OPCO (OTCBB)

Durapet is introduced and
quickly becomes a winner in
all retail channels

Litigation begins between
Applica/LitterMaid and
SmartScoop

1985

1995

2001

2004

Durapet Hybrid line launched at
Walmart and continues to set
sales records while only in
limited stores

2007

2013

1997-1998

1999-2000

2006

2010

2012

Enters into Canine &
Feline Toys; Changes
name to OurPets

Innovative products such as raised
feeders and the Play-N-Squeak
Mouse are instantly disruptive and
successful

Acquires PetZone, which
includes rights to
SmartScoop

Acquires Cosmic Catnip
Products Company

SmartScoop litigation is
resolved

Major Products & Acquisition Timeline
Wonder Bowl

1995

1998

1997

2000

1999

2004

2001

2007

2006

2010

2009

2013

2012

2014
EZ Scoop, Corknip
Launch
New Branding
Business Model
Innovative Product Offerings Backed by Strong R&D and Patents




Products are brought to market after careful
investment in both behavioral research and
technology research



Aversion to developing commodity products



Formidable patent fencing process to secure
inimitability versus the competition

Focus on products with proven efficacy

Positioning with Leading Retailers


Strong sell-through history with retailers such as WalMart, PetSmart, and Petco





#1 ranking within product category position at Amazon

Private label business helps maintain shelf space
within pet specialty retailers



Broad retail presence across pet specialty and food,
drug & mass retailers, as well within e-commerce

Specific Pet Industry Trends


Consolidation of vendors within leading retailers



Growth in Toys & Accessories continue



The feline Waste & Odor control market represents a
particularly attractive, growing segment
Products
Toys & Accessories – Case Study: Play-N-Squeak
Issued & Pending Patents
Utility Patents

Design Patents

•

4/16/02 – Mouse Sound Profile for a Toy

•

•

4/22/03 – Pet Toy

7/17/07 – Toy Fishing Wand with a
Set of Interchangeable Cat Lures

•

5/6/03 – Interactive Pet Toy

•

11/13/07 – Hanging Pet Toy

•

9/12/06 – Rolling Pet Toy

•

11/13/07 – Pet Toy

•

9/27/11 – Nocturnal Pet Toy

•

2/7/12 – Interactive Pet Toy Having
Extendable and Retractable Flexible Target

Launch Date: 2001

•

6/12/12 – Simulated Prey Pet Toy

• Feline toy looks and feels like a mouse (polyester material), and
most importantly mimics the sound of a real mouse by means of
a prerecorded micro-chip, motion sensitive module inside the
mouse

•

7/01/13 – PNS Sound

•

2013 Numerous PNS/Corknip patents
(pending)

• Introduced with a smashing success, became a trend setter for
pre-recorded sound electronic chip pet toys

Patent Defense History
•

Has been successful defended against four infringers, as well as collecting damages:
— World Wise (2005) – validated patent

• Result of extensive research on the biological behavior of cats

— Pet Edge (2009) – validated patent, $ X settlement

• Has expanded to over 50 different SKUs, selling over 25 million
units since 2001

— Multipet (2009) – validated patent, $ X settlement

• Top selling product line as of 2012, garnering $5.5 million in
sales and representing over 56% and 27% of total toys &
accessories sales and total net sales respectively

— Kong (2011) – validated patent, $ X settlement

— Sergeants (2010) – validated patent, $ X settlement

— Westminster (2013) - pending
Products
Product Overview - 2013

Total Revenue by Pet, 2013

Toys & Accessories by Pet, 2013

0.2%

0.3%

Feeding & Storage, 2013

Waste & Odor by Pet, 2013

0.7%

15.6%

11.7%

Canine
43.9%
55.8%

Canine

Canine

Feline

Feline

Feline

Felin

Other Pet

Other Pet

63.9%
Other Pet

Oth

84.2%

87.6%

Canine

Feline

Other Pet

36.1%

Can
Products
Product Offerings
Toys & Accessories

Feeding & Storage

Canines
Feeder products are “Pet-Agnostic”

Felines

Waste & Odor
Healthy Feeding/Storage Systems
Interactive Cat Toys
Interactive Cat Toys
FLAPPY Dog Toys
Smarter Toys™ For Dogs
Smarter Toys = Smarter Dogs

