Supporting documents

Investment Opportunity

We are seeking to raise up to $2m of new growth capital, in addition to $260.7k of shareholder loan conversions, to fund our market growth strategy and product development activities.

• Minimum Raise Target: $1,500,000
• Maximum Raise Target: $2,260,700
• Valuation: $6M (Pre-money)
• Minimum Equity Offered: 20%
• Minimum Equity Offered: 27.37% (including loan conversions)
• Share Price: $1.00
• Type of shares: Ordinary Share (held in nominee) and investments >$100,000 will be held directly
• Offer Duration: 30 days (the company reserves the right to extend or reduce the offer period)
• Use of Capital: New Product Development, Working Capital, Global Marketing, Brand Awareness & People Capability

Company Structure and Shareholders

The Hello Cup Holdings Company

The following table sets out the current shareholding structure and the shareholding structure on completion of the offer. The final shareholder structure may vary from this due to the actual amount raised and rounding of individual allotments.

*The cap table above is fully diluted and includes a 5% ESOP that the board intends to implement post raise.

The founding shareholders will be converting $260,700 of shareholder loans into equity as part of this round.

Link to Companies Office can be found here

The Hello Cup Company Limited

Link to Companies Office can be found here

The Hello Cup Company Limited is a wholly-owned subsidiary of The Hello Cup Holdings Company Limited. The Hello Cup Holdings Company Limited company as a conventional Holding Company holds all material assets such as Intellectual Property rights. The Hello Cup Company Limited was formed as a subsidiary and trading arm of the business to sell products into New Zealand and international markets such as the US as a risk minimisation strategy to protect assets in light of product liability or other potential legal exposure. However, it should be noted that both companies hold appropriate levels of product liability insurance.

Share Registry Management

The company intends to use Orchestra.co.nz to manage their share registry.

Shareholder Communication

We intend to keep our investors updated through:

• A quarterly business summary update (more frequently if required);
• An annual update on the outlook for The Hello Cup, including financial statements and commentary approved by the board; and
• Participation in an Annual General Meeting (AGM) of Shareholders.
• Shareholder communication will be distributed through Orchestra.co.nz

Trademarks and IP

Risks & Mitigations

International Growth

Risk

We aren’t experts in unfamiliar markets, and we aren’t able to reach the expected adoption or traction in that market with new products.

Mitigation

At the moment we are focused on North America as our next country we break into. We have been operating in this market for over a year with D2C channel, Pharmapacks – our Amazon equity partner and various smaller retailers. Due to COVID-19 our Country Launch was interrupted and postponed. However, this has allowed us to re-design our approach with the best partners. For example - Pharmapacks give us valuable insights on market trends and buyer behaviour on Amazon. We have also partnered with Kim Rosas of Period Nirvana who is a leader in the period product space in the US. We partner with Kim on design and market appetite for NPD. In terms of sales, we are currently entering into sales conversations with a major US retailer. We have also engaged our digital agency to ramp up our influencer marketing and brand awareness campaigns. As a direct result of this we’re already seeing an uptick in US D2C sales from our website. We have a US-based digital agency in place and ready to engage once we secure capital. As we identify new markets to enter, we will leverage industry experts and on the ground experts to ensure we have local knowledge and support to best service that market.

Manufacturing

Risk

Concentration + capacity risk

Mitigation

To mitigate concentration risk we will engage with multiple suppliers for each SKU. A large part of our partner strategy is to work with suppliers who are values-aligned with the Hello. brand – ensuring a prosperous and reliable working relationship. As part of our parameters for engaging with any supplier (historically and in the future) is to ensure any the manufacturer we engage with will have the capacity to support our growth plans.

NPD

Risk

Our New Products don’t have the traction we have forecasted.

Mitigation

Before any new product goes into the development pipeline, we evaluate the market and our community and, in some cases, we work with experts in this category to ensure we are producing products that best serve our customer. We want to continue to add value & support to our customer’s period management by offering them a wide range of products from our brand. In addition to this, each new product will have its own dedicated marketing launch budget along with an elevated digital spend for the first 6 months after launch to create awareness amongst our existing customer base, and to engage with a new sector of the market who will benefit from this offering.

People

Risk

Hello. cannot secure the right talent to support growth.

Mitigation

Attracting the right people is key to the next phase of Hello’s success. We have an excellent company culture and a flexible work from home offering for our team. The board intends to create an ESOP to offer to current staff and key employees we hire in the future. We will begin our recruiting process early and appoint a recruitment agency with a proven track record. In conjunction with this, the Hello. leadership team are well-connected within the business world (both in NZ and abroad) and can leverage those contacts to assist with sourcing new talent. NZTE will also be instrumental in guiding Hello. As we make key hires in new markets.

Competition

Risk

Increased competition

Mitigation

In the first instance, we will increase marketing spend and push Wholesale and Supermarket sales. We will continue to stick with our brand values and continue to build on the the engaged community we already have. There is no clear leader in the sustainably led period category as yet, and we believe with a combination of working capital, increasing digital marketing spend, NPD, building brand awareness in new territories we have the necessary ingredients to gain a strong foothold in the period category.

Logistics

Risk

Global issues in Supply Chain could impact our forecasted freight costs and the time it takes us to get products to our export markets

Mitigation

We will partner with a best-in-class 3PL in NZ and are currently in the R&D phase of this work. We currently have a 3PL in the US and have an additional 3PL ready to engage who will become our primary 3PL in that market. This 3PL will also service our US Wholesale and Supermarket customers, which will decrease freight costs and shipping times. Overall, Hello. does not rely on one export market so we can respond quickly to freight delays by adjusting our online marketing targeting.

