|1||A real solution to the opioid and prescription drug abuse epidemic.|
|2||Reach a market of over 118M Americans.|
|3||In-production Gen 1 generating sales now.|
|4||Gen 2 features Software-as-a-Service (SaaS) and compliance data revenue streams.|
|5||33% manufacturing cost reduction since Q2 2019.|
|6||Team of senior tech leaders, doctors, entrepreneurs with 120 years combined relevant experience.|
|7||IP protection: Utility patents and CIPs filed.|
|8||Marketing plan on schedule and showing strong signs of pandemic recovery|
The application of this technology goes far beyond safeguarding valuables from those in and around our lives. It extends to a variety of verticals where a voice activated lockbox system can be the key to children's safety and to the safety of our community's elderly, in the home environment and the work environment. The founder imagines a world where the elderly are reminded to take their medications once and only once per day, where curious teenagers are not at risk of taking pills that may have terrible effects on them, and where an electronic lockbox could be tied to lifesaving medical monitoring devices that could inhibit the taking of medications when they are not necessary. Working in concert with a variety of governmental agencies and independent companies wishing to create assisting living protocols that can ensure the correct people get the correct medications, LockedBrands can help take the health and welfare of our communities to the next level. I believe in the vision of the founder and I believe in the founder's ability to create success. I'm 100% behind LockedBrands, LLC.
Bottom Line: 33,000+ opioid involved overdose deaths and up to $600 billion, annually.
LockedBrands was founded in 2017 with the goal of creating a solution for the prescription drug abuse and opioid epidemic.
In 2017, the United States Department of Health and Human Services declared a public health emergency due to the opioid crisis. Founder & CEO, Justin Monger, like so many Americans, was directly impacted by the crisis. One of his siblings suffered from addiction issues her entire adult life. He saw first hand the devastation to the individual and the family.
The Solution: LockedBrands was founded in 2017 with the goal of securing opioids, controlled substances, and personal valuables. We initially launched on Kickstarter in late 2018 with The Pillar/StashCan: a portable, voice-activated, app-controlled personal lockbox.
The Pillar/StashCan is LockedBrands Gen 1 device. It is ideal for storing meds and other valuables. The Pillar/StashCan is in production and available online and in-stores. Our Gen 2 device, the Secure Med Manager (SMM) is in development now. The SMM not only secures meds, like The Pillar, but also dispenses them only to the patient, and only per the doctor's prescription, and generates a compliance record in the cloud. Further, if tampered with, it shuts down and notifies the healthcare team via the cloud. The proof-of-concept prototype, shown above, was completed in April 2020.
Watch this video to see all the capabilities The Pillar has to offer:
Watch this StashCan promotional video:
Dr. Sajad Zalzala, MD - Wefunder Investor
Briand Greer, Seed & Angel round Investor, Strategic Advisor for Asia
Bryan Waters, Angel Investor, Board Member & Strategic Advisor
The success of LockedBrands is driven by more than our day-to-day staff. It really is a team effort that includes our board members and investors.
The total addressable market for the Gen 1 device, the personal lockbox, is over 60M in the US alone. Taking into account Europe, Middle East, Asia, Latin America, and Asia Pacific the market sizing could easily triple.
Having The Pillar and The StashCan as identical products, but positioned for different market sub-segments, allows us to focus our marketing based on the customer's needs.
The rapidly emerging legal cannabis industry promises significant growth opportunities. Given its added complexities and regulations, we developed a second, standalone brand, StashCan, managed by ArxLabs, aimed at this expanding market. While non-traditional, we believe this dual-positioning and branding of our singular product will maximize growth.
The gadget-oriented/high-tech cannabis segment is estimated at 21M consumers. The StashCan is the leading storage solution for responsible cannabis users-- a smart device that provides access, sharing, logging, and voice-action through voice profiles from Amazon Alexa. The StashCan is also smell proof, delivering added discretion and peace of mind to its users.