• Provides mental and
physical stimulation
• Three learning levels for
added difficulty as dogs
learn:
•
* Smart
* Brilliant
* Genius
• Two sizes for each style
Feline Waste Management Solutions

Fresh Scoop Litter Box & System
• Litter box with convenient
disposal and storage in one unit
• Includes 1 Activated Carbon Filter
to eliminate odor
• Includes 4 no-touch waste bags to
line the waste bin
• Nests on shelf for optimal
merchandising
• Retail Price Range $29.99-$39.99

EZ Scoop Manual Litter Box
• One Easy Sweep cleans the
whole box
• Hands-free scooping
• Easy to clean
• No-touch waste bags
• Special no-stick coating
• Advanced carbon zeolite filter*
• No assembly required
• Made in the USA
• One Year Warranty
• Retail Price Range - $59.99$69.99

SmartScoop Automatic Litter Box
• Easy to clean and maintain
• No expensive trays or cartridges
to buy
• Use any clumping litter or
crystals
• Rugged and reliable-metal gears
• Quiet operation
• Includes 6 activated carbon
zeolite filters and 24 no-touch
bags
• One to Two Year Warranty
• Retail Price Range $129.99$149.99
Growth Through Product Innovation
• Toys and Accessories:
• Corknip™
• Catnip Gel
• Scent toys
• Feeding & Storage:
• WonderBowl™ and other Wireless Products
• New feeding & storage products
• Waste & Odor Control:
• odorLESS™ Technology
• Natural cat litter
• Accessories
New Products: Natural Corknip

TM

• Innovative line of branded products for cats

• Made from all natural compressed catnip
• Features the unique feel of cork and the appeal of catnip
• Cork and catnip are renewable, biodegradable resources
• OurPet’s Company is first-to-market with a proprietary line
of corknip products

Patent Pending
Natural Corknip

TM (1)

Features and Benefits

Features

Benefits

•

•

•
•
•
•

Cosmic brand premium catnip
embedded in natural, eco-friendly
cork toys and scratcher accessories.
Earth-friendly, fun and safe
alternative to artificial plastic toys
Brings a new level of fun into a wellaccepted, regularly purchased item
Cork is natural, eco-friendly and
hypo-allergenic
Cork is durable but soft

•

•

•
•

(1)

Patent Pending

Provides the cat with a natural,
durable, warm material and a longlasting scented toy.
Cork, direct from the forest, + catnip,
direct from the field= Corknip--two
renewable biodegradable resources
Prevents loose catnip mess while
providing healthy mental and
physical stimulation for cats.
Exercise enjoyment and a healthy
peace of mind for the pet owner
Stimulates a cat’s innate clawing and
scratching/catching urges
WonderBowl Wireless Technology

Technology Applications – facilitating
human-animal interactions within the
home

• Multi-species homes
– different diets
• Multi-pet homes with
behavioral issues
• Pets on prescription
diets
• Keep food fresh and
clean
• Keep toddlers from
eating kibble
New Products: Natural Cat Litter (1)

(1)

Switchgrass

(1)

Patent Pending

Natural Cat Litter
Brand Strategy
Dual Brand Strategy

Premium brand and pet
specialty channel of products
for “pet parents”

Pet-specialty quality
products at affordable
prices for pet enthusiasts
The OurPet’s Company is focused on 3 strategic categories:
• Feline Waste Management Solutions
• Interactive cat & dog toys, health & beauty
products
• Healthy feeding systems

•
•

•

OurPets products sold exclusively through the Pet
Specialty channel

•

OurPets satisfies demands of the Pet Specialty
consumer
 Wide variety of premium, innovative, quality toys
and accessories
 Specially-designed to awaken a pets’ natural
instincts
 Available exclusively at pet specialty retailers
 Dedicated trade and consumer support

•

•

Pet Zone is sold through the Food/Drug/Mass
Merchandise channel
Pet Zone satisfies the demands of the Multi-Outlet
consumer
 Pet Specialty quality products at affordable prices
 Unique point of difference
 Value-added features that go beyond fun and
functionality
 Dedicated trade and consumer support
No other brand offers easier access to high quality
products that go beyond fun, functionality and price
than Pet Zone
When tested by consumers, Pet Zone’s brand awareness
scored highest among competitors
Customers/Distribution Channels

