Cricket Flours Business Plan

perfect thank you my name is Charles Wilson this is Omar Ellis and our 13 member that can be today is Paul Butler but we are cricket flowers we are a new food ingredient platform company with our first line of products that’s gonna be in the sports nutrition space and it’s a high-performance protein powder now I’d like to introduce you to Julie now Julie is 35 she has two kids and while her time is important her kids and nutrition is even more so so she’s an athlete she’s a lifestyle consumer and what she does is whether it’s biking or whether it’s going for a swim or going on a hike with her kids she wants to find more nutrition better protein to actually fuel her workouts now that can come in a couple different forms that you’ll actually find in the market today and that’s either in the form of fish on a fish fillet or sushi could be beef and the steak or it could be poultry whether it’s a chicken breast or it could be in the form of eggs but it also comes in a powder form as well which you might have seen on store shelves which is a way or soy based protein isolate or concentrate which is highly processed but a lot protein per gram now our product is a new ingredient that actually comes and does everything that you see up there and more in its application by providing more protein and more nutrition I’d like to introduce you to a cricket flour product line now this includes our 100% pure cricket flour our Peruvian chocolate flavor and also our chocolate peanut butter flavor as well now our cricket flour is milled from crickets raised in the United States that are raised for human consumption each of these are raised for about six weeks and then they’re processed into a fine milled flour using only the chicken breast of the cricket from there we actually mix it and then create our own recipes which some of them you’ll actually see here today so this is our first line of products is what you’re seeing and it’s naturally gluten free soy free and dairy free and this is without this isn’t this isn’t with actual the additive processing at all so now looking at an actual weight to weight comparison what we’ve done is we’ve compared all those different protein sources if we’re giving you 64 grams of protein as you can see if you look to the far right way and soy concentrate they give you about the same amount of protein as what our product does but they’re limited in their application they can only be used in a shake but they taste funny when they go into other applications such as baked goods or other recipes and in seven out nine categories of nutrients we beat them and actually able to provide more nutrients than what they’re able to because they’re highly processed to get into that concentrator isolate form now when you look at the other categories of animal-based proteins what you see is if you wanted that same amount of 64 grams of protein you’d have to eat six times as many eggs you’d have to eat three times as much fish or two times as much beef or poultry we’re able to reduce your actual intake of food to get that same amount of protein to both fuel her own nutrition but then also feel the nutrition of our kids and part of how we’re doing that is through our different recipes and over here is actually going to take around a couple samples of one of our recipes that’s in that cricket flour cookbook that we published just two months ago this is our spice granola recipe now if you have a nut or a shellfish allergy hold off but it’s actually delicious it’s a spice cinnamon recipe high in protein from what you’re normally gonna find because we use cricket flour we give you about twenty to thirty percent more protein than what you’ll actually find in a granola on store shelves but we don’t stop there we’re not just in a shake workout even though we do do those we also couldn’t be an ice cream we can be in brownies so where your kids might not eat a salad they might not crave spinach if you have one of our cricket flour brownies we can give you that I am that iron calcium b12 b6 omega-3 fatty acids and all the essential amino acids as well so it’s a great combination that we’re able to actually provide to our customers and for this first product line this is where we sort of shaped the path of our business as we had an idea we actually took it outside to do these interviews and testings with consumers and also with friends and family and what we found is that over a thousand different interviews and taste testings we found that really our target market for this first launch is in that lifestyle consumer and also in that Fitness market we’re able to provide a cleaner source of protein that they need for their own diets and also for their family now many of our customers are in the women’s age group of 28 to 45 but this also is not only just for the lifestyle but also for dietary restrictions as well so people who can’t have gluten because of diabetics well we can help you there now if you can’t have dairy you can’t have gluten you can’t have soy we can also help you there and that’s just naturally without those additional additives now our initial target market as I mentioned was a sports nutrition market and in the United States this was worth over 5.9 billion dollars per year in the United States with powder specifically accounting for 3.7 billion dollars per year now for both of those there’s a compound annual growth rate of 11% projected over the next five years so while our consumer testing tools we had a great product that’s solving those problems we’re also seeing a great market for our product to launch into with great returns for our investors now in the United States and also up here in Canada there’s been some great traction for cricket flour this is coming from publications such as the New York Times from Businessweek we also

