Investor Update

June 25, 2017

As we enter the second half of 2017, we have several exciting things happening. Let’s start with manufacturing. As many of you know, we have had numerous difficulties with our prior manufacturing companies. After nearly two years of attempting to fix the various problems, we have at last been able to completely re-capture the products manufacturing rights and responsibilities. The primary problem we had with the prior vendors was their unwillingness to follow our quality control guidelines. In addition, they made unauthorized changes to the product that has caused a completely unacceptable return rate. This has cost our company a lot of money and has hurt our reputation. It’s fortunate that we are now on an entirely new path with respect to production and quality control.

I have just returned from China after spending more than three weeks there making this vital transition. Here are some of the highlights of the trip.

My primary mission was to completely undo the established manufacturing arrangements that have caused us so many headaches. We are replacing them with a company that we can be assured will follow our strict quality control demands as established via our ISO13485 guidelines. I had already removed a portion of the manufacturing away from the prior vendor a few months ago. Continued poor quality issues have forced me to take all manufacturing of our product away from them. We also had some manufacturing done by a second company. They considered taking on the entire manufacturing responsibility; handles, charges, and brush heads. The concern I had was that they were insisting on making only very large production runs. More concerning was that actual brush head production was going to be a new experience for them. I felt that it was too risky to allow them to venture into a new production task that would certainly involve some learning time.

My first task in China was to locate and completely vet a new vendor/manufacturer. The mission was to find a well-established company that specializes in toothbrush manufacturing. I needed to locate a company that could manufacture our entire product: handles, brush heads, and chargers. Essentially I was searching for a company that specialized in manufacturing toothbrushes. Once I found such a company, I needed to visit them and present our product, and conduct proper due-diligence on their entire operation. The number one consideration was production quality and their willingness to follow precise production procedures as set forth by utilizing our ISO13485 quality guidelines. After locating and visiting 3 potential vendors, I settled on one and we came to agreement to move full-speed ahead.

Now satisfied that we were heading in the right direction with the new factory, I needed to visit the prior factories and begin the process of locating and collecting all of the hundreds of fixtures, tooling and molds that relate to our product. They were completely unorganized, so this task took several days. Not only did I have to open and inspect every mold (each weighing upwards of 700 pounds) I had to inspect each aspect of every cavity in the molds to determine if maintenance was required. I then marked each mold for our ease in identification (since prior marking were all in Chinese characters) I also lubed all moving parts within each mold to prevent storage corrosion. I then palletized all of the above for safe transport to the new factory. That took a number of days.

Next, I moved on to the second factory, one that we have used to produce the handles. They had all of the handle molds both for the current model and the older AA battery model. I had to perform the same tedious procedures with each and every mold. This took several days. I also had to de-commission the sonic welding machines and prepare them for safe transport. This factory also had many component parts that belong to Hydrabrush. I had to locate all of these components. I needed to inspect all of the components because some were damaged due to improper storage. I personally re-packaged all of the above on pallets for safe transport to the new factory. I did not want to take a chance of anything being forgotten or packed in a manner that would cause travel damage.

The second factory also proved to be completely unorganized. They had lost track of 20,000 of the handle motors that are in our inventory. I located the motors on the third floor of a warehouse. They were stored under some bags of plastic raw material. There was no working elevator in the building so I had to rig up a pulley mechanism to hoist the motors down to ground level. It was a holiday so getting help was nearly impossible. I was able to get one helper who packed the motors on a pallet on the ground floor as I hoisted them down, one box at a time, each with 150 motors.

Over that Holliday weekend, I packed all of the facility goods belonging to Hydrabrush onto pallets for safe transport to the new factory. I took two semi-trucks to transport the goods to the new factory. The new week brought on two un-expected Chinese holidays so I lost those two days. On Wednesday of that week I began work at the new factory.

My initial days at the new factory were spent organizing all of the machinery and equipment and teaching them how to use the equipment. The balance of the time I spent helping set up the assembly line and teaching them exactly what was expected, and set down quality control procedures for each step in the assembly line. Only one person was able to speak English. Things went really well on the final day on which I made the final adjustment to the sonic welding machines. I was very happy to finally return home after a successful trip. We have posted a number of video links at the end of this update so you can get a real feel for the production process.

On the home front, the most important task is to generate sales and therefore revenue. Now that we will have a quality product, we can truly concentrate our efforts in that direction. We have taken over all customer service responsibilities directly into our Escondido facility. This is primarily the job function of Karlene Fields. She has taken what was considered a disastrous customer service department we inherited from the prior marketing company, and turned it into a fine tuned machine that we are beginning to get rave reviews. Great job Karlene! There was a lot of bad blood out there via a combination of high returns and bad customer service due to allowing the prior marketing company to manufacture our product and handle customer service. Both have been fixed, and we are on a new path that presents high hopes of ultimate success.

In the last month, we have established key associations with the Better Business Bureau and the Chamber of Commerce to establish and grow our credibility as a brand. By incorporating consumer oriented entities with our brand, we are sending the proper trust signals not only to consumers, but also to search engines which consider these business mentions and backlinks as high quality. We have hired a professional Social Media firm to develop and manage all aspects of our marketing plan. They have been on the job since May 1, and have implemented more than 15 critical product listing enhancements on our website and specifically on the product page itself that allows not only to be found faster by potential customer, but it also provides a more desirable user experience. Here is a list of some of the recent enhancements and accomplishments that have been made:

• Comprehensive Product Illustrations that showcase the toothbrush features succinctly
• A custom made short clip that allows visitors to quickly view the toothbrush best features and ease of use
• Implemented a product reviews function and received 11 new product reviews
• Enhanced toothbrush listing by incorporating on-page sales best practices by utilizing conversion proven colors, font type, image placement and size (thumbnails and image zoom), product description, product’s Q&A
• Enhanced Product’s comparison table – added key brand differentiators so that customers understand the value our product offers compared to other brands at a glance
• Acquired #1 rankings for product and brand related search engine keywords such as but not limited to: 30 second smile, 30 second smile toothbrush and others.
• Earned INC.com business profile
• Established key associations with qualified and highly regarded blog writers for high quality websites such as Forbes.com, INC.com, Entrepreneur.com, Huntingtonpost.com, Business.com, ChicagoTribune.com with others pending
• Created brand specific 30 Second Smile Youtube Channel with custom made 40 Second video clip
• Increased visitors by 70.95% resulting in an increase of 9.09% conversion rate
• Claimed important Google My Business profile

Sincerely,

Hydrabrush Management Team

Testing each power handle BEFORE the assembled mechanism is welded into the enclosure. Several electronic parameters are measured in this test station.

All internal components are thoroughly lubricated before assembly to insure smooth/quiet operation.