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Mountjoy Sparkling

CBD-infused sparkling water

$54,347

Raised from 197 investors

Min: $25,000

Max: $107,000

Security Offered

Convertible Note

Minimum Investment: $100

  • Currently sells sparkling waters in retail stores with the assistance of 14 distributors in seven different states

  • Retail outlets include small grocery chains, bars, convenience stores, health food and specialty stores

  • As of October 2019, the company has generated approximately $822,084 in revenue since 2017

  • Raised $565,000 in total funds since its inception in 2017

Mountjoy Sparkling is the brainchild of Alex Mountjoy and was inspired by the thirsty demands of his own family. He created Mountjoy Sparkling to combine the potential health benefits of cannabidiol (CBD) with pure, revitalizing sparkling water. The company also provides tetrahydrocannabinol (THC)—the psychoactive compound found in marijuana—infused beverages in California where THC is legalized.

Mountjoy currently sells its sparkling waters in retail stores with the assistance of 14 distributors in seven different states. Retail outlets include. small grocery chains, bars, convenience stores, health food and specialty stores. The company plans to begin increasing its distribution of CBD-infused beverages in the coming months to 22 additional states. So far, the company has raised $585,000 in total funds since its inception in 2017.

Terms

Investment Terms*

Security Type: Crowd Note

Round Size: Min: $25,000 Max: $107,000

Valuation Cap: $4.5 million or $5.5 million

Discount: 20%

Conversion Provisions: In connection with equity financing of at least $1 million, the Company has the option to convert the Crowd Note into non-voting preferred stock (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per share for Preferred Stock by investors in the Qualified Equity Financing or (B) the price per share paid on a $4.5 million or $5.5 million valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.

Perks

Perks

You are investing in a Crowd Note in this Offering. Perks are meant to be a thank you from the company for investing. The perks below, subject to Regulation CF investment limits, are not inclusive of lower dollar amount perks, except where otherwise noted.

Early bird investors that purchase the first 25,000 Crowd Notes, and thereby fund the first $25,000, will receive Crowd Notes with a conversion provision based on a $4.5 million valuation cap instead of a $5.5 million valuation cap. That means, in connection with equity financing of at least $1,000,000, the company has the option to convert the Crowd Note into non-voting preferred shares (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per share paid for Preferred Shares by investors in the Qualified Equity Financing or (B) the price per share based on a $4.5 million valuation cap (instead of $5.5 million).

$250: Mountjoy Sparkling CBD Assorted Flavors 12 Pack

$500: Mountjoy Sparkling CBD Assorted Flavors 24 Pack

$1,000: Investor Bronze Discount - Mountjoy Sparkling CBD Assorted Flavors 12 Pack + 10% off all future online purchases for one year

$2,500: Investor Silver Discount - Mountjoy Sparkling CBD Assorted Flavors 12 Pack + 20% off all future online purchases for three years

$5,000: Investor Gold Discount - Mountjoy Sparkling CBD Assorted Flavors 12 Pack + 30% off all online purchases for five years

$10,000: Two round-trip tickets to visit the Mountjoy Sparking facility + a gift bag of assorted flavors

Overview

Opportunity

In 2018, the U.S. Farm Bill designated hemp—from which cannabidiol (CBD) is derived—as an agricultural crop and made it legal to farm nationwide.i While additional research is needed, studies suggest that CBD may help patients fall, and stay, asleep and may also be a viable treatment option for certain types of chronic pain. The strongest scientific evidence for CBD’s treatment of health issues is its effectiveness in fighting childhood epilepsy syndromes.ii Due to an increase in consumer interest, companies have begun bringing CBD-based products, such as CBD-infused beverages, to market to meet the growing demand.iii According to Zenith Global, a market research firm, U.S. sales of CBD-based drinks reached $86 million in 2018 and are projected to reach $1.4 billion by 2023.iv

Large alcohol brands like Molson Coors, Anheuser-Busch InBev, and Heineken have noticed the potential of CBD and have invested in cannabis-infused (e.g. CBD and THC) drinks as a result.v In fact, Constellation Brands—one of the top three beer producers in the U.S.—made a $4 billion investment in Canopy Growth—a cannabis and hemp consumer products company—in August 2018.vi Additionally, beverage companies such as Coca-Cola, Pepsi, and Starbucks have indicated interest in cannabis-based and cannabis-infused beverages.vii  

Mountjoy Sparkling offers cannabis-infused sparkling water created from fresh filtered carbonated water and full-spectrum cannabis oils. The company utilizes a proprietary, full-spectrum process uniquely suited to edibles and beverages to offer naturally flavored beverages with a hint of fruit, such as orange, peach, and lemon lime. Mountjoy was initially founded in a backyard barn on Alex’s sheep rescue farm—aptly named Crybaby Ranch—and has since moved into a warehouse space in Petaluma, California. The new location provides the company with truck loading and staging bays and has better access to established beverage distribution routes.