LEADER IN RESPONSIBLE STORAGE
Whether prescription opioids, keys to a gun safe, or cannabis, consumers need a trusted solution for locking away and control access to personal items, particularly in the presence of children and young adults. LockedBrands will establish industry leadership by uniquely positioning Pillar and StashCan at the areas of greatest market need.
The StashCan has demonstrated traction since its launch through MasterMinded in February of this year. We have signed up over 60 authorized StashCan retailers since partnering with MasterMinded. Pillar sales through retailers is picking up in Q3 with Sharper Image, community pharmacies, and a specialized Blue Star Senior Tech retailer. The direct to consumer (DTC) sales channel, which has the best margins, will be the marketing focus with funding from this crowdfunding campaign.
Price point, coupled with key features like smell-proof, voice activation, and shared access put The Pillar (and StashCan) in a class of its own.
Key advantages include: Price point; Opens from anywhere; Voice-activation; Logs all access; Access without a key or combination; Smell proof. For more details on the competition, please see the Investor Deck under Downloads.
We have developed a proof-of-concept prototype for the SMM. It demonstrates some of the key functions as listed below. Be sure to watch the lab demo below as well.
The SMM has a significant total addressable market, (TAM), 58M in the US alone. As with the Pillar, taking into account Europe, Middle East, Asia, Latin America, and Asia Pacific the market sizing could easily triple.
Further, this sizing is limited to the two use cases above. Taking into account senior living centers, retirement homes, Alzheimer's facilities and assisted living centers, the potential market grows significantly.
While there are competitors trying to address both use cases described above, there is a very small number trying to address use case #2. As a result, the SMM for those with chronic pain or opioid misuse disorder is the primary market thrust for the near term. The secondary market for the SMM, Americans with two or more chronic diseases, will be addressed once the opioid version of the SMM is in low-rate-initial-production (LRIP), Q4 2021.
Reimbursement Strategy: The SMM has multiple value propositions across the entire health care eco-system, including prescription providers, distributors, manufacturer rep firms, health insurance companies, health care providers, senior and assisted living facilities, and home care providers. We are focused on selecting the right reimbursement strategy for a strategic partner in order to achieve quick market penetration.
Distribution & sales channels: We have a signed letter of intent to support opioid trials in early 2021. This will provide access to the Veterans Administration as well as provide trial data that will be crucial for the major pharmacy benefit managers (PBMs). Grants: We are always seeking non-profit partners for grants and other funding to support the on-going battle of the opioid crisis.
We have developed a proof-of-concept prototype for the SMM. It demonstrates some of the key functions as listed below. Be sure to watch the lab demo.
This is the primary market thrust for the SMM in the near term. The primary competition for the secure storage and dispensing of opioids is the Take-As-Directed (TAD). It dispenses individual pills, as opposed to pill packs, like the SMM. Therefore, the TAD cannot be used by the large number of patients that take opioids in combination with other controlled substances, eg opioids with anti-depressants. As a result, the market segment addressed by the SMM will not be the same as that addressed by the TAD. The SMM also has strong tamper detect logic that shuts down the unit and notifies the health care team through the cloud should someone attempt to break into it.
Key advantages include: Price point; Pill pack compatibility enables dispensing more than one controlled substance; Pill packs are very easy for a pharmacy to load; Anti-tamper provides strong motivation for patients not to tamper with the dispenser.
What can we accomplish with the funds?
Secure Med Manager Development Schedule
If fully funded, this crowdfunding capital raise will fund the SMM development through Requirements Definition, Detailed Design / FDA Registration and into some amount of LRIP 1 and Beta testing. The scope of Beta testing, coupled with the exact nature of our relationship with our strategic partner, will determine what effort will be needed to get into LRIP 2 production. LRIP 2 production will be followed by a regional roll-out of the SMM product.
LRIP - Low Rate Initial Production
LockedBrands has financial statements ending March 31 2020. Our cash in hand is $148,400, as of July 2020. Over the three months prior, revenues averaged $7,300/month, cost of goods sold has averaged $7,630/month, and operational expenses have averaged $26,000/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.
LockedBrands is a purpose driven company with the single goal of providing real solutions for the opioid and prescription drug abuse problem in this country.
