Ample Hills Runs into Financial Roadblocks, Shutters Operations

Ice cream maker Ample Hills is temporarily closing in a last-ditch attempt to secure critical financing to continue operations, the company stated in a letter posted to its website on Monday.

The letter, authored by Ample Hills CEO Michael Zapata, stated that the creamery was closed effective immediately, with all employees furloughed. The company’s storefronts and factory will be shuttered for at least a week while the executives “[seek] the additional capital required for it to continue operations.”Despite being engaged in ongoing discussions with possible investors, Zapata said he has been unable to find a capital partner to-date.

“We have an incredibly talented and hardworking team, which makes this furlough extremely difficult,” Zapata said. “Unfortunately, we have reached a point where this is our only option…[we are] open to discussions with other interested parties to prevent a full shut down.”

According to owner Schmitt Management’s annual report for the year ending May 2022, Ample Hills had $8.31 million in net revenue, up roughly 105% year-over-year, compared to its (non-CPG related) measurement division, which had $1.57 in revenue. Ample Hills’ gross margin was $4.42 million, though it also reported elevated operating expenses of $12.02 million, which accounted for the majority of the company’s overall operating expenses.

In total, Schmitt had cash and cash equivalents of roughly $1.05 million (down from $4 million as of May 2021) and a working capital deficiency of $1.8 million, reporting a net loss of $3.28 million for the fiscal year.

The company had announced plans in April to spin off its non-CPG measurement division and focus solely on Ample Hills, the report noted. However, the planned reverse merger needed to enable the move was terminated by its potential partner.

On top of its financial difficulties, the company also faced a lawsuit last year when a store manager alleged he was fired in retaliation soon after filing a complaint about sexual harassment issues and questioning the store’s COVID-19 protocols.

Founded in 2010 by Brian Smith and Jackie Cuscuna, Ample Hills gained notoriety as part of a wave of indie-owned creameries that rose to prominence. Despite raising over $12 million in funding and positive sales growth, after building a new factory and opening 16 stores, the company ran out of working capital. Unable to find investment partners, Ample Hills declared bankruptcy in March 2020.

Portland, Oregon-based Schmitt Industries, where Zapata was CEO, assumed control of the ice cream maker in June 2020, purchasing Ample Hills for $1 million. According to an SEC filing, Schmitt valued Ample Hill’s assets at $13.95 million and its liabilities at $11.10 million.

A 2021 website post by Schmitt’s investor Eagle Point Capital notes that Zapata quickly rehired 90% of employees, reopened ten New York locations and brought on former Ben & Jerry’s VP of sales Chuck Green as COO. At the time, Eagle Point believed Ample Hills could ultimately be sold once it achieved roughly $40 million in revenue.

“Venture capitalists once valued [Ample Hills] at $40-45 million. You can argue whether that price was right or wrong, but investors obviously believed it was worth at least that much,” Eagle Point’s briefing noted. “In five years we think the ice cream segment could generate substantially more revenue than its ~$10 million today. Even a 10% margin would produce a meaningful earnings stream.”

“We’re virtually certain Ample Hills is worth more than the $1.6 million Schmitt paid for it. At 2x sales, half of its prior private-market valuation, Ample Hills would be worth $5 per share. At 4x sales, it’s worth $10 per share,” the document continued. “At $6.50 per share today, we don’t need a spreadsheet to [tell] us that the company remains cheap.”

Zapata did not reply to a request for comment.