Press

Product

Mountjoy’s sparkling waters offer a refreshing, calorie-free drink for health conscious individuals. The company’s flagship product, Mountjoy Sparkling CBD, is a full-spectrum CBD beverage with 10mg of industrial hemp-derived CBD. Mountjoy is made using a proprietary full-spectrum process uniquely designed to suit edibles and beverages in particular. The company’s process—trade-named NanoTonic—receives ongoing development attention. Flavors include Blackberry, Orange, Lemon Lime, Peach and Natural.

MountJoy Sparkling (CBD)

Blackberry

 

MountJoy Sparkling (CBD)

Orange

 

MountJoy Sparkling (CBD)

Lemon Lime

 

MountJoy Sparkling (CBD)

Peach

 

MountJoy Sparkling (CBD)

Natural

 

MountJoy Sparkling (CBD)

Assorted Flavors

 

Mountjoy’s products are intended for health-conscious individuals who care about their bodies and the environment. As such, Mountjoy Sparkling CBD waters are packaged in convenient, portable, resealable 16 oz. polyethylene terephthalate (PET) bottles. PET is inexpensive, lightweight, resealable, shatter-resistant, and highly recyclable.viii Recycled PET—known as RPET—is the most widely recycled plastic in the world.ix RPET is used in products such as:

  • Polyester carpet fiber
  • Fabric for T-shirts
  • Sweaters
  • Athletic shoes
  • Fiberfill for sleeping bags and winter coats

The company also plans to offer alternative packaging formats such as glass and cans, to satisfy various preferences and social situations.

Use of Proceeds

Mountjoy has built a distribution business model to help expansion efforts. The funds raised will be used to increase distribution throughout the U.S., drive sales and marketing, build brand identity, and introduce new packaging solutions—such as glass bottles or aluminum cans—for varying situations. The company intends to allocate funds in the following manner:

If Mountjoy raises the minimum amount of $25,000, it plans to use the proceeds primarily for the following:

  • General marketing (37%)
  • Manufacturing (56%)
  • Research and Development (7%)

If Mountjoy raises the maximum amount of $107,000, it plans to use the proceeds primarily for the following:

  • General marketing (37%)
  • Manufacturing (56%)
  • Research and development (7%)

Product Roadmap

Mountjoy Enterprises aims to provide new aluminum can packaging for its sparkling water and is currently in talks with a co-packer. It also aims to develop new distribution deals with large beverage distributors in 15 additional states by 2020. Should regulations allow, the company also aims to create partnerships with more large grocery chains to supply CBD beverages in bulk.

Business Model

The bulk of Mountjoy’s revenue comes from sales to distributors. On average, a full truckload nets $64,800 (24  pallets at $2,700 per pallet; 60 cases of 24 per pallet), which includes a 25% distributor discount off regular wholesale. ($3,600 *(1-25%) = $2,700). The company’s CBD beverages are distributed through standard beverage channels, alongside beer, energy drinks and bottled waters and are sold in groceries, convenience stores, gas stations, bars, and other beverage retailers. Currently, Mountjoy Sparkling Water is sold through 14 different distributors and distributed in seven states. It is also available for purchase through the company’s website. Drinks range in price from $30 for a six-pack, $55 for a 12-pack, and $100 for a case of 24 bottles.

Six Pack:

$30.00

 

12 Pack:

$55.00

 

24 Pack:

$100.00

 

Mountjoy’s target consumers are individuals looking to actively optimize their daily lives through supplements, superfoods, natural ingredients, exercise, spiritual means, and other holistic approaches. These individuals are open to discovery and may be willing to pay a premium for products that can enhance their daily routine.

User Traction

Mountjoy currently sells its sparkling waters through 14 different beverage distributors and is distributed in seven states. Its CBD products can also be purchased online through the company’s website.

Distributors include:

  • Aqua More, Better Brands, Bev South Augusta, Classic City, Columbia, Haralambos distributors, Jackson Bev, Macon Bev, Mission Bev Co., North Georgia Distribution, Olympic Eagle, Pacific Expeditors, Intrastate Distributors, and Smart Distributors.

Distribution states include:

  • California, Florida, Georgia, South Carolina, Washington, Missouri, and Michigan

Historical Financials

As of October 2019, Mountjoy has generated approximately $822,084 in revenue since inception. Q4 2018 was the company’s best sales period to date with a 257% quarter-over-quarter increase in revenue. This was attributed to existing distributors ordering more product along with the addition of new distributors ordering for the first time. So far, total revenue for 2019 has outpaced 2018’s performance year-to-date. Through October 2019, Mountjoy has generated $396,507 in revenue year-to-date, up by 45% over total revenue of $272,581 for that same period in 2018. Gross margins for 2017 and 2018 were 51% and 49% respectively.

As of October 2019, overall expenditures—cost of goods sold (COGS) + operating expenses (OpEx)—have totaled $1,445,468 since inception, with COGS accounting for $426,067 and OpEx accounting for $1,019,402. Year-to-date, expenses have totaled $645,589 which represents a 33% increase over the same period in 2018. Total expenses were $139,902 and 659,977 for years 2017 and 2018 respectively. Expenses for 2018 increased ~372% over totals in 2017.

As of October 2019, Mountjoy has generated a net loss of $623,385 since inception. Year-to-date, the company has incurred a net loss of $249,082 as of October 2019, up 9% from a net loss of $224,053 over the same period in 2018. On average, the company has had a monthly net loss of $24,908 year-to-date for 2019. As of the close of November 1, 2019, the company had $18,419 in cash on hand and an average monthly cash burn of $22,854 in 2018. The company intends to rely on selling inventory, filling upcoming orders, and raising additional capital from supportive investors to fund operations over the near future. Net Income losses for 2019, 2018, and 2017 were $243,904, $238,081, and $136,222 respectively.

Industry

In 2018, the U.S. CBD industry grew by nearly 30% to reach a total market size of $10.3 billion and is expected to grow by 32% to reach nearly $13.6 billion through end-of-year 2019. Total combined legal sales are projected to grow at a compound annual growth rate (CAGR) of 14% to reach $30 billion by 2025.x 

The CBD industry can be split into two categories, hemp-derived CBD and marijuana-derived CBD. The U.S. hemp-derived CBD market is expected to reach $646 million by 2022, while the U.S. marijuana-derived CBD market is expected to reach $647 million by 2022. In 2017, hemp was grown in 19 different states across 25,500 acres of farmland with 70% of land allocated for CBD production, 20% for seed, and 10% for hemp fiber production.xi  

Within the CBD industry are CBD-infused beverages. According to Zenith Global, a market research firm, U.S. sales of cannabis-based or infused drinks reached $86 million in 2018. Zenith believes the market will undergo substantial growth in the coming years, reaching $1.4 billion by 2023. Key growth drivers for CBD drinks could include a loosening regulatory environment, investment from major beer brewers, and innovation by startups. Additionally, there has been a cultural shift toward drinks with natural ingredients and potential health benefits as consumers look to reduce their alcohol consumption.xii In addition to being part of the fast-growing cannabis industry, CBD beverages also stand to benefit from the recent trend in wellness beverages.xiii  

While infused beverages currently make up only 2-3% of total sales in the adult marijuana industry, Mark Hunter from Molson Coors believes it could soon account for 20-30% of cannabis sales. As a result, large alcohol brands like Molson Coors, Anheuser-Busch InBev, and Heineken have invested in cannabis-infused drinks in recent years.xiv Additionally, large beverage companies Coca Cola, Pepsi, and Starbucks have all indicated they’re monitoring developments in the cannabis-based or infused beverages market.xv  