Other
Retail
E-Commerce/ 1.3%
Catalog
9.4%

Pet Specialty
45.0%

Food, Drug & Mass
44.3%
Global Pet Expo Booth
March 12-14, 2014
Orange County Convention Center
Orlando, Florida

• One Company – two major
brands – OurPets® and PetZone®
• Unleashing great ideas in pet
care
• Over two dozen new, trend
setting products
• Leader in Healthy/Stimulating
Toys, Waste & Odor Control and
Store/Feeding Systems
Five-Year Financial Trends
Dollars and shares outstanding in
millions except per share amounts

2010

Net sales

$14.3

$17.1

Gross profit margin

30.0%

Income from operations

$ 0.8

$ 1.2

$ 0.4

$ 0.4

$ 1.5

Income tax expense (benefit)

$ 0.1

$ (0.1)

$ (0.1)

$(0.1)

$ 0.5

Net income

$ 0.8

$ 1.0

$ 0.1

$0.2

$ 0.9

$0.05

$ 0.05

$0.00

$0.01

$ 0.04

15.5

19.1

Net income per share

(2)

Weighted average number of
common and equivalent shares
Outstanding

(1

) Twelve months ended September 30, 2013
After dividend requirements for preferred stock
(3)
At September 30, 2013
(2)

28.1%

2011
$19.7
23.5%

17.4

2012
$20.2
26.0%

16.2

2013

(1)

2009

$21.5
29.4%

18.0

(3)
Quarterly Earnings per Share Trend
1Q 2012 – 3Q 2013
¢ per share

Fully-taxed

1Q

2Q

3Q

2012

4Q

1Q

2Q
2013

3Q
Quarterly EBITDA Trend
1Q 2012 – 3Q 2013
Dollars in Thousands

900,000
800,000
700,000
600,000

500,000
400,000
300,000
200,000
100,000
0

1Q

2Q

3Q
2012

4Q

1Q

2Q
2013

3Q
EBITDA CALCULATION
EBITDA
Net Income
Interest
Tax Expense/(Benefit)
Depreciation
Amortization
Total EBiTDA

Q1'12
$

$

81,864 $
45,136
29,818
149,956
9,889
316,663 $

Q2'12

Q3'12

8,322 $ (130,097) $
38,019
36,019
13,017
(53,869)
141,928
154,346
10,283
10,580
211,569 $
16,979 $

Q4'12
232,655 $
39,095
69,332
156,346
10,667
508,095 $

Q1'13
223,602 $
40,245
81,139
152,189
11,631
508,806 $

Q2'13
132,765 $
47,092
80,000
159,979
12,993
432,829 $

Q3'13
339,261
38,641
250,020
121,315
12,948
762,185

The above table reconciles the Company’s disclosure of Net Income per GAAP with the non GAAP financial
measure EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization.) As the investment
community has often requested the EBITDA calculation to help them evaluate performance, Management
has chosen to provide this disclosure. Although EBITDA is widely used in the investment community as a
benchmark to reflect operating performance, financing capability and liquidity, it is not regarded as a measure
of operating performance and liquidity under generally accepted accounting principles (“GAAP”). It also does
not represent cash flows from operating activities. In addition, the Company’s EBITDA may not be comparable
to similar indicators provided by other companies. The Presentation of this additional information is not
meant to be considered n isolation or as a substitute for net income (loss), or any component thereof, in
accordance with GAAP.
Third Quarter 2013 Financial Results
($ in 000)

2013
$5,738

Net sales
Gross profit margin

2012
$ 4,270

Change
$1,468
6.3% (1)

32.2%

26.0%

Income (loss) from operations

$ 582

$ (148)

$ 730

Income tax expense (benefit)

$ 250

$ ( 54)

$ 304

Net income (loss)

$ 339

$ (130)

$ 469

$ 0.02

$ (0.01)

$0.03

Net income (loss) per common share
(1)
2)

