|1||Over 3X growth for total revenue since December, 2019.|
|2||First advertisement has been successfully tested and is generating sales and reoccurring revenue.|
|3||3,062 long-form advertisement airings for over 1,500 hours of airtime through 9/30/20.|
|4||We don’t compete for premium retail shelf space or attention on online market places.|
|5||Almost 2,700 customers acquired through 9/30/20.|
|6||Recurring revenues through proven, profitable subscription model with attractive margins.|
|7||Our team has decades of experience creating/managing, health/wellness direct marketing campaigns.|
|8||The projected collective market for CBD sales in the U.S. will surpass $20 billion by 2024.|
I personally know the Founder of Hempzene, Mike Alden. We have been friends and business colleagues for many years. I can say this without hesitation, he is one of the smartest business people I know, he has great character, and in my book is a true rock star. When Mike shared the opportunity to invest in Hempzene with me, I could quickly see it was a no-brainer! It's a great product, great company, and, it's run by a great leader. To top that off, it's perfect timing to be in the "hemp" business.
The Path To Providing High Quality Full Spectrum CBD Through Direct Marketing
Hempzene™ sprouted organically through our executive team’s decades of direct response experience in the marketing and fulfillment of a variety of products in the health and wellness areas that help people on a personal level.
In order to be heard in a crowded room, you need to stand out by raising your voice. We have crafted a formula that gives us the ability to do just that in the explosive CBD market. Our team has perfected the art of telling a better story through its years of experience in the health and wellness industry which it has now applied to a proven long form advertisement which is already generating sales and reoccurring revenue.
As a team, we are constantly searching for innovative and beneficial products to bring to market and the CBD market was the logical next step. CBD has become increasingly accepted and integrated into mainstream society and the projected collective market for CBD sales in the U.S. will surpass $20 billion by 2024.
What Sets Our Marketing Apart
As we mentioned before, in order to be heard in a crowded room, you need to stand out by raising your voice. One way we do this is by producing informative and entertaining long-form advertisements which capture the audience’s attention from the moment they tune in. A long form television advertisement lasts significantly longer than a regular commercial (nearly a ½ hour (28:30)) allowing it to act as a stand-alone program.
The Customer Market Barrier Solution
Long form advertisements are the perfect mechanism for overcoming the main challenges marketers face in the CBD market; consumer lack of knowledge and consumer skepticism. This lack of understanding regarding cannabis-derived products, what is legal and what isn’t, what is recreational, what is medicinal and where exactly CBD fits in can be daunting and confusing. Additionally, as with any emerging product category, high consumer demand produces bad actors. Misinformation and outright deceptiveness as to ingredient strength and purity coupled with outlandish and over-the-top “cure all” claims are leaving many would be customers skeptical.
Long form advertisements overcome these challenges by presenting more details about a brand and CBD in general and allowing more time to present a persuasive call to action. Ultimately, this drives more qualified leads resulting in higher customer conversion rates and a lower overall cost per acquisition. Our long form ads run nationally across numerous networks.
Less expensive long form media rates allow us to stretch a dollar further while still capturing a larger market share of new customers. Current industry leaders pay a premium price for shorter, less informative and less educational ads. To our knowledge, no one else is utilizing long form advertising in the CBD market like we’ve been able to do with other health and wellness products for almost two decades.
What Sets Our Products Apart
While CBD is one of the fastest growing health and wellness products on the market, we were not interested in “jumping on the bandwagon.” We could have easily rushed to market and come out of the gate with an inferior product. However, we took our time to focus on bringing superior CBD products to market which will provide the ultimate overall benefits to the mind, body and spirit and meet our high standards for quality and effectiveness.
Hempzene™ Herbal Formula
Hempzene's high potency CBD Herbal Formula is one of the few USDA certified organic CBD oils on the market and is the only CBD product to combining full spectrum CBD with many Endocannabinoid boosting plants such as Black Pepper, Echinacea, Cacao, Turmeric, Helichrysum, nutmeg and Cinnamon. This powerful and synergistic blend of multiple phyto-cannabinoids nourishes the whole Endocannabinoid system.
Hempzene™ Pain Relief Cream
Hempzene's Relief Cream combines full spectrum CBD extracted from high-grade hemp ensuring with additional natural substances and nutrients, such as aloe vera, cocoa butter, chamomile and other key ingredients to provide cool, refreshing and invigorating relief.
Where We're At and Where We're Going
The great news is we've been out of the development phase for quite some time. Our quality products are already developed and we have a completed and proven long-form advertisement out-of-the-box and generating sales and recurring revenue. Capital will be used right away to generate immediate revenue through the purchase of media.