have an article that’s coming out in popular science next month talking about the nutrition sustainability and the different benefits of using cricket flour in your diet but there’s also three different companies that are not only showing the consumer interest by selling to consumers but they’ve actually concluded their funding rounds with investors the show that investors are invested in these types of companies so two of those in the United States are EXO raise 1.2 million dollars from their seed a financing round but then also chip pool I know it’s not Dragons Den up here but Shark Tank down the United States he actually invested in their company as well both of those are protein bars that use about 40 to 65 crickets per bar our bags we have up here have about 1,100 in our fourth pound packaging so we actually give a lot more crickets than what you’ll find in those but once again this is just some I know this is just what you’ll actually see from some of the companies but another exciting thing is right now in next millennium farms is a company up here in Canada which also just finished a financing round to build out their own infrastructure but they’re more in the farming side so they actually are working with the University of Winnipeg to actually put their ingredients in some of the actual schools recipes there on campus now we’re gonna go into our value chain and defensibility and turn over to omar Thank You Charles so our crickets are growing in the southeastern United States and high-capacity fda-approved facilities this is really important to our consumers to maintain that quality control we don’t want to source in from other countries that we might be able to get them cheaper we want to keep that high quality control that the FDA regulation can bring us then they’re sent to our milling partner who has a patent-pending process to get them into the finest grain particle size available on the market what this is what this does is it increases shelf-life by a year and it also allows for that nutrition to be retained longer right now we have a two year supply agreement with them and we also have a three exclusive supply to be the only people allowed to the only company allowed to use this in the sports nutrition industry this will automatically extend once we hit certain performance metrics we are cricket flowers and sports nutrition ingredient company who currently sells B to C but we recognize that there’s a massive opportunity B to B which we want to further explore currently we do have some b2b letters of intent we also if you look too far left paleo scavenger who’s been seen on Good Morning America right now in the works has used our product further I’m sorry use it our product in their product which will be on store shelves here relatively shortly there’s also two other companies right now doing testing with our product to put in their products for our marketing operations we have three phases our first phase which we’re currently in is we’re doing an e-commerce we do this for two reasons first we want to keep the capital costs real low while we build that extensive customer network second we recognize that internet retailing is the fastest-growing retail channel in the sports nutrition industry it grew at 18 percent last year we use evergreen SEO campaigned to get us onto the first page for Google search results for cricket flowers which is highly important because as you know 95 percent of people don’t go to that second page our marking is still in phase one this is our website that’s currently you can see our awesome growth that we’ve had up until March we’ve had over 40,000 unique page views the best part about this is that zero dollars have been spent on marketing and advertising I repeat that not a penny has been spent on marketing and advertising this is all organic people are searching this out on their own so imagine what could happen if we had 500,000 to a million dollars to spend on marketing and advertising this is our cookbook that a recipe book I apologize that our founder wrote Charles Wilson it’s currently selling on Amazon and a few other channels and what this does is three things it brings another revenue stream it also brings back repeat customers and it also allows customer education for the wide amount of applications that our product can be used for this is the traction that our company personally has gotten as you can see on the top left Charles is being interviewed by NBC we’ve also been interviewed on Radio Disney which is another national platform we’ve been seeing in Portland monthly which is pretty much the biggest magazine in the Oregon region our phase two and phase three late 2015 we start self distributing to more traditional retail sites like GNC and Whole Foods we are primary targets we recognize that once we hit about 25 stores and we got this number from talking to other