Percentage points
After dividend requirements for preferred stock

(2)
Investment Highlights Summary
• Pet industry = continued strong, healthy growth (recession resistant)
• OurPet’s (OPCO) is one of the few “Non-Retail Pure Pet Plays”
• Successfully received a patent and settled the expensive litigation
involving SmartScoop (2007-2011)
• OurPet’s has successfully navigated through “No Man’s Land” through
the last three years:
• Completed organizational restructuring and is staffed with highly
experienced professional and executive personnel
• Modern facility – 96,000 sq. ft./ 14 acres (east of Cleveland)
• Installed a fully integrated ERP system to meet current and future
information technology needs – including TWL
• Integrated the Cosmic Catnip Products acquisition and moved
operations into its Ohio facility
• Developed and is implementing an effective two brand channel
strategy
Investment Highlights (cont.)
• OurPet’s has one of the most extensive new product pipelines
in the pet industry-225 patents issued or pending
• Company has a well planned program for growth:
• Product innovation
• Marketing strategy – two brand channel strategy
• Aggressive Sales effort – expand in current markets, enter
new domestic markets ( e-commerce, clubs, “dollar
stores”, etc. and pursue overseas opportunities (Canada,
Europe, Japan, Brazil, Australia, Russia, etc.)
• Strategic acquisitions
• OurPet’s has strengthened its balance sheet and achieving
revenue and profit growth above pet industry norms.
Thank You – Q & A

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MicroCapClub Invitational: OurPet's Company (OPCO)