COVID-19

Risk

Sales impacted due to lockdowns

Mitigation

We are largely buffeted from COVID impacting our D2C business which accounts for 50% of our revenue. Supermarkets and Wholesale still trade during lockdowns, so we don’t see much risk in terms of sales being impacted. As a period product company, we are considered an essential business. During COVID-19 2020 lockdown we were able to fulfill our orders from our own premises in Wellington. In the case of future lockdowns, our suppliers will be classified as essential businesses so they can resume operations.

Disclosures

Type of shares on offer

The Hello Cup Limited is offering ordinary voting shares (Ordinary Shares) ranking equally with all other shares on issue. The Ordinary Shares to be issued by The Hello Cup are to be issued to Snowball Nominees Limited (“Nominee”), who will hold legal title to those Ordinary Shares on trust for the relevant beneficial owner of those Ordinary Shares (i.e. the investor). Further detail on why The Hello Cup is choosing to use a Nominee is described under the heading “Nominee Shareholding Structure”.

Holders of Ordinary Shares have:

• The right to receive notice of, and attend, every meeting of the shareholders
• The right to vote at a meeting of the shareholders on any resolution
• The right to an equal share in dividends authorised by the board
• Certain shareholder information rights
• pre-emptive, or anti‑dilution, rights on certain share issues, as set out in the Shareholders’ Agreement and Constitution. There are exceptions to these rights (also set out in those documents) – for example, certain issues of equity securities (including shares and options) to employees and/or management and other issues of equity securities (again, including shares and options).

Holders of Ordinary Shares are also subject to drag and tag along rights (as set out in the Shareholders’ Agreement).

The Shareholders’ Agreement and Constitution set out other terms that will apply to a shareholding in The Hello Cup. You should read these documents before subscribing for Ordinary Shares under the Offer.

Note: Investors that subscribe for 100,000 shares or more will have the option to hold those shares directly in the company and not in Snowball Nominees.

Nominee Shareholding Structure

We are making use of a nominee shareholding structure to simplify the share register and prevent The Hello Cup from becoming a “Code Company” for the purposes of the Takeovers Code in the future. In broad terms, a company becomes a Code Company when it has 50 or more (voting) shareholders and share parcels and it (including subsidiaries) has total assets of at least $30 million or total revenue of at least $15 million at the end of its last financial year. Shareholders of Code Companies can be restricted in how and when they are able to transfer their shares. Given the forecast growth, the Hello Cup directors do not believe it is in the best interests of the company, its existing shareholders, or investors for The Hello Cup to become a Code Company and bear increased compliance costs.

The Ordinary Shares to be issued by The Hello Cup are to be issued to the nominee company Snowball Nominees Limited (the Nominee), who will hold legal title to those Ordinary Shares on trust for the relevant beneficial owner of those Ordinary Shares (i.e. the investor). The full terms on which the Nominee will hold the shares are set out in the Nominee Deed Poll (which forms part of the Offer Documents).

In broad terms, the Nominee must:

• Act in accordance with the relevant beneficial owner’s instructions (e.g. in exercising the voting rights attached to the relevant Ordinary Shares)
• Account to the relevant beneficial owner for all proceeds from the relevant Ordinary Shares (e.g. dividends received)
• Deliver notices, letters, reports, demands, offers, agreements and other documents and communications received by the Nominee to the relevant beneficial owner.

Under the Nominee Deed Poll, each beneficial owner indemnified the Nominee against any losses, damages, costs, actions, proceedings, claims and demands that may be made against or incurred by the Nominee as a result of it holding the Ordinary Shares under the Nominee Deed Poll (unless the Nominee has been fraudulent or grossly negligent).

Historical Funding

• The founders have invested $260,700 in cash to date.
• $200,000 was invested by family and friends in 2019.

Future Funding

The Hello Cup board may elect to raise additional capital in the future to accelerate growth plans or take advantage of other opportunities that will increase shareholder value, as they arise.

Governance

The Hello Cup currently has two directors, Mary Bond and Robyn McLean. An independent director will be elected after the capital raise.

Remuneration

All remuneration of key executives and team members will be reviewed regularly by the board to ensure that remuneration is market driven and reflects individual performance and achievement of role objectives. Mary Bond and Robyn McLean will have new contracts issued and base salaries of $90,000 resuming in October 2021.

Litigation and Disputes

There are no past or current litigations or disputes known to the directors or management.

Employee share option program (ESOP)

The board’s intention is to create an ESOP equivalent to 5% of shares on issue post raise.

Snowball Effect Fees

No fees are payable by investors to Snowball Effect. If a company successfully reaches its funding target, Snowball Effect charges the company a fee up to 7.5% of funds raised.

International investors

The distribution of this offer outside of New Zealand may be restricted by law. This is not intended to, and does not, constitute an offer of securities in any place which, or to any person to whom, the making of such offer would not be lawful under the laws of any jurisdiction outside New Zealand. This includes, but is not in any way limited to, Australia and the United States. It is the responsibility of any Snowball Investor to ensure compliance with all laws of any country outside New Zealand relevant to their subscription, and any such Snowball Investor should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to apply for securities pursuant to each offer. The failure to comply with any applicable restrictions may constitute a violation of securities law in those jurisdictions. The securities in each offer have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States.