Our team is led by company founder Michael Alden. His proven track record is evidenced by his being named by the Boston Business Journal as one of Boston’s “40 Under 40” and being awarded the 2016 SmartCEOs Future 50 Awards based on his accomplishment of growing a small call center into a comprehensive multi-million dollar marketing management company ranked by Inc. Magazine for three years in a row as one of the nation’s 5000 fastest-growing private companies.
Hempzene has financial statements ending September 30 2020. Our cash in hand is $33,611.39, as of October 2020. Over the three months prior, revenues averaged $57,755.81/month, cost of goods sold has averaged $9,096.58/month, and operational expenses have averaged $70,274.75/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 market high-quality health and wellness CBD products directly to the consumer predominantly via informative long-form television media and online content. Many times companies with great products and packaging overlook the most important factor in generating sales and revenue. We have not only perfected the art of telling a better story, we have a proven long form advertisement that is already generating sales and reoccurring revenue.
In 5 years, we hope that the brand Hempzene will become synonymous with excellence and superiority in order to become a leader in the CBD market by providing high quality educational content / products that breed trust and confidence.
Milestones we hope to achieve:
-Q4 2020, revenues over $1M/test long form radio ads.
-Q1 2021, test direct mail
-Q4 2021, expand into retail.
-Q3 2022, cust. acquisition rate of 100,000 new buyers/month.
These are forward looking projections that are not guaranteed.
Natural Solutions Direct, Inc. was incorporated in the State of Delaware in June 2020. Hempzene division of Nature Refined LLC is a company that developed, tested, and launched Hempzene. On July 1, 2020 Hempzene was sold to Natural Solutions Direct Inc.
Since then, we have:
Historical Results of Operations
Our company was organized in June 2020 and has limited operations upon which prospective investors may base an evaluation of its performance.
Related Party Transaction
Refer to Question 26 of this Form C for disclosure of all related party transactions.
Liquidity & Capital Resources
To-date, the company has been financed with $150,000 in debt.
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 4 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 3 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
Natural Solutions Direct, Inc. cash in hand is $33,611.39, as of October 2020. Over the last three months, revenues have averaged $57,755.81/month, cost of goods sold has averaged $9,096.58/month, and operational expenses have averaged $70,274.75/month, for an average burn rate of $21,615.52 per month. Our intent is to be profitable in 24 months.
Since September 2020, there have been no materials changes in finances or operations. Media performance is continuing on-trend.
As an existing brand that is already producing revenue, the bulk of our expenses stem from purchasing advertising media time and much of the funds raised will be used for this purpose in the next 3-6 months. More ad time means more phone traffic which ultimately means more sales. Therefore, we hope to achieve significant increases in both sales and expenses over the next 3-6 months. In the next 3-6 months we hope to generate $350,000 of revenue with an expected loss of $35,000 in total, and an expected 350 customers on monthly continuity. We believe that we'll be able to reach consistent profitability within 24 months as we acquire recurring revenues through our proven subscription model. These projections cannot be guaranteed.
Owner / Operators may lend additional funds to provide additional short-term funds.
The Company and its business will be subject to the risks generally incident to the ownership and operation of a business, including the uncertainty of cash flow to meet fixed obligations, adverse changes in national economic conditions, changes in the investment climate, adverse changes in local market conditions due to changes in general or local economic conditions, availability of funds for financing, imposition of price controls, changes in applicable taxes, fluctuation in other operating expenses, governmental rules and fiscal policies, uninsured losses, and other factors which are beyond the control of the Company.
The health and wellness industry, including the CBD market, is subject to regulation by numerous national and state agencies including but not limited to the FDA and the FTC. Federal, state and local municipalities may adopt laws which may be counter to the success of CBD products. We cannot predict the nature of any such future laws, regulations, interpretations or applications, nor can we determine what effect they could have on the Company.
We rely on technological systems to manage customer orders and provide client services. While we can migrate solutions to mitigate damages, a disruption in such systems could have a negative impact on our business.
Some of the products and services we source and manage are provided by third parties. Failure of our third-party partners to provide goods and services in the quantities, at the quality levels or at the times required by the Company, or if their services are interrupted for reasons beyond our control or an inability by the Company to develop alternative sources of supply or service if required, could have a materially adverse effect the Company. While we have product safety and quality standards in place, if our third-party suppliers provide us with inferior products, the Company may be required to conduct costly product recalls and may be exposed to bad publicity or product liability claims which would have a negative impact on the Company.