  • 1. MicroCapClub Invitational January 29, 2014 OTCQB: OPCO www.ourpets.com
  • 2. Safe Harbor Statement This presentation may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which represent our expectations or beliefs concerning future events. Forward-looking statements generally include words such as “anticipates,” “believes,” “expects,” “planned,” “scheduled,” or similar expressions and statements. Although we believe these forwardlooking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of assumptions, uncertainties, and risks that could cause future results to be materially different from the results stated or implied in this presentation. Uncertainties, risks, and other factors that may cause actual results or performance to differ materially from any results of performance expressed or implied by forward-looking statements in this presentation include: (1) our ability to manage our operating expenses and realize operating efficiencies, (2) our ability to maintain and grow our sales with existing and new customers, (3) our ability to retain existing members of our senior management team and to attract additional management employees, (4) our ability to manage fluctuations in the availability and cost of key materials and tools of production, (5) general economic conditions that might impact demand for our products, (6) competition from existing or new participants in the pet products industry, (7) our ability to design and bring to market new products on a timely and profitable basis, (8) challenges to our patents or trademarks on existing or new products, or (9) our ability to secure access to sufficient capital on favourable terms to manage and grow our business. We caution that these risk factors are not exclusive. Additionally, we do not undertake to update any forward looking statements that may be made from time to time by or on behalf of us except as required by law.
  • 3. The OurPet’s Company • Founded in 1995 by Dr. Steve Tsengas and Dean Tsengas - “Big Dog Feeder” • Focused on high growth categories in non-food pet products • Feline waste and odor control solutions ($250 million/year category) • Interactive cat and dog toys and accessories ($315 million/year category) • Healthy feeding/storage systems ($100 million/year category) • Products designed to: • Satisfy the mental/physical health, safety and comfort of pets • Satisfy the pet owners pleasure and convenience of owning a pet • Satisfy the needs of retailers for innovative, upscale, profitable, products • Strong, diversified product portfolio (approximately 1500 SKUs) • Solid pipeline of new, innovative products and line extensions (225 patents issued/pending)
  • 4. Market Trends U.S. Pet Industry • Third largest consumer market ($60 billion in 2013) • Forecasted compound annual growth rate of 4%-5% through 2017 • 68% of households own a pet totaling 82.5 million pet owners • Dogs owned by 47% and cats by 37% of households • Average annual spending on non-food pet products: • • $1,135 for dogs, $931 for cats Recession resistant Pet Accessories and Treats Category • Represents 19% of U.S. Pet Industry annual sales • Category sales expected to be $12.5 billion in 2014 • Forecasted compound annual growth rate of 8%-10% through 2017 • Pets are living longer – 40% are “seniors” Source: Packaged Facts U.S. Pet Market Outlook 2013-2014
  • 5. Our History Corporate Timeline & Milestones Market Acceptance & Recognition Market Entrance Continued Expansion & Acquisition Founded in 1985 as Napro Inc. Founded with launch of the Big Dog Feeder Becomes publically traded company under the symbol OPCO (OTCBB) Durapet is introduced and quickly becomes a winner in all retail channels Litigation begins between Applica/LitterMaid and SmartScoop 1985 1995 2001 2004 Durapet Hybrid line launched at Walmart and continues to set sales records while only in limited stores 2007 2013 1997-1998 1999-2000 2006 2010 2012 Enters into Canine & Feline Toys; Changes name to OurPets Innovative products such as raised feeders and the Play-N-Squeak Mouse are instantly disruptive and successful Acquires PetZone, which includes rights to SmartScoop Acquires Cosmic Catnip Products Company SmartScoop litigation is resolved Major Products & Acquisition Timeline Wonder Bowl 1995 1998 1997 2000 1999 2004 2001 2007 2006 2010 2009 2013 2012 2014 EZ Scoop, Corknip Launch New Branding
  • 6. Business Model Innovative Product Offerings Backed by Strong R&D and Patents   Products are brought to market after careful investment in both behavioral research and technology research  Aversion to developing commodity products  Formidable patent fencing process to secure inimitability versus the competition Focus on products with proven efficacy Positioning with Leading Retailers  Strong sell-through history with retailers such as WalMart, PetSmart, and Petco   #1 ranking within product category position at Amazon Private label business helps maintain shelf space within pet specialty retailers  Broad retail presence across pet specialty and food, drug & mass retailers, as well within e-commerce Specific Pet Industry Trends  Consolidation of vendors within leading retailers  Growth in Toys & Accessories continue  The feline Waste & Odor control market represents a particularly attractive, growing segment