consumer product companies in that industry once you get about 25 stores then distributors will start to acknowledge your presence and in 2000 I’m sorry early 2016 this one want to partner with those distributors to increase the number of doors around ten fold overnight as far as defensibility besides the exclusive agreements that we’re talking about what we really want to do is we want to generate proprietary user data much like Gatorade did and Nike did with their products and be the knowledge gateway for anybody looking for information on critic flowers or anything like that we want to hold the keys to that information we also want to build an elite community of athletes we know Olympians personally and we also know the Jessie Thomas you see on this magazine he’s a world-class triathlete we basically want to use a trickle-down Marketing effect by them being brand advocates for us I apologize that Paul our CFO couldn’t be here but I’m going to present his slides so this is our

financials we have about a 60% gross margin on average you can see we break-even in year two then we see a nice growth curve this is due from the multiple growth revenue streams that we will be into thank you and then we’re looking for an exit in 2050 with a 35 million dollar revenue stream our funding milestones during the spring we want 500,000 and this is to increase that marketing where it’s been 300,000 of it just on marketing to bring more customers and we also want to secure lower inventory costs with our current supplier in 2016 we want that 1.5 million dollar series a this is to fill a talent needs Charles and I recognize that we think we’re great we can’t do it all so we’re gonna bring more people on board want to hit that 1 million in sales and then we want to exit in 2020 via acquisition for acquisitions it’s been a lot of activity in this space point out a particular company glam BIA which is an Irish cheese conglomerate they buy up a lot of protein companies they have nothing in their portfolio that resembles what we do and has the properties that we have so we think we’d be a great strategic fit for them if you look down at the bottom the angel investors who invest right now will get 25% equity at the end when we hopefully exit and then the expected IR of 106 percent and it twenty-seven point two five cash-on-cash I’m gonna hand it to Charles to talk about the team thank you all marks so once again our team right now is made out of three individuals and our business descriptions really fall into three main categories and that’s business development operations and finance so Paul Butler has a piece of JD MBA candidate can’t be here right now but his backgrounds in government and nonprofit finance Omar Ellis he spent over ten years we’ve knighted States Air Force working in logistics and operations and also in food service myself my background is in marketing product development SEO and then also in private equity and Angel office investments but however we know that when we bring on our next round of team we need to build out some of those other channels to help facilitate what we’re planning to do to hit those revenue marks and that’s really going to be in the food science area b2b b2c and also to help us develop out more of those distribution channels as well now right now to help us fill those roles we’ve really hand-picked our Board of Advisors to really help us fill those needs that our business currently has as we grow in scale so with our plan we’ve brought in some people to have extensive experience both with Nike for private equity and venture capital also in retail food space and in distribution with hummingbird wholesale but just as Omar mentioned with our brain development Jesse Thomas is also on our Board of Advisors who’s not only a world-class triathlete but he’s also developed and launched his own protein bar company using some of the same sales and metrics and channels that we’re currently using for ourselves which would be great as we build out and scale our own business now once again we are cricket flowers and we’re here with our protein powder they were actually putting into that sports nutrition product now our powder not only is like what you’ll see in the soy and whey based protein powders we can be used in a variety of applications just as you try it in that spice granola recipe we can be in muffins salad dressings all these things that we’ve already tested with consumers and we have products ready to go out into development they’re just going into the next stage of our business so if you have any questions I would love to hear them spice granola it’s also in the recipe book this is a Charles’s family recipe that it’s dusted with our cricket flour protein so it’s granola with better / more protein in it mm-hmm I see David finishes theirs artists suggest your campus probably has some good athletes on it for certain has been tested with their what’s their feedback been yeah no it’s great so there’s we’ve actually been talking to a couple of different athletes both Jesse Thomas some Olympians but then also on campus so there’s some different regulations for what products can go into dh1 schools and regulations but that’s sort of why we’ve been talking to our athletic department to see how to hit those same standards and get our metrics with them but we’ve recently just had a d1 school