INVESTMENT OPPORTUNITY
THE HERBAL BOTANICAL PRODUCTS INVESTMENT OPPORTUNITY
We are offering an opportunity to Accredited Investors to participate in a round of Bridge Financing in the total amount of $300,000.00, of which $60,000 is already invested by the lead investor. This capital will be used to accelerate the Company's distribution network, expand our Omnichannel Digital Marketing Strategy, and add new products. For this investment, the bridge investors will receive a total of 750,000 membership units of Herbal Botanical Products, LLC at a pre-money valuation of $2.0 million ($.40/membership unit).
The Bridge Financing is being offered with a minimum investment of $10,000 in exchange for 25,000 membership units representing a ½ of 1% fully diluted ownership of the Company for the minimum investment. Accredited Investors can invest additional capital in $10,000 increments each representing an additional ½ of 1% ownership of the fully diluted ownership of Herbal Botanical Products.
THE TIMING FOR THE BRIDGE FINANCING IS PERFECT
As all investors know, timing is everything. Too early is just as bad as too late. This is the perfect time in the developmental cycle of Herbal Botanical Products to make an investment. As we have pointed out the risk profile have been materially improved over the last 18 months as management has improved the operational profile of the Company.
The following illustration of an Investment Risk Analysis shows the difference in the risk return profile hypothetical risk adjusted position that management assumed when the initial seed developmental capital was invested verses the investment of the proposed Bridge Financing growth capital.
There have been numerous quantitative studies that try to determine the point of the business development cycle that offers investors the best reward-to-risk ratio when investing. These studies suggest that the optimal point in the business development cycle to invest capital is the point where the expected reward to risk ratio peaks, or in other words the risk and presumed reward would be in equilibrium.
Since management has invested time and capital to position the Company with positive operating momentum, all of the formative (early) risk has been extracted. There is a small amount of:
➢ Scaling Risk;
➢ Market Risk, and;
➢ Competitive Risk.
All these are forms of risks all investors and management assume when conducting business operations. They are, in the normal course of events, typical, and manageable.
From a Bridge Investors perspective, the risk profile of the Company is significantly lower now than when management put capital at risk, and therefore now is the perfect point in the business cycle to deploy growth capital and participate in future multiple expansion and enterprise valuation increases.
ADDITIONAL CAPITAL FORMATION PLANS
The Company anticipates additional financing of two consecutive Crowdfunding rounds under SEC 506c rules. Management decided to pursue Crowdfunding because:
Unaccredited Investors as not as sensitive to valuation as they are to identifying with the product or service as they relate more as consumers rather than investors.
Because of this the "investment" includes "Perks" which are products. The product portion of the monetary exchange is booked as revenue and the balance as capital contribution.
Therefore, we not only get capital, but the Company acquires customers, and some of those customer become Distributors.
The Crowdfunding capital plan is as much about distribution development as raising operational capital.
The anticipated valuation for those rounds should be substantially higher than the premoney valuation of the Bridge Round and the additional equity dilution has already been accounted for in the fully diluted ownership discussed above.
The benefit for the Bridge Investors is the chance to ride the Crowdfunding wave to higher equity valuations and expanded operations with increased sales and revenue, thereby further increasing the enterprise valuation.
Finally, the Securities and Exchange Commission recently modernized the Crowdfunding rules making the use of this capital medium even more attractive to issuers.
Crowdfunding I – Will begin as soon as the Bridge round is closed. We anticipate going to market for $500,000 at a pre-money valuation of $8,500,000, with a price per membership unit of $1.70 or a 4.25X valuation increase over the Bridge valuation.
Crowdfunding II - Will begin about three months after CFI tranche is closed. We need a small time-gap to accelerate operation and distribution development so as to justify a $15,000,000 per-money valuation, which would result in an offering price of $3.00 per membership unit or a 7.5X increase in equity value over the Bridge financing.
Both of these future rounds have been considered in the fully diluted ownership percentage as shown in the following capitalization table. In short, for every $10,000 invested in the Bridge Round, the Bridge investor owns one-half percent of Herbal Botanical Products on a fully diluted basis.
CAPITALIZATION TABLE - FULLY DILUTED
POTENTIAL EXIT SCENARIOS
Continued Operations with distributions
Look for an upstream merger partner (this was the preferred exit method in Telecom)
Become a consolidator to continue growth and then either merge with an even bigger partner or go public.