  • 7. Products Toys & Accessories – Case Study: Play-N-Squeak Issued & Pending Patents Utility Patents Design Patents • 4/16/02 – Mouse Sound Profile for a Toy • • 4/22/03 – Pet Toy 7/17/07 – Toy Fishing Wand with a Set of Interchangeable Cat Lures • 5/6/03 – Interactive Pet Toy • 11/13/07 – Hanging Pet Toy • 9/12/06 – Rolling Pet Toy • 11/13/07 – Pet Toy • 9/27/11 – Nocturnal Pet Toy • 2/7/12 – Interactive Pet Toy Having Extendable and Retractable Flexible Target Launch Date: 2001 • 6/12/12 – Simulated Prey Pet Toy • Feline toy looks and feels like a mouse (polyester material), and most importantly mimics the sound of a real mouse by means of a prerecorded micro-chip, motion sensitive module inside the mouse • 7/01/13 – PNS Sound • 2013 Numerous PNS/Corknip patents (pending) • Introduced with a smashing success, became a trend setter for pre-recorded sound electronic chip pet toys Patent Defense History • Has been successful defended against four infringers, as well as collecting damages: — World Wise (2005) – validated patent • Result of extensive research on the biological behavior of cats — Pet Edge (2009) – validated patent, $ X settlement • Has expanded to over 50 different SKUs, selling over 25 million units since 2001 — Multipet (2009) – validated patent, $ X settlement • Top selling product line as of 2012, garnering $5.5 million in sales and representing over 56% and 27% of total toys & accessories sales and total net sales respectively — Kong (2011) – validated patent, $ X settlement — Sergeants (2010) – validated patent, $ X settlement — Westminster (2013) - pending
  • 8. Products Product Overview - 2013 Total Revenue by Pet, 2013 Toys & Accessories by Pet, 2013 0.2% 0.3% Feeding & Storage, 2013 Waste & Odor by Pet, 2013 0.7% 15.6% 11.7% Canine 43.9% 55.8% Canine Canine Feline Feline Feline Felin Other Pet Other Pet 63.9% Other Pet Oth 84.2% 87.6% Canine Feline Other Pet 36.1% Can
  • 9. Products Product Offerings Toys & Accessories Feeding & Storage Canines Feeder products are “Pet-Agnostic” Felines Waste & Odor
  • 14. Smarter Toys™ For Dogs Smarter Toys = Smarter Dogs • Provides mental and physical stimulation • Three learning levels for added difficulty as dogs learn: • * Smart * Brilliant * Genius • Two sizes for each style
  • 15. Feline Waste Management Solutions Fresh Scoop Litter Box & System • Litter box with convenient disposal and storage in one unit • Includes 1 Activated Carbon Filter to eliminate odor • Includes 4 no-touch waste bags to line the waste bin • Nests on shelf for optimal merchandising • Retail Price Range $29.99-$39.99 EZ Scoop Manual Litter Box • One Easy Sweep cleans the whole box • Hands-free scooping • Easy to clean • No-touch waste bags • Special no-stick coating • Advanced carbon zeolite filter* • No assembly required • Made in the USA • One Year Warranty • Retail Price Range - $59.99$69.99 SmartScoop Automatic Litter Box • Easy to clean and maintain • No expensive trays or cartridges to buy • Use any clumping litter or crystals • Rugged and reliable-metal gears • Quiet operation • Includes 6 activated carbon zeolite filters and 24 no-touch bags • One to Two Year Warranty • Retail Price Range $129.99$149.99
  • 16. Growth Through Product Innovation • Toys and Accessories: • Corknip™ • Catnip Gel • Scent toys • Feeding & Storage: • WonderBowl™ and other Wireless Products • New feeding & storage products • Waste & Odor Control: • odorLESS™ Technology • Natural cat litter • Accessories
  • 17. New Products: Natural Corknip TM • Innovative line of branded products for cats • Made from all natural compressed catnip • Features the unique feel of cork and the appeal of catnip • Cork and catnip are renewable, biodegradable resources • OurPet’s Company is first-to-market with a proprietary line of corknip products Patent Pending
  • 18. Natural Corknip TM (1) Features and Benefits Features Benefits • • • • • • Cosmic brand premium catnip embedded in natural, eco-friendly cork toys and scratcher accessories. Earth-friendly, fun and safe alternative to artificial plastic toys Brings a new level of fun into a wellaccepted, regularly purchased item Cork is natural, eco-friendly and hypo-allergenic Cork is durable but soft • • • • (1) Patent Pending Provides the cat with a natural, durable, warm material and a longlasting scented toy. Cork, direct from the forest, + catnip, direct from the field= Corknip--two renewable biodegradable resources Prevents loose catnip mess while providing healthy mental and physical stimulation for cats. Exercise enjoyment and a healthy peace of mind for the pet owner Stimulates a cat’s innate clawing and scratching/catching urges
  • 19. WonderBowl Wireless Technology Technology Applications – facilitating human-animal interactions within the home • Multi-species homes – different diets • Multi-pet homes with behavioral issues • Pets on prescription diets • Keep food fresh and clean • Keep toddlers from eating kibble
  • 20. New Products: Natural Cat Litter (1) (1) Switchgrass (1) Patent Pending Natural Cat Litter
  • 22. Dual Brand Strategy Premium brand and pet specialty channel of products for “pet parents” Pet-specialty quality products at affordable prices for pet enthusiasts