from it’s a big one up in Michigan actually reached out from their hockey team that actually wanted their coach actually wanted cricket flour for their teams so they reached out that Co can you sell it we can so that’s there’s some exciting things happening that way but they are interested unfortunate we haven’t got marcus mariota to try it yet so we’re still trying to say why is michigan interested but yeah well we’re still going the question i have the only intellectual property comment I heard related to the milling partner is there any intellectual property that you own or is it just the milling partners process that’s going to be protected other than trade secret or proprietary recipes and our trademarks that’s really what we have internally other than the license that we get from our supplier okay and in terms of the license you said there’s exclusivity for three months but it may be extended I take it if you hit certain milestones can you go into that I mean if you keep hitting milestones can you keep exclusivity for longer periods of time yes so right now what we’ve said I was like we envisioned that we would we would love to have a year we know that we’ve only been selling for about two months so what we have is sort of this window that we have

built out where right now on our actual rate that we’re buying from if we just maintain we keep that exclusivity now for actually growing and getting that longer time frame like we have the renewal terms would actually get a year out and not having to meet it every three months that’s really when we start growing and scaling the business and so for protections for some other options we are looking into what it would cost to buy out to supply the entire supply for two years and then just actually maybe partnership and one or two years after we’ve validated the market more yeah thank you can you explain what you’re spending your marketing budget on and why it balloons so big in nineteen for sure so with or actually those are old financials sir we originally had an eight million dollar because it is we are branding a marketing company we had a we know that’s a long term very expensive game to play so we had an eight million dollar ass that we removed because we thought we could be more efficient with our money and the front half and still get the same benefits at the end so that I should have taken that marketing budget out I apologize or that that large honey million it’s 55.1 million is the expense absolutely so we had an eight million dollar ask and we were gonna spend five minute on that on on marketing itself just to bring more customers in to prepare for an exit in 2020 so what are you what are you gonna do now like you that was so that’s that still happened he’s just scaled back on the amount we’re actually investing and part of this because we actually built out the b2b channels before we’re just gonna go just ecommerce and just to our be to see market but because we’re opening up into these other companies channels they’re actually doing some of the advertising some of that burden for us it’s are able to take down that capital song what should I pencil in here what’s the number for the marking infants what we’d have to check on that for the most recent one yes it wouldn’t be five million dollars I apologize about those old financials question I assume these are free-range we do we do I don’t want to see them with small cages the end but I did I understand the I appreciate the focus on the sports nutrition market which is a big one but have you considered sort of the the power of an environmental spin of the fact that there’s two hundred thousand brand new people on the planet every day which takes about the size of Manhattan to produce enough protein and food for them in terms of the you you give some impressive ratios of the protein that’s generated versus beef and the less water being used have you thought of that angle in terms of future sales yeah no we actually have and that’s that’s something that we soared did a different focus with this actual presentation but that is something that’s sort of key to our customers and that’s the ones that are looking for those sustainable and environmental benefits because to raise our crickets we actually use less feed than what you’d find from poultry and beef and also less water you like one-tenth 1/6 of the water depending on what we’re actually comparing our company to so right now with the focus for athletes they’re really looking for something that’s a cleaner better protein so for that customer second that’s definitely a little bit the higher on their you know the priority list but for the consumers and lifestyle stuff that definitely rings true definitely in our Eugene in Portland markets and also nationally as well and to your point obviously by 2050 there’s supposed to be nine billion people on the planet and the World Health Organization just released a report saying that we have to find a solution and they actually chose entomology as the entomophagy as the solution which is kind of where we this idea got its origins in thank you so how do people react so I’m a vegetarian so I didn’t eat the granola how do people react to the overall just eating crickets particularly in the States right I mean well actually worldwide it’s actually 80 percent of the world’s population currently eats