|1||The demand for Hoop Tea is spreading faster than we can keep up with it. Every dollar invested translates to increased sales.|
|2||The Flavored Malt Beverage category is booming, surpassing craft beer. We are one of the only craft brands pioneering the category.|
|3||In a single summer, (as a division of SB1 Inc.) we achieved $1.3mm with only one full time employee and no outside investment!|
|4||Hoop Tea's organic growth and demand from our loyal tribe of fans has landed our brand in the country's top bars and chain stores.|
|5||We've assembled a leadership team of industry superstars bringing experience from established companies such as Heineken and Molson.|
Born in a tiny brewery on the beach of Ocean City MD, Hoop Tea is a brand of tea-based alcoholic beverages for modern consumers who prefer products with ‘clean labels’, low calories, and thoughtful ingredients.
Hoop Tea was started by free spirited individuals who decided to quit their jobs and move to the beach. While simply "creating things they wished existed", the Hoop Tea team quickly became pioneers of the exploding "beyond beer" alcohol category.
According to Danny, the founder of Hoop Tea;
"I've always been careful about what goes into my body, but I grew frustrated that I couldn't find any clean-label or organic options when I joined my friends for drinks. I watched the change in grocery and convenience stores as they focused on better-for-you options when consumers began to seek alternatives to artificial, sugary, and high calorie foods. Unfortunately liquor stores and bars have shelves that look the same as they have for the past 40 years. We believe there is a better way. Using thoughtful ingredients, we've created a beverage to be enjoyed without great sacrifice to your health or compromising on flavor. We create options for people, like me, who are concerned with their wellness, but still want to enjoy a vibrant social life."
I’ve been in the hospitality business my whole life. I began by parking cars, washing dishes, and eventually bootstrapped my way up to owning my own bars and restaurants. In 2013 I fulfilled my dream of opening a brewery on the beach of Ocean City MD. We brew our beer with our toes in the sand and the sun on our faces, so it’s fitting that this is where Hoop Tea was born.
In Ocean City we spend our mornings surfing or practicing yoga, then re-fuel at a local fresh juice shop or organic market. After a day's work at the brewery we'll usually meet up with friends at a local beach bar to watch the sun set. I noticed that my healthy habits had to be left at the door, and I heard the same complaint from many of my friends. I couldn't help but think there was a glaring need for something different and, since I owned a brewery, I thought there was no one better suited to craft a concoction to make all my juice drinking, yoga practicing, surf riding friends have a happier happy-hour.
We launched the first iteration of Hoop Tea a few years ago after making some small batches in the brewery. We immediately got bombarded with inquiries from customers as well as bars and retail stores asking where to purchase our product. The following year we decided to package our alcoholic tea in eco-friendly 3 liter pouches and distribute them to local bars. We made 4 flavors including White Mango, Watermelon Mint Green Tea, Peach Tea Lemonade, and Sweet Lemon. In no time our little brand gained a cult-like tribe of loyal followers and the demand is spreading faster than we can keep up with it.
Our products are created with natural ingredients, purified water, organic cane sugar, and a thousands of years old process of fermenting natural sugars to create alcohol.
Today's consumers are increasingly turning towards emerging brands. They place importance on authentic brand stories and distrust the advertising of large companies. This trend has helped Hoop Tea achieve remarkable sales growth and a cult-like following in the Mid-Atlantic region.
While the "beyond beer" or "flavored malt beverage" category has dwarfed the growth of almost all alcohol categories, including craft beer, Hoop Tea remains one of the only craft brands achieving success against the larger competitors.
Note: the above shows sales of Southbound One, Inc., who have conducted all historic sales for Hoop Tea. Hoop Tea, Inc., the company conducting this raise, is a new entity.
While the Hoop Tea brand has shown remarkable traction with limited resources and almost no employees, we've decided it's time to 'pour fuel on the fire' by hiring a team of superstars to handle sales, marketing, production, and finance.
We have the unfair advantage of being an exciting, free spirited, and authentic brand which no big competitor can recreate. Raising capital is our last hurdle to becoming an unstoppable brand.
Hoop Tea has financial statements ending December 31 2019. Our cash in hand is $100, as of September 2019. Over the three months prior, revenues averaged $0/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $0/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.
Hoop Tea, Inc., a recently formed Maryland corporation, was organized to acquire and manage the Hoop Tea brand. Hoop Tea is a craft alcoholic beverage brand for modern consumers who prefer products with “clean labels,” low calories and thoughtful ingredients. The Hoop Tea brand was created by Southbound One, Inc. as a test in 2015 and went into initial production in 2016, and, as such, all historical sales activities relating to the Hoop Tea brand were conducted by Southbound One, Inc.
Prior to the initial closing of this offering, the Hoop Tea trademark and other related intellectual property (the “HTIP”) will be sold and transferred to Hoop Tea, Inc., by Southbound One, Inc. in exchange for shares in Hoop Tea, Inc. Along with and at the time of the HTIP transfer, Hoop Tea, Inc. and Southbound One, Inc. will enter into a royalty and services agreement pursuant to which Hoop Tea, Inc. will license the HTIP to Southbound One, Inc., which under its brewing license will manufacture, package, inventory and distribute the Hoop Tea line of products. In addition to licensing the HTIP to Southbound One, Inc., under the licensing and services agreement Hoop Tea, Inc. will provide services, and may, from time to time, advance funds, to Southbound One, Inc., relating to materials sourcing, manufacturing and equipment acquisition and support, product marketing support, sales support, logistics, warehousing, and other administrative services. In exchange, Hoop Tea, Inc. will receive from Southbound One, Inc. royalties from its sale of Hoop Tea in addition to the return of any funds advanced to Southbound One, Inc. under the royalty and services agreement.
Southbound One, Inc. has been manufacturing and selling Hoop Tea branded products for the past three years. Although under a new corporate structure, Hoop Tea, Inc. intends to replicate the business model and sales strategies established by Southbound One, Inc. into new territories that fit with the Hoop Tea brand strategy. Southbound One, Inc., will continue to be responsible for manufacturing, packaging, distributing and selling the Hoop Tea branded products. There can be no assurances, however, that Hoop Tea, Inc. will be able to replicate the sales levels or results achieved by Southbound One, Inc.
The history of the Hoop Tea brand and any related historical sales results data presented in this offering statement or in the attached exhibits relate to the historical business of Southbound One, Inc. and are being provided for illustrative purposes only.
Milestones Achieved by Southbound One, Inc.
Since Hoop Tea was created:
· The demand for Hoop Tea has been increasing faster than Southbound One, Inc. could keep up with. Hoop Tea, Inc expects that every dollar invested will translate to increased sales.
· The Flavored Malt Beverage (FMB) category is booming, and its growth rate is surpassing that of craft beer. Hoop Tea is one of the only craft FMB brands pioneering the category.
· In a single summer, Southbound One, Inc. achieved $1.3 million in sales of Hoop Tea with only one full time employee and no outside investment!
· Hoop Tea's organic growth and demand from its loyal tribe of fans has landed its brand in some of the country's top bars and chain stores
· Hoop Tea, Inc. has assembled a leadership team of industry superstars bringing experience from established companies such as Heineken and Molson.
There can be no assurances that Hoop Tea, Inc. will be able to replicate or build on any of the historical results achieved by its affiliate, Southbound One, Inc.
Historical Results of Operations
Our company was organized in July 2018 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
Hoop Tea, Inc. plans to use the proceeds as set forth in this Form C under "Use of Funds". There are no other sources of capital in the immediate future, although the founder can contribute capital to the business if needed.
We will likely require additional financing in excess of the proceeds from this offering in order to perform operations over the lifetime of the Company. We plan to raise additional capital in 12 months although there can be no assurances that we will be successful in this endeavor at all or on terms favorable to us. 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
Hoop Tea Inc. cash in hand is $100, as of September 2019. Over the three months ending in September 2019, revenues of Hoop Tea, generated by Southbound One, Inc., averaged approximately $140,000 per month, cost of goods sold has averaged $94,000 per month, and operating expenses averaged $49,000 per month. Hoop Tea, Inc. expects that Southbound One, Inc. will continue to be able to sell the Hoop Tea brand and generate royalties for us. The intent of Hoop Tea, Inc is to be profitable through the receipt of royalties in 8 months.
We believe that we'll be able to reach consistent profitability if our Hoop Tea branded products get into large chain stores. We are're currently in discussions with some larger stores, and now that we believe our supply chain, through the historical efforts of Southbound One, Inc. has been stabilized, we feel ready to enter into these stores. We cannot assure you, however, that we will be successful in getting the Hoop Tea brand of products in any of the chain stores that we may target.
We have new flavors planned that, we expect, will allow us to sell "off season" flavors. We anticipate those flavors to be ready to be manufactured in the next 3 - 6 months.
The nature of the business for Hoop Tea products is currently highly seasonal, with the majority of the revenue being generated in May through September. Accordingly, we expect royalty revenues earned on the sale of Hoop Tea products for the six months ending in May 2020 to be approximately $230,000, and the our total operating expenses to be approximately $290,000. It should be noted that the royalty revenue earned by Hoop Tea, Inc. is not the same as the gross sales of the products generated by Southbound One, Inc., as there are product manufacturing costs associated with those gross sales.
We expect (although cannot guarantee) to raise additional capital in 12 - to 18 months following this offering, from institutional investors.;
We plan on introducing our products into territories that are less seasonal in nature than the territories in which Hoop Tea is currently sold.
We propose operations under the business plan discussed herein. Potential investors should be made aware of the risk and difficulties encountered by a new enterprise in the alcoholic beverage industry, especially in view of the intense competition from existing businesses in the industry. We are not profitable and the business effort is considered to be in a development stage. We must be regarded as a development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject.
There is no assurance that we will ever operate profitably. There is no assurance that we will generate revenues or profits, or that you will receive a return on your investment
Our manufacturing and marketing service provider, Southbound One, Inc., may be subject to future governmental regulations. Aspects of our business and our products may be regulated at the local, state, and federal levels. Hoop Tea branded products may be subject to state, local and federal environmental laws and regulations, including those relating to the handling and storage of hazardous materials. We and our products may also be subject to significant governmental regulation relating to labor conditions, safety in the workplace, healthcare and other human resource issues. The nature and scope of future legislation, regulations and programs cannot be predicted. While we anticipate that we and our products will be in compliance with all applicable governmental regulations, there still may be risks that such laws and regulations may change with respect to present or future operations and such changes may result in added costs to our manufacturer and distributor, Southbound One, Inc. Such additional costs would increase the cost of investments and operations and decrease the demand for products and services resulting in reduces sales of our Hoop Tea brand and, thus, reduced royalties from Southbound One, Inc. Our subcontractors will be ultimately responsible for compliance with such regulations and for obtaining and maintaining all required permits and licenses. Such compliance may be time consuming and costly, and such expenses may materially affect our future ability to break even or generate profits.
We rely entirely on our contract with our affiliate, Southbound One, Inc., for manufacturing and distribution of Hoop Tea and marketing our products through licensed alcohol distributors. Although we believe that our management services provided to Southbound One, Inc. will mitigate a number of operating risks, any breach or termination of this contract will negatively affect our sales and distribution, decreasing our revenues. It may be difficult, expensive, or impossible to find a replacement supplier/distributor.
Third party distributors of Hoop Tea may not perform up to expectations for our products, and it will be difficult to remove and replace underperforming distributors once they are established within a territory. Changing distributors that are not performing to expectation can be time consuming and costly.
We operate in competitive markets and our future success will be largely dependent on our ability to provide quality products and services at competitive prices. The beverage market is intensely competitive and sensitive to national and regional economic conditions. Demand for the products that we distribute may be adversely affected by consumer spending, which may be adversely impacted by economic conditions such as consumer confidence in future economic and business conditions, interest and tax rates, employment levels, salary and wage levels and weather patterns affecting food production.
We rely on consumers’ demand for our products. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, public health policies, and changes in leisure, dining and beverage consumption patterns. Our continued success will require us to anticipate and respond effectively to shifts in consumer behavior and drinking tastes. If consumer preferences were to move away from our Hoop Tea brand, in any of our major markets, our financial results might be adversely affected.
Our success is also dependent on our product innovation, including maintaining a robust pipeline of new products, and the effectiveness of our product packaging, advertising campaigns and marketing programs, including our ability to successfully adapt to a rapidly changing media environment, such as through use of social media and online advertising campaigns and marketing programs. There can be no assurance as to our ability to develop and launch successful products or to effectively execute advertising campaigns and marketing programs that resonate with and appeal to consumers. Both the launch of new products and advertising campaigns are inherently uncertain, especially as to their appeal to consumers. Our failure to make the right strategic investments to drive innovation or successfully launch our products or variants of established products could decrease demand for our products by negatively affecting consumer perception, as well as result in inventory write-offs and other costs.
Our future success depends on the efforts of a small management team including our founder, Danny Robinson. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
We will rely upon multiple co-packers to produce our product. Our ability to grow our business and customer base will depend upon smoothly functioning relationships with our manufacturing and fulfillment partners and our ability to integrate their roles with our online marketing and customer service operations. If we are unable to smoothly integrate these third party operations into our business, or if we are unable to establish and maintain strong relationships with these key outside parties, our ability to successfully deliver quality products to our customer in a timely manner will be adversely affected, and our ability to achieve profitability will be severely impaired.
Intellectual property – although the company's recipes are closely held and guarded secrets, industrial espionage is a relevant risk, such as from illegal acts of potential competitors who might seek to gain access to the recipes, reverse engineer the ingredients or production methods, or bribe individuals in the supply chain to provide information, trade secrets, or intellectual property to the detriment of the company. Additionally, our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We have been granted trademark registration covering our Hoop Tea brand and products and we expect to continue to file additional trademark applications seeking to protect newly-developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any future trademark applications. We could also, by omission, fail to timely renew or protect a trademark and our competitors could challenge, invalidate or circumvent any existing or future trademarks issued to, or licensed by, us.
Maintaining a good reputation is critical to selling our Hoop Tea branded products. Our reputation could be impacted negatively by public perception, adverse publicity (whether or not valid), negative comments in social media, or our responses relating to:
● a perceived failure to maintain high ethical, social and environmental standards for all of our and our affiliate’s operations and activities;
Certain of the Hoop Tea flavors may have seasonal appeal and if all of our manufactured inventory does not sell in the appropriate season, we may be left with excess inventory that would have to be carried over to the next year. This might negatively affect our cash flow and royalty income stream
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