In about 4 years we hope to sell in the 2024/2025 timeframe to a competitor, strategic partner or a new player in the Home Automation or Health Care industry.
LockedBrands, LLC was originally incorporated in the State of Florida on January 30, 2017. On June 28, 2019, the Company incorporated in the State of Delaware and dissolved their LLC in the State of Florida.
Since that time, LockedBrands has achieved the following major milestones:
- Executed a successful Kickstarter campaign
Mar - Jun 2019
- Delivered Kickstarter units, collected feedback, and incorporated fixes to improve the user experience and functionality while reducing manufacturing cost
- The Pillar is available on Amazon and through the LockedBrands online store.
- Raised capital - $350K Angel Investor raise through Aug 2019.
- Received 3000 production units from the manufacturer in China
- Amazon makes voice activation with voice profiles available for third party “Skill” developers. LockedBrands began developing the skill in earnest.
- Signed up Sharper Image and MasterMinded distribution.
- MasterMinded has over 5,000 brick and mortar smoke shops in the US
- Received POs for 500+ units
- Pandemic lockdown began in March – most stores with product had to close or go to curbside delivery, significantly impacting sales of this new product
- Closed out Angel Investor capital raise oversubscribed at $506K
- Secure Med Manager prototype available in the lab
- Received Amazon Alexa Skill Certification for Voice Activation with Voice Profiles
- This new capability is 100% backwards compatible and is now available for all existing and inventory units and does NOT require the purchase of any Amazon hardware
- This enables a $2.00 / unit manufacturing cost reduction while providing next generation voice activation and “voice ID” capability.
- Placed an order for 1000 units, with our manufacturer in China. PO was based on $36 / unit, a 33% reduction in unit cost from 2018
- Received Economic Injury Disaster Loan (EIDL) from the Small Business Administration
- First two EIDL applications were rejected. The third, and successful attempt, included a rigorous justification based on sales immediately prior to the Covid 19 lockdown.
- Sharper Image and MasterMinded distribution submit POs for 500+ additional units
- First indication that pandemic induced sales slump could be lifting
Historical Results of Operations
Our company was organized in June 2019 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 $295K in seed funding and $506K from Angel Investors, for a total of $801,000 in equity.
- After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 12 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 anticipate 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 about 12 months. Except as otherwise described in this Form C, we do not anticipate 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
- LockedBrands, LLC cash in hand is $148,400, as of July 2020. Over the last three months, revenues have averaged $7,300/month, cost of goods sold has averaged $7,630/month, and operational expenses have averaged $26,000/month, for an average burn rate of $26,330 per month. Our intent is to be profitable by the end of 2021.
- Our financial compilations are through Q1 2020. The pandemic all but halted the sales trajectory that began in Jan 2020. Q1 2020 revenue ~ $27K. Further, our ability to develop sales channels through college campuses and community pharmacies was severely impaired due to the pandemic.
- We believe, along with our existing distributor, MasterMinded, and online sales channel Sharper Image, that sales will improve in the near term. Through MasterMinded we now have product in stores in the US, Canada and Mexico, and retail stores are slowly beginning to open up again, as indicated by the three purchase orders for 500+ units that was received in the third week of July. That, combined with some initial sales in the community pharmacy and college campus channels, may result in selling all the available inventory during 2020, which is about 3700 units for about $240K revenue.
Selecting the right marketing partner and market sub-segment for launch that will provide significant, fast market penetration.
Our future success depends on the efforts of a small management team. 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.
Must be able to scale up from one state or region to the next, while accounting for different reimbursement strategies from one region to the next.
If the current trade/tariff war with China is not settled, we may have to execute a strategy to move enough content out of China so tariffs are not an issue. (Our factories in China are Taiwanese owned). However, this could result in a temporary hit to our margins as we move some operations out of China.
LockedBrands is in the early stage of a multi-year growth plan. Macroeconomic changes could slow sales growth.
LockedBrands has protected some of its core intellectual property with United States patents (Utility patents filed by LockedBrands, LLC, not yet granted). If these patents are challenged or overturned, this could aversely effect the company.