insects I know but your targets the US market so talk to me about that yeah so that’s really where we see the biggest market potential because it’s right now it’s established that we know one it’s good for people it’s healthy it’s safe but then it’s actually an untapped market and emerging in the United States and also in North America so when we launched our company of where we’re seeing where we could actually bring it into we found the United States by bringing someone we’re bringing our product to these consumers that want something that has environmental sustainable benefits or that’s also less processed we can give them those benefits and so when they try our product whether it’s in the flavored because that’s when someone’s buying the product mmm crickets they don’t really know that it tastes neutral or nutty so that’s why we do have the flavored lines for some of the Americans that might be okay we’ll try Peruvian chocolate but we might not try the 100% pure but the hundred percent pure is actually what we’re selling out of the fastest because that’s what people are searching for and also to point like initially we do get a very you know if I’m not I was at first when Charles approached me I was kind of like I don’t think that’s going to work whatsoever and then but the fact that I was able to give it to my daughter and put it into a cookie and realize that she’s getting those extra benefits it started to sell me on it and I was like you know what this isn’t a big deal and it’s gonna happen in the future so I think it’s that customer education and that’s really a big piece of it that we’re gonna have to communicate really you fed your daughter before you tasted eight years I didn’t have any no but like I mean I don’t see chickens walking down the street in Manhattan but I’ve been walking down the street there’s crickets everywhere I wouldn’t eat those free

music yeah no it is true but we’re able to fun actually protect like the actual food chain because we’re using this commercial facility so what you’re gonna see on the streets of New York isn’t gonna be what’s in their product but the nutritional benefits were able to give you from that same source in our normal diet well it depends on what your your diet personally is like but the CDC just released a report it was a few months back that said that the average American is not getting enough protein in the room and their diet and that’s why I chose sports nutrition because we know that athletes need more protein than an average consumer so that’s we thought okay okay and just one more question on your revenue stream you talked about other new products every six months you got a challenge to get this one going oh what other new prop or other new products with that as an additive or yes sort of like you tried with the granola that would be one idea for the product we also have an all-purpose baking flour that you can for your kid might make those brownies or cookies that’s already developed we have a gluten-free one as well we also have a protein energy drink that’s made out of the protein powder as well okay for future like pinch tap pinch top development okay so those are in the pipeline just not out right now so we don’t get distracted you say in the plan that with your current capacity you can do 4,500 to 5,000 units what’s the revenue on that number of units so that’s when we’re looking to that January of 2016 yeah and we start moving into distributor that’s when we sort of max out of what we’re able to get so that number would be really what you’re seeing on our sales when you look into January 2016 so then do you have to go to a different factory or what happens when you hit that growth what’s the investment that you need to make yes so that’s with like the minimum orders we’d have to place with our distributors so right now we’re able to stay lean because we have our own domestic facilities that we’re using and can actually process these orders and so that helps keep our cells lean but when we move into January 2016 and one where we talked about the 25 stores before we get into those distribution channels that’s when we actually go to a co-packer that’s when some of those expenses you see yes yeah we won’t still be doing that part okay any scientific studies are there any plans for scientific studies are on the health benefits of the of the protein either in their overall health absolutely there have so each first of all each batch of our curry flour is sent for testing to make sure it has certain you know the full amino acid profile and stuff like that and we get those letters from our supplier as well but there’s been a lot of testing in general on just the quality of animal protein and how well it dissolves within the human body and it dissolves just as good as beef protein does and the rest of those animal proteins so and this is some of those testings that he had mentioned and also the amino acids as well and if you’re going to if you’re getting so large that you need to go to a co-packer but you you’re using equipment that’s got a patent by your milling partner how do you deal with the IP to get the equipment to the co-packer so we actually don’t have to do the part so they’d be actually sending our actual cricket flour that’s milled with that patented process okay so that cofactor wouldn’t be touching I see I see they’re not