Léon & George

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.

Overview

We make it easy for people and companies to buy fully-prepared plant and pot sets, in sizes ranging from small tabletop plants to large 7 foot trees. The sets are delivered to customers’ home and we provide lifetime access to expert plant care advice through our Plant Doctor service. It’s plant buying for the 21st century.

We aim to be the leader of the plant space – the first place everyone thinks of when they need plants. In the same way Casper and Away have dominated the mindshare of the mattress and travel spaces, we want to be the brand that continues to innovate in the plant industry and provides an unbeatable service, so that you never think of going anywhere else. We’ll have a retail location in every major US city, as well as nationwide coverage of our white-glove delivery service.

Milestones

Leon & George, Inc. was incorporated in the State of Delaware in June 2017.

Since then, we have:

• $3 million in revenue from 10,000+ customers
• $48 billion US market and growing. Consumer spending on plants is up 60% since 2016.
• Part of Y Combinator S17
• 5 star average rating from customers from hundreds of reviews on Yelp, Google and our website
• Established brand and well-developed supply chain, with a clear path for sustained growth
• Majority of revenue has come from California focus, and expansion nationwide now offers a clear path to future growth

Historical Results of Operations

Our company was organized in June 2017 and has limited operations upon which prospective investors may base an evaluation of its performance.

• Revenues & Gross Margin. For the period ended December 31, 2018, the Company had revenues of $1,349,052 compared to the year ended December 31, 2017, when the Company had revenues of $386,454. Our gross margin was 56.36% in fiscal year 2018, compared to 51.08% in 2017.
• Assets. As of December 31, 2018, the Company had total assets of $117,565, including $74,356 in cash. As of December 31, 2017, the Company had $130,532 in total assets, including $113,218 in cash.
• Net Loss. The Company has had net losses of $177,355 and net losses of $39,993 for the fiscal years ended December 31, 2018 and December 31, 2017, respectively.
• Liabilities. The Company's liabilities totaled $397,442 for the fiscal year ended December 31, 2018 and $174,132 for the fiscal year ended December 31, 2017.

Liquidity & Capital Resources

To-date, the company has been financed with $347,000 in SAFEs, $19,994 of convertible securities, and $10,076 in debt.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 14 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 12 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

Leon & George, Inc. cash in hand is $101,838.06, as of October 2019. Over the last three months, revenues have averaged $213,550/month, cost of goods sold has averaged $85,210/month, and operational expenses have averaged $144,670/month, for an average burn rate of $16,330 per month. Our intent is to be profitable in 4 months.

We have grown monthly revenue significantly since the end of 2018, and in the period of January–August 2019 we made more revenue than we did in all of 2018. 

We have also greatly increased the number of products available to customers. Our new small plants were introduced early this year, which lowered our entry price point to just $69. Our large plants also went from being available just in the SF/LA area to now the entire US market. We also introduced a number of accessories like watering cans, plant stands, and fertilizers, all of which have contributed to revenue growth.

Our operations center in Los Angeles has grown to 5 times the size it was last year, and now handles the majority of shipping operations. 

We have also been able to reduce our COGS and increase our contribution margin by buying in bulk, finding new suppliers, and negotiating discounted rates with our existing suppliers. Our marketing expenses have stayed relatively stable, but we’ve been able to get significantly better performance out of our paid ads efforts on Google and Facebook, so the ROI has increased.

We expect revenue to increase further as we head into the 2019 holiday season and beyond, which presents an opportunity for gifting and increased sales. At the same time we are expanding our product availability and ramping up marketing efforts, both of which are expected to contribute to top line revenue growth. Our fixed costs will be offset by this growth and we expect to reach profitability within 6 months. In the event that we need more capital, we have secured several business lines of credit which can cover our expenses for up to 6 months.

If needed, we have business lines of credit we can rely on for additional capital.