Our future success depends on the efforts of a small management team. The experience and relationships we have developed over the years extend from the executive team currently in place. If we are unable to retain key management, or are unable to economically replace them, our business model could be negatively impacted. We will rely significantly on the skills of the company’s founder. His resignation, death, or illness, could have a negative impact on the Company. The Company does not currently carry “key man insurance” to protect against this risk. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
The Company will face competition from local and national competitors some of which may have superior capital and resources than that of the Company. The entry of new companies would result in substantially greater competition for the Company. There can be no assurance that the Company will be able to offset the adverse effect on potential revenues resulting from competition by increasing the number of its customers, by generating higher revenue, by reducing costs or otherwise.
No assurance can be given that hemp CBD will always be obtainable at favorable prices or that the market for such hemp will hold in value. Additionally, Federal, state and local governments may create and assess new forms of taxes on the sale, processing and/or storage of hemp and CBD products which may raise the cost of goods potentially to the point of excessive prices for the average consumer.
To date, large social media and search engine companies have refused to allow the marketing of CBD products on their platforms. While we rely a great deal on television marketing, there can be no assurance that the rules related to marketing CBD on television will not change which could have a negative effect on the Company and its profitability.
Certain events concerning financial institutions may occur, including, but not limited to the freezing of certain bank accounts, payment processing shut downs so that consumer transactions fail to process or that banking/financing service providers raise prices out of the realm of profitability for the Company.
The Company was recently formed and has only a limited operating history on which to base an evaluation upon. The Company recently purchased the existing campaign for Hempzene including all rights related
The Company will seek to protect its proprietary rights through a combination of confidentiality agreements and copyright, trademark and trade secret laws and protections. If we are unable to protect our intellectual property, the value of our brand and other intangible assets and the Company may be adversely affected. There can be no assurance that we will be able to get federal protections for our intellectual property or defend our current trademarks and future trademarks and copyrights or that we may operate without inadvertently infringing on the proprietary rights of others. Monitoring and protecting our intellectual property against unauthorized use by third parties can be expensive and time-consuming. There can also be no assurance that a third party will not assert infringement claims with respect to our products. Any litigation for either defending or protecting our intellectual property could have material adverse effect on our business regardless of the outcome of such litigation. Additionally, some of the Company’s assets, possibly including intellectual property, may be pledged as collateral to third-party lenders.
As of the initial date of this Offering, the Company’s management owns a majority of the equity in the business and upon completion of this Offering, will continue to own a majority of the outstanding equity and will be able to continue to control the Company. All decisions on the management of the Company will be made exclusively by the management of the Company. The management, and, ultimately, the Board of Directors, will have complete discretion regarding the conduct of the business of the Company, including, but not limited to, administration, management, sale or refinancing of the business, expansion activities, other acquisitions, etc. Because no voting rights exist for an investor unless and until a certain triggering liquidity event occurs, such as a sale of the Company or an IPO, the holders of a majority-in-interest of voting rights in the Company could limit the investor’s rights in a material way as the Company may never undergo such an event.
Investors will be entrusting the use of the funds obtained hereunder to the Company’s Management, and the success of the Company will be significantly dependent upon the discretion and judgment of Management with respect to application and allocation of the net proceeds of this Offering. While the net proceeds from this Offering will be used for the purposes described under “Use of Proceeds,” the Company reserves the right to use the acquired funds for other similar purposes not currently contemplated which it deems to be in the best interests of the Company in order to address changed circumstances or opportunities.
Although the Company believes that there are good reasons for consumers to pay for the goods and services of the Company, such beliefs are based on assumptions that may not coincide with customer needs and wants. Even if the Company’s offerings are attractive to potential customers, significant effort, skill, and the expenditure of significant capital will be necessary to get the message to potential customers in order to sell them the Company’s goods and services. There is, therefore, risk that the Company may not be able to attract sufficient business to become profitable and the projections of the Company may not come to pass.
There may be shortages or increased costs of fuel, natural gas, water, electric power or equipment, or allocations thereof by suppliers or governmental regulatory bodies. The Company is unable to predict the extent to which shortages, increased prices or allocations will occur and the degree to which such events will influence the ability of the Company to meet its objectives. If shortages, price increases or allocations occur, the operation of its business by the Company may be adversely affected.
The occurrence of a natural disaster, pandemics (including but not limited to COVID-19), federal and local governmental actions, fire, power loss, telecommunication failure, technological virus attack and/or other unanticipated events could cause interruptions in the goods and services provided by the Company which would have a material adverse effect on the Company.
The Company may never receive a future equity financing or elect to convert the securities upon such future financing. SAFEs may only convert to equity if certain triggering events occur and the Company may never undergo such a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions. Unlike convertible notes and other securities convertible into or exchangeable for preferred stock, the SAFEs do not have any “default” provisions allowing the holders to demand repayment. We have the discretion as to whether or not to enter into a transaction that causes the conversion of the SAFEs into preferred stock, and the holders have no right to demand such a conversion.
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