doing that part of it yes the manufacturing part of it yes sir in your plan you’ve talked about the unique visitor value of 40 cents u.s. dollars so we visitor or that’s the customer acquisition cost or yeah it’s our it’s an estimated revenue per visitor at this point and we currently push that down way down to ten fifteen percent later on down the line who did was who reached out for to a few other companies sports nutrition companies that are sewing or primary started selling online and found out what metrics they were using and then we put that into our model and that’s how we got those numbers but if you’ve got zero marketing dollars your customer acquisition should be your customer revenues should be a lot higher well so this is the ones who are coming to and what we take into account they they might go to 10 pages before they buy because we actually have information what’s the nutritional profile of crickets they’ll go to that one or they might check out how do I make cricket flour they’ll go of that one and then the recipe page and then like I actually want to buy and so when they click we might have five or six of those pageviews before we actually convert them into a buyer and so that’s where you might see a little bit lower number where it actually might increase when you start paying for advertising because when someone then searches how to buy cricket flour they click directly to our buy page and it’s a faster conversion at that point instead of the five clicks or three clicks for the educational yeah and that’s not just cost you more they’re still gonna want to know about crickets they’re gonna what the research won’t go away right the early markets always gonna do research when you add pageviews you’re just gonna pay more first year but when we’re looking for someone who’s looking at least specifically in that instance to buy

cricket flour they’ll be directed to the actual buy page right now because we do an evergreen approach we bring them in with knowledge and so they come in to try to find more on the topic and then it’s kind of an upsell approach where they find more and more information and then how to use it but it’s not an acquisition cost that metric you’re talking about it’s simply a value cost to us and that’s how we projected some of our revenues out it’s a revenue per visitor yes so aspire originally they had won the whole prize and they got that one million dollars and they really focused on mealworms to other countries originally and then they started moving into the cricket flour market and they’ve been doing this they won that 2012 so about two years now and they don’t they’re if you’ve been to their website it’s not okay it’s not set up like ours is not a real friendly ecommerce site it’s it’s very much an informational site as well and they’re not selling on any of those other channels and they’re a private company and so you don’t have any ideas to how we can give you numbers that are ahead of you guys though they’re there they’re ahead of a salad but in our conversations with them their focus isn’t actually in the consumer side so there’s their focus is actually on becoming a supplier themselves and really only going after supplying more a more coarse grain cricket flour and also to a different customer segment than what we’re targeting with our applications okay so what how does how do you stop somebody else from buying a cricket farm and making cricket flour well part of its with that IP and defense ability with our actual supplier yeah because if you’re to get the Korea fire I’m not going to name a company but if you were to get another company’s cricket flour there’s actually going to be more course so it’s actually gonna be a thicker grain compared to our light and fluffy one it’s because your machinery the machinery the processing and also sort of because it can either be freeze-dried dehydrated there’s a couple or baked there’s some different processes so another flour couldn’t actually compete with us on a one-to-one basis when it’s with their own milling process you’re pretty sure that well that’s from our own supplier in testing and the pattern do I care about that if I’m putting it in a smoothie you do because it’s like putting coffee grounds in your smoothie compared to putting really fine almost dust like powder in your smoothie it’s gonna be more easily I don’t say adopted I’m sorry well yeah it’s more soluble thank you very much for her and that’s and that’s the coffee grounds are more of the other companies because they don’t have the patent-pending process that we do for ours okay and I like the idea I think it’s really cool but I can’t get like I can’t get the P&L to work I can’t get the I just can’t get the math to work on the investment absolutely and those are those are month old financials and it because obviously that’s when the requirement and I apologize that we don’t have updated ones but we’ve done addressing changes to them especially since we’ve started in the last month getting a lot more b2b interest we’ve charted changing them it’s moving away from that asking for more money like we talked about earlier so the financials are really different and I apologize that we can’t give you you don’t have a slide or anything that you could talk us through cuz like you’re asking for a check we can we answer the oh I’m sorry thank you though