  • 23. The OurPet’s Company is focused on 3 strategic categories: • Feline Waste Management Solutions • Interactive cat & dog toys, health & beauty products • Healthy feeding systems • • • OurPets products sold exclusively through the Pet Specialty channel • OurPets satisfies demands of the Pet Specialty consumer  Wide variety of premium, innovative, quality toys and accessories  Specially-designed to awaken a pets’ natural instincts  Available exclusively at pet specialty retailers  Dedicated trade and consumer support • • Pet Zone is sold through the Food/Drug/Mass Merchandise channel Pet Zone satisfies the demands of the Multi-Outlet consumer  Pet Specialty quality products at affordable prices  Unique point of difference  Value-added features that go beyond fun and functionality  Dedicated trade and consumer support No other brand offers easier access to high quality products that go beyond fun, functionality and price than Pet Zone When tested by consumers, Pet Zone’s brand awareness scored highest among competitors
  • 25. Global Pet Expo Booth March 12-14, 2014 Orange County Convention Center Orlando, Florida • One Company – two major brands – OurPetsÂŽ and PetZoneÂŽ • Unleashing great ideas in pet care • Over two dozen new, trend setting products • Leader in Healthy/Stimulating Toys, Waste & Odor Control and Store/Feeding Systems
  • 26. Five-Year Financial Trends Dollars and shares outstanding in millions except per share amounts 2010 Net sales $14.3 $17.1 Gross profit margin 30.0% Income from operations $ 0.8 $ 1.2 $ 0.4 $ 0.4 $ 1.5 Income tax expense (benefit) $ 0.1 $ (0.1) $ (0.1) $(0.1) $ 0.5 Net income $ 0.8 $ 1.0 $ 0.1 $0.2 $ 0.9 $0.05 $ 0.05 $0.00 $0.01 $ 0.04 15.5 19.1 Net income per share (2) Weighted average number of common and equivalent shares Outstanding (1 ) Twelve months ended September 30, 2013 After dividend requirements for preferred stock (3) At September 30, 2013 (2) 28.1% 2011 $19.7 23.5% 17.4 2012 $20.2 26.0% 16.2 2013 (1) 2009 $21.5 29.4% 18.0 (3)
  • 27. Quarterly Earnings per Share Trend 1Q 2012 – 3Q 2013 ¢ per share Fully-taxed 1Q 2Q 3Q 2012 4Q 1Q 2Q 2013 3Q
  • 28. Quarterly EBITDA Trend 1Q 2012 – 3Q 2013 Dollars in Thousands 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1Q 2Q 3Q 2012 4Q 1Q 2Q 2013 3Q
  • 29. EBITDA CALCULATION EBITDA Net Income Interest Tax Expense/(Benefit) Depreciation Amortization Total EBiTDA Q1'12 $ $ 81,864 $ 45,136 29,818 149,956 9,889 316,663 $ Q2'12 Q3'12 8,322 $ (130,097) $ 38,019 36,019 13,017 (53,869) 141,928 154,346 10,283 10,580 211,569 $ 16,979 $ Q4'12 232,655 $ 39,095 69,332 156,346 10,667 508,095 $ Q1'13 223,602 $ 40,245 81,139 152,189 11,631 508,806 $ Q2'13 132,765 $ 47,092 80,000 159,979 12,993 432,829 $ Q3'13 339,261 38,641 250,020 121,315 12,948 762,185 The above table reconciles the Company’s disclosure of Net Income per GAAP with the non GAAP financial measure EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization.) As the investment community has often requested the EBITDA calculation to help them evaluate performance, Management has chosen to provide this disclosure. Although EBITDA is widely used in the investment community as a benchmark to reflect operating performance, financing capability and liquidity, it is not regarded as a measure of operating performance and liquidity under generally accepted accounting principles (“GAAP”). It also does not represent cash flows from operating activities. In addition, the Company’s EBITDA may not be comparable to similar indicators provided by other companies. The Presentation of this additional information is not meant to be considered n isolation or as a substitute for net income (loss), or any component thereof, in accordance with GAAP.
  • 30. Third Quarter 2013 Financial Results ($ in 000) 2013 $5,738 Net sales Gross profit margin 2012 $ 4,270 Change $1,468 6.3% (1) 32.2% 26.0% Income (loss) from operations $ 582 $ (148) $ 730 Income tax expense (benefit) $ 250 $ ( 54) $ 304 Net income (loss) $ 339 $ (130) $ 469 $ 0.02 $ (0.01) $0.03 Net income (loss) per common share (1) 2) Percentage points After dividend requirements for preferred stock (2)
  • 31. Investment Highlights Summary • Pet industry = continued strong, healthy growth (recession resistant) • OurPet’s (OPCO) is one of the few “Non-Retail Pure Pet Plays” • Successfully received a patent and settled the expensive litigation involving SmartScoop (2007-2011) • OurPet’s has successfully navigated through “No Man’s Land” through the last three years: • Completed organizational restructuring and is staffed with highly experienced professional and executive personnel • Modern facility – 96,000 sq. ft./ 14 acres (east of Cleveland) • Installed a fully integrated ERP system to meet current and future information technology needs – including TWL • Integrated the Cosmic Catnip Products acquisition and moved operations into its Ohio facility • Developed and is implementing an effective two brand channel strategy
  • 32. Investment Highlights (cont.) • OurPet’s has one of the most extensive new product pipelines in the pet industry-225 patents issued or pending • Company has a well planned program for growth: • Product innovation • Marketing strategy – two brand channel strategy • Aggressive Sales effort – expand in current markets, enter new domestic markets ( e-commerce, clubs, “dollar stores”, etc. and pursue overseas opportunities (Canada, Europe, Japan, Brazil, Australia, Russia, etc.) • Strategic acquisitions • OurPet’s has strengthened its balance sheet and achieving revenue and profit growth above pet industry norms.