In 2018, the U.S. Farm Bill designated hemp as an agricultural crop and made it legal to farm nationwide.xvi The increasing consumer interest in hemp and CBD is currently driving new market entrants to fill shelves with hemp-derived products to meet the growing demand in an evolving regulatory environment.xvii Hemp and marijuana are derived from different varieties of the Cannabis sativa species. Marijuana is grown by selectively breeding for high concentrations of the psychoactive tetrahydrocannabinol (THC), whereas hemp is cultivated for high concentrations of cannabidiol (CBD). According to the Farm Bill, hemp is legal provided that it contains no more than 0.3% THC.xviii While additional research is needed, studies suggest that CBD may help patients fall, and stay, asleep and may also be a viable treatment option for certain types of chronic pain. The strongest scientific evidence for CBD’s treatment of health issues is its effectiveness in fighting childhood epilepsy syndromes such as Dravet Syndrome and Lennox-Gastaut syndrome (LGS).xix

Although the Farm Bill changed the federal government’s position on hemp farming and the production of CBD oils, individual states have not responded in-kind. The debate on the substance’s legality is still murky.

Over the last few years, the space has seen a significant increase in both the amount of venture capital invested and overall deal count:

  • In 2018, venture capital financings in cannabis companies surpassed $1.6 billion, a record high, and a 193% increase from 2017
  • Deal count in 2018 was also record-setting, with 225 venture financings
  • 2017 also saw significant growth in funding towards cannabis companies, with nearly $555 million invested, a 143% year-over-year increase, across 173 total deals
  • Deal count surpassed 100 total deals for the first time in 2015, with 123 such venture financings, a 124% increase from 2014
  • Between 2008 and 2018, there has been $2.97 billion invested across 722 venture capital deals in cannabis companies
  • Over 70% of the capital invested from 2008 to 2018 occurred in 2017 and 2018xx  

Source: PitchBook Data, Inc.

Source: PitchBook Data, Inc.

Competitors

Recess

Founded in 2017, Recess is a consumer wellness brand offering sparkling water infused with hemp extract. The company offers flavors for sparkling water like blackberry chai, peach ginger, and pomegranate hibiscus. Each flavor of sparkling water is made with hemp extract (typically 10mg of broad-spectrum oil), American ginseng, L-theanine, schisandra, filtered water, flavor concentrate, and cane sugar. An eight-pack of 12oz cans sells for $39.99 on the Recess website.xxi Since the company launched in October 2018, it has sold around 400,000 cans.xxii It has raised $3 million in total as of February 2019.xxiii  

Queen City Hemp

Founded in 2015, Queen City Hemp is a provider of a range of CBD products including seltzers, oils, and topical creams. The company’s seltzers come in four different flavors: blood orange, passion fruit, guava, and lemon lavender. Ingredients in Queen City Hemp seltzers include carbonated water, natural flavors, sorbate, and 5mg of CBD from hemp extract. A twenty-four pack of 12oz cans can be purchased on the company’s website for $89.99.xxiv Queen City Hemps’ oils and topical creams come with higher doses of CBD and range in price from $39.99 to $59.99. In January 2019, the company expanded its product availability to all 50 states.xxv  

Sprig

Founded in 2015, Sprig produces CBD-infused sparkling water. The company currently offers flavors including citrus, citrus zero sugar, lemon tea zero sugar, and melon zero sugar. Each can of Sprig sparkling water is made with 20mg of CBD isolate, derived from hemp. Other ingredients found in Sprig sparking water includes carbonated water, cane sugar, flavor extract, gum arabic, fruit and vegetable juice, and beta carotene. A twelve-pack of 12oz cans sells for $50.00.xxvi Sprig became the most-widely distributed CBD drink in the United States in 2019.xxvii The company has raised $2.8 million so far in funding.xxviii  

Sweet Reason

Founded in 2018, Sweet Reason is a CBD-infused beverage brand. The company currently offers three flavors of CBD-infused sparkling water, grapefruit, cucumber mint, and strawberry lavender. Drinks are made with carbonated water, natural flavors, and 7mg of CBD isolate from organic hemp. A six-pack of 12oz cans sells for $39.99 on the Sweet Reason website.xxix Sweet Reason drinks are currently offered in around 200 retailers in New York. The company raised $2.5 million in a seed round led by Lerer Hippeau with participation from RiverPark Ventures, Max Ventures, Subversive Capital, and angel investors in July 2019.xxx  

Weller

Founded in 2017, Weller provides an assortment of CBD-infused products including a water-soluble CBD powder, CBD-infused sparkling water, and CBD-infused coconut bites. These products contain 0% THC, are lab-tested and verified for potency, and contain 25 mg of broad-spectrum hemp extract per serving.xxxi Weller Snacks products can be purchased through the company’s website, with prices ranging from $14.99 for three packages of coconut bitesxxxii to $80 for the Barista Blend water-soluble CBD powder.xxxiii In July 2019, the company raised a $3 million Series Seed round, of which MicroVentures participated, bringing its total funding amount to date to $4.25 million.xxxiv  

 

Team

Alexander Mountjoy

Founder and CEO

Alex is a serial entrepreneur with 25 years of leadership experience in product design and innovation, domestic and overseas manufacturing, sales management, and factory engineering. He has a Bachelor of Arts in Physics from Tufts University. Mountjoy Sparkling was conceived on the eight-acre ranch in Sonoma County, California that Alex calls home.

Past Financing

So far, Mountjoy has raised $565,000 from investors via SAFE Notes. It also issued a $20,000 SAFE to Willington Research Corporation for previous work performed. The company has also issued two warrants to Ackrell Capital and CannaAngels LLC redeemable for 1% and 0.5% of the company’s fully diluted capitalization respectively.

Discussion

Risks

The information provided herein is not intended to be, nor should it be construed or used as, investment, tax or legal advice, a recommendation to purchase, or an offer to sell securities of the company. You should rely on the offering statement and documents attached as exhibits to the offering statement when making any investment decision. An investment in the company is not suitable for all investors.

Investment Risk

An investment in the company is speculative, and as such is not suitable for anyone without a high tolerance for risk and a low need for liquidity. You should invest only if you are able to bear the risk of losing your entire investment. There can be no assurance that that investors will receive any return of capital or profit. Investors should have the financial ability and willingness to accept the risks (including, among other things, the risk of loss of their entire investment and the risks of lack of liquidity) that are characteristic of private placement investments. There will be no public market for the securities being offered, applicable securities laws will restrict any transfer of the securities, and the securities will not be transferable without the company’s consent.

Company Risk

The company’s industry is highly competitive, and the company may not be able to compete effectively against the other businesses in its industry. The company is subject to a number of significant risks that could result in a reduction in its value and the value of the company securities, potentially including, but not limited to:

  • Rapidly changing consumer preferences and market trends,
  • Inability to expand and maintain market acceptance for the company’s services and products,
  • Inability to gain access to international markets and comply with all applicable local laws and regulations,
  • Inability to achieve management’s projections for growth, to maintain or increase historical rates of growth, to achieve growth based on past or current trends, or to effectively manage rapid growth,
  • Inability to develop, maintain and expand successful marketing relationships, affiliations, joint ventures and partnerships that may be needed to continue and accelerate the company’s growth and market penetration,
  • Inability to keep pace with rapid industry, technological and market changes that could affect the company’s services, products and business,
  • Technological problems, including potentially widespread outages and disruptions in Internet and mobile commerce,
  • Potential costs and business disruption that may result if the company’s customers complain or assert claims regarding the company’s technology,
  • Failure to adequately address data security and privacy concerns in compliance with U.S. and international laws, rules and policies,
  • Performance issues arising from infrastructure changes, human or software errors, website or third-party hosting disruptions, network disruptions or capacity constraints due to a number of potential causes including technical failures, cyber-attacks, security vulnerabilities, natural disasters or fraud,
  • Inability to adequately secure and protect intellectual property rights,
  • Potential claims and litigation against the company for infringement of intellectual property rights and other alleged violations of law,
  • Difficulties in complying with applicable laws and regulations, and potential costs and business disruption if the company becomes subject to claims and litigation for legal non-compliance,
  • Changes in laws and regulations materially affecting the company’s business,
  • Liability risks and labor costs and requirements that may jeopardize the company’s business,
  • Dependence on and inability to hire or retain key members of management and a qualified workforce,
  • Ongoing need for substantial additional capital to support operations, to finance expansion and/or to maintain competitive position,
  • Issuance of additional company equity securities at prices dilutive to existing equity holders,
  • Potential significant and unexpected declines in the value of company equity securities, including prior to, during, and after an initial public offering, and
  • Inability of the company to complete an initial public offering of its securities, merger, buyout or other liquidity event.

Endnotes