For LockedBrands to execute on its multi-year growth plan, it needs to add key people in target geographies to build sales channels and drive sales growth. If we are unable to hire these key people, it can potentially slow sales growth and could adversely effect the company.
COVID-19 has had an impact on our business. Beginning in March, shortly after a successful launch with a major distributor, stores were shuttered. And as of early-July, most remain shuttered, or are drive-through and/or curbside delivery only. However, as stores are slowly reopening across the US, inventory is moving and interest is on the rise. Given that, the extent and duration of the effects of the COVID-19 pandemic and economic downturn are difficult to predict, which makes our future performance more difficult to predict. If the COVID-19 pandemic and economic downturn persist, or if they worsen, we expect that our business will continue to be adversely affected, resulting in a further negative impact on our business, financial condition, results of operations and cash flows.
We are a growth startup company and are not currently profitable. We expect to need to raise additional capital to enter full scale production of the Secure Med Manager. We can give no assurance that we will successfully negotiate or obtain additional financing on terms favorable or acceptable to us, or at all. We do not have any commitments for additional financing. Our ability to obtain additional capital will depend on market conditions, the U.S. economy and other factors outside our control. If we do not obtain adequate financing or such financing is not available on acceptable terms, our ability to continue our operations would be significantly limited. If we are not able to sell all of the securities offered in this financing, or complete such additional equity or debt financing, we may not have the funds necessary to fully execute our objectives. Our failure to secure necessary financing on a timely basis when needed (including the maximum offering amount hereunder) could have a material adverse effect on our business, prospects, financial condition and results of operations.
Offerings under Section 4(a)(6) of Securities Act of 1933, as amended (the “Securities Act”), are exempt from state and federal registration requirements. Therefore, there is less disclosure of, or publicly available, information contained in this document than would typically be provided in a registered offering. While we have attempted to summarize the risks to the best of our ability, there may in fact be risks associated with participating in this offering, and Company-specific risks that have not been contemplated in this document.
Investments in private companies, particularly early stage companies such as us, involve a high degree of risk. Early stage companies are usually comparatively more vulnerable to developments such as rapid changes in technology, fluctuations of demand and prices and to marketing competition from larger, more well established competitors. Therefore, we cannot assure that we will ever achieve or maintain profitability from our operations.
The market values of investments in private companies (especially early stage companies such as us) are difficult to determine. They generally are subject to negotiations between company management and prospective investors, and may result in values that are highly arbitrary. Furthermore, a private investment made in our company will be illiquid and likely will be long term in nature and may require years from the date of initial investment before disposition, if ever. The value of your investment may be lost or substantially devalued at liquidity.
Neither the Convertible Promissory Notes to be issued in this offering (the “Notes”) nor the securities issuable upon their conversion will be registered under the Securities Act, or the securities laws of any state or other jurisdiction, and will not be subject to resale unless they are subsequently registered under the Securities Act and other applicable securities laws or an exemption from registration is available. Thus, there will no public market for the Notes or the securities issuable upon conversion of the Notes, and no public market is expected to develop.
Given the early stage of our company and the rapidly evolving nature of the markets in which we compete, we may experience significant fluctuations in our future operating results due to a variety of factors, many of which are outside our control. Factors that may adversely affect our future operating results include, without limitation, unforeseen development costs, variable operating costs, general economic conditions and market conditions, and the development or introduction of new technological innovations, products or services by our competitors. If we are unable to address the above factors, our operating results may fall below the expectations of management, which could adversely affect our business.
The state of US – China relations is a significant risk to price stability and long-term reductions in manufacturing costs of LockedBrands products. Further, there are multiple manufacturers in Asia that can produce LockedBrands products more cost effectively than China, regardless of tariffs. Given that, it would be prudent to mitigate this risk to our long-term competitive price position by developing a plan to move operations out of China. As a result, LockedBrands management has set aside budget within the proceeds of this crowdfunding raise to develop and implement the plan. (See Use